How the RBI's August 2026 loan recovery directions restrict device locking and mandate call recording

On August 6, 2026, the Reserve Bank of India issued a set of Amendment Directions on recovery of loan dues and engagement of recovery agents. They take effect on January 1, 2027. For regulated lenders, recovery calls and visits are generally limited to 08:00–19:00, with earlier or later contact permitted when the borrower or guarantor expressly requests or authorises it. Records of recovery calls must be preserved for six months, subject to the directions’ treatment of sub judice matters.

The directions also limit technology-based restrictions on financed mobile devices. A lender cannot initiate a restriction until the associated loan is 30 days past due and the borrower has not paid after receiving the required notices. The full set of restrictions in the loan agreement may take effect only after 60 days past due. Essential functions remain protected, and outgoing calls cannot be restricted before that 60-day point. If a lender-caused delay continues after the loan is repaid in full, compensation is payable at ₹250 per hour until the wrongful restriction is remedied, capped at the amount of the loan disbursed. Any technology-based mechanism must obtain certification from the device OEM or operating-system platform, if provided.

The RBI’s press release lists directions for commercial banks, small finance banks, local area banks, regional rural banks, co-operative banks, NBFCs, housing finance companies and all India financial institutions. Recovery agencies engaged by those entities fall within the operating model the directions regulate; digital lending arrangements therefore need to be mapped to the regulated lender’s responsibilities rather than treated as a separate collections channel.

The January 2027 commencement date makes the change an implementation exercise, not only a policy update. Recovery-agency contracts and instructions need to reflect contact hours and call-record requirements. Product counsel need an inventory of device-restriction mechanisms, their certification status and their treatment of protected functions. Legal operations also need an auditable record of repayment, restoration time and any lender-attributable delay, because recovery-system latency can now create a defined compensation obligation.