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Disclose all loan charges: Borrowers will now be able to know all the details including the total cost incurred during the loan process and the annual cost of interest rate charged on the loan. With the help of which they will be able to choose smart loan option.
RBI has directed all banks and finance companies from October 1 to mandatorily submit a statement showing all the fees charged as part of loan processing and all material details including the annual cost of the loan.
You will get this information while taking the loan
Including policy on recovery agent, contact details for complaints, possibility of selling the loan to others should also be mentioned in this statement. Regulated organizations have been asked to put in place necessary systems and processes to implement the above guidelines as soon as possible. For all new loans including retail, MSME term loans after October 1, customers will have to be informed as per the above guidelines.
New rules will apply to all types of loans
RBI said that these changes will ensure that customers know what they are getting when they take a loan and how much they have to pay in total. Which helps increase transparency in the loan process and empowers borrowers to make smart choices about their finances. These new rules will be applicable to all types of loans including individuals and MSMEs.
The annual cost of the loan will also be known
For the first time, RBI has introduced the annual cost of borrowing by releasing loan interest rates on an annual basis. In which details of what interest rate and other charges will be applicable on the loan of loan holders during the year will have to be given. “In fact, regulatory bodies on behalf of third party providers have directed them to separately disclose APR details of charges collected like insurance and legal fees from borrowers.
The APR will also allow borrowers and aggregators to compare the total cost of loans from different lenders.