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
