RBI directs banks to fix personal loan EMI interest rates. Loan agreements must detail interest rates and EMIs, quarterly statements mandatory.
RBI statement on personal loans: The Reserve Bank of India (RBI) on Friday instructed all banks to offer all EMI-based personal loans at a fixed interest rate. This directive applies to loans based on external or internal benchmarks.
EMI Loan Information Requirements
The RBI clarified that when a loan is approved, complete information regarding it must be provided in the loan agreement and fact statement (KFS). This includes details on the annual interest rate, EMI amount, and loan tenure. If the loan tenure is extended, the borrower must be fully informed.
Quarterly Statements Mandatory for Communication
The RBI also stated that quarterly statements are mandatory if a loan's interest rates change. These statements must provide the borrower with information on principal and interest, EMI amount, remaining EMI, and loan tenure.
Increase in Personal Loan Borrowers
According to a report, the number of personal loan borrowers has increased in recent years. Approximately 5 million individuals have borrowed from four or more lenders, which represents about 6% of the total loan borrowers. Credit bureau CRIF High Mark data indicates that 11 million individuals have borrowed from three or more lenders.
The RBI's guidelines aim to provide transparency and security to borrowers, enabling them to easily understand their EMI status and loan details.
