RBI Considers Remote Locking of Phones for EMI Defaulters to Curb NPAs

The Reserve Bank of India (RBI) is reportedly considering a new measure that would allow banks and non-banking financial companies (NBFCs) to remotely lock smartphones purchased on equated monthly installments (EMIs) in cases where borrowers default on payments. The initiative aims to address the growing concern of non-performing assets (NPAs) in the consumer finance sector, particularly for small-ticket loans below ₹1 lakh.

The RBI plans to revise its Fair Practices Code to incorporate this feature. Under the proposed framework, lenders would have the authority to lock devices remotely if a borrower misses an EMI. However, the central bank has emphasized that prior consent from the borrower would be mandatory before enabling such measures. Importantly, the RBI has stated that the process must ensure that no personal data stored on the device can be accessed by the lender, safeguarding privacy while enforcing repayment.

This move is designed to enhance repayment discipline and reduce defaults, particularly among borrowers with limited or weaker credit histories. By giving lenders a tangible mechanism to secure assets, authorities hope to improve the risk management practices of financial institutions offering small-ticket consumer loans.

However, the proposal has sparked debate among consumer rights advocates and tech experts. Critics argue that remotely locking smartphones could disproportionately affect low-income users who depend on their devices for essential functions such as employment, education, and financial transactions. They warn that a missed EMI due to temporary cash flow issues could inadvertently leave borrowers isolated from critical communication and services.

The RBI is currently reviewing the operational, legal, and ethical implications of the measure. Officials are expected to issue detailed guidelines outlining the technical safeguards, borrower consent procedures, and dispute resolution mechanisms before implementing the scheme.

As digital lending and EMI-based purchases continue to grow in India, this proposal underscores the central bank’s intent to balance financial discipline with consumer protection, while exploring innovative approaches to mitigate defaults in the rapidly expanding small-ticket loan segment.