diff --git a/fineract-e2e-tests-core/src/test/java/org/apache/fineract/test/stepdef/loan/LoanStepDef.java b/fineract-e2e-tests-core/src/test/java/org/apache/fineract/test/stepdef/loan/LoanStepDef.java
index b62cc6f4c..35f942855 100644
--- a/fineract-e2e-tests-core/src/test/java/org/apache/fineract/test/stepdef/loan/LoanStepDef.java
+++ b/fineract-e2e-tests-core/src/test/java/org/apache/fineract/test/stepdef/loan/LoanStepDef.java
@@ -65,6 +65,7 @@ import org.apache.fineract.client.models.CommandProcessingResult;
 import org.apache.fineract.client.models.DeleteLoansLoanIdResponse;
 import org.apache.fineract.client.models.GetLoanProductsChargeOffReasonOptions;
 import org.apache.fineract.client.models.GetLoanProductsProductIdResponse;
+import org.apache.fineract.client.models.GetLoanProductsResponse;
 import org.apache.fineract.client.models.GetLoanProductsTemplateResponse;
 import org.apache.fineract.client.models.GetLoansLoanIdDelinquencySummary;
 import org.apache.fineract.client.models.GetLoansLoanIdLoanChargeData;
@@ -3834,4 +3835,32 @@ public class LoanStepDef extends AbstractStepDef {
         assertThat(totalPagesActual).as(ErrorMessageHelper.wrongValueInTotalPages(totalPagesActual, totalPagesExpected))
                 .isEqualTo(totalPagesExpected);
     }
+
+    @Then("Loan Product response contains interestRecognitionOnDisbursementDate flag with value {string}")
+    public void verifyInterestRecognitionOnDisbursementDateFlag(final String expectedValue) throws IOException {
+        final Response<PostLoansResponse> loanResponse = testContext().get(TestContextKey.LOAN_CREATE_RESPONSE);
+        assertNotNull(loanResponse.body());
+        final Long loanId = loanResponse.body().getLoanId();
+
+        final Response<GetLoansLoanIdResponse> loanDetails = loansApi.retrieveLoan(loanId, false, "", "", "").execute();
+        ErrorHelper.checkSuccessfulApiCall(loanDetails);
+        assertNotNull(loanDetails.body());
+
+        final Long targetLoanProductId = loanDetails.body().getLoanProductId();
+
+        final Response<List<GetLoanProductsResponse>> allProductsResponse = loanProductsApi.retrieveAllLoanProducts().execute();
+        ErrorHelper.checkSuccessfulApiCall(allProductsResponse);
+
+        assertNotNull(allProductsResponse.body());
+        final List<GetLoanProductsResponse> loanProducts = allProductsResponse.body();
+        assertThat(loanProducts).isNotEmpty();
+
+        final GetLoanProductsResponse targetProduct = loanProducts.stream().filter(product -> {
+            assertNotNull(product.getId());
+            return product.getId().equals(targetLoanProductId);
+        }).findFirst().orElseThrow(() -> new AssertionError("Loan product with ID " + targetLoanProductId + " not found in response"));
+
+        assertNotNull(targetProduct.getInterestRecognitionOnDisbursementDate());
+        assertThat(targetProduct.getInterestRecognitionOnDisbursementDate().toString()).isEqualTo(expectedValue);
+    }
 }
diff --git a/fineract-e2e-tests-runner/src/test/resources/features/LoanProduct.feature b/fineract-e2e-tests-runner/src/test/resources/features/LoanProduct.feature
index 7726a5095..75ac07696 100644
--- a/fineract-e2e-tests-runner/src/test/resources/features/LoanProduct.feature
+++ b/fineract-e2e-tests-runner/src/test/resources/features/LoanProduct.feature
@@ -207,3 +207,9 @@ Feature: LoanProduct
       | Fraud                  |             | 2        | true      | false        |
       | Delinquent             |             | 3        | true      | false        |
       | Other                  |             | 4        | true      | false        |
+
+  Scenario: As a user I would like to verify interestRecognitionOnDisbursementDate flag in loan product response
+    When Admin sets the business date to "01 January 2025"
+    When Admin creates a client with random data
+    And Admin successfully creates a new customised Loan submitted on date: "01 January 2025", with Principal: "1000", a loanTermFrequency: 1 months, and numberOfRepayments: 1
+    Then Loan Product response contains interestRecognitionOnDisbursementDate flag with value "false"
diff --git a/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanproduct/api/LoanProductsApiResourceSwagger.java b/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanproduct/api/LoanProductsApiResourceSwagger.java
index eb7c13701..8e01a143c 100644
--- a/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanproduct/api/LoanProductsApiResourceSwagger.java
+++ b/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanproduct/api/LoanProductsApiResourceSwagger.java
@@ -649,6 +649,8 @@ public final class LoanProductsApiResourceSwagger {
         public GetLoanProductsResponse.GetLoanProductsRepaymentStartDateType repaymentStartDateType;
         public List<StringEnumOptionData> supportedInterestRefundTypes;
         public StringEnumOptionData chargeOffBehaviour;
+        @Schema(example = "false")
+        public Boolean interestRecognitionOnDisbursementDate;
     }
 
     @Schema(description = "GetLoanProductsTemplateResponse")