The Reserve Bank of India has extended the implementation date for its revised recovery norms to January 1, 2027, from the earlier proposed October 1, 2026. As reported by The Economic Times, the extension was granted after stakeholders indicated that lenders would require additional time to make changes to systems and workflows, and to train recovery agents. The RBI stated that the extension takes into account the "technical and operational changes necessitated by the Directions" and is intended to facilitate smooth implementation. The new directions on 'Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents' were issued on August 6, 2026, addressing concerns about aggressive recovery tactics by lenders and recovery agencies. According to Mint, the guidelines are meant to prevent lenders and their agents from going too far in pursuit of defaulters, with the regulator wanting banks to monitor and control the activities of their recovery agencies to ensure they do not engage in activities that damage the bank's integrity and reputation.
The RBI has barred banks from remotely restricting or disabling borrowers' mobile phones, tablets and laptops to recover unpaid loans, unless the loan was specifically taken to finance the device itself. According to the latest RBI directions, banks can use technology to restrict a device only when the loan funded its purchase and the loan agreement expressly allows such action. The agreement must set out the recovery process and specify the sequence in which restrictions may be applied following a default. Banks must obtain certification for the technology mechanism from the device's original equipment manufacturer or operating system platform, wherever applicable, and borrowers must be able to check the status of restrictions at any time. As per the RBI, "A bank shall not deploy any technology-based mechanism, either on its own or by entering into an arrangement with a third-party service provider, which restricts or disables any of the functionalities of a mobile device of a borrower such as mobile phone, tablet and laptop as a recovery tool, except to recover its loan dues arising out of financing of such a device." The central bank has also barred banks from accessing personal data stored on borrowers' devices, including contacts, SMS, call logs, photos, and location history for loan recovery purposes. According to Business Standard, lenders cannot use device restrictions as a general recovery tool - the restriction can apply only where the loan itself financed that particular device.
The RBI has softened the compensation provisions for borrowers affected by device restrictions, with lenders now required to pay ₹250 per hour for delays in restoring device functionality, capped at the total loan amount disbursed. According to the latest RBI guidelines, a lender that wrongly restricts a device or fails to restore its functions within the prescribed period after repayment must compensate the borrower at ₹250 for every hour of delay. The central bank has clarified that lenders will continue to be liable for compensation delays attributable to them in reversing restrictions, while the total compensation payable to a borrower has now been capped at the amount of the loan disbursed. Once borrowers repay the loan in full, banks must give up access to the technology used to restrict the device and inform borrowers about any steps needed to uninstall the relevant software. The device must be unlocked within one hour once dues are realised, with compensation payable at ₹250 per hour for delays, subject to the prescribed cap. However, as noted by Business Standard, the biggest implementation challenge could be lack of awareness among both lenders and borrowers regarding these provisions.
The RBI has retained comprehensive safeguards to protect borrowers even as it allowed operational flexibility for lenders. As reported by The Times of India, incoming calls, SMS and emergency SOS features cannot be blocked under any circumstances. The latest RBI directions specify that even after a loan crosses 60 days past due, lenders cannot disable incoming calls, SMS or emergency SOS functions. Restrictions must also not prevent borrowers from using their devices for work or employment-related activities. The central bank has completely barred banks from disabling mobile phones and laptops of defaulting borrowers for loan recovery purposes, with the exception of devices financed by lenders. Banks must adopt a gradual approach rather than ab initio in specific cases where device disabling is allowed, with full restrictions only permitted after the loan becomes 60 days past due as per the loan agreement. The RBI has also barred banks from accessing personal data stored on borrowers' devices, including contacts, SMS, call logs, photos, and location history for loan recovery purposes. According to Business Standard, 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. Family, friends cannot be used as pressure points - recovery efforts spilling over into personal circles, such as contacting relatives, creating WhatsApp groups, or using personal contact lists to embarrass borrowers, can turn a financial problem into a social one. Under the new framework, lenders cannot lock a financed device immediately after a missed EMI - restrictions can only be imposed after a graduated process triggered after the loan remains overdue for a defined period and after the borrower receives prior notices and an opportunity to repay.
One of the most significant changes is the requirement to record recovery calls and retain those records for six months. As reported by Business Standard, "Recovery finally has a paper trail," said Amitraj Kaushal, advocate, Supreme Court. Recovery agent will generally be allowed to contact a borrower only between 8 am and 7 pm, with the borrower must also be given prior notice before the first field visit. According to Kapil Makhija, chief operating officer at MinEMI, the interaction will effectively become more accountable from January 2027. 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 situations where borrowers receive recovery calls at inconvenient hours - instead of disputes being reduced to the borrower's word against the agent's, the lender would have a recorded interaction and record of when the call took place. Family, friends cannot be used as pressure points - recovery efforts spilling over into personal circles can create pressure that extends beyond the actual loan obligation. Borrowers who face such conduct should preserve call logs, messages or other evidence and approach the lender's grievance officer. If complaints remain unresolved, borrowers can approach the RBI Ombudsman after the applicable waiting period.
