The RBI has created strict rules for Loan Recovery by Banks.
New recovery rules
A bank shall ensure that the recovery agency engages only those agents who have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF.
A bank shall make available an up-to-date list of recovery agencies empanelled with or engaged by it on its website. Such list shall include the name and other details of the recovery agencies such as type (corporate / individual), correspondence address, the period of engagement and purpose of engagement (recovery / possession of security). The bank shall update the list within seven calendar days of any modification to the list. However, in the event of termination of the agreement with a recovery agency for any reason, the bank shall promptly update such list.
While forwarding a case to any recovery agency for recovery of loan dues through in-person visit to the place of the borrower / guarantor, the bank shall intimate the details of the recovery agency to the borrower / guarantor at least one day prior to the first visit.
In case of change of the recovery agency during an ongoing recovery process, the bank shall immediately notify the borrower / guarantor of the change.
In the event of termination of the agreement with a recovery agency for any reason, the bank shall immediately notify the same to the borrowers / guarantors, to whom such recovery agency was assigned, so as to ensure that they do not continue to deal with that agency or its recovery agents.
A bank shall document the time and number of calls made by its employee / recovery agent to the borrower / guarantor for recovery of loan dues. Further, the bank shall ensure that there is a recording of the content / text of the calls made by the employee / recovery agent to the borrower / guarantor and the calls made by the borrower / guarantor to the telephone / mobile number conveyed by the bank. The record shall be preserved for a period of six months from the date the call was made, or in cases which are sub judice, till they are disposed of. Further, the bank shall take reasonable precautions such as intimating the borrower / guarantor that the conversation is being recorded, etc.
A bank’s employee and recovery agent, while visiting the borrower / guarantor for collection / recovery of loan dues / taking possession of security, shall identify themselves by displaying their identity card issued by the bank and recovery agency, respectively.
An employee / recovery agent shall contact / visit the borrower / guarantor only between 08:00 hours and 19:00 hours.
A bank shall have a dedicated mechanism for redressal of recovery related grievances.
Locking of mobile devices
A bank cannot use technology to restrict or disable the functions of a borrower’s mobile phone, tablet or laptop for loan recovery, either on its own or through a third-party service provider, except when the bank has financed the purchase of that particular device.
In such a case, the bank may restrict the device only when certain conditions are met. The device must have been purchased through a loan provided by the bank, and the loan agreement must clearly and specifically allow device restriction or disabling, including the procedure to be followed.
The borrower must also be given proper notice and time to repay the dues. No restriction can be imposed until the loan becomes 30 days past due and the borrower has failed to pay despite receiving notice. After 30 days, gradual restrictions may be introduced, but essential functions cannot be restricted.
The full restrictions can be applied only after the loan becomes 60 days past due, and outgoing calls cannot be restricted before 60 days past due. The bank or its third-party service provider should also obtain certification of the technology mechanism from the device’s Original Equipment Manufacturer (OEM) and/or Operating System platform, if such certification is available.
The bank must follow a gradual approach and cannot disable the device from the beginning. Essential functions such as incoming calls, SMS and emergency SOS features must always remain available. Restrictions must also not prevent the borrower from carrying out activities related to their work or employment.
The borrower must be able to see the current status of restrictions on the device at any time. Once the borrower pays the dues, the restrictions must be removed as soon as possible and within one hour of realisation of the dues.
If the bank wrongly restricts the device or delays unlocking it after payment for reasons attributable to the bank, the bank must compensate the borrower at ₹250 per hour, subject to a maximum compensation equal to the amount of the loan disbursed. Once the loan is fully repaid, the bank must promptly give up access or control of the technology mechanism.
If the borrower has to uninstall the mechanism, the bank must provide the necessary instructions. The borrower also has the right to prepay the loan, either partly or fully, at any stage, and the bank must have a proper grievance redressal mechanism for complaints relating to delays or problems in unlocking the device.
Importantly, the bank and its third-party service provider must not access or use the borrower’s personal data stored on the device for loan recovery or any other purpose. This includes contacts, SMS, call logs, photos, location history and other personal data.
Click here to download RBI Circular on Recovery
