RBI Rules: RBI is working on such rules that if you repay the loan before time, then you will not have to pay any type of foreclosure charge to the bank or NBFC. Preparations are being made to give great relief to the loan takers through this.
Loan Foreclosure Charges: If you have also taken a home loan or personal loan from a bank, then this news is useful for you. Yes, the Reserve Bank (RBI) has issued some draft guidelines, in which it has been proposed to remove the foreclosure fee and prepayment penalty on loans with floating interest rates. RBI has sought opinion from the general public on this by March 21, 2025. When these rules are finalized, the changed rules will be applied to loans or advances. Under this, foreclosure will be done after the date mentioned in the final circular. These rules will apply to all banks and NBFCs.
There is no charge on business loan as well
According to the draft, if a person takes a loan with floating rate (changing interest rate), then he will not have to pay any kind of charge for repaying or closing the loan before time. However, this charge will be levied on business loans. Apart from this, no charge will be levied on floating rate business loans given to personal and small businesses (MSE), but some cooperative banks and NBFCs have been exempted from this. This rule will apply to all types of floating rate loans. Whether the loan is taken from anywhere and whether the loan is repaid in full or in part.
There will be no time limit.
Charges on other types of loans will be levied as per the policy of the bank or financial institution. Banks or financial institutions will provide the facility of repaying the loan before time and there will be no minimum time limit for this. If the bank or financial institution itself closes the loan, then no charges will be levied. The rule will also be that all the charges will be informed to the loan taker by the bank in advance. If any charge was waived earlier or was not informed, then it will not be levied later.
What is a floating rate loan?
Floating rate loans are loans in which the interest rate keeps changing. This interest rate changes on some standard like RBI’s repo rate or MCLR. In fixed rate loans, the interest rate remains the same throughout the loan period, but in floating rate loans, the interest rate keeps changing according to the interest rate decisions of RBI during MPC. In simple words, you can also say that in fixed rate loans, the interest always remains the same, whereas in floating rate loans, the interest keeps increasing and decreasing according to the decisions of RBI.
This simply means that when interest rates are low, Gilon borrowers can benefit from lower interest rates. But if interest rates rise, they may have to pay more money. Now, RBI has started reducing interest rates, as it cut the repo rate by 25 basis points earlier this month.
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