The new rules restrict recovery calls and visits to between 8 a.m. and 7 p.m., prohibit abusive behaviour and misuse of borrower information, and require lenders to record recovery calls.
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To ensure fair treatment of borrowers during the recovery process, the RBI has issued comprehensive instructions to lenders, including asking them to contact/ visit a borrower/ guarantor only between 08:00 hours and 19:00 hours, and to avoid inappropriate occasions, such as bereavement in the family or medical emergencies, for making calls/ visits.As per the Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Fourth Amendment Directions, 2026, which come into effect from January 1, 2027, lenders, including banks and non-banking finance companies, have to ensure that their employees/ recovery agents don’t use abusive language or use social media for posting video / audio recordings or personal details of the borrower/ guarantor.Lenders need to put in place mitigants, including penalty provisions, to ensure that their employees/recovery agencies do not misuse customer information in any manner. They have to record the content/text of the calls made.Further, lenders can restrict or turn off the functionality of a mobile device -- a mobile phone, tablet, or laptop -- only if the bank finances the device through a loan.RBI said lenders have to put in place a policy on the collection/recovery of loan dues, including taking possession of a security by their own employee or a recovery agent.The policy shall, inter alia, cover aspects related to trigger(s) for initiating the recovery process, graded actions as per an escalation matrix for loan recovery, and a code of conduct for employees and recovery agents.The policy will also include aspects relating to recovery of loan dues in case of the borrower’s demise, a structured framework for handling cases involving financial distress, including documented pre-escalation engagement and guidance regarding available resolution options, etc.RBI said a bank shall document the time and number of calls made by its employee/recovery agent to the borrower/guarantor for recovery of loan dues.Further, the bank shall ensure that recordings of the content/text of calls made by the employee/recovery agent to the borrower/guarantor, and by the borrower/guarantor to the telephone/mobile number provided by the bank, are maintained.A bank shall ensure that its recovery targets or the structure of incentives for its employees, or those covered under its contract with a recovery agency, do not induce the adoption of harsh recovery practices.Loan contracts/agreements should specify provisions such as the notice period before taking possession; the circumstances under which the notice period can be waived; the procedure for taking possession of the security; and a final chance to be given to the borrower to repay the loan before the sale/auction of the security.They should also include the procedures for returning possession of the security to the borrower and for its sale or auction.Rules for restricting loan-financed mobile devicesIn the case of a mobile device financed by a lender, due notice must be issued to the borrower, in accordance with the timelines specified in the loan agreement, to repay the loan dues, including details of the gradual restrictions to be imposed on the device’s functionalities.However, the bank shall not initiate any restriction or turn off the device’s functionalities using the technology mechanism deployed for this purpose until the associated loan is 30 days past due and the borrower has not paid the amount due despite being served notices in this regard.Gradual restrictions on device functionality (except those deemed essential, such as access to incoming calls, SMS, and emergency SOS features) may be initiated thereafter, and the full set of restrictions covered in the loan agreement may be made effective only after the loan has become 60 days past due. Further, outgoing calls shall not be restricted until the loan is 60 days past due.Borrowers to be compensated for wrongful device restrictionsIn cases of wrongful restrictions or delays in the reversal of restrictions on the functionalities of a mobile device after realisation of dues from the borrower, where the delay is attributable to the bank, the lender shall compensate the borrower at the rate of ₹250 per hour until the wrongful action is remedied. However, the total compensation payable by the bank to the borrower shall be capped at the amount of the loan disbursed.Published on August 6, 2026
