RBI bars bank recovery agents from remote device locking and data access from Jan 1, 2027. HDFC Bank, SBI shares slip as sector weighs compliance costs.
Shares of India's largest banks fell Tuesday after the Reserve Bank of India issued new rules that restrict how lenders can recover unpaid personal, car and home loans. The guidelines, which take effect Jan. 1, 2027, ban banks from remotely locking borrowers' devices and restrict the use of personal data by recovery agents.
State Bank of India shares closed 0.7% lower, while HDFC Bank slipped 0.5%. ICICI Bank fell 0.2%. The Nifty Bank index dropped 0.3%, underperforming the broader Nifty 50 which rose 0.1%. The sector's decline came despite no change in the RBI's repo rate at its August policy meeting.
The central bank's new rules, titled "Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents," prohibit lenders from using technology to restrict borrowers' mobile phones, laptops or tablets to force repayment. The only exception is when the loan was taken to finance that specific device, and even then lenders must follow a gradual process with notice.
Recovery agents cannot use abusive language, threaten borrowers, or contact relatives or colleagues to intimidate them, the RBI said. Banks and their technology vendors are barred from accessing personal information stored on a borrower's device – contacts, photos, text messages, call records and location history – for recovery purposes.
The rules apply to all regulated entities including commercial banks, non-bank finance companies and housing finance companies. "Customer integrity and privacy are of paramount importance," the RBI said in its notification. Banks must share only the minimum information necessary for recovery with employees or agencies.
For banks that rely heavily on digital lending and automated recovery tools, the restrictions could slow collections on overdue personal and credit card loans, two analysts said. Non-bank lenders that serve riskier borrowers may face higher delinquency costs as they shift from device-locking to conventional recovery methods.
The impact on bank earnings will depend on how much each lender used device-locking technology. Most large banks used it sparingly, the analysts said. The bigger risk is for newer digital lenders whose underwriting models assumed fast digital recovery.
The RBI also said banks must have systems to address financial distress and explain resolution options. The new rules do not cancel or reduce loan obligations – borrowers remain liable for unpaid dues, the central bank clarified.
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