The RBI on Friday proposed to do away with foreclosure charges or pre-payment penalties charged by banks and other lenders on all floating rate loans, including for business purposes, availed by individuals as well as micro and small enterprises (MSEs).
In terms of the extant norms, certain categories of regulated entities (REs) are not permitted to levy foreclosure charges/ pre-payment penalties on the floating rate term loans sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s).
"REs, other than Tier 1 and Tier 2 Primary (Urban) Co-operative Banks and Base Layer NBFCs, shall not levy any charges/ penalties in case of foreclosure/ prepayment of floating rate loans granted to individuals and MSE borrowers, with or without co-obligant(s), for business purpose," an RBI's draft circular said.
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