Bar recovery agents from calling borrowers before 8 am, after 7 pm, proposes RBI

The Reserve Bank of India (RBI) on Thursday put forth more stringent guidelines for collecting past-due debts. These guidelines prohibit financial institutions and their recovery agents from contacting borrowers before 8 a.m. or after 7 p.m.

The ‘Draught Master Direction on Managing Risks and Code of Conduct in Outsourcing of Financial Services’ stated that Regulated Entities (REs), such as banks and NBFCs, should not outsource core management functions, such as policy formulation and decision-making functions like determining compliance with KYC norms and approving loan approval.

“The underlying principle of the proposed directions is that the RE should ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers nor impede effective supervision by the supervisory authority,” the Reserve Bank of India said.

According to the draft, REs should implement a code of conduct for recovery agents, direct sales agents, and direct marketing agents that has been approved by the board and is applicable to commercial banks, cooperative banks, and NBFCs.

The Recovery Agents, DSAs, and DMAs should be properly trained to handle their responsibilities with care and sensitivity. This includes training them on how to properly solicit customers, handle call hours, protect customer privacy, and accurately convey the terms and conditions of the products they are offering.

“The REs and their Recovery Agents shall not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors’/their guarantors’ family members…,” the draft said.

Additionally, they should refrain from making threatening or anonymous phone calls, continuously contacting the borrower or guarantor, sending improper communications via social media or mobile devices, and making false or misleading assertions.

“Further, the REs and their Recovery Agents are barred from calling the borrower/guarantor before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans,” the RBI has proposed.

The draught further stated that the REs should have a management structure in place to oversee and regulate their outsourcing operations. The RBI has invited stakeholders to comment on the draught by November 28, 2023.

It also suggests guidelines for financial service outsourcing that takes place offshore.

(With agency inputs)