The Reserve Bank of India (RBI) has introduced new guidelines to make banking and digital lending more transparent.
From now on, banks and loan apps cannot increase your loan limit without your written approval.
Previously, some banks and apps would automatically increase small loans.
For example, if a customer had a ₹20,000 loan, the bank might issue an additional ₹10,000 without consent, citing good credit.
If the customer tried to repay early, penalties were often imposed. RBI’s new rules stop such practices.
Loans Cannot Be Linked to FDs or Savings
The RBI has clarified that banks cannot tie loans to fixed deposits (FDs), savings accounts, or other security plans.
Earlier, some banks required customers to block their FDs until the loan was repaid, even for small loans.
Now, banks can only assess household income and expenses, but cannot use FDs or other accounts as collateral.
This protects customers from unnecessary restrictions and ensures financial freedom.
Stricter Rules for Digital Lending Apps
The new regulations also cover data privacy for loan apps.
Apps can only access data necessary for KYC purposes, like a one-time use of camera, microphone, or location.
Sensitive personal data like contacts, call logs, files, or photos cannot be accessed.
Other important rules include:
Loan documents must be sent via verified email or SMS.
Loan funds must go directly to the customer’s account, not through an app or agent.
Customers must have the option to repay early without penalties.
Information about recovery agents must be shared with the customer in advance.
No third party can control loan transactions.
What This Means for Customers
These changes ensure fair lending practices, protect personal data, and prevent banks or apps from arbitrarily controlling loans.
Borrowers now have greater transparency, safety, and control over their financial transactions.