RBI Update: RBI will lock your smartphone if you skip EMIs? Governor clarifies..
RBI Governor Sanjay Malhotra said after the MPC meeting on October 1 that the Reserve Bank of India is considering a proposal that would allow lenders to remotely lock smartphones if EMIs (equated monthly installments) are not paid on time. When asked whether the RBI would allow locking phones purchased on installments in case of EMI skipping, the RBI chief said the matter is sub judice as we have arguments from both sides (consumers and lenders). These arguments are being considered. Our main objective is to protect consumer rights and data privacy. Consumer rights are paramount for us… At the same time, we will also look at how we can protect the interests of lenders…”
Discussions are ongoing
Answering the same question, RBI Deputy Governor M. Rajeshwar Rao said that there are arguments on both sides regarding the balance between consumer rights, requirements, data privacy, and lenders' needs… Therefore, we are examining the issue and will evaluate the pros and cons and make a decision in due course. According to a recent study cited by Reuters, in India, approximately one-third of consumer electronics, including smartphones, are purchased by customers on EMIs. It also states that just last year, the RBI decided to prevent lenders from locking the mobile phones of defaulting customers.
What do experts say on this matter?
Experts say that if the central bank allows smartphone locking in case of EMI skipping, it will require the borrower's explicit consent at the time of the loan agreement. He explained that the loan agreement. This solution is possible by installing a "device lock app" when signing a loan. Experts said that in case of missing a certain number of installments, the device can be temporarily disabled until the outstanding amount is paid. Reuters reported that the RBI may update its "Fair Practices Code" in a few months. According to experts, current laws do not explicitly permit this practice, leaving it open to regulatory uncertainty.
Why is the RBI considering this move?
Several reports have stated that the default rate on small loans, including smartphones and other consumer electronics, is very high. By introducing this phone locking option, experts believe that the rising rate of defaults on small consumer loans could be reduced. If lenders are given the option to lock devices in case of loan default, it will certainly discourage willful defaults.
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