In its first bi-monthly monetary policy review
on 1 April, RBI had indicated that in the interest of their consumers,
banks should consider allowing their borrowers the possibility of
prepaying floating rate term loans without any penalty. Photo: Pradeep
Gaur/Mint
Mumbai: The Reserve Bank of India (RBI) on
Wednesday said banks cannot levy charges on individual customers if they
choose to close their floating rate loans.
Some banks charge a fee if an individual borrower chooses to close
his or her loan. This fee varies from bank to bank, and is mostly in the
range of 1-3%
In its first bi-monthly monetary policy review on 1
April, RBI had indicated that in the interest of their consumers, banks
should consider allowing their borrowers the possibility of prepaying
floating rate term loans without any penalty.
“Accordingly, it is advised that banks will not be
permitted to charge foreclosure charges/pre-payment penalties on all
floating rate term loans sanctioned to individual borrowers, with
immediate effect,” RBI said in a notification on Wednesday.
PRASHANT SHARMA
PGDM-IIsem
Source-Mint
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