The Reserve Bank of India is considering a latest move in which they will allow lenders to remotely lock mobile phones of borrowers who default on EMI payments.
Your Phone May Get Locked If You Don’t Pay Your EMI
With this move, RBI is planning to reduce the bad debt but is worried regarding consumer rights concerns.
The proposed measure comes as small-ticket loans for consumer electronics, particularly mobile phones, have become increasingly
common as per the report.
More than one-third of consumer electronics in India are purchased this way as mentioned in a 2024 study by Home Credit Finance.
This lending practice has a massive market reach as it would be affecting over 1.16 billion mobile connections in a country of 1.4 billion people.
According to the credit bureau CRIF Highmark, they found that the loans under Rs 1,00,000 are especially prone to default, showing some of the highest delinquency rates.
RBI To Update Its Fair Practices Code
It appears that the RBI needs to update its Fair Practices Code as it requires lenders to obtain consent and prohibits access to personal data.
This is going to be a remarkable change from last year, when the Reserve Bank of India (RBI)
instructed lenders to stop the practice of using apps to lock devices belonging to defaulting borrowers.
The RBI is now expected to update its Fair Practices Code within the coming months to include specific guidelines on phone-locking mechanisms as per the media report following consultations with financial institutions.
These new rules will require lenders to obtain prior consent from borrowers and will strictly prohibit them from accessing any personal data on the locked devices as per the media report.
Sources said, “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.”
Moving ahead, the report noted that non-bank lenders account for a significant 85% of consumer durable loans.
After implantation, this new rules could benefit
major consumer lenders such as Bajaj Finance, DMI Finance, and Cholamandalam Finance by improving loan recoveries and making it
easier to lend to customers with poor credit histories.
In this regard, the consumer advocates have warned that the policy may have severe consequences for millions of people.
The founder of the advocacy group
CashlessConsumer, Srikanth L. said,”This practice weaponises access to essential technology to enforce behavioral compliance, locking users out of livelihoods, education, and financial services until repayment.”
