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ARTICLE · 18 OCTOBER 2026

Beyond Loan Defaults: RBI’s 2026 Reforms On Loan Recovery Practices And NBFC Accountability

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Loan recovery is an essential part of lending operations, but the methods adopted by financial institutions to recover outstanding dues have often raised concerns regarding borrower privacy, harassment and the misuse of recovery mechanisms. The Reserve Bank of India (RBI), through the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Third Amendment Directions, 2026, dated 6 August 2026, has introduced a comprehensive framework governing the recovery of loan dues by non-banking financial companies (NBFCs).

IndiaFinance and Banking
Anavi Naik
Anavi Naik

Introduction

Loan recovery is an essential part of lending operations, but the methods adopted by financial institutions to recover outstanding dues have often raised concerns regarding borrower privacy, harassment and the misuse of recovery mechanisms. The Reserve Bank of India (RBI), through the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Third Amendment Directions, 2026, dated 6 August 2026, has introduced a comprehensive framework governing the recovery of loan dues by non-banking financial companies (NBFCs).

Issued under Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934, the Amendment Directions will come into effect on 1 January 2027. They consolidate and strengthen the regulatory requirements governing recovery activities, the engagement of recovery agencies and the conduct expected from NBFC employees and recovery agents. The amendments seek to ensure that recovery of legitimate dues takes place through transparent,

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