India's central bank directed lenders on Monday to review practices such as disbursal of loans and application of interest in its latest move aimed at tightening the scrutiny of the sector.

The Reserve Bank of India said it "came across instances of lenders resorting to certain unfair practices in charging of interest", referring to malpractices regarding duration for calculating interest and quantum of repayment installments, among others.

"These are matters of serious concern to the Reserve Bank," it said, asking lenders to take corrective action "including system level changes".

(Reporting by Hritam Mukherjee in Bengaluru; Editing by Krishna Chandra Eluri)