Every term you'll come across in your loan documents — APR, EMI, KFS, LTV, NACH, SMA, GNPA and more — explained in plain English.
Loan Glossary
The terms you'll see in your sanction letter — explained.
A
APR (Annual Percentage Rate)
The all-in annualised cost of a loan, including interest + processing fees + insurance + other charges. Always compare APR (not just interest rate) across lenders.
Asset Quality
A measure of how many loans in an NBFC's book are performing vs delinquent. Tracked using metrics like GNPA and NNPA.
C
CIBIL Score
A 3-digit credit score (300–900) issued by TransUnion CIBIL, indicating creditworthiness. 750+ is generally considered good.
Cooling-off Period
A timeframe (typically 1 day per RBI rules) within which a borrower can exit a digital loan without penalty after disbursement.
Co-lending
A framework where two regulated entities (e.g., a bank and an NBFC) jointly lend to a borrower, sharing the loan on their balance sheets in a pre-agreed ratio (often 80:20).
CRAR (Capital Adequacy Ratio)
The ratio of an NBFC's capital to its risk-weighted assets. RBI mandates a minimum of 15% for Base Layer NBFCs.
D
DLA (Digital Lending App)
A mobile or web app through which customers apply for and manage loans, regulated under RBI's Digital Lending Directions 2025.
Disbursal
The act of transferring the sanctioned loan amount to the borrower's bank account.
E
EMI (Equated Monthly Instalment)
The fixed monthly payment that covers both interest and principal repayment over the loan tenure.
e-NACH
Electronic National Automated Clearing House — an Aadhaar-based digital mandate that auto-debits your EMI from your bank account each month.
F
Fair Practices Code (FPC)
A mandatory RBI-issued code of conduct for NBFCs covering transparency, fair lending practices and grievance redressal. Published on every NBFC's website.
FLDG (First Loss Default Guarantee)
An arrangement where one party (typically an LSP) guarantees the first slice of losses on a loan portfolio. Now regulated under RBI's Digital Lending Directions 2025.
Foreclosure
Closing your loan in full before the end of the tenure. For most retail floating-rate loans to individuals, RBI does not allow lenders to charge foreclosure penalties.
G
Gross NPA (GNPA)
Loans where the borrower has not paid for 90+ days, as a % of total loans. A key asset quality indicator.
Grievance Redressal Officer (GRO)
The designated officer at an NBFC or LSP responsible for handling customer complaints. Their contact details must be publicly disclosed.
H
Hypothecation
The legal charge marked on an asset (like a vehicle) where the asset stays with you but acts as security for the loan. Cancelled after loan closure via NOC.
I
Interest Rate
The cost of borrowing money, expressed as an annual percentage. Different from APR, which includes fees.
Income Tax Return (ITR)
Annual tax filing that doubles as income proof for many loan applications.
J
JLG (Joint Liability Group)
A group of 4–10 individuals who collectively guarantee each other's loans, enabling small-ticket credit access in rural and semi-urban markets.
K
KFS (Key Fact Statement)
A standardised, plain-language summary of loan T&Cs that the lender must give the borrower before disbursal. Mandatory under RBI's Digital Lending Directions 2025.
KYC (Know Your Customer)
The mandatory identity verification process under RBI's Master Direction on KYC.
L
LAP (Loan Against Property)
A secured loan where you pledge owned residential or commercial property as collateral.
LSP (Lending Service Provider)
A company that performs one or more functions for a Regulated Entity (NBFC/Bank) — origination, KYC, servicing, recovery. Regulated under RBI's Digital Lending Directions 2025.
LTV (Loan-to-Value)
The ratio of loan amount to the value of the underlying asset/collateral. E.g., 65% LTV means loan = 65% of property value.
M
MITC (Most Important Terms & Conditions)
A standard borrower-facing summary of the loan's key T&Cs, prepared in plain language.
N
NACH (National Automated Clearing House)
An NPCI-operated payment system that lets lenders auto-debit EMIs from your bank account monthly.
NBFC (Non-Banking Financial Company)
A company registered under the RBI Act, 1934, that provides banking-like services (lending, investment) without holding a banking license. Grow Money Capital is an NBFC.
NPA (Non-Performing Asset)
A loan where EMIs are overdue for more than 90 days. NPA classification triggers higher provisioning by the lender.
NOC (No Objection Certificate)
A formal letter issued by the lender after full loan closure, used to remove hypothecation from your vehicle/asset.
P
Penal Charges
Charges levied for delayed EMI payment or other contractual breaches. RBI requires these to be reasonable and proportionate.
Pre-closure
Closing a loan before the scheduled tenure ends. See also: Foreclosure.
R
RBI (Reserve Bank of India)
India's central bank and the regulator for all NBFCs and banks.
RE (Regulated Entity)
Under RBI's Digital Lending Directions, any RBI-regulated bank or NBFC that lends through digital channels — directly or via LSPs. Grow Money Capital is an RE.
Risk-Based Pricing
The practice of charging different interest rates to different borrowers based on their credit risk profile.
S
Sachet Portal
RBI's portal (sachet.rbi.org.in) for reporting unauthorised lending entities and apps.
SMA (Special Mention Account)
A category for loans with payment delays of less than 90 days (before NPA classification). SMA-0: 0–30 days overdue; SMA-1: 31–60; SMA-2: 61–90.
SBR (Scale Based Regulation)
RBI's framework classifying NBFCs into Base, Middle, Upper and Top layers, with progressively stricter regulation. Grow Money is in the Base Layer.
T
Tenure
The duration of the loan, typically in months or years.
Top-up Loan
An additional loan extended on an existing loan account after a satisfactory repayment track record.
U
Unsecured Loan
A loan with no collateral. Approved based purely on income, cashflow and credit history. Typically priced higher than secured loans.
Udyam Registration
Government MSME registration certificate. Often required as business proof for Micro Enterprise Loans.