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What the key fact statement says about your bank loan

Mint Mumbai

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February 16, 2024

It is a single-page document that also lists out charges levied over and above the interest rate

- Aprajita Sharma

Taking out a bank loan can be a stressful experience, especially if one is not aware of the charges that could be levied by the lender over and above the loan interest rate. To be sure, some lenders do share all such charges in a key fact statement (KFS) before the loan agreement is signed, but not all borrowers keep an eye out for it. But its importance is underscored by the fact that the Reserve Bank of India (RBI) last week made it mandatory for all lenders to provide the KFS to all borrowers.

The KFS is a one-page document that contains information such as the rate of interest, loan amount, loan term, processing fees, documentation charges, foreclosure charges and late payment fee, among others. Certain categories of lenders also disclose an all-inclusive annual percentage rate (APR) and recovery and grievance redress mechanism in the KFS.

"Historically, the cost of borrowing has been opaque for many consumers.

Interest rates were prominently advertised, but the additional fees that significantly affect the overall cost were often disclosed in a less transparent manner.

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