The Reserve Bank of India (RBI) is considering introducing a new rule regarding EMI payments by customers. This proposal will be important for customers who have purchased expensive electronic items like smartphones, smart TVs, refrigerators, washing machines, or even electric vehicles on small personal loans or EMIs.
Home Credit Finance's 2024 survey shows that over 33% of people purchase gadgets like mobile phones on EMIs. India, with a population of 1.4 billion, has over 1.16 billion mobile connections – one in three is carrying the burden of phone loans. This RBI move will make lenders the 'boss,' but will it break the barrier of privacy?
Why Is This Rule Necessary?
Small loans are growing rapidly in India. According to a study, more than one-third of people purchase electronics on EMI. Loans under ₹1 lakh have the highest default rate. This rule will make recovery easier for banks and finance companies.
Which Products Will This Rule Apply To?
- This can easily be implemented on digital products like mobile phones, tablets, laptops, and smart TVs.
- Such systems already exist for vehicles like cars and bikes in the US, Canada, and African countries.
- It is technically possible for home appliances like refrigerators and washing machines, but is currently limited in markets like India.
- This system will not apply to furniture and non-digital products.
What Will This Rule Change Entail?
Under this potential rule, if a customer fails to repay their loan EMI on time, lenders can temporarily deactivate their device using remote locking technology. This step is being taken to address the rising default rate, especially for small-ticket consumer loans up to ₹1 lakh.
However, the RBI has placed special emphasis on protecting consumer rights and data privacy in this regard. According to the proposal, lenders will be allowed to lock devices only if they have obtained the customer's explicit consent at the time of the loan agreement. Even if the device is locked, the lender will not have access to the customer's personal data, and emergency call functionality will remain on the device.
Such regulations are already in place in several countries, such as Canada and Nigeria. In India, this would be a recovery tool that would help lenders reduce bad loans, but it also raises concerns for customers who rely on digital services. The RBI is currently discussing this proposal with banks, NBFCs, and other stakeholders. This rule has not yet been implemented, but if finalized, it could transform the way EMI-based purchases and loan recovery are handled in the country.
Advantages and Disadvantages
- Default cases will decrease.
- Confidence in banks and loan companies will increase.
- Even those with weak credit scores will have the opportunity to purchase products.
- Non-payment of EMIs will result in the termination of essential items like mobile phones or cars, which will impact education, employment, and health.
Products Purchased On EMI Will Have Pre-Installed Software?
When this system is implemented, electronics products purchased on EMI will have an app or software pre-installed. If a customer defaults on an installment payment, the bank or finance company will remotely lock the device. Once the installment is paid, the device will restart.
Conclusion
Under this scheme, if a customer fails to pay EMI on time, products like mobile phones, smart TVs, and washing machines will be remotely locked. This means the customer will be unable to use the product until the installment is paid. This rule has not yet been implemented. If you have any question regarding this post, then you can tell us by commenting in the comment box given below. Your feedback and suggestions are welcome as always. Thank you.