For Abhay (name changed), a man in his mid-40s living in Delhi, the harassing calls from bank recovery agents began after he missed a monthly payment on personal loans he took out in desperation to pay for his wife’s urgent medical care.
It soon escalated into threats, intimidation and humiliation – first on the phone and then at his door.
Initially, he managed to pay the EMIs on time. But in the fourth month, stretched by medical bills and rising household expenses, he fell once. What followed was not a reminder or a conversation about restructuring his repayments, but a series of incidents of harassment.
“They didn’t ask what happened. They shouted, cursed at me, threatened me. Soon, people started repeatedly coming to my house,” recalls Abhay.
Abhay’s experience is no exception. It is fast becoming an alarming norm in India’s fast-paced credit ecosystem.
A grim picture
An internal investigation by a panel of experts specializing in protecting borrowers from financial harassment reveals the alarming extent to which enforcement practices have become normalised.
The think tank, which claims to have provided direct debt advice to more than 35,000 borrowers, said almost 39% of those surveyed admitted they had been subjected to unfair debt collection requests, while 28% said they had received repeated calls from multiple creditors.
For many, the pressure spilled over into their personal lives, with 11% facing visits from recovery agents to their homes or workplace and 8% being threatened with legal action or police complaints.
The survey also highlights that loan defaults are rarely intentional. Job loss or salary cut emerged as the biggest trigger cited by 31% of borrowers, followed by high EMI burden disproportionate to income (28%). Another 19% faced problems due to multiple loans or over-borrowing, while 12% slipped into default due to health or family crises.
In an interview with The Hindu, the director of the panel of experts, Anurag Mehra, recalled that there is an opinion in our society that if you do not repay the loan, you are a criminal. “But it’s not really a crime. If I default on the loan, it’s not a crime. It’s a business contract between two entities and if one defaults, then the bank has to follow what’s written in the contract,” Mehra said.
He added that while the RBI has laid down clear guidelines, banks and enforcement often do not follow them. In many cases, collection agents do not even disclose which bank hired them. That was the experience of Tarun (name changed), a local IT peripherals dealer, who said the recovery agent who turned up at his door flatly refused to reveal the bank on whose behalf he was acting.
RBI data
According to RBI’s Integrated Ombudsman Scheme report for the fiscal year 2024-25, people’s complaints against banks accounted for the largest share of 2,41,601 complaints, accounting for 81.53% of all complaints received by ombudsman offices. The number of complaints against non-banking financial companies (NBFCs) was 43,864, i.e. 14.80%. Among the banks topping the list were private sector banks, whose share of complaints rose from 34.39% in FY2023-24 to 37.53% in FY2024-25.
Complaints related to “Loans and Advances” remained the most numerous category, representing 29.25% of the total complaints. Credit card-related complaints rose sharply – up 20.04%, making them the second largest contributor. The vast majority of complainants – 87.19% – were individuals, not businesses or institutions.
Legal precedents
The Supreme Court already in 2007 in the case of ICICI Bank Ltd. vs. Prakash Kaur slammed the practice of employing musclemen for loan recovery and directed banks to follow procedures recognized by law instead of “strong arm tactics”.
The RBI guidelines are clear. Its circulars specifically state that creditors must not resort to undue harassment, including persistent phone calls at odd hours, the use of muscle power or intimidation during recovery. The guidelines also make it clear that creditors are fully responsible for their collection actions.
In a landmark move, Tamil Nadu has become the first state to criminalize debt collection harassment. The law, passed by the State Legislature in April, received the governor’s assent on June 13, making forced recovery punishable by three to five years in prison and a fine.
Union Finance Minister Nirmala Sitharaman in July this year emphasized that NBFCs must ensure that recovery procedures are fair, empathetic and respectful and strictly adhere to the RBI’s Code of Fair Practices.
“India is facing an acute shortage of available legal support for people dealing with loan defaults, review cases and enforcement harassment,” Mr Mehra said.
He believed that “mutual settlement and agreement is the best way because if we go to court it would be a waste of time for both parties. And since harassment is illegal, settlement is the right course of action. But people are not aware of that.”
In particular, he said that 99% of cases dealt with by the expert panel are resolved without litigation using alternative dispute resolution mechanisms such as negotiation, mediation and conciliation.
Published – 28 Dec 2025 20:23 IST
