What changed
Earlier, banks were required to furnish loan agreements only upon borrower request. Now, RBI mandates that a copy of the loan agreement along with all enclosures must be given to all borrowers at the time of sanction or disbursement, without waiting for a request.
What it means for you
Banks must update their disbursement processes to ensure loan agreements are automatically provided to borrowers. Non-compliance is considered an unfair practice and could lead to disputes over loan terms. This strengthens borrower transparency and reduces legal risks for lenders.
What you must do
- Ensure loan agreements and all enclosures are handed over to borrowers at sanction or disbursement, not just on request.
- Update internal checklists and disbursement workflows to include mandatory delivery of loan documents.
- Train loan officers and branch staff on the revised requirement to avoid non-compliance.
- Audit current practices to identify any gaps where agreements are still being provided only on request.
Who it affects
All scheduled commercial banks, All India Financial Institutions (excluding RRBs), Borrowers of loans from these entities
Does this circular apply to all types of loans?
Yes, the circular applies to all credit facilities covered under the Fair Practices Code for Lenders, including term loans, working capital, and other advances.
What happens if a bank fails to provide the loan agreement copy?
RBI considers this an unfair practice that could lead to disputes. Banks may face regulatory action or customer grievances if they do not comply.