The Reserve Bank of India (RBI) invited comments on the draft amendments to the directions on ‘Conduct of Regulated Entities in Recovery of Loan and Engagement of Recovery Agents’. These directions apply to entities such as commercial banks, cooperative banks, and non-Banking financial companies.
Key features of the draft amendments include:
▪ Restrictions on technology-based recovery: The draft amendments prohibit lending entities (such as banks) from using recovery mechanisms such as disabling a borrower’s mobile device. An exception is when the loan was taken to finance that device. However, it specifies that even when used for financing a device, a bank cannot lock it until the loan is 90 days past due and multiple notices have been served. Further, banks are also prohibited from disabling essential functions such as SOS features.
▪ Restriction on recovery actions before grievance redressal: If a borrower lodges a grievance regarding loan dues or recovery, the lending entities must not forward the case to any recovery agent until the grievance is disposed. Currently, if a lending entity believes that a complaint is frivolous or vexatious, it may forward the case.
▪ Advance notice: Under the draft amendments, lending entities must notify a borrower at least one day prior via SMS or email (or three days by letter) before an agent makes the first in-person visit. There is no such minimum timeframe for notice under the current Rules.
▪ Mandatory certification for recovery agents: The draft amendments prohibit recovery agencies from engaging any agent who has not obtained a certificate from the Indian Institute of Banking and Finance, after completing a specialised training.
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