An NBFC may contact a borrower’s relatives in limited circumstances, but it cannot harass, threaten, shame, or repeatedly contact relatives to recover the borrower’s loan. The Reserve Bank of India (RBI) has clearly directed NBFCs and their recovery agents not to use intimidation or harassment during debt collection, including actions that intrude on the privacy of the debtor’s family members, referees, and friends.
Therefore, receiving a legitimate communication involving a family member does not automatically mean that the NBFC has acted illegally. The legality depends on why the relative is being contacted, what information is disclosed, how the contact is made, and whether the person is actually responsible for the loan.
Why Do NBFCs Contact Relatives?
When a borrower becomes unreachable or fails to repay a loan, an NBFC or its authorised recovery agent may try to establish contact through information available in its records.
For example, a relative may have been provided as:
- An emergency contact
- A reference
- A co-borrower
- A guarantor
- A contact person during the loan application
However, being listed as a contact or relative does not automatically make that person responsible for repaying the borrower’s loan.
A guarantor or co-borrower can have separate contractual obligations, but an ordinary family member generally does not become liable simply because of their relationship with the borrower.
Can an NBFC Legally Call a Relative?
There is an important distinction between contacting a relative and harassing a relative.
RBI’s framework specifically states that NBFCs and their recovery agents should not resort to intimidation or harassment against any person during debt collection. It also prohibits conduct intended to publicly humiliate borrowers or intrude upon the privacy of their family members, referees and friends.
Therefore, a recovery agent cannot use a relative as a tool to pressure or embarrass the borrower.
A limited contact may be legitimate in some circumstances, but the communication must remain professional, proportionate and consistent with applicable privacy and recovery guidelines.
What Is Considered Harassment?
Harassment can take several forms.
An NBFC or recovery agent should not:
- Threaten the borrower or relatives
- Use abusive or insulting language
- Repeatedly call relatives to pressure the borrower
- Publicly disclose the borrower’s debt
- Shame or humiliate family members
- Send inappropriate messages or social-media communications
- Make threatening or anonymous calls
- Misrepresent the consequences of non-payment
- Intrude unnecessarily into the privacy of family members
RBI has specifically included acts intended to humiliate borrowers publicly or intrude upon the privacy of their family members, referees and friends among prohibited recovery practices.
Can Recovery Agents Disclose the Loan Details to Relatives?
Recovery agents must maintain customer confidentiality.
If an agent contacts a relative, that does not give the agent unlimited permission to disclose the borrower’s private financial information.
For example, repeatedly telling neighbours or relatives that a borrower has defaulted, revealing the outstanding amount unnecessarily, or attempting to publicly shame the borrower can raise serious concerns under RBI’s recovery and customer-protection framework.
The purpose of contacting someone should not be to publicly embarrass the borrower.
What If the Relative Is a Guarantor or Co-Borrower?
The situation can be different if the relative is a co-borrower or guarantor.
A co-borrower has contractual responsibility associated with the loan. Similarly, a guarantor may have liability according to the guarantee agreement if the borrower defaults.
Therefore, an NBFC can take appropriate recovery steps against a person who has legally undertaken responsibility for the loan, subject to applicable law and regulatory requirements.
Simply being the borrower’s:
- Parent
- Spouse
- Brother
- Sister
- Child
- Other relative
does not by itself make someone responsible for another person’s loan.
What Are the Permitted Calling Hours?
RBI has placed restrictions on the timing of recovery calls.
For NBFCs and their recovery agents, RBI directions prohibit persistent calls and calls before 8:00 a.m. or after 7:00 p.m. for recovery of overdue loans.
This means recovery efforts should not turn into repeated calls at unreasonable hours.
Borrowers and their family members should keep records if recovery agents repeatedly contact them outside the permitted hours.
Are NBFCs Responsible for Recovery Agents?
Yes.
An NBFC cannot simply avoid responsibility by saying that a third-party recovery agency made the calls.
RBI has stated that regulated entities remain responsible for the actions of their service providers, including recovery agents. The NBFC must also ensure that its agents follow applicable instructions and maintain appropriate standards of conduct.
This is important because many lenders outsource collection activities to specialised recovery agencies.
If an outsourced agent behaves improperly, the borrower can raise the complaint with the NBFC itself.
What About Digital Lending Apps?
Digital lending is also covered by RBI’s regulatory framework.
For digital loans, regulated entities must communicate the details of the recovery agent to the borrower when the loan is sanctioned and when recovery responsibility is transferred to an LSP or when the responsible LSP changes.
The regulated entity remains responsible for ensuring compliance with applicable recovery and outsourcing requirements.
Borrowers should therefore be cautious if an unknown person claims to be a recovery agent. They should verify the person’s identity and authority directly with the NBFC.
What Should You Do If an NBFC Harasses Your Relatives?
If a recovery agent is repeatedly calling or threatening your relatives, take the following steps:
1. Keep Evidence
Save call recordings where legally appropriate, screenshots, messages, emails and call logs.
2. Ask for Agent Details
Request the recovery agent’s name, agency, employee identification and the NBFC they represent.
3. Contact the NBFC
Raise a written complaint with the lender’s customer-care and grievance-redressal department.
4. Clearly State the Problem
Explain that the relative is not the borrower or guarantor, if applicable, and that repeated or threatening contact is causing harassment.
5. Escalate the Complaint
If the NBFC does not resolve the complaint satisfactorily, the borrower can consider the applicable RBI complaint mechanism, subject to the entity being covered by the relevant scheme and the applicable complaint conditions.
Can You Refuse to Pay a Loan Because of Harassment?
No.
Harassment by a recovery agent does not automatically cancel the underlying loan obligation.
If the loan is genuinely outstanding, the borrower remains responsible for repayment according to the loan agreement. However, the lender and its recovery agents must follow applicable recovery rules while attempting to collect the dues.
The correct approach is to address the outstanding debt separately from any complaint about improper recovery practices.
Conclusion
An NBFC cannot use a borrower’s relatives as a means of harassment or intimidation for loan recovery. While there may be circumstances in which a lender or authorised recovery agent contacts a reference, family member or other person connected with the borrower, RBI rules prohibit practices that threaten, humiliate, repeatedly pressure or intrude upon the privacy of family members, referees and friends.
Being a relative does not automatically make someone liable for another person’s loan. Liability generally depends on the contractual role of the person, such as being a co-borrower or guarantor.
If recovery agents cross the line, borrowers should preserve evidence, complain directly to the NBFC and use the applicable grievance-redressal mechanism. At the same time, genuine loan obligations should continue to be addressed separately through a suitable repayment or settlement arrangement.
Frequently Asked Questions
Q: Can an NBFC call my parents for my loan recovery?
A: An NBFC may have legitimate reasons to contact a person listed as a reference or contact, but it cannot use the person’s family relationship as a basis for harassment, intimidation or public humiliation.
Q: Can recovery agents threaten my relatives?
A: No. RBI prohibits intimidation and harassment during debt collection, including conduct that intrudes upon the privacy of family members.
Q: Is my wife or husband responsible for my personal loan?
A: Not merely because of the marital relationship. Liability depends on the loan contract and whether the person is a co-borrower, guarantor or otherwise legally responsible.
Q: Can an NBFC call relatives repeatedly?
A: Persistent or harassing calls are not permitted. RBI specifically prohibits persistent calling as part of improper recovery practices.
Q: What if the recovery agent is from a third-party agency?
A: You can still complain to the NBFC. RBI makes regulated entities responsible for the actions of their recovery agents and other outsourced service providers