NBFC fair practice code now in place

MUMBAI: Non-banking finance companies (NBFCs) will now have to specify the annualised rate of interest charged on advances to their borrowers in the form of a written document, at the time of application itself. The Reserve Bank of India on Thursday released the final guidelines of the fair practices code for NBFCs, asking them to implement the fair practices code by the end of October ’06 and place the same on their websites to cater to shareholder’s information requirements.

The loan application form may also state what documents are required to be submitted along with it. As per these guidelines, NBFCs have been asked to acknowledge the receipt of applications, which needs to preferably indicate the time frame within which loan applications need to be processed. Companies will also have to notify borrowers in advance in case of a change in the terms and conditions such as the schedule of disbursement, interest rates, service and prepayment charges.

Borrowers requesting for receipt of request for transferring their account will now get NBFC’s response within three weeks. NBFCs have also been told to refrain from resorting to undue harassment of borrowers at the time of loan recoveries. Accordingly, the RBI has directed the board of directors of NBFCs to put in place an appropriate mechanism for redressal of grievances. The board should also carry out a periodical review to check compliance with the code, the RBI said in its notification.