‘Banks can’t immediately seize student’s smartphone if he misses EMI’:RBI sets boundaries for loan recovery agents in a breather for borrowers

Taking a loan or Equated Monthly Installments (EMI) for a new smartphone, laptop, or gadget is about to get much safer, as the Reserve Bank of India (RBI) has issued strict new rules to protect borrowers from aggressive loan recovery practices followed by lending institutions. Many young professionals and students use financing or Buy Now, Pay Later (BNPL) options to upgrade their tech. The RBI’s updated directives have set firm boundaries on how financial institutions collect loan dues. New rules: Lenders can only lock software on a phone, tablet, or laptop if the loan was specifically taken to purchase that exact device. Financial institutions cannot take advantage of this rule to recover loans given for other purposes like personal loan, home loan or auto loan. Notice period: Lender can return the gadget even after the notice period has lapsed Lender can shorten the notice period and seize the device even before the notice period lapses Recovery agent can’t access borrower’s smartphone’s gallery: Lenders and recovery agents are strictly prohibited from accessing personal data, including photos, contacts, SMS, call logs, or location history of the borrower. Banks can block borrower’s outgoing calls if he doesn’t pay loan dues for 60 days: Restrictions cannot start until a payment is at least 30 days overdue. Full restrictions and blocking outgoing calls can only happen after 60 days of default. 1-hour rule Once the borrower pays the pending dues, the lender must restore all phone features within one hour. ₹250 per hour rule: If a lender delays unlocking the phone or locks it wrongfully, they must compensate the borrower at a rate of ₹250 per hour, capped at the total loan amount. Protection against agent harassment Time Limits: Recovery agents can only call or visit borrowers between 8:00 AM and 7:00 PM. No Abusive Tactics: Threatening language, social media shaming, anonymous calls, or contacting your friends, family, and co-workers is strictly forbidden. Lenders are also forbidden from setting aggressive targets that push agents toward harsh behavior. Respectful Boundaries: Agents must avoid contacting borrowers during medical emergencies, family bereavements, or weddings. Recorded Calls: Lenders must record all recovery calls, inform borrowers about the recording, and keep the files for at least six months. Proper ID: Agents visiting borrowers in person must display official ID cards and carry authorization letters with grievance contact details (either physical or digital docs) In any case, lenders shall not disable following 3 essential services: 1. Incoming Calls 2. Incoming messages 3. Emergency SOS features According to the RBI, the above-mentioned directions would come into effect from 1 January, 2027.