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The Reserve Bank of India (RBI) has introduced a regulatory framework governing the remote restriction of smartphones, tablets, and laptops financed by banks and other regulated lenders. The changes, which will take effect on January 1, 2027, are designed to balance lenders' recovery rights with better consumer protection by limiting how and when financed devices can be remotely locked.
The framework is a response to the growing trend among lenders to block access to financed devices once they are in default of repayments. The RBI has said that these steps must not be used for harassment and must have definite safeguards.
Under the new guidelines, lenders could use remote restriction technology only on the devices financed through a specific loan. Lenders cannot remotely disable a customer's existing phone or laptop because of a personal loan or any other unsecured loan.
The lenders will be unable to block a financed device right after a missed EMI, according to the RBI. Restrictions on the use of the device may start after the loan is overdue for a minimum of 30 days. Even then, lenders are expected to implement a phased approach as opposed to an immediate lock.
A full device restriction can only be implemented after 60 days of overdue repayments,giving borrowers additional time to regularize their payments before their access to the device is restricted.
RBI also specified the important tasks that should continue to be carried out even under the restrictions. These range from incoming phone calls, SMS services, emergency SOS services and work or employment-related functions.
Another key component of the framework is privacy protections. The RBI said lenders cannot access personal information on the financed device, such as contact lists, photos, videos, SMS, call logs, location history, etc., anything that is not directly related to the loan recovery.
The framework has also instructed the lenders to meet the requirements of data protection while implementing remote restriction technology.
Also Read: A step-by-step guide to calculating your car loan EMI
The borrowers should be given prior intimation in advance before any restriction and the lenders should inform the borrower clearly at the time of sanction of the loan.
If a borrower's overdue payment is cleared, the lender shall restore access to the device within one hour of the payment being cleared, provided that the time is reasonable based on normal circumstances. In case they fail to do so, the RBI has set aside Rs. 250 per hour of delay up to the outstanding loan amount.
The new blueprint also ensures borrowers' contractual rights to prepay or foreclose loans. Overall, the RBI's fresh guidelines provide a framework that will enable the use of technology in loan recovery, without imposing undue restrictions on consumers and ensuring they have access to key services and their personal data.
