Recovery calls, agent visits, phone locks: Experts explain RBI's new rules

RBI loan recovery New rules: 'Recovery finally has a paper trail': Experts on RBI's new curbs on calls, agent visits, harassment and phone locking

The Reserve Bank of India’s (RBI’s) new framework for loan recovery, coming into effect from January 1, 2027, seeks to put clearer boundaries around how banks and other regulated lenders can pursue overdue borrowers.

 

The rules cover everything from recovery-agent identification and calling hours to call recording, borrower privacy and restrictions on mobile devices financed through loans.

 

For borrowers, the bigger change is not that lenders lose the right to recover their money. Rather, the process is expected to become more documented, traceable and less open to intimidation.

 

The RBI has long prohibited harsh recovery practices, including threats, abusive language and harassment of borrowers’ relatives, friends or co-workers.

 

   

Recovery calls will leave a clearer trail

   

One of the most significant changes is the requirement to record recovery calls and retain those records for six months.

 

“Recovery finally has a paper trail,” said Amitraj Kaushal, advocate, Supreme Court. According to him, mandatory recording, agent identification and fixed calling hours could change the balance between a borrower and a recovery agent because there would be evidence if a dispute arises.

 

Kapil Makhija, chief operating officer (COO) at MinEMI, said the interaction will effectively become more accountable from January 2027. A recovery agent will generally be allowed to contact a borrower only between 8 am and 7 pm. The borrower must also be given prior notice before the first field visit.

 

Makhija said borrowers should be able to ask for the agent’s identity card, authorisation letter and the required notice before engaging with them.

 

This could matter in a situation where, for instance, a borrower receives a recovery call at 10 pm and alleges harassment. Instead of the dispute being reduced to the borrower’s word against the agent’s, the lender would have a recorded interaction and a record of when the call took place. 

   

Family, friends cannot be used as pressure points

   

The rules also put greater emphasis on borrower privacy. Kundan Shahi, founder of Zavo, a loan repayments and settlement platform, said one of the common problems seen among borrowers is recovery efforts spilling over into their personal circles.

 

For example, an agent contacting a borrower’s relatives, creating WhatsApp groups, sharing loan details or photographs, or using personal contact lists to embarrass the borrower can turn a financial problem into a social one.

 

“These provisions can also help curb early-morning or late-night harassment calls,” Shahi said, adding that banks would remain accountable for violations by recovery agents.

 

Makhija gave a similar example. A borrower facing a temporary financial setback such as job loss or a medical expense may miss EMIs without being a wilful defaulter. Calling the person’s employer or colleagues, or confronting them in front of neighbours, can create pressure that extends beyond the actual loan obligation.

 

Kaushal said borrowers who face such conduct should preserve call logs, messages or other evidence and approach the lender’s grievance officer.

 

What should borrowers do if an agent crosses the line?

 

The experts suggest maintaining a simple evidence trail.

 

•        Save call logs, messages and screenshots.

 

•        Note the date and time of the interaction.

 

•        Ask the agent for identification and authorisation.

 

•        Keep any CCTV footage where a field visit becomes contentious.

 

•        Complain to the lender’s grievance redressal mechanism.

 

Shahi said borrowers should first give the lender an opportunity to resolve the complaint. If it remains unresolved, a borrower can approach the RBI Ombudsman after the applicable waiting period.

   

Mobile-phone locking gets specific limits

   

The new framework also deals with loans used to finance mobile phones and other devices. According to the experts, lenders cannot use device restrictions as a general recovery tool. The restriction can apply only where the loan itself financed that particular device.

 

Shahi said the distinction is important because borrowers need to understand when such restrictions are legally applicable.

 

Makhija said the rules also protect essential functions such as incoming calls, SMS and emergency SOS, while lenders cannot access contacts, photographs or call logs for recovery purposes.

 

Once the dues are realised, the device must be unlocked within one hour. If the lender is responsible for the delay, compensation is payable at Rs 250 per hour, subject to the prescribed cap. 

   

The clock could become the next dispute

   

The compensation provision sounds straightforward, but implementation could be more complicated.

 

“The biggest implementation challenge could be lack of awareness,” Shahi said. Kaushal and Makhija pointed to another issue: Establishing the exact time at which payment was received and when the device was actually unlocked.

 

A missed EMI does not remove borrower’s rights. The debt remains payable, but recovery agents must operate within defined boundaries, with identification, documentation and safeguards against harassment.