RBI May Let Lenders Lock Your iPhone for Missed EMI Payments: What Borrowers Need to Know

The Reserve Bank of India (RBI) might make amendments to the Fair Practices Code that would enshrine within the legal framework provisions for locking of smartphones remotely by the lenders, should the borrowers fail to pay the EMIs on time. Hence, if you were thinking about purchasing an iPhone 17 on EMI, you may want to reconsider.

Such a proposed regulation looks at trying to address the growing cases of defaults in India's consumer finance segment, especially for small-ticket loans used to buy premium gadgets from top brands like Apple, Samsung, and Google.

How the RBI Rules Would Work

Under the new set of rules, lenders could lock the device that has been given to the borrower, subject to compliance with very stringent conditions:

• Prior to activating this measure, lenders must take the borrower's explicit consent.
• At the time of entering the loan agreement, the borrower must be made fully aware of what would happen if he/she failed to pay EMIs;
• Lenders cannot look at any personal data on the device and thus respect user privacy.

Why The RBI Is Considering This Step>

For smartphone loans, nonbanks now provide almost 85% of the finance, particularly for high-priced devices. With EMI options being made easily available, this has increased the sales but has however led to a high default rate. Allowing lenders to lock devices could serve as an incentive for timely repayment as well as increase the loan recovery rate, thus enhancing access to credit for customers with little or poor credit history.

Opposition from Consumer Advocates

While lenders are embracing the move, consumer advocates have been opposing it. Srikanth L., founder of CashlessConsumer, said, "This practice weaponizes essential technology, locking users out of livelihoods, education, and financial services until repayment."

Critics aver that modern smartphones are integral to daily life, serving as tools for work, education, and finance. Locking down such devices could spell serious trouble for borrowers, especially those who rely on their phones for these life-essential operations.

What Comes Next

It still remains unclear when the RBI will implement these regulations, but if they do, the lender will need to consider enforcement of repayment vis-à-vis the social implications of locking out devices that might be considered aggrieved.