Many people buy electronic items like mobile phones, TVs, or washing machines on EMI but later fail to repay the loan. This makes it difficult for banks to recover the money.
To solve this, the Reserve Bank of India (RBI) is planning a new strict rule that will allow lenders to remotely disable such products until payments are made. Discussions have already been held with banks and financial institutions.
Expert Opinion
Finance expert Adil Shetty explained that loans for phones, laptops, and other small electronics are usually collateral-free.
Customers don’t need to pledge property, and interest rates are 14–16%.
If RBI introduces this new rule, these loans may be treated like secured loans (such as home or car loans). In that case, interest rates will also need to be reduced.
5 Key Points You Should Know
Already in place abroad: In countries like the US, cars don’t start if EMI payments are missed.
How it may work in India: EMI-based products will come with pre-installed software that lets banks lock them if payments are due.
Data security concern: Consent will be taken, but since banks will get access to users’ data, there’s a risk of misuse, blackmail, or leaks. RBI must address this before rollout.
Applicable products: Works easily on smart devices (phones, TVs, laptops, washing machines). For non-digital items (like furniture), traditional recovery methods will still apply.
International examples:
US: “Kill switch” shuts down cars if EMI is unpaid.
Canada: Lenders use “starter interrupt devices” to disable vehicles.
Africa (Kenya, Nigeria, etc.): Pay-as-you-go solar systems stop working if EMIs aren’t paid.
Pros and Cons of the New Rule
Benefits: Lowers fraud and default cases, builds lender confidence, and allows even low-credit customers to buy products.
Drawbacks: May hurt consumer rights. Locking phones or vehicles could affect jobs, education, and even healthcare.
Rising EMI Purchases in India
Small-ticket loans are growing fast. A 2024 Home Credit Finance study says over one-third of Indians buy electronics, mainly smartphones, on EMI.
India now has over 1.16 billion mobile connections. According to CRIF Highmark, loans under ₹1 lakh show the highest default rates, though experts believe this system may reduce risks in the long run.
