RBI bans banks from locking borrowers’ phones for recovery

The Story in Brief

The Reserve Bank of India has prohibited banks from disabling a borrower's mobile phone, tablet or laptop as a loan recovery tool, except when the device itself was financed by the bank. The revised draft directions, effective January 1, 2027, apply to all commercial banks except small finance banks, payments banks, RRBs and local area banks. Even for financed devices, restrictions can start only after 30 days past due, with full restrictions after 60 days. Incoming calls, SMS and emergency SOS features must never be blocked.

Banks must compensate borrowers Rs 250 per hour for wrongful or delayed reversal of restrictions, capped at the loan amount. The rules also require banks to publish lists of empanelled recovery agencies, notify borrowers before agent visits, and restrict contact to between 8 am and 7 pm. Use of abusive language, threats, intimidation of relatives, or posting personal details on social media is banned.