Mumabi: The Reserve Bank asked all non-banking finance companies (NBFCs) to revise their fair practices code (FPC) norms with prior approval of their boards within a month.

"The NBFCs may ... Make suitable amendments in their existing FPC norms and the modified FPC should be put in place by all NBFCs with the approval of their boards within one month," RBI said in its circular today.

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

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

"As complaints received against NBFCs generally pertain to charging of high interest or penal interest, NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement," it said.

It further said not furnishing a copy of the loan agreement or enclosures

... Is an unfair practice and this could lead to disputes between the NBFC and the borrower.

"NBFCs are, therefore, advised to furnish a copy of loan details as understood by the borrower along with a copy each of all enclosures quoted in agreement to all the borrowers at the time of sanction or disbursement of loans," it added.

On the loans recovery, it said, the recovery should normally be made only at a central designated place.

"NBFCs shall ensure a board approved policy is in place with regard to code of conduct by field staff and systems for their recruitment, training and supervision," it said.

The code should lay down minimum qualifications necessary for the field staff and shall have necessary training tools identified for them to deal with the customers, it added.