Borrowing a loan is a major financial step. Whether you’re planning to buy a home, expand a business, fund your education, or cover personal needs, it’s essential to understand your rights and responsibilities as a borrower.

The Reserve Bank of India (RBI) has laid down several important guidelines to protect borrowers like you. These rules ensure transparency, fairness, and accountability from banks and lending institutions. Let’s walk you through them in simple terms.

1. Transparent Loan Application Process

Clear Information Right From the Start

When you apply for a loan, the bank must provide you with a loan application form that clearly lists all fees, charges, and key terms. There should be no hidden costs. If your loan amount is ₹2 lakh or below, the form must include detailed information to help you make an informed decision.

Acknowledgement of Application

Once you submit your loan application, the bank must give you an acknowledgement receipt, confirming that your request is under process. They should also inform you about how long the loan processing will take.

2. Fair Loan Appraisal And Disbursal

Proper Evaluation

Banks cannot approve or reject a loan simply based on the collateral you offer. They are required to fairly assess your repayment capacity, income, and credit history. If your loan is approved, the sanction letter must state:

• The approved loan amount
• Interest rate (fixed or floating)
• Repayment terms
• Applicable charges or fees

Loan Agreement Copy

You have the right to receive a copy of the signed loan agreement and any other related documents for your personal records.

3. Honest Communication and Terms

Change In Terms And Conditions

If the bank plans to revise the terms of your loan, such as increasing interest rates or altering repayment schedules—they must inform you well in advance. No changes should be applied without your knowledge or agreement.

Use Of Your Information

Banks must respect your privacy. They are not allowed to share your personal or financial details with unauthorised parties. Your data is protected under RBI regulations.

4. Post-Disbursal Supervision

After disbursing the loan, the bank has the right to monitor how the funds are being used—but it must be done without causing unnecessary pressure on you. If you face genuine financial difficulty, the bank should try to work with you to find a solution rather than penalise you unfairly.

5. Interest Rates and Charges

• The Annual Percentage Rate (APR), which includes interest and all other charges, must be clearly shared with you.
• Banks must display their current interest rates on loan products in their branches and on their websites.
• If any penalty charges are applicable (e.g., for late payments), they must be reasonable and explained beforehand.
  

6. Loan Closure And Security Release

After you’ve repaid your loan in full, the bank is required to:

• Return your original documents or collateral within 15 days
• Provide a ‘No Dues’ certificate or loan closure statement

If there is any outstanding balance due to errors or charges, the bank must explain this clearly before holding your security.

7. Recovery and Collection Practices

Banks must follow ethical guidelines when recovering dues. Recovery agents must:

• Identify themselves properly
• Respect your privacy and dignity
• Avoid any form of harassment, intimidation, or force

If you feel mistreated, you can raise a complaint with the bank or escalate the matter to the RBI-appointed Banking Ombudsman.

8. Guidelines for Digital and Online Lending

As more people use mobile apps and digital platforms for loans, the RBI has introduced additional safeguards:

• Loan money must be credited directly to your bank account
• Repayments must also be made from your account to the bank only, with no third-party interference
• All fees and interest must be disclosed clearly in advance
• You must be given the option to decline bundled services, such as insurance or memberships

9. Special Provisions For Priority Sector Loans

If you’re applying for a loan in sectors like agriculture, education, housing, or MSME, these fall under Priority Sector Lending (PSL). Banks are encouraged (and in some cases, required) to lend to such segments on reasonable terms and lower interest rates.

10. How BankEMI Ensures Compliance

To ensure strict adherence to RBI guidelines, BankEMI has implemented a range of internal measures:

• Regular Audits: We conduct periodic internal and external audits to ensure that our operations remain in full compliance with RBI regulations.
• Employee Training: Our teams undergo rigorous training to stay informed about the latest guidelines issued by the RBI, ensuring that they can deliver services that are fully compliant.
• Proactive Updates: BankEMI continuously monitors and implements updates based on new circulars and notifications from the RBI. This allows us to keep our practices in line with any regulatory changes.