Loan management software: what Indian lenders need
Every stage a loan passes through, what software has to do at each one under the Reserve Bank’s current Directions, and where a loan management system stops, from the team building ERPStack.
Last updated 21 October 2026
What is a loan management system?
A loan management system runs a loan from application to closure: it records the sanction and Key Facts Statement, disburses, builds the repayment schedule, posts EMIs and accrued interest, flags overdue accounts as SMA or NPA, drives collections and reports to credit bureaus. For an Indian lender it must also follow the Reserve Bank’s rules at each step.
Where ERPStack is today
ERPStack Lending is planned and in development. Nothing on this page is available to use yet, and no part of it has been reviewed or approved by the Reserve Bank.
Sign upWhat does loan management software do at each stage of a loan?
A loan passes through the same stages whatever the product. Each stage creates records the next one depends on, and most of the regulatory rules attach to a specific stage. Since 28 November 2025 the Reserve Bank’s rules for each type of lender sit in consolidated, function-wise Master Directions (RBI press release); the references below are to the NBFC versions.
| Stage | What the software must do | Rule it serves |
|---|---|---|
| Origination | Capture the application, acknowledge it, collect documents and run KYC | KYC Directions, 2025 |
| Underwriting | Pull bureau reports, assess income and existing obligations, apply the credit policy and record the decision | Credit Facilities Directions |
| Sanction and KFS | Issue the sanction letter and a Key Facts Statement with an APR computation and repayment schedule | Responsible Business Conduct Directions |
| Disbursal | Pay out and post the entry; for digital loans, only into the borrower’s own bank account | Credit Facilities Directions, Ch. III |
| Servicing | Generate EMIs, accrue interest, post receipts, handle prepayment and rate resets | Responsible Business Conduct Directions |
| Collections | Track overdue days, levy penal charges (never penal interest) and log every recovery contact | Responsible Business Conduct Directions |
| SMA and NPA classification | Tag SMA-0, SMA-1, SMA-2 and NPA in the day-end process for the relevant date | IRACP Directions |
| Credit reporting | Send credit information to all credit information companies on the prescribed dates | Credit Information Reporting amendment |
| Closure | Settle the account and release property documents held as security | Responsible Business Conduct Directions |
The classification step is the one most often built wrong. The Reserve Bank’s IRACP Directions say an account is flagged overdue in the day-end process for its due date, and SMA or NPA status takes the calendar date for which that process runs, whatever time it actually runs (IRACP Directions). The SMA buckets are up to 30 days overdue (SMA-0), more than 30 and up to 60 days (SMA-1) and more than 60 and up to 90 days (SMA-2) (Resolution of Stressed Assets Directions).
Which loan products should a loan management system handle?
Most lenders run more than one product. The lifecycle is shared, but each product adds its own data and calculations, so a useful system configures products rather than hard-coding one.
| Product | What the software has to add |
|---|---|
| Term loans | Fixed or floating rates, EMI or step-up schedules, prepayment and part-payment handling |
| MSME and business loans | Business financials, GST and bank statement analysis, moratoriums and limit reviews |
| Gold loans | Ornament details, purity and weight, valuation, loan-to-value tracking and auction workflow |
| Vehicle loans | Dealer disbursal, hypothecation, registration and insurance tracking |
| Microfinance (JLG) | Groups and centres, household income assessment, weekly or fortnightly collections in the field |
| Loan against property (LAP) | Property documents, legal and technical valuation, mortgage creation and release |
Microfinance has the most product-specific rules: an income limit, a cap on household repayments and its own conduct code. See microfinance software.
Which RBI rules does loan management software have to follow?
These are the rules that change what the software calculates or shows, not the whole rulebook. They are taken from the Reserve Bank’s NBFC Directions; banks have parallel Directions of their own.
| Rule | What it means for the software | Source |
|---|---|---|
| Key Facts Statement | Standard KFS with a unique proposal number, an APR computation sheet and the amortisation schedule, for retail and MSME term loans sanctioned from 1 October 2024 | RBC Directions, para 29 |
| Penal charges | Penalties as flat charges, not added to the interest rate, never capitalised; for fresh loans from 1 April 2024 | RBC Directions, para 30 |
| Prepayment | No prepayment charges on floating rate loans to individuals for non-business purposes | RBC Directions, paras 33–34 |
| Flow of funds (digital loans) | Disburse to the borrower’s account and collect into the lender’s account, with no pool account of a third party | Credit Facilities Directions, para 10 |
| Asset classification | SMA and NPA tagged in the day-end process; NPA after more than 90 days overdue for most NBFCs | IRACP Directions |
| Credit reporting | From 1 July 2026, data as on the 9th, 16th, 23rd and last day of each month, with a full file by the 5th | CIR Amendment Directions |
| KYC | KYC records uploaded to the Central KYC Records Registry within 10 days of starting the relationship | KYC Directions, 2025 |
Software can calculate and record these things; it cannot make a lender compliant. The board-approved policies, the credit decisions and the conduct of staff and agents remain the lender’s responsibility.
What is a loan management system not?
Buyers often expect a loan system to do jobs that belong to other systems. The usual three:
- Not a core banking system. It does not run deposit accounts, cheque clearing or the payment rails. A bank needs core banking as well; most NBFCs need a loan system plus accounting.
- Not a credit bureau. It sends data to the credit information companies and reads their reports, but the bureau scores and histories belong to the bureaus.
- Not a payment gateway. It creates EMI mandates and reconciles receipts, but money moves through a bank, NACH or UPI. The flow-of-funds rules above also mean no intermediary account should sit in between.
Where it should connect is accounting: every disbursal, accrual, receipt and write-off is a journal entry. See the accounting module for how ERPStack plans to post them.
What is ERPStack Lending planning?
ERPStack is an ERP for Indian small and mid-sized businesses that Perimattic is building. ERPStack Lending is a planned app line for lenders. The plan:
- Configurable loan products covering the lifecycle above, from application to closure.
- KFS generation with the APR computation sheet and repayment schedule.
- Day-end SMA and NPA tagging, with penal charges kept separate from interest.
- Credit information files for the bureaus on the reference dates.
- Disbursals, accruals and collections posted straight to ERPStack accounting.
Status: ERPStack Lending is planned and in development; none of this is available to use yet, and it has no RBI approval or certification. Sign up to tell us how you lend today.
This page is general guidance, not legal or regulatory advice. RBI Directions were checked on 22 October 2026.
Go deeper on lending software
Loan management, answered
What is the difference between a loan management system and core banking software?
Core banking software runs a bank’s deposit accounts, payments and the general ledger for the whole institution. A loan management system handles only the lending side: applications, sanction, disbursal, schedules, collections and loan accounting. Banks usually run both; a lender without deposit accounts typically needs only the lending side plus accounting.
When does a loan become an NPA in India?
For most NBFCs and for microfinance loans of NBFC-MFIs, a loan becomes a non-performing asset when interest or principal stays overdue for more than 90 days. Base Layer NBFCs moved from 180 days to 90 days on a glide path that finished on 31 March 2026. Classification runs as part of the day-end process.
Do Indian lenders have to give every borrower a Key Facts Statement?
For NBFCs, a Key Facts Statement is required for all new retail and MSME term loans sanctioned on or after 1 October 2024, including fresh loans to existing customers; credit card receivables are exempt. The KFS includes an APR computation sheet and the repayment schedule, and is valid for at least three working days for loans of seven days or more.
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