RBI considers allowing lenders to lock borrowers' phone after default

With a surge in demand for small-ticket loans from customers who are new to credit, the Reserve Bank of India is considering allowing lenderstouse “device-lockingtech-nology” (DLT), by which they can lock the borrowers’ smartphone in the case of a default.

- MANOJIT SAHA

For such customers, who are mostly from the low-income category, traditional collateral or credit checks are not available. At the same time, credit demand from such categories is rising, particularly smartphone financing.

Allowing banks and non-bank-ing financial companies to lock mobile phones can enable them to manage risk and get repayment without costly repossession. Remotelockingactsasadigitalcol-lateral substitute, and is also expected to instill financial discipline among borrowers.

At the same time, the regulatoris consciousofthe factthatsuch practices raise concern and the use of these methods comes with signifi-cantnon-financialrisktoborrowers.