Bombay High Court Calls For Regulatory Framework To Curb Misleading 'Debt Management' Campaigns Promising Loan Waiver
The Bombay High Court has called upon the Reserve Bank of India (RBI) and the Union Government to examine the need for a regulatory framework to distinguish permissible debt-management assistance from misleading campaigns promising borrowers that their loans can be waived or extinguished. The Court observed that a clear demarcation was necessary between legitimate assistance to borrowers and prohibited activities, and directed that a report examining the issue be placed before it.
A Division Bench of Justice Bharati Dangre & Justice Ashish S. Chavan was hearing a writ petition filed by Bajaj Finance Ltd. concerning campaigns by certain private entities offering Debt Management Plans, loan settlements, foreclosures and legal services to borrowers.
The Court considered an affidavit filed by the Union Government referring to the work undertaken by the Indian Cyber Crime Coordination Centre (I4C) under the Ministry of Home Affairs and the National Cyber Crime Reporting Portal. The affidavit primarily addressed illegal digital lending applications, including those allegedly charging excessive processing fees and exorbitant interest, misusing borrowers' personal data and resorting to harassment, blackmail and coercive recovery practices.
The Court, however, noted that the affidavit did not adequately address the specific concern raised in the petition regarding entities advertising Debt Management Plans and promising loan settlements or extinguishment.
The Court noted that certain entities had filed affidavits explaining that they merely assisted consumers in securing loans, restructuring or settling existing loans, while the ultimate decision rested with the lending bank. They claimed to provide hand-holding assistance without giving borrowers any direct assurance.
The Court observed that it was necessary to clearly identify what such intermediaries could legitimately advertise and offer. Hence, it noted:
“… it would be necessary to have a clear demarcation as to what is permissible and what is not. It is for this purpose that we have called upon the Reserve Bank of India and the Union of India to respond as to whether any regulatory framework can resolve this issue. Unfortunately, the affidavit is not indicative of any such suggestion or plan being in the pipeline.”
It noted that some advertisements went further by claiming that borrowers would not have to repay their loans at all, while promising legal and other assistance.
The Court further took note of the entities that advertise and allure customers by claiming that they will help them get rid of their loans altogether or secure a reduced rate of interest. Some advertisements had gone to the extent of claiming that the consumer will not have to repay the loan at all. The Court emphasized that targeting such operators is crucial.
“… it will probably be necessary to segregate what is permissible under the Reserve Bank of India's regulations and to what extent advertisements or hand-holding assistance to a consumer/borrower can be allowed… we intend to develop a mechanism that clearly demarcates two categories, namely, the permissible limits of advertising and assisting borrowers, and the activities that are prohibited,” the Court remarked.
The Court further directed that the proposed report should be placed before any criminal liability was fastened, so that the permissible and prohibited activities could first be clearly demarcated.
Pending receipt of the report, the Court directed that no action be initiated against Respondent Nos. 6, 7 and 10. The matter was posted for December 8, 2026, and the report was directed to be filed on or before December 5, 2026, with copies to be served in advance on all concerned.
Case Title: Bajaj Finance Ltd. v. Union of India [Writ Petition No. 5224 of 2022]