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ARTICLE · 01 APRIL 2024

Actionable Mandate: New Fair Lending Rules

Mandala Law Offices
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In order to ensure transparency in disclosure of penal charges and interest rates on loans, the Reserve Bank of India, vide its circular dated August 18, 2023, on Fair Lending Practice - Penal Charges in Loan Accounts...

IndiaFinance and Banking
Divya Mohil
Divya Mohil
Mansi Delu
Mansi Delu
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In order to ensure transparency in disclosure of penal charges and interest rates on loans, the Reserve Bank of India ("RBI"), vide its circular dated August 18, 2023, on Fair Lending Practice - Penal Charges in Loan Accounts, issued instructions to lending institutions regarding the imposition of penal interest and charges on financial products and / or any other kind of financial assistance ("Guidelines"). The Guidelines have also led to amendments in several Master Directions and Master Circulars issued by RBI to Regulated Entities.1 These Guidelines were initially scheduled to take effect from January 1, 2024. However, this timeline was extended to April 1, 2024, for fresh loans granted. For existing loans, penal charges must be implemented at a review or renewal of the loan falling on or after April 1, 2024, but no later than June 30, 2024 ("Effective Date").

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