Right now, every household in India owns at least one smartphone: a 2025 survey by the Ministry of Statistics and Programme Implementation (MoSPI) found that 85.5% of Indian households reported possessing a smartphone. This implies hundreds of millions of individuals rely on smartphones often financed via loans.

A substantial portion of consumer-durable loans go toward buying phones, as buyers upgrade to newer models or splurge on premium devices. For example, as per industry data, around one in every three smartphones sold in India is now bought on credit.

At the same time, lenders and credit bureaus are reporting a worrying trend: a significant rise in EMI defaults. One recent report cites a 20% month-on-month increase in smartphone-loan defaulters after lenders stopped using remote device-locking as a deterrent.

Even though many people want the latest smartphones and are willing to commit to EMIs, more and more are failing to repay on time. That gap between desire and repayment capacity is now causing alarm for financiers.

This tension between demand and repayment stress may have serious implications for both consumers and NBFCs / banks, a story this article unpacks.

20% Increase in Smartphone Loan Defaults Because of RBI’s Policy Change

The surge in defaults on smartphone loans appears tied closely to a policy shift by the RBI. Until recently, many non-bank lenders and finance companies used a “device-locking” mechanism: when a borrower defaulted on EMIs for a smartphone bought on credit, the lender (often via an in-built/pre-installed app) could remotely lock or disable the phone. This acted as a strong deterrent, people didn’t want to lose access to their phones.

However, the RBI in 2024 intervened and asked lenders to stop using remote locking of devices as a loan-recovery or enforcement mechanism, raising concerns over consumer rights, privacy, and fairness.

Read More – Should Borrowers Trust Online Personal Loans? Learn The Hidden Dark Side of Money

Since that enforcement tool was withdrawn, repayment discipline seems to have weakened. According to a report quoted by Business Standard and Economic Times, one collections-agency (or lender monitoring firm) has observed a 20% month-on-month increase in borrowers not paying back smartphone EMIs.

Loan Default Trends: Pre- and Post-Remote-Locking Ban

Here’s a tabular snapshot of how default / delinquency rates have moved, according to recent data:

Year / Period	Smartphone / Mobile-phone Loan Default Rate (Annual / Rolling)	Notes / Context
FY 2024 (before lock ban)	2.0% (expected baseline)	Default rates under control; remote locking still allowed
FY 2025 (after RBI ban)	2.7% – 2.9% annual default on mobile-phone financing	Higher than baseline; device-locking removed
Post-policy change (recent months)	20% month-on-month increase in defaulters (short-term)	Suggests accelerating delinquency after removal of enforcement mechanism

The data suggests a clear correlation between the withdrawal of remote-locking and an uptick in defaults. Where lenders previously had a powerful deterrent, borrowers may now perceive EMI repayment as more optional, leading to a deterioration in repayment behaviour.

The spike in delinquencies threatens to raise non-performing assets (NPAs) for consumer-loan portfolios, particularly small-ticket loans.

Beyond the quantitative deterioration, the change signals a structural challenge: when enforcement tools are weakened, credit discipline among lower-ticket borrowers can deteriorate quickly, a risk especially significant for NBFCs that dominate this segment.

Will RBI Restart the Device-Blocking System from January 2026?

Given the rising defaults, there is speculation the RBI may revisit its ban on remote locking of smartphones, possibly re-introducing a regulated phone-locking mechanism in early 2026.

Several media reports have cited industry sources and stakeholder discussions suggesting that the central bank is “studying the mechanism again” and may update its Fair Practices Code for lenders to allow phones to be locked, but only under stricter conditions.

Proposed safeguards under discussion reportedly include: obtaining explicit borrower consent at loan issuance, ensuring lenders cannot access personal data on the device, and limiting remote locking to a last-resort recovery tool, especially for small-ticket loans under ₹1 lakh, which have the highest delinquency rates.

Supporters argue that this would restore a “teeth” in recovery mechanisms and help stabilise the consumer-durable loan segment. However, critics, especially consumer-rights advocates, warn of privacy violations, discrimination, and digital exclusion, given how essential a phone has become for communication, livelihood, education, and financial access.

As of now (December 2025), no formal policy notification has been issued. If the RBI does re-permit device locking from January 2026, it will mark a major shift, but success will depend on how balanced and consumer-friendly the final guidelines are.

How Many People in India Take Loans for Consumer Durables (Phones, ACs, Furniture, etc.) And What Happens When a Middle-Class Buyer Defaults?

Consumer-durable loans, covering smartphones, TVs, air-conditioners, furniture, household appliances, etc., are widely used in India to spread payments over small EMI instalments, making high-cost items more affordable.

According to a recent report by a credit bureau, the total value of consumer-durable loans in FY 2025 stood at ₹1.6 lakh crore, though growth has slowed sharply: it rose just 3.3% YoY in FY25 against an 18% rise the previous year. Typically, smartphones account for around one-fourth of all consumer-durable loans.

Also Read – Why The Government Blocked 87 Digital Loan Apps in December 2025

Here is a rough breakdown of major consumer-durable loan categories and their share (based on available data and general industry estimates):

Consumer Durable Loans by Item Type

Durable Item Type	Approximate Share in Consumer-Durable Loans	Typical Loan Value Range*
Smartphones / Mobile Phones	25–30%	₹10,000 – ₹50,000 (common segment)
Televisions, Smart-TVs, Appliances (AC, refrigerator, cooler, geyser etc.)	20–25% (estimate)	₹20,000 – ₹60,000+
Furniture, Home Furnishings (sofas, beds, etc.)	15–20% (estimate)	Varies widely
Others (washing machines, kitchen appliances etc.)	Remaining share	₹10,000 – ₹40,000+

These are typical EMI-financed durable-goods values; actual distribution may vary depending on urban/rural, income class, urbanisation, etc.

What Happens When a Middle-Class Buyer Defaults?

Imagine a middle-class buyer in a tier-2 city, he needs a refrigerator for his family but cannot afford the full cost upfront. He takes a consumer-durable loan of ₹25,000 with monthly EMIs. Suppose he loses a job or faces financial stress and misses payments for several months. Because the equipment is essential, a default can cause multiple problems:

The lender may begin reminders and phone-calls; if the overdue crosses 90 days, debt-collection agencies might be assigned (per industry norms). Reports suggest that collection agencies usually focus on loans unpaid for more than 90 days, or those already classified as non-performing assets (NPAs). Approximately 95% of other delayed payments are resolved just by collection calls, without aggressive measures.
If the policy allowing remote-locking is reinstated and contractual consent is in place, the lender may have the legal power to disable the device (in case of a phone), though for appliances or refrigerators, enforcement would be through asset repossession or litigation, which is costlier and more cumbersome.
The buyer’s credit score will get damaged. Future ability to obtain credit, for education, housing, auto, or further consumer-durable loans, becomes risky.
For essential appliances, default may also lead to social hardship (loss of functionality), particularly in households relying on these items for daily living.

Thus, while EMIs make durable goods accessible, default carries real personal and financial risks, especially for lower- or middle-income borrowers for whom repayment capacity can be volatile.

Conclusion

India’s boom in smartphone ownership and consumer-durable financing has provided many households with affordability and access to desired goods. However, the surge in EMI defaults, especially after withdrawal of remote-locking enforcement, reveals a structural stress in the system.

A 20% month-on-month rise in smartphone loan defaults is not just a statistic: it reflects growing repayment fatigue, perhaps overstretched families, or a mismatch between aspirations and actual ability to repay.

If defaults continue rising, lenders will face mounting non-performing portfolios, which may lead to stricter credit norms, squeezing access for lower-income borrowers in the future.

The possibility that the RBI may re-allow device locking (with safeguards) from early 2026 suggests a pushback from lenders. But such a move must be balanced with respect for consumer rights, data privacy, and fair recovery practices.

For prospective borrowers, especially middle-class households, the message is clear: EMIs for consumer durables are convenient, but must be taken only if repayment capacity is reliably judged. Otherwise, the “easy EMI now, worry later” model could backfire, with loss of credit standing, loss of asset, and long-term cost.

If you like, I can project what this rising default trend might mean for NBFC-led consumer financing in FY2026, including risk of NPA jump, tightening credit, or shift in business models.

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