**Executive Summary**
This document outlines the Reserve Bank of India's (RBI) Second Amendment Directions, 2026, concerning responsible business conduct for Regional Rural Banks (RRBs) related to loan recovery and engagement of recovery agents. It modifies existing guidelines and comes into effect on July 1, 2026. The directions provide comprehensive instructions on conduct related matters in recovery of loans.
**Key Points / Main Content**
* **Policy on Recovery of Loans:**
* RRBs must implement a policy on loan recovery, engaging recovery agents, and security repossession.
* The policy should encompass due diligence criteria for agents, specified activities, a Code of Conduct, performance standards, inspection/audit procedures, compliance mechanisms, and actions against non-compliant agents.
* Aspects related to recovery in the case of demise of borrower(s) or guarantor(s).
* **Engagement of Recovery Agents:**
* RRBs must conduct due diligence on recovery agents, adhering to RBI's outsourcing guidelines.
* Verification of agents’ representatives/employees is required before engagement and periodically thereafter.
* Recovery agents must obtain certification from the Indian Institute of Banking and Finance (IIBF) within one year of these Directions.
* **Code of Conduct:**
* RRBs must create a Code of Conduct for recovery agents and employees, aligned with these Directions.
* Agents and employees must agree to abide by the Code, especially regarding loan recovery and security possession.
* **Responsibilities of RRBs (Disclosure, Treatment, and Processes):**
* RRBs must prominently display an updated list of engaged recovery agents on all customer interaction channels.
* Termination of an agent must be publicized to ensure borrowers do not continue to deal with them.
* Borrowers must be informed about the assigned recovery agent details.
* RRBs must identify borrowers facing repayment difficulties and offer appropriate guidance.
* Borrower information disclosure to employees/agents must be limited.
* RRBs must not forward recovery cases with pending grievances.
* RRBs must document call details with borrowers, obtain borrower consent for recording, and avoid targets inducing harsh practices.
* Legal action should not be the first resort; written notice is required before security repossession.
* **Taking Possession of Assets:**
* RRBs must ensure possession clauses in loan contracts are valid and clearly communicated.
* Loan contracts must contain provisions regarding the notice period, circumstances for waiver, possession procedures, final repayment opportunity, security return procedure, and sale/auction procedures.
* Recovery of loans or enforcement of security interest must follow due process.
* **Monitoring and Control:**
* RRBs must implement a management structure to monitor recovery agent activities and ensure compliance with provisions to protect the integrity of the RRB.
* Periodic reviews of the recovery mechanism are required.
* **Conduct of RRB's Employees and Recovery Agents:**
* Agents must carry recovery notices, ID cards, and authorization letters.
* Strict adherence to regulations is necessary regarding borrower privacy, contact hours, place of contact, appropriate occasions for contact, designated places for microfinance collection, civil interaction, and authorized visits.
* Approval is required for all written communication.
* Prompt issue of acknowledgement / receipt on collection / recovery is necessary.
* Prohibition of harsh recovery methods including abusive language, inappropriate messages, excessive or ill-timed calls, threatening behavior, intimidation, violence, or misleading representations.
* **Complaints Against RRBs employees and its Recovery Agents**
* RRBs must have a dedicated mechanism for redressal of recovery related grievances.
* **Adherence to Other Regulations:**
* RRBs must comply with relevant RBI and Telecom Regulatory Authority of India (TRAI) guidelines, including the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018.
**Impact Analysis**
**Stakeholder: Regional Rural Banks (RRBs)**
* **Impact:** RRBs need to implement new policies and procedures related to loan recovery and agent engagement.
* **Action Required:** RRBs must update policies, train staff and recovery agents, establish monitoring mechanisms, and ensure compliance with all requirements by July 1, 2026, including obtaining IIBF certification for recovery agents within one year.
**Stakeholder: Recovery Agents**
* **Impact:** Recovery agents need to adhere to new Code of Conduct and training requirements.
* **Action Required:** Recovery agents must obtain IIBF certification and comply with the RRB's Code of Conduct.
**Stakeholder: Borrowers of RRBs**
* **Impact:** Borrowers are subject to revised procedures and protections during the loan recovery process.
* **Action Required:** Borrowers need to be aware of their rights, including the right to a transparent and fair recovery process, and access to a grievance redressal mechanism.
Key Entities Referenced
Reserve Bank of India (Regional Rural Banks – Responsible Business Conduct) Directions, 2025: The primary directions being amended by these new directions, concerning responsible business conduct of Regional Rural Banks (RRBs).
Regional Rural Banks (RRBs): The specific financial institutions to which these directions apply, focusing on engagement of recovery agents and loan recovery processes.
Reserve Bank of India: The regulatory body issuing the directions, responsible for overseeing and regulating banks in India.
Banking Regulation Act, 1949: The legislation under which the Reserve Bank of India derives its power to issue these directions.
Draft Reserve Bank of India (Regional Rural Banks - Responsible Business Conduct) Second Amendment Directions, 2026: The document itself; introduces updates to existing guidelines on responsible business conduct in Regional Rural Banks (RRBs).
DOR.MCS.REC.No. /01-01-036/2025-26 February 12, 2026
Draft Reserve Bank of India (Regional Rural Banks - Responsible Business
Conduct) Second Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Regional
Rural Banks (RRBs) have been issued to RRBs under the Reserve Bank of India
(Regional Rural Banks – 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 RRBs (hereinafter referred to collectively as
“RRBs” and individually as an “RRB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21 and 35A of the Banking
Regulation Act,1949, 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 (Regional Rural Banks
- 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 (Regional
Rural Banks – Responsible Business Conduct) Directions, 2025 as under:
In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 428 to 437 shall
be deleted. Further, the following section and paragraphs shall be inserted after
paragraph 437, namely:
“J. Conduct of RRBs in Recovery of Loans and Engagement of Recovery
Agents
J.1 Policy
437A. An RRB 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 RRB for
recovery of loan dues from its borrowers / guarantors and the representatives /
employees of such agencies.
J.2 Engagement of recovery agents / RRB employees for recovery of
loans
J.2.1 Due diligence
437B. An RRB 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 on outsourcing of financial services,
as amended from time to time. An RRB 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.
J.2.2 Training
437C. An RRB 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 RRB 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.
2J.2.3 Code of Conduct
437D. An RRB, 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 RRB 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.
J.3 Responsibilities of an RRB
J.3.1 Disclosure of information on recovery agents
437E. An RRB 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.
437F. In the event of termination of the agreement with a recovery agent for
any reason, the RRB shall publicize the same to ensure that the borrowers do
not continue to deal with that agent or its representatives / employees.
437G. While forwarding cases to any agent for recovery of default amount, the
RRB 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
of recovery agent during an ongoing recovery process, the RRB shall
immediately notify the borrower of the change.
J.3.2 Fair treatment to borrowers during recovery process
437H. An RRB 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.
437I. An RRB shall ensure that the disclosure of borrower’s information to its
employees / recovery agents is limited to the extent required to enable them to
3discharge their loan recovery related duties. Further, the RRB shall put in place
mitigants to ensure that its employees / recovery agents do not transfer or
misuse any customer information in any manner.
437J. Where a grievance has been lodged by a borrower, the RRB shall not
forward the concerned recovery case to an employee / recovery agent till it
finally disposes off the grievance. However, where the RRB 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.
437K. In cases where the subject matter of the borrower’s loan dues is sub-
judice, the RRB shall exercise utmost caution, as appropriate, in referring the
matter to its employee / recovery agent.
437L. An RRB 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 RRB 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 RRB shall take reasonable precautions such as
intimating the borrower / guarantor that the conversation is being recorded, etc.
437M. An RRB 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 437U below.
437N. An RRB may use written communications, telephonic reminders or visits
by an RRB’s representatives to the borrower’s place or residence as follow up
measures for collection / recovery of loans. However, the RRB 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 RRB shall not initiate any legal action as a first resort for
collection / recovery of loan dues / possession of security.
J.3.3 Taking possession of mortgaged / hypothecated assets
437O. Where an RRB has incorporated a possession clause in the loan
contract / agreement with a borrower and relies on such possession clause for
enforcing its rights, the RRB shall ensure that the possession clause is legally
4valid, 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.
437P. The RRB shall ensure that the recovery of loans or enforcement of
security interest shall be done only by following due process of law.
J.3.4 Periodic review, monitoring and control
437Q. An RRB 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 RRB shall ensure that the
agreement with the recovery agents contains details of such provisions.
437R. An RRB, engaging recovery agents, shall undertake a periodic review of
the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of RRB’s employees and recovery agents
437S. The RRB’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 RRB / recovery agency. The recovery agent shall also carry the
authorization letter from the RRB. The recovery notice and the authorization
letter shall, among other details, include the telephone / mobile number of the
RRB’s employee / recovery agent and the grievance redressal officer appointed
by the RRB in terms of paragraph 437V below.
5437T. An RRB shall ensure that its employee / 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
and the RRB. 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 RRB shall visit the borrower’s premises for activities related to
collection / recovery of loan dues.
6(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 RRB.
(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.
437U. The RRB’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;
(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.
J.5 Complaints against RRB’s employees and its recovery agents
437V. An RRB 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 437G above. Further, all
recovery related communications issued by the RRB must contain the name,
7email address, telephone number and address of the grievance redressal
officer concerned of the RRB whom the borrower / guarantor can contact.
J.6 Adherence to other regulations issued by the Reserve Bank / other
authorities
437W. In addition to the Directions mentioned herein, an RRB 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
8