RBI may allow banks, NBFCs to disable financed mobile phones after loan defaults
21 May 2026, 01:19 PMThe lenders would be permitted to deploy technology-based mechanisms to restrict functionalities of a borrower’s mobile device.
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The Reserve Bank of India has released revised draft directions proposing amendments to the 'conduct of regulated entities in recovery of loans and engagement of recovery agents.'
The central bank has proposed that lenders, including banks and non-banking financial companies (NBFCs), are allowed to restrict or disable certain functionalities of a mobile phone in cases where borrowers default on loans taken to finance the device.
The lenders would be permitted to deploy technology-based mechanisms to restrict functionalities of a borrower’s mobile device. According to the draft guidelines, the loan contract/agreement must explicitly permit such action and clearly disclose the circumstances under which restrictions may be imposed.
In the revised draft directions, the RBI said lenders must serve notice to the borrower after the loan becomes 60 days past due, with at least 21 days provided to the borrower to cure the default. A second notice with another seven days would also be mandatory before any restriction is imposed.
The RBI has mandated lenders to adopt a “graduated approach” instead of completely disabling devices immediately.
Essential functionalities, such as internet access, incoming calls, emergency SOS features and receipt of emergency government or public safety notifications cannot be disabled, the guidelines added.
The draft directions further mentioned that lenders must reverse restrictions within one hour once the borrower clears the dues. And, in cases of wrongful restrictions or delay in reversal of restriction in the device functionalities, lenders would have to compensate borrower at the rate of Rs 250 per hour until the issue is resolved.
The RBI also prohibits lenders accessing, storing or using any data present on the borrower’s mobile phone under any circumstances.
Other than that, the draft guidelines also stated that lenders engaging recovery agencies must ensure that the recovery agents have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF.
And, the existing recovery agencies partner of the lender must obtain the certificate from IIBF within a period of one year from the date of issuance of these Directions.
The draft directions will come into effect from October 1, 2026.
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