RBI bans banks from locking phones of defaulting borrowers, effective 2027

The Reserve Bank of India (RBI) has issued new regulations that will take effect on 1 January 2027. Banks and non‑bank finance companies (NBFCs) are prohibited from disabling or remotely locking smartphones, tablets or laptops of borrowers, except when the device was purchased using a loan from the same lender. In such cases, a gradual restriction may be applied, but essential functions – incoming calls, SMS and emergency SOS – must remain active.

If a borrower repays the loan and the device is not unlocked within one hour, the lender must compensate the customer at a rate of ₹250 per hour. Recovery agents are barred from making harassing calls before 8 a.m. or after 7 p.m., from using social‑media platforms to defame borrowers, and must carry an ID and authorization letter. Lenders must also use certified, secure device‑locking technology approved by the device OEM or operating‑system provider, and they may only access data strictly necessary for loan recovery.

The rules aim to curb abusive recovery practices that have been reported in recent months, ensuring greater transparency, privacy protection and consumer rights in loan‑recovery processes.