RBI may allow lenders to remotely lock mobile phones bought on credit, Pg15

Key Highlights:

• The Reserve Bank of India (RBI) is considering allowing lenders to remotely lock mobile phones bought on credit if borrowers default on loan payments.
• This move aims to reduce Non-Performing Assets (NPAs) related to small-ticket loans for consumer electronics.
• The RBI had previously asked lenders to stop locking phones of defaulting borrowers in the past year.
• New guidelines are expected to be introduced within months as an update to the Fair Practices Code.

Detailed Insights:

• Over one-third of consumer electronics purchases in India are financed through small-ticket loans, according to a 2024 study by Home Credit finance.
• India has over 1.16 billion mobile connections, indicating significant market penetration.
• The proposed guidelines will require lenders to obtain prior consent from borrowers before implementing phone-locking mechanisms.
• Lenders will be prohibited from accessing personal data on locked phones to protect consumer privacy.
• The RBI aims to balance lenders' ability to recover small loans with the need to safeguard customer data.

Key Concepts Involved:

• Non-Performing Asset (NPA): A loan or advance for which the principal or interest payment remained overdue for a period of time.
• Fair Practices Code: A set of guidelines issued by the RBI to ensure transparency and fairness in lending practices.