The Reserve Bank of India is introducing new measures in the financial services sector. What does this mean for you?

10 February 2024 | 02:22

The Reserve Bank of India (RBI) is implementing new measures to enhance transparency in the financial services sector. As part of these efforts, banks and other regulated entities (RE), such as financial companies, will be required to disclose detailed information on loan prices and associated fees to retail customers, as well as small and medium-sized micro, small, and medium enterprises (MSMEs).

Under the new guidelines, REs will have the obligation to provide borrowers with “Key Information Statements” (KFS) regarding all retail and MSME loans. Borrowers will have access to essential information about the terms of the loan agreement, such as the total cost of interest, in a simple and easy manner, enabling them to make informed decisions.

RBI aims to increase transparency in the financial services sector. Currently, KFS is only applicable to loans provided by commercial banks as per the individual schedule for borrowers, as well as for digital and microfinance loans as per RBI regulations. However, the new guidelines will apply to all regulated entities, including non-banking financial companies (NBFCs).

Additionally, RBI plans to introduce offline functionality for the CBDC-Retail (CBDC-R), also known as e-rupee or digital rupee. The purpose of this solution is to facilitate transactions in regions with weak or limited internet access. The central bank will test different offline solutions in various locations, such as hilly, rural, and urban areas. These features will be gradually introduced through pilot programs.

The pilot program for CBDC-R initiated by RBI already enables peer-to-peer (P2P) and peer-to-merchant (P2M) transactions using digital rupee wallets. RBI now plans to expand this program to additional use cases through programmability and offline functionality. With programmability, users such as government agencies and corporations will be able to customize payments for specific purposes, increasing efficiency and control.

RBI’s introduction of these measures aims to enhance transparency in the financial services sector and provide borrowers and digital rupee users with important information regarding costs and loan terms. This will enable customers to make more informed decisions, and transactions in regions with limited internet access will become easier. RBI continues to develop its initiatives in digitalization and the modernization of India’s financial sector.