The Reserve Bank of India has prohibited commercial banks from restricting or disabling the a borrower's mobile phone, tablet or laptop as a loan recovery tool, except where the device itself was bought with the bank's money, and has fixed compensation of Rs 250 an hour where such restrictions are wrongly applied or not lifted in time.
The curbs form part of the Reserve Bank of India’s revised draft directions on the conduct of recovery agents. The directions take effect from January 1, 2027, and apply to all commercial banks other than small finance banks, payments banks, regional rural banks and local area banks.
Even where the loan financed the device, a bank may resort to locking only if the loan agreement expressly and unambiguously permits it and sets out the procedure, and if due notice detailing the gradual restrictions has been served. No restriction may be initiated until the loan has been 30 days past due and the borrower has failed to pay despite notice, the full set of contractual restrictions may take effect only after 60 days past due, and outgoing calls may not be restricted before the 60-day mark.
The Reserve Bank has ring-fenced a set of functions that cannot be switched off at all — incoming calls, SMS and emergency SOS features — and has said restrictions must not deny the borrower access to activities related to her work or employment.
Banks must adopt a gradual approach rather than disabling the device at the outset, give the borrower visibility into the status of restrictions at any point, and reverse them no later than one hour after realisation of dues. Where restrictions are wrongful, or their reversal is delayed for reasons attributable to the bank, compensation accrues at Rs 250 per hour until the wrongful action is remedied, subject to an overall cap at the amount of the loan disbursed. Borrowers retain the right to prepay part or full at any stage, and banks must relinquish control of the mechanism once the loan is repaid in full.
The amendment also rewrites the framework governing recovery agencies. Banks must now publish and maintain on their websites an up-to-date list of empanelled recovery agencies, with type, correspondence address, and the period and purpose of engagement, updating it within seven calendar days of any change and promptly on termination. Before a recovery agency makes an in-person visit to a borrower or guarantor, the bank must intimate the agency's details at least one day in advance, and must immediately notify borrowers of any change in agency mid-process or of any termination.
A recovery agent can only contact a borrower or a guarantor between 8 am and 7 pm unless the borrower expressly requests otherwise. The directions also prohibits use of abusive language, posting of video or audio recordings or personal details on social media, excessive or out-of-hours calling, threatening or anonymous calls, intimidation of the borrower's relatives, referees, friends or co-workers, the use or threat of violence, and false representations about the extent of the debt or the consequences of non-repayment.
