RBI loan default rule: If you buy a mobile phone or electronic item on loan and fail to pay the EMI on time, your device could soon be locked.
The Reserve Bank of India (RBI) is considering a strict step to deal with rising defaults on small personal loans. This move could make recovery tougher on defaulters.
Reason behind this step:
In recent years, small personal loans (up to ₹1 lakh) have grown quickly, especially among people who earlier had no access to formal credit.
But defaults on these loans have also increased. Non-Performing Assets (NPAs) are rising sharply, with the highest defaults seen in loans taken for smartphones and electronic gadgets. Banks and NBFCs believe locking these devices will help ensure repayment.
What’s special in the proposal?
Under the RBI plan, smartphones, refrigerators, TVs, and other IoT devices bought on loan can be remotely locked. The process will first start with mobile phones.
A third-party app will be installed to lock the device, with prior permission from the customer. During the lock period, only emergency calls will work.
As soon as the EMI is cleared, the device will be unlocked. Customers will also receive a reminder before their device is locked.
Who will this impact?
This rule will mainly affect those who have taken personal loans of up to ₹1 lakh to buy smartphones or household items.
Students, young professionals, and low-income customers in both urban and rural areas could be the most affected. Missing even a single EMI could bring instant action.
No final decision yet:
The RBI is still discussing this proposal with banks, NBFCs, and other stakeholders. It has not been implemented yet.
Detailed rules will be created to safeguard customer rights before any final decision is made.
