RBI Bars Lenders From Locking Borrowers’ Devices Except For Gadget Loans

The RBI has barred banks and other regulated entities (REs) from disabling or restricting borrowers’ mobile phones, tablets or laptops as a loan recovery measure, except where the loan was specifically taken to finance the device. 

The revised directions, which will come into effect from January 1, 2027, form part of the central bank’s updated framework governing the conduct of REs in loan recovery and the engagement of recovery agents. 

Under the new norms, lenders cannot deploy technology-based mechanisms to restrict or disable a borrower’s mobile device for recovering dues arising from personal, home, vehicle or any other loan that is unrelated to the device. 

However, where the loan is used to finance the device itself, lenders may deploy such mechanisms subject to strict safeguards. The RBI has directed REs to adopt a graduated approach instead of immediately disabling the device. Essential functionalities such as incoming calls, SMS, emergency SOS services and government or public safety notifications must remain accessible. 

OEM Certification Mandatory

The central bank has mandated that REs and third-party service providers offering device-locking solutions obtain certification from the original equipment manufacturer (OEM) of the device or the operating system platform before deploying such technology. 

Further, lenders must ensure that any borrower or guarantor information shared with employees or recovery agencies is limited to what is necessary for carrying out recovery activities. 

Beyond technology-enabled recovery, the revised framework also lays down detailed norms governing the appointment, conduct and oversight of recovery agents, as part of the RBI’s broader effort to strengthen borrower protection. 

The final directions follow the draft framework issued by the RBI in May, which proposed allowing lenders to restrict functionalities of lender-financed devices only if the loan agreement explicitly disclosed the possibility of such action, along with the repayment timeline, escalation stages and grievance redressal mechanism. 

Under the revised framework, lenders cannot initiate any restriction on a financed device until the loan has become 30 days past due despite due notices. Gradual restrictions may be imposed thereafter, while the full set of restrictions agreed under the loan contract can be activated only after the loan becomes 60 days past due. Outgoing calls cannot be restricted before the loan reaches 60 days past due. 

The directions also require lenders to restore the blocked functionalities within one hour of the borrower curing the default. In case of any delay or wrongful restriction, lenders will have to compensate borrowers at the rate of ₹250 per hour until the services are restored. 

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