Module: | Capital Adequacy, Basel Norms & Monetary Policy
Q12: Consider the following statements regarding Responsible Lending Conduct and the Key Facts Statement (KFS):
1. The mandate to provide a Key Facts Statement (KFS) applies to all retail and MSME term loan products, explicitly including credit card receivables.
2. The KFS shall have a minimum validity period of 3 working days for loans with a tenor of 7 days or more.
3. Charges recovered by the bank on behalf of third-party service providers, such as insurance or legal charges, must form a component of the Annual Percentage Rate (APR).
4. Banks are required to convey in writing the main reasons for loan rejection exclusively for retail loans exceeding ₹5 Lakhs.
Which of the statements given above is/are correct?
2. The KFS shall have a minimum validity period of 3 working days for loans with a tenor of 7 days or more.
3. Charges recovered by the bank on behalf of third-party service providers, such as insurance or legal charges, must form a component of the Annual Percentage Rate (APR).
4. Banks are required to convey in writing the main reasons for loan rejection exclusively for retail loans exceeding ₹5 Lakhs.
Which of the statements given above is/are correct?
✅ Correct Answer: B
The correct answer is B. Statement 1 is incorrect because the lending conduct guidelines mandate the Key Facts Statement (KFS) for retail and MSME term loans but explicitly EXEMPT credit card receivables from this specific requirement.
Statement 2 is correct: The framework establishes a validity period of 3 working days for loans with a tenor of 7 days or more, and 1 working day for shorter loans.
Statement 3 is correct: The rules strictly require that third-party charges routed through the bank, such as insurance premiums or legal fees, must be factored into the Annual Percentage Rate (APR) computation.
Statement 4 is incorrect: The regulations dictate that banks must convey the reasons for loan rejection in writing for ALL categories of loans, irrespective of any arbitrary threshold limits like ₹5 Lakhs.
Statement 2 is correct: The framework establishes a validity period of 3 working days for loans with a tenor of 7 days or more, and 1 working day for shorter loans.
Statement 3 is correct: The rules strictly require that third-party charges routed through the bank, such as insurance premiums or legal fees, must be factored into the Annual Percentage Rate (APR) computation.
Statement 4 is incorrect: The regulations dictate that banks must convey the reasons for loan rejection in writing for ALL categories of loans, irrespective of any arbitrary threshold limits like ₹5 Lakhs.