RBI examining digital phone locking as loan recovery tool, says governor

The Reserve Bank of India (RBI) on Thursday said that digital locking of a phone is under examination for missing repaying loan instalments, Governor Sanjay Malhotra said during the post monetary policy press meet.

 

Responding to a question on locking of phones for default in repayment of loans, Malhotra said that currently phones cannot be locked on missing repaying loan instalments such as in cases of housing, auto or other loans. However, there are discussions going on and it is under examination.

 

“The issue of digital locking is under examination. As the Governor had pointed out, there are pros and cons on both sides in terms of balancing the customer rights and requirements, data privacy and also the creditors’ requirements. So, we are examining the issue, we will evaluate the pros and cons and then take a view at a later point in time,” Deputy Governor Rajeshwar Rao added.

 

In September 2025, it was reported that the RBI is considering allowing lenders to use “device-locking technology” (DLT), by which they can lock the borrowers’ smartphone in the case of a default.

 

There is an increase in credit demand from customers, who are mostly from the low-income category, for whom traditional collateral or credit checks are not available. For such categories, there is a rise in smartphone financing. Allowing banks and non-banking financial companies to lock mobile phones can enable them to manage risk and get repayment without costly repossession. Remote locking acts as a digital collateral substitute, and is also expected to instil financial discipline among borrowers.

 

In this case, the borrowers’ personal data becomes de facto collateral. If their smartphones are locked, they could lose personal data because they are not only denied the use of the phone but the data stored in the device such as contacts, work-related apps, children’s education material, among others.