RBI bars banks from remotely locking borrowers' phones, laptops except for device loans; sets 30-day, 60-day recovery timeline

The Reserve Bank of India has issued fresh directions barring banks from remotely disabling or restricting borrowers' mobile phones, tablets and laptops as a means of loan recovery, unless the device itself was financed through the loan in question.

Under the new framework, banks can only restrict access to a device if the loan was specifically used to purchase it, and only when the loan agreement explicitly permits such action. The agreement must also lay out the full recovery process, including the exact sequence in which restrictions can be applied once a borrower defaults.

Staggered restrictions tied to overdue period

The central bank has built in a graded timeline before any restriction can kick in. No device can be restricted until the loan account has been overdue for at least 30 days, even if the borrower has already received notice of default. Banks are also barred from imposing the complete set of permitted restrictions until the account crosses 60 days past due, with outgoing call blocks specifically prohibited before this 60-day mark.

Certain functions remain off-limits regardless of how overdue the loan is. Incoming calls, SMS and emergency SOS services cannot be disabled at any stage, and restrictions cannot be used in a way that stops borrowers from using their device for work or employment purposes.

Banks are additionally required to get the restriction technology certified by the device's original equipment manufacturer or operating system provider, where applicable, and must give borrowers a way to check the restriction status on their device at any time.

Rules for restoring access

Once a borrower clears the outstanding dues, banks are required to lift all restrictions within one hour. Failure to do so, or wrongful restriction of a device in the first place, will attract compensation of Rs 250 per hour of delay, though the total payout is capped at the loan amount itself.

The RBI has also mandated that once a loan is fully repaid, banks must relinquish any technological access used to restrict the device, and inform the borrower of steps needed to remove the relevant software. Borrowers, the central bank noted, retain the right to prepay their loans in part or in full at any point. A dedicated grievance redressal mechanism must also be set up by banks to handle complaints related to delayed or faulty restoration of device functions.

New conduct rules for recovery agents

Separately, the RBI has tightened rules around how banks and their recovery agents engage with borrowers and guarantors during the recovery process. Lenders are now required to maintain a formal policy governing their relationship with recovery agents, publish a list of empanelled agents and agencies on their websites, and ensure agents are trained on appropriate conduct.

The RBI specified that employees and recovery agents must interact with borrowers and guarantors in a civil manner, maintaining decency and decorum during recovery-related visits.

Contact hours have also been restricted. Recovery-related calls or visits can only take place between 8 am and 7 pm, unless the borrower or guarantor has specifically requested or authorised contact outside this window. The central bank further directed that any request from a borrower or guarantor to avoid contact at a particular time should be honoured under normal circumstances.

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