Direct Answer: Under RBI Key Fact Statement rules and Fair Lending norms on penal charges. Banks and NBFCs cannot add unlisted fees or compound penal rates on late personal loan EMIs. clients can audit their loan statement of account to force lenders to reverse hidden visit fees and capitalized penal rates. This simple audit establishes a clean main sum baseline for a 50% to 70% One-Time closure (OTS).
Many personal loan clients with top NBFCs face a sharp shock when they fall behind on loan payments. Lenders such as Bajaj Finserv loan closure targets, Aditya Birla loan closure accounts. Also, Poonawalla Fincorp loan closure cases often claim huge dues. For example. A clients with a Rs. 5 Lakh unpaid loan balance may see the lender demand Rs. 9.2 Lakh within nine months. Lenders do this by adding 36% penal rates right into the loan balance. They also tack on claims visit fees. Legal notice costs. Also, bounce charges. None of these extra costs were shown in the original Key Fact Statement.
Two clear RBI circulars have changed the game for personal loan closures in 2025 and 2026. First. The RBI Circular on Fair Lending Practice bans compounding penal rates. Loan defaults can only draw simple penal charges. Lenders can never add penal rates to the base rates rate. Second. The RBI Key Facts Statement rules make unlisted fees illegal. Any fee left out of the KFS and the Annual Percentage Rate cannot be charged to the clients at any time. By doing a quick statement audit. Clients can wipe out these fake dues. Then. They can settle a fair main sum cut through trusted personal loan closure programs.
How NBFCs Artificially Double Personal Loan Dues After 90 DPD
When you miss three loan EMIs. Your personal loan account crosses 90 days past due. At that mark. The bank or NBFC marks the loan as a Non-Performing Asset. Standard customer service stops. The file moves to calls agents and debt claims desks. At this point. The lender changes the loan ledger math.
Instead of charging simple loan rates. Calls software starts compounding late charges. The lender lumps unpaid EMI sums into the main main sum debt. Then. They charge high monthly penal rates on top of that inflated sum. For instance. An extra 2% to 3% monthly fee is added to the base loan rate. In less than a year. This snowball effect can double the total amount demanded.
In addition. Claims teams add manual ledger fees. clients often see surprise debits on their loan statements. Common hidden fees include:
- Field visit charges of Rs. 1,500 to Rs. 5,000 for each visit by a calls agent.
- Legal notice fees of Rs. 2,500 to Rs. 10,000 for automated form letters.
- NACH bounce fees of Rs. 500 to Rs. 1,000 billed three to four times a month.
- Extra loan broken period charges added during payment breaks.
- Clerical loan file charges disguised as calls handling costs.
These entries are not real borrowed main sum. They are extra fees added by lenders to panic clients into paying. When clients feel trapped. Calls agents offer a fake discount. They offer to waive 20% of the fake total while forcing the clients to pay more than the true main sum debt. Spotting this ledger trick is the first step toward a clean NBFC loan closure.
Rule #1: RBI's Absolute Ban on Compounding Penal Interest Explained
The Reserve Bank of India issued clear rules in Circular DOR.MCS.REC.28/01.01.001/2023-24 on Fair Lending Practice. These rules took full effect across all banks and NBFCs to protect retail clients from unfair debt penalties.
In the past. Lenders punished late payments by raising the loan rates rate. If you had a personal loan at 14% rates. The lender added a 2% monthly penal rate. This pushed your strong rates rate to 38% a year. Because rates compounds on unpaid debt. The penalty generated its own rates every single month. The RBI noted that lenders were using penalties to make profits rather than to build payment discipline.
The RBI circular set three strict rules that every lender must follow:
- Penal Charges Only: Lenders can only charge separate. Flat penal charges for missed loan payments. They cannot add a penal rate to the loan rates rate.
- No Compounding Allowed: Lenders cannot capitalize penal charges. This means no rates can be computed on top of penal charges. Unpaid fees cannot be merged into the main sum to create extra rates.
- Fair Terms for people: For personal loans taken by people for personal needs. Penal charges cannot be higher than what lenders charge firm clients.
If your NBFC statement shows monthly compounding penal rates. That entry breaks RBI rules. In any loan talks. You can demand that the lender erase all capitalized penal rates from your account ledger.
Rule #2: Why Any Charge Missing from Your KFS Document Is Void
clients rights gained huge strength under RBI Circular DOR.STR.REC.13/13.03.00/2024-25. This circular mandates a Key Facts Statement (KFS) for all retail and small business loans across India.
The KFS is a one-page summary given to you before you sign the loan pacts. It explains all loan costs in plain words. It includes the Annual Percentage Rate (APR). The APR shows the true yearly cost of credit. It combines the base rates rate. Processing charges. Insurance costs. Also. All third-party fees into one clear number.
Paragraph 5 of the RBI KFS rules lays down an ironclad consumer shield. It states that any fee or charge not listed in the KFS cannot be charged to the clients at any time during the loan term. Also. Lenders cannot add new fees later without your clear written consent.
This rule gives clients massive leverage when settling bad loans:
- If the KFS does not list a Rs. 2,500 claims visit fee. The lender cannot charge it.
- If the KFS does not name lawyer notice fees. Those charges are legally void.
- If the lender fails to produce your signed KFS. Their fee claims fall apart.
- Any charge debited to your statement without KFS backing must be refunded or wiped out.
During talks. CredSettle checks every line of your loan statement against the original KFS. If a fee is not in the KFS. We demand its full deletion before settling the closure payout.
Forensic SOA Audit: Spotting Illegal Visit Fees & Capitalization
To wipe out unfair charges. You must audit your loan Statement of Account (SOA). Never talk closure numbers on the phone with agents. Call center agents only see inflated balances on their screens. You must look at the full line-by-line transaction ledger from the day your loan was disbursed.
Here is how you can audit your personal loan records in four easy steps:
- Ask for Your Full SOA and KFS: Email your lender customer care and Grievance Officer. Quote your loan account number. Ask for the complete statement of account in Excel or PDF format. Along with your original signed KFS. Under RBI fair rules. Lenders must share these records within seven days.
- Find Your True Disbursed main sum: Check the exact net loan amount credited to your bank account at the start. Count the EMIs you paid before default. Subtract the main sum paid to find your true remaining main sum debt.
- Check Charges Added After Default: Look at every debit entry after your first missed payment. Look for lines named Penal rates. Overdue Surcharge. Or Late Payment Fees. See if the lender added these charges into your main sum column to charge rates on them.
- Flag Unlisted calls Charges: Search for flat fees like Visit Charges. Legal Charges. Tracing Fees. Also, Bounce Fees. Compare every fee against your original KFS sheet.
Once you list these hidden items. Make a simple claim sheet. Separate the true main sum from the illegal charges. This gives you the real legal debt under RBI rules. You can then stop calls agents from demanding fake sums.
