**Summary:**
RBI Circular RBI202324102 DoR.MCS.REC.6101.01.001202324, dated December 29, 2023, addresses the implementation timeline for instructions regarding fair lending practices, specifically concerning penal charges in loan accounts. This circular modifies the implementation date of instructions outlined in the earlier circular DoR.MCS.REC.2801.01.001202324 dated August 18, 2023.
The original effective date of January 1, 2024, has been extended by three months due to requests from regulated entities (REs) for clarifications and additional time to reconfigure their internal systems. The revised implementation timeline mandates that the instructions apply to all fresh loans availed from April 1, 2024, onwards. For existing loans, the switchover to the new penal charges regime must occur on the next review/renewal date falling on or after April 1, 2024, but no later than June 30, 2024.
This circular applies to all Commercial Banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks, excluding Payments Banks), all Primary Urban Cooperative Banks, all NBFCs (including HFCs), and All India Financial Institutions (EXIM Bank, NABARD, NHB, SIDBI, and NaBFID).
The Reserve Bank of India (RBI) will release a set of Frequently Asked Questions (FAQs) on its website to provide clarifications related to the implementation of this circular.
For further information, contact Santosh Kumar Panigrahy, Chief General Manager, Department of Regulation, Central Office, at Tel No: 22601000 or Fax No: 0222270 5670, 2260 5671, 5691 2270, 2260 5692. The central office is located at 12th-13th Floor, Central Office Building, Shaheed Bhagat Singh Marg, Mumbai 400001.
Key Entities Referenced
Reserve Bank of India (RBI): The central bank of India, responsible for regulating the banking sector and monetary policy.
All Commercial Banks including Small Finance Banks, Local Area Banks and Regional Rural Banks: A category of financial institutions regulated by the RBI.
All Primary Urban Cooperative Banks: A category of cooperative banks regulated by the RBI.
All NBFCs including HFCs: Non-Banking Financial Companies including Housing Finance Companies, regulated by the RBI.
All India Financial Institutions: Financial institutions like EXIM Bank, NABARD, NHB, SIDBI and NaBFID
EXIM Bank: Export-Import Bank of India, an All India Financial Institution.
NABARD: National Bank for Agriculture and Rural Development, an All India Financial Institution.
Fair Lending Practice Penal Charges in Loan Accounts: The subject of the RBI circular, related to regulations on penal charges in loan accounts.
RBI/2023-24/102
DoR.MCS.REC.61/01.01.001/2023-24 December 29, 2023
All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional
Rural Banks, excluding Payments Banks)
All Primary (Urban) Co-operative Banks
All NBFCs (including HFCs) and
All India Financial Institutions (EXIM Bank, NABARD, NHB, SIDBI and NaBFID)
Madam / Dear Sir,
Fair Lending Practice - Penal Charges in Loan Accounts: Extension of Timeline for
Implementation of Instructions
Reference is invited to RBI circular DoR.MCS.REC.28/01.01.001/2023-24 dated August
18, 2023 on ‘Fair Lending Practice - Penal Charges in Loan Accounts’.
2. In terms of paragraph 3 (viii) of the circular, the instructions were to come into effect
from January 1, 2024. However, considering that certain clarifications and additional time
has been sought by some regulated entities (REs) to reconfigure their internal systems
and operationalize the circular, it has been decided to extend the timeline for
implementation of the instructions by three months. Accordingly, REs shall ensure that
the instructions are implemented in respect of all the fresh loans availed from April 1,
2024 onwards. In the case of existing loans, the switchover to new penal charges regime
shall be ensured on the next review/ renewal date falling on or after April 1, 2024, but not
later than June 30, 2024.
3. A set of frequently asked questions (FAQs) providing clarifications related to
implementation of the circular will be uploaded in the FAQs section of the RBI website
shortly.
Yours faithfully,
(Santosh Kumar Panigrahy)
Chief General Manager
िविनयमन िवभाग, क�द्रीय काया�लय, 12वी ंऔर 13वी ंमंिज़ल, क�द्रीय काया�लय भवन, शहीद भगत िसंह माग�, मुंबई 400001
टेलीफोन /Tel No: 22601000 फै�/ Fax No: 022-2270 5670, 2260 5671, 5691 2270, 2260 5692
Department of Regulation, Central Office, 12th & 13th Floor, Central Office Building, Shaheed Bhagat Singh Marg, Mumbai – 400001
Tel No: 22601000 Fax No: 022-2270 5670, 2260 5671, 5691 2270, 2260 5692
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