Banks and NBFCs are not permitted to levy foreclosure charges on any floating rate term loan sanctioned to individual borrowers for purposes other than business
Announcing the fourth bi-monthly monetary policy for the current financial year on Wednesday, RBI Governor Shaktikanta Das proposed changes in guidelines for lenders regarding foreclosure charges, and prepayment penalties on floating rate term loans.
Das said that the Reserve Bank has taken several measures over the years to safeguard consumer’s interests.
As part of these measures, Banks and NBFCs are not permitted to levy foreclosure charges/ prepayment penalties on any floating rate term loan sanctioned to individual borrowers for purposes other than business.
“It is now proposed to broaden the scope of these guidelines to include loans to Micro and Small Enterprises (MSEs),” Das said.
Das said a draft circular will be issued for public consultation.
The RBI on Wednesday decided to keep the policy rate unchanged for the tenth time in a row but changed its stance to ‘neutral’ which may lead to a cut in the forthcoming policies.
RBI maintained the status quo despite the US Federal Reserve lowering the benchmark rates by 50 basis points last month. The central banks of some developed nations have also reduced their interest rates.
Announcing the fourth bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.
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The RBI has maintained the status quo on benchmark interest rate since February 2023.
Das said RBI will remain watchful of elevated food inflation even when India’s GDP growth remains strong.
This was the first meeting of the reconstituted MPC. The three newly appointed external members are Ram Singh, Saugata Bhattacharya and Nagesh Kumar.
The MPC was reconstituted by the government last month.
