If you are stuck in such a situation, here is what to do.

Mr. Rohan Mehra, a resident of a city named Anandpur, recently found himself in a distressing situation. He had taken a personal loan from ‘Zenith Finance Corp’ and, after some financial difficulty, reached a one-time settlement agreement with the bank. He made the full and final settlement payment on a specified date in mid-October. The recovery agents who facilitated the settlement promised him a No Objection Certificate (NOC) within three weeks. However, weeks turned into over a month, and not only did he not receive the NOC, but the harassing calls from different recovery agents resumed. When he contacted the bank, a representative from the loan department vaguely stated that the NOC process takes up to 45 working days and they could not help him before that. This left Mr. Mehra wondering about his legal rights against the continued harassment for a debt that he had already settled.

Advice in such cases

Facing harassment from recovery agents after settling a loan is not only stressful but also illegal. Banks and financial institutions are regulated by the Reserve Bank of India (RBI), which has laid down strict guidelines for recovery practices. Here is what you should do:

• Document Everything: Keep a record of all communication. This includes the settlement agreement letter, proof of payment (bank transfer receipt), call logs, messages, and if possible, recordings of the harassing calls.
• Send a Formal Complaint: Write a formal complaint letter or email to the bank’s nodal officer and head of the grievance redressal cell. Attach copies of your settlement letter and payment proof. Clearly state the harassment you are facing and demand an immediate issuance of the NOC and cessation of all recovery calls.
• File a Complaint with the RBI Ombudsman: If the bank does not resolve your issue within 30 days, you can file a complaint with the Banking Ombudsman. This is a powerful and effective mechanism for resolving disputes with banks.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

While the issue primarily falls under banking regulations, continued harassment can attract provisions of the Bharatiya Nyaya Sanhita, 2023 (BNS).

• Section 318 of BNS (Criminal Intimidation): If the recovery agents threaten you or your family with any injury to your person, reputation, or property, it constitutes criminal intimidation.
• Section 316 of BNS (Extortion): If agents intentionally put you in fear of any injury and thereby dishonestly induce you to deliver any property or valuable security, it can amount to extortion. Demanding more money after a settlement under threat falls into this category.
• RBI Guidelines on Recovery Agents: The RBI’s Fair Practices Code explicitly prohibits banks and their agents from indulging in harassment. This includes calling borrowers at odd hours (before 8 AM and after 7 PM), using abusive language, and employing muscle power. Violating these guidelines can lead to penalties for the bank.

If you are the complainant

As the person being harassed, you are the complainant. You must take proactive steps to protect your rights.

• Send a Legal Notice: Through a lawyer, send a formal legal notice to the bank and the recovery agency. This notice should detail the settlement, the payment made, the continued harassment, and the legal consequences if it does not stop immediately.
• File a Police Complaint: Visit the nearest police station and file a formal complaint (FIR) against the recovery agents and the bank officials for criminal intimidation and extortion under the relevant sections of the BNS. Provide all the evidence you have collected.
• File a Consumer Complaint: You can also file a case in the Consumer Disputes Redressal Forum for deficiency in service by the bank. You can claim compensation for the mental agony and harassment caused.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

As a victim of such harassment, your immediate actions are crucial.

• Do Not Engage: Do not get into arguments with the recovery agents. State clearly that the loan has been settled and disconnect the call. Inform them that all further communication should be in writing.
• Preserve Evidence: Immediately save the numbers from which you are receiving calls. Take screenshots of call logs and any abusive messages. If legal in your state, record the calls.
• Inform the Bank in Writing: Your first formal step should always be to put the bank on notice. An email or a registered post letter creates a legal record that you have officially informed them of the issue.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

Initially, the police might perceive the issue as a civil dispute related to a loan and may be hesitant to file an FIR. They might suggest you approach a court. However, you must insist that the issue is not about the loan (which is already settled) but about the criminal acts of harassment, intimidation, and potential extortion. If you provide clear evidence, such as call recordings with threats or a pattern of incessant calling, the police are obligated to register an FIR. Having a lawyer accompany you can often ensure the police take the matter seriously and register the complaint under the appropriate criminal sections.

FAQs people normally have

Can recovery agents use abusive language?
No. The RBI guidelines strictly prohibit the use of uncivilized, abusive, or foul language by recovery agents. Doing so is a direct violation of the Fair Practices Code.

Are they allowed to call my family or colleagues?
No. The agents’ communication should be limited to you, the borrower. Contacting your family, friends, or colleagues and disclosing your loan details is a breach of privacy and a form of harassment.

What is the legal time for recovery calls?
Recovery agents can only call you between 8:00 AM and 7:00 PM. Calls outside these hours are a violation of RBI norms.

Is a settlement letter enough proof?
Yes, a formal settlement letter issued by the bank, along with the proof of payment of the settlement amount, is a legally binding contract that closes the debt. The bank cannot demand more money after this.

What evidence is required?

To build a strong case, you will need the following evidence:

• The official loan settlement letter from the bank.
• Proof of payment of the settled amount (bank statement, transaction ID, receipt).
• Call records (screenshots of call logs showing repeated calls from the same numbers).
• Audio recordings of the harassing conversations (if legally permissible).
• Copies of any threatening or abusive text messages or emails.
• A copy of the written complaint sent to the bank and any response received.
• A copy of the legal notice sent through your lawyer.

How long will the investigation take?

The timeline can vary depending on the path you choose. A complaint to the Banking Ombudsman is usually resolved within 30 to 90 days. A police investigation and subsequent criminal case can take several months to years, depending on the complexity and the court’s workload. A case filed in a consumer court may also take anywhere from six months to a few years to reach a final decision. However, sending a strong legal notice often resolves the issue much faster, as banks are wary of legal and reputational damage.

Advocate Sudhir Rao, Supreme Court of India