RBI MPC: Greater loan pricing transparency for retail borrowers

RBI MPC: Greater loan pricing transparency for retail borrowers

RBI MPC: Greater loan pricing transparency for retail borrowers

In the days ahead, retail loan customers should anticipate more loan price transparency.

The repo rate was left at 6.5% by the RBI

The Reserve Bank of India said that banks would need to lend at a rate that covers the whole cost of the loan, maintaining its emphasis on client centricity. This includes not only the interest rate but also other expenses for things like processing and paperwork fees. All retail loans as well as loans to MSME (Micro, Small, and Medium-Sized Enterprises) will be subject to this.

The consumer will get the loan at an annual rate, which will be an all-inclusive cost, once the interest rate and other loan-related fees are combined together. The Key Fact Statement need to include this information (KFS). These days, upon issuance of the loan, all fees associated with it—aside from the interest rate—are paid in full.

KFS is now required exclusively for microfinance loans, digital loans from regulated businesses, and loans to individual borrowers from scheduled commercial banks. The RBI Governor said in the most recent monetary policy statement that all regulated companies would henceforth be required to provide KFS to all retail and MSME credit customers.

To implement this new loan pricing methodology, RBI will publish a circular. The governor of the RBI said that banks would have time to abide with this.