Loan recovery by NBFCs often falls under the RBI’s scrutiny due to unethical approaches. It isn’t something NBFCs can shape as per their needs. The Reserve Bank rolled out new guidelines regarding the same in the month of October this year. Qualified NBFCs must abide by these rules without fail to stay penalty-free. In this article, we will take a brief walk-through of these guidelines and their impact on end-users as well as NBFCs.
What’s New About the NBFC Loan Recovery Guidelines?
On 1 Oct, 2026, RBI[1] introduced loan recovery guidelines built on the RBI (NBFC—Responsible Business Conduct) Directions, 2025. While changes within new guidelines aren’t as stringent as they appear, they address several touch points that have everything to do with the borrowers’ experience and how NBFCs approach loan recovery.
What Are the New NBFC Loan Recovery Guidelines?
The new guidelines pivot around RBI recovery agent rules, NBFC borrower rights, and other essential areas. In a nutshell, with these new NBFC loan recovery guidelines, RBI requires NBFCs to:
- Maintain harmony with borrowers; unethical or harsh tactics are completely banned now.
- Have a proper system in place to receive and resolve borrowers’ grievances
- Avoid following up with borrowers without understanding their present situation. They cannot send a recovery agent during a family crisis.
- Send the first recovery notice when the loan repayment outstanding for 60 days.
- Give ample opportunity to borrowers to settle loans. Recovering assets (on which a loan was taken) under coercion is no longer the right approach.
- Keep the borrowers’ gadgets out of consideration unless the same is bought via credit. Simply put, NBFCs cannot freeze borrowers’ gadgets during communication for loan recovery.
- Take a legal course of action against the non-compliant recovery agents
- Maintain proper records of recovery agents, clearly reflecting their details and the borrowers they serve.
- Appoint certified recovery agents, especially from government-recognized institutions, such as the Indian Institute of Banking and Finance (IIBF)
- Avoid copying and using borrowers’ data
- Inform the borrowers promptly if the recovery agent is changed
- Inform the borrower about the first visit of the agent—either digitally or via a hard copy.
- Reveal the list of agents and their corresponding agencies (where they were trained) on their website.
- Showcase the loan recovery details in the loan documents.
- Set forth clear policies to vet agencies, facilitating trained agents
Who is Exempt from NBFC Loan Recovery Guidelines?
NBFCs and MFIs engaged in lending are essentially required to align with these guidelines. This means these guidelines do not apply to
- Mortgage Guarantee Companies
- Core Investment Companies (CICs)
- NBFC-Account Aggregators
- Standalone Primary Dealers
- Non-Operating Financial Holding Companies
Reserve Bank’s fresh loan recovery guidelines seem practical, holistic, and in favour of borrowers, paving the way for enhanced financial inclusion. On the other hand, these rules will set the stage for deeper credit reach, allowing NBFCs to effectively address the unbanked section.
If you need any clarity pertaining to these guidelines, feel free to contact Advisou. As a reliable and registered firm, Advisou has years of expertise in regulated licensing and compliance management. Whether you run a P2P platform, a credit portal, or a regulated venture, Advisou can transform how you manage your business, apply for licenses, and oversee compliance. Contact us now to book a free consultation.
Also Read: NBFC Principal Business Criteria
Frequently Asked Questions
Q1: Can NBFC fine-tune recovery policies at a later stage?
No, unless the RBI intends them to do so.
Q2: What would happen if the entity breaches the NBFC loan recovery guidelines?
In such cases, RBI will levy strict penalties, ranging from harsh monetary fines to revocation of license.
Q3: How long does it take to implement these guidelines?
That is entirely dependent on the overhauling required by the NBFCs. That said, please consult with licensing and regulations experts, such as Advisou, for prompt and seamless adherence.
Q4: Can an NBFC take a borrower’s assets if the repayment is outstanding for more than 60 days?
No, the fresh guidelines oblige such an approach. NBFCs must notify borrowers at set intervals before taking the assets.
Q5: Are P2P lending platforms required to follow such guidelines?
No, P2P lending platforms aren’t the lenders; they just connect lenders with borrowers through a digital platform.
