Mumbai: A security guard outside the Reserve Bank of India (RBI) headquarters in Mumbai, Wednesday, June 8, 2022.  (PTI photo)

It further added that at the time of reset of interest rates, regulated entities (REs) should provide an option to borrowers to switch to a fixed rate as per their board-approved policy.

The Reserve Bank on Friday asked banks and other lenders to provide individual borrowers an option to switch to a fixed rate at the time of reset of interest rates.

In a notification, it has been said in respect of EMI-based floating rate personal loan, in view of rising interest rates, several consumer complaints relating to extension of loan tenure and/or increase in EMI amount, without proper communication and/or consent. Borrowers have received.

To address these concerns, the RBI asked the entities regulated by it to put in place an appropriate policy framework.

“At the time of sanction, RES shall clearly inform the borrowers about the likely impact of change in the benchmark interest rate on the loan, leading to change in EMI and/or tenure or both. Thereafter, any increase in EMI/tenure or both Will be.” “The above will be communicated to the borrower through appropriate channels immediately,” RBI said.

It further added that at the time of reset of interest rates, regulated entities (REs) should provide an option to borrowers to switch to a fixed rate as per their board-approved policy.

RBI said that the policy should specify the number of times the borrower would be allowed to switch during the tenure of the loan.

Borrowers should also be given the option to opt for an increase in EMI or extension of tenure or a combination of both.

They should also be given the option to prepay, partly or fully, at any time during the tenure of the loan.

(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content was auto-generated from a syndicated feed.)

first published: 18 August 2023 | 2:34 pm First


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