RBI Loan Guidelines and Thumb Rules

Transparency is Key: Lenders must provide a Key Fact Statement (KFS) detailing all loan costs, interest rates, tenure, and fees upfront. All charges, including penal charges, must be disclosed and cannot be capitalized (no interest on penalties).
Written Agreements: A comprehensive loan agreement and all enclosures must be provided in writing.
Timely Processing: Lenders must acknowledge loan applications and specify processing timelines. For small loans (up to ₹2 lakhs), rejections must be communicated in writing with reasons.
Holistic Assessment: Creditworthiness, not just collateral, should be the primary basis for loan approval.
Prepayment Flexibility: Prepayment charges are waived for individual borrowers on floating interest rate loans.
Fair Recovery: Recovery agents must adhere to a strict Code of Conduct, prohibiting harassment and intimidation. Borrowers have rights regarding meeting places and can take legal action against illegal tactics.
Consumer Protection: Lenders need explicit permission for data collection and sharing. Borrowers should only engage with RBI-authorized institutions and be digitally aware to prevent fraud.
Grievance Redressal: Lenders must have a grievance redressal system, and unresolved complaints can be escalated to the Reserve Bank – Integrated Ombudsman Scheme.

Credit Score Matters: A strong credit score (typically 750+) is crucial for eligibility.
Income & KYC: Comprehensive income proof and standard KYC documents are mandatory.
Loan-to-Value (LTV) Ratios:
- Up to ₹30 lakhs: 90% LTV .
- ₹30 lakhs to ₹75 lakhs: 80% LTV .
- ₹75 lakhs and above: 75% LTV .
Exclusions from LTV: Stamp duty, registration charges, and documentation fees are not included in the LTV calculation and must be paid separately by the borrower .
Tenure & Insurance: Maximum tenure is commonly up to 20 years. Home Loan insurance is strongly recommended, though not mandatory, to protect families in unforeseen circumstances.

Eligibility: Typically, applicants should be between 18-65 years, with minimum gross monthly income (e.g., ₹25,000 for new cars) or net annual income for self-employed.
Loan Quantum: Up to 90% for new vehicles, and generally 70% for used vehicles (often with an age limit of 3 years for the vehicle).
Repayment Tenure: Up to 60 months for two-wheelers and up to 84 months for four-wheelers.
Interest Rates: Often linked to the borrower’s CIBIL Personal Score, with higher scores leading to lower rates .
No Prepayment Penalties: Many lenders offer no prepayment penalties for individual borrowers on vehicle loans.
Processing Fees: Applicable fees vary by vehicle type (e.g., 0.25% for new four-wheelers, 1.0% for two-wheelers/old vehicles), with concessions for electric vehicles.

Loan-to-Income (LTI) Ratio Cap: As of 2025, your total EMIs (existing + new loan) cannot exceed 50% of your monthly income. Lenders must verify existing debt.
Debt-to-Income (DTI) Management: Aim to keep total EMIs below 40% of monthly income for better approval chances.
Credit Score Impact: A credit score of 750+ offers the highest eligibility and lowest rates. Lower scores result in restricted eligibility, higher rates, and potentially more documentation or a co-applicant.
Stricter Assessment: Lenders conduct more detailed income verification, comprehensive credit history checks, and employment stability assessments.
Digital Lending Guidelines: Digital platforms must display all matching loan offers fairly, disburse directly to bank accounts, and cannot automatically increase loan limits without explicit request.

Timely Processing: Credit decisions for loans up to ₹25 lakh to Micro and Small Enterprises (MSEs) should not exceed 14 working days.
No Collateral for Small Loans: Scheduled Commercial Banks (SCBs) are mandated not to accept collateral security for loans up to ₹10 lakh extended to MSE units.
Working Capital Norms: For borrowal limits up to ₹5 crore, working capital requirements for MSE units should be a minimum of 20% of their projected annual turnover.
External Benchmark Linkage: Banks are advised to link interest rates for MSME loans to an external benchmark for transparency.
Co-lending Norms (Effective Jan 2026):
- Borrowers will be charged a blended interest rate based on weighted average contributions.
- A single point of contact must be specified for the borrower throughout the loan lifecycle.
- Uniform NPA tagging is required across co-lenders for early stress recognition.
Government Schemes & Digital Platforms: Leverage initiatives like CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) and MCGS-MSME for credit guarantees. Utilize digital platforms such as TReDS, ULI, GST Sahay App, and Jansamarth portal for easier and faster credit access.