The Reserve Bank of India has proposed new rules that could change how mobile phone loans work in India. According to the draft, if a customer buys a smartphone on EMI
and fails to pay installments, banks or finance companies may be allowed to remotely disable certain features of that phone.
However, the phone will not be completely locked. Instead, only selected functions may be restricted. These rules are still in draft form and are expected to be implemented from October 1, 2026.
Importantly, these rules will apply only to phones bought through loans, not to fully paid devices.
When and How the Phone Features Can Be Disabled
The RBI has set a strict process before any action is taken.
If EMI payments are overdue:
The bank must wait 60 days first
Then send a notice to the customer
The customer gets 21 days to respond
After that, a final 7-day notice is given
Only if the loan remains unpaid for 90 days can phone features be restricted.
Banks and NBFCs cannot disable phones suddenly. Everything must follow a proper step-by-step procedure.
What Features Will Stay Working
Even if action is taken, essential services will remain active. Banks cannot block:
Emergency SOS services
Incoming calls
Internet access
Government safety alerts
This ensures that users do not face complete isolation or safety risks.
Fast Reversal and Compensation Rules
Once the customer pays the pending amount, all restrictions must be removed within 1 hour.
If the bank delays restoring services, the customer will get ₹250 per hour as compensation.
Also, banks must immediately remove any software used to limit phone features once the loan is cleared.
Strong Focus on Data Privacy
The draft clearly states that banks or recovery agencies cannot access, store, or misuse any personal data on the customer’s phone.
This rule is meant to protect user privacy and prevent misuse of mobile data.
New Rules for Recovery Agents
The RBI is also tightening rules for loan recovery teams.
Recovery agents must be certified by the Indian Institute of Banking and Finance (IIBF) before working. Banks must also publicly share details of recovery agencies.
Strict rules include:
No calls before 8 AM or after 7 PM
No threats, abuse, or harassment
No contacting family members inappropriately
Call records must be stored for at least 6 months
If a customer has a complaint pending, recovery actions cannot continue.
