Defaulting on monthly payments on a loan taken to purchase a mobile phone may result in the device getting remotely locked by the lender.
The mechanism works through an app installed at the time of loan issuance, which allows lenders to partially disable the phone if EMIs are missed. Even then, basic functions like making emergency calls remain accessible.
Reuters, quoting sources, has reported that such a move is under discussion between the lenders and the regulator Reserve Bank of India in a bid to curb a rise in bad assets in the consumer durables sector. Last year, the RBI reportedly asked lenders to halt a move to lock phones of defaulting borrowers.
According to the Reuters report, after consultation with lenders, the RBI is expected to update its Fair Practices Code within months, introducing guidelines on phone-locking mechanisms.
If implemented, the measure could benefit major consumer lenders, particularly NBFCs such as Bajaj Finance, DMI Finance and Cholamandalam Finance by boosting recoveries and easing loans to customers with poor credit.
Recovery vs rights
Over one-third of consumer electronics, including phones, are purchased on small-ticket loans in India, a 2024 study by Home Credit Finance showed. The country of over 1.4 billion people has more than 1.16 billion mobile connections, according to the telecom regulator, reflecting deep market penetration.
According to data compiled by Crif High Mark, lower ticket size loans (below ₹10,000) have the highest delinquency rate (1.5 per cent for portfolio at risk of default between 31-90 days in June 2025), even as there are signs of improvement on a year-on-year basis.
According to a private sector bank executive, this loan segment has been under the lens for its high default rate.
This move, if officially allowed, would make the borrowers wary of default. But there needs to be a balance between loan recovery and maintaining consumer rights.
Industry sources also said consumer durable loans, which have been on a slow lane, are expected to get a push from the measures such as direct and indirect tax rationalisation and festive season sales and timing of such regulations have to be carefully considered.
Consumer advocates warn of potential exploitation for millions if the change is implemented.
“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.