Introduction: The Reserve Bank of India (RBI) has mandated all regulated entities (REs), including banks and financial institutions, to provide comprehensive key facts statements (KFS) to all new retail and Micro, Small & Medium Enterprises (MSME) borrowers starting from October 1, 2024. This initiative aims to enhance transparency in lending practices.
Key Points:
- Details in KFS:
- Recovery agent policy.
- Contact details for grievances.
- Information on the likelihood of the loan being sold to others.
- Presented in simple and easy-to-understand language.
- Included Information:
- Annual Percentage Rate (APR): Computation sheet detailing the APR, including all charges levied by the RE and charges from third-party service providers (e.g., insurance and legal charges).
- Amortisation Schedule: Details of the loan’s repayment schedule over the loan tenor.
- No Hidden Fees: REs cannot charge borrowers any fees not explicitly mentioned in the KFS without the borrower’s explicit consent.
- Implementation Requirements:
- REs must establish necessary systems and processes to implement this guideline as early as possible.
- Once the borrower agrees to the KFS, the RE is bound by the terms provided.
- Proposal Validity:
- Each KFS will have a unique proposal number and a validity period.
- For loans with a tenor of 7 days or more, the validity period is at least 3 working days.
- For loans with a tenor of less than 7 days, the validity period is 1 working day.
- The validity period is the time frame within which the borrower must accept the loan terms after receiving the KFS.
Conclusion: This mandate by the RBI is a significant step towards increasing transparency in lending practices, ensuring borrowers are fully informed about loan terms and associated charges.
Login with Google