The Reserve Bank of India (RBI) may introduce a new rule to enhance the recovery power of lenders. Under this proposal, lenders will be able to remotely lock the phones of customers who are unable to repay their loans. Once the rule is implemented, companies like Bajaj Finance, DMI Finance, and Cholamandalam Finance will benefit, but concerns regarding consumer rights and data protection will persist.
RBI New Rule: The Reserve Bank of India (RBI) is considering the implementation of a new rule to bolster the recovery capabilities of lenders. According to this proposal, lenders will be able to remotely lock the smartphones of customers who fail to repay their loans. This rule could be significant for all consumers with a connection to consumer loans in India and may benefit companies such as Bajaj Finance, DMI Finance, and Cholamandalam Finance. The RBI's objective is to enhance the recovery capacity of lenders and mitigate financial risks.
Impact on Borrowers and the Electronics Market
Studies indicate that, according to a Home Credit Finance report in 2024, over one-third of people purchase mobile phones and other electronics on loan. Furthermore, data from CRIF Highmark suggests that a majority of people default on EMIs in the segment of small loans below ₹1 lakh. In such a scenario, the phone locking rule could impact both small borrowers and the consumer electronics market.
Phone Locking Rules and Security
As per the RBI's proposal, an app will be installed on borrowers' phones at the time of loan issuance. In case of default, the phone can be locked. In the coming months, the RBI may issue guidelines on phone-locking mechanisms as an update to the Fair Practices Code. The aim is to enable lenders to recover loans while ensuring customer data remains secure.
Companies to Benefit
If this rule is implemented, companies offering consumer product loans, such as Bajaj Finance, DMI Finance, and Cholamandalam Finance, could stand to benefit. Phone locking will increase recovery opportunities and strengthen the power of lenders in cases of default. Currently, the RBI has not provided any official comment on this matter.
