RBI's Fair Practices Code for Lenders: What It Means for Borrower Calls

The RBI Fair Practices Code requires lenders to communicate with borrowers transparently, in a language the borrower understands, and without coercion. For borrower calls specifically, the Reserve Bank of India prohibits harassment, threatening or anonymous calls, and — for recovery of overdue loans — calling before 8:00 a.m. or after 7:00 p.m.

This is an explainer, not legal advice. For exact obligations, refer to the official circular.

Every borrower call your team makes — a payment reminder, a restructuring offer, a recovery follow-up — sits inside a framework the RBI has been building since 2003. The RBI Fair Practices Code (FPC) is not a single document; it is a set of Master Circulars and directions that together govern how banks and Non-Banking Financial Companies (NBFCs) treat borrowers. Get the calling rules wrong and you risk regulatory action, reputational damage, and complaints escalated to the Ombudsman.

Here is what the FPC actually says about contacting borrowers — and where the lines are drawn.

What Is the RBI Fair Practices Code?

The Reserve Bank of India first issued Guidelines on Fair Practices Code for Lenders to banks via circular DBOD.Leg.No.BC.104/09.07.007/2002-03, dated May 5, 2003. For NBFCs, the FPC was introduced through a circular dated September 28, 2006, later revised on March 26, 2012, and consolidated in the Master Circular – Fair Practices Code (RBI/2015-16/16, DNBR (PD) CC.No.054/03.10.119/2015-16, dated July 01, 2015).

The Code covers the entire borrower relationship — loan applications, sanction terms, disbursement, changes in terms, and recovery. A single principle runs through all of it: the borrower must be informed, must understand, and must not be harassed.

Key takeaway. The FPC is board-mandated. Every NBFC must adopt a Board-approved Fair Practices Code and place it on its website for stakeholders.

Which lenders does the Code apply to?

The FPC and its recovery provisions apply broadly across regulated entities (REs):

Note that the August 12, 2022 recovery-agent circular explicitly does not apply to microfinance loans, which are covered separately under the Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022, dated March 14, 2022.

What Does the Fair Practices Code Say About Borrower Communication?

The Code is precise about how you talk to borrowers.

Communicate in a language the borrower understands. Under the Master Circular, all communications to the borrower "shall be in the vernacular language or a language as understood by the borrower." Sanction letters, terms and conditions, and the annualised rate of interest must be conveyed in writing in that language.

Be transparent about charges. Penal interest for late repayment must be mentioned in bold in the loan agreement. Not furnishing a copy of the loan agreement and its enclosures is described by the RBI as an "unfair practice."

Give notice of changes. Any change in terms — disbursement schedule, interest rates, service charges, prepayment charges — must be notified to the borrower in the language they understand, and applied only prospectively.

Do not interfere or intimidate. In recovery, NBFCs "should not resort to undue harassment viz; persistently bothering the borrowers at odd hours, use muscle power for recovery of loans." Staff must be adequately trained to deal with customers appropriately.

What Are the Rules for Recovery and Collections Calls?

This is where borrower calls are governed most directly. The RBI circular DOR.ORG.REC.65/21.04.158/2022-23, dated August 12, 2022 ("Outsourcing of Financial Services – Responsibilities of regulated entities employing Recovery Agents") tightened the conduct expected on recovery calls.

Under that circular, lenders and their agents shall not:

• Resort to intimidation or harassment, verbal or physical.
• Publicly humiliate borrowers or intrude on the privacy of family members, referees and friends.
• Send inappropriate messages on mobile or social media.
• Make threatening or anonymous calls.
• Persistently call the borrower (for example, calling repeatedly).
• Call the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans.

The RBI states that "any violation in this regard by REs will be viewed seriously." Because the lender retains ultimate responsibility for its agents, the conduct standard applies whether calls are made in-house or by an outsourced Lending Service Provider.

For NBFC-Microfinance Institutions, the Code adds that recovery should normally be made only at a central designated place, and field staff may visit the borrower's residence or workplace only if the borrower fails to appear at the central designated place on two or more successive occasions.

How AI Helps Lenders Stay Compliant on Borrower Calls

AI voice agents make FPC compliance systematic rather than aspirational. A platform like YuVoice can be configured so every borrower call runs inside guardrails — dialling windows locked to the 8:00 a.m.–7:00 p.m. rule for overdue-loan recovery, language auto-matched to the borrower's preference across Indian languages, and scripts that stay non-coercive by design.

Because every call is recorded and transcribed, supervisors get a consistent, auditable record instead of relying on spot checks. Frequency caps prevent persistent calling, and disclosures are read out uniformly. The result is scale without drift — the same courteous, compliant conversation on the first reminder and the fiftieth, with an evidence trail if a complaint ever reaches the grievance channel.

For deeper coverage, see how AI supports fair practice compliance in collections calling and the full AI for banking collections India playbook.

Building a Compliant Borrower-Contact Policy

A practical FPC-aligned calling policy usually includes:

1. Calling window controls — enforce 8:00 a.m.–7:00 p.m. for overdue-loan recovery contact.
2. Language preference capture — record and use the borrower's understood language.
3. Frequency limits — prevent persistent or repeated calls.
4. Script governance — no threats, no anonymity, no public humiliation.
5. Grievance signposting — every borrower knows how to complain.
6. Agent oversight — the same standards for outsourced agents as in-house staff.

For collections-specific workflows, see six real use cases for AI voice agents in loan collections and how Indian banks use voice AI for outbound collections.

FAQ

What is the RBI Fair Practices Code in simple terms? It is a set of RBI rules requiring lenders to be transparent with borrowers about loan terms, communicate in a language the borrower understands, and recover dues without harassment or coercion. It is anchored in Master Circulars and directions for banks and NBFCs.

Can a lender call a borrower after 7 p.m.? For recovery of overdue loans, the RBI's August 12, 2022 circular directs that lenders and their recovery agents shall not call the borrower before 8:00 a.m. and after 7:00 p.m. For other service communication, follow your Board-approved code and the borrower's stated preferences.

Which language must borrower communications be in? The Master Circular – Fair Practices Code requires that communications to the borrower be in the vernacular language or a language the borrower understands, including sanction letters and terms of the loan.

Does the Code apply to outsourced recovery agents? Yes. The RBI holds the regulated entity ultimately responsible for the actions of its recovery agents. Agents must follow the Fair Practices Code and the lender's Board-approved code of conduct.

What happens if a lender breaches the calling rules? The RBI has said violations of the recovery-agent conduct norms "will be viewed seriously." Borrowers can also escalate grievances internally and, if unresolved, to the RBI Ombudsman. For exact consequences, refer to the official circular.

Are microfinance loans covered by the 8 a.m.–7 p.m. rule? The August 12, 2022 recovery-agent circular does not apply to microfinance loans, which are governed by the Master Direction on Microfinance Loans, 2022. Those loans have their own conduct and recovery framework.

Conclusion

The RBI Fair Practices Code turns borrower respect into a compliance requirement — transparent terms, the right language, and calls that never tip into harassment or odd-hour pressure. As call volumes grow, the challenge is consistency, and that is where automation earns its place: enforcing the rules on every single conversation.

Bring your borrower calls into line with the Fair Practices Code. Talk to the YuVerse team to see how compliant voice AI works in practice.

References

• Master Circular – Fair Practices Code (RBI/2015-16/16), Reserve Bank of India — https://www.rbi.org.in/commonperson/English/Scripts/Notification.aspx?Id=1572
• Outsourcing of Financial Services – Responsibilities of regulated entities employing Recovery Agents (DOR.ORG.REC.65/21.04.158/2022-23, August 12, 2022), Reserve Bank of India — https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12378&Mode=0
• Directions on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs (RBI/2017-18/87, November 9, 2017), Reserve Bank of India — https://www.rbi.org.in/commonperson/English/Scripts/Notification.aspx?Id=2646