RBI May Let Lenders Remotely Lock Smartphones of Loan Defaulters — What It Means for You

RBI may allow remote phone locking for EMI defaults

India’s lenders may soon get the power to remotely lock smartphones of borrowers who default on
repayments. The Reserve Bank of India (RBI) is preparing changes to the
Fair Practices Code amid rising consumer-loan delinquencies—prompting debate over
fairness, digital inclusion, and data privacy.

Should you still buy premium phones on EMI?

The proposal raises a practical question: does paying a premium on EMI still make sense if a device
can be locked for missed payments? Regulators are attempting to balance stronger recovery tools with
borrower protection, transparency, and privacy safeguards.

How remote locking would work

• If a borrower misses EMIs on a phone bought on credit, banks/NBFCs could trigger a
  remote lock that disables core device functions until dues are cleared.
• Locking relies on a certified app installed at purchase—such as
  Google Device Lock Controller, Samsung Finance+ (for Samsung), or approved
  third-party services.
• These apps do not access personal data; they enforce a device lock while
  preserving essential features like emergency calling.

What the draft rules could require

• Explicit consent: Lenders must obtain clear, opt-in consent before any remote locking.
• No personal data access: Accessing photos, messages, contacts, or files would be strictly barred.
• Minimum necessary lock: Only the borrower’s device can be locked, and only for the shortest justified period.
• Transparency: Clear pre-disclosure of how locking works, when it can be invoked, and steps to unlock.
• Basic use retained: Emergency and essential access can remain available until dues are paid.

Context: earlier pause & stronger safeguards

After concerns over aggressive recovery and privacy risks, such locking was previously paused. Tech
providers now claim that hardened encryption, audit trails, and compliance controls can prevent abuse
by ensuring only the intended device is affected and only for the necessary duration.

What this means for borrowers

• Read the loan and device-lock consent terms carefully before purchase. Ask how to
  dispute errors and how quickly unlocks are processed after payment.
• Keep EMI alerts enabled and payment proofs handy. If a lock occurs in error, raise a
  formal grievance with the lender and escalate if needed.
• Remember: a lock should not expose your personal data; it is a gate on access, not a window into it.

Note: Final provisions will depend on RBI’s notified guidelines. Details could change between draft and final regulations.