Life may become difficult if you default on a loan taken to buy a mobile phone. The financier may now disable the phone in order to recover the loan from the customer.
The Reserve Bank of India (RBI) has allowed banks and NBFCs (non-banking financial companies) to disable a customer’s mobile phone if the loan-financed device goes into default.
The proposed directions are to be implemented from October 1 this year.
The banking regulator has also imposed various restrictions on lenders in return for allowing them to take such an extreme measure.
The lender will be allowed to do so only if the loan was taken to finance the mobile phone and the loan repayment is defaulted, according to the RBI’s revised draft amendment directions on ‘Conduct of Regulated Entities in Recovery of Loans and Engagement of Recovery Agents’.
Banks or NBFCs cannot take such a measure if they have not financed the mobile phone or if the defaulted loan was taken for some other purpose.
Also, the lender will be required to serve a notice to the borrower after the loan is 60 days past the due date. The borrower will be given at least 21 days to cure the default.
The lender will serve another notice after the expiry of the first notice, with at least another seven days provided to the borrower to cure the default.
Further, the RBI has directed banks not to restrict the functioning of certain essential features of the mobile phone if such a measure is taken.
Banks or NBFCs cannot restrict access to the internet, incoming calls, emergency SOS features, and receipt of emergency government or public safety notifications.
The lenders are also directed to reverse the restrictions within an hour of the borrower curing the default.
If the lender fails to do so, the borrower will need to be compensated at a rate of Rs 250 per hour until the restrictions are reversed.
The draft norms have also laid down various instructions for recovery agents to ensure a dignified recovery process for defaulters.
