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No threats, abuses or social media harassment: RBI's new loan recovery rules to bring relief for borrowers
The new loan recovery regulations issued by RBI will come into effect from January 1, 2027.
In a major relief to borrowers, the Reserve Bank of India (RBI) has issued new rules which prohibit loan recovery agents from using harsh measures, such as use of abusive language, excessive calling or use of violence. The Central bank on Thursday announced new norms on conduct of lenders and recovery agents during retrieval of loan dues. These rules come amid rising complaints of harassment faced by borrowers over calls and social media platforms.
What RBI's new loan recovery rules say
While RBI already prohibited phone calls at odd hours or use of muscle power, the new guidelines have expanded the spectrum of what amounts to harsh methods and must be avoided. The Central bank has restricted bank employees and recovery agents from using threatening or abusive language, posting personal details of the borrower on social media, sending inappropriate messages or calling excessively.
The agents cannot resort to intimidating or publicly humiliating the borrowers or their relatives, referees, friends or co-workers. The new RBI rules also disallow making false or misleading representations, particularly about the extent of the debt or the consequences of non-repayment.
Banks cannot disable phones, laptops of borrowers
The Reserve Bank of India further stated that banks cannot disable mobile phones and laptops of defaulting borrowers to recover loans, except in cases where the devices have been financed by lenders. "A bank shall not deploy any technology-based mechanism... which restricts or disables any of the functionalities of a mobile device of a borrower such as mobile phone, tablet and laptop as a recovery tool, except to recover its loan dues arising out from financing of such a device," it said.
In cases where banks are allowed to disable devices in order to recover loans, they must take gradual measures instead of resorting to ab initio (from the beginning) approach. The lender cannot restrict or disable essential functionalities, including access to incoming calls, SMS and emergency SOS features.
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New loan recovery loans to come into effect in 2027
Earlier on May 20, RBI had issued the revised draft amendment directions on 'Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents' for seeking feedback from stakeholders. Based on the response, modifications were made and the new directions were issued on August 6. The regulations will come into effect from January 1, 2027.
