Key Fact Statement for Loans: Automating KFS and APR
Key Fact Statement for Loans: Automating RBI-Compliant KFS and APR Disclosure Across Every Product
Last reviewed: November 2026
A key fact statement for loans is a standardised summary of a loan's cost and terms that the lender must give the borrower before signing. Its centrepiece is the annual percentage rate (APR), which folds interest and every upfront charge into one comparable number.
This guide is for Chief Compliance Officers and Heads of Product at NBFCs and fintech lenders. It covers what the KFS must show, how to get the APR right and how to generate it automatically for every product you sell.
Key Takeaways
- For NBFCs, the KFS rules now sit in paragraph 29 and Annex I of the NBFC Responsible Business Conduct Directions, 2025.
- A KFS is required for all retail and MSME term loans sanctioned from 1 October 2024, with credit card receivables exempt.
- The APR must include third-party charges collected at actual cost, such as insurance premiums.
- No charge outside the KFS can be levied later without the borrower's explicit consent.
Which Loans Need a KFS, and Where Are the Rules Now?
Every retail and MSME term loan needs one, whatever the channel. The rules were consolidated on 28 November 2025.
The RBI's April 2024 KFS circular has been folded into the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025. Banks and other regulated lenders have equivalent provisions in their own entity-wise directions, so confirm clause numbers for your licence type.
Digital loans carry extra duties under Chapter III of the NBFC Credit Facilities Directions, 2025. In a multi-lender app, each lender's KFS must be linked, and the offer screen must show APR alongside amount, tenor, instalment and penal charges.
What Must a KFS Contain?
The Annex I format has two parts: the key terms and an APR computation sheet with the full repayment schedule. Each field must come from a system of record, not a manual template.
| KFS Element | Source System | Common Failure |
|---|---|---|
| Loan amount, tenor, instalment count and amount | Loan origination system | Values typed into a Word template |
| Interest rate type and rate | Product and pricing engine | Floating rate shown without the benchmark and spread |
| Fees payable to the lender | Fee engine | Processing fee shown without taxes |
| Third-party charges | Partner and insurance modules | Insurance premium left out of APR |
| Net disbursed amount | Disbursement module | Gross amount shown instead |
| Total amount payable and APR | Calculation service | APR computed on sanctioned, not net, amount |
| Amortisation schedule | Loan management system | Schedule differs from the booked loan |
| Penal and pre-payment charges | Charge policy tables | Only a website link given |
| Grievance and recovery details | Servicing configuration | Outdated nodal officer contact |
The KFS must be in a language the borrower understands, and its contents must be explained. The lender must then record the borrower's acknowledgement.
How Long Does an Offer Stay Open?
Each KFS needs a unique proposal number. It must stay valid for at least three working days for loans of seven days or more, and one working day for shorter loans.
If the borrower accepts within that window, the lender is bound by the terms. Your system must therefore freeze the price and fees against the proposal number.
How Should APR Be Calculated?
APR is the annual cost of credit, including interest and all charges. The RBI illustration computes it as an internal rate of return on the net disbursed amount.
Illustrative example. An NBFC sanctions a ₹5,00,000 personal loan for 36 months at 14% a year on a reducing balance.
- Instalment: about ₹17,089 a month, so total repayment is roughly 36 × ₹17,089 = ₹6,15,204.
- Total interest: ₹6,15,204 − ₹5,00,000 = ₹1,15,204.
- Upfront charges: a ₹7,500 processing fee to the NBFC and a ₹6,000 credit insurance premium collected for the insurer.
- Net disbursed amount: ₹5,00,000 − ₹7,500 − ₹6,000 = ₹4,86,500.
- APR: solving for the rate that equates 36 payments of ₹17,089 to ₹4,86,500 gives about 15.94%.
Now leave the insurance premium out by mistake. The APR falls to about 15.07%, understating the borrower's cost by nearly 0.9 percentage points.
The lesson for leadership: APR errors usually come from missing charges, not maths. The fix is a single fee register that feeds both the KFS and the ledger.
How Do You Automate the KFS Across Every Product?
Automate it as a by-product of loan booking, not a separate document task. This flow works for term loans, digital loans and MSME products alike.
- Configure products once. Rates, fees, third-party charges, penal charges and pre-payment rules live in versioned product tables.
- Generate at offer stage. The calculation service produces the schedule, net disbursed amount and APR, then assigns a proposal number.
- Render from the template. A document engine fills the Annex I layout in the borrower's chosen language.
- Capture acceptance. E-sign or OTP acceptance is time-stamped against the proposal number and validity window.
- Book what was disclosed. The loan management system books the exact values in the accepted KFS and embeds the summary box in the agreement.
- Guard against new charges. The fee engine blocks any charge not in the KFS unless explicit consent is recorded.
- Deliver automatically. For digital loans, the signed KFS and agreement flow to the verified email or SMS on execution.
A document composition platform handles templates, languages and versioning at scale. The wider principle, covered in compliance by design architecture, is that rules live in configuration rather than in people's memory.
Which Products Are Hardest to Automate?
Standard EMI loans are simple. The difficulty sits in products whose cash flows are irregular or change after sanction.
- Floating-rate loans. Show the benchmark, spread and reset basis, and for EMI personal loans tell borrowers at sanction how rate changes may affect the EMI or tenor.
- Moratorium and step-up schedules. The APR must use the actual schedule, not an averaged instalment.
- Bullet and seasonal MSME loans. Interest-only periods change the IRR and need their own schedule logic.
- Top-ups. A fresh loan to an existing customer needs a fresh KFS, even if the agreement is amended rather than replaced.
- Bundled insurance. Premiums financed into the loan amount and premiums deducted upfront need different treatment in the net disbursed amount.
Test each product type against a hand-checked spreadsheet before launch. Then rerun the tests whenever fees, partners or templates change.
Conversational channels can help borrowers understand the document. A lending chatbot can explain KFS terms in the borrower's language and record that the explanation was given.
Is your KFS generated from the same data that books the loan?
Talk to Our Lending Technology Specialists
Visit Digiqt to see how we build loan journeys with disclosures generated from product configuration.
What Evidence Should You Keep?
Supervisors and auditors will test whether what you disclosed matches what you charged. Keep evidence that proves it, loan by loan.
- Proposal log. Proposal number, version of product tables, KFS issue time and acceptance time.
- Acknowledgement. Proof that contents were explained in the borrower's language.
- Reconciliation. A monthly test comparing charges levied against each loan's KFS.
- Third-party receipts. Receipts or documents for every third-party charge collected.
- Template history. Every version of the KFS template, with the date it went live and who approved it.
When a complaint arrives, this record lets you show exactly what the borrower saw and signed. It also shortens internal audit reviews, because sampling becomes a query rather than a file hunt.
Origination automation makes this easier to sustain. AI agents in loan origination can check KFS completeness before a file moves to disbursement.
Which KFS Mistakes Do Lenders Make?
These errors appear in every product line and are cheap to prevent.
- Static templates. Hand-edited PDFs drift from the booked loan within weeks.
- Gross amounts. APR computed on the sanctioned amount rather than the net disbursed amount understates the cost.
- Website-only disclosures. Penal charges must appear in the KFS and agreement, not just on a web page.
- Expired offers honoured silently. Accepting outside the validity window without a fresh KFS weakens your audit trail.
What Has Changed Recently?
The KFS has become the anchor for other disclosures. From 1 January 2026, whether pre-payment charges apply must be disclosed in the sanction letter, agreement and KFS.
Penal charge amounts and reasons must also appear in the KFS. For digital loans, the KFS must disclose any one-time fee retained on a cooling-off exit and the nodal grievance officer's contact details.
Each of these rules adds a field, not a new document. If your lending platform cannot hold these as configurable rules, every regulatory change becomes a code release.
Want one engine to produce the KFS, APR and agreement for every product?
Talk to Our Lending Technology Specialists
Visit Digiqt to see how we build lending platforms and digital loan journeys for NBFCs and fintechs.
