RBI’s New Recovery Agent Framework for Housing Finance Companies

On August 6, 2026, the Reserve Bank of India (“RBI”) issued an amendment to the regulatory framework governing loan recovery and the engagement of recovery agents by Housing Finance Companies (“HFCs”). The amendment seeks to align the conduct requirements applicable to HFCs with the broader framework governing Non-Banking Financial Companies (“NBFCs”), thereby moving towards a more uniform regulatory approach to recovery practices across the two sectors.

The amendment applies to HFCs regulated under the RBI (Housing Finance Companies) Directions, 2025 and modifies Chapter X on the Fair Practices Code, which contains the requirements governing recovery of loan dues and engagement of recovery agents. The changes seek to remove sector-specific differences and bring HFCs within the consolidated conduct framework applicable to NBFCs.

Transition from the Standalone HFC Framework

Under the amendment, sub-section A.15, titled “Guidelines for engaging Recovery Agents”, and paragraph 170 of Chapter X of the RBI (Housing Finance Companies) Directions, 2025 are proposed to be deleted.

In their place, a new sub-section A.15A, titled “Conduct of HFCs in Recovery of Loans and Engagement of Recovery Agents”, has been introduced, along with paragraph 170A. The new provision requires HFCs to comply with the relevant provisions of the RBI (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025.

This represents a shift away from a standalone set of HFC-specific requirements towards a common regulatory framework governing the conduct of regulated entities in relation to loan recovery and recovery agents.

Convergence with the NBFC Conduct Framework

Under the new paragraph 170A, HFCs are required to comply with paragraphs 100A to 100Z of Chapter III of the RBI (Non-Banking Financial Companies; Responsible Business Conduct) Directions, 2025. These provisions establish the broader framework governing conduct in the recovery of loan dues and the engagement of recovery agents.

The convergence is intended to ensure that HFCs are subject to the same core standards applicable to the relevant category of NBFCs in matters concerning recovery practices, engagement and supervision of recovery agents, borrower communication and related conduct requirements.

The RBI’s broader recovery-agent framework places responsibility on regulated entities for the actions of their recovery agents and requires regulated entities to ensure that recovery practices do not involve intimidation, harassment or other inappropriate conduct. The existing RBI framework, for instance, prohibits practices such as threatening or anonymous calls, inappropriate communications, persistent calls and conduct intended to humiliate borrowers or intrude upon the privacy of their family members.

Transition Period for HFCs

The amendment is proposed to come into effect from October 1, 2026, providing HFCs with a transition period to align their internal frameworks with the revised requirements. During this period, HFCs may need to review and update their recovery-related policies, agreements with recovery agents, monitoring mechanisms and internal codes of conduct to ensure consistency with the requirements incorporated by reference from the NBFC Responsible Business Conduct framework.

The transition period also provides HFCs an opportunity to assess whether their existing recovery processes, borrower communication practices and grievance-redressal mechanisms are aligned with the broader conduct standards that will become applicable under the revised framework.

Key Implications for HFCs

The amendment reflects RBI’s continuing efforts to harmonise and consolidate conduct-related requirements across different categories of regulated entities. By incorporating the NBFC framework into the HFC Directions, the RBI seeks to reduce regulatory divergence and establish greater consistency in the manner in which loan recovery activities and recovery agents are governed.

For HFCs, the change is likely to require a review not only of their formal recovery-agent policies but also of the contractual and operational arrangements through which recovery activities are undertaken. HFCs should accordingly examine their recovery-agent agreements, codes of conduct, training and monitoring mechanisms, borrower communication processes and grievance-redressal systems before the revised framework takes effect.

Conclusion

The amendment marks a further step towards regulatory convergence between HFCs and NBFCs in the area of responsible business conduct and loan recovery. HFCs should utilise the transition period leading up to October 1, 2026 to review their existing recovery frameworks and align their policies, documentation and operational practices with the applicable provisions of the NBFC Responsible Business Conduct Directions, 2025.

As the amendment represents a consolidation of existing recovery-related requirements into a common conduct framework, HFCs should also monitor any consequential changes to the underlying NBFC Responsible Business Conduct Directions and ensure that their compliance frameworks remain aligned with the requirements applicable to them from time to time.

Last Updated on 19 August, 2026