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Key Fact Statement

Definition

A Key Fact Statement is a standardised document that outlines the key terms and conditions of a loan provided by a lender before the borrower signs the loan agreement.

What is a Key Fact Statement?

A Key Fact Statement (KFS) is a standardised document that lenders provide to borrowers before they accept a loan offer. It lists the most important details of the loan in a clear, easy-to-understand format and helps borrowers know exactly what they are agreeing to. A KFS generally includes the loan amount, interest rate, Annual Percentage Rate (APR), repayment tenure, EMI, processing fees, foreclosure charges, late payment penalties, and any other applicable costs.

The primary purpose of a KFS is to help borrowers clearly understand the loan terms, compare loan offers from various lenders, and make an informed financial decision. The Reserve Bank of India (RBI) introduced the KFS requirement as part of its efforts to encourage responsible lending practices and protect borrowers from hidden charges or unclear loan terms. Thus, every borrower must review the KFS carefully before accepting a loan because it outlines the key financial terms and obligations that apply to the loan.

What Must A Key Fact Statement Include?

Name of the borrower and lender
Loan account number (or proposal number)
Type of loan
Sanctioned loan amount
Applicable interest rate
Annual Percentage Rate (APR)
EMI amount and repayment schedule
Total repayment amount
Processing fees
Documentation charges, if applicable
Late payment charges
Foreclosure or prepayment charges
Other applicable fees and taxes
Cooling-off period
Terms and conditions
Responsibilities of a borrower
Responsibilities of a lender
Contact details of LSP acting as a recovery agent
Contact details of the grievance redressal officer

Key Fact Statement vs Sanction Letter

Key Fact Statement	Sanction Letter
Summarises the important details of a loan	Confirms that the lender has approved the loan
Uses a standardised format	Format differs across lenders
Focuses on transparency and disclosure	Focuses on loan approval and conditions
Highlights interest rates, charges, APR, and repayment details	Includes sanctioned loan amount and approval conditions
Helps borrowers compare loan offers	Confirms eligibility for the approved loan
Mandatory under applicable RBI guidelines for eligible lending products	Forms part of the loan approval process
Informs borrowers about the total borrowing cost	Informs borrowers about the approved credit facility

Benefits of a Key Fact Statement for Borrowers

Provides complete transparency into loan costs
Simplifies comparison between multiple loan offers
Helps avoid unexpected costs of borrowing
Explains repayment obligations clearly
Supports better financial planning
Improves confidence before loan acceptance
Encourages responsible borrowing
Makes digital loan documentation easier to understand
Promotes informed decision-making
Reduces confusion about loan terms

FAQs

What is a Key Fact Statement?

A Key Fact Statement is a standardised document that outlines the key terms and conditions of a loan provided by a lender before the borrower signs the loan agreement.

Is a Key Fact Statement applicable to digital loans in India?

Yes, a KFS is fully applicable to digital loans. RBI mandates banks and NBFCs like Kissht to provide a standardised KFS to borrowers before they sign a loan agreement.

What is the validity period for the KFS?

The validity period for a Key Fact Statement starts from the date it is provided to the borrower. It remains valid for at least 3 working days for loans with a tenure of 7 days or more and 1 working day for loans with a tenure of less than 7 days.

What should be the language of a Key Fact Statement?

A Key Fact Statement must be in a language understood by the borrower, which means the local vernacular language or a bilingual format with simple, clear words.