Mumbai: The Reserve Bank of India (RBI) has introduced a comprehensive framework governing the use of technology-based recovery tools, restricting when banks and other regulated entities can remotely disable borrowers' smartphones, tablets and laptops.

The new rules, which come into effect on January 1, 2027, make it clear that lenders cannot remotely disable a borrower's mobile device to recover personal, home or vehicle loans. Such action will only be permitted when the loan was specifically taken to finance the device itself.

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The move follows complaints from borrowers alleging harassment during loan recovery, including misuse of technology, abusive language and pressure through social media platforms.

According to the RBI, lenders financing smartphones, tablets or laptops may use remote device restrictions only for recovering dues related to those devices. Even then, they must first adopt a gradual approach rather than immediately disabling the device.

"A bank shall not deploy any technology-based mechanism... which restricts or disables any of the functionalities of a mobile device of a borrower such as mobile phone, tablet and laptop as a recovery tool, except to recover its loan dues arising out from financing of such a device," the RBI said.

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The central bank added that lenders may disable certain functions only if the mobile device was purchased through their financing.

"The bank shall adopt a gradual approach rather than disabling the device, ab initio".

The RBI has also prohibited lenders from blocking essential services even when a financed device is restricted. Features such as incoming calls, SMS and emergency SOS services must continue to remain operational.

The revised framework further requires banks and regulated entities to use only certified and secure device-locking technologies. Both the lender and any third-party service provider must obtain certification for the technology from the device's original equipment manufacturer (OEM) or the operating system platform.

In addition, the RBI has strengthened borrower privacy protections, directing banks to ensure that information shared with employees or recovery agencies is limited strictly to what is necessary for loan recovery.

The revised directions also lay down detailed norms governing the conduct of recovery agents and the engagement of recovery agencies during the loan recovery process.