The Reserve Bank of India issued comprehensive conduct requirements for non-banking financial companies’ collection and recovery of loan dues, including the use of recovery agencies and possession of security, effective Jan. 1, 2027. The rules require NBFCs to establish recovery policies covering escalation, borrower financial distress, agency oversight and compensation for losses caused by noncompliant recovery actions. They exclude Mortgage Guarantee Companies, Core Investment Companies, NBFC-Account Aggregators, Standalone Primary Dealers, Non-Operating Financial Holding Companies and NBFCs without customer interface. NBFCs must conduct due diligence on recovery agencies, verify agents’ backgrounds and use agents certified through the Indian Institute of Banking and Finance framework. They must publish and maintain agency lists, notify borrowers before in-person recovery visits, record recovery calls and retain them for at least six months, and provide dedicated grievance redressal. Employees and agents may ordinarily contact borrowers only between 8 a.m. and 7 p.m. and are prohibited from harassment, excessive communications, public humiliation, threats, privacy intrusions and misleading representations. Technology-based restrictions may be used only to recover loans that financed the affected mobile device. Restrictions cannot begin until a loan is 30 days past due, must be introduced gradually and cannot be fully applied until 60 days past due. Essential functions, work-related access and personal data must remain protected, and restrictions must be removed within one hour after payment. Wrongful restrictions or attributable delays require compensation of INR 250 an hour, capped at the amount disbursed. Existing recovery agents without the required certification must obtain it within one year of the rules taking effect.

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