RBI, don't allow a disconnecting spree

RBI, reportedly, has plans to allow lenders to remotely lock phones bought on credit if the debt is in default. The regulatory body had earlier stopped the practice, but the facility may return, raising some serious concerns over consumer rights. First, the lock is activated by third-party applications that borrowers would be required to instal at the time of purchase. Since lenders gain remote access to smartphones through such apps, they would become liable to uphold data security on these devices. Consent to allow installation of specific apps would not extend blanket immunity to data privacy violations.

Second, the move would be discriminatory because not all consumer goods bought on credit can be locked remotely by lenders in the event of a loan default. Where this facility does not exist, lenders would be limited to existing loan recovery methods in case of default. Allowing a special dispensation for cellphones becomes less tenable. Introducing discriminatory recovery can have adverse effects on lending behaviour. It could encourage lenders to rely less on traditional risk management when lending money for phone purchases. It could also affect the flow of credit to the segment, being slightly less unsecured than other unsecured lending. The probability of perverted outcomes increases with distortions introduced in the market for loan recovery.

Finally, and most problematically, is denial of an essential service like access to the internet. Livelihoods are linked to smartphones. Snapping connectivity over credit default could affect repayment ability. Here, the approach to small loans runs contrary to big borrowers where the debt recovery process relies on retaining value of the underlying assets. A host of other essential services, including government schemes, are linked to mobile phones - these, too, are affected by a remote locking arrangement. The proposal should be disconnected before it leads to far more serious complications, including trust deficit at a time where it's building more trust that we need.