RBI Fair Practices Code: every right you have when a loan goes unpaid

If you have fallen behind on a loan, you may feel as though you have lost all standing — that because you owe money, you must simply accept whatever phone calls, messages and pressure come your way. That is not true, and it is important you know it. The Reserve Bank of India has written a clear rulebook, the Fair Practices Code (FPC), that every bank and non-banking financial company (NBFC) must follow when dealing with you, including when a loan goes unpaid. Your rights do not switch off the moment you default. If anything, that is when they matter most.

This article walks through the rights the Fair Practices Code gives you, in plain language. The aim is not to help anyone dodge a genuine debt — paying back what you can is fair and reasonable. The aim is to make sure that recovery happens within the law, with your dignity intact, and free of harassment.

What the Fair Practices Code is

The Fair Practices Code is a framework the RBI requires lenders to adopt and publish. It is not optional. Banks and NBFCs must put their FPC on their websites and apply it to every stage of the lending relationship: how a product is advertised, how a loan is sanctioned and disbursed, how the terms are communicated, how the account is serviced, and crucially how dues are recovered if you fall behind. The RBI Digital Lending Directions extend the same expectations to lending done through apps and digital platforms, holding the regulated lender responsible for the conduct of everyone acting on its behalf.

The simplest way to think about the FPC is this: it is the set of promises a lender makes to behave decently, and the RBI stands behind those promises. When a lender breaks them, you have somewhere to go.

Your right to clear, upfront information

One of the foundations of the FPC is transparency. Before and during your loan, you are entitled to understand exactly what you have agreed to. That includes the interest rate, the method of calculating interest, any fees and charges, the penalty for late payment, and the consequences of default. Lenders are expected to communicate these clearly, in a language you understand, and not bury crucial terms in fine print.

A key part of this is the Key Fact Statement (KFS), a single standardised document that sets out the real cost of your loan, including the Annual Percentage Rate. If you were never shown the true cost of borrowing, or were charged fees that were never disclosed, that is a transparency failure you can raise. You can read more in our explainer on the Key Fact Statement.

Your right to fair, non-coercive recovery

This is the right that matters most when a loan goes unpaid. The FPC and the RBI's guidance on the recovery of loans are explicit: dues must be recovered without harassment, without intimidation, and with due regard to your privacy. Concretely, this means:

• Recovery agents may contact you only between 8 AM and 7 PM. Calls, visits or messages outside this window are not permitted.
• Contact must not be persistent or excessive. Dozens of calls a day, back-to-back calling, or contact designed to wear you down is harassment.
• No threats, abuse, or use of force. Intimidation, insult, or the threat of criminal consequences for a civil debt is not legitimate recovery and can attract provisions of the Bharatiya Nyaya Sanhita (BNS).
• No public shaming. Posting about your debt, messaging your contacts, or threatening to do so is not allowed.

The lender cannot escape responsibility by saying "that was a third-party agent." Under the FPC and the Digital Lending Directions, the regulated lender owns the conduct of every agency and tele-caller it engages.

Your right to privacy

The FPC requires lenders to respect your privacy. This means your loan is a matter between you and the lender, not between the lender and your family, your employer, your neighbours or your phone contacts. Contacting third parties to embarrass or pressure you is a privacy violation, not recovery. Where a loan app has harvested your contacts or photos and is misusing them, you may also have protections under the Digital Personal Data Protection Act, 2023 (DPDP Act), which governs how your personal data may be collected and used. You can read more in our guide on whether agents can call your family.

Your right to a grievance redressal mechanism

Every regulated lender must have a working complaints system and a named grievance redressal officer, whose contact details should appear on the lender's website, in your loan documents and within any lending app. This is not a courtesy; it is a requirement. You are entitled to raise a complaint and receive a response within a defined time. If the lender does not resolve your complaint within 30 days, the door to the RBI Ombudsman opens.

Your right to fair treatment on charges and prepayment

The FPC also touches on how interest and charges are applied. Penal charges for default must be reasonable and disclosed, not used as a tool to inflate your debt unfairly. You are generally entitled to clear information about foreclosure or prepayment terms, and lenders should not impose surprise penalties that were never communicated. If you find charges appearing on your account that were never disclosed in your loan agreement or KFS, that is something you can question in writing.

Quietly build your record

Whatever right has been breached, the most powerful thing you can do is keep calm evidence. You do not need to argue on the phone. You simply need to document.

• Keep a log of every call: date, time, number, and what was said.
• Save screenshots of SMS, WhatsApp and app messages with timestamps visible.
• Keep copies of your loan agreement, KFS and statements.
• Note any contact made with your family, employer or contacts.

A safe, private place to keep these records matters when you are stressed. You can store your call logs, screenshots and documents securely using the document locker, so everything is in one place if you later need to complain.

How to enforce your rights — step by step

You have a clear, free, escalating path.

1. Write to the grievance officer first. Send a short written complaint (email is fine) describing exactly what happened, quoting the specific Fair Practices Code standard breached, and asking for it to stop and for written confirmation. Keep a copy.

2. Verify who you are dealing with. Confirm the lender is genuinely RBI-registered and that whoever is contacting you is connected to your loan. You can cross-check a lender before you respond using our lender check tool. This also protects you from impersonators.

3. Escalate to the RBI Ombudsman. If the lender does not resolve your complaint within 30 days, or rejects it, approach the RBI Ombudsman under the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS). File online at cms.rbi.org.in. There is no fee.

4. Use the Sachet portal. RBI's Sachet portal (sachet.rbi.org.in) lets you report unfair or unauthorised practices directly to the regulator.

5. For threats, abuse or data misuse. Where conduct crosses into threats or intimidation, the police are available. For online or app-based harassment and data misuse, use the cybercrime helpline 1930 and cybercrime.gov.in.

If you cannot afford a lawyer

You do not need to hire anyone to assert these rights. The complaint routes above are built for borrowers to use directly, free of cost. If your situation is more serious and you need legal help but cannot afford it, India's free legal aid system exists for exactly this. Under the Legal Services Authorities framework, the National Legal Services Authority (NALSA), State Legal Services Authorities (SLSA) and District Legal Services Authorities (DLSA) provide free legal assistance to eligible people, and Lok Adalats can help settle disputes amicably. Learn how to approach them through our free legal aid guide.

A calm closing thought

The Fair Practices Code exists because the RBI recognises a simple truth: a borrower who owes money is still a person with rights. Default does not erase your entitlement to transparency, to privacy, and to recovery that stays within the law. When you know the standards a lender is bound by, the balance of power shifts back toward fairness. Document calmly, complain in writing, escalate where needed, and let the rules do their work.

If you want to read more borrower-rights explainers, our blog has further guides on recovery harassment, calling hours, and how to respond to pressure tactics with confidence.

This is general information, not legal advice. Rules and procedures can change, and your situation may have specific facts that matter. For advice on your own case, consider free legal aid through NALSA/DLSA or a qualified professional.