What changed
RBI issued revised Fair Practices Code guidelines for NBFCs, building on the March 26, 2012 circular. Key additions include mandatory display of grievance redressal officer details at branches and local RBI office, and a requirement for the board to approve the modified FPC within one month. The guidelines also emphasize providing loan agreements and terms in the borrower's vernacular language.
What it means for you
NBFCs must strengthen customer grievance handling by ensuring disputes are escalated to at least the next higher level. Lenders need to revise loan application forms, sanction letters, and agreements to include annualized interest rates, penal interest charges in bold, and vernacular language options. Non-compliance could lead to regulatory action under Section 45L of the RBI Act.
What you must do
- Review and update your Fair Practices Code with board approval within one month from the circular date.
- Display prominently at all branches the details of your grievance redressal officer and the local RBI office.
- Ensure loan application forms, sanction letters, and agreements are provided in the borrower's vernacular language.
- Include annualized rate of interest and penal interest charges in bold in loan agreements.
- Set up a system to acknowledge loan applications with a disposal timeframe.
Who it affects
All NBFCs (including NBFC-MFIs), NBFC boards of directors, Customer-facing staff at branches, Compliance and legal teams
What is the deadline for implementing the revised Fair Practices Code?
NBFCs must put in place the modified FPC with board approval within one month from the date of this circular, i.e., by March 18, 2013.
What language must loan documents be in?
All communications, including loan application forms, sanction letters, and agreements, should be in the vernacular language or a language understood by the borrower.
What should be displayed at branches regarding grievance redressal?
NBFCs must prominently display the details of their internal grievance redressal officer and the local office of RBI at all branches and business locations.