What it means
RBI’s circular of 15 Apr 2024 made the KFS compulsory for all retail and MSME term loans by regulated lenders from 1 Oct 2024. It must be in a language the borrower understands and show, in a standard format, the loan amount, interest rate, all fees and charges, the annual percentage rate (APR) that includes them, the repayment schedule, recovery and grievance details, and the cooling-off period. Charges not in the KFS cannot be collected without the borrower’s consent.
Example
A ₹1,20,000 loan at 11.5% for 12 months, EMI ₹10,634, with a processing fee of ₹2,400:
| Item | Value |
|---|---|
| Interest rate | 11.5% a year (reducing) |
| Processing fee | ₹2,400 |
| Net amount disbursed | ₹1,17,600 |
| APR | about 15.4% |
The APR shows the true cost because the borrower repays on ₹1,20,000 but receives ₹1,17,600.
Common mistakes
- Quoting only the interest rate and leaving the APR off.
- Giving the KFS in English to a borrower who reads only Kannada.
- Adding insurance or other charges later that were not in the KFS.
In MyRecords
The Lending module prints the KFS and the sanction letter as PDFs from the loan application: amount, term, instalments, interest, fees, net disbursed, total payable and the APR worked out as above. The KFS can carry one of 12 Indian languages as an AI translation under each English line, with “English version prevails”. The recovery, grievance and cooling-off parts of RBI’s format are not printed yet.