[Link].
/01-01-039/2025-26 February 12, 2026
Draft Reserve Bank of India (Non-Banking Financial Companies - Responsible
Business Conduct) Second Amendment Directions, 2026
Certain instructions on matters related to recovery of loans and engagement of
recovery agents by Non-Banking Financial Companies (NBFCs) have been issued to
NBFCs under Chapter III on ‘Responsible Lending Conduct’ of the Reserve Bank of
India (Non-Banking Financial Companies – Responsible Business Conduct)
Directions, 2025. The extant instructions have since been reviewed. It has also been
decided to issue comprehensive instructions on conduct related matters in recovery
of loans and engagement of recovery agents to all NBFCs, excluding Mortgage
Guarantee Companies, Core Investment Companies, NBFC-Account Aggregators,
Standalone Primary Dealers, Non-Operating Financial Housing Companies, and
NBFCs not having any customer interface.
2. In exercise of the powers conferred by Sections 45JA, 45L and 45M of the Reserve
Bank of India Act, 1934, the Reserve Bank, being satisfied that it is necessary and
expedient in public interest so to do, hereby issues the Amendment Directions
hereinafter specified.
3. Short Title and Commencement
(1) These Directions shall be called the Reserve Bank of India (Non-Banking Financial
Companies - Responsible Business Conduct) Second Amendment Directions,
2026.
(2) These Directions shall come into effect from July 1, 2026.
4. These Amendment Directions shall modify the Reserve Bank of India (Non-Banking
Financial Companies – Responsible Business Conduct) Directions, 2025 as under:
(1) In Chapter II on ‘Institutional Framework’, the sub-paragraphs 7(7) and 7(8) shall
be deleted.
(2) In Chapter III on ‘Responsible Lending Conduct’, the paragraphs 89 to 97 shall be
deleted.
(3) In Chapter III on ‘Responsible Lending Conduct’, the section H on ‘Responsibilities
of Recovery Agents of the NBFC’ and the paragraphs 98 to 100 thereunder shall
be deleted. Further, the following section and paragraphs shall be inserted after
paragraph 100, namely:
“I. Conduct of NBFCs in Recovery of Loans and Engagement of Recovery
Agents
I.1 Policy
100A. An NBFC shall put in place a policy on recovery of loans, engagement
of recovery agents for recovery of loan dues and taking possession of security.
The policy shall, inter alia, cover aspects related to eligibility and due diligence
criteria for engagement of recovery agents, specified activities, Code of
Conduct, performance evaluation standards, inspection / audit, control
mechanisms to ensure compliance with statutory / regulatory requirements by
recovery agents and procedures to be followed / penal actions to be taken in
case of non-compliant recovery agents. The policy shall also include aspects
related to recovery of loan dues in case of demise of borrower(s) or
guarantor(s).
Explanation: The term ‘Recovery Agents’ in these Directions shall be read
contextually to mean individuals and / or agencies engaged by the NBFC for
recovery of loan dues from its borrowers / guarantors and the representatives /
employees of such agencies.
I.2 Engagement of recovery agents / NBFC employees for recovery of
loans
I.2.1 Due diligence
100B. An NBFC employing the services of recovery agents shall put in place a
due diligence process for their engagement, which shall conform to the
instructions issued by the Reserve Bank in the Reserve Bank of India (Non-
Banking Financial Companies – Managing Risks in Outsourcing) Directions,
2025, as amended from time to time. An NBFC shall also ensure that the
recovery agencies engaged by it carry out verification of the antecedents of
their representatives / employees at pre-engagement level and subsequently,
on an ongoing basis at a pre-defined periodicity.
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I.2.2 Training
100C. An NBFC shall ensure that recovery agents engaged by it 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. An NBFC shall also
ensure that recovery agents already engaged by it, but not holding the
aforesaid certificate, obtain the certificate from IIBF within a period of one year
from the date of issuance of these Directions.
I.2.3 Code of Conduct
100D. An NBFC, based on the instructions mentioned in these Directions, shall
put in place a Code of Conduct for the recovery agents and its own employees
engaged in activities related to recovery of loans. Further, prior to assigning any
recovery related activities on its behalf, the NBFC shall obtain an undertaking
from its employees / recovery agents that they agree to abide by its Code of
Conduct and other policies, especially related to recovery of loan dues and
taking possession of security.
I.3 Responsibilities of an NBFC
I.3.1 Disclosure of information on recovery agents
100E. An NBFC shall prominently display an up-to-date list of recovery agents
empanelled and engaged with it on all channels through which it engages with
customers, viz., branches / offices or digital platforms such as website, mobile
app, etc. Such list shall include the name of the recovery agents and details of
the individual(s) engaged by it, the period of engagement, etc.
100F. In the event of termination of the agreement with a recovery agent for
any reason, the NBFC shall publicize the same to ensure that the borrowers do
not continue to deal with that agent or its representatives / employees.
100G. While forwarding cases to any agent for recovery of default amount, the
NBFC shall inform the details of the recovery agent to the borrower through a
written notice, either through a letter to his / her current address or SMS on
registered mobile number or email on registered email address, as the case
may be, to ensure due intimation and proper authorization. In case of change
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of recovery agent during an ongoing recovery process, the NBFC shall
immediately notify the borrower of the change.
I.3.2 Fair treatment to borrowers during recovery process
100H. An NBFC shall put in place a mechanism for identification of the
borrowers facing repayment related difficulties, engagement with such
borrowers and providing them necessary guidance about the recourse
available.
100I. An NBFC shall ensure that the disclosure of borrower’s information to its
employees / recovery agents is limited to the extent required to enable them to
discharge their loan recovery related duties. Further, the NBFC shall put in
place mitigants to ensure that its employees / recovery agents do not transfer
or misuse any customer information in any manner.
100J. Where a grievance has been lodged by a borrower, the NBFC shall not
forward the concerned recovery case to an employee / recovery agent till it
finally disposes off the grievance. However, where the NBFC is convinced, with
appropriate evidence, that the borrower is making frivolous / vexatious
complaints to avoid recovery, it may continue with the recovery proceedings
even if a grievance is pending with it.
100K. In cases where the subject matter of the borrower’s loan dues is sub-
judice, the NBFC shall exercise utmost caution, as appropriate, in referring the
matter to an employee / recovery agent.
100L. An NBFC 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 NBFC 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 vice-versa. Further, the NBFC shall take reasonable precautions such as
intimating the borrower / guarantor that the conversation is being recorded, etc.
100M. An NBFC shall ensure that the recovery targets or the structure of
incentives in the contract with the recovery agent do not induce adoption of
harsh recovery practices as explained at paragraph 100U below.
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100N. An NBFC may use written communications, telephonic reminders or
visits by an NBFC’s representatives to the borrower’s place or residence as
follow up measures for collection / recovery of loans. However, the NBFC shall
initiate any legal or other recovery measures including taking possession of the
security only by giving due notice in writing as per applicable statutory
provisions. Accordingly, the NBFC shall not initiate any legal action as a first
resort for collection / recovery of loan dues / possession of security.
I.3.3 Taking possession of mortgaged / hypothecated assets
100O. Where an NBFC has incorporated a possession clause in the loan
contract / agreement with a borrower and relies on such possession clause for
enforcing its rights, the NBFC shall ensure that the possession clause is legally
valid, and that such possession clause is clearly brought to the notice of the
borrower at the time of execution of the loan contract / agreement. Accordingly,
the terms and conditions of the loan contract / agreement shall contain
provisions regarding:
(1) notice period before taking possession;
(2) circumstances under which the notice period can be waived;
(3) the procedure for taking possession of the security;
(4) final chance to be given to the borrower for repayment of loan before the
sale / auction of the security;
(5) the procedure for giving the possession of the security back to the
borrower; and
(6) the procedure for sale / auction of the security.
100P. The NBFC shall ensure that the recovery of loans or enforcement of
security interest shall be done only by following due process of law.
I.3.4 Periodic review, monitoring and control
100Q. An NBFC shall put in place a management structure to monitor and
control the activities of its recovery agents and ensure that they refrain from
actions that could damage its integrity and reputation. The NBFC shall ensure
that the agreement with the recovery agents contains details of such provisions.
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100R. An NBFC, engaging recovery agents, shall undertake a periodic review
of the mechanism to learn from experience and to effect improvement therein.
I.4 Conduct of NBFC’s employees and recovery agents
100S. The NBFC’s employee / recovery agent, while visiting the borrower, shall
carry a copy of the recovery notice along with his / her identity card issued by
the NBFC / recovery agency. The recovery agent shall also carry the
authorization letter from the NBFC. The recovery notice and the authorization
letter shall, among other details, include the telephone / mobile number of the
NBFC’s employee / recovery agent and the grievance redressal officer
appointed by the NBFC in terms of paragraph 100V below.
100T. An NBFC shall ensure that its employee / recovery agent engaged in
activities related to collection / recovery of loan dues adheres to the following:
(1) Respect for borrower’s privacy: An employee / recovery agent shall
interact only with the borrower or the guarantor and shall not approach
any other relatives / contacts of the borrower.
(2) Maintaining hours of contact: An employee / recovery agent shall contact
/ visit the borrower / guarantor only between 08:00 hours and 19:00
hours. Further, the borrower’s request to avoid call / visit at a particular
time shall be honoured in normal circumstances.
(3) Place of contact: An employee / recovery agent shall ordinarily contact
a borrower at the place of the borrower’s choice and in the absence of
any specific choice, at the place of his / her residence and if unavailable
at his / her residence, then at the place of business / occupation.
(4) Avoiding recovery calls / visits during inappropriate occasions: An
employee / recovery agent shall avoid inappropriate occasions such as
bereavement in the family or such other calamitous occasion, or
marriage functions, festivals, etc. for making calls / visits to collect /
recover loan dues.
(5) Designated place for collection / recovery of microfinance loans: In case
of microfinance loans, collection / recovery shall be made at a
designated / central designated place decided mutually by the borrower
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and the NBFC. However, field staff shall be allowed to make collection /
recovery at the place of residence or work of the borrower if the borrower
fails to appear at the designated / central designated place on two or
more successive occasions.
(6) Interaction with borrower: An employee / recovery agent shall interact
with the borrower in a civil manner. Further, he / she shall maintain
decency and decorum during visits to the borrower’s place for collection
/ recovery of loan dues.
(7) Visit to borrower’s premises: Only the representative(s) authorised by
the NBFC shall visit the borrower’s premises for activities related to
collection / recovery of loan dues.
(8) Approval for written communication: Written communication, if any, sent
by an employee / recovery agent to the borrower / guarantor shall have
the approval of the NBFC.
(9) Issue of acknowledgement / receipt: An employee / recovery agent shall
promptly give proper acknowledgement / receipt on collection / recovery
of loan dues from the borrower / guarantor.
100U. The NBFC’s employee / recovery agent shall not engage in any harsh
methods towards recovery. Without limiting the general application of the
foregoing, following practices shall be deemed as harsh:
(1) Use of minatory or abusive language;
(2) Sending inappropriate messages either on mobile or through social
media;
(3) Excessively calling the borrower / guarantor and / or calling outside the
prescribed hours;
(4) Making threatening and / or anonymous calls;
(5) Intimidating or harassing the borrower / guarantor and / or his / her
relatives, referees, friends, or co-workers in either verbal or physical
manner, including acts intended to humiliate them publicly or intruding
upon their privacy;
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(6) Use or threat of use of violence or other similar means to harm the
borrower / guarantor or their family / assets / reputation;
(7) Making false or misleading representations to the borrower / guarantor,
especially about the extent of the debt or the consequences of non-
repayment.
I.5 Complaints against NBFC’s employees and its recovery agents
100V. An NBFC shall have a dedicated mechanism for redressal of recovery
related grievances. The details of this mechanism shall be provided to the
borrower by including the same under the loan agreement and while advising
the details of the recovery agents as at paragraph 100G above. Further, all
recovery related communications issued by the NBFC must contain the name,
email address, telephone number and address of the grievance redressal
officer concerned of the NBFC whom the borrower / guarantor can contact.
I.6 Adherence to other regulations issued by the Reserve Bank / other
authorities
100W. In addition to the Directions mentioned herein, an NBFC shall also
ensure compliance with any relevant guidelines issued by the Reserve Bank on
related matters and also with guidelines issued by the relevant authorities from
time to time, including the guidelines issued by Telecom Regulatory Authority
of India (TRAI) on aspects related to commercial communication such as the
Telecom Commercial Communications Customer Preference Regulations
(TCCCPR), 2018, as amended from time to time.”
(Veena Srivastava)
Chief General Manager