Guidelines on Fair Practices Code for Lenders
RBI/2006-2007/280
DBOD.No.Leg.BC.65 /09.07.005/2006-07
March 6, 2007
All Scheduled Commercial Banks / All India Financial Institutions
(Excluding RRBs)
Dear Sir,
Guidelines on Fair Practices Code for Lenders
- Please refer to our Circular DBOD. Leg. No.BC. 104 /09.07.007/2002-03 dated May
5, 2003 wherein guidelines were issued to banks / FIs for framing the Fair
Practices Code for Lenders.
- In terms of Para 2 (i) (a) of the above Circular, banks / FIs were advised
that loan application forms in respect of priority sector advances up to Rs.2.00
lakhs should be comprehensive and should include information about the
fees/charges, if any, payable for processing, the amount of such fees refundable
in the case of non-acceptance of application, pre-payment options and any other
matter which affects the interest of the borrower, so that a meaningful
comparison with that of other banks can be made and informed decision can be
taken by the borrower.
- With a view to achieving greater transparency and in the light of experience
gained, it has been decided that the above instructions will be applicable to
all loan applications in respect of all categories of loans irrespective of the
amount of loan sought by the borrower. Banks / FIs are advised to work out a
transparent policy in this regard with the approval of their Board.
- Further, in terms of Para 2 (i) (d) of the above Circular dated May 5, 2003,
banks / FIs were advised that in the case of small borrowers seeking loans up to
Rs. 2 lakhs the lenders should convey in writing, within stipulated time, the
main reason/reasons which, in the opinion of the bank / FI have led to rejection
of the loan applications.
- On a review, it has been decided that in case of all categories of loans
irrespective of any threshold limits, including credit card applications, banks
/ FIs should convey in writing the main reason / reasons which, in the opinion
of the bank / FI have led to rejection of the loan applications.
- Necessary modifications in the Fair Practices Code based on the above
instructions, with the approval of the Board, should be carried out by April 30,
2007. The modified Fair Practices Code should be placed on the bank's / FI's
website and also given wide publicity.
Yours faithfully
(Prashant Saran)
Chief General Manager-in-Charge