If you are having second thoughts on getting that new iPhone 17 on EMI, you should put your purchasing decision on hold. The Reserve Bank of India (RBI) wants to revise the Fair Practice Code, and if the regulations are passed, smartphone buyers purchasing on EMI may face the risk of getting their phones locked remotely if they fail to pay their monthly dues.
In a move that could significantly reshape the landscape of consumer finance, especially for the smartphone market, the RBI is considering a policy that would grant lenders the power to remotely lock a borrower’s mobile phone if they fail to make their EMI payments. The proposed measure is a response to India’s rising levels of bad debt, particularly in the rapidly growing segment of small-ticket loans for consumer electronics.
If implemented, this new rule would be a game-changer for both the lending industry and millions of consumers.
New RBI regulations for phone buyers on EMI
As part of the Fair Practices Code, the RBI is expected to issue a revised set of guidelines in the coming months to regulate this practice. According to a Reuters report, these new rules will come with stringent conditions for both lenders and borrowers:
– Lenders would be required to obtain explicit and prior consent from borrowers.
– Lenders should ensure that customers are fully aware of the potential consequences of the inability to pay the loan when they sign the agreement.
– Guidelines also strictly prohibit lenders from accessing any personal data on the locked device, thus addressing the concerns of privacy.
But why is RBI taking such a drastic measure?
One of the major reasons why RBI is taking such a drastic measure lies in the explosive growth of consumer finance. Non-bank lenders now account for 85 per cent of loans for products like mobile phones, especially the premium ones from Apple, Samsung, and Google. Premium smartphones like Apple’s iPhones have seen tremendous growth in sales and market share, owing to the easy availability of EMI purchase options for these devices.
However, this kind of proliferation has also led to a high default rate, making loan recovery a significant challenge for lenders.
By allowing lenders to remotely lock devices, the RBI and the financial sector hope to create an incentive for consumers to make timely payments, thereby improving the overall health of the loan portfolio.
For lenders, this could translate into better loan recovery rates and a willingness to extend credit to a wider range of customers, even for those with a limited or poor credit history.
Will such power corrupt lenders?
While lenders are looking forward to such a regulation, the proposal has drawn sharp criticism from consumer advocates who argue that such a policy weaponizes essential technology.
“This practice weaponizes access to essential technology to enforce behavioural compliance, locking users out of livelihoods, education, and financial services until repayment,” said Srikanth L., who is the founder of advocacy group CashlessConsumer.
It is argued that a modern mobile phone is far more than a communication device; it is a gateway to livelihood, financial services, education, and social connection. The ability of a lender to remotely disable or lock their device could lead to devastating consequences, potentially locking individuals out of critical aspects of their daily lives.
What remains to be seen is if RBI introduces this mandate, how will the new regulations allow lenders to manage such risks while mitigating the consumer debt.
