The Reserve Bank of India has proposed stricter recovery norms for Urban Co-operative Banks (UCBs) and Rural Co-operative Banks (RCBs), aiming to curb borrower harassment and strengthen oversight of loan recovery practices.
Under the draft amendment directions, released for public comments till May 31, 2026, cooperative banks and their recovery agents will be barred from using abusive language, intimidation, anonymous calls or any action intended to publicly humiliate borrowers.
The RBI has specifically prohibited recovery agents from shaming defaulters through social media posts, videos, audio clips or offensive messages.
The draft norms prescribe fixed recovery hours, allowing bank officials and recovery agents to contact or visit borrowers only between 8 AM and 7 PM unless borrowers explicitly permit otherwise. Excessive calls, repeated messaging and communication beyond permitted hours will be treated as harsh recovery practices.
Banks will also be required to record all recovery-related calls and preserve such records for at least six months. Borrowers must be informed that conversations are being recorded, while banks will have to maintain detailed logs of recovery communications.
Further, cooperative banks must notify borrowers before assigning recovery agencies for physical recovery visits. Details of empanelled recovery agencies, including addresses, engagement periods, purpose of engagement and operational areas, must be displayed on bank websites, mobile apps and branch premises.
Recovery agents visiting borrowers will have to carry identity cards, authorisation letters and copies of notices issued by the bank. Importantly, banks cannot hand over recovery cases to agents while customer complaints relating to loan dues or recovery remain unresolved.
The draft directions also make training and certification mandatory for recovery agents through programmes conducted by the Indian Institute of Banking and Finance or affiliated institutions.
Another major proposal relates to financed smartphones and tablets. Banks may impose technology-based restrictions on device functionalities only after a structured notice process beginning once a loan becomes 60 days overdue. Actual restrictions can be imposed only after the account turns 90 days past due and the borrower still fails to clear dues.
However, essential services such as incoming calls, internet access, emergency SOS features and public safety alerts cannot be blocked. Borrowers will also be entitled to compensation of Rs 250 per hour for wrongful restrictions or delays in restoring services after dues are cleared.
The proposed norms for UCBs and RCBs are largely identical, with only minor wording differences.
