RBI is considering allowing lenders to remotely lock smartphones purchased on credit when borrowers default on EMIs, aiming to curb bad debt while igniting concerns over consumer rights and digital access harms .
What’s proposed
Reuters reporting indicates RBI may amend its Fair Practices Code to explicitly permit device locking for loan recovery on financed phones, reversing a 2023 direction that told lenders to stop using locking apps on defaulters’ devices.
The proposed framework would mandate explicit borrower consent before any locking mechanism is enabled, and expressly prohibit lenders from accessing or altering personal data on the device, positioning the tool as a narrow recovery control rather than a surveillance vector. A cited source frames the intent as balancing “power to recover small-ticket loans” with protection of customer data under the updated ruleset .
Why now
The move sits against a surge in credit-funded electronics purchases, especially smartphones, with a 2024 Home Credit Finance study estimating over one-third of electronic goods in India are bought on credit, underscoring the scale of exposure across 1.16 billion mobile connections in a 1.4 billion population market.
Delinquencies are pronounced on loans under Rs 1 lakh, per CRIF Highmark data, with non-bank finance companies responsible for nearly 85% of consumer durable lending, indicating systemic sensitivity to recovery tools in this segment.
Potential impact on lenders
If adopted, the policy could materially improve recovery rates and risk appetite for large NBFCs like Bajaj Finance, DMI Finance, and Cholamandalam Finance, potentially expanding credit access to borrowers with weaker scores given a stronger collateral-like enforcement mechanism on the financed handset itself.
This could reshape underwriting models for small-ticket device finance by lowering expected loss estimates tied to first-payment default and early delinquency cohorts.
Consumer rights concerns
Critics warn of serious unintended effects: remote locking could “weaponise” access to essential technology, coercing behavioral compliance by cutting off lifeline services—work, education, payments—until repayment is made, with disproportionate harm to low-income and digitally dependent users, as argued by CashlessConsumer’s Srikanth L.
Even with consent and data-access restrictions, the essential-services dependency of smartphones raises risks of overreach and due-process gaps in contested defaults or wrongful triggers.