The Reserve Bank of India is working on a new rule to strengthen the position of lenders. The central bank is planning to allow lenders to remotely lock the phones of borrowers who default on their loan payments. This initiative is designed to give lenders more power, but consumer rights are also a consideration.
A significant portion of consumers finance consumer electronics, like mobile phones, through loans. India has a substantial number of mobile connections.
The RBI previously asked lenders to avoid locking the phones of defaulting borrowers. The plan involves installing an app on borrowers’ phones when a loan is issued. The RBI intends to update the Fair Practice Code and issue guidelines on the phone-locking mechanism. The RBI wants to enable lenders to recover loan amounts while protecting customer data. The new rule could benefit companies providing loans for consumer products, potentially improving recovery rates. Smaller loans are considered riskier.