Now banks will not be able to hide information about various charges and fees on loans from customers. They will have to inform customers about these fees and charges. For this, RBI has made KFS i.e. Fact Statement Rule. Let us explain to you in simple language what is KFS…
RBI New Rules: If you have any loan or you are planning to take a loan for some work, then this news is useful for you. In fact, now banks will not be able to hide information about various charges and fees on loans from customers. They will have to inform customers about these fees and charges. The Reserve Bank of India will require banks and NBFCs to provide all information about the loan, including interest and other costs, to customers taking retail and MSME loans from October 1. For this, RBI has made KFS i.e. Fact Statement Rule. Let us explain to you in simple language what is KFS…
Why was the decision taken?
RBI said in the statement that it has been decided to harmonize the instructions on KFS for loans. According to the central bank, this has been done to increase transparency and remove the lack of information regarding the products of financial institutions coming under the purview of RBI. With this, the borrower will be able to take financial decisions thoughtfully. This instruction will be applicable in the cases of retail and MSME term loans given by all the entities (REs) coming under the regulation of RBI.
What is KFS, when will it be implemented?
KFS is a statement of key facts of the loan agreement in simple language. It is provided to borrowers in a standardized format. According to the central bank, financial institutions will take necessary measures to implement the guidelines as soon as possible. The guidelines will be followed in case of all new retail and MSME term loans sanctioned on or after October 1, 2024. This also includes new loans given to existing customers.
Third Party Service Provider
According to RBI, amounts like insurance and legal fees collected by the institutions falling under the purview of the central bank on behalf of third party service providers from the borrowing institutions will also be a part of the Annual Percentage Rate (APR). This should be disclosed separately. Wherever RE is involved in recovery of such charges, receipts and related documents will be provided to the borrowers for each payment within a reasonable time.
Credit card discount
Also, one such charge which is not mentioned in KFS is credit card. Such charges cannot be levied at any stage during the tenure of the card without the express consent of the borrower.
