The Reserve Bank of India (RBI) is stepping in to ensure more transparency and fairness in the loan sector. Recognizing instances where banks have unreasonably extended the tenor of floating rate loans without the borrower’s knowledge or consent, RBI is introducing a new framework. This move aims to protect borrowers from unexpected increases in their total interest payments.

What Happened? RBI Governor Shaktikanta Das on Thursday during the monetary policy announcement, shed light on the upcoming changes. Under the new guidelines, banks must:

• Clearly communicate any changes in loan tenor or Equated Monthly Installments (EMI) to borrowers.
• Offer borrowers the option to switch from floating to fixed-rate loans or even foreclose loans.
• Disclose all charges associated with these options transparently.

Why it matters to borrowers?

This initiative comes as a response to feedback and supervisory reviews that highlighted the need for better communication between lenders and borrowers. By ensuring that banks are more transparent about their decisions, borrowers will be better equipped to make informed choices about their loans.

The detailed guidelines for this borrower-friendly framework are on the horizon, promising a more transparent loan environment for all.

Read next: Paytm CEO Left Baffled By Slack’s Newest Bug Fix Description On The App Store