Banks cannot disable important features such as incoming calls, SMS services and emergency SOS functionsThey must also ensure that any restrictions do not affect the borrower’s ability to work or carry out employment-related tasks.
Published: August 7, 2026, 12:34 PM IST
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Can banks lock your phone for loan default? RBI’s new rules give borrowers major relief; Banks can’t harass, shame or threaten (Image: FIle/PTI)
The Reserve Bank of India (RBI) has said that banks cannot lock or disable a borrower’s mobile phone, laptop or tablet to recover unpaid personal, home or vehicle loansThe only exception is when the device itself was purchased using a loan provided by the bankThe new rules have been introduced after several borrowers complained about unfair recovery methods, including harassment, abusive behaviour and pressure through social mediaAccording to an RBI circular, the guidelines will come into effect from January 1, 2027.
The central bank said banks must not use technology to block or limit the features of a borrower’s electronic devices as a way to recover loan duesThis rule applies to all types of loans except those taken specifically to buy the device.
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If a bank has financed the purchase of a mobile phone, laptop or tablet, it may restrict some of the device’s functions in case of non-paymentHowever, the RBI has made it clear that banks should not disable the device immediatelyInstead, they must follow a step-by-step approach and give borrowers a reasonable opportunity to repay the loan.
Can banks lock your mobile phone if you fail to repay a loan?
The answer is yes, but only in limited situations and under strict RBI rules.
The Reserve Bank of India has allowed banks to restrict certain features of a mobile phone, tablet or laptop only if the loan was taken to buy that particular deviceBanks cannot use this method to recover personal, home or vehicle loans.
The RBI has also made it clear that the loan agreement must clearly mention that the device’s features may be restricted if the borrower fails to repay the loanIt should also explain how the recovery process will work and when such restrictions may be applied.
According to the guidelines, banks cannot block any feature as soon as a borrower misses a paymentRestrictions can be considered only after the loan account remains unpaid for 30 days and after the borrower has been given proper notices.
Even then, banks must introduce restrictions step by step instead of disabling the device all at once.
If the borrower still does not repay the loan after 60 days, banks may impose the full set of restrictions allowed under the loan agreementHowever, the RBI has clearly stated that outgoing calls cannot be blocked before the 60-day periodEssential features such as incoming calls, SMS and emergency SOS services must continue to work.
What parts of the phone cannot be disabled?
Banks cannot disable important features such as incoming calls, SMS services and emergency SOS functionsThey must also ensure that any restrictions do not affect the borrower’s ability to work or carry out employment-related tasks.
Borrowers must also be able to check the status of any restrictions placed on their device at any time.
The RBI has said that once the borrower clears the overdue amount, the bank must restore the device’s restricted features within one hourIf the bank fails to do so, it will have to pay compensation of Rs 250 for every hour of delay until the services are restoredHowever, the total compensation cannot be more than the outstanding loan amount.
The central bank has also introduced strict privacy rulesBanks and any third-party technology providers working with them are not allowed to access or collect personal information stored on a borrower’s deviceThis includes contacts, photos, messages, call records and location history.
The RBI has listed several loan recovery practices that banks and recovery agents are strictly prohibited from using:
- Using threatening, intimidating or abusive language while speaking to borrowers.
- Posting a borrower’s photos, videos, audio recordings or personal information on social media to pressure them into paying.
- Sending offensive or inappropriate messages through mobile phones or social media platforms.
- Calling or messaging borrowers repeatedly or contacting them outside the prescribed hours.
- Making anonymous, threatening or intimidating phone calls.
- Under the new rules, they can contact or visit borrowers only between 8:00 am and 7:00 pm.
- Harassing or threatening borrowers, their family members, relatives, friends, colleagues or references.
- Publicly shaming borrowers or invading their privacy.
- Threatening violence or warning of harm to a borrower’s family, property or reputation.
- Making false or misleading claims about the borrower’s debt or the consequences of not repaying the loan.
