The Reserve Bank of India has introduced new rules preventing lenders from remotely disabling borrowers’ mobile phones and laptops to recover personal, car, and home loans, marking a significant shift towards safeguarding customer rights in debt collection practices.
The Reserve Bank of India has barred lenders from remotely disabling borrowers’ mobile phones and laptops to collect dues on ordinary personal, car and home loans, drawing a clear line between those debts and device loans in which the handset or computer itself was financed by the lender. According to the RBI’s new recovery rules, banks may use such technology only where the device was purchased on credit through that bank, and even then they must take a gradual approach rather than cutting off service at the outset. The central bank said the move is meant to curb harsh recovery practices, after complaints that borrowers had been harassed through social media and abusive language.
The revised directions, which the RBI said will take effect on January 1, 2027, also protect essential functions on any locked device, including incoming calls, SMS and emergency SOS features. In cases where the device loan is in default, lenders can restrict functions only after following the required process. Earlier draft proposals circulated in May had pointed to an October 1, 2026 start date and suggested a 90-day delinquency threshold, but the final circular published this week sets out the later implementation date. Industry reports on the draft also said borrowers would have to receive notices before any restriction and that lenders would need to restore access quickly once the overdue amount is cleared.
The RBI has also tightened the rules around the technology itself. It said regulated entities and any third-party provider used to deploy a device-locking system must obtain certification from the device maker or operating-system platform, a move intended to prevent unlicensed or unreliable software from being used in recovery work. Reuters-style summaries of the draft proposals also said lenders would be required to reverse any restriction within an hour of the borrower curing the default, and compensate the customer for wrongful blocking or delays. The draft further said the locking mechanism must be removed once the loan is repaid in full.
Beyond device recovery, the new framework sets conduct standards for banks and their recovery agents. The RBI said borrower and guarantor data may be shared only to the extent needed for recovery duties, reflecting broader privacy concerns raised during consultation. The central bank said it received a number of responses to its draft norms and accepted several suggestions, including the need for compliant and tested technology. It has also asked lenders to tighten oversight of recovery agencies as part of a wider effort to curb coercive collection tactics.
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