Kolkata: Taking a loan from a bank or non-banking financial institution begins a chapter of challenge for many. One has to keep repaying EMIs by the scheduled time every month till the entire loan is extinguished. If a borrower fails to repay a few instalments, the lending institution often puts recovery agents on his/her trail. Usually the agents are paid commissions in proportion to the amount recovered, which makes it lucrative for the agents to use any means, fair or foul, to extract the due amount from the borrower. The situation is about to change with new guidelines by the RBI set to kick in from July 1.
Agents can no longer ill treat, or abuse borrowers or compromise their social prestige. The more the loan is recovered, the higher the commission the recovery agent receives. Due to this, recovery agents often resort to mistreatment of customers, in some cases even resorting to violence and abuse. This causes not only financial but also social harm to customers. But now, borrowers will receive greater protection and respect during recovery.
The Reserve Bank of India has issued new draft rules to strengthen and make the loan recovery process by banks more transparent. These have been introduced under the “RBI (Commercial Banks – Responsible Business Conduct) Second Amendment Directions, 2026.” One of the primary objectives is to prevent any kind of abuse or pressure on borrowers. Suggestions have been sought on the proposed rules by March 6, 2026. Once approved, they could come into effect on July 1 this year.
What changes are coming?
Under the new rules, every bank will be required to develop a clear recovery policy. Banks will be required to ensure that borrowers facing difficulties in repaying EMIs are identified and offered necessary guidance. Banks should also publish a list of authorised recovery agents in their branches, websites and apps. Moreover, before appointing any recovery agent, the bank must inform borrowers. If a borrower has filed a complaint, the bank will not assign the case to a recovery agent until the complaint is resolved. However, if the complaint is found to be false or evasive, the bank may continue to take action.
Rules for recovery agents
- Agents will only be allowed to interact with the borrower only between 8 AM and 7 PM
- The borrower’s personal life and privacy must be respected
- Relatives, friends, or coworkers must not be contacted
- Calls or visits will not be allowed on occasions such as mourning, weddings or festivals
- Agents must be courteous and polite
- Harassing family or acquaintances, or threatening violence or harm will not be tolerated at all
Call recording and monitoring system
According to the new rules, banks will be required to maintain records of the number of calls made and at what time. Conversations will also be recorded, and the borrower will be informed in advance. Banks will also be required to ensure that targets or incentives set for recovery agents are not such that they are encouraged to use harsh or abusive methods.
The RBI has said it will not tolerate any form of intimidation, abuse, or pressure will be strictly prohibited. The central bank will consider these behaviors by recovery agents to be violative of its policy.