On Friday, the central bank asked banks and other lenders to offer individual borrowers the option to switch to a fixed rate when interest rates are reset to zero.
In the notice, he noted a number of consumer complaints related to extension of loan tenure and/or increase in EMI amount without proper communication and/or consent due to increase in interest rates of EMI-based variable personal loans. of borrowers were received.

To address these issues, RBI has asked its regulated entities to put in place an appropriate operational framework.
"At the time of sanction, Regulated Entities (REs) must clearly inform borrowers about the potential impact on the loan of a change in the reference rate leading to changes in EMI and/or loan tenure or both. Thereafter, the borrower will immediately be informed through appropriate channels of any extension of ERI/loan tenure or both for the above reason,” RBI said. It stated that during the recovery of interest rates, RE should offer borrowers the option to switch to a fixed rate as per the policy approved by the government.
According to the RBI, the policy should specify the number of times a borrower is allowed to switch during the loan period.
Borrowers should also be given the option to improve the EMI or extend the loan term or a combination of both.

They should also be given the option to prepay in part or in full at any time during the loan term.