RBI's Warning: Phone Lock for Loan Defaulters, Here's What You Need to Know

New Delhi (The Uttam Hindu): The Reserve Bank of India (RBI) is preparing to give new power to lenders. Under the proposed rule, if a customer fails to repay the loan on time, the lender will be able to remotely lock his mobile phone. However, this has also intensified the debate and concerns about consumer rights.

According to a study conducted by Home Credit Finance in 2024, a large number of consumer electronics, especially mobile phones, are purchased on loan in India. According to the data of the telecom regulator, there are more than 1.16 billion mobile connections in the country. In such a situation, this system can prove to be a big weapon for lenders to recover from loan defaulters. According to sources, an app will be installed in the phone of the customers while issuing the loan.

This app will be used later to lock the phone in case of default. However, the customer's data will remain safe despite the phone being locked. RBI may issue official guidelines on this system by amending the Fair Practice Code in the next few months. While the aim of RBI is to ensure the recovery of lenders, on the other hand, protection of consumer rights is also an important issue. The question is arising whether strictness like locking the phone will not put additional pressure on the common consumer?

If this rule is implemented, companies like Bajaj Finance, DMI Finance and Cholamandalam Finance can benefit as the recovery rate of small consumer product loans can increase. According to the credit bureau CRIF Highmark, loans with amounts less than Rs 1 lakh are most at risk of default.