RBI asks banks, regulated entities to prevent harassment by recovery agents

No phone calls to borrowers before 8 am and after 7 pm; 'no intrusion of privacy'

The Reserve Bank of India (RBI) on Friday asked banks, non-banking financial institutions, and other regulated entities to ensure that they and their loan recovery agents do not harass people.

A RBI circular said the central bank has observed that recovery agents are deviating from instructions for outsourcing of financial services. It asked regulated entities to ensure that borrowers do not receive phone calls before 8.00 am and after 7.00 pm. It warned against making false and misleading representation to borrowers.

Regulated entities and their agents must not resort to "intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls.”

Any violation will be viewed seriously, said the RBI circular that applies to all commercial, regional and rural, small finance banks, and non-banking financial companies including housing finance companies. Payments banks are excluded.

All-India financial institutions including Exim Bank, the National Bank for Agriculture and Rural Development, the National Housing Bank, the Small Industries Development Bank of India and National Bank for Financing Infrastructure and Development also fall under the purview of the circular.

All primary urban cooperative banks, state cooperative banks and district central cooperative banks and asset reconstruction companies must also abide by the RBI’s circular.

The circular does not apply to microfinance loans covered under the RBI’s master directions on the regulatory framework for microfinance loans, dated March 14, 2022, the banking regulator said.

“The Reserve Bank of India has from time to time advised regulated entities that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsible for the actions of their service providers including Recovery Agents,” the circular read.