The Reserve Bank of India (RBI) has issued draft Second Amendment Directions, 2026 proposing comprehensive instructions on conduct-related matters in the recovery of loans and engagement of recovery agents for Urban Co-operative Banks (UCBs) and Rural Co-operative Banks (RCBs).
The draft Directions require banks to put in place a policy on recovery of loans, engagement of recovery agents, and taking possession of security. The policy shall cover eligibility and due diligence criteria, a Code of Conduct, performance evaluation standards, audit and inspection mechanisms, and penal action in cases of non-compliance.
Banks engaging recovery agents must undertake due diligence in line with the RBI’s Outsourcing Directions and ensure antecedent verification of agents. Further, recovery agents must obtain certification from the Indian Institute of Banking and Finance (IIBF).
The draft also prescribes detailed conduct standards, including restricted contact hours (08:00 to 19:00), prohibition of harsh recovery practices, documentation and recording of recovery calls, prior intimation to borrowers regarding assigned recovery agents, and establishment of a dedicated grievance redressal mechanism.
The Directions are proposed to come into effect from July 1, 2026, after consideration of public comments.
