The Fair Practice Code (FPC) is a set of guidelines issued by the Reserve Bank of India (RBI) to ensure fair and transparent lending practices by Non-Banking Financial Companies (NBFCs) in India. The FPC aims to promote customer protection and confidence in the NBFC sector and requires NBFCs to adopt fair and ethical practices in their dealings with customers.
The FPC for NBFCs covers several aspects of lending practices, including loan application, processing, disbursement, repayment, and grievance redressal. The key features of the FPC for NBFCs are as follows:
- Loan Application: NBFCs should provide loan application forms free of cost to prospective borrowers and ensure that the information provided by the borrower is kept confidential.
- Loan Processing: NBFCs should communicate the time frame for loan processing and inform the borrower of the additional documents required for loan processing.
- Loan Appraisal and Disbursement: NBFCs should undertake a proper appraisal of the loan application, including creditworthiness, and disburse the loan only after ensuring compliance with the necessary documentation and KYC norms.
- Interest Rates and Charges: NBFCs should disclose the interest rates and charges applicable to the loan, including prepayment charges, if any, and communicate the same to the borrower.
- Transparency and Disclosure: NBFCs should disclose all relevant information to the borrower, including terms and conditions of the loan, penal interest charges, if any, and the procedure for foreclosure of the loan.
- Customer Grievances: NBFCs should have a proper mechanism for handling customer grievances and ensure that the grievances are addressed promptly and fairly.
- Recovery Practices: NBFCs should ensure that the recovery practices are fair and transparent and in compliance with the applicable laws and regulations.
The RBI requires NBFCs to adopt and implement the FPC as part of their corporate governance framework. The FPC is reviewed periodically to ensure its relevance and effectiveness in promoting fair and transparent lending practices by NBFCs.
In conclusion, the Fair Practice Code for NBFCs in India is a set of guidelines issued by the RBI to ensure fair and ethical lending practices by NBFCs in their dealings with customers. The FPC covers several aspects of lending practices, including loan application, processing, disbursement, repayment, and grievance redressal. NBFCs are required to adopt and implement the FPC as part of their corporate governance framework to promote customer protection and confidence in the NBFC sector.