ARTICLE · 06 SEPTEMBER 2023

Regulatory Updates Reserve Bank Of India Recent Circulars

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The said regulation outlines specific guidelines to be adhered to by regulated entities, by emphasizing on prudent lending practices and effective communication with borrowers.

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On August 18, 2023, the Reserve Bank of India (RBI) issued the instructions es/circulars in relation to Fair Lending Practice - Penal Charges in Loan Accounts (ref no. RBI/2023-24/53); ("Penal Charges Instruction"); Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans (ref no. RBI/2023-24/55) ("Interest Reset Circular "); and Review of Regulatory Framework for IDF[1]NBFCs (ref no. RBI/2023-24/54) ("IDF Review Circular "). In a snapshot-

Penal Charges Instruction intends to streamline the charging of default/ penal interest and has clarified that such charges are not meant to be used as a revenue enhancement tool over and above the contracted rate of interest.

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