The Reserve Bank of India (RBI) may introduce a new rule to expedite the recovery of mobile phones purchased on small loans. Under this rule, phones can be remotely locked in case of loan default. Data privacy will be ensured, safeguarding consumers' personal data while assisting lenders in loan recovery.
The Reserve Bank of India (RBI) is considering implementing a new mechanism for the recovery of mobile phones purchased on small loans, in cases of default. Under this mechanism, if a customer fails to repay EMIs on time, the phone can be remotely locked. This plan will grant lenders the right to recovery while protecting data privacy, thereby benefiting consumer lenders such as Bajaj Finance and DMI Finance.
Rising Trend of Loans for Phone Purchases in India
A study by Home Credit Finance in 2024 revealed that over one-third of consumers in India purchase consumer electronics, including phones, through small personal loans. According to telecom regulator TRAI, India has over 1.16 billion mobile connections, while the country's population is approximately 1.4 billion. Based on this, it is evident that purchasing phones on loan has become common, and this rule could prove significant for both consumers and lenders.
Previous System for Phone Locking Existed
Previously, a pre-installed app was used in phones purchased on loan. This app would lock the phone in case of loan default. However, last year, the RBI halted this practice, instructing banks and NBFCs to discontinue this phone locking system.
Currently, the RBI is contemplating reintroducing this mechanism. The objective is to expedite the loan recovery process and improve the relationship between consumers and lenders.
Focus on Data Privacy
The RBI's new proposal is being developed with consumers' data privacy in mind. Under this, lenders will be prevented from accessing users' personal data, and the data will remain completely secure. The Reserve Bank wants to ensure that while lenders are granted rights for loan recovery, consumers' personal information remains protected.
Benefits for Lenders
If this new rule is implemented, major consumer lenders such as Bajaj Finance, DMI Finance, and Cholamandalm Finance could benefit. This would accelerate loan recovery and make it easier to lend to customers with poor credit. Additionally, lenders will gain confidence that phones of consumers who fail to repay EMIs on time can be locked, thereby reducing financial risk.
Process of the Rule
In this process, an app will be pre-installed on phones taken on loan. If the consumer fails to repay the loan EMIs on time, this app will remotely lock the phone. This step is being taken to prevent loan default cases and reduce financial losses for lenders.
The RBI has not yet made an official announcement. Discussions with lenders are ongoing, and guidelines on this new mechanism are expected to be issued in the coming months. Experts believe this will bring new transparency to the consumer credit system and increase the tendency to repay loans on time.
