Bought a phone on EMI? Don't miss an installment, or your device will be locked. Find out what this new rule is.

India is one of the largest smartphone markets in the world today. Millions of people are purchasing new phones across every budget segment, a large number of whom are users who purchase smartphones on EMI.

Phones on EMI: India is one of the largest smartphone markets in the world today. Millions of people are purchasing new phones across every budget segment, a large number of whom are users who purchase smartphones on EMI. Companies offer attractive discounts on these plans, but this has also increased the risk of mounting bad loans. Now, the Reserve Bank of India (RBI) is preparing to introduce a new rule that will allow the phones of those who don't pay EMIs to be locked remotely.

What is RBI's new proposal?

According to a Reuters report, the RBI is soon going to make a major change to its Fair Practices Code. Under this proposal, banks and non-banking finance companies (NBFCs) will be able to remotely lock mobile phones purchased by customers on EMI. This means that if someone fails to pay the installments on time, the lender will block the phone from working. However, the RBI is currently thoroughly examining the legal, technical, and ethical aspects of this system to ensure its safe and transparent implementation.

Why was this rule deemed necessary

This step by the RBI is being taken to control the rising non-performing assets (NPAs). Small loans in India, especially consumer loans under ₹1 lakh, are rapidly increasing, and defaults have also risen. According to the 2024 Home Credit Finance Report, EMI sales of electronic items have seen a sharp increase, and defaults have also increased. This policy will provide protection to lenders so that they do not hesitate to extend loans to customers with low credit scores.

How will the new system be implemented?

The RBI will amend its Fair Practices Code to determine how phone locking technology will work. It will be mandatory to obtain customer consent before granting a loan. Banks and NBFCs will not be able to access personal data on a customer's phone under any circumstances. The locking feature will be limited to deactivating the phone, ensuring data security. This system will be implemented as a balanced and transparent process.

When could this rule be implemented?

The RBI had previously prohibited loan companies from using such locking apps in 2024 due to complaints of misuse. However, after new discussions and consultations, the RBI is planning to reintroduce it, this time with stricter security rules. Although an official announcement has not yet been made, it is expected that this policy will be implemented in the coming months.

Who will be affected?

If this rule is implemented, it will directly impact millions of Indians who purchase mobile phones or electronic devices on EMI. India currently has over 1.16 billion mobile connections, which people rely on for their daily lives, work, education, and online transactions. While this move may serve as a risk mitigation measure for lenders, it poses a concern for ordinary users. Many experts say that locking phones could impact digital access for poor or rural consumers and further exacerbate the digital divide.