What is KFS made mandatory by RBI for SME loans?

Feb 10, 2024 Abhishek Yadav

Key Fact Statement or KFS is among the RBI’s measures to foster greater transparency and disclosure by banks in the pricing of loans and other charges levied on borrowers.

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It enables borrowers to understand key information regarding a loan agreement in an easy-to-understand format.

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These include all-in-cost of the loan, all-inclusive annual percentage rate, recovery and grievance redress mechanism.

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So far, it has been applicable for loans to individual borrowers, digital lending by lenders and microfinance loans.

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RBI has now made it mandatory for all lenders to provide KFS to MSME and retail loans as well.

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Extra costs such as processing fees, upfront charges, penal interest, and other expenses, are typically not prominently featured in the loan terms and conditions. KFS provides such information.

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As of December 2023, the gross bank credit deployed to MSMEs under the priority sector lending was Rs 23.87 lakh crore.

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This grew by 19.1 per cent from Rs 20.03 lakh crore as of December 2022, as per RBI data on monthly deployment.

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The priority lending as of December 2023 in MSMEs was 14.9 per cent of Rs 159.18 lakh crore in India’s total non-food credit during the month in comparison to 15.1 per cent during December 2022.

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