Banks have made it mandatory to provide a copy of the loan agreement to the borrower, once the loan is sanctioned, according to the latest RBI guideline.
Though RBI had mandated it in 2003 that banks need to furnish a copy of the loan agreement to the borrower, many of the banks were found flouting the norms and providing the copy only on request.
Most banks provide a term sheet along with the payment schedule that includes a break-up of the interest and principal for EMIs. In fact, unlike what is prescribed in the May 2003 circular, banks also get away by not informing the borrower about the change in terms and conditions.
From now on, you can insist on a copy of the agreement to get the details of the terms and conditions and other caveats governing the credit facility finalised after negotiation. In addition, an authorised official from the bank has to certify the document, says RBI guidelines.
The circular had also said that banks need to clearly mention the fee and charges for all priority sector loans of up to Rs 2 lakh.