RBI Proposes Code of Conduct for Recovery Agents

The Reserve Bank of India (RBI) has come out with a proposal to have a code of conduct in place for recovery agents. The same is part of the draft Master Direction on Managing Risks and Code of Conduct in Outsourcing of Financial Services. The comments on the draft master direction may be shared by November 28, 2023.

Last year, it was decided to introduce a framework to effectively address the risks involved in outsourcing of financial services considering the rise in the use of such outsourcing by REs to avail of specialist expertise and bring down costs.

It is proposed to mandate REs to bring into effect a Board-approved code of conduct for recovery agents, direct sales agents, and direct marketing agents. Such agents would have to be trained to ensure that they factor in aspects such as confidentiality of customer information, hours of calling, etc. in the discharge of their responsibilities. It is emphasised that recovery agents and REs including commercial banks, Non-Banking Financial Companies (NBFCs), etc. should not “resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts”. Accordingly, they would be prohibited from humiliating the debtor in public, intruding upon the privacy of the debtor’s family members, referees, and friends, sending inappropriate messages, making threatening calls, persistently calling the borrower, etc. The recovery agents and REs would also be restrained from calling the borrowers or guarantors before 8 a.m. and after 7 p.m. for the recovery of overdue loans.

Also, the draft master circular restricts outsourcing of certain activities, lists down the regulatory and supervisory responsibilities of the REs, provides for the setting up of a mechanism to address grievances related to outsourced services, etc.