KFS will also include annual percentage rate (APR) calculations and a schedule showing how the loan will be repaid over time. The purpose of making these decisions is to make loan terms transparent and clear to borrowers.
KFS Rule: The Reserve Bank of India (RBI) has increased the applicability of KFS for all retail and micro, small and medium enterprises (MSME) term loan borrowers to increase transparency in loan agreements. RBI has decided that retail and MSME loan borrowers will now get a ‘Key Fact Statement’ i.e. KFS along with their loan agreement. KFS is a standardized format explaining the main points of the loan agreement in a simple and easy language. Which is given to the borrowers. This statement will now be in simpler language, making it easier for borrowers to understand important details about their loan.
Circular issued
As per RBI instructions, banks cannot charge extra fees without asking or consenting from the borrower, especially those whose statements are not written in KFS. Any charge, which is not mentioned in the KFS, cannot be collected from the borrowers through regulated entities at any level during the loan tenure, RBI said in the circular.
Loan payment
The KFS will also include Annual Percentage Rate (APR) calculations and a schedule showing how the loan will be repaid over time. The purpose of taking this decision is to make the loan terms transparent and clear for the borrowers, which will help them in taking better financial decisions. This rule will be applicable to loans of regulated companies.
Unique proposal number
KFS will be easy to understand, have a unique proposal number and will be valid for a certain number of days depending on the loan term. Not only this, any fees like insurance or legal fees, which are charged from borrowers through third-party services, will also be included in the APR and disclosed separately. RBI said that these rules will not apply to loans obtained through credit cards.
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