RBI Tightens Rules for Debt Recovery Agents

- The new framework mandates that all recovery agents must be certified through a training program from the Indian Institute of Banking and Finance (IIBF) or an affiliated body. Regulated entities are also required to conduct background verification of agents at the pre-engagement stage and periodically thereafter. - Contact with borrowers is now restricted to the hours between 8 a.m. and 7 p.m., and agents must avoid visiting or calling on sensitive occasions like weddings, festivals, or during times of bereavement. For microfinance loans specifically, collection must happen at a mutually agreed-upon designated place, and agents can only visit the borrower's residence or workplace if the borrower has missed two consecutive meetings at the designated location. - The rules explicitly prohibit a range of coercive behaviors, including using abusive language, making threatening or anonymous calls, harassing the borrower's relatives or associates, and any acts intended for public humiliation. - Regulated entities like banks and NBFCs will now be required to establish a dedicated mechanism for handling grievances related to debt recovery. If a borrower files a complaint, the bank cannot assign that case to a recovery agent until the grievance is resolved, unless the complaint is deemed frivolous. - The updated guidelines aim to create a unified framework for all regulated entities, including banks, NBFCs, and Housing Finance Companies (HFCs), which previously operated under different sets of rules for recovery agents. This harmonization is a response to persistent complaints about aggressive tactics, particularly in the NBFC and microfinance sectors. - Lenders must provide borrowers with written notice detailing the name of the recovery agency and the specific agent assigned to their case. Agents are required to carry a copy of this notice and their official ID card when they visit a borrower. - The RBI has clarified that the lender is ultimately responsible for the actions of its recovery agents. The new rules require banks to have a formal policy covering due diligence for engaging agents, a code of conduct, and defined penal actions for non-compliance by their agents. - All calls made by recovery agents must now be recorded, with the borrower being informed of the recording. Furthermore, agents are prohibited from sharing a borrower's personal information with unauthorized third parties to protect their privacy.