RBI Governor: Lenders must inform borrowers when loan EMIs are reset

According to Governor Shaktikanta Das on Thursday, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has resolved to increase transparency while establishing the interest rate on equivalent monthly installments (EMI) for floating interest loans.

“It is proposed to put in place a transparent framework for reset of interest rates on floating interest loans,” Das stated while announcing the MPC’s conclusions.

“The framework will require Regulated Entities to (i) clearly communicate with borrowers for resetting the tenor and/or EMI; (ii) provide options for switching to fixed-rate loans or foreclosure of loans; (iii) disclose various charges incidental to the exercise of the options; and (iv) ensure proper communication of key information to borrowers,” according to the regulatory framework.

He continued by saying that these actions would significantly boost consumer protection.