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Reserve Bank of India released the Fair Practices Code for NBFCs



The Reserve Bank of India on 26 March 2012 restructured the fair practices code (FPC) to be adopted by non-banking finance companies (NBFCs) while doing lending business. 

The guidelines issued by the central bank covered general principles on adequate disclosures on the terms and conditions of a loan and also adopting a non-coercive recovery method.

The modified FPC is required to be put in place by all NBFCs with the approval of their boards within one month from the date of issue of this circular (26 March 2012). Also RBI directed that the FPC should be published and disseminated on the web-site of the company for public information.

NBFCs were however granted the freedom of drafting the FPC, enhancing the scope of the guidelines. It is however not to contradict the spirit dominating the guidelines. 

The RBI directed NBFCs to mention the penal interest charged for late repayment in bold in the loan agreement. Also the NBFCs were directed not to resort to undue harassment such as persistently bothering the borrowers at odd hours and use of muscle power with respect to loan recovery.

The RBI had in 2006 issued FPC norms for all NBFCs to be adopted by them while doing the lending business. It had also covered norms on adequate disclosures on terms and conditions of a loan, and also adopting a non-coercive recovery method.


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