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Mumbai. The Reserve Bank of India (RBI) has issued new and stricter rules to loan recovery for banks, non-banking financial companies (NBFCs) and other lending institutions. The new guidelines aim to protect the rights of borrowers and make the recovery process more transparent. Under the new rules, it will now be mandatory for the bank to be informed at least 24 hours before the first visit of the recovery agent to the borrower’s home. The bank will also have to share the name and contact number of the agency with the borrower.

The bank will be fully responsible

The RBI has clarified that the bank or lending institution will be solely responsible for the conduct and actions of the recovery agency or recovery agent. Furthermore, all banks and financial institutions will be required to publicly list their appointed recovery agencies and agents on their websites.

Call recordings will be kept safe for six months

Under the new rules, recordings of phone conversations between recovery agents and borrowers must be preserved for at least six months. If the case reaches court, the recordings must be preserved until the judicial process is complete.

Identity card and authorization letter required

The RBI has mandated that bank employees and recovery agents must present their ID cards during collections. Furthermore, the agent must possess an authorization letter issued by the bank or recovery agency, which also includes the contact numbers of the agency and the grievance redressal officer.

Meeting will take place at a place of the borrower’s choice

According to the new rules, bank employees or recovery agents will meet the borrower or guarantor at a location of their choice. Only if the borrower fails to show up at the designated location two times in a row will recovery agents be able to visit their home or workplace.

Complete ban on bullying

The RBI has strictly prohibited any coercive or abusive tactics employed by recovery agents. These include abusive or threatening behavior; making repeated or blank calls; making calls and messages late at night or at inappropriate hours; sharing audio, video, or personal information on social media; harassing family, friends, or coworkers; publicly humiliating; and exaggerating the consequences of loan default.

Banks will formulate an internal recovery policy

The RBI has directed all banks and other regulated entities to develop clear internal policies for loan recovery. This policy will also specify the circumstances under which recovery proceedings will be initiated. Any loss suffered by a borrower during the recovery process will be the responsibility of the respective bank or financial institution.