RBI: Banks to place consumer education info on websites

The Reserve Bank of India (RBI) issued a set of clarifications on November 12, 2021 regarding its existing asset classification guidelines. Under the guidelines, banks have been asked to specify the exact due dates of repayment in loan agreements.

Highlights

  • As per current norms, loan turns overdue in case it is not repaid on the due date fixed by bank.
  • RBI noted observed that, due dates for repayments are not specifically mentioned sometimes, in the loan agreements. Instead, a description of due dates is mentioned. It led to different interpretations.
  • Thus, RBI has asked banks to specify exact due dates for repayment of a loan, breakup between principal & interest, frequency of repayment, non-performing asset (NPA) classification and examples of special mention account (SMA) in the loan agreement.
  • Borrower will be apprised of all the specification that RBI has asked, at the time of loan sanction as well as at the time of subsequent changes in future.
  • RBI also directed banks to specify exact date of commencement of repayment for loans, having a moratorium facility.

When banks shall comply with these guidelines?

These instructions shall be complied by December 31, 2021, with respect to fresh loans. But for existing loans, banks have to comply with guidelines as and when these loans become due for review or renewal.

Guidelines on NPAs

According to RBI, currently some lending institutions upgrade NPA accounts to standard asset category after payment of interest overdues and partial overdues. But now, loan accounts classified as NPAs will be upgraded as standard asset only if entire interest and principal are paid by borrower.

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