RBI bars lenders from locking borrower devices

The Reserve Bank of India has barred banks and other regulated entities from disabling or restricting a borrower’s mobile phone, tablet or laptop as a loan recovery measure. The single exception is where the loan was specifically taken to finance that device. The revised directions come into effect on 1 January 2027 and follow a draft framework the central bank issued in May 2026.

The scope is narrower than a quick reading suggests. This is not a blanket ban on device locking. It is a ban on using device locking to collect on loans that were not for the device. Where the carve-out does apply, the conditions are tight. The lender needs OEM certification before deployment. The approach has to be graduated rather than an immediate lockdown. Emergency functions must survive, including incoming calls, SMS, emergency SOS and government safety notifications. Nothing starts before 30 days past due and full restriction only after 60 days past due. Once a default is cured, access must return within one hour, with compensation of Rs 250 per hour for wrongful or delayed restoration.

The device rules sit inside a wider update to how regulated entities conduct recovery and engage recovery agents, covering agent appointment and oversight, limits on sharing borrower and guarantor information, and grievance redressal. Inc42 does not name a formal title for the directions, and does not mention digital lending apps, BNPL or consumer durable loans specifically.

If you sell phones or laptops on no-cost EMI, this is your category and not somebody else’s. The carve-out survives, but it now costs the lender more to use: OEM certification, staged restriction, an hour to restore, and a per-hour penalty when they get it wrong. Lenders do not absorb that. It surfaces as tighter approval at the thin-file end of your funnel, or a higher subvention rate charged back to the merchant.

The date to act on is not January 2027. Financing partners will re-price well before then, because they always do. If you are negotiating instalment terms for next year, ask now what the recovery framework does to your approval rate and your discount fee, and get the answer in writing while you still have leverage.