**Executive Summary**
This document contains the Draft Reserve Bank of India (Rural Co-operative Banks - Responsible Business Conduct) Second Amendment Directions, 2026, issued on February 12, 2026, by the Reserve Bank of India. These directions, effective from July 1, 2026, amend the 2025 Directions and provide comprehensive instructions on conduct related to loan recovery and engagement of recovery agents by all Rural Co-operative Banks (RCBs). The document outlines policies, procedures, and responsibilities for RCBs and their agents, aiming to protect borrowers and ensure fair practices.
**Key Points / Main Content**
* **Policy on Recovery and Engagement of Agents:**
* RCBs must establish a policy covering eligibility, due diligence, code of conduct, performance evaluation, compliance, and procedures for handling non-compliant agents and cases of deceased borrowers/guarantors.
* **Engagement of Recovery Agents:**
* **Due Diligence:** RCBs must conduct due diligence following RBI's outsourcing guidelines and ensure verification of agents' antecedents.
* **Training:** Recovery agents must obtain certification from the Indian Institute of Banking and Finance (IIBF) within one year of the directions' issuance.
* **Code of Conduct:**
* RCBs must implement a Code of Conduct for recovery agents and employees, requiring an undertaking of compliance from them.
* **Responsibilities of RCBs:**
* **Disclosure:** RCBs must prominently display an updated list of recovery agents on all customer interaction channels and notify borrowers in writing about agent details.
* **Fair Treatment:** RCBs must establish mechanisms for identifying and assisting borrowers facing repayment difficulties.
* Borrower information disclosure to employees/recovery agents should be limited.
* Grievance must be resolved before forwarding cases to recovery agents.
* Must document calls and take precautions such as intimating the borrower/guarantor that the conversation is being recorded.
* Recovery targets must not induce harsh practices.
* Legal action is not to be the first action
* **Taking Possession of Assets:** The terms and conditions of the loan contract must include provisions on notice period before possession, circumstances for waiving notice, procedure for taking possession, final chance for repayment before sale, procedure for returning possession, and procedure for sale/auction.
* Due process of law must be followed.
* **Monitoring:** RCBs must implement a management structure to monitor recovery agent activities, with agreements detailing these provisions, and conduct periodic reviews.
* **Conduct of RCB Employees and Recovery Agents:**
* Agents must carry identification and authorization letters during borrower visits.
* Adherence to specific guidelines, including respect for borrower's privacy, maintaining appropriate contact hours, suitable place of contact, avoiding inappropriate occasions, designated places for microfinance, civil interaction, and authorized representatives for visits.
* Written communication must have approval.
* **Harsh Recovery Methods:**
* Prohibition of harsh methods, including abusive language, inappropriate messages, excessive/untimely calls, threatening calls, harassment, violence, false representations.
* **Complaints and Grievances:**
* RCBs must have a dedicated mechanism for grievance redressal, with details provided in loan agreements and recovery communications.
* **Adherence to Other Regulations:**
* RCBs must comply with relevant RBI guidelines and those issued by other authorities, including TRAI's regulations on commercial communication.
**Impact Analysis**
**Stakeholder: Rural Co-operative Banks (RCBs)**
**Impact:** Increased regulatory oversight, requirement to implement new policies and procedures related to loan recovery and engagement of recovery agents, need for enhanced monitoring and due diligence, potential changes to training programs for recovery agents, and enhanced measures for consumer protection.
**Action Required:** Review current practices, develop and implement necessary policies and procedures, ensure compliance with the new directions, and communicate changes to relevant staff and stakeholders.
**Stakeholder: Recovery Agents**
**Impact:** Stricter regulatory framework, need for certification from IIBF, adherence to a Code of Conduct, limitations on recovery practices, and increased scrutiny from RCBs.
**Action Required:** Obtain required certifications, comply with the Code of Conduct, and adhere to the new guidelines for recovery practices.
**Stakeholder: Borrowers/Guarantors of RCBs**
**Impact:** Increased protection against unfair recovery practices, enhanced transparency in the recovery process, improved grievance redressal mechanisms, and clear guidelines on communication and contact from recovery agents.
**Action Required:** Be aware of their rights and responsibilities, utilize the grievance redressal mechanisms if needed, and cooperate with RCBs and recovery agents within the bounds of the new regulations.
Key Entities Referenced
Reserve Bank of India (Rural Co-operative Banks - Responsible Business Conduct) Second Amendment Directions, 2026: The primary subject of the document - amendment directions for Rural Co-operative Banks regarding responsible business conduct.
Rural Co-operative Banks (RCBs): Entities regulated by these directions regarding engagement of recovery agents and loan recovery processes.
Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Directions, 2025: The prior directions that this document amends.
Banking Regulation Act, 1949: Act that confers powers on the Reserve Bank to issue these directions.
Reserve Bank of India (Rural Co-operative Banks – Managing Risks in Outsourcing) Directions, 2025: Directions related to due diligence requirements for RCBs when engaging services of recovery agents.
DOR.MCS.REC.No. /01-01-038/2025-26 February 12, 2026
Draft Reserve Bank of India (Rural Co-operative Banks - Responsible Business
Conduct) Second Amendment Directions, 2026
Certain instructions on matters related to engagement of recovery agents by Rural
Co-operative Banks (RCBs) have been issued to RCBs under the Reserve Bank of
India (Rural Co-operative 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 RCBs (hereinafter referred to collectively as
“RCBs” and individually as an “RCB”) under the aforesaid Directions.
2. In exercise of the powers conferred by Sections 21, 35A and 56 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 (Rural Co-operative
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 (Rural Co-
operative Banks – Responsible Business Conduct) Directions, 2025 as under:
In Chapter VIII on ‘Responsible Lending Conduct’, the paragraphs 369 to 378 shall
be deleted. Further, the following section and paragraphs shall be inserted after
paragraph 378, namely:
“J. Conduct of RCBs in Recovery of Loans and Engagement of Recovery
Agents
J.1 Policy
378A. An RCB 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 RCB for
recovery of loan dues from its borrowers / guarantors and the representatives /
employees of such agencies.
J.2 Engagement of recovery agents / RCB employees for recovery of
loans
J.2.1 Due diligence
378B. An RCB 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 (Rural
Co-operative Banks – Managing Risks in Outsourcing) Directions, 2025, as
amended from time to time. An RCB 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
378C. An RCB 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 RCB 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
378D. An RCB, 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 RCB 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 RCB
J.3.1 Disclosure of information on recovery agents
378E. An RCB 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.
378F. In the event of termination of the agreement with a recovery agent for
any reason, the RCB shall publicize the same to ensure that the borrowers do
not continue to deal with that agent or its representatives / employees.
378G. While forwarding cases to any agent for recovery of default amount, the
RCB 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 RCB shall
immediately notify the borrower of the change.
J.3.2 Fair treatment to borrowers during recovery process
378H. An RCB 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.
378I. An RCB 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 RCB shall put in place
mitigants to ensure that its employees / recovery agents do not transfer or
misuse any customer information in any manner.
378J. Where a grievance has been lodged by a borrower, the RCB shall not
forward the concerned recovery case to an employee / recovery agent till it
finally disposes off the grievance. However, where the RCB 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.
378K. In cases where the subject matter of the borrower’s loan dues is sub-
judice, the RCB shall exercise utmost caution, as appropriate, in referring the
matter to its employee / recovery agent.
378L. An RCB 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 RCB 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 RCB shall take reasonable precautions such as
intimating the borrower / guarantor that the conversation is being recorded, etc.
378M. An RCB 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 378U below.
378N. An RCB may use written communications, telephonic reminders or visits
by an RCB’s representatives to the borrower’s place or residence as follow up
measures for collection / recovery of loans. However, the RCB 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 RCB 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
378O. Where an RCB has incorporated a possession clause in the loan
contract / agreement with a borrower and relies on such possession clause for
enforcing its rights, the RCB 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.
378P. The RCB 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
378Q. An RCB 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 RCB shall ensure that the
agreement with the recovery agents contains details of such provisions.
378R. An RCB, engaging recovery agents, shall undertake a periodic review of
the mechanism to learn from experience and to effect improvement therein.
J.4 Conduct of RCB’s employees and recovery agents
378S. The RCB’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 RCB / recovery agency. The recovery agent shall also carry the
authorization letter from the RCB. The recovery notice and the authorization
letter shall, among other details, include the telephone / mobile number of the
RCB’s employee / recovery agent and the grievance redressal officer appointed
by the RCB in terms of paragraph 378V below.
5378T. An RCB 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
and the RCB. 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 RCB 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 RCB.
(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.
378U. The RCB’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 RCB’s employees and its recovery agents
378V. An RCB 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 378G above. Further, all
recovery related communications issued by the RCB must contain the name,
7email address, telephone number and address of the grievance redressal
officer concerned of the RCB whom the borrower / guarantor can contact.
J.6 Adherence to other regulations issued by the Reserve Bank / other
authorities
378W. In addition to the Directions mentioned herein, an RCB 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