RBI Draft Norms to Curb Harsh Loan Recovery Practices
Why in the news
Complaints about coercion, intimidation and public humiliation by recovery agents have grown, so the Reserve Bank of India proposed behavioural norms for banks and their agents.
Key facts
- Draft instrument: Responsible Business Conduct Second Amendment Directions, 2026.
- Start: 1 July 2026, after consultation.
- Grievances: dedicated mechanism with timely resolution in every bank.
Prohibited “harsh recovery practices”
- Threatening, abusive or humiliating language.
- Repeated or excessive calls, or calls outside permitted hours.
- Coercive or inappropriate messages by phone or social media.
- Harassing borrowers, guarantors or their circle; public shaming; threats of violence or harm to reputation or property.
- False or misleading statements on the debt or legal consequences.
Bank duties
- Formal policy on recovery and on hiring recovery agents.
- Due diligence before engaging agents.
- Codes of conduct and performance standards.
- Lawful procedures for taking collateral into possession.
Exam angle
- Effective date: 1 July 2026.
- Themes: recovery agents, collateral possession, grievance redressal.