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On Friday, the Reserve Bank of India (RBI) announced some additional guidelines to regulated entities (RE) that outsource financial services. The new rules address Recovery Agent (RAs)-related difficulties for the central bank. RBI has from time to time advised that the ultimate responsibility for their outsourced activities rests with the regulated entities, who are also in charge of overseeing RAs as part of this role.
The rules are the result of an observation by RBI that RE agents have been deviating from the current guidelines governing the outsourcing of financial services.
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The call for recovery window is intended to run from 8 am to 7 pm
The Reserve Bank of India (RBI) stated that businesses must make sure that their collection agents do not abuse anyone when collecting debts. In view of the concerns arising from the activities of these agents, RBI has advised that the REs shall strictly ensure that:
- RE’s or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors’ family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc.
Instructions to RE
It was further stated that all commercial banks, with the exception of payments banks, local area banks, regional rural banks, and small finance banks, as well as all all-India financial institutions, including Exim Bank, NABARD, NHB, SIDBI, and NaBFID, as well as all non-banking financial companies, including housing finance companies, state cooperative banks, district central cooperative banks, and primary (urban) cooperative banks, will be subject to this circular.
“The extant guidelines on permissible hours for calling borrowers on phone for recovery purposes are currently specified in respect of Housing Finance Companies and REs extending microfinance loans. Taking into account certain recent developments including growing incidences of unacceptable practices followed by REs, the Reserve Bank of India has issued certain additional instructions to REs by extending the scope of the guidelines,” the circular said.
Copy of the circular can be downloaded from here:
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