Smartphone EMI defaults rise as lenders stop remote cell blocking

Synopsis Loan defaults on smartphones are climbing after the Reserve Bank of India (RBI) barred non-banking lenders from remotely blocking devices when borrowers miss repayments. Industry executives said delinquencies in smartphone financing have risen about 20% month-on-month since the RBI order late last year. Defaults on consumer durable loans taken to purchase smartphones are increasing every month after the Reserve Bank of India asked non-banking lenders to stay away from remotely blocking devices for which repayments have failed. “Ever since the RBI has clamped down on practices like device blocking for defaulting borrowers, the underlying health of portfolios has started to surface more clearly. We are already seeing a 20% month-on-month rise in delinquencies in the smartphone financing category,” said Ananth Shroff, founder of DPDZero, a Bengaluru-based debt collections startup. While the regulator stopped the practice towards the end of last year, RBI governor Sanjay Malhotra said at the October 2025 monetary policy press conference that the central bank was evaluating the mechanism, looking into its pros and cons. Lending in this sector has gone down drastically after some of the lenders having high exposure to smartphone financing saw defaults piling up, the founder of another debt collections startup said on the condition of anonymity. Working with OEMs While consumer durable loans are unsecured, in many cases the lender while financing the purchase would retain a lien on the smartphone as security. Lenders used to partner with manufacturers and, in case of a default, get the manufacturer to block the smartphone through an in-built app in the device, said an industry executive, explaining the practice. “The concern here was around how a lender is sharing data around customer default to an OEM (manufacturer), since device locking can only be done by the manufacturer and not the lender,” said the founder of a Mumbai-based digital lending startup. Consumer durable lending is one of the fastest growing digital lending categories in the country, primarily led by the likes of Bajaj Finance, HDB Financial Services, DMI Finance and Cholamandalam Finance. According to industry estimates, around 50% of the total consumer durable book could be smartphones, since most of the recurring purchases are happening in this category. “People do not buy refrigerators or television sets frequently, but smartphones are a common purchase and meant for multiple members of the family, hence this is a very big category,” said the Mumbai-based founder. While confirming that defaults in this sector have shot up, he added that such issues are not systemic and can be managed at a portfolio level by the lenders themselves. A top executive at a non-banking finance company pointed out that debt collection agencies typically have visibility of loans which have not been repaid in more than 90 days, or those which have become NPA already; otherwise 95% of the overall portfolio gets resolved at the level of a tele-calling only. Lenders going slow While specific data pertaining to smartphone financing is not released by the central bank, the consumer durable segment has seen some cooling off. According to the RBI, Rs 22,279 crore of such loans were outstanding as on September 19, compared with Rs 23,264 crore a year earlier, showing a slight contraction. According to a report released by credit bureau Crif Highmark, the number of outstanding consumer durable loans shrank 4.7% year-on-year to 95.5 million in the September quarter of fiscal 2026. “CD loans are unsecured products; lenders continue to be cautious in disbursing these loans,” said Sachin Seth, chairman, Crif High Mark Credit Bureau. “There is a trend of doing bigger-ticket-size loans for customers with higher credit worthiness and cross sell to existing customers with proven track record of repayment,” he added. (Catch all the Technology News News, and Latest News Updates on The Economic Times.) ...more