No, banks can't lock your phone over loan defaults: RBI
What's the story
The Reserve Bank of India (RBI) has issued a new directive, barring banks from disabling mobile phones and laptops of defaulting borrowers. The move comes against the backdrop of borrowers' complaints about being harassed, including through social media platforms and the use of abusive language. The regulation will come into effect on January 1, 2027. However, there are exceptions when the devices themselves have been financed by lenders.
Regulation details
Banks can't use tech to restrict device functionalities
The RBI has clearly stated that banks cannot use any technology-based mechanism to restrict or disable the functionalities of a borrower's mobile device. This includes phones, tablets, and laptops.
The only exception is if these devices were financed by the bank itself.
In such cases, banks shall adopt a gradual approach instead of disabling the device immediately.
User access
Banks can't restrict essential functionalities of a mobile device
The RBI's directive also stresses that banks cannot restrict or disable essential functionalities of a mobile device. This includes access to incoming calls, SMS, and emergency SOS features.
The move is part of the central bank's efforts to regulate conduct-related matters in loan recovery and engagement with recovery agencies.
It comes after complaints from borrowers about harassment through social media platforms and abusive language.
Technology regulation
RBI responds to feedback on draft norms
The RBI has also responded to feedback on its draft norms regarding 'Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents.'
The central bank has mandated that only secure, compliant, and tested device-locking technologies are deployed by regulated entities (REs).
This is to prevent the use of unlicensed or unreliable software solutions.
Compliance check
OEM certification required for technology-based recovery mechanisms
The RBI has also mandated that the RE and third-party service provider deploying a technology-based recovery mechanism must obtain certification from the original equipment manufacturer (OEM) of the device or the operating system platform.
This is part of the central bank's efforts to ensure compliance and security in loan recovery practices.
The amended directions also detail norms banks have to follow for engaging recovery agencies for loan dues.