Reserve Bank of India issues comprehensive loan recovery and device-locking rules for urban co-operative banks

The Reserve Bank of India issued comprehensive conduct requirements for urban co-operative banks covering loan recovery, possession of security and the engagement of recovery agencies, effective Jan. 1, 2027. Banks must establish recovery policies that include escalation procedures, support for borrowers in financial distress, oversight of recovery agencies and compensation for losses caused by actions that breach the directions. Recovery agencies will be subject to due diligence, ongoing antecedent checks and performance controls, while agents must hold specified certification and comply with a bank-approved code of conduct. Banks must disclose engaged agencies, notify borrowers before in-person recovery visits, record recovery calls and retain them for at least six months. Employees and agents generally may contact borrowers only between 8 a.m. and 7 p.m., must follow identification and conduct requirements, and are prohibited from harassment, threats, public humiliation and other harsh practices. Technology-based restrictions may be used only for devices financed by the bank. Restrictions cannot begin until a loan is 30 days past due, and the full permitted restrictions and limits on outgoing calls cannot apply before 60 days past due. Essential functions, including incoming calls, text messages and emergency features, must remain available, personal device data cannot be accessed, and restrictions must be reversed within one hour after payment. Wrongful restrictions or attributable delays require compensation of INR 250 per hour, capped at the amount of the loan disbursed.