The banking regulator has made it abundantly clear that not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the NBFC and the borrower with regard to terms and conditions on which the loan is granted, said the RBI notification on its official website.

Not aware of terms
In a few cases, RBI learnt, borrowers at the time of sanction of loans are not fully aware of the terms and conditions of the loans including rate of interest, either because the NBFC does not provide details of the same or the borrower has no time to look into detailed agreement.

RBI had issued Guidelines on Fair Practices Code for Non-Banking Financial Companies on September 28, 2006 for framing the Fair Practices code.  

In terms of paragraph (ii) of the Annex to the Company Circular it has been prescribed under 'Loan appraisal and terms/conditions', that  the NBFCs should convey in writing to the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record.