The Reserve Bank of India (RBI) has prohibited bank and non-bank lenders from charging prepayment fees for individual borrowers’ floating rate loans. The new regulations, which go into effect on January 1st of next year, will facilitate early loan repayment and penalty-free lender switching for borrowers.
Relief for individual borrowers
The RBI stated in a notification that non-banking financial firms (NBFCs) and commercial and cooperative banks among regulated entities (REs) are not permitted to levie pre-payment fees on variable rate loans for non-business uses.
Veena Srivastava, chief general manager of the RBI, stated in the circular that this action guarantees that borrowers are not bound by unfavorable loan arrangements and can choose the options that best serve their financial interests.
Customers with fluctuating interest rates on personal, auto, and home loans can now cancel their loans sooner without worrying about extra fees.
