Not Paying New Mobile Phone EMI? Soon, Your Mobile Phone May Get Locked

New Delhi: The Reserve Bank of India (RBI) is preparing to introduce new rules that will allow lenders to remotely lock mobile phones bought on credit if borrowers default on their EMIs, two sources told Reuters.

The move is aimed at curbing the rising problem of loan defaults in small-ticket consumer lending, but it has already sparked concerns over consumer rights.

Why RBI is Considering Phone Locking

According to a 2024 study by Home Credit Finance, over one-third of consumer electronics in India, including smartphones, are purchased through loans. With more than 1.16 billion mobile connections in a country of 1.4 billion people, smartphones are not just communication tools; they are essential for work, education, and banking.

However, loans below Rs 1 lakh are most vulnerable to defaults, and credit bureau CRIF Highmark has flagged high delinquency rates in this category. Non-bank lenders, who provide 85% of consumer durable loans, face mounting risks.

“The RBI wants to ensure that lenders have the power to recover small-ticket loans, and at the same time ensure that customers' data is protected,” sources told Reuters.

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How the System Will Work

Previously, some lenders used apps installed at the time of loan issuance to remotely lock the phone of a defaulting borrower. But in 2023, the RBI asked lenders to halt this practice.

Now, after consultations, the RBI is expected to update its Fair Practices Code within the next few months. The new guidelines will: Require prior consent from borrowers before enabling phone-locking. Ensure that lenders cannot access personal data on the locked phones.

Provide a structured framework so lenders like Bajaj Finance, DMI Finance, and Cholamandalam Finance can use this tool responsibly.

Consumer Concerns

While lenders may welcome the move to secure recoveries, consumer advocates are raising red flags.

“This practice weaponises access to essential technology to enforce behavioural compliance, locking users out of livelihoods, education, and financial services until repayment,” said Srikanth L, founder of advocacy group CashlessConsumer told Reuters.

Critics argue that in a country where smartphones are lifelines for millions, using them as leverage could create disproportionate hardship for poorer borrowers.

The RBI has not officially commented yet, but sources say the guidelines could be rolled out within months.