RBI mulls allowing lenders to lock phones if EMIs are missed; here's what governor said

Reserve Bank Governor Sanjay Malhotra on Wednesday said the central bank is examining a proposal to allow lenders to remotely lock mobile phones purchased on credit if borrowers default on EMI payments.

The issue of digital locking is under consideration, Malhotra said while responding to questions after the monetary policy announcement.

RBI Deputy Governor M Rajeshwar Rao said both the advantages and concerns around the proposal were being studied.

“The issue of digital locking is under examination as the Governor has pointed out. There are pros and cons on both sides in terms of balancing customer rights and requirements, data privacy, and creditors' requirements. So, we are examining the issue, we will take a view at a later point in time,” Rao said.

A Reuters report last month said the RBI was considering updating its Fair Practices Code (FPC) to empower banks to lock smartphones bought on credit in case of default.

Under the revised FPC, the RBI may allow lenders to obtain explicit prior consent from borrowers before activating any locking feature/app on mobile phones bought on credit, according to the report.

The proposal, however, has triggered a debate on its legality. According to legal experts, existing consumer protection and information technology laws do not expressly authorise financial institutions to lock the mobile devices of defaulters.

“Currently, no statutory body in India, including the RBI, banks, or any other financial institution, possesses the legal authority to remotely lock any citizen’s smartphone,” Pranav Bhaskar, Partner at SKV Law Offices, told Upstox.

Shashank Agarwal, Founder of Legum Solis, said that the Information Technology Act, 2000, protects against tampering of electronic devices without the consent of the owner.

“As of today, RBI or banks or any other statutory authority do not have any legal power to remotely lock people’s smartphones simply on default,” he said.