AI Debt Collectors Will Chase Whatever Lenders Reward

Banks pass overdue accounts to agencies in batches sorted by how long they have gone unpaid. A loan turns bad once it is more than 90 days past due, and firms handling the early stages try to prevent that. 

A 2023 Business Today investigation found thousands of small recovery offices doing this work, most of them sole proprietorships. Their pay rises with the share of dues they bring in, putting pressure on agents to maximize recovery.

“Borrowers are often treated like criminals,” Shroff says. “There’s almost no focus on experience or empathy.”

The RBI’s August rules list the conduct it wants gone, including abusive language, threats, excessive calls, and shaming borrowers on social media. 

Earlier RBI circulars banned much of this too. Proving a breach has always been harder than banning it, and recordings change that.

Household debt reached 45.5% of GDP at the end of September 2025, according to the RBI’s June Financial Stability Report. That was below Thailand’s 87.3%, Malaysia’s 69.9% and China’s 59% in the RBI’s emerging-market comparison. The more striking change is in what Indians are borrowing for. By March 2026, non-housing retail loans accounted for 58.4% of household borrowing, while loans for consumption made up nearly half of the total.

Fintech lenders now hold more than half of the market for personal loans under ₹50,000 after a rapid expansion. The RBI also flagged rising delinquencies of 6.4%, saying they signaled potential risks to asset quality. Bad loans across banks, by contrast, sat at a multi-decade low. This kind of lending can leave lenders managing large numbers of small overdue accounts. Each is worth too little to justify a home visit.

The RBI’s Rules Make Recovery Calls Auditable

The RBI first proposed the recovery rules in February 2026 and revised them in May after public comment. It issued them in final form on August 6.

Agents may contact borrowers only between 8 am and 7 pm unless asked otherwise, a limit in place since 2022. Each call must be recorded, the borrower told, and the recording kept for six months. Lenders may lock a phone only if the loan paid for that phone.

Recovery agents will need a certificate from the Indian Institute of Banking and Finance or one of its partners. Those already working have until January 1, 2028, to qualify.

Lenders must also publish the recovery agencies they use and update the list within seven days of any change. Borrowers can then check whether the agency contacting them is authorized.

An automated calling system can refuse to dial after 7 pm, record every call, and store the transcript where an auditor can search it. A supervisor checking a dozen agencies by hand cannot match that. Software can also cap how often any borrower is contacted across every channel and vendor. Such limits are hard to enforce when calls come from agents’ personal phones.

The recordings can protect agents from false complaints and show when abuse has occurred. They also give lenders a clearer view of what their collection agencies are actually doing.

That may expose scripts or tactics lenders would not want associated with their name. The transcripts can also show which approaches recover money and which generate complaints.

The Telecom Regulatory Authority of India (Trai) ordered banks and NBFCs to move service and transaction calls to a dedicated 1600 number series. The deadlines fell between January and March 2026. The aim is to help customers tell a real lender from a fraudster.

From May 13, 2027, India’s data protection rules require security safeguards for personal data, and call recordings hold a great deal of it. The lender stays responsible for that information even when a vendor’s system records and stores it.

A single call about an overdue loan now answers to a central bank, a telecom regulator, and a privacy law.

DPDzero’s voice agents speak 10 Indian languages and can switch between them mid-call, according to the company. Low-risk borrowers get digital reminders, and the riskiest cases go to human callers. During a conversation, the AI agent can send a payment link so the borrower can pay through UPI before hanging up. Cashfree Payments and other fintech firms offer links of this kind for loan repayments.

DPDzero also sorts borrowers into types it calls “supportive,” “bargaining,” “intentional,” and “escapist,” and plans its approach to each.

“If the system detects a borrower is going through a crisis, it can automatically pause outreach,” Shroff says. “That kind of discipline is hard to maintain manually.”

FICCI and the Indian Banks’ Association surveyed 24 banks early in 2026. The bankers ranked AI as the development most likely to change how they operate, with underwriting, risk assessment, and collections among the areas expected to be affected.

Software Inherits the Incentives Lenders Set

Rishabh Goel runs Credgenics, a collections software company that raised $50 million from Accel and WestBridge Capital in 2023.

In September 2025, he told Business Standard that its bots were being used by ICICI Bank, HDFC Bank, Yes Bank and L&T Finance to remind borrowers about payments. The same report described a harsher use of the technology. Some borrowers who had missed payments were getting video calls from an AI avatar dressed as a lawyer. The avatar used legal language and a firm tone to ask for payment.

An unnamed bank executive quoted in the report said an AI agent cost about half as much as a human caller.

DPDzero says its clients have fewer overdue loans getting worse. In some cases, it puts the improvement at as much as 25%. 

The economics are easy to see. Bots are cheaper and can make far more calls than people can. That also creates a risk. A bad setting can mean the same borrower is contacted again and again, or thousands of borrowers are called too often. RBI rules already prohibit excessive calling.

Performance-linked pay helped create the pressure problem in agency collections. A lender that judges vendors only on what they collect rebuilds the old incentive in software. Complaints, repeated calls and cases passed to human staff can show what happened before the money was recovered.

The August recovery directions do not mention AI. They require lenders to monitor and control the agencies that collect on their behalf.

A separate RBI draft on model risk, issued on June 24, 2026, sets rules for AI systems that deal with customers. If adopted, lenders would have to tell people when they are dealing with AI and warn them about its limits. Customers could also ask to switch to a human.

The draft holds lenders accountable for models bought from vendors and calls for ways to override, suspend, or switch off any model. It also asks for stricter explainability where a system drives material decisions or has a significant impact on customers.

Collections are not mentioned, but a model that decides whom to call, how often and in what tone still has a direct effect on borrowers. Comments closed on July 24, and the RBI has yet to issue final guidance.

DPDzero sends difficult cases to human callers, and its field teams still visit borrowers. Bots handle routine reminders. People deal with disputes, hardship and borrowers who do not respond. Those workers will need the new certificate, and their calls will also have to be recorded.