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Informist, Thursday, Feb. 12, 2026

 

--RBI issues draft norms on conduct of regulated cos in recovery of loans 

--RBI seeks comments on draft norms on cos' conduct in loan recovery by Mar 6 

--RBI: Propose norms on cos' conduct in loan recovery to be effective Jul 1 

 

MUMBAI – The Reserve Bank of India has proposed regulated entities to put in place a policy on recovery of loans, engagement of recovery agents for recovery of loan dues, and taking possession of security. The RBI Thursday issued draft amendment directions for conduct of regulated entities in recovery of loans and engagement of recovery agents, seeking feedback on the same by Mar. 6. 

 

"The policy shall, inter alia, cover aspects related to eligibility and due diligence criteria for engagement of recovery agents, specified activities, Code of Conduct, performance evaluation standards, inspection/audit, control mechanisms to ensure compliance with statutory/regulatory requirements by recovery agents and procedures to be followed/penal actions to be taken in case of non-compliant recovery agents," the RBI said. 

 

The policy set up by the regulatied entities should also include aspects related to recovery of loan dues in case of demise of borrower or guarantor, it proposed.

 

Further, an entity employing the services of recovery agents is proposed to put in place a due diligence process for their engagement, which should conform to the instructions issued by the central bank. The entity is also required to ensure that the recovery agencies engaged by it carry out verification of the antecedents of their representatives or employees at pre-engagement level and subsequently, on an ongoing basis at a "pre-defined periodicity".

 

The RBI has also proposed to set up a code of conduct for the recovery agents and its own employees engaged in activities related to recovery of loans. Moreover, regulated entities are proposed to prominently display an up-to-date list of recovery agents empanelled and engaged with them on all channels through which they engage with customers, such as, branches or digital platforms like website, mobile app, the RBI said. "Such list shall include the name of the recovery agents and details of the individual(s) engaged by it, the period of engagement, etc," it said. 

 

Moreover, in the event of termination of the agreement with a recovery agent, the entity is proposed to publicise the same to ensure that the borrowers do not continue to deal with that agent or its representatives, it said. The entities are also required to inform the detail of the recovery agent to the borrower through a written notice, when forwarding cases to any agent for recovery of default amount. 

 

The central bank has also proposed setting up of a mechanism by the regulated entities for identification of the borrowers facing repayment related difficulties, engagement with such borrowers and providing them necessary guidance about the recourse available. 

 

In case of a grievance lodged by a borrower, regulated entities should not forward the concerned recovery case to a recovery agent till it finally disposes off the grievance. However, if the entity is convinced that the borrower is making frivolous, vexatious complaints to avoid recovery, it can continue with the recovery proceedings even if a grievance is pending with it, the RBI proposed.

 

Under the draft norms, regulated entities are also directed to document the time and number of calls made by its employee or recovery agent to the borrower or guarantor for recovery of loan dues. A recording of the content, text of the calls made by the employee or recovery agent to the borrower or guarantor and vice-versa also needs to be ensured by the entity, it said.

 

Further, in case of intiating any legal or recovery proceedings, entities are required to provide due notice in writing as per applicable statutory provisions to the borrower. Moreover, initiating any legal action for recovery of loan dues or possession of security should not be the first resort, it said. 

 

Entities engaging recovery agents are directed to undertake a periodic review of the mechanism to learn from experience and to effect improvement, the draft norms said. The central bank has also proposed a list of norms for conduct of employees and recovery agents, which includes respect for privacy of the borrower, mandating a particular time and place for contact, and avoiding recovery calls or visits during inapproporiate occasions, among others. 

 

The RBI has also directed regulated entities, under the draft norms, that recovery agents should not engage in any harsh methods towards recovery, saying that use of abusive language, inappropriate messages, excessively calling, threatening or intimidating, among other actions, would be deemed as harsh. 

 

The central bank has also proposed to set up a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism should be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agents, it said, adding all recovery related communications issued by the regualted entity must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the regulated entity whom the borrower or guarantor can contact.

 

The proposed directions by the RBI will come into effect from Jul. 1.  End

 

Reported by Pratiksha

Edited by Akul Nishant Akhoury

 

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