Smartphone loan defaults rise after RBI stops remote locking of devices

Don't want to miss the best from Business Standard?

More people are defaulting on smartphone loan payments ever since the Reserve Bank of India (RBI) stopped lenders from locking borrowers’ phones remotely, The Economic Times reported. The rule was aimed at protecting customers from unfair practices.

 

According to the report, Bengaluru-based DPDZero is already seeing a 20 per cent month-on-month increase in people not paying back their smartphone loans. Another founder of a debt collections startup, who did not want to be named, also said they have seen defaults increasing.

RBI examining digital phone locking

The RBI stopped the device-blocking practice last year. At the October 2025 Monetary Policy Committee meeting, RBI Governor Sanjay Malhotra said the central bank was still studying the mechanism and checking its advantages and disadvantages.

 

Malhotra, responding to a question by The Economic Times, said that currently phones cannot be locked for missing loan repayment 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 said, as reported by The Economic Times.

Debt collection process

Earlier, lenders would work with phone manufacturers to block the device through an in-built app if the customer did not repay.

 

According to The Economic Times, debt collection agencies usually focus on loans unpaid for more than 90 days or those that have already become non-performing assets (NPAs). Around 95 per cent of all other loans are solved by just making phone calls to customers.

Consumer durable loans seeing strong growth

According to the report, 50 per cent of all consumer durable loans are for smartphones, because people buy smartphones more often and for multiple family members, unlike TVs or refrigerators, which are not bought frequently.

 

Consumer durable loans are one of the fastest-growing digital lending categories in India, mainly driven by Bajaj Finance, HDB Financial Services, DMI Finance and Cholamandalam Finance.

 

However, the overall consumer durable loan segment has slowed down. According to RBI data, ₹22,279 crore of such loans were outstanding on September 19, compared with ₹23,264 crore a year earlier.

 

According to EY, the consumer durables sector contributes to around 0.6 per cent of India’s GDP, and is expected to grow at a 11 per cent compound annual growth rate to reach ₹3 trillion by FY29. Despite the pandemic, the domestic market experienced a 10 per cent growth during FY24, driven by increasing affluence, household penetration, premiumisation and shorter replacement cycles.