APR and the Key Facts Statement
Before a retail term loan, the lender must hand you one page with the real yearly cost, every fee included, and cannot later charge a fee that is not on it.
Verified context. Sources last checked
An interest rate tells you part of what a loan costs. The annual percentage rate (APR) is meant to tell you all of it. RBI’s Directions define APR as “the annual cost of credit to the borrower which includes interest rate and all other charges associated with the credit facility”.
The Key Facts Statement (KFS) is the document that carries it.
What the rules say
- Who gets one. The requirement is “applicable in all new retail and MSME term loans sanctioned on or after October 1, 2024”. Credit card receivables are exempt.
- It must be understandable. “The KFS shall be written in a language understood by such borrowers. Contents of KFS shall be explained to the borrower”, and the lender must obtain an acknowledgement.
- You get time to read it. The terms stay open for “a validity period of at least three working days for loans having tenor of seven days or more”. For shorter loans the minimum is one working day.
- APR includes every charge. “APR will include all charges which are levied by the bank.” Third-party charges the lender collects, “such as insurance charges, legal charges etc., shall also form part of the APR and shall be disclosed separately.”
- No surprise fees. “Any fees, charges, etc. which are not mentioned in the KFS, cannot be charged by the bank to the borrower at any stage” during the loan “without explicit consent”.
- It comes with a schedule. The KFS must include the APR computation and an amortisation schedule.
The wording quoted is from the Directions for commercial banks. The Directions for NBFCs carry the same requirement.
Why the APR can look alarming on a short loan
A fee is a fixed number of rupees. Spread over twenty years it barely moves the yearly cost. Spread over one month it moves it a great deal. In our story One Missed Payday, a one-month loan at 36% a year with a ₹600 fee works out to an annualised rate far above 36%, because the fee is paid for only thirty days of borrowing. The rupee cost is small; the percentage is large. Both statements are true, and the KFS exists so you see both before you accept.
What we could not confirm
The text refers to term loans. We did not find, in the versions we read, whether a KFS is required for overdrafts and similar non-term facilities, so we do not say either way.
Sources
- Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Directions, 2025. Reserve Bank of India, 28 November 2025, updated 1 October 2026. Chapter VIII, Section B, Key Facts Statement for Loans and Advances.
- Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025. Reserve Bank of India, 28 November 2025, updated 1 July 2026. Chapter III, Section B, and the definition of APR.
- Key Facts Statement (KFS) for Loans & Advances, RBI/2024-25/18. Reserve Bank of India, 15 April 2024. The original circular, since carried into the Directions above.
Quotations are from these documents as retrieved on 10 November 2026. Paragraph numbers shift when RBI updates a Direction, so we cite sections by name. This page is general information, not legal advice. For your own loan, the agreement and the lender's written reply are what count.