The Reserve Bank of India (RBI) has proposed a comprehensive set of loan recovery norms designed to clamp down on aggressive practices and enhance customer protection across the banking system. These draft guidelines, detailed under the RBI (Commercial Banks – Responsible Business Conduct) Second Amendment Directions, 2026, represent a major shift toward fair treatment of borrowers during loan default and recovery processes. Why RBI Is Reforming Loan Recovery Loan recovery by banks and financial institutions in India has long been criticised for coercive tactics, intrusive calls, and harassment of borrowers or their contacts. In its latest draft, the RBI aims to remove these harsh practices by setting clear behavioral standards, conduct codes, and safeguards for borrowers. The move follows announcements in the 2026 Union Budget and recent monetary policy statements. Stricter Conduct Rules for Recovery Agents Under the proposed framework, banks must develop a formal, board-approved loan recovery policy that governs not just procedures but also the ethical conduct of recovery agents. Key elements include: Mandatory code of conduct for agents and bank employees engaged in recovery. Agents must be certified and trained, ensuring accountability. Banks must document and record all recovery calls. Limits on Contact and Harassment Bans One… Read MoreBusiness Archives – Trak.in – Indian Business of Tech, Mobile & Startups
