Empowering borrowers: RBI asks lenders to disclose loan details

The Key Fact Statement rules, which will help borrowers make smart choices with their money, will apply to all types of loans for individuals, small businesses

- BENN KOCHUVEEDAN

THE Reserve Bank of India (RBI) has recently mandated all lenders, including fintechs, to disclose all retail and small business loan details in simple format and lucid language effective October 1 2024, by notifying the key fact statement (KFS) issued on April 15.

The KFS guidelines are an important step towards protecting both retail as well as small business borrowers, and it mandates lenders to provide comprehensive loan agreement details in clear and transparent language and details of all the charges on the borrower including those charged by the lender on behalf of third-party service providers apart from details of recovery agents.

The KFS also has to provide contact details for grievance resolution, and the possibility of the loan being transferred to other organisations.

Empowering borrowers

The monetary authority feels KFS will empower borrowers to make smart choices with their money as the new rules will apply to all types of loans for individuals and small businesses, irrespective of the type of lenders.

The new norms are applicable to all commercial banks, housing finance companies, non-bank lenders, cooperative banks and fintechs who are more into co-lending practices, which has the biggest grey areas. They are also applicable to small finance banks, local area banks, regional rural banks, urban co-operative banks, and state & central co-operative banks. The only excluded entities are payments banks and credit card receivables.