Reserve Bank of India Tightens Loan Recovery and Device-Locking Rules

The Reserve Bank of India has implemented a comprehensive regulatory framework to strengthen borrower protections and tighten loan recovery rules, effective January 1, 2027. The directives prohibit the use of abusive language, threats, and public humiliation, specifically banning the disclosure of borrower details on social media. Recovery agents must now be certified by the Indian Institute of Banking and Finance or an approved institute, carry proper identification, and limit visits to between 8 a.m. and 7 p.m.

Banks are required to establish board-approved recovery policies and record all recovery calls for at least six months. To ensure transparency, lenders must notify borrowers one day before the first in-person visit and publish lists of empanelled agencies. Agents are further prohibited from contacting borrowers during bereavement or medical emergencies.

The framework introduces strict safeguards for technology-based recovery. Banks may only remotely restrict smartphones, tablets, or laptops if the device was financed by the loan and the agreement explicitly permits such action. Restrictions follow a phased timeline: non-essential functions can be limited after 30 days of delinquency, while full restrictions and blocking outgoing calls are permitted only after 60 days. Essential services, including emergency SOS and incoming calls, must remain operational, and lenders are barred from accessing personal data like photos or location history.

To enforce compliance, the central bank mandated compensation for borrowers affected by non-compliant practices. Banks must pay ₹250 per hour for wrongful device restrictions or failures to restore functionality within one hour of payment, capped at the total loan amount disbursed.