The Reserve Bank of India (RBI) is planning a new rule that could empower lenders to remotely lock the phones of borrowers who fail to repay their loans. This move is intended to strengthen lenders’ recovery mechanisms, though it may raise concerns about consumer rights. A 2024 study by Home Credit Finance revealed that over a third of consumer electronics, including mobile phones, are purchased on loan. With India having more than 1.16 billion mobile connections, the scope of this measure is significant.

Under the proposed system, an app would be installed on the borrower’s phone at the time of issuing the loan, allowing the device to be locked if repayments are missed. While the phone would be locked, the borrower’s personal data would remain secure. The RBI had previously advised lenders against locking phones, but after consultations, it may issue updated guidelines on the phone-locking mechanism and revise the Fair Practice Code in the coming months. If implemented, this rule could particularly benefit consumer finance companies such as Bajaj Finance, DMI Finance, and Cholamandalam Finance, improving loan recovery rates. According to credit bureau CRIF Highmark, loans under Rs 1 lakh are considered higher risk for defaults.