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Key Facts Statement (KFS) for Loans & Advances

Reserve Bank of India (RBI) has revised the guidelines on Key Facts Statement (KFS) for loans & advances.

What are Key Facts?

Key Facts of a loan agreement between a regulated entity (RE) / a group of REs and a borrower are legally significant and deterministic facts that satisfy basic information required to assist the borrower in taking an informed financial decision.

What is Key Facts Statement (KFS)?

Key Facts Statement (KFS) is a statement of key facts of a loan agreement, in simple and easier to understand language, provided to the borrower in a standardised format.

What is Annual Percentage Rate (APR)?

Annual Percentage Rate (APR) is the annual cost of credit to the borrower which includes interest rate and all other charges associated with the credit facility.

What is Equated Periodic Instalment (EPI)?

Equated Periodic Instalment (EPI) is an equated or fixed amount of repayments, consisting of both the principal and interest components, to be paid by a borrower towards repayment of a loan at periodic intervals for a fixed number of such intervals; and which result in complete amortisation of the loan. EPIs at monthly intervals are called EMIs.

What are the guidelines on KFS?

  • REs shall provide a KFS (in standardised format) to all prospective borrowers to help them take an informed view before executing the loan contract. 
  • The KFS shall be written in a language understood by such borrowers. Contents of KFS shall be explained to the borrower and an acknowledgement shall be obtained that he / she has understood the same.
  • The KFS shall be provided with a unique proposal number and shall have a validity period of at least 3 working days for loans having tenor of 7 days or more, and a validity period of 1 working day for loans having tenor of less than 7 days. Validity period refers to the period available to the borrower, after being provided the KFS by the RE, to agree to the terms of the loan. 
  • The KFS shall also include a computation sheet of APR, and the amortisation schedule of the loan over the loan tenor. APR will include all charges which are levied by the RE. 
  • Charges recovered from the borrowers by the REs on behalf of third-party service providers on actual basis, such as insurance charges, legal charges etc., shall also form part of the APR and shall be disclosed separately. In all cases wherever the RE is involved in recovering such charges, the receipts and related documents shall be provided to the borrower for each payment, within a reasonable time.
  • Any fees, charges, etc. which are not mentioned in the KFS, cannot be charged by the REs to the borrower at any stage during the term of the loan, without explicit consent of the borrower.
  • The KFS shall also be included as a summary box to be exhibited as part of the loan agreement.

To which loans shall the guidelines be applicable?

The guidelines on KFS shall be applicable in cases of all retail and Micro Small and Medium Enterprises (MSME) term loan products extended by all RE.

Which credit facilities are exempted from the applicability of the guidelines?

Credit card receivables are exempted from the applicability of the guidelines.

By when shall the guidelines be implemented?

REs shall implement the guidelines at the earliest. In any case, all new retail and MSME term loans sanctioned on or after October 1, 2024, including fresh loans to existing customers, shall comply with the guidelines in letter and spirit without any exception. 

During the interregnum, the relevant provisions on ‘KFS / Factsheet’ under the extant guidelines shall continue to remain applicable and on the date the revised guidelines come into effect, the below listed provisions shall stand repealed. 

  • Para 2 (b) of Circular on ‘Display of Information by Banks’ dated January 22, 2015
  • Para 6.3, 6.4 & 6.5 of ‘Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022’ dated March 14, 2022
  • Para 5.1, 5.2 of ‘Guidelines on Digital Lending’ dated September 02, 2022


References

Reserve Bank of India. (2015, January 22). 'Display of information by banks'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9508&Mode=0

Reserve Bank of India. (2022, September 02). 'Guidelines on Digital Lending'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12382&Mode=0

Reserve Bank of India. (2022, March 14). 'Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 (Updated as on July 25, 2022)'. Retrieved from https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12256

Reserve Bank of India. (2024, April 15). 'Key Facts Statement (KFS) for Loans & Advances'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12663&Mode=0

Reserve Bank of India. (n.d.). 'Annex A - Standardised Format of KFS'. Retrieved from https://rbidocs.rbi.org.in/rdocs/content/pdfs/CIRCULARKFS1504242_A.pdf


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