RBI Mulls Device-Locking Tech For Lenders To Lock Borrowers' Phones On Small-Ticket Loan Defaults In Mumbai

The Reserve Bank of India (RBI) is contemplating the use of device-locking technology (DLT) to allow lenders to remotely lock borrowers' smartphones in cases of persistent non-payment.

This proposal comes as demand for such loans surges among new-to-credit customers, often involving amounts up to Rs 50,000 for gadgets or personal needs.

News reports revealed that the RBI aims to regulate this technology to curb bad assets, particularly in the fintech sector where defaults have spiked by 5-10 per cent over the past year.

The move targets loans where the smartphone itself is financed, enabling lenders to disable the device until repayment.

This could significantly reduce non-performing assets but raises serious consumer rights concerns. Meanwhile, the RBI is cautious about potential misuse, emphasizing that such actions must comply with fair recovery practices.

The regulator is reviewing proposals to ensure borrowers are not unduly harassed, drawing parallels to existing guidelines prohibiting humiliating tactics by recovery agents.

It is worth noting that this technology is already in limited use by some private lenders, but formal RBI approval would standardize it for small-ticket personal loans.

Public sector banks are also exploring AI-driven follow-ups, as per reports, to improve repayment rates without invasive measures.

However, critics argue that locking phones could disrupt essential services like banking and emergency calls, especially for low-income groups reliant on mobiles for livelihoods.

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