The draft — titled Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026 — will come into effect from October 1, once finalised.
The framework has been issued under Sections 21 and 35A of the Banking Regulation Act, 1949, and applies to all commercial banks except Small Finance Banks, Payments Banks, Regional Rural Banks and Local Area Banks.
A key change in the draft is the formal definition and regulatory treatment of “recovery agencies” and “recovery agents”.
The RBI has clarified that any outsourced entity or individual engaged in loan recovery activities — including Business Correspondents involved in recovery — will be treated as recovery agencies. Individuals interacting directly with borrowers will be classified as recovery agents, bringing a wider set of outsourcing arrangements under regulatory oversight.
The central bank has replaced earlier fragmented
instructions with a consolidated framework on recovery practices. Banks will now be required to formulate a detailed recovery policy covering escalation mechanisms, due diligence standards for agencies, performance monitoring, and compensation mechanisms for borrowers in case of loss arising from non-compliant recovery actions.
The draft also tightens onboarding and conduct norms for recovery agencies. Banks must ensure agencies conduct antecedent verification of agents, while agents themselves must hold certification from the Indian Institute of Banking and Finance (IIBF) or equivalent training institutions. A formal code of conduct will be mandatory, and agencies must agree to abide by it.
On customer protection, the RBI has proposed stronger disclosure requirements. Banks will have to publish an updated list of all empanelled recovery agencies on their websites and digital platforms, and inform borrowers at least one day prior to any recovery-related visit. Any change or termination of recovery agency engagement must also be promptly communicated to customers.
The draft further sets strict behavioural standards for recovery interactions, limiting calls and visits to between 08:00 and 19:00 hours, barring exceptions requested by borrowers. It explicitly prohibits “harsh recovery practices”, including abusive language, harassment, excessive calls, threats, or misuse of social media to shame borrowers.
In a significant consumer protection measure, the RBI has also regulated the use of technology in recovery. Banks will not be allowed to restrict or disable mobile device functionalities for recovery purposes unless the device was financed by the bank itself and strict safeguards are followed. Even in such cases, essential features like emergency calls and public safety alerts cannot be disabled. Borrowers must also be compensated at ₹250 per hour for delays in restoring device access after loan repayment or resolution.
The draft additionally mandates call recording and documentation of recovery interactions, mandatory grievance redress mechanisms, and immediate suspension of recovery action in case of pending borrower complaints until resolution. Banks will also be prohibited from using or accessing data stored on borrowers’ mobile devices for recovery purposes.
With these proposed amendments, the RBI aims to standardise recovery practices across banks while strengthening borrower dignity, privacy, and fair treatment during loan recovery processes.
