If you buy a smartphone on EMI and miss a payment, your device could soon get locked remotely. Yes, you read that right. The Reserve Bank of India (RBI) is working on new rules that may allow banks and finance companies to lock mobile phones purchased on credit if borrowers default on their EMIs.
Why is RBI Considering This Move?
According to a Reuters report, this step is part of RBI’s effort to tackle rising defaults in small-ticket consumer loans, especially for smartphones and electronics.
In 2024, a survey by Home Credit Finance revealed that more than one-third of electronic items in India are purchased on credit. With 1.16 billion mobile connections in a country of 1.4 billion people, the impact of such a rule could be massive.
What Will the Rules Look Like?
The RBI isn’t giving lenders free rein. Under the proposed framework:
- Borrowers’ explicit consent will be required before any locking feature is enabled.
- Lenders will not be allowed to access or tamper with personal data on the phone.
- The focus will strictly be on loan recovery, not privacy invasion.
A source told Reuters that the RBI wants to strike a balance between helping lenders recover loans and protecting customers’ data.
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Who Stands to Gain?
Analysts believe stricter recovery tools could benefit large lenders like Bajaj Finance, DMI Finance, and Cholamandalam Finance. These companies already dominate consumer durable loans, which are seeing some of the highest delinquency rates in loans under ₹1 lakh.
With better enforcement, lenders could expand access to people with weaker credit profiles while keeping defaults under control.
Why Are Critics Worried?
Not everyone is cheering this move. Critics argue that locking a borrower’s smartphone could backfire, especially for lower-income households who depend on their phones for work, education, and digital payments.
“Locking users out of essential technology is like cutting off their livelihoods until they pay up,” said Srikanth L, founder of the consumer advocacy group Cashless Consumer.
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What Happens Next?
The RBI is expected to amend its Fair Practices Code after further consultations with lenders. If the proposal is approved, it would be the first time smartphone locking becomes an official credit enforcement tool in India.
That means the way small consumer loans are managed in India could soon change dramatically
