Banks have to provide key fact statement to all new retail MSME term loans sanctioned on or after October First. RBI's order, banks should give complete information about the loan to the loan takers.

RBI Guidelines on Bank Loan: The Reserve Bank of India (RBI) said that banks and NBFCs will have to provide all types of information to borrowers for retail and MSME term loans from October 1. In this, all the information about the loan document (KFS) including loan interest and other costs will have to be given. RBI said in the statement that it has been decided to rationalize the guidelines on KFS for loans. To understand KFS in simple language, it is a description of the main facts of the loan agreement. This loan is given to the borrower in a standard format.

At present, it has been made mandatory to give all the information about loan agreements, especially for individual borrowers given by commercial banks, digital loans of units coming under the purview of RBI and small amount loans.

What did RBI say

The country's central bank said, “This has been done to increase transparency and remove the lack of information regarding the products of financial institutions under the purview of RBI. With this, borrowers will be able to make informed financial decisions.” This instruction will be applicable in cases of retail and MSME term loans given by all units (REs) coming under the regulation of RBI. The Reserve Bank said, “Financial institutions will take all necessary steps to implement these guidelines as soon as possible. The guidelines will remain in place without any change in case of all new retail and MSME term loans passed on or after October 1, 2024.” This will also be followed in letter and spirit for new loans given to existing customers.

What will be the rules

On actual basis, amounts like insurance and legal fees collected from institutions taking loans from institutions under the purview of RBI on behalf of third-party service providers will also be a part of the Annual Percentage Rate (APR). This should be disclosed separately.

Apart from this, RBI also said that wherever RE is involved in recovery of such charges, receipts and related documents will be provided to the borrowers for each payment within the stipulated time.

Further, no fees or charges other than those mentioned in the KFS can be levied at any stage during the loan tenure without the express consent of the borrower. However, in case of credit cards, the provisions regarding amount received have been exempted.

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