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If you want a bank loan, the manager owes you these details from October 1
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
The RBI has said retail and MSMEs loan agreements will now require a Key Facts Statement (KFS) detailing all terms, including interest rates and additional costs.
From October 1, 2024, individuals and businesses seeking loans from banks and non-banking financial companies (NBFCs) in India will be entitled to comprehensive information regarding their loan agreements, thanks to new rules mandated by the Reserve Bank of India (RBI).
This initiative aims to enhance transparency and empower borrowers to make well-informed financial decisions.
The RBI on Monday (April 15) said that retail and micro, small, and medium enterprises (MSMEs) loan agreements will now require a Key Facts Statement (KFS) detailing all terms, including interest rates and additional costs.
This KFS will be provided in a standardised format, making it easier for borrowers to understand.
The central bank emphasised that regulated entities (REs) must implement the guidelines without exception for all new retail and MSME term loans sanctioned on or after October 1, 2024.
Even existing customers availing of fresh loans will fall under these regulations.
The central bank clarified that charges recovered from the borrowers by the REs on behalf of third-party service providers on an actual basis, such as insurance and legal charges, should also form part of the annual percentage rate (APR) and should be disclosed separately.
Borrowers must receive receipts and related documents for all such payments within a reasonable timeframe.
The guidelines also prohibit REs from levying fees or charges not mentioned in the KFS without explicit consent from the borrower during the loan term.
However, exemptions are granted for credit card receivables.
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