The Reserve Bank of India (RBI) has issued new, stricter guidelines to curb the arbitrariness of loan recovery agents. The rules will be implemented nationwide from January 1, 2027 and will protect millions of borrowers across the country who take loans from banks and non-banking financial companies (NBFCs). Strict guidelines have been established to ensure transparency in the recovery process and prevent customer harassment. This development holds significance because there have been frequent complaints of misbehaviour and inappropriate calls from recovery agents. Furthermore, locked devices must be unlocked within one hour of loan repayment; otherwise, the bank will be required to compensate the customer.
New rules for recovery agents
Under the new rules, recovery agents will only be able to contact customers between 8 am and 7 pm. Any customer must be notified in writing or electronically at least 1 day before a recovery agent is sent to their home or office. The bank must preserve audio recordings of all recovery calls for six months. Also, agents will not be given arbitrary recovery targets to exert undue pressure.
New recovery conditions
According to the new RBI guidelines, all banks and financial institutions must establish a transparent loan recovery policy. Due diligence will be mandatory before engaging recovery agencies. Furthermore, all recovery agents will be required to have certification from the Indian Institute of Banking and Finance (IIBF). Banks will make public a complete list of authorised recovery agencies on their websites.
New math for device locking and penalties: Big relief for customers
The RBI has adopted a stricter stance on mobile-locking for digital and device loans. According to the new rules, mobile locking is only permitted for device loans. No device restrictions can be imposed before the loan is 30 days overdue. A full device restriction can only be imposed if the loan is 60 days overdue.
However, even during a full restriction, the customer’s phone’s incoming calls, SMS, and emergency SOS features will not be disabled. Once the customer repays their outstanding loan balance, the bank or company must unlock the mobile device within 1 hour. If the unlocking delay exceeds one hour, the bank will be required to compensate the customer at the rate of Rs 250 per hour.
Under the new rules, threats, abuse, and social media shaming in the name of recovery will be completely banned. Also, customers’ personal data will not be used for recovery purposes. This will protect the privacy and dignity of ordinary citizens. If instalment payments are stopped for any reason, customers will be given a fair opportunity to express their views. Meanwhile, RBI Governor has hinted at possible timeline for plastic currency notes.
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