The Reserve Bank of India (RBI) is moving forward with a proposal to allow lenders to remotely lock smartphones purchased on EMI if users default on payments. This measure aims to reduce the surge in defaults on consumer loans and give financial institutions more leverage in debt recovery. The RBI has drafted guidelines that require borrower consent and prohibit lenders from accessing personal data while locking devices.
The proposal has sparked intense debate about privacy, fairness, and digital inclusion, with stakeholders holding different views. Some argue that remote locking is necessary to curb defaults, while others express concerns about the potential misuse of personal data and the impact on vulnerable users. The RBI has clarified that remote locking will only be used as a last resort, with strict privacy controls in place, and that lenders will not be allowed to view or manipulate personal data on borrowers’ devices.
The mechanism is specifically designed for loans below ₹1 lakh, which often see higher delinquency rates. Consumers will be informed about the possibility of remote locking before accepting loan terms, and activation will occur only after formal consent. Lenders will employ certified software or apps that enable locking but not data extraction, addressing past concerns about misuse.
The policy has been met with mixed reactions from industry groups, with some arguing that it is necessary to bring discipline to loan markets, while others express concerns about the potential impact on vulnerable users. Privacy advocates have cautioned that the policy could create a punitive digital ecosystem that disproportionately affects the poor and digitally marginalized.
The RBI’s draft ‘Fair Practices Code’ aims to balance lender interests with borrower protection. Technology experts have warned that remote locking could “weaponize access to vital digital infrastructure,” potentially pushing vulnerable users deeper into exclusion during financial hardship. The coming weeks will see consultations with industry, consumer groups, and digital rights advocates before the final notification.
Ultimately, the policy’s success will depend on its ability to balance the needs of lenders with the rights of borrowers. While lenders need recovery tools, regulations must protect user rights at every stage. The RBI must ensure that the policy is implemented in a way that prioritizes dignity, transparency, and access to essential communication services.