If you are planning to buy a smartphone on EMI or through a mobile loan, this update is important for you.
The Reserve Bank of India (RBI) has released new draft rules related to mobile phone loan defaults.
Under these proposed rules, banks and financial institutions may be allowed to limit certain features of a smartphone if the borrower fails to repay the loan on time.
The new rules are expected to come into effect from October 1, 2026.
In recent years, many digital lenders and fintech companies have already been using technical systems to block phones in case of non-payment.
Now, the RBI wants to officially regulate and control this process.
When Can Banks Restrict Your Phone?
According to the RBI draft, banks will only be allowed to restrict phone features under specific conditions.
The most important condition is that the loan must have been taken specifically to purchase that mobile device.
Apart from this, the loan agreement must clearly mention:
That the phone can be restricted in case of default
The situations in which restrictions can happen
The timeline given to the borrower to repay dues
The process for filing complaints or appeals
The RBI has made it clear that lenders cannot suddenly block devices without proper notice.
Borrowers Will Get Multiple Warnings First
Under the proposed rules, lenders can start taking action only if the loan account remains unpaid for more than 90 days.
Before any restriction is imposed, banks will have to follow a proper warning process.
Here’s how it will work:
First notice after 60 days of overdue payment
Borrower gets at least 21 days to repay dues
Second notice issued before any restriction
Additional 7 days given before final action
This means customers will receive enough time and warnings before any phone-related restrictions are applied.
Essential Services Cannot Be Blocked
The RBI has also provided major relief for borrowers.
Banks and lenders will not be allowed to completely block important phone services, even if the customer defaults on the loan.
The following services must remain active:
Internet access
Incoming calls
Emergency SOS features
Government and public safety messages
The RBI has advised lenders to follow a gradual approach instead of completely shutting down the device immediately.
Compensation If the Phone Is Wrongly Blocked
Another important rule is related to customer protection.
Once the borrower clears the pending amount, lenders must restore phone functionality within one hour.
If there is any delay or accidental blocking, the lender will have to pay compensation of ₹250 per hour until the issue is resolved.
The RBI has also stated that after full repayment of the loan, all software used to control or restrict the phone must be removed immediately.
RBI Wants Better Protection for Borrowers
Through these draft rules, the RBI is trying to create a balance between lender rights and borrower protection.
The goal is to stop unfair practices while ensuring that customers are treated fairly during the recovery process.
For people planning to buy smartphones on EMI, understanding these new rules will become very important in the coming years.
