No late-night calls, no threats: RBI rolls out new loan recovery rules

The Reserve Bank of India (RBI) has unveiled a new framework aimed at making loan recovery more transparent and borrower-friendly. The revised rules, which will come into effect from January 1, 2027, lay down clear guidelines on how banks and regulated lenders can recover dues, including when recovery agents can contact borrowers and how they should conduct themselves.

Under the new norms, recovery calls and visits will generally be allowed only between 8 am and 7 pm. Contact outside these hours will be permitted only if the borrower has specifically requested or authorised it.

The RBI has also prohibited recovery agents from using threatening, abusive or intimidating language. They are barred from making anonymous calls, repeatedly contacting borrowers, publicly humiliating them or misusing social media to shame them.

Rules for doorstep recovery and monitoring

The Central bank has also introduced safeguards for physical recovery visits.

Before a recovery agency makes its first visit, the borrower must be informed at least one day in advance. Banks will also have to share details of the agency handling the recovery.

Recovery agents must carry an identity card, an authorisation letter and the relevant notice while visiting borrowers. The authorisation letter must also include contact details of the recovery agency as well as the bank's grievance officer.

The RBI has also made lenders more accountable by requiring them to maintain records of recovery conversations, including the timing and number of calls. These records must generally be preserved for at least six months.

New rules for remotely locking financed devices

The framework also formally regulates the use of technology to remotely restrict financed smartphones, tablets and laptops in case of loan defaults.

However, such action can be taken only when the loan was specifically used to finance that device. Remote restrictions cannot begin immediately after a missed EMI. The RBI has said a device can be restricted only after the loan remains overdue for at least 30 days, while a complete restriction is allowed only after 60 days of overdue payments.

Even then, incoming calls, SMS, emergency communication and functions required for work must continue to remain available. Lenders have also been barred from accessing unrelated personal data, including contacts, photographs, videos, call logs, SMS messages and location history.

Devices must be restored quickly after payment

The RBI has directed lenders to restore access to a restricted device, ordinarily within one hour after the borrower clears the overdue amount or regularises the loan.

If this timeline is not met, borrowers may be entitled to compensation of Rs 250 per hour of delay, subject to a prescribed cap.

Calling the new norms a "structural reset", DPDzero Co-Founder and CEO Ananth Shroff said, "The RBI's new framework is not an incremental update, it is a structural reset." He added that technology, including AI, can strengthen compliance, while human agents will continue to play an important role when dealing with borrowers facing financial stress.