Overview
- The Reserve Bank of India on May 20 released a revised consultative draft that bars lenders from using technology to disable or restrict mobile-device functions except when the device itself was bought with the loan tied to that default.
- Before any restriction can be applied the draft mandates a staged notice process with an initial notice after 60 days overdue that gives at least 21 days to cure and a second seven-day warning, and restrictions are permitted only after 90 days of unresolved default.
- The draft protects essential device services by requiring uninterrupted access to incoming calls, internet connectivity, emergency SOS features and government or public-safety alerts, and it forbids lenders from accessing or using personal data stored on borrowers’ devices.
- Recovery agents must be formally defined and certified, limited to contacting borrowers between 08:00 and 19:00, barred from abusive language or online shaming, and banks must keep records and publish empanelled agency details; wrongful or delayed restorations carry a Rs 250 per hour compensation rule and restorations must occur within one hour of cure.
- The directions, intended to formalise practices used by some fintechs and to strengthen borrower protections across banks, NBFCs and other regulated entities, are open for public comments until May 31, 2026 and are proposed to take effect from October 1, 2026.