Miss a smartphone EMI, and your lender can now wirelessly strip the ‘smart’ out of it

**Rachel Varghese** (0:02)
For millions of gig workers in India, their entire livelihood runs on a 5-inch screen phone. Receiving orders, booking rides, scheduling massages. If the phone were to suddenly stop working, then that usually means that the income also stops flowing.
Turns out, this dependence is also what some of India's biggest lenders recognized as an opportunity. Up until 2024, NBFCs or non-banking finance companies like Bajaj Finance, Jola Mandalam and DMI Finance were financing smartphone loans by weaponizing that exact dependence as collateral. What they did was have these phones come preloaded with a very specific kind of software. Software that allowed lenders, if you missed an EMI, to actually remotely disable your device. Sounds pretty scary, right? Well, it was. And it was scary enough that the tactic actually worked.
Turns out, remote disable was one of the main reasons why borrowing for smartphones and home appliances increased between 2021 and 2024, from 1% to nearly 40%.
But the thing is, the demographic that was the most likely to take on these loans was also the one that was most likely to default. You know, the ones who relied on their phones the most to earn, to survive and of course, to even pay back the lender in the first place. Of course, as the remote disablements kept going on, the complaints piled up and advocacy groups raised alarms that eventually ended up reaching the regulator. And in 2024, the RBI finally stepped in and banned the practice, which came with a surprising downside. Delinquencies actually rose in number. And soon, so did the loan rejections. Lending to the segment collapsed by roughly 80%, and it left the RBI weighing two very unsavoury options. Either keep people locked out of credit entirely, or let the lenders lock their phones again. But now, nearly two years later, the practice is back. A second draft amendment, expected to be finalized around October, once again gives lenders the legal cover to remotely disable phones. But this time, with very specific guardrails in place. The timing might even probably be for the best, as phone prices have been increasing because of rising memory costs, and budget phones have started to disappear from the market entirely.
To get into the story further, today on Daybreak, we are joined by Mutasim Khan, who reported on the story, to talk about how this recovery tool became as effective as it did, why banning it kind of backfired, and what Day 2 looks like for RBI. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Rachel Varghese, and every day of the week, my co-host, Snigdha Sharma and I will bring you one new story that is worth understanding and worth your time. Today is Friday, the 10th of July.
Hi, so before Mutasim and I start getting into this discussion, I have a quick request for you. Snigdha and I have been thinking a lot lately about this show, about what it is and what it could be, and about you, the people who show up for it every single morning. And we realized we don't actually know that much about you. So we made the survey, it takes about three minutes, and we're genuinely asking, what's working, what isn't, and what you want more of. The link is in the show notes, and we promise to read every single response. With that, let's get into it.
Hi, Muttasim, thank you so much for coming on Daybreak yet again. So, I'd like to start with a question that basically covers what you started the story with. How you met this Rapido driver named Naresh, who had to get a new cell phone as soon as possible because his livelihood pretty much depended on it. Could you tell us a little bit more about what it means to be a gig worker without a smartphone?

**Mutasim Khan** (4:29)
Right, thanks Rachel for having me again.
So, this anecdote that I start the article with, I was taking a Rapido bike ride and the rider whose name was Naresh, actually who had just moved to Bangalore, I think about a year ago or something. And the reason for him moving to Bangalore was that his family owned some farm lands, but because of drought, they were not getting enough produce. So he had to look for alternate livelihoods and he knew that you could go to a city like Bangalore. If you have a vehicle, you can just earn basic living, which is about 18,000-19,000 a month. But what had happened is suddenly his phone had stopped working about a week before I took the ride. So for seven days, he was left without a phone. And for him, that meant seven days of just no income at all. And with that kind of income, if you're living in a city like Bangalore, you're literally living hand to mouth in the sense that you have to plan your expenses really well. And a seven-day delay is a huge deal. And it can just like mess your expenses and you're spending patterns completely.