The Supreme Court has directed the RBI to secure genuine compliance by banks and NBFCs with its loan-recovery norms, after finding they had "existed only on paper" in a case of unlawful vehicle repossession.

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• The Supreme Court on September 16, 2026 directed the RBI to ensure genuine compliance by NBFCs and scheduled commercial banks with its loan-recovery guidelines and master circulars.
• The bench, comprising Justices Pamidighantam Sri Narasimha and Alok Aradhe, delivered the ruling in Hari Dutta Sharma v. State of U.P. & Ors. (2026 INSC 998).
• The case involved the unauthorised night-time repossession of a borrower's hypothecated commercial truck by Cholamandalam Investment and Finance Company Ltd after loan defaults.
• The Court set aside an Allahabad High Court order that had earlier dismissed the borrower's writ petition, partly on grounds of delay in approaching the court.
• Cholamandalam was directed to close both of the borrower's loan accounts and refund Rs 4.5 lakh realised from the vehicle's sale, with 6 percent annual interest from August 31, 2023.
• The finance company was also ordered to pay Rs 10 lakh as compensation for mental agony and loss of livelihood, plus Rs 50,000 in costs.
• The bench reaffirmed the Court's earlier ruling in ICICI Bank Ltd v. Prakash Kaur that vehicle repossession must follow lawful means and lenders cannot use "goondas" to seize property.
• The judgment cited RBI's Fair Practices Code for Lenders, which bars undue harassment such as persistent late-night visits or the use of muscle power for recovery.
• The Court observed that RBI's recovery-related guidelines, master circulars and clarifications had "existed only on paper" without effective steps to implement them.
• The Registry was directed to send a copy of the judgment to RBI, which was told to take effective steps to prevent recurrence of such incidents.
• The ruling also flagged that penal charges levied by lenders must be reasonable, properly disclosed, and not used merely as a revenue-enhancement mechanism.