RBI's proposed norm to disable phone service of loan defaulters will ease lender concerns and support growth: ICEA

New Delhi [India], May 22 (ANI): The Reserve Bank of India's proposed draft framework allowing lenders to disable certain smartphone services in case of loan defaults is expected to ease concerns among banks and non-banking financial companies (NBFCs), revive financing in the entry-level segment and support growth in the smartphone industry, India Cellular and Electronics Association Chairman Pankaj Mohindroo told ANI on Friday.
"It is a very beautiful amendment and the draft proposal is a very beautiful proposal. It is consent-based. If there is a default, you would be deprived of some services and if you are making good the default, then there is an immediate recourse which the lender has to implement within one hour," Mohindroo told ANI in an exclusive interview.
He said the framework addresses a major concern among lenders after the RBI had earlier advised banks and non-banking financial companies (NBFCs) against resorting to disconnections for defaults, which had adversely affected smartphone financing, particularly in smaller towns and the entry-level market.
"The disconnection acts as a very strong recourse for the lenders. That is why this is very timely and a very calibrated draft regulation," he said.
According to Mohindroo, smartphone affordability has worsened in recent years due to rising memory prices and global supply-chain disruptions linked to the artificial intelligence (AI) boom.
"What was Rs 4,000-5,000 a few years back is now Rs 10,000-15,000. So, the gap for the first-time user transitioning from feature phone to smartphone has become much larger. That makes financing very essential," he said.
The Reserve Bank of India (RBI) has proposed draft rules allowing lenders to remotely restrict functionalities of financed mobile phones if borrowers default on loans used to purchase the device. Scheduled to take effect on October 1, 2026, the norm introduces strict borrower safeguards and heavy penalties for non-compliance
Highlighting the role of smartphones in India's digital economy, he said nearly 500 million Indians still do not own smartphones despite rapid expansion of digital public infrastructure.
"Our smartphone population is around 750 million while the country's population is about 1.5 billion. If you exclude the very young population, around 500 million people who should have smartphones still do not have smartphones. They cannot do UPI and they are in digital darkness," he said.
Calling UPI "the eighth wonder of the world", Mohindroo said smartphones are central to financial inclusion and access to internet-based services.
He said India's mobile phone manufacturing ecosystem has expanded significantly in recent years, with total manufacturing growing from around Rs 18,000 crore to over Rs 6 lakh crore.
"Mobile phone exports have gone up 160 times and are now over Rs 2.5 lakh crore. This year, India will become the second-largest exporter of mobile phones and overtake Vietnam," he said.
India is already the world's second-largest smartphone manufacturer with production valued at nearly USD 70 billion, he added.
On domestic demand, Mohindroo said smartphone shipment volumes are likely to decline by 5-7 per cent this year amid global economic uncertainty, though value growth is expected to remain positive at 8-10 per cent because of rising product costs.
He also identified memory shortages linked to the global AI boom as the biggest challenge facing the electronics supply chain.
At the same time, he said India is rapidly strengthening its semiconductor ecosystem with 12 semiconductor units currently under development.
"We have finally broken ground in semiconductors. We also need to design products and build the manpower ecosystem so that India becomes a global manpower supplier for semiconductors," he said.
Mohindroo further said the industry is working towards developing Indian-owned smartphone brands and domestic supply chains over the next one to five years. (ANI)