Transparency and disclosure obligations

Transparency and disclosure obligations.—

1. (1) The effective rate of interest charged by the lenders shall be prominently displayed in all its offices, its website, and in the prospectus or brochure or advertisement notices, as the case may be.
2. (2) No Micro Finance Institution
   • (MFI) or Money Lending Agency or Organization shall recover from the borrower towards interest in respect of any loans advanced by it, whether before or after commencement of this Act, an amount in excess of the principal amount.
3. (3) Every Micro Finance Institution
   • (MFI) or Money Lending Agency or Organization shall keep and maintain a cashbook, a ledger and such other books of account in such form and in such manner as may be prescribed.
4. (4) Every loan application form shall include necessary information which may affect the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other money lending entities can be made and a proper decision can be taken by the borrower. Such application form shall indicate the documents required to be submitted with the application form.
5. (5) Every registered lender shall mandatorily comply with the following disclosure and transparency requirements before disbursing any loan:
   • (a) provide a written loan agreement in Hindi language clearly stating the principal loan amount, annual percentage rate of interest calculated on reducing balance method, processing charges, insurance premium if any, penal charges for delayed payment, total cost of credit, monthly installment amount, and complete repayment schedule with due dates;
   • (b) deliver a comprehensive pre-loan disclosure statement to the borrower at least seventy-two hours before loan disbursement, explaining all terms and conditions, borrower’s rights and obligations under this Act, consequences of default, available grievance redressal mechanisms, and contact details of regulatory authorities;
   • (c) establish and maintain an office within the State of Bihar with adequate infrastructure for borrower services, complaint resolution, and document storage, which shall remain accessible to borrowers during prescribed business hours;
   • (d) ensure that all communications, documents, notices, and correspondence with borrowers are provided in Hindi or the local language understood by the borrower, and no borrower shall be compelled to understand or sign documents in any language other than Hindi or the local language;
   • (e) issue computer-generated or properly signed receipts bearing the name, address, and registration number of the lender for every repayment received from the borrower, whether in cash, cheque, or through digital payment modes, and such receipts shall clearly show the amount received, date of payment, and outstanding balance;
   • (f) supply photocopies of all loan-related documents including the loan agreement, repayment schedule, and transaction history to the borrower free of cost within seven working days of written request;
   • (g) display prominently at all branch offices, on websites, and in all advertisements the maximum interest rates charged, processing fees, penal charges, standard terms and conditions of loans, and grievance redressal contact information.
6. (6) Every lender shall provide the borrower a loan passbook or digital loan statement containing the following mandatory information:
   • (a) name, address, and registration details of the lender and complete details of the borrower;
   • (b) principal amount sanctioned and actually disbursed with dates;
   • (c) effective annual percentage rate of interest and method of calculation;
   • (d) detailed breakdown of all charges, fees, insurance costs, and additional expenses;
   • (e) complete repayment schedule showing installment amounts and due dates;
   • (f) acknowledgment and date of all repayments received with running balance;
   • (g) current outstanding principal and interest amounts after each payment;
   • (h) final discharge certificate upon complete repayment of the loan.
7. (7) No lender shall charge any amount, fee, or penalty that is not explicitly disclosed in the loan agreement and pre-loan disclosure statement signed by the borrower.
8. (8) Every lender shall establish a toll-free helpline number staffed by trained personnel for borrower queries, complaints, and assistance, and such helpline shall be operational during business hours on all working days.
9. (9) Submissions of monthly statement by MFIs – Every MFI shall submit a Monthly Statement to the Registering Authority before 10th day of every month giving therein the list of borrowers, the loan given to each and the interest rate charged on the repayment made.
10. (10) Provision of submissions of annual returns – Every MFI shall submit annual returns for the financial year ending 31st March every year before to the Registering Authority latest by the end of month “May” of next financial year.
11. (11) Multiple-lending Over-borrowing.— 1) Non-Banking Financial Company
    • (NBFC) – Micro Finance Institutions
    • (MFIs) can lend to individual borrowers who are not member of Joint Liability Group
    • (JLG) or Self Help Group
    • (SHG) or to borrowers that are members of Joint Liability Group
    • (JLG) or Self Help Group (SHG). 2) A borrower cannot be a member of more than one Self Help Group
    • (SHG) or Joint Liability Group (JLG). 3) Not more than two
12. (02) Micro Finance Institutions
    • (MFI) or Money Lending Agency or Organization shall lend to the same borrower. 4) There shall be a minimum period of moratorium between the grant of the loan and the due date of the repayment of the first installment. The moratorium shall not be less than the frequency of repayment. For Example: In the case of weekly repayment, the moratorium shall not be less than one week. 5) Recovery of loan made in violation of the recovery norms shall be deferred till all prior existing loans are fully repaid. 6) All sanctioning and disbursement of loans shall be done only at a central location and more than one individual shall be involved in this function.