Key Fact Statement (KFS) now mandatory: New RBI measure enhances transparency in lending for retail and MSME borrowers
The RBI has mandated that all regulated entities provide a Key Fact Statement (KFS) to retail and MSME borrowers, ensuring greater transparency and enabling customers to make informed decisions
The Reserve Bank of India has further announced an important measure to ensure greater transparency for retail and MSME borrowers. The central bank has mandated that all regulated entities provide a Key Fact Statement (KFS) to retail and MSME borrowers, containing essential information such as the all-inclusive APR and recovery and grievance redress mechanisms.
"The requirement of KFS is now being extended to cover all retail and MSME loans. This measure will lead to enhanced transparency in lending and enable customers to make informed decisions," Governor Das said on Thursday, 8 February.
What is a Key Fact Statement (KFS)?
A Key Fact Statement is a document that clearly explains lending terms. It has key information regarding a loan agreement, including the all-in-cost of the loan, in a simple and easy-to-understand format.
“This is a welcome extension from personal loans to MSME loans. In 2023, the RBI had guided penal charges to be disclosed in the KFS. The KFS must include all must-know details of the loan in a template format for the borrower. It should mention the Annual Percentage Rate, processing fees, penalties, various loan charges, etc. A KFS was mandatory for individual loans. Now, all regulated entities must provide the KFS to all retail and MSME borrowers,” said Adhil Shetty, CEO & Co-Founder, BankBazaar.
The regulated entities are required to share a detailed document called Key Fact Statement (KFS), listing all the key information regarding a loan agreement.
“As an NBFC adhering to compliance, corporate governance, and taking proactive measures to safeguard the interest of our customers is of prime importance to us, and we welcome this move as it will encourage and enable the borrowers to make informed decisions,” said George Alexander Muthoot, MD, Muthoot Finance
Currently, the key fact statement is specifically mandated for loans by scheduled commercial banks to individual borrowers, digital lending by regulated entities; and microfinance loans.
Meanwhile, in its February review meeting, the Monetary Policy Committee of the RBI unanimously decided to keep the policy repo rate, the rate of interest at which the RBI lends to other banks, unchanged at 6.5 per cent, thus maintaining the status quo for the sixth straight time.
Catch all the Business News , Economy news , Breaking News Events andLatest News Updates on Live Mint. Download TheMint News App to get Daily Market Updates.
Business NewsEconomyKey Fact Statement (KFS) now mandatory: New RBI measure enhances transparency in lending for retail and MSME borrowers
First Published:8 Feb 2024, 02:00 PM IST
- Top Gainers
- Top Losers
- 52 Week High