NBFC Fair Practices Code RBI Compliance India 2026

NBFC Fair Practices Code RBI Compliance India 2026

RBI's Fair Practices Code (FPC) for NBFCs is a comprehensive framework governing how an NBFC should interact with borrowers — from loan application through servicing to recovery. Every NBFC is required to have a Board-approved FPC reviewed annually, a published FPC summary on its website, and documented evidence that the code is actually followed — not just adopted on paper.

FPC violations are among the most commonly cited findings in RBI inspections of NBFCs, particularly in collection practices and interest rate disclosure.

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What the Fair Practices Code Requires

Loan Application and Appraisal
- Loan application form: all information required from borrower must be disclosed upfront; no hidden documentation requirements surfaced later
- Acknowledgement of application: borrower must receive an acknowledgement with expected turnaround time
- Credit appraisal: assessment done based on established criteria — not arbitrary
- Sanction/rejection communication: reason for rejection communicated to borrower
- Terms of sanction: all terms clearly communicated in writing before acceptance

Interest and Charges
- Interest rate: communicated in annualised rate (APR) including all fees
- Floating vs. fixed: clearly explained to borrower
- Penal charges: disclosed upfront and applied only on overdue amounts (not entire outstanding)
- Processing fee: non-refundable or refundable policy disclosed before collection
- No charges not disclosed at sanction: surprise charges after disbursement violate FPC

Disbursement
- Changes after sanction: any change in terms (due to market conditions or policy change) communicated before disbursement — borrower has right to exit
- Timely disbursement: once all conditions met, disbursement within committed timeline

Post-Disbursement
- Account statement: borrower can access loan statement on request
- Prepayment: NBFC must not levy prepayment penalty on floating rate loans to individual borrowers
- NOC: issued within reasonable time after full repayment

Recovery and Collection Practices
- Authorised staff: only authorised personnel conduct recovery
- Call timing: contact borrower only between 8 AM and 7 PM
- Workplace contact: with borrower permission only
- Family contact: not acceptable unless borrower has explicitly provided family member as reference
- No harassment: threats, abusive language, or humiliation of any kind — zero tolerance
- Third-party agents: all third-party collection agents must be disclosed and authorised by the NBFC

General
- Discrimination: no differential treatment based on sex, religion, caste
- Borrower data: not shared with third parties without consent (DPDP Act alignment)
- FPC copy: available on website and on request at branch

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MICS FPC Compliance Support

FPC Document Drafting
- Draft Board-approved Fair Practices Code in RBI-compliant format
- Annual review: update FPC when RBI guidelines change
- Board resolution template for FPC adoption

Loan Application Workflow Compliance
- Application acknowledgement: automated with TAT commitment
- Rejection workflow: reason captured and communicated to borrower
- KFS integration: APR and all charges disclosed before sanction acceptance

Collection Compliance
- Call timing enforcement in MICS collection system: calls restricted to 8 AM – 7 PM
- Agent authorisation: only registered agents visible in collection system
- Call recording: all collection calls recorded with timestamp
- Harassment complaint workflow: immediate escalation to compliance team
- Third-party agent register: all agencies documented with agreement

Charge Disclosure
- Charge master: all charges configured in system — only configured charges can be applied
- No ad-hoc charges: system prevents collection of any charge not in charge master
- Penal charge computation: only on overdue amount, configurable in MICS

Prepayment Policy
- Floating rate individual loans: prepayment penalty field locked to zero
- Foreclosure statement: generated on request — borrower sees exact payoff amount

Documentation and Audit
- FPC training records: staff trained on FPC — documented
- Mystery shopping: periodic test of compliance with FPC procedures
- Annual FPC compliance report: presented to Board
- Inspection readiness: FPC documents, training records, and call recordings accessible for RBI inspection

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Website Compliance

FPC requires specific information on the NBFC's website:
- FPC summary (not full document, but key terms)
- Nodal Officer contact
- Grievance redressal process
- Interest rate range for each product
- Processing fee
- RBI Integrated Ombudsman link

MICS reviews NBFC websites and provides a compliance gap report.

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Pricing

- FPC drafting and review: Rs. 20,000 one-time
- Annual FPC update: Rs. 10,000/year
- FPC compliance audit: Rs. 25,000 (includes gap report and remediation roadmap)
- Ongoing compliance monitoring: included in MICS NBFC software subscription

Book an FPC compliance consultation: +91 9355273535 | admin@mics.asia