Module: General Practice
Q3: Consider the following statements regarding the regulatory norms for loan recovery agents:
Statement 1: The RBI mandates banks to establish a comprehensive, board-approved policy covering due diligence, a code of conduct, and performance evaluation standards for recovery agents.
Statement 2: The RBI has issued the draft "Commercial Banks – Responsible Business Conduct (Second Amendment) Directions, 2026" to explicitly define and prohibit harsh loan recovery practices.
Statement 3: Under the new draft guidelines, recovery agents are strictly prohibited from contacting borrowers outside the standard hours of 8:00 AM to 7:00 PM.
Statement 4: The new directions are slated to officially come into effect from July 1, 2026.
Which of the above statements is/are correct?
Statement 2: The RBI has issued the draft "Commercial Banks – Responsible Business Conduct (Second Amendment) Directions, 2026" to explicitly define and prohibit harsh loan recovery practices.
Statement 3: Under the new draft guidelines, recovery agents are strictly prohibited from contacting borrowers outside the standard hours of 8:00 AM to 7:00 PM.
Statement 4: The new directions are slated to officially come into effect from July 1, 2026.
Which of the above statements is/are correct?
✅ Correct Answer: D
🎯 Quick Answer:
All statements are correct. (Option D)This ensures that while financial institutions can legally recover dues, they cannot violate a borrower's dignity or privacy.
Structural Breakdown: Banks are not just responsible for their direct employees but also bear the ultimate regulatory liability for outsourced third-party recovery agents.
This requires them to enforce strict KYC, due diligence, and grievance redressal mechanisms.
Historical / Static Context: Historically, guidelines on recovery agents were scattered across different circulars.
The RBI has periodically warned banks against employing "musclemen" or coercive tactics, emphasizing the need for a unified regulatory code to protect consumer rights.
The Dynamic Update (NEW) & Data: The February 2026 draft "Responsible Business Conduct (Second Amendment) Directions, 2026" consolidates and tightens these rules.
It introduces a qualitative ban on "harsh recovery practices," which now explicitly includes public humiliation, excessive calling, and social media shaming.
The hard data parameters mandate that recovery calls or visits can only occur between 8:00 AM and 7:00 PM.
Once finalized, these sweeping regulatory changes will take effect on July 1, 2026.