The draft titled RBI (Commercial Banks - Responsible Business Conduct) Second Amendment Directions, 2026 was released following Finance Minister Nirmala Sitharaman's announcement in the Union Budget 2026 regarding reforms in loan recovery practices.

The draft is open for public and stakeholder feedback until March 6, 2026, and is expected to come into force from July 1, 2026, after government approval.

The RBI has suggested several major changes, including:

Separate draft directions have also been issued for small finance banks, NBFCs, urban co-operative banks and regional rural banks.

Under the proposed rules, banks must identify borrowers facing repayment difficulties and provide guidance instead of initiating legal action as a first resort.

Borrowers must be informed before a recovery agent is assigned. Recovery proceedings cannot continue if a grievance is pending — unless the complaint is found to be frivolous.

Banks will be required to record calls made by recovery agents, document call frequency, and inform borrowers that conversations are being recorded.

The RBI has explicitly barred abusive language, threatening calls, contacting borrowers outside 8 am to 7 pm, sending inappropriate messages, or humiliating borrowers publicly.

Agents must respect privacy, interact only with borrowers or guarantors, and avoid contacting them during sensitive occasions such as bereavement or festivals.

The draft signals a strong shift towards responsible banking conduct, aiming to balance recovery rights with dignity and fairness for borrowers.