RBI New Loan Recovery Rules From 2027: Banks Cannot Harass Borrowers, EMI Calls Restricted To 8 AM–7 PM

The Reserve Bank of India (RBI) has introduced a new regulatory framework for loan recovery practices aimed at preventing harassment of borrowers who fail to repay equated monthly instalments (EMIs) on time.

The new guidelines, which will come into effect from January 1, 2027, require banks and regulated lending institutions to follow stricter procedures while communicating with borrowers, appointing recovery agents and using technology-based recovery methods.

The framework lays down clear rules on calling hours, physical visits, data usage, agent conduct and remote restriction of financed electronic devices. The move is expected to bring greater transparency and accountability to the loan recovery process.

Recovery Agents Cannot Call Borrowers Anytime

Under the new RBI framework, banks and recovery agents will not be allowed to contact borrowers at any time of the day. Recovery-related calls and visits will generally be permitted only between 8 am and 7 pm.

Any communication outside this time window will require prior request or approval from the borrower.

The central bank has also instructed recovery agents to avoid contacting individuals during sensitive personal situations, including bereavements, medical emergencies or important family occasions such as marriages.

The RBI has prohibited aggressive recovery practices, including threatening language, abusive communication, intimidation or repeated unwanted calls. Recovery agents cannot make anonymous calls or threaten borrowers with damage to their reputation, property or family relationships.

The use of social media for borrower humiliation has also been banned. Agents cannot share personal details, photographs, videos or audio recordings of borrowers publicly to pressure them into making payments.

Physical Recovery Visits Will Require Prior Notice

The RBI has introduced additional safeguards for physical recovery visits. Before making the first in-person visit, recovery agencies must inform borrowers at least one day in advance.

Banks will also have to provide details of the recovery agency assigned to the borrower’s account.

Borrowers should normally be contacted at a location preferred by them. A recovery agent can visit their residence or workplace only when no preferred location has been provided or when the borrower repeatedly fails to appear at the agreed location.

During any visit, agents must carry proper identification documents, including an identity card, authorisation letter and relevant notices.

The authorisation letter must contain details of the recovery agency as well as contact information of the bank’s grievance redressal officer.

The RBI has also placed greater responsibility on banks to monitor recovery agencies. Even when collections are outsourced, lenders will remain accountable for ensuring that agents follow regulatory requirements.

Banks will be required to record recovery conversations and maintain details such as the number and timing of calls. These records must generally be preserved for at least six months.

The central bank has also directed lenders to ensure that recovery agents receive proper training and that incentive structures do not encourage aggressive collection methods.

Rules For Remote Locking Of Financed Devices

A major aspect of the new framework is regulation of technology-driven recovery methods, including remote restriction of smartphones, tablets and laptops purchased through loans.

However, lenders will not be allowed to remotely disable any device simply because a borrower has defaulted on a regular personal loan. The facility can only apply when the loan was specifically taken to finance that particular device.

The RBI has also introduced a waiting period before lenders can activate such restrictions. A device cannot be remotely restricted immediately after an EMI default.

The restriction process can begin only after the loan remains overdue for at least 30 days. A complete device restriction can be applied only after the account remains unpaid for 60 days.

Even after restriction, essential services such as incoming calls, SMS facilities, emergency communication and functions required for employment must continue to remain available.

Lenders will also be prohibited from accessing unrelated personal information stored on the device, including contacts, photographs, videos, call records, messages or location history.

Borrowers must be informed in advance about the possibility of remote restriction, and such terms cannot remain hidden in lengthy loan agreements.

Compensation For Delay In Restoring Devices

The RBI has also introduced timelines for restoring access to devices after borrowers clear overdue payments or regularise their loans.

Lenders must generally restore device functionality within one hour of receiving payment or settlement. Failure to meet this timeline could make borrowers eligible for compensation of ₹250 per hour of delay, subject to a limit linked to the outstanding loan amount.

Experts believe the new rules will transform loan recovery practices by making compliance a routine operational requirement rather than just an internal guideline.