Smartphone to be locked for missed EMI? RBI’s new rules explained
The Reserve Bank of India (RBI) has laid out some guidelines for lenders on recovery of loans, and whether they can block or lock the device that has been purchased via EMI financing. This new framework will come into effect from January 1, 2027.
A new set of rules from the Reserve Bank of India (RBI) has been announced, specifically addressing the issue of loan recovery for devices purchased through EMI financing. This regulation will come into effect on January 1, 2027, and comes in response to complaints from borrowers about harassment during the recovery process.
Lenders are no longer allowed to lock or disable a borrower's mobile phone, laptop, or tablet for non-payment of EMIs, except in cases where the device was financed through the loan itself. In such instances, restrictions can only be imposed gradually, starting from a formal notice after 30 days of overdue payment. Full restrictions can only be applied after 60 days of overdue payments.
During this period, restrictions cannot include blocking outgoing and incoming calls, SMS, Emergency SOS, or any features that impact work or employment. Lenders are also prohibited from accessing the borrower's personal information such as contacts, photos, call logs, location history, or SMS.
Once the loan payment is received, the device must be unlocked within an hour, or the lender will have to pay a compensation fee of Rs 250 per hour, up to the loan amount. Additionally, uncertified recovery agents are not allowed to interact with the borrower regarding the loan.
For borrowers, the most significant impact is that their device will not be blocked for missed EMIs. However, if restrictions are imposed, they will only apply to devices financed through the loan, and the loan agreement must clearly state these conditions. It is crucial for borrowers to read the terms and conditions of their loan agreement carefully, especially regarding remote access and default remedies. Borrowers should opt for regulated lenders to ensure they benefit from these safeguards.
Experts recommend setting up auto-debit payments and insisting on written notice, as these will serve as evidence of the graded-step rule and any compensation claim. Adhil Shetty, CEO of Bankbazaar.com, emphasizes that the new framework strikes a balance between lenders' need to recover dues and borrowers' right to fair treatment.
Written by urgent.news from Times of India's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
