What changed
Previously, full fee disclosure on loan applications and written rejection reasons were only mandatory for priority sector advances up to ₹2 lakh and small borrowers up to ₹2 lakh. Now, these requirements apply to all loan applications and all categories of loans, regardless of amount, including credit card applications.
What it means for you
Banks must update their Fair Practices Code to ensure every loan application form includes comprehensive fee details and prepayment options. Lenders must also provide written reasons for rejecting any loan or credit card application. This increases transparency and borrower protection across the board, requiring operational changes in application processing and customer communication.
What you must do
- Revise all loan application forms to include fees, charges, refundability, and prepayment options for every loan type.
- Develop a board-approved policy for conveying written rejection reasons for all loan and credit card applications.
- Update the Fair Practices Code by April 30, 2007, and publish it on your website with wide publicity.
- Train staff on new disclosure and rejection communication requirements across all loan categories.
Who it affects
All scheduled commercial banks, All India financial institutions (excluding RRBs), Loan processing and customer service teams, Compliance and legal departments
Does this apply to credit card applications as well?
Yes, the circular explicitly includes credit card applications under the requirement to convey written rejection reasons.
What is the deadline for implementing these changes?
Banks and FIs must carry out necessary modifications to their Fair Practices Code with board approval by April 30, 2007.
Are there any loan amount thresholds for these new rules?
No, the instructions now apply to all loan applications irrespective of the amount, removing earlier thresholds of ₹2 lakh.