RBI-regulated lending, at a general level
Non-banking finance companies and other regulated lenders operate under
directions issued by the Reserve Bank of India covering matters such as
capital adequacy, fair practice in customer dealings, and reporting. The
specific requirements differ by the category and scale of the entity, and
change periodically, which means a lender’s compliance framework needs
regular review rather than a one-time setup. We advise on this framework in
general terms and work with clients to keep documentation and internal
processes aligned with current regulatory expectations.
Recovery under SARFAESI and the RDDB Act
Lenders with secured loans above the applicable threshold can generally
enforce their security directly under the SARFAESI Act 2002, without first
obtaining a court order, through a structured notice and possession process.
Where SARFAESI is not available or the debt is unsecured, recovery
proceedings before the Debts Recovery Tribunal under the Recovery of Debts
and Bankruptcy Act 1993 are the applicable route. Both processes are
procedural, and a lender that has not maintained clean loan and security
documentation from origination often finds its recovery delayed by disputes
over the validity of the underlying agreement rather than the borrower’s
actual default.
Fair practice and customer grievances
Regulated lenders are generally expected to follow a fair practice code
covering clear disclosure of interest rates and charges, restrained conduct
in recovery and collection, and an accessible grievance redressal mechanism.
Complaints about aggressive recovery practices or unclear charges are a
recurring source of regulatory scrutiny and reputational exposure, and they
are also, in our experience, largely preventable through clearer loan
documentation and better-trained collection staff.
Digital lending and data protection
Digital lending platforms, particularly those operating through
partnerships with regulated entities, face additional scrutiny over how
loans are disclosed, how borrower data is collected and shared with third
parties, and how collection is conducted through digital channels. The
Digital Personal Data Protection Act 2023 adds a further layer of obligation
around consent and data handling for any lender collecting borrower
financial and personal information. Businesses combining a lending model
with a technology platform need both frameworks addressed together, not as
separate compliance exercises handled by different teams.
