RBI Tightens Loan Recovery Rules

The Reserve Bank of India (RBI) has tightened the rules governing loan recovery, with a strong focus on protecting borrowers from harassment by recovery agents and digital lending platforms. Under the new framework, coming into effect from January 1, 2027, recovery agents can contact borrowers only between 8 am and 7 pm, unless the borrower specifically requests communication outside those hours. Threats, abusive language, anonymous calls, public humiliation and attempts to intimidate family members will not be permitted. Lenders must also ensure that borrowers are treated with dignity during the recovery process.

The rules also bring greater transparency to home visits and recovery operations. Borrowers must receive advance information before an agent visits their home, while agents are required to carry proper identification and authorisation documents. Recovery agencies cannot misuse borrowers’ photographs, videos, audio recordings or other personal information on social media. Banks and financial institutions will remain responsible even when recovery activities are outsourced and must monitor the conduct of their agents. The RBI has also prescribed safeguards for remotely restricting smartphones, tablets and laptops purchased through EMI financing, ensuring that such measures are linked only to the relevant device loan and do not arbitrarily disable a borrower’s personal device for unrelated dues.