Banks will have to reveal all fees they charge on loans: What changes for you
Key information of a loan agreement will be part of the KFS. This will include the all-in-cost of the loan.
The Reserve Bank of India (RBI) said that regulated entities will be bound by terms of the loan indicated in the Key Fact Statement (KFS) if the borrower agrees to them owing to which they will have to issue KFS to retail borrowers and small businessmen from October 1, 2024. This will help borrowers take an informed view before executing a loan document as per the RBI although credit card receivables are exempted from the same.
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What will the KFS include?
Key information of a loan agreement will be part of the KFS. This will include the all-in-cost of the loan. It will be provided to borrowers with a unique proposal number and will have a validity period of at least three working days for loans with a tenor of seven days or more. As per RBI, KFS should include:
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- A computation sheet of the annual percentage rate (APR) and the amortisation schedule of the loan over the loan tenor. APR is the annual credit cost to the borrower.
- All charges levied by the RE.
- Charges levied on borrowers by the REs on behalf of third-party service providers on an actual basis like insurance charges and legal charges.
What changes for you?
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As per the RBI, the REs cannot charge the borrower any fees or charges not mentioned in the KFS without the borrower's consent at any stage during the loan term.
