RBI bans lenders from locking EMI-financed phones, sets gradual restriction rules

The Reserve Bank of India has finalized a framework governing the recovery of loans tied to smartphones, tablets and laptops, which will take effect on January 1, 2027. Under the new norms, banks cannot deploy any app or technology to disable a borrower’s device unless the loan was taken specifically for that equipment, and even then restrictions must follow a stepped approach: no action before 30 days overdue, limited measures between 30 and 60 days, and full contractual limits after 60 days, using only software certified by the original equipment manufacturer or OS provider.

Essential functions such as incoming and outgoing calls, emergency SOS and any features needed for employment must stay operational, and lenders are barred from accessing contacts, photos, call logs or location data. Should a lender delay unlocking a device after payment, they must pay Rs 250 per hour to the borrower, capped at the loan amount, and only regulated recovery agents may interact with borrowers. Experts from Grant Thornton Bharat, Bankbazaar.com and Paisabazaar highlighted the importance of reading loan agreements, setting up auto-debits and retaining repayment proof to protect consumer rights.