Banks must provide simple key facts statement to borrowers on terms of loans: RBI

The RBI on Monday directed all banks and housing finance corporations to provide ‘key reality statements’ (KFS) in simple terms to the potential borrowers on the loans and curiosity that they’re anticipated to pay to guarantee transparency and assist them make knowledgeable choices.

All regulated entities, resembling banks and housing finance corporations, may have to provide a KFS to all the potential borrowers earlier than executing the mortgage contract, as per the standardised format given by the RBI, the directive said.

“The KFS shall be written in a language understood by such borrowers. The contents of KFS shall be defined to the borrower and an acknowledgment shall be obtained that he/she has understood the identical,” the RBI stated.

Further, the KFS shall be supplied with a singular proposal quantity and shall have a validity interval of at the least three working days for loans having a tenor of seven days or extra, and a validity interval of one working day for loans having a tenor of lower than seven days, the RBI directive stipulates.

The RBI has determined to harmonise all directions on KFS and disclosure of the Annual Percentage Rate (APR).

This is being accomplished to improve transparency and scale back data asymmetry on monetary merchandise being provided by the completely different regulated entities, thereby empowering the borrowers to make knowledgeable monetary choices.

The harmonised directions shall apply to all retail and MSME time period mortgage merchandise prolonged by all of the regulated entities, resembling banks and housing finance corporations.

(With inputs from IANS)