For Abhay (name changed), a man in his late 40s living in Delhi, the harassment calls from bank recovery agents started after he missed a monthly instalment on personal loans he had borrowed in desperation to pay for his wife’s urgent medical treatment.
Soon, it spiralled into threats, intimidation and humiliation — first over the phone, and then at his doorstep.
Initially, he managed to pay the EMIs on time. But by the fourth month, stretched thin by medical bills and rising household expenses, he defaulted once. What followed was not a reminder or a conversation about restructuring his repayment, but a series of harassment incidents.
“They didn’t ask what had happened. They shouted, abused, threatened me. Soon, people started coming to my house repeatedly,” recalls Abhay.
Abhay’s experience is not an exception. It is fast becoming a disturbing norm in India’s rapidly expanding credit ecosystem.
A grim picture
An in-house survey by Expert Panel, specialising in protecting borrowers from financial harassment, reveals the alarming extent to which coercive recovery practices have become normalised.
Expert Panel, which claims to have provided direct debt counselling to over 35,000 borrowers, said that nearly 39% of those surveyed admitted to being subjected to abusive recovery calls, while 28% reported receiving repeated calls from multiple lenders.
For many, the pressure spilled into their personal lives, with 11% facing visits by recovery agents to their homes or workplaces, and 8% being threatened with legal action or police complaints.
The survey also underlines that loan defaults are rarely deliberate. Job loss or salary reduction emerged as the biggest trigger cited by 31% of borrowers, followed by a high EMI burden disproportionate to income (28%). Another 19% struggled due to multiple loans or over-borrowing, while 12% slipped into default because of medical or family emergencies.
Speaking to The Hindu, Anurag Mehra, Director of Expert Panel, reminded that there is a mindset in our society that if you fail to repay loan, you are a criminal. “But, actually it is not a crime. If I am defaulting on my loan, it is not a criminal offence. It is a commercial agreement between two entities and if one is failing in his obligation, then the bank has to follow what is written in the agreement,” Mr. Mehra said.
He added that while the RBI has laid down clear guidelines, banks and their recovery agents often fail to follow them. In many cases, recovery agents do not even disclose which bank has hired them. This was the experience of Tarun (name changed), a local IT peripherals businessman, who said a recovery agent who turned up at his doorstep flatly refused to reveal the bank on whose behalf he was acting.
RBI data
According to the RBI’s Integrated Ombudsman Scheme report for FY 2024–25, complaints by people against banks formed the largest share — 2,41,601 complaints, accounting for 81.53% of all grievances received by Ombudsman offices. Complaints against non-banking financial companies (NBFCs) stood at 43,864, or 14.80%. Among banks, private sector banks topped the list, with their share of complaints rising from 34.39% in FY 2023–24 to 37.53% in FY 2024–25.
Complaints related to “Loans and Advances” remained the single largest category, accounting for 29.25% of total complaints. Credit card-related grievances rose sharply — up by 20.04%, making them the second-highest contributor. The overwhelming majority of complainants — 87.19% — were individuals, not businesses or institutions.
Legal precedents
The Supreme Court, as far back as 2007 in ICICI Bank Ltd. vs. Prakash Kaur, deprecated the practice of employing musclemen for loan recovery, directing banks to follow procedures recognised by law instead of “strong-arm tactics.”
The RBI’s guidelines are unambiguous. Its circulars explicitly state that lenders must not resort to undue harassment, including persistent calls at odd hours, use of muscle power, or intimidation during recovery. The guidelines also make it clear that lenders are fully accountable for the actions of their recovery agents.
In a landmark move, Tamil Nadu has become the first State to criminalise harassment during loan recovery. A law passed by the State Legislative Assembly in April received the Governor’s assent on June 13, making coercive recovery punishable with three to five years of imprisonment and a monetary fine.
Union Finance Minister Nirmala Sitharaman in July this year stressed that NBFCs must ensure recovery practices are fair, empathetic and respectful, strictly adhering to the RBI’s Fair Practices Code.
“India is facing an acute shortage of accessible legal support for people dealing with loan defaults, cheque bounce cases and recovery harassment,” Mr. Mehra said.
He opined that “mutual settlement and agreement is the best route, because if we go to court, there would be a wastage of time for both parties. And since harassment is illegal, settlement is the right procedure. But people are not aware of it.”
He said, notably, that 99% of the cases handled by the Expert Panel are settled without litigation, using alternative dispute resolution mechanisms such as negotiation, mediation and conciliation.
Published – December 28, 2025 08:23 pm IST
