RBI Brings Strict Rules to Curb Harassment by Recovery Agents; What to Do If They Show Up at Your Door
RBI Brings Strict Rules to Curb Harassment by Recovery Agents; What to Do If They Show Up at Your Door
Draft framework proposes strict code of conduct for recovery agents, clear borrower protections, and an explicit ban on abusive practices.
The Reserve Bank of India (RBI) is set to tighten loan recovery practices across banks and financial institutions, with a new draft framework aimed at preventing harassment and ensuring fair treatment of borrowers.
The central bank has issued the draft RBI (Commercial Banks – Responsible Business Conduct) Second Amendment Directions, 2026, which focus on transparency, borrower dignity, and stricter accountability for recovery agents. The proposed rules are expected to come into effect from July 1, 2026, once finalised.
The RBI said the draft is open for public and stakeholder feedback until March 6, 2026. Similar draft norms have also been issued for NBFCs, small finance banks, urban co-operative banks and regional rural banks.
A key highlight of the framework is an explicit ban on harassment during loan recovery, following rising complaints of abusive behaviour by recovery agents in recent years.
Under the proposed directions, banks will be required to put in place a mandatory recovery policy, clearly outlining the qualifications, vetting process, monitoring systems and code of conduct for agents hired for collections.
The RBI has also suggested stricter rules for appointing recovery agents, including background checks and mandatory certification. Agents will need a Debt Recovery Agent Training Certificate from the Indian Institute of Banking and Finance (IIBF) or affiliated institutions.
Borrowers will also get greater transparency. Banks must inform customers in advance before assigning a recovery agent, and any change of agent must be communicated through written notice, SMS or email. Banks will also be required to publish updated lists of authorised recovery agents on their websites, mobile apps and at branches.
The draft lays down clear do’s and don’ts for recovery staff. Agents can contact borrowers only between 8 am and 7 pm, must respect privacy, and avoid calls or visits during inappropriate occasions such as bereavement, weddings or festivals.
Certain practices have been classified as strictly harsh and prohibited, including the use of abusive language, excessive calls, anonymous threats, intimidation, or sending inappropriate messages through mobile or social media. Harassing relatives, co-workers or friends of the borrower has also been barred.
The RBI has further proposed that all recovery-related calls be recorded, with borrowers informed that conversations are being recorded.
Importantly, if a borrower lodges a grievance, banks must suspend the recovery process until the complaint is resolved. Banks must also ensure that incentive structures or recovery targets do not encourage harsh behaviour.
The central bank’s move is aimed at ensuring that loan recovery remains legal, humane and borrower-centric, while holding both banks and recovery agents accountable for misconduct.
