For those of you who’ve taken a loan from a bank or any financial institution, this information will be crucial if repayment pressure has become a nightmare for you. The Reserve Bank of India (RBI) has laid down a set of stringent guidelines on loan recovery agents dealing with the loan recovery process to prevent the harassment of borrowers.
If you know these rules, then you can safeguard yourself from harassment and rightfully exercise your legal rights.
RBI’s Guidelines on Loan Recovery Agents
The RBI has instructed banks to ensure the conduct of their recovery agents: There have been cases of harassment, threats, and misuse of personal information against borrowers. These matters have become serious concerns. In response to this, the RBI has put in place several stringent measures and compliance provisions regarding the protection of borrowers’ rights.
What to Do If A Recovery Agent Harasses You?
Threats and intimidation are tools recovery agents sometimes use against their clients. But there are laws against such conduct. The RBI has put in place laws to protect borrowers:
- Complaint against the recovery agent to the concerned bank and local police.
- Demand penalties against agents violating RBI guidelines.
- Know your rights – beyond that limit, agents cannot harass you.
Loan Default Rules: When Recovery Starts?
When a person misses loan EMIs, the bank proceeds with the recovery in a structured manner:
- First Reminder – The Bank sends a notice after the borrower misses two EMIs.
- Legal Notice – The Bank issues a legal notice against the borrower if he defaults on three consecutive EMIs.
- Declared a Defaulter – With continued non-payment, the account concerned becomes a loan default; the banks start recovery processes.
How Do Banks Recover Loans?
There are primarily two methods of recovery that banks employ:
- Non-Judicial Process – Negotiation and settlement before instituting legal action.
- Judicial Process – To file a case in court in the event of unsuccessful out-of-court recovery.
RBI mandates that banks must respect borrowers’ rights in the process.
Ways To File a Complaint Against Unfair Loan Recovery Practices
If a recovery agent threatens, intimidates, or violates any of the guidelines set by the RBI, keep the following in mind:
- Complain to the Bank – Report the misconduct outright.
- Lodge the Complaint Before Police – In case the agent proves to use illegal tools.
- Call Time Limit – The agents can only reach you from 7 AM to 7 PM; visits at home outside these hours are unacceptable.
- Verifying Authorization – Agents must have an authorization letter along with the bank notice.