The Reserve Bank of India issued amendments requiring All India Financial Institutions (AIFIs) to adopt comprehensive policies governing loan collection, recovery and possession of security from January 1, 2027. The policies must cover escalation procedures, borrower financial distress, employee and agent conduct, oversight of recovery agencies, grievance handling and compensation for losses caused by recovery actions that breach the directions. AIFIs must conduct due diligence on recovery agencies, verify agents’ backgrounds and ensure agents hold the prescribed debt recovery certification. They must disclose engaged agencies, notify borrowers before in-person recovery visits, limit access to customer information and record recovery calls for at least six months. Employees and agents may generally contact borrowers only between 8 a.m. and 7 p.m. and are prohibited from harassment, threats, public humiliation, excessive communications and misleading representations. Technology-based restrictions on a borrower’s mobile device are permitted only where the AIFI financed that device. Restrictions may begin after the loan is 30 days past due and become fully effective only after 60 days, while essential functions and access needed for work must remain available. Restrictions must be reversed within one hour after payment, with compensation of INR 250 per hour for attributable wrongful restrictions or delayed reversal, capped at the loan amount disbursed. AIFIs and service providers are prohibited from accessing personal data stored on the device, and uncertified recovery agents already engaged must obtain certification within one year of the effective date.

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