RBI’s New Debt Collection Rules May Complicate Loan Recovery
Date: 22-feb-2025
RBI's New Debt Collection Regulation
The Reserve Bank of India (RBI) has implemented a new regulation aimed at formalizing debt collection processes, requiring all transactional calls from banks and financial institutions to originate from numbers starting with the ‘160’ series, while promotional calls must use the ‘140’ series.
Directive Overview
Issued on January 17, 2025, the directive is designed to enhance transparency and curb fraudulent activities related to financial transactions. It forms part of the central bank’s broader effort to standardize debt collection in India, reducing consumer harassment and unauthorized recovery practices.
Industry Concerns
Industry experts have raised concerns that these guidelines could complicate loan recovery efforts for lenders. Financial institutions rely heavily on transactional calls for reminders about loan due dates and follow-ups on overdue payments, and the new requirement may create unintended disruptions.
Many borrowers tend to ignore unknown or unfamiliar numbers, potentially leading to missed payment reminders, increased defaults, delayed recoveries, and higher non-performing assets (NPAs).
Impact on Digital Lending
Digital lending platforms, which depend on real-time communication to manage repayments and assist borrowers in maintaining their credit scores, are particularly concerned. Any barrier to direct communication may result in compliance challenges and potential revenue losses.
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Industry Response and Alternatives
While RBI’s policy aims to protect consumers from unethical practices, industry stakeholders suggest that a more flexible approach may be necessary. Experts recommend:
- Allowing financial institutions to register multiple designated calling numbers under the ‘160’ series
- Adopting alternative solutions such as automated messages, app notifications, and email reminders to complement traditional debt recovery methods
Financial institutions and digital lending companies are expected to seek clarifications from the RBI regarding possible adjustments to these new guidelines. Meanwhile, banks and NBFCs are preparing for a transition period that may temporarily affect their debt recovery mechanisms.
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