The Reserve Bank of India issued revised draft Amendment Directions, 2026 on conduct of regulated entities in recovery of loans and engagement of recovery agents after receiving stakeholder feedback on earlier draft proposals. The revised framework applies to banks, NBFCs, housing finance companies, cooperative banks, regional rural banks, local area banks, and small finance banks. The draft directions prescribe detailed standards for recovery practices, borrower protection, grievance redressal, and engagement of recovery agencies. Regulated entities must implement due diligence, training, monitoring, and codes of conduct for recovery agents while prohibiting abusive, coercive, or misleading recovery methods. The draft also regulates technology-based recovery mechanisms that restrict mobile device functionalities, permitting such actions only under strict safeguards, notice requirements, and compensation provisions for wrongful restrictions. Borrower privacy protections, mandatory call recording, restrictions on communication timing, and transparency obligations have also been introduced. RBI has invited public comments on the revised draft directions until 31 May 2026 before finalisation.
Reserve Bank of India
Press Releases
Page Contents
- RBI Issues Revised Draft Amendment Directions on ‘Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents’
- Draft Reserve Bank of India (Commercial Banks – Responsible Business Conduct) ……. Amendment Directions, 2026
- Draft Reserve Bank of India (Small Finance Banks – Responsible Business Conduct)………. Amendment Directions, 2026
- Draft Reserve Bank of India (Local Area Banks – Responsible Business Conduct) …….. Amendment Directions, 2026
- Draft Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct)……… Amendment Directions, 2026
- Draft Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) ….. Amendment Directions, 2026
- Draft Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) …… Amendment Directions, 2026
- Draft Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) ……. Amendment Directions, 2026
- Draft Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) ……. Amendment Directions, 2026
- Draft Reserve Bank of India (Housing Finance Companies) …… Amendment Directions, 2026
RBI Issues Revised Draft Amendment Directions on ‘Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents’
In pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated February 6, 2026, the Reserve Bank of India had issued the draft Amendment Directions on ‘Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents’ for public comments on February 12, 2026. Substantial feedback has been received from stakeholders on the draft Amendment Directions, which has resulted in changes in many key draft provisions. Feedback has also been submitted by stakeholders regarding regulatory enablement to the lenders to deploy technology-based mechanisms, which restrict or disables some of the functionalities of a financed mobile device such as mobile phone, tablet, etc., to recover loan dues from the borrower in cases of default. The published draft Amendment Directions have been suitably amended to incorporate the accepted feedback. It has now been decided to issue revised draft Amendment Directions for another round of public consultation.
- Accordingly, the Reserve Bank of India has today issued the following revised draft Amendment Directions for public comments.
i. Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026
ii. Reserve Bank of India (Small Finance Banks – Responsible Business Conduct) Amendment Directions, 2026
iii. Reserve Bank of India (Local Area Banks – Responsible Business Conduct) Amendment Directions, 2026
iv. Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct) Amendment Directions, 2026
v. Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) Amendment Directions, 2026
vi. Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Amendment Directions, 2026
vii. Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) Amendment Directions, 2026
viii. Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Amendment Directions, 2026
ix. Reserve Bank of India (Housing Finance Companies) Amendment Directions, 2026
3. The comments / feedback on the revised draft Amendment Directions may be submitted by the regulated entities and members of public / other stakeholders on or before May 31, 2026through the following channels:
i. the ‘Connect 2 Regulate’ section on the website by following the corresponding hyperlink provided against each document in the page where they are hosted;
or
ii. by emailwith the subject line ‘Feedback on (full name of the draft Amendment Directions (including the type of Regulated Entity))’.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/298
***
Reserve Bank of India
DOR.MCS.REC.No. /01-01-032/2026-27 | Dated: XXXXXX XX, 2026
Draft Reserve Bank of India (Commercial Banks – Responsible Business Conduct) ……. Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by banks have been issued to Commercial Banks (other than Small Finance Banks, Payments Banks, Regional Rural Banks, and Local Area Banks) under the Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all Commercial Banks (other than Small Finance Banks, Payments Banks, Regional Rural Banks, and Local Area Banks) (hereinafter referred to collectively as “banks” and individually as a “bank”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act,1949, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (Commercial Banks – Responsible Business Conduct) ……. Amendment Directions, 2026.
(2) These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Directions, 2025 as under:
(1) In paragraph 4, the following definitions shall be inserted after sub-paragraph 4(24), namely:
“4(24A) Recovery agency means an entity or individual (other than bank’s own employees) who has been engaged by a bank, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
Illustration: A Business Correspondent (BC) involved in recovery related activities on behalf of a bank shall be treated as a recovery agency for the purpose of these Directions.
4(24B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of a bank, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by a bank under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 408 to 416 and 442 to 454 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 454, namely:
“L. Conduct of Banks in Recovery of Loan Dues and Engagement of Recovery Agencies
454A. The provisions under this Section shall apply to recovery of loan dues by a bank from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
454B. The provisions under this Section shall be without prejudice to any statutory rights available to a bank, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
454C. ‘Bank employees’, for the purpose of this Section, shall include those employees of a bank who are deployed for recovery of loan dues, including taking possession of a security.
L.1 Policy
454D. A bank shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery related actions of the bank or the recovery agencies not consistent with these Directions.
L.2 Engagement of recovery agencies for recovery of loan dues
L.2.1 Due diligence
454E. A bank engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (Commercial Banks – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. A bank shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the bank’s policy.
L.2.2 Training
454F. A bank shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF.
L.2.3 Code of Conduct for recovery agents and bank employees
454G. A bank, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the bank shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
L.3 Responsibilities of a bank
L.3.1 Disclosure of information on recovery agencies
454H. A bank shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The bank shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the bank shall immediately update such list.
454I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the bank shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the bank, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
454J. In case of change of the recovery agency during an ongoing recovery process, the bank shall immediately notify the borrower / guarantor of the change.
454K. In the event of termination of the agreement with a recovery agency for any reason, the bank shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
L.3.2 Fair treatment to borrowers during recovery process
454L. A bank shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the bank shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
454M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the bank shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
454N. 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 there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the bank. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the bank shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
454O. A bank shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 454X below.
L.3.3 Taking possession of security
454P. Where a bank has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the bank shall ensure that the possession clause is legally valid and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
(1) notice period before taking possession;
(2) circumstances under which the notice period can be waived;
(3) the procedure for taking possession of the security;
(4) final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
(5) the procedure for giving the possession of the security back to the borrower; and
(6) the procedure for sale / auction of the security.
L.3.4 Deployment of technology-based mechanism for recovery of loan dues
454Q. 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The bank may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
(1) The acquisition of the concerned mobile device is financed by the bank through a loan;
(2) The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
(3) A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
(4) Another notice has been given to the borrower after the expiry of the notice in paragraph 454Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The bank shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 454Q(3) and (4) above.
454R. A bank, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
(1) The bank shall adopt a graduated approach rather than disabling the device, ab initio.
(2) The bank shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
(3) The bank shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
(4) In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
(5) The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
(6) The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The bank shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
454S. A bank shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
L.3.5 Periodic review, monitoring and control
454T. A bank shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the bank’s integrity and reputation. The bank shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
454U. A bank, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
L.4 Conduct of bank’s employees and recovery agents
454V. A bank’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the bank and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the bank or the recovery agency and a copy of the notice issued by the bank in terms of paragraph 454I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the bank in terms of paragraph 454Y below.
454W. A bank shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
(1) An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
(2) An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
(3) Only the representative(s) authorised by the bank / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
(4) An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
(5) An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
(6) An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
(7) In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the bank. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
(8) Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the bank and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
454X. A bank’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
(1) Use of minatory or abusive language;
(2) Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
(3) Sending inappropriate messages either on mobile or through social media;
(4) Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
(5) Making threatening and / or anonymous calls;
(6) Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
(7) Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
(8) Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
L.5 Complaints against bank’s employees and its recovery agents
454Y. A bank shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 454I above. Further, all recovery related communications issued by the bank must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the bank whom the borrower / guarantor can contact.
L.6 Adherence to other regulations issued by the Reserve Bank / other authorities
454Z. In addition to the Directions mentioned herein, a bank shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
****
Reserve Bank of India
DOR.MCS.REC.No. /01-01-033/2026-27 | XXXXXX XX, 2026
Draft Reserve Bank of India (Small Finance Banks – Responsible Business Conduct)………. Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Small Finance Banks (SFBs) have been issued to SFBs under the Reserve Bank of India (Small Finance Banks – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all SFBs (hereinafter referred to collectively as “SFBs” and individually as an “SFB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act,1949, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
1. These Directions shall be called the Reserve Bank of India (Small Finance Banks – Responsible Business Conduct)………. Amendment Directions, 2026.
2. These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Small Finance Banks – Responsible Business Conduct) Directions, 2025 as under:
(1) In paragraph 4, the following definitions shall be inserted after sub-paragraph 4(24), namely:
“4(24A) Recovery agency means an entity or individual (other than SFB’s own employees) who has been engaged by an SFB, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
Illustration: A Business Correspondent (BC) involved in recovery related activities on behalf of an SFB shall be treated as a recovery agency for the purpose of these Directions.
4(24B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of an SFB, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by an SFB under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 408 to 416 and 442 to 454 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 454, namely:
“L. Conduct of SFBs in Recovery of Loan Dues and Engagement of Recovery Agencies
454A. The provisions under this Section shall apply to recovery of loan dues by an SFB from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
454B. The provisions under this Section shall be without prejudice to any statutory rights available to an SFB, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
454C. ‘SFB employees’, for the purpose of this Section, shall include those employees of an SFB who are deployed for recovery of loan dues, including taking possession of a security.
L.1 Policy
454D. An SFB shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit, and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery related actions of the SFB or the recovery agencies not consistent with these Directions.
L.2 Engagement of recovery agencies for recovery of loan dues L.
2.1 Due diligence
454E. An SFB engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (Small Finance Banks – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. An SFB shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the SFB’s policy.
L.2.2 Training
454F. An SFB shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF.
L.2.3 Code of Conduct for recovery agents and SFB employees
454G. An SFB, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the SFB shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
L.3 Responsibilities of an SFB
L.3.1 Disclosure of information on recovery agencies
L.3 Responsibilities of a bank
L.3.1 Disclosure of information on recovery agencies
454H. A bank shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The bank shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the bank shall immediately update such list.
454I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the bank shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the bank, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
454J. In case of change of the recovery agency during an ongoing recovery process, the bank shall immediately notify the borrower / guarantor of the change.
454K. In the event of termination of the agreement with a recovery agency for any reason, the bank shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
L.3.2 Fair treatment to borrowers during recovery process
454L. A bank shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the bank shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
454M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the bank shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
454N. 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 there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the bank. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the bank shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
454O. A bank shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 454X below.
L.3.3 Taking possession of security
454P. Where a bank has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the bank shall ensure that the possession clause is legally valid and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
1. notice period before taking possession;
2. circumstances under which the notice period can be waived;
3. the procedure for taking possession of the security;
4. final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
5. the procedure for giving the possession of the security back to the borrower; and
6. the procedure for sale / auction of the security.
L.3.4 Deployment of technology-based mechanism for recovery of loan dues
454Q. 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The bank may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
1. The acquisition of the concerned mobile device is financed by the bank through a loan;
2. The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
3. A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
4. Another notice has been given to the borrower after the expiry of the notice in paragraph 454Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The bank shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 454Q(3) and (4) above.
454R. An SFB, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
T
1. The bank shall adopt a graduated approach rather than disabling the device, ab initio.
2. The bank shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
3. The bank shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
4. In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
5. The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
6. The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The bank shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
454S. An SFB shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
L.3.5 Periodic review, monitoring and control
454T. A bank shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the bank’s integrity and reputation. The bank shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
454U. A bank, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
L.4 Conduct of SFB’s employees and recovery agents
454V. A bank’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the bank and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the bank or the recovery agency and a copy of the notice issued by the bank in terms of paragraph 454I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the bank in terms of paragraph 454Y below.
454W. A bank shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
1. An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
2. An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
3. Only the representative(s) authorised by the bank / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
4. An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
5. An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
6. An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
7. In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the bank. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
8. Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the bank and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
454X. An SFB’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
1. Use of minatory or abusive language;
2. Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
3. Sending inappropriate messages either on mobile or through social media;
4. Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
5. Making threatening and / or anonymous calls;
6. Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
7. Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
8. Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
sleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
L.5 Complaints against SFB’s employees and its recovery agents
454Y. An SFB shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 454I above. Further, all recovery related communications issued by the SFB must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the SFB whom the borrower / guarantor can contact.
L.6 Adherence to other regulations issued by the Reserve Bank / other authorities
454Z. In addition to the Directions mentioned herein, an SFB shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
DOR.MCS.REC.No. /01-01-035/2026-27 | Dated: XXXXXX XX, 2026
Draft Reserve Bank of India (Local Area Banks – Responsible Business Conduct) …….. Amendment Directions, 2026
Certain instructions on matters related to recovery of microfinance loans and engagement of recovery agents therefor by Local Area Banks (LABs) have been issued to LABs under the Reserve Bank of India (Local Area Banks – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all LABs (hereinafter referred to collectively as “LABs” and individually as an “LAB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act,1949, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
1. These Directions shall be called the Reserve Bank of India (Local Area Banks – Responsible Business Conduct)…….. Amendment Directions, 2026.
2. These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Local Area Banks – Responsible Business Conduct) Directions, 2025 as under:
(1) In paragraph 4, the following definitions shall be inserted after sub-paragraph 4(24), namely:
“4(24A) Recovery agency means an entity or individual (other than LAB’s own employees) who has been engaged by an LAB, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
Illustration: A Business Correspondent (BC) involved in recovery related activities on behalf of an LAB shall be treated as a recovery agency for the purpose of these Directions.
4(24B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of an LAB, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by an LAB under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 227 to 235 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 235, namely:
“H. Conduct of LABs in Recovery of Loan Dues and Engagement of Recovery Agencies
235A. The provisions under this Section shall apply to recovery of loan dues by an LAB from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
235B. The provisions under this Section shall be without prejudice to any statutory rights available to an LAB, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
235C. ‘LAB employees’, for the purpose of this Section, shall include those employees of an LAB who are deployed for recovery of loan dues, including taking possession of a security.
H.1 Policy
235D. An LAB shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit, and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery related actions of the LAB or the recovery agencies not consistent with these Directions.
H.2 Engagement of recovery agencies for recovery of loan dues
H.2.1 Due diligence
235E. An LAB engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (Local Area Banks – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. An LAB shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the LAB’s policy.
H.2.2 Training
235F. An LAB shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF. An LAB shall also ensure that recovery agents already engaged by its recovery agencies, but not holding the aforesaid certificate, obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
H.2.3 Code of Conduct for recovery agents and LAB employees
235G. An LAB, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the LAB shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
H.3 Responsibilities of an LAB
H.3.1 Disclosure of information on recovery agencies
235H. An LAB shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The LAB shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the LAB shall immediately update such list.
235I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the LAB shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the LAB, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
235J. In case of change the of recovery agency during an ongoing recovery process, the LAB shall immediately notify the borrower / guarantor of the change.
235K. In the event of termination of the agreement with a recovery agency for any reason, the LAB shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
H.3.2 Fair treatment to borrowers during recovery process
235L. An LAB shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the LAB shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
235M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the LAB shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
235N. An LAB 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 LAB shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the LAB. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the LAB shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
235O. An LAB shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 235X below.
H.3.3 Taking possession of security
235P. Where an LAB has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the LAB shall ensure that the possession clause is legally valid and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
(1) notice period before taking possession;
2. circumstances under which the notice period can be waived;
3. the procedure for taking possession of the security;
4. final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
5. the procedure for giving the possession of the security back to the borrower; and
6. the procedure for sale / auction of the security.
H.3.4 Deployment of technology-based mechanism for recovery of loan dues
235Q. An LAB 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. An LAB may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
1. The acquisition of the concerned mobile device is financed by the LAB through a loan;
2. The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
3. A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
4. Another notice has been given to the borrower after the expiry of the notice in paragraph 235Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The LAB shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 235Q(3) and (4) above.
235R. An LAB, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
1. The LAB shall adopt a graduated approach rather than disabling the device, ab initio.
2. The LAB shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
3. The LAB shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
4. In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
5. The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
6. The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
7. The LAB shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
235S. An LAB shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
H.3.5 Periodic review, monitoring and control
235T. An LAB shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the LAB’s integrity and reputation. The LAB shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
235U. An LAB, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
H.4 Conduct of LAB’s employees and recovery agents
235V. An LAB’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the LAB and recovery agency, respectively. The recovery agent shall also carry an authorization letter issued by the LAB or the recovery agency and a copy of the notice issued by the LAB in terms of paragraph 235I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the LAB in terms of paragraph 235Y below.
235W. An LAB shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
1. An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
2. An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
3. Only the representative(s) authorised by the LAB / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
4. An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
5. An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice, or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place his / her of business / occupation.
6. An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
7. In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the LAB. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
8. Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the LAB and shall contain the name and contact details of the sender.
9. An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
235X. An LAB’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
1. Use of minatory or abusive language;
2. Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
3. Sending inappropriate messages either on mobile or through social media;
4. Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
5. Making threatening and / or anonymous calls;
6. Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
7. Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
8. Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
H.5 Complaints against LAB’s employees and its recovery agents
235Y. An LAB shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 235I above. Further, all recovery related communications issued by the LAB must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the LAB whom the borrower / guarantor can contact.
H.6 Adherence to other regulations issued by the Reserve Bank / other authorities
235Z. In addition to the Directions mentioned herein, an LAB shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
DOR.MCS.REC.No. /01-01-036/2026-27 | Dated: XXXXXX XX, 2026
Draft Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct)……… Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Regional Rural Banks (RRBs) have been issued to RRBs under the Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all RRBs (hereinafter referred to collectively as “RRBs” and individually as an “RRB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act,1949, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
1. These Directions shall be called the Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct)…….. Amendment Directions, 2026.
2. These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct) Directions, 2025 as under:
(1) In paragraph 4, the following definitions shall be inserted after sub-paragraph 4(24), namely:
“4(24A) Recovery agency means an entity or individual (other than RRB’s own employees) who has been engaged by an RRB, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
Illustration: A Business Correspondent (BC) involved in recovery related activities on behalf of an RRB shall be treated as a recovery agency for the purpose of these Directions.
4(24B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of an RRB, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by an RRB under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 428 to 437 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 437, namely:
“J. Conduct of RRBs in Recovery of Loan Dues and Engagement of Recovery Agencies
437A. The provisions under this Section shall apply to recovery of loan dues by an RRB from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
437B. The provisions under this Section shall be without prejudice to any statutory rights available to an RRB, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
437C. ‘RRB employees’, for the purpose of this Section, shall include those employees of an RRB who are deployed for recovery of loan dues, including taking possession of a security.
J.1 Policy
437D. An RRB shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery actions of the RRB or the recovery agencies not consistent with these Directions.
J.2 Engagement of recovery agencies for recovery of loan dues J.
2.1 Due diligence
437E. An RRB engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank on outsourcing of financial services, as amended from time to time. An RRB shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the RRB’s policy.
J.2.2 Training
437F. An RRB shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF. An RRB shall also ensure that recovery agents already engaged by its recovery agencies, but not holding the aforesaid certificate, obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
J.2.3 Code of Conduct for recovery agents and RRB employees
437G. An RRB, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the RRB shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
J.3 Responsibilities of an RRB
J.3.1 Disclosure of information on recovery agencies
437H. An RRB shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The RRB shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the RRB shall immediately update such list.
437I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the RRB shall notify, the details of recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the RRB, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
437J. In case of change of the recovery agency during an ongoing recovery process, the RRB shall immediately notify the borrower / guarantor of the change.
437K. In the event of termination of the agreement with a recovery agency for any reason, the RRB shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
J.3.2 Fair treatment to borrowers during recovery process
437L. An RRB shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the RRB shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
437M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the RRB shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
437N. An RRB 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 RRB shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the RRB. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the RRB shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
437O. An RRB shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 437X below.
J.3.3 Taking possession of security
437P. Where an RRB has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the RRB shall ensure that the possession clause is legally valid, and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
1. notice period before taking possession;
2. circumstances under which the notice period can be waived;
3. the procedure for taking possession of the security;
4. final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
5. the procedure for giving the possession of the security back to the borrower; and
6. the procedure for sale / auction of the security.
L.3.4 Deployment of technology-based mechanism for recovery of loan dues
437Q. An RRB 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The RRB may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
1. The acquisition of the concerned mobile device is financed by the RRB through a loan;
2. The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
3. A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
4. Another notice has been given to the borrower after the expiry of the notice in paragraph 437Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The RRB shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 437Q(3) and (4) above.
437R. An RRB, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
1. The RRB shall adopt a graduated approach rather than disabling the device, ab initio.
2. The RRB shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
3. The RRB shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
4. In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
5. The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
6. The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The RRB shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
437S. An RRB shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
J.3.5 Periodic review, monitoring and control
437T. An RRB shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the RRB’s integrity and reputation. The RRB shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
437U. An RRB, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of RRB’s employees and recovery agents
437V. An RRB’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the RRB and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the RRB or the recovery agency and a copy of the notice issued by the RRB in terms of paragraph 437I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the RRB in terms of paragraph 437Y below.
437W. An RRB shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
1. An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
2. An employee / recovery agent with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
3. Only the representative(s) authorised by the RRB / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
4. An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
5. An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
6. An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
7. In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the RRB. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
8. Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the RRB and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
437X. An RRB’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
1. Use of minatory or abusive language;
2. Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
3. Sending inappropriate messages either on mobile or through social media;
4. Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
5. Making threatening and / or anonymous calls;
6. Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
7. Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
8. Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
J.5 Complaints against RRB’s employees and its recovery agents
437Y. An RRB shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 437I above. Further, all recovery related communications issued by the RRB must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the RRB whom the borrower / guarantor can contact.
J.6 Adherence to other regulations issued by the Reserve Bank / other authorities
437Z. In addition to the Directions mentioned herein, an RRB shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
Draft – Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) ….. Amendment Directions, 2026
DOR.MCS.REC.No. /01-01-037/2026-27
XXXXXX XX, 2026
Draft Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) ….. Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Urban Co-operative Banks (UCBs) have been issued to UCBs under the Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all UCBs (hereinafter referred to collectively as “UCBs” and individually as an “UCB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21, 35A and 56 of the Banking Regulation Act,1949, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) …… Amendment Directions, 2026.
(2) These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Urban Co-operative Banks – Responsible Business Conduct) Directions, 2025as under:
(1) In paragraph 4, the following definitions shall be inserted after sub-paragraph 4(23), namely:
“4(23A) Recovery agency means an entity or individual (other than UCB’s own employees) who has been engaged by a UCB, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
Illustration: A Business Correspondent (BC) involved in recovery related activities on behalf of a UCB shall be treated as a recovery agency for the purpose of these Directions.
4(23B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of a UCB, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by a UCB under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 316 to 325 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 325, namely:
“J. Conduct of UCBs in Recovery of Loan Dues and Engagement of Recovery Agencies
325A. The provisions under this Section shall apply to recovery of loan dues by a UCB from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
325B. The provisions under this Section shall be without prejudice to any statutory rights available to a UCB, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
325C. ‘UCB employees’, for the purpose of this Section, shall include those employees of a UCB who are deployed for recovery of loan dues, including taking possession of a security.
J.1 Policy
325D. A UCB shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery related actions of the UCB or the recovery agencies not consistent with these Directions.
J.2 Engagement of recovery agencies for recovery of loan dues
J.2.1 Due diligence
325E. A UCB engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (Urban Co-operative Banks – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. A UCB shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the UCB’s policy.
J.2.2 Training
325F. A UCB shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF. A UCB shall also ensure that recovery agents already engaged by its recovery agencies, but not holding the aforesaid certificate, obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
J.2.3 Code of Conduct for recovery agents and UCB employees
325G. A UCB, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the UCB shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
J.3 Responsibilities of a UCB
J.3.1 Disclosure of information on recovery agencies
325H. A UCB shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The UCB shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the UCB shall immediately update such list.
325I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the UCB shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the UCB, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
325J. In case of change of the recovery agency during an ongoing recovery process, the UCB shall immediately notify the borrower / guarantor of the change.
325K. In the event of termination of the agreement with a recovery agency for any reason, the UCB shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
J.3.2 Fair treatment to borrowers during recovery process
325L. A UCB shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the UCB shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
325M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the UCB shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
325N. A UCB 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 UCB shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the UCB. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the UCB shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
325O. A UCB shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 325X below.
J.3.3 Taking possession of security
325P. Where a UCB has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the UCB shall ensure that the possession clause is legally valid and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
(1) notice period before taking possession;
(2) circumstances under which the notice period can be waived;
(3) the procedure for taking possession of the security;
(4) final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
(5) the procedure for giving the possession of the security back to the borrower; and
(6) the procedure for sale / auction of the security.
J.3.4 Deployment of technology-based mechanism for recovery of loan dues
325Q. A UCB 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The UCB may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
(1) The acquisition of the concerned mobile device is financed by the UCB through a loan;
(2) The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
(3) A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
(4) Another notice has been given to the borrower after the expiry of the notice in paragraph 325Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The UCB shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 325Q(3) and (4) above.
325R. A UCB, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
(1) The UCB shall adopt a graduated approach rather than disabling the device, ab initio.
(2) The UCB shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
(3) The UCB shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
(4) In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
(5) The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
(6) The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The UCB shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
325S. A UCB shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
J.3.5 Periodic review, monitoring and control
325T. A UCB shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the UCB’s integrity and reputation. The UCB shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
325U. A UCB, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of UCB’s employees and recovery agents
325V. A UCB’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the UCB and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the UCB or the recovery agency and a copy of the notice issued by the UCB in terms of paragraph 325I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the UCB in terms of paragraph 325Y below.
325W. A UCB shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
(1) An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
(2) An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
(3) Only the representative(s) authorised by the UCB / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
(4) An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
(5) An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
(6) An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits recover loan dues from a borrower / guarantor.
(7) In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the UCB. However,
325U. A UCB, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of UCB’s employees and recovery agents
325V. A UCB’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the UCB and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the UCB or the recovery agency and a copy of the notice issued by the UCB in terms of paragraph 325I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the UCB in terms of paragraph 325Y below.
325W. A UCB shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
(1) An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
(2) An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
(3) Only the representative(s) authorised by the UCB / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
(4) An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
(5) An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
(6) An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits recover loan dues from a borrower / guarantor.
(7) In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the UCB. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or successive occasions.
(8) Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the UCB and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
325X. A UCB’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
(1) Use of minatory or abusive language;
(2) Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
(3) Sending inappropriate messages either on mobile or through social media;
(4) Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
(5) Making threatening and / or anonymous calls;
(6) Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
(7) Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
(8) Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
J.5 Complaints against UCB’s employees and its recovery agents
325Y. A UCB shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 325I above. Further, all recovery related communications issued by the UCB must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the UCB whom the borrower / guarantor can contact.
J.6 Adherence to other regulations issued by the Reserve Bank / other authorities
325Z. In addition to the Directions mentioned herein, a UCB shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
Draft – Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) …… Amendment Directions, 2026
DOR.MCS.REC.No. /01-01-038/2026-27
XXXXXXX XX, 2026
Draft Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) …… Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Rural Co-operative Banks (RCBs) have been issued to RCBs under the Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all RCBs (hereinafter referred to collectively as “RCBs” and individually as an “RCB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21, 35A and 56 of the Banking Regulation Act,1949, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) …… Amendment Directions, 2026.
(2) These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Directions, 2025as under:
(1) In paragraph 4, the following definitions shall be inserted after sub-paragraph 4(23), namely:
“4(23A) Recovery agency means an entity or individual (other than RCB’s own employees) who has been engaged by an RCB, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
Illustration: A Business Correspondent (BC) involved in recovery related activities on behalf of an RCB shall be treated as a recovery agency for the purpose of these Directions.
4(23B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of an RCB, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by an RCB under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 369 to 378 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 378, namely:
“J. Conduct of RCBs in Recovery of Loan Dues and Engagement of Recovery Agencies
378A. The provisions under this Section shall apply to recovery of loan dues by an RCB from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
378B. The provisions under this Section shall be without prejudice to any statutory rights available to an RCB, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
378C. ‘RCB employees’, for the purpose of this Section, shall include those employees of an RCB who are deployed for recovery of loan dues, including taking possession of a security.
J.1 Policy
378D. An RCB shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on
378E. An RCB engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (Rural Co-operative Banks – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. An RCB shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the RCB’s policy.
J.2.2 Training
378F. An RCB shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF. An RCB shall also ensure that recovery agents already engaged by its recovery agencies, but not holding the aforesaid certificate, obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
J.2.3 Code of Conduct for recovery agents and RCB employees
378G. An RCB, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the RCB shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
J.3 Responsibilities of an RCB
J.3.1 Disclosure of information on recovery agencies
378H. An RCB shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The RCB shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the RCB shall immediately update such list.
378I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the RCB shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the RCB, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
378J. In case of change of the recovery agency during an ongoing recovery process, the RCB shall immediately notify the borrower / guarantor of the change.
378K. In the event of termination of the agreement with a recovery agency for any reason, the RCB shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
J.3.2 Fair treatment to borrowers during recovery process
378L. An RCB shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the RCB shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
378M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the RCB shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
378N. An RCB 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 RCB shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the RCB. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the RCB shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
378O. An RCB shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 378X below.
J.3.3 Taking possession of security
378P. Where an RCB has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the RCB shall ensure that the possession clause is legally valid, and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
(1) notice period before taking possession;
(2) circumstances under which the notice period can be waived;
(3) the procedure for taking possession of the security;
(4) final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
(5) the procedure for giving the possession of the security back to the borrower; and
(6) the procedure for sale / auction of the security.
J.3.4 Deployment of technology-based mechanism for recovery of loan dues
378Q. An RCB 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The RCB may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
(1) The acquisition of the concerned mobile device is financed by the RCB through a loan;
(2) The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
(3) A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
(4) Another notice has been given to the borrower after the expiry of the notice in paragraph 378Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The RCB shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 378Q(3) and (4) above.
378R. A RCB, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
(1) The RCB shall adopt a graduated approach rather than disabling the device, ab initio.
(2) The RCB shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
(3) The RCB shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
(4) In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
(5) The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
(6) The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The RCB shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
378S. An RCB shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
J.3.5 Periodic review, monitoring and control
378T. An RCB shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the RCB’s integrity and reputation. The RCB shall ensure that its agreement with a recovery agency contains the necessary provisions for achieving the same.
378U. An RCB, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of RCB’s employees and recovery agents
378V. An RCB’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the RCB and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the RCB or the recovery agency and a copy of the notice issued by the RCB in terms of paragraph 378I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the RCB in terms of paragraph 378Y below.
378W. An RCB shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
(1) An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
(2) An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
(3) Only the representative(s) authorised by the RCB / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
(4) An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
(5) An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
(6) An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
(7) In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the RCB. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
(8) Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the RCB and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
378X. An RCB’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
(1) Use of minatory or abusive language;
(2) Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
(3) Sending inappropriate messages either on mobile or through social media;
(4) Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
(5) Making threatening and / or anonymous calls;
(6) Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
(7) Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
(8) Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
J.5 Complaints against RCB’s employees and its recovery agents
378Y. An RCB shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 378I above. Further, all recovery related communications issued by the RCB must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the RCB whom the borrower / guarantor can contact.
J.6 Adherence to other regulations issued by the Reserve Bank / other authorities
378Z. In addition to the Directions mentioned herein, an RCB shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
Draft – Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) ……. Amendment Directions, 2026
DOR.MCS.REC.No. /01-01-040/2026-27
XXXXXX XX, 2026
Draft Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) ……. Amendment Directions, 2026
Certain instructions on responsibilities of an All India Financial Institution (AIFI) employing recovery agents have been issued to AIFIs under the Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all AIFIs (hereinafter referred to collectively as “AIFIs” and individually as an “AIFI”) under the aforesaid Directions.
2. In exercise of the powers conferred by Section 45L of the Reserve Bank of India Act, 1934, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) ……. Amendment Directions, 2026.
(2) These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) Directions, 2025as under:
(1) In Chapter I on ‘Preliminary’, the following section and paragraph shall be inserted after paragraph 3, namely:
“C. Definitions
3A. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:
(1) Recovery agency means an entity or individual (other than AIFI’s own employees) who has been engaged by an AIFI, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
(2) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of an AIFI, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by an AIFI under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(1) In Chapter III on ‘Responsible Lending Conduct’, paragraph 32 shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 32, namely:
“E. Conduct of AIFIs in Recovery of Loan Dues and Engagement of Recovery Agencies
32A. The provisions under this Section shall apply to recovery of loan dues by an AIFI from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
32B. The provisions under this Section shall be without prejudice to any statutory rights available to an AIFI, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
32C. ‘AIFI employees’, for the purpose of this Section, shall include those employees of an AIFI who are deployed for recovery of loan dues, including taking possession of a security.
E.1 Policy
32D. An AIFI shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit and control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery related actions of the AIFI or the recovery agencies not consistent with these Directions.
E.2 Engagement of recovery agencies for recovery of loan dues
E.2.1 Due diligence
32E. An AIFI engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (All India Financial Institutions – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. An AIFI shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the AIFI’s policy.
E.2.2 Training
32F. An AIFI shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF. An AIFI shall also ensure that recovery agents already engaged by its recovery agencies, but not holding the aforesaid certificate, obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
E.2.3 Code of Conduct for recovery agents and AIFI employees
32G. An AIFI, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the AIFI shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
E.3 Responsibilities of an AIFI
E.3.1 Disclosure of information on recovery agencies
32H. An AIFI shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc, as applicable. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The AIFI shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the AIFI shall immediately update such list.
32I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the AIFI shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the AIFI, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
32J. In case of change of the recovery agency during an ongoing recovery process, the AIFI shall immediately notify the borrower / guarantor of the change.
32K. In the event of termination of the agreement with a recovery agency for any reason, the AIFI shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
E.3.2 Fair treatment to borrowers during recovery process
32L. An AIFI shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the AIFI shall put in place mitigants, including penal provisions to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
32M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the AIFI shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
32N. An AIFI 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 AIFI shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the AIFI. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the AIFI shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
32O. An AIFI shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 32X below.
E.3.3 Taking possession of security
32P. Where an AIFI has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the AIFI shall ensure that the possession clause is legally valid and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
(1) notice period before taking possession;
(2) circumstances under which the notice period can be waived;
(3) the procedure for taking possession of the security;
(4) final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
(5) the procedure for giving the possession of the security back to the borrower; and
(6) the procedure for sale / auction of the security.
E.3.4 Deployment of technology-based mechanism for recovery of loan dues
32Q. An AIFI 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The AIFI may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
(1) The acquisition of the concerned mobile device is financed by the AIFI through a loan;
(2) The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
(3) A notice is issued to the borrower after the loan becomes 60 days past due, with at least 21 days of time being provided to the borrower to cure the default; and
(4) Another notice has been given to the borrower after the expiry of the notice in paragraph 32Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The AIFI shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 32Q(3) and (4) above.
32R. An AIFI, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
(1) The AIFI shall adopt a graduated approach rather than disabling the device, ab initio.
(2) The AIFI shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
(3) The AIFI shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
(4) In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
(5) The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
(6) The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The AIFI shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
32S. An AIFI shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
E.3.5 Periodic review, monitoring and control
32T. An AIFI shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the AIFI’s integrity and reputation. The AIFI shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
32U. An AIFI, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
E.4 Conduct of AIFI’s employees and recovery agents
32V. An AIFI’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the AIFI and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the AIFI or the recovery agency and a copy of the notice issued by the AIFI in terms of paragraph 32I above. The authorisation letter and the notice shall, among other details, include the telephone number of the recovery agency and the grievance redressal officer appointed by the AIFI in terms of paragraph 32Y below.
32W. An AIFI shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
(1) An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
(2) An employee / recovery agent shall interact with the borrower/ guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
(3) Only the representative(s) authorised by the AIFI / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
(4) An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
(5) An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
(6) An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
(7) In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the AIFI. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
(8) Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the AIFI and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
32X. An AIFI’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
(1) Use of minatory or abusive language;
(2) Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
(3) Sending inappropriate messages either on mobile or through social media;
(4) Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
(5) Making threatening and / or anonymous calls;
(6) Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal , physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
(7) Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
(8) Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
E.5 Complaints against AIFI’s employees and its recovery agents
32Y. An AIFI shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 32I above. Further, all recovery related communications issued by the AIFI must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the AIFI whom the borrower / guarantor can contact.
E.6 Adherence to other regulations issued by the Reserve Bank / other authorities
32Z. In addition to the Directions mentioned herein, an AIFI shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
Draft – Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) ……. Amendment Directions, 2026
DOR.MCS.REC.No. /01-01-039/ 2026-27
XXXXXX XX, 2026
Draft Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) ……. Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Non-Banking Financial Companies (NBFCs) have been issued to NBFCs under Chapter III on ‘Responsible Lending Conduct’ of the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all NBFCs, excluding Mortgage Guarantee Companies, Core Investment Companies, NBFC-Account Aggregators, Standalone Primary Dealers, Non-Operating Financial Housing Companies, and NBFCs not having any customer interface.
2. In exercise of the powers conferred by Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) …… Amendment Directions, 2026.
(2) These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025as under:
(1) In paragraph 6, the following definitions shall be inserted after sub-paragraph 6(11), namely:
“6(11A) Recovery agency means an entity or individual (other than NBFC’s own employees) who has been engaged by an NBFC, irrespective of the contractual designation / nomenclature used for such engagement, under an outsourcing arrangement to assist in recovery of loan dues from a borrower in default, including taking possession of a security.
6(11B) Recovery agent means a representative of a recovery agency who is involved in recovery related activities, on behalf of an NBFC, at the point of customer interface.
Explanation: Wherever an individual is directly engaged by an NBFC under an outsourcing arrangement for recovery / possession related activities, instructions applicable to recovery agency as well as recovery agent shall apply to such an individual.”
(2) In Chapter II on ‘Institutional Framework’, the sub-paragraphs 7(7) and 7(8) shall be deleted.
(3) In Chapter III on ‘Responsible Lending Conduct’, the paragraphs 89 to 97 shall be deleted.
(4) In Chapter III on ‘Responsible Lending Conduct’, the section I on ‘Responsibilities of Recovery Agents of the NBFC’ and the paragraphs 98 to 100 thereunder shall be deleted. Further, the following section and paragraphs shall be inserted after paragraph 100, namely:
“J. Conduct of NBFCs in Recovery of Loan Dues and Engagement of Recovery Agencies
100A. The provisions under this Section shall apply to recovery of loan dues by an NBFC from borrowers in default, including taking possession of a security.
Provided that, wherever explicitly specified, these provisions shall also apply, mutatis mutandis, to collection of dues in the normal course from the borrowers who are not in default.
100B. The provisions under this Section shall be without prejudice to any statutory rights available to an NBFC, and / or obligations, relating to enforcement of security under any statute, as well as provisions relating to specific recovery actions such as one-time settlement contained in other relevant Directions.
100C. ‘NBFC employees’, for the purpose of this Section, shall include those employees of an NBFC who are deployed for recovery of loan dues, including taking possession of a security.
J.1 Policy
100D. An NBFC shall put in place a policy on collection / recovery of loan dues, including taking possession of a security, by its own employee or recovery agent. The policy shall generally cover aspects related to, inter alia, trigger(s) for initiation of recovery process, graded actions as per an escalation matrix for loan recovery, code of conduct for employees and recovery agents, recovery of loan dues in case of demise of borrower, etc. Further, with regard to engagement of recovery agencies, the
policy shall cover, inter alia, eligibility and due diligence criteria for engagement of recovery agencies, performance evaluation standards, inspection / audit, control mechanisms to ensure compliance with statutory / regulatory requirements, procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies and / or their agents, etc. The policy shall also incorporate provisions relating to compensation to the borrowers / guarantors for loss arising on account of recovery related actions of the NBFC or the recovery agencies not consistent with these Directions.
J.2 Engagement of recovery agencies for recovery of loan dues
J.2.1 Due diligence
100E. An NBFC engaging recovery agencies shall put in place a due diligence process for their engagement, which shall conform to the instructions issued by the Reserve Bank in the Reserve Bank of India (Non-Banking Financial Companies – Managing Risks in Outsourcing) Directions, 2025, as amended from time to time. An NBFC shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their recovery agents at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity as specified in the NBFC’s policy.
J.2.2 Training
100F. An NBFC shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF. An NBFC shall also ensure that recovery agents already engaged by its recovery agencies, but not holding the aforesaid certificate, obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
J.2.3 Code of Conduct for recovery agents and NBFC employees
100G. An NBFC, based on the instructions mentioned in these Directions, shall put in place a code of conduct for recovery agents and its own employees. Where a recovery agency has been engaged, the NBFC shall obtain an undertaking from the recovery agency that its recovery agents agree to abide by the code of conduct.
J.3 Responsibilities of an NBFC
J.3.1 Disclosure of information on recovery agencies
100H. An NBFC shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on all prominent channels through which it engages with customers, viz., branches / offices or digital platforms such as website, mobile app, etc., as applicable. Such list shall include the name and other details of the
recovery agencies such as type (corporate / individual), correspondence address, the period of engagement, purpose of engagement (recovery / possession of security) and assigned geographical areas, if any. The NBFC shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the NBFC shall immediately update such list.
100I. While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the NBFC shall notify the details of the recovery agency to the borrower / guarantor to ensure due intimation and proper authorisation, at least one day prior to the first visit, by sending a message and / or email on the registered mobile number / email address. Where the registered mobile number or email address is not available with the NBFC, such a notice shall be sent to the borrower / guarantor by way of a letter to his / her current address at least three days prior to the first visit.
100J. In case of change of the recovery agency during an ongoing recovery process, the NBFC shall immediately notify the borrower / guarantor of the change.
100K. In the event of termination of the agreement with a recovery agency for any reason, the NBFC shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
J.3.2 Fair treatment to borrowers during recovery process
100L. An NBFC shall ensure that the disclosure of any borrower’s / guarantor’s information to its employees / recovery agencies is limited to the extent required to enable them to discharge their loan recovery related duties. Further, the NBFC shall put in place mitigants, including penal provisions, to ensure that its employees / recovery agencies do not misuse any customer information in any manner.
100M. Where a grievance related to the loan dues or recovery thereof has been lodged by a borrower, the NBFC shall not forward the concerned recovery case to an employee / recovery agency till it finally disposes of the grievance.
100N. An NBFC 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 NBFC shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the NBFC. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the NBFC shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
100O. An NBFC shall ensure that the recovery targets or the structure of incentives in the contract with a recovery agency do not induce adoption of harsh recovery practices as described at paragraph 100X below.
J.3.3 Taking possession of security
100P. Where an NBFC has incorporated a possession clause in the loan contract / agreement with a borrower and relies on such possession clause for enforcing its rights, the NBFC shall ensure that the possession clause is legally valid and that such possession clause is clearly brought to the notice of the borrower at the time of execution of the loan contract / agreement. Accordingly, the terms and conditions of the loan contract / agreement shall contain provisions regarding:
(1) notice period before taking possession;
(2) circumstances under which the notice period can be waived;
(3) the procedure for taking possession of the security;
(4) final chance to be given to the borrower for repayment of loan before the sale / auction of the security;
(5) the procedure for giving the possession of the security back to the borrower; and
(6) the procedure for sale / auction of the security.
J.3.4 Deployment of technology-based mechanism for recovery of loan dues
100Q. An NBFC 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, etc., as a recovery tool, except to recover its loan dues arising out from financing of such a device. The NBFC may resort to such restriction or disablement of the functionalities of a mobile device provided the following conditions are satisfied:
(1) The acquisition of the concerned mobile device is financed by the NBFC through a loan;
(2) The loan contract / agreement expressly and unambiguously permits such an action. The contract / agreement shall specify, inter alia, the events that may trigger issuance of notice for loan recovery and imposition of restrictions on the functionalities of the device, means by which such notices shall be served, graduated approach that shall be employed to restrict the functionalities of the device in case of non-repayment of loan, time allowed to cure the loan default, grievance redressal mechanism, etc.;
(3) A notice is issued to the borrower after the loan becomes 60 days past due , with at least 21 days of time being provided to the borrower to cure the default; and
(4) Another notice has been given to the borrower after the expiry of the notice in paragraph 100Q(3) above with at least another 7 days of time being provided to the borrower to cure the default.
Explanation: The NBFC shall not deploy the mechanism to restrict or disable the functionalities of the device until the associated loan has become 90 days past due and the borrower has not cured the default despite being served notices mentioned at paragraph 100Q(3) and (4) above.
100R. An NBFC, deploying any technology-based mechanism for restricting or disabling the functionalities of a mobile device of a borrower, shall ensure adherence to the following:
(1) The NBFC shall adopt a graduated approach rather than disabling the device, ab initio.
(2) The NBFC shall not restrict / disable certain essential functionalities, such as access to internet, incoming calls, emergency SOS features, and receipt of emergency Government or public-safety notifications.
(3) The NBFC shall ensure that the restrictions on device functionalities are reversed expeditiously, in any case within one hour of the borrower curing the default.
(4) In cases involving wrongful restriction or delay in reversal of restriction in the device functionalities after the borrower cures the default, the lender shall compensate the borrower at the rate of ₹250 per hour till the wrongful action is remedied.
(5) The technology-based mechanism deployed for restricting the functionalities of the mobile device shall be uninstalled soon after the loan is repaid in full.
(6) The borrower shall have the right to prepay the loan, either partly or fully, at any stage.
(7) The NBFC shall put in place a robust grievance redressal mechanism to resolve borrower’s grievances regarding delays and issues in unlocking of mobile device functionalities.
100S. An NBFC shall neither access or use nor obtain or retain the data stored in the mobile device of a borrower for the purpose of loan recovery or any other purpose under any circumstances.
J.3.5 Periodic review, monitoring and control
100T. An NBFC shall put in place a management structure to monitor and control the activities of its recovery agencies and ensure that they refrain from actions that could damage the NBFC’s integrity and reputation. The NBFC shall ensure that its agreement with a recovery agency contains necessary provisions for achieving the same.
100U. An NBFC, engaging recovery agencies, shall undertake a periodic review of the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of NBFC’s employees and recovery agents
100V. An NBFC’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the NBFC and recovery agency, respectively. The recovery agent shall also carry an authorisation letter issued by the NBFC or the recovery agency and a copy of the notice issued by the NBFC in terms of paragraph 100I above. The authorisation letter and the notice shall, among other details, include the telephone number of the / recovery agency and the grievance redressal officer appointed by the NBFC in terms of paragraph 100Y below.
100W. An NBFC shall ensure that its employee / recovery agent engaged in activities related to collection / recovery of loan dues adheres to the following:
(1) An employee / recovery agent shall discuss the matters related to the loan dues and collection / recovery thereof only with the borrower / guarantor, as applicable.
(2) An employee / recovery agent shall interact with the borrower / guarantor in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower’s / guarantor’s place for collection / recovery of loan dues.
(3) Only the representative(s) authorised by the NBFC / recovery agency shall visit the borrower’s / guarantor’s premises for activities related to recovery of loan dues.
(4) An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the borrower / guarantor has expressly given a request or authorisation to do so. Further, the borrower’s / guarantor’s request to avoid call / visit at a particular time shall be honoured in normal circumstances.
(5) An employee / recovery agent shall ordinarily contact a borrower / guarantor at the place of the borrower’s / guarantor’s choice. In the absence of any specific choice or if the borrower / guarantor fails to appear at the chosen place on two or more successive occasions, the employee / recovery agent may contact the borrower / guarantor at the place of his / her residence or at the place of his / her business / occupation.
(6) An employee / recovery agent shall avoid inappropriate occasions such as bereavement in the family or such other calamitous occasion, or marriage functions, etc. for making calls / visits to recover loan dues from a borrower / guarantor.
(7) In case of microfinance loans, collection / recovery shall be made at a designated / central designated place decided mutually by the borrower and the NBFC. However, field staff shall be allowed to make collection / recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated / central designated place on two or more successive occasions.
(8) Written communication, if any, sent by an employee / recovery agent to the borrower / guarantor shall have prior approval of the NBFC and shall contain the name and contact details of the sender.
(9) An employee / recovery agent shall promptly give proper acknowledgement / receipt on collection / recovery of loan dues from the borrower / guarantor.
100X. An NBFC’s employee / recovery agent shall not engage in any harsh methods towards collection / recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
(1) Use of minatory or abusive language;
(2) Use of social media for posting video / audio recordings or personal details of the borrower / guarantor;
(3) Sending inappropriate messages either on mobile or through social media;
(4) Excessively calling / messaging to the borrower / guarantor and / or calling / messaging outside the prescribed hours;
(5) Making threatening and / or anonymous calls;
(6) Intimidating or harassing the borrower / guarantor and / or his / her relatives, referees, friends, or co-workers in either verbal, physical or any other manner, including acts intended to humiliate them publicly or intruding upon their privacy;
(7) Use or threat of use of violence or other similar means to harm the borrower / guarantor or their family / assets / reputation;
(8) Making false or misleading representations to the borrower / guarantor, especially about the extent of the debt or the consequences of non-repayment.
J.5 Complaints against NBFC’s employees and its recovery agents
100Y. An NBFC shall have a dedicated mechanism for redressal of recovery related grievances. The details of this mechanism shall be provided to the borrower by including the same under the loan agreement and while advising the details of the recovery agency as at paragraph 100I above. Further, all recovery related communications issued by the NBFC must contain the name, email address, telephone number and address of the grievance redressal officer concerned of the NBFC whom the borrower / guarantor can contact.
J.6 Adherence to other regulations issued by the Reserve Bank / other authorities
100Z. In addition to the Directions mentioned herein, an NBFC shall also ensure compliance with any relevant guidelines issued by the Reserve Bank on related matters and also with guidelines issued by the relevant authorities from time to time, including the guidelines issued by Telecom Regulatory Authority of India (TRAI) on aspects related to commercial communication such as the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager
Reserve Bank of India
Draft – Reserve Bank of India (Housing Finance Companies) …… Amendment Directions, 2026
DOR.MCS.REC.No. /01-01-039/2026-27
XXXXXX XX, 2026
Draft Reserve Bank of India (Housing Finance Companies) …… Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Housing Finance Companies (HFCs) have been issued to HFCs under Chapter-X on ‘Fair Practices Code’ of the Reserve Bank of India (Housing Finance Companies) Directions, 2025. The extant instructions have since been reviewed and it has been decided to issue comprehensive instructions on conduct related matters in recovery of loan dues and engagement of recovery agencies to all NBFCs, excluding Mortgage Guarantee Companies, Core Investment Companies, NBFC-Account Aggregators, Standalone Primary Dealers, Non-Operating Financial Housing Companies, and NBFCs not having any customer interface, under the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025.
2. In exercise of the powers conferred by Section 30A of the National Housing Bank Act,1987, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby issues the Amendment Directions hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (Housing Finance Companies) …… Amendment Directions, 2026.
(2) These Directions shall come into effect from October 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Housing Finance Companies) Directions, 2025as under:
In Chapter-X on ‘Fair Practices Code’, the sub-section A.15 Guidelines for engaging Recovery Agents and paragraph 170 thereunder shall be deleted and substituted with a new sub-section and paragraph as under:
“A.15A Conduct of HFCs in Recovery of Loan Dues and Engagement of Recovery Agents
170A. An HFC shall ensure compliance with the provisions of paragraphs 100A to 100Z under Chapter III of Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025.”
(Veena Srivastava)
Chief General Manager
