The Hindu Business Line : NBFCs get a month for Fair Practices Code

The Reserve Bank of India has given a one-month deadline to Non-Banking Finance Companies (NBFCs) to come out with a Fair Practices Code. To aid NBFCs write the code, the central bank on Thursday released guidelines.

NBFCs cannot use muscle power to recover loans. "In the matter of recovery of loans, NBFCs should not resort to undue harassment — persistently bothering the borrowers at odd hours or using muscle power for recovery of loans," said the RBI circular.

NBFCs are also supposed to respond (consent or reject) to borrowers' requests for transfer of borrowal account within 21 days from the date of receipt of the request.

Changes in interest rates should be effected only prospectively and NBFCs should also give notice to the borrower of any change in the terms and conditions about disbursement schedule, service and prepayment charges.

Also the RBI wants a grievance redressal mechanism to be set up within the organisation.

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