prpri Bank should not charge Foreclosure Charges on Floating Rate Term Loans other than Business Loan Bank should not charge Foreclosure Charges on Floating Rate Term Loans other than Business Loan

Reserve Bank of India

RBI/2019-20/29
DBR.Dir.BC.No.08/13.03.00/2019-20

August 02, 2019

All Scheduled Commercial Banks
(Excluding RRBs)
All Small Finance Banks
All Local Area Banks

Dear Sir / Madam

Levy of Foreclosure Charges /Pre-payment Penalty on Floating Rate Term Loans

Please refer to our circulars DBOD. No. Dir.BC.107/13.03.00/2011-12 dated June 5, 2012  and DBOD.Dir.BC.No.110 /13.03.00/2013-14 dated May 7, 2014, in terms of which banks are not permitted to charge foreclosure charges / pre-payment penalties on home loans / all floating rate term loans sanctioned to individual borrowers.

2. In this connection, it is clarified that banks shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s).

Yours faithfully,

(Dr. S. K. Kar)
Chief General Manager

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