In pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated February 08, 2023 regarding the review of extant regulatory guidelines on levy of penal interest, the Reserve Bank of India has released today the Draft Circular on Fair Lending Practice - Penal Charges in Loan Accounts.

Comments by the stakeholders on the ‘Draft Circular’ may be submitted by May 15, 2023 to the Chief General Manager, Department of Regulation, Central Office, Reserve Bank of India, 12th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001 or by e-mail with the subject line “Draft Circular on Fair Lending Practice - Penal Charges in Loan Accounts”.

(Yogesh Dayal)     
Chief General Manager

Fair lending practice reform: draft circular proposes standardising penal charges and invites stakeholder consultation. Review of the levy of penal interest: the Reserve Bank has issued a draft circular proposing revisions to regulatory guidelines to align levy practices with fair lending principles, focusing on conditions and mechanics for levying penal charges to ensure transparency and prevent arbitrary or disproportionate charging. The draft is released for stakeholder consultation, with comments invited to the Chief General Manager, Department of Regulation, Central Office.