RBI guidelines and your rights

Overview

Non-Banking Financial Companies (NBFCs) that lend to the public must be registered with and regulated by the Reserve Bank of India (RBI). The RBI issues directions on how lenders must treat borrowers. The sections below summarise the ones that matter most to a personal loan customer.

Fair Practices Code

The Fair Practices Code sets the standard for how an NBFC deals with borrowers from application to closure. In practice it means:

• Clear information. Application forms carry the information you need to compare lenders, and the loan terms are told to you in writing.
• Sanction in writing. You receive the sanctioned amount, rate, tenure, repayment schedule and all terms in a language you understand, and your acceptance is recorded.
• Copy of the agreement. You get a copy of the loan agreement and all enclosures at the time of sanction or disbursal.
• Changes with notice. Any change in rate or charges is communicated in advance and applies only going forward.
• No harassment. Lenders must not use undue pressure, and must treat you with courtesy when collecting dues.

Key Fact Statement (KFS)

For retail loans, RBI requires lenders to give borrowers a standardised Key Fact Statement before the loan contract is executed. It is a short document in a prescribed format so that you can compare offers easily. A KFS includes:

• Loan amount, tenure, instalment amount and number of instalments
• Interest rate, whether fixed or floating, and the Annual Percentage Rate (APR)
• All fees and charges, including processing fee, insurance if any, and penal charges
• Amount you will actually receive after deductions
• Cooling-off or look-up period, where applicable
• Details of the grievance redressal officer and complaint channels

Read it fully. If something is not in the KFS, it should not be charged to you.

APR and pricing

APR (Annual Percentage Rate) is the yearly cost of the loan expressed as a percentage, including interest and other fees. It lets you compare two loans fairly even if one has a lower interest rate but a higher fee. Our APR calculator shows how fees raise the effective cost.

Interest on our personal loans is calculated on the reducing balance. Each month interest is charged on the principal still outstanding, so the interest part of your EMI falls over time.

Penal charges

RBI's framework on penal charges in loan accounts says that if you miss a payment or breach a loan condition, the lender may levy a penal charge but:

• It must be a charge, not an addition to the interest rate.
• It must not be capitalised, meaning no further interest is charged on it.
• It must be disclosed upfront in your KFS and agreement, and applied reasonably and in line with the terms.

Prepayment and foreclosure

Under RBI's directions on prepayment charges, lenders cannot levy a prepayment or foreclosure charge on floating-rate loans given to individuals for non-business purposes. For fixed-rate loans, any charge must be clearly stated in the KFS before you accept. You may pay extra toward principal or close the loan early using the process explained in your agreement.

Digital lending rules

If you apply through a website or mobile app, RBI's digital lending directions also apply. The key protections are:

• Direct money flow. Loan disbursal and repayment must move directly between your bank account and the lender's account, without passing through the account of a third-party partner.
• No hidden fees from partners. Fees payable to a Lending Service Provider are paid by the lender, not added to your cost unless stated in the KFS.
• Cooling-off period. You can exit a digital loan within a set period by repaying the principal and proportionate interest, without any penalty.
• Disclosure of partners. The lender must disclose the Lending Service Providers and digital lending apps it works with, on its website.
• Data minimisation. Apps may collect only the data needed for the loan, with your prior and explicit consent. Access to your phone's contacts, call logs or gallery is not permitted for lending purposes, apart from limited permissions such as camera, microphone or location with one-time consent where needed.
• Grievance officer. A nodal grievance redressal officer must be named for digital lending complaints.

Recovery and conduct

• Collection calls and visits must be made at reasonable hours, generally between 8:00 am and 7:00 pm.
• No abusive language, threats, or public shaming.
• Recovery agents must identify themselves and the lender, and must not contact people unconnected with the loan, such as your friends or colleagues, to pressure you.
• Only authorised staff or partners disclosed by the lender may contact you about the loan.

Credit reporting

Lenders report your repayment behaviour to credit information companies (credit bureaus). Under the RBI framework, lenders update this data at short intervals, and you have the right to get your credit report and to dispute errors. If a lender or bureau delays correcting your credit information beyond the permitted time, RBI's framework provides for compensation to you (currently ₹100 per calendar day). Please check rbi.org.in for the current rules.

Data and privacy

We collect and use your personal data only for the purpose you agreed to, and keep it secure. You can read how we handle your data and exercise your rights in our Privacy policy.

Complaints

If something goes wrong, follow our three-step path on the Grievance and contact page: customer care first, then the Grievance Redressal Officer, and finally the RBI. You can approach the RBI if the lender has rejected your complaint, or if you do not receive a reply within 30 days. File a complaint at cms.rbi.org.in or call the RBI helpline 14448.

Verify and stay updated

• Ask any lender for its RBI Certificate of Registration number, and check that the lender appears in the list of registered NBFCs published on rbi.org.in.
• Check whether a lending app is reported by a regulated lender. RBI has been publishing a directory of digital lending apps on its website.
• Our compliance information is on the About us page and in the footer of every page.