Banks must display loan rates clearly, says RBI directive

In a move towards greater transparency, the Reserve Bank of India today asked commercial banks to display loan interest rates and processing fees on their websites from 1 April.

"Banks should display on their websites the interest rate range of contracted loans for the past quarter for different categories of advances granted to individual borrowers along with mean interest rates for such loans," RBI said in a notification.

The total fees and charges applicable on various types of loans to individual borrower should be disclosed at the time of processing of loan as well as displayed on the website of banks for transparency and comparability and to facilitate informed decision making by customers, RBI said.

It also asked banks to publish Annual Percentage Rate (APR) or such similar other arrangement of representing the total cost of credit on a loan to an individual borrower on their websites so as to allow customers to compare the costs associated with borrowing across products and lenders.

Banks are also asked to provide a clear, concise, one-page key fact statement, in a prescribed format, to all individual borrowers at every stage of the loan processing as well as in case of any change in any terms and conditions, RBI said.

In order to give banks sufficient time to comply with the above instructions, RBI has asked banks to comply with the additional guidelines by 1 April 2015.

RBI is also working on comprehensive consumer protection norms for the non-banking finance sector, its executive director NS Vishwanathan, has said.

The central bank will also soon align private placement norms for NBFCs with norms stipulated in the new company law enacted in 2013, Vishwanathan told an Assocham summit on 'NBFCs - way forward' in New Delhi today.

Under the new company law, private placement cannot be undertaken with more than 200 persons in a financial year.

However, as per the RBI specified norms, private placement by NBFCs cannot exceed 49 per cent in a year.

Vishwanathan urged NBFCs to take "consumer protection' more seriously and also urged them to ponder as to whether there should be an ombudsman for the sector on the lines of the one for the banking sector.