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Outsourcing of Financial Services - Responsibilities of regulated entities employing Recovery Agents

RBI/2022-23/108
DOR.ORG.REC.65/21.04.158/2022-23

August 12, 2022

Madam/ Sir,

Outsourcing of Financial Services - Responsibilities of regulated entities employing Recovery Agents

The Reserve Bank of India has from time to time advised regulated entities (REs) that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsible for the actions of their service providers including Recovery Agents (hereafter referred to as ‘agents’).

2. It has been observed that the agents employed by REs have been deviating from the extant instructions governing the outsourcing of financial services. In view of concerns arising from the activities of these agents, it is advised that the REs shall strictly ensure that they 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, persistently1 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.

3. The instructions contained in para 2 above shall supplement and be read in conjunction with the existing guidelines/directions issued by the Reserve Bank of India, as amended from time to time, including those tabulated in Annex.

4. Any violation in this regard by REs will be viewed seriously.

Applicability

5. This circular shall apply to the following REs:

  1. All Commercial Banks (including Local Area Banks, Regional Rural Banks, and Small Finance Banks) excluding Payments Banks;
  2. All All-India Financial Institutions (viz. Exim Bank, NABARD, NHB, SIDBI, and NaBFID);
  3. All Non-Banking Financial Companies including Housing Finance Companies;
  4. All Primary (Urban) Co-operative Banks, State Co-operative Banks, and District Central Co-operative Banks; and
  5. All Asset Reconstruction Companies.

6. This circular shall not apply to microfinance loans covered under ‘Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022’, dated March 14, 2022.

Yours faithfully,

(Sunil T. S. Nair)
Chief General Manager


Annex

Existing Guidelines/Directions issued by the Reserve Bank of India referring to/governing the ‘Outsourcing of Financial Services’ and ‘Recovery Agents’

Sl. No.

Circular No.

Date

Subject

1.

DBOD.Leg.No.BC.104/09.07.007/2002-03

May 5, 2003

Guidelines on Fair Practices Code for Lenders

2.

DBOD.NO.BP.40/ 21.04.158/ 2006-07

November 3, 2006

Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks

3.

DBOD.No.BL.BC.59/22.01.010/2006-2007

February 21, 2007

Section 23 of Banking Regulation Act, 1949 - Doorstep Banking

4.

DBOD.NO.BP.64/21.04.158/ 2007-08

March 03, 2008

Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks

5.

DBOD.No.Leg.BC.75/09.07.005/2007-08

April 24, 2008

Mid-Term Review of the Annual Policy for the Year 2007-08 - Recovery Agents Engaged by Banks

6.

DBOD.No.BP.97/21.04.158/2008-09

December 11, 2008

Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks

7.

DBS.CO.PPD.BC. 5 /11.01.005/2008-09

April 22, 2009

Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks-Compliance Certificate

8.

DBOD.No.BAPD.BC.7/22.01.001/2014-15

July 1, 2014

Section 23 of the Banking Regulation Act, 1949 - Master Circular on Branch Authorisation

9.

DBR.No.BP.BC.76/21.04.158/2014-15

March 11, 2015

Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks

10.

DBR.No.Dir.BC.10/13.03.00/2015-16

July 1, 2015

Master Circular - Loans and Advances - Statutory and Other Restrictions

11.

DBR.CO.RRB.BL.BC.No.17/31.01.002/2015-16

July 1, 2015

Master Circular on Branch Licensing

12.

DNBR.PD.004/03.10.119/2016-17

August 23, 2016

Master Direction - Standalone Primary Dealers (Reserve Bank) Directions, 2016

13.

DoR(NBFC).PD.003/03.10.119/2016-17

August 25, 2016

Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016

14.

DNBR.PD.007/03.10.119/2016-17

September 1, 2016

Master Direction - Non-Banking Financial Company - Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016

15.

DNBR.PD.008/03.10.119/2016-17

September 1, 2016

Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016

16.

DNBR.PD.009/03.10.119/2016-17

September 2, 2016

Master Direction - Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016

17.

DNBR.(PD).090/03.10.124/2017-18

October 4, 2017

Master Directions - Non-Banking Financial Company - Peer to Peer Lending Platform (Reserve Bank) Directions, 2017

18.

DNBR.PD.CC.No.090/03.10.001/2017-18

November 9, 2017

Directions on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs

19.

DOR(NBFC)(PD)CC.No.112/03.10.001/2019-20

June 24, 2020

Loans Sourced by Banks and NBFCs over Digital Lending Platforms: Adherence to Fair Practices Code and Outsourcing Guidelines

20.

CEPD.CO.PRD.Cir.No.01/13.01.013/2020-21

January 27, 2021

Strengthening of Grievance Redress Mechanism in Banks

21.

DOR.FIN.HFC.CC.No.120/03.10.136/2020-21

February 17, 2021

Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021

22.

DOR.ORG.REC.27/21.04.158/2021-22

June 28, 2021

Guidelines for Managing Risk in Outsourcing of Financial Services by Co-operative Banks

23.

DOR.SIG.FIN.REC 1/26.03.001/2022 -23

April 1, 2022

Master Circular - Asset Reconstruction Companies

24.

DOR.ACC.REC.No.20/21.04.018/2022-23

April 19, 2022

Disclosures in Financial Statements- Notes to Accounts of NBFCs

25.

DoR.AUT.REC.No.27/24.01.041/2022-23

April 21, 2022

Master Direction - Credit Card and Debit Card - Issuance and Conduct Directions, 2022

26.

DOR.REG.No.45/19.51.052/2022-23

June 8, 2022

Section 23 of the Banking Regulation Act, 1949 - Doorstep Banking


1 For example- calling repeatedly