91-9711165183
January 13, 2025
The Reserve Bank of India (RBI) on January 10 said it is mandatory for banks to offer fixed interest rate product in all equated installment based personal loan categories.
The frequently asked questions (FAQs) on ‘Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans’ (August 2023) also said the circular covers all equated installment based personal loans, irrespective of whether the interest rate is linked to an external benchmark or an internal benchmark.
What Did The FAQ Say?
– At the time of sanction of loans, annualised rate of interest/ annual percentage rate (APR), as applicable, should be disclosed in the Key Fact Statement (KFS) and the loan agreement, the FAQs said when and at what frequency should banks and other regulated entities (REs) communicate with the borrower.
– During the tenure of the loan, any increase in the EMI/tenor on account of the external benchmark rate should be communicated.
– The quarterly statements should be provided disclosing at the minimum, the principal and interest recovered till date, EMI amount, number of EMIs left and annualised rate of interest for the tenor of the loan.
– Regulated entities (REs), the FAQs said have to mandatorily offer fixed interest rate product in all equated installment based personal loan categories.
– REs have to provide the option to the borrowers to switch over to a fixed rate as per their board approved policy at the time of reset of interest rates.
