The Reserve Bank of India (RBI) is considering allowing lenders to remotely lock mobile phones bought on credit if the borrower defaults on those loans. This is aimed at recovery of small-ticket loans from mostly low-income customers.

In 2024, India saw more than one-third of consumer electronics, including phones, being bought on small-ticket loans, according to a study by Home Credit Finance. 

Remote locking by device-locking technology (DLT) can act as a digital collateral substitute for banks and non-banking financial companies (NBFCs) to use this as an instrument to manage risk and get repayment.

The matter is sensitive as personal data of borrowers becomes de facto collateral. By being denied the phone, they will not have access to the data stored in the device. 

The regulator is weighing the pros and cons as it involves customer rights on one side and creditor’s requirements of data usage and privacy on the other. 

“Such a proposal is currently under discussion and we are getting views both for and against such a move,” Malhotra said during a post monetary-policy press conference. “We are taking those views on record.”

If implemented, the rules will mandate digital locking of a phone only after obtaining explicit prior consent from the borrower at the time of the loan agreement. Also, the lock must prohibit lenders from accessing personal data or tamper with it.