Short answer: Banks and RBI-registered NBFCs must follow RBI rules on disclosing the full cost (APR) in a Key Facts Statement, fair recovery, data privacy, credit reporting and complaint handling, and you can take an unresolved complaint to the RBI Ombudsman. Unregulated lenders and illegal apps offer none of this. Before borrowing, confirm the lender’s name on RBI’s NBFC list or bank list and, for apps, in RBI’s published directory of digital lending apps.
Last updated: 13 October 2026.
Who is allowed to lend in India?
Lending to the public is a regulated activity. The main legitimate lenders are:
- Banks — commercial, small finance, regional rural and co-operative banks, licensed and supervised by RBI.
- NBFCs — companies holding an RBI certificate of registration, listed on RBI’s registered NBFC list, which RBI updates periodically along with a list of cancelled registrations.
- Housing finance companies — regulated by RBI and supervised by the National Housing Bank.
- Licensed moneylenders — governed by state money-lending laws, outside RBI’s consumer protection framework.
Loan apps and websites are often just lending service providers (LSPs) — marketplaces or tech partners — with the actual loan coming from a bank or NBFC behind them. That partner lender is who you must verify. Use our RBI-registered NBFC search or browse the lender directory.
Some apps also show the name of a little-known NBFC as their “partner” without that NBFC actually lending through them. That is why you should match the lender named in your loan agreement and KFS, not just the app’s marketing page, against RBI’s records. If the names do not match, or the app cannot tell you who the lender is, do not proceed.
What you get from a regulated lender
| Protection | Regulated bank / NBFC | Unregulated lender or illegal app |
|---|---|---|
| Full cost disclosed upfront | Key Facts Statement with APR, fees, EMI and total repayable | Fees often hidden or deducted silently |
| Money flow | Disbursal to your bank account; repayment to the lender’s account | Payments through personal or third-party accounts |
| Data privacy | Need-based data, explicit consent; no access to contacts, call logs, files | Contact lists harvested and misused |
| Recovery conduct | Fair practices code; no intimidation or calls at odd hours | Threats and shaming |
| Cooling-off for digital loans | Exit by repaying principal + proportionate APR | None |
| Credit reporting | Repayments reported to bureaus, building your score | No credit history built |
| Complaint route | Grievance officer, then RBI Ombudsman | Police or courts only |
| Closing the loan | NOC and documents returned on time | Disputed balances, no NOC |
1. Transparent cost through the KFS
Regulated lenders must give you a Key Facts Statement before you sign. It shows the annual percentage rate (APR) — interest plus all fees, in one annual number — so you can compare offers fairly. Learn to read it in APR vs interest rate and the KFS.
2. Digital lending safeguards
RBI’s Digital Lending Directions, 2025 cover every loan sourced through apps or websites. Key points: the lender must be named; funds go directly between your account and the lender’s; apps cannot access contacts, call logs, files or media; a cooling-off period lets you exit early; and multi-lender platforms must show all matching offers with APR in an unbiased way. Lenders must also report their apps to RBI, and the list is published on RBI’s website (RBI does not verify the submissions, so it is a check, not an endorsement).
3. Fair recovery and grievance redress
Regulated lenders are responsible for their recovery agents’ behaviour. Every regulated lender must have a grievance officer. If there is no reply in 30 days, or you are unhappy with it, you can complain to the RBI Ombudsman under the Integrated Ombudsman Scheme, 2026, in force since 1 July 2026. See our RBI rules for borrowers for the steps.
4. Fair closure
After full repayment, regulated lenders must return original property documents within 30 days or pay ₹5,000 a day for delays they cause, under RBI’s 2023 instructions. Floating-rate loans to individuals for personal use cannot carry foreclosure charges. Our guide on closing a loan and getting an NOC walks through the process.
5. Your credit score benefits
Regulated lenders report your repayments to credit bureaus. Paying on time builds a record that gets you lower rates later. An unregulated lender’s loan, even if repaid perfectly, does nothing for your score.
Worked example: the real cost of a ₹20,000 loan
| Regulated NBFC (illustrative) | Unregulated app (illustrative) | |
|---|---|---|
| Amount sanctioned | ₹20,000 | ₹20,000 |
| Upfront deduction | ₹500 processing fee + GST, disclosed in KFS | ₹4,000 “service + GST” deducted silently |
| Amount received | about ₹19,410 | ₹16,000 |
| Tenure and rate | 6 monthly EMIs at an illustrative 30% a year | 30 days, “daily interest” |
| Total repayable | about ₹21,300 (shown in KFS) | ₹20,000 + daily interest + late fees |
| If you are 10 days late | Penal charge as disclosed; reported as DPD | Calls to your contacts; balance balloons |
The regulated loan costs more than a bank loan but is predictable and disclosed. The unregulated one costs far more, leaves you with less cash in hand, and puts your privacy at risk. If you already have several short-term app loans, read how to get out of multiple loan apps before taking another.
How to verify any lender in five minutes
- Find the lender’s legal name in the app, website footer, KFS or sanction letter.
- Check it on RBI’s NBFC list (or confirm it is a bank). Our step-by-step verification guide shows how.
- For an app, check RBI’s digital lending app directory; see our RBI digital lending app list.
- Ask for the KFS before accepting; walk away if none is offered.
- Check app permissions: deny any request for contacts, photos or files.
Spotted a loan on your credit report from a company you have never heard of? It may be the NBFC behind an app you used; see unknown lender in CIBIL report. For more scam patterns, read common loan scams and why Play Store availability is not proof of registration.
What changed since 2023
- Key Facts Statements with APR became mandatory for all retail and MSME term loans from regulated lenders in 2024.
- RBI consolidated digital lending rules into the Digital Lending Directions, 2025, adding the published app directory and rules for multi-lender platforms.
- The Integrated Ombudsman Scheme, 2026 replaced the 2021 scheme from 1 July 2026.
Compare personal loan offers from RBI-regulated banks and NBFCs, with clear terms, on FundsTiger.
Frequently asked questions
How can I check if an NBFC is registered with RBI?
Search its legal name in RBI’s list of registered NBFCs on rbi.org.in, or use FundsTiger’s NBFC search. Also check the list of NBFCs whose registration was cancelled.
Is a loan app on the Play Store automatically RBI-approved?
No. Store listing is not regulatory approval. Check that a bank or RBI-registered NBFC is named as lender and that the app is in RBI’s digital lending app directory.
What if a regulated lender does not resolve my complaint?
After 30 days or an unsatisfactory reply, you can file with the RBI Ombudsman through RBI’s complaint management system.
Do RBI-registered lenders always charge low interest?
Not necessarily. RBI does not fix rates for most loans, but regulated lenders must disclose the full cost as APR so you can compare.
Are private moneylenders legal?
Licensed moneylenders operate under state laws, but they are outside RBI’s consumer protections such as the KFS and Ombudsman.
Sources
- RBI: List of NBFCs registered with RBI
- RBI: Digital Lending Directions, 2025
- RBI: Release of property documents on repayment (2023)
- RBI press release: Integrated Ombudsman Scheme, 2026
Disclosure: FundsTiger (Gatimaan Finance Advisors Pvt. Ltd.) is a loan marketplace and lending service provider for RBI-regulated lenders. Aparampaar Finance Pvt. Ltd. (Omozing), one of those lenders, is a related party of FundsTiger. This article is general information, not financial advice. Read your loan agreement and KFS before you decide.