FILE PHOTO: A Reserve Bank of India (RBI) logo is seen inside its headquarters in Mumbai, India, April 6, 2023. REUTERS/Francis Mascarenhas/File Photo
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The Reserve Bank of India has proposed strict curbs on the use of mobile phone disabling tools by lenders, alongside a wider overhaul of loan recovery practices aimed at strengthening borrower protection and tightening oversight of recovery agents.Under the revised draft amendment directions on “Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents”, released on Wednesday, lenders will not be allowed to disable or restrict functions of a borrower’s mobile phone as a recovery tool except in cases where the device itself was financed through a loan.Even in such cases, lenders can deploy the mechanism only after the loan account becomes 90 days overdue and after issuing multiple notices to the borrower, including a 21-day cure period followed by an additional seven-day notice.The draft norms also bar lenders from disabling essential features such as internet access, incoming calls, emergency SOS services and public safety notifications.Banks, small finance banks and other lenders will have to restore device functionalities within one hour once the borrower clears dues, failing which they will have to compensate the borrower at the rate of ₹250 per hour until the issue is rectified.The central bank further said lenders cannot access, retain or use any data stored on a borrower’s mobile device for loan recovery or any other purpose under any circumstances.The revised framework introduces several additional borrower protection measures amid concerns over coercive recovery practices by lenders and outsourced recovery agencies.Banks will not be allowed to assign recovery cases to agents if a borrower has lodged a grievance relating to loan dues or recovery proceedings until the complaint is resolved.Lenders will also be required to maintain records of calls made by recovery agents, including recordings of conversations with borrowers, for at least six months. Recovery agents can contact borrowers only between 8 am and 7 pm unless specifically authorised otherwise by the borrower.The draft directions explicitly prohibit harsh recovery practices, including abusive language, threatening or anonymous calls, public humiliation, excessive messaging and the use of social media to shame borrowers.The RBI has also proposed tighter governance standards for recovery agencies, including mandatory due diligence, certification and training requirements for recovery agents, and public disclosure of empanelled recovery agencies on lenders’ websites and digital platforms.RBI had originally issued the draft directions in February, but substantial feedback from stakeholders resulted in many changes in the key draft provisions, it said.The proposed directions will come into effect from October 1, 2026, from the earlier July 1 deadline.Published on May 20, 2026
