Financiers can't block borrower phones, online shaming barred

MUMBAI: Mobile phone financiers will face restrictions on "mobile lock" practices under RBI's amended rules for loan recovery. Under the reworked draft regulation, lenders can restrict financed devices only under explicit contractual consent and after a 90-day default cycle with a staged 60-day and 7-day notice regime, while mandating that core functions such as incoming calls, internet, SOS, and public alerts remain accessible. the norms also require banks to unlock devices within one hour of payment or pay Rs 250 per hour as penalty.

The draft introduces a more structured and technology-aware framework compared to the Feb 2026 version. While both drafts aim to curb harsh recovery practices, the May draft shifts focus from individual agents to organised recovery agencies, refines operational timelines, and adds detailed rules for technology-backed recovery.

It also bars lenders from accessing borrower data on devices and prohibits sharing creditor information on social media, strengthening privacy alongside recovery norms. The definition of recovery agents has been widened to include those engaged in routine EMI collection, and a formal borrower compensation provision has been introduced.

The scope now explicitly includes business correspondents engaged in recovery activities, closing regulatory gaps. Customer protection norms have also been widened, with fair-conduct provisions applying to routine EMI collections where borrowers are not in default. To enable transition, the RBI has deferred implementation by three months from July 1, 2026, to Oct 1, 2026.

Borrowers must be informed via text or email at least one day before the first visit, or through a physical letter at least three days in advance in case digital contact is unavailable. Affected borrowers must be immediately notified of any agency terminations.

The code of conduct for recovery agents and bank staff has also been tightened. Banks must retain call recordings for at least six months, or longer if disputes are sub-judice. Contact hours remain limited between 08:00 to 19:00. The definition of harsh methods now includes misuse of social media by sharing borrower details or recordings.

Banks must also embed compensation mechanisms in policies to reimburse borrowers or guarantors for losses arising from violations of these directions.


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