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Word has been going around that the Reserve Bank of India (RBI) proposed allowing lenders to remotely restrict or disable functions of a mobile phone or tablet bought on credit in cases of default in loans used to finance the device.
Reacting to this, the RBI on Wednesday said that lenders are prohibited from completely blocking or disabling mobile phones due to non-payment of loans taken to buy the device.
According to the draft amendment guidelines issued by the banking regulator, lenders are allowed to impose restrictions on some mobile phone functions when loan dues remain unpaid. However, shutting down or completely blocking the phone is not permitted.
Notably, these restrictions apply only for loans taken specifically to buy mobile phones, and are not related to borrowings for other purposes.
According to a 2024 report by Home Credit Finance, buying phones through loans has emerged as a growing trend in India, which currently has more than 1.16 billion mobile connections as per telecom regulator data. Today, mobile phones play a crucial role in communication, employment and education.
Further, a bank, deploying any technology-based blocking mechanism, cannot restrict or disable certain essential functionalities, such as access to the internet, incoming calls, emergency SOS features, and receipt of emergency government or public-safety notifications.
It also said the bank should ensure that the restrictions on device functionalities are reversed expeditiously, in any case, within one hour of the borrower curing the default. In cases involving wrongful restriction or delay in reversal, the lender will have to compensate the borrower at the rate of Rs 250 per hour till the wrongful action is remedied.
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The revised draft amendment directions on ‘Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents’ also said a bank should document the time and number of calls made by its employee/ recovery agent to the borrower/ guarantor for recovery of loan dues.
“Further, the bank shall ensure that there is a recording of the content/text of the calls made by the employee/recovery agent to the borrower/guarantor and the calls made by the borrower/guarantor to the telephone / mobile number conveyed by the bank,” the draft said.
The draft also emphasised that a bank’s employee/recovery agent should not engage in any harsh methods towards collection/recovery. Harsh methods include ‘use of minatory or abusive language’, ‘use of social media for posting video / audio recordings or personal details of the borrower/guarantor’, ‘sending inappropriate messages either on mobile or through social media’, and ‘excessively calling/messaging the borrower/guarantor’.
The RBI also said a bank should put in place a policy on collection/ recovery of loan dues, including taking possession of a security, by its own employee or a recovery agent. The policy should cover procedures to be followed / penal actions to be taken in case of non-compliant recovery agencies or their agents.
With inputs from PTI
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