RBI Evaluating Platform To Lock Phones After Loan Defaults

The Reserve Bank of India (RBI) is evaluating a platform that would allow lenders to remotely lock mobile phones bought via credit in the event of borrower defaults. 

“We are assessing the potential benefits and risks linked to this platform. The RBI is particularly focussed on balancing consumer data privacy and upholding borrower rights, while also addressing the needs of creditors seeking to recover loans,” RBI governor Sanjay Malhotra said while briefing the media on the outcome of the central bank’s Monetary Policy Committee (MPC) meeting.

Notably, over one-third of consumer electronics products in India, including phones, are bought on small-ticket loans.

The RBI had reportedly previously instructed lenders to pause locking phones of borrowers in default, a practice that involved pre-installed applications capable of restricting device usage. 

The central bank is now expected to revise its ‘Fair Practices Code’ in the months ahead, putting in place clear guidelines around the use of such phone-locking mechanisms. This would mandate obtaining explicit borrower consent upfront and will prohibit lenders from accessing any personal data on the locked devices.

The development comes at a time when both the government and the central bank are pushing to deepen credit penetration in India. To this end, multiple initiatives are underway to make credit more accessible and mainstream.

For instance, the National Payments Corporation of India (NPCI) is currently working on an EMI-on-UPI feature that would let users convert their UPI transactions into EMIs. The payments body already runs two credit-linked UPI products, RuPay credit cards and the credit line on UPI, which have seen rapid adoption. 

In fact, nearly 16% of all credit card spending in India is now processed via the RuPay network, with about half routed through UPI.

With UPI transactions seeing steady growth, credit-led innovations are being seen as the next growth lever for India’s digital payments ecosystem. Last month, the number of UPI transactions rose 31% YoY to 19.6 Bn. However, the transaction count declined 2.3% MoM.