Missed Your Phone EMI? RBI Could Soon Let Banks Partially Lock Your Smartphone

The RBI wants banks to partially disable financed phones if borrowers default, but emergency calls and internet access must stay on.

RBI is overhauling loan recovery rules.

Source : ABPLIVE AI

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Key points generated by AI, verified by newsroom

• RBI proposes allowing lenders to disable financed mobile functions.
• Restrictions apply only after 90 days of overdue payments.
• Essential services like emergency calls will remain active.

The Reserve Bank of India has proposed allowing lenders to disable certain functions of a mobile phone if a borrower defaults on a loan taken specifically to buy that device. The move is part of a broader draft framework aimed at overhauling loan recovery practices while strengthening borrower protections. 

The draft amendments are issued under the RBI's Responsible Business Conduct Directions and are set to take effect from October 1, 2026.

How Would The Mobile Phone Restriction Work?

The proposal allows banks to use technology to restrict certain functions of a financed mobile device, but only under tightly regulated conditions.

According to the draft directions, lenders can initiate restrictions only after a loan account becomes 90 days past due. Before that, banks must issue a notice once the loan is 60 days overdue, giving borrowers at least 21 days to clear the default. A second notice with a seven-day window is mandatory before any restriction is applied.

The RBI has barred lenders from cutting off essential services. Internet access, incoming calls, emergency SOS features, and government or public safety notifications cannot be disabled. Once dues are cleared, lenders must lift all restrictions within one hour. 

In cases of wrongful blocking, lenders must compensate borrowers at Rs 250 per hour until the issue is resolved. Any technology used to restrict the device must be uninstalled once the loan is fully repaid.

What Are The New Rules For Loan Recovery Agents?

The draft guidelines also introduce a wider code of conduct for recovery. The RBI has formally defined "recovery agencies" and "recovery agents," bringing business correspondents involved in recovery under its oversight. Recovery agents must obtain certification through the Indian Institute of Banking and Finance (IIBF) before deployment.

Banks are barred from contacting borrowers outside 8 am to 7 pm, using abusive language, threatening borrowers, or using social media to shame defaulters. Records of recovery calls must be maintained for at least six months.

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