Missed an EMI? RBI may let lenders lock your smartphone remotely

Under the revised framework, lenders would need explicit prior consent from borrowers before activating any locking feature. Importantly, the new rules would ban access to or interference with personal data stored on the device.

The Reserve Bank of India (RBI) is considering a new set of rules that could allow banks and finance companies to remotely lock mobile phones purchased on credit if customers fall behind on their EMI payments.

According to a Reuters report, the move is part of the central bank’s effort to curb rising defaults in small-ticket consumer loans. It comes less than a year after the RBI directed lenders to stop using apps that locked defaulters out of their devices.

Under the revised framework, lenders would need explicit prior consent from borrowers before activating any locking feature. Importantly, the new rules would ban access to or interference with personal data stored on the device.

“The RBI wants to ensure that lenders have the power to recover small-ticket loans, and at the same time ensure that customers’ data is protected,” Reuters quoted a source as saying.

The proposed step comes at a time when consumer lending for electronic goods, especially smartphones, is surging. A 2024 survey by Home Credit Finance found 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, the potential impact is massive.

Loans under Rs 1 lakh currently show some of the highest delinquency rates, according to data from credit bureau CRIF Highmark. Non-bank finance companies account for nearly 85 percent of these consumer durable loans.

Analysts say stricter enforcement mechanisms could benefit large lenders such as Bajaj Finance, DMI Finance and Cholamandalam Finance by boosting recovery rates and widening access to borrowers with weaker credit profiles.

Not everyone is convinced. Critics warn the measure could lead to unintended consequences, particularly for lower-income borrowers who rely on smartphones for work, education and financial access.

“This practice weaponises access to essential technology to enforce behavioral compliance, locking users out of livelihoods, education and financial services until repayment,” Srikanth L, founder of the advocacy group CashlessConsumer, told Reuters.

The RBI is expected to amend its Fair Practices Code in the coming months after further consultation with lenders. If the proposal goes through, it will mark the first formal recognition of smartphone locking as a credit enforcement tool, potentially reshaping how small consumer loans are managed in India.