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The Reserve Bank of India on Friday tightened rules for loan recovery agents following complaints of unfair recovery practices and strong-arm tactics, and told banks to ensure the agents do not harass borrowers during collection.

“In view of concerns arising from the activities of the agents, it is advised that the REs shall strictly ensure that they or their agents do not resort to intimidation or harassment, either verbal or physical, against any person in their debt collection efforts," it said in a press note.

The central bank said banks, non-banking financial companies, cooperative banks, housing finance and asset reconstruction companies should ensure recovery agents desist from publicly humiliating borrowers or send inappropriate messages on mobile or through social media. They should also avoid calling borrowers before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, and making false and misleading representations.

RBI has come down hard on illegal activities by digital lenders following a Chinese loan app scam. On Wednesday, the regulator came out with a regulatory framework for digital lenders.

RBI said regulated entities must ensure that loan servicing and repayments are executed directly in their bank accounts without any third party pass-through or pool account.

The disbursements need to be made in the borrower’s bank account, it added

RBI said any fee or charge payable to lending service providers should be paid directly by the regulated entity and not by the borrower. Regulated entities will also have to offer a cool-off period during which the borrowers can exit digital loans by paying the principal amount and the proportionate costs without penalty.

In addition, regulated entities should also ensure all loan service providers engaged by them have a nodal grievance redressal officer to deal with digital lending-related complaints.

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