What changed
RBI reinforced its December 2008 guidelines, now explicitly requiring co-operative banks to disclose all fees/charges in loan application forms and on their websites. The circular expands the list of mandatory disclosures to include refundable amounts if loans are not sanctioned, prepayment options, penalty for delayed repayments, conversion charges, and interest reset clauses.
What it means for you
Banks must now provide a complete, upfront picture of the total cost of borrowing, enabling customers to compare offers across lenders. This increases transparency and reduces hidden charges, but also places a compliance burden on banks to update application forms, train staff, and maintain website disclosures for all loan products.
What you must do
- Update all loan application forms to include a comprehensive list of fees, charges, and refund policies.
- Display the all-in-cost and all fee details prominently on your bank's website for every loan product.
- Ensure charges are non-discriminatory and applied uniformly to all borrowers.
- Train frontline staff to explain the all-in-cost and each charge to customers during the application process.
Who it affects
State Co-operative Banks (StCBs), Central Co-operative Banks (CCBs), Borrowers seeking loans from co-operative banks
What is the 'all-in-cost' that must be disclosed?
It is the total cost of the loan including all processing fees, charges, prepayment penalties, conversion charges, and any other fees, presented transparently so customers can compare with other lenders.
Do we need to disclose fees on our website for all loan products?
Yes, the circular requires that all information about fees and charges be displayed on the bank's website for every category of loan product.
What happens if a loan is not sanctioned after processing?
Banks must disclose upfront the amount of fees refundable if the loan is not sanctioned or disbursed, ensuring customers know their rights.