RBI Tightens Guidelines on Loan Recovery Practices

The RBI has introduced revised requirements for loan recovery and recovery agents, aimed at strengthening banks’ processes and borrower safeguards.

Key Highlights:

• Banks must maintain a comprehensive recovery agency policy and monitor recovery agents.
• Recovery agents must undergo background verification and prescribed training/certification.
• Borrowers must be informed about the recovery agent and proposed recovery visits.
• Harassment, threats, abusive language, excessive calls/messages and public humiliation are prohibited.
• Banks must maintain a dedicated grievance redressal mechanism for recovery-related complaints.
• Specific safeguards apply to technology-based recovery measures, including device restrictions.

Effective Date: January 1, 2027.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13665

RBI Strengthens Loan Recovery Guidelines for Small Finance Banks

The RBI has introduced comprehensive guidelines for loan recovery and engagement of recovery agencies by Small Finance Banks (SFBs), effective January 1, 2027.

Key Highlights

• SFBs must have a formal recovery policy covering recovery procedures, escalation, agent conduct and borrower compensation.
• Recovery agencies must undergo due diligence, and recovery agents must complete prescribed IIBF training and certification.
• SFBs must disclose recovery agency details on their website and inform borrowers before recovery visits or changes in the assigned agency.
• Recovery agents must follow prescribed timings and conduct standards and must not use threats, abusive language, harassment or public humiliation.
• Technology-based device restrictions for loan recovery are permitted only for devices financed by the SFB, subject to safeguards. Essential functions and borrower employment-related access cannot be restricted.
• SFBs must provide a dedicated grievance redressal mechanism for recovery-related complaints.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13666

RBI Tightens Loan Recovery Norms for Local Area Banks

RBI has introduced revised norms for loan recovery and recovery agents applicable to Local Area Banks (LABs), effective January 1, 2027.

Key Highlights:

• LABs must have a comprehensive recovery policy and due-diligence process for recovery agents.
• Recovery agents must follow prescribed contact hours and borrower conduct standards.
• Harassment, threats, abusive language, excessive calls and misleading statements are prohibited.
• Borrower data and device information must be protected during recovery activities.
• LABs must provide a dedicated grievance redressal mechanism for recovery-related complaints.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13667

RBI Tightens Loan Recovery Norms for RRBs

The RBI has introduced comprehensive guidelines for Regional Rural Banks (RRBs) on loan recovery and engagement of recovery agencies, effective January 1, 2027.

Key Highlights:

• Mandatory policy, due diligence and IIBF certification for recovery agents.
• Disclosure of recovery agencies and prior notice to borrowers.
• Recovery calls/visits generally restricted to 8:00 AM–7:00 PM.
• Prohibition of harassment, threats, abusive language and other harsh recovery practices.
• Clear procedures for security possession and auction.
• Safeguards for technology-based device restrictions and customer data protection.
• Dedicated recovery grievance redressal mechanism and periodic monitoring of recovery agencies.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13668

RBI Strengthens Recovery Practices for Urban Co-operative Banks

The Reserve Bank of India has issued the Fourth Amendment to the Urban Co-operative Banks – Responsible Business Conduct Directions, 2025, introducing comprehensive requirements for loan recovery and engagement of recovery agencies.

Key requirements include:

• UCBs must maintain a board-approved recovery policy, covering recovery procedures, due diligence, training, monitoring and borrower compensation.
• Recovery agents must undergo IIBF-certified training and follow a prescribed code of conduct.
• UCBs must disclose details of engaged recovery agencies on their websites and inform borrowers before visits or changes in agencies.
• Recovery activities must protect borrower information and privacy, with recovery calls recorded and retained for six months.
• Recovery agents must contact borrowers only between 8:00 AM and 7:00 PM, except where specifically authorised.
• Harassment, abusive language, threats, excessive calls, social-media misuse and misleading representations are prohibited.
• Technology-based restrictions on financed mobile devices are permitted only subject to specified conditions, including gradual restrictions, protection of essential functions and prohibition on accessing personal data.
• UCBs must maintain a dedicated grievance redressal mechanism for recovery-related complaints.

The amended Directions will come into effect from January 1, 2027.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13669

RBI Strengthens Loan Recovery Practices for Rural Co-operative Banks

The Reserve Bank of India has issued the Fourth Amendment to the Rural Co-operative Banks – Responsible Business Conduct Directions, 2025, introducing comprehensive requirements for loan recovery and engagement of recovery agencies.

Key provisions include:

• RCBs must establish a recovery policy covering recovery procedures, due diligence, monitoring, training and borrower compensation.
• Recovery agents must undergo IIBF-certified training and follow a prescribed code of conduct.
• RCBs must disclose details of recovery agencies on their websites and inform borrowers before recovery visits or changes in agencies.
• Borrower information must be protected, and recovery calls must be recorded and retained for six months.
• Recovery agents may contact borrowers only between 8:00 AM and 7:00 PM, subject to specified exceptions.
• Harassment, threats, abusive language, excessive calls, social-media misuse and misleading representations are prohibited.
• Technology-based restrictions on financed mobile devices are permitted only under specified conditions, including gradual restrictions, protection of essential functions and prohibition on accessing personal data.
• RCBs must provide a dedicated grievance redressal mechanism for recovery-related complaints.

The amended Directions will come into effect from January 1, 2027.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13670

RBI Updates Recovery Guidelines for AIFIs

The RBI (All India Financial Institutions – Responsible Business Conduct) Third Amendment Directions, 2026, effective January 1, 2027, introduce comprehensive requirements for recovery of loan dues and engagement of recovery agencies by AIFIs.

Key requirements include:

• Recovery Policy: Cover recovery triggers, escalation, conduct, and borrower distress.
• Due Diligence & Training: Recovery agencies and agents must undergo prescribed due diligence and IIBF certification.
• Agency Disclosure: Updated recovery agency details must be published on the AIFI’s website and communicated to borrowers.
• Fair Recovery Practices: Customer information must be protected, recovery calls recorded, and harsh practices prohibited.
• Security & Technology: Rules govern security possession and technology-based device restrictions, including a 30-day/60-day past-due framework.
• Data Protection: Device-locking mechanisms must not access personal data.
• Contact Norms: Recovery agents must maintain proper identification, conduct, and contact borrowers between 8:00 AM and 7:00 PM.
• Grievance Redressal: A dedicated recovery-related complaint mechanism must be provided.
• Regulatory Compliance: AIFIs must comply with applicable RBI, TRAI, and other regulatory requirements.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13671

RBI Strengthens Recovery Conduct Framework for NBFCs

The RBI has issued the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Third Amendment Directions, 2026, effective January 1, 2027, introducing comprehensive requirements for loan recovery and engagement of recovery agencies by applicable NBFCs.

Key requirements include:

• Recovery Policy: NBFCs must establish policies covering recovery processes, escalation mechanisms, employee and agent conduct, financial distress cases, and borrower compensation.
• Due Diligence & Training: Recovery agencies and agents must undergo appropriate due diligence, background verification, and prescribed IIBF-certified training.
• Agency Disclosure: NBFCs must publish and regularly update the list of engaged recovery agencies on their websites and notify borrowers of agency assignments or changes.
• Fair Recovery Practices: Recovery activities must protect borrower information, maintain call records, and prohibit abusive, threatening, misleading, or harassing practices.
• Technology-Based Recovery: Device restriction mechanisms are permitted only for financed devices, subject to prescribed notice, timelines, essential-function safeguards, data protection, and grievance redressal requirements.
• Monitoring & Accountability: NBFCs must monitor recovery agencies, conduct periodic reviews, and maintain appropriate contractual controls.
• Grievance Redressal: A dedicated mechanism must be established for recovery-related complaints, with grievance officer details provided to borrowers.
• Regulatory Compliance: NBFCs must also comply with applicable RBI, TRAI, outsourcing, and other relevant regulatory requirements.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13672

RBI Strengthens Recovery Conduct Framework for HFCs

The Reserve Bank of India (RBI) has issued the Housing Finance Companies (HFCs) Third Amendment Directions, 2026, introducing revised requirements for recovery of loan dues and engagement of recovery agents.

Effective January 1, 2027, HFCs will be required to comply with the provisions under paragraphs 100A to 100AB of the RBI (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025.

The provisions cover recovery policies, due diligence and training of recovery agents, disclosure of recovery agencies, fair treatment of borrowers, technology-based recovery mechanisms, monitoring and control, conduct of recovery agents, and grievance redressal.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13673

RBI Updates Priority Sector Lending Treatment for FCNR(B) and NRE Deposit-Linked Advances

The Reserve Bank of India has amended the Priority Sector Lending (PSL) – Targets and Classification Directions, 2025, with immediate effect.

The amendment provides that certain advances linked to eligible FCNR(B) and NRE deposits will be excluded from Adjusted Net Bank Credit (ANBC) for calculating priority sector lending targets.

Key Changes

• Advances against fresh FCNR(B) deposits with a tenor of 3 to 5 years, mobilised between June 8 and September 30, 2026, will be excluded from ANBC, subject to eligibility.
• Advances against NRE term deposits of 3 years or more, mobilised between June 19 and September 30, 2026, will also be excluded.
• The amount excluded from ANBC cannot exceed the eligible fresh FCNR(B)/NRE deposits qualifying for CRR/SLR exemption.
• The existing footnote relating to the calculation of incremental advances from eligible FCNR(B)/NRE deposits has been deleted.

Effective Date: Immediate effect.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13674

Ladakh Establishes Five New Districts and Assigns Lead Bank Responsibilities

The Union Territory (UT) of Ladakh has notified the formation of five new districts—Sham, Nubra, Changthang, Zanskar and Drass, effective as per Gazette Notification dated April 27, 2026.

The Lead Bank responsibility for all five newly created districts has been assigned to State Bank of India (SBI).

There is no change in the Lead Banks assigned to the other districts in the UT of Ladakh.

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=13675