The draft code requires NBFCs to convey in writing to the borrower the amount of loan sanctioned along with the terms and conditions including an annual rate of interest and method of application of interest and keep the acceptance of these terms and conditions by the borrower, on their record.
NBFCs would devise a system of acknowledging the receipt of loan applications. Preferably, this would involve indicating the timeframe within which loan applications would be disposed of.
The code provides that the borrower would have to be given a notice of any change in the terms and conditions including the disbursement schedule, interest rates, service charges and pre-payment charges.
NBFCs would ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement, the code recommends.
Post-disbursement supervision by NBFCs should be constructive and genuine difficulties which the borrower may face, may be given due consideration.
Before taking a decision to recall or accelerate payment or performance under the agreement or seeking additional securities, NBFCs should give notice to borrowers in consonance with the loan agreement, the draft code states.
In case of receipt of a request for transfer of a borrower account either from the borrower or from a lender, which proposes to take over the account, the consent or objection of the NBFC, if any, should be conveyed within 21 days from the date of receipt of request.
Such transfer shall be according to transparent contractual terms in consonance with the law, the code points out. It further states that for the recovery of loans, the NBFCs should not resort to harassment.
The board of directors of NBFCs would have to lay down an appropriate grievance redressal mechanism within the organisation to resolve disputes arising from this.
Such a mechanism would ensure that disputes arising because of the decisions of lending institutions' functionaries are heard and disposed of at least at the next higher level.
The RBI said the NBFCs will have the freedom of drafting the fair practices code, enhancing the scope of the guidelines but in no way sacrificing the spirit underlying them. The same should be put up on their website, if any, for the information of various stakeholders.
