What changed
Earlier guidelines required NBFCs to convey loan terms in writing, but RBI observed that borrowers often lacked full awareness of terms. Now, NBFCs must invariably furnish a complete copy of the loan agreement and all enclosures to borrowers at the time of sanction or disbursement.
What it means for you
NBFCs must update their loan disbursement processes to ensure every borrower receives a physical or digital copy of the signed agreement and all referenced documents. This reduces legal disputes and enhances transparency, but increases operational costs for document management. Lenders should audit current practices to avoid non-compliance penalties.
What you must do
- Update loan sanction workflows to include automatic generation and delivery of loan agreement copies with all enclosures.
- Train loan officers to hand over or send the agreement copy at the time of sanction/disbursement and obtain acknowledgment.
- Review existing loan documentation to ensure all enclosures quoted in agreements are included in the copy provided to borrowers.
- Implement a system to track delivery of agreement copies to borrowers for audit and compliance purposes.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Borrowers of NBFCs
What documents must be provided to the borrower?
A copy of the loan agreement along with a copy of each enclosure quoted in the agreement must be furnished at the time of sanction or disbursement.
Why did RBI issue this guideline?
RBI found that borrowers were often unaware of loan terms, especially interest rates, because NBFCs did not provide details or borrowers had no time to review the full agreement, leading to disputes.
Does this apply to all types of loans from NBFCs?
Yes, the guideline applies to all loans sanctioned by NBFCs and RNBCs, as per the circular.