The Code, the central bank said, should also ensure transparency and fairness in operation.
ARCs buy bad loans from banks to turn them around.
"In order to achieve the highest standards of transparency and fairness in dealing with stakeholders, asset reconstruction companies are advised to put in place Fair Practices Code (FPC) duly approved by their board," the RBI said.
It has prescribed the minimum regulatory expectation, while each ARC''s board is free to enhance its scope and coverage.
The FPC must be followed in right earnest, and the board must involve itself in its evolution and proper implementation at all times, it added.
"ARC shall follow transparent and non-discriminatory practices in acquisition of assets. It shall maintain arm''s length distance in the pursuit of transparency," it said while asking them that FPC should be placed in public domain for information of all stakeholders.
As per the guidelines regarding FPC, ARCs should release all securities on repayment of dues or on realisation of the outstanding amount of loan, subject to any legitimate right or lien for any other claim they may have against the borrower.
"If such right of set-off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which ARCs are entitled to retain the securities till the relevant claim is settled/ paid," it said.
Also, ARCs should put in place a board-approved policy on the management fee, expenses and incentives, if any, claimed from trusts under their management.
The policy should be transparent and ensure that the management fee is reasonable and proportionate to financial transactions.
"ARCs shall ensure that recovery agents are properly trained to handle their responsibilities with care and sensitivity, particularly in respect of aspects such as hours of calling, privacy of customer information, etc.
"They should ensure that recovery agents do not induce adoption of uncivilised, unlawful and questionable behaviour or recovery process," the guidelines said.
In the matter of recovery of loans, ARCs should not resort to harassment of the debtor and they should ensure that the staff are adequately trained to deal with customers in an appropriate manner.