RBI allows gradual device restrictions for EMI defaults, eases recovery agent disclosure norms

The Reserve Bank of India (RBI) has recently approved measures allowing banks to gradually impose restrictions on devices purchased via EMI financing when borrowers fail to make payments. This move comes after industry suggestions and aims to balance borrower protection with the need for recovery agents. Under the updated rules, lenders cannot restrict devices until a loan is 30 days overdue, with graded restrictions possible between 30 and 60 days, and full restrictions only after 60 days of overdue payments.

The new guidelines ease restrictions from an earlier proposal that required a 90-day delay before any device disablement. The RBI retained safeguards, preventing restrictions on incoming calls, SMS, and emergency SOS functions, and ensuring that borrowers can still use their devices for work or employment purposes. Lenders must obtain certification from the device's original equipment manufacturer or operating system platform, and they are barred from accessing personal information stored on the device.

Restrictions must be lifted within an hour of payment, and if a borrower faces wrongful restrictions, the lender must compensate the borrower ₹250 per hour, up to the loan amount. Disclosure requirements for recovery agents have also been relaxed, with banks now only needing to publish a list of the recovery agencies they work with, rather than detailed information about individual agents.

This change addresses concerns over high turnover among recovery personnel and the difficulty in maintaining updated agent details. The revised norms will now be implemented by January 1, 2027, giving recovery agents one year to obtain required certifications from the Indian Institute of Banking and Finance (IIBF).