CA Rushabh Shah

CA Rushabh ShahThe RBI, vide its circular RBI/2013-14/ 582 DBOD. Dir. BC. No. 110 /13.03.00/2013-14 dated the 7th of May 2014 has advised all the banks that from immediate effect, there shall be no prepayment penalties / foreclosure charges to individual borrowers for all the floating rate term loans. However, it can be clearly inferred from the notification that business / corporate borrowers do not fall under this purview and hence, there is no benefit available to them.

This comes as a relief to individual borrowers as it not allows them avail the benefits of low rate of interest in the market from bankers. This notification comes a few days after the RBI released the First Bi-Monthly Monetary Policy Statement for 2014 – 15 on April 1, 2014 wherein they specifically mentioned that consumer protection is an integral part of financial inclusion. With this notification, the RBI has indicated that banks cannot take any undue benefit of customers difficulty or inattention. RBI has thus initiated steps towards framing comprehensive customer protection regulations based on domestic experience and global best practices.

 ————————

Relevant RBI Notification is as follows :-

RBI/2013-14/582
DBOD. Dir.BC.No.110/13.03.00/2013-14

May 7, 2014

All Scheduled Commercial Banks
(Excluding RRBs)

Dear Sir/Madam

Levy of foreclosure charges/pre-payment penalty on Floating Rate Term Loans

Please refer to our circular DBOD. No. Dir.BC.107/13.03.00/2011-12 dated June 5, 2012 on ‘Home Loans- Levy of Fore-closure Charges/ Pre-payment Penalty’.

2. A reference is invited to Part B of the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014 proposing certain measures for consumer protection. It was indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Accordingly, it is advised that banks will not be permitted to charge foreclosure charges/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.

Yours faithfully,

(Prakash Chandra Sahoo)
Chief General Manager

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50 responses to “No Prepayment / Foreclosure Charges on Floating Rate Loans of individual borrowers”

  1. Moxesh says:

    Hello
    Please let me know if a NBFC can charge foreclosure/prepayment charges on loan against property given to an Individual borrower and the co borrower is a Huf karta (which is not a firm.)
    The loan was purely given to an individual but Huf was added as a co borrower only for loan eligibility. All the Emis are paid by the Individual alone from his bank account.
    Regards
    Moxesh 9979729595

  2. Prakash. Takhtani says:

    Hello
    Please let me know if a NBFC can charge foreclosure/prepayment charges on loan against property given to an Individual borrower and the co borrower is a Huf karta (which is not a firm.)
    The loan was purely given to an individual but Huf was added as a co borrower only for loan eligibility. All the Emis are paid by the Individual alone from his bank account.
    Regards
    Prakash
    9867334052

  3. Rajesh says:

    Dear sir I have taken 1140000 amount in 09-2014 but I am closing on 09-2016 but magma has given 1144000 and they charges fore closing charges is it APPLICABLE.

    Please suggest the same

  4. Bhupen Jain says:

    hello, i m bhupendra jain owner of a pvt ltd co, my bro ther is employed with my co, he has availaed a home loan and my co has become a co borrower in the same loan. now he wants to forclose the loan but tata is saying that full penalty of 2 % is applicable even if the loan is availed by individual and the co is co borrower to it, hence please guide what should be the outcome of this

  5. Mak says:

    Mr. Rushabh, as per your posting, RBI has said “All Scheduled Commercial Banks [excluding RRB]” in their notification, so do NBF like chola / tata come / controlled under this policy? As Chola is currently asking processing fee 1% to 2% on Principal for reducing the interest rate from 13% to 12%. If foreclosed from other source of if funds [banks / NBF] it is 4%. Is this correct?

  6. dhiraj says:

    KINDLY MAIL THE forcloser query on xcelcapital09@gmail.com
    will give assistance to NIL the For-closer charges with Banks & NBFC..
    Dhiraj.

  7. Kirti Jain Kothari says:

    Rushabh ji, we are a MSME unit, we have taken CC loan from HDFC bank for our business in the year 2013 Aug, since their services are very poor we have shifted our account to BOB this January, now to release the documents they are asking for Foreclosure charges to the tune of 2%.
    Pls Suggest.

    The banker is holding the documents asking for 1 Lakh rupees as pre-closure charges.
    for the working capital loan of Rs.50 Lakhs., Pls suggest.

    regards
    Kirti Jain Kothari

  8. Mayur Shah says:

    Sir, I have availed a home loan(Floating/Variable Rate) from HDFC Ltd. with main applicant as Individual and co-applicant as HUF

    Now, when i approached the Bank for foreclosure, they have levied me prepayment charges of 2%, stating me that, as HUF is a co-borrower, I shall be liable to foreclosure charges.

    Please help me with this regards, whether foreclosure charges shall be leviable on me or not?

    Your help will be greatly appreciated.

    MAYUR SHAH
    98201 70525.

  9. P.Thangaraj says:

    sir, i had taken 42,50,000/- in cholamandalam invesment and finance company ltd. after the completion of 13 EMI, now i take over my loan to HDFC LTD. from CIFCL they charged 4%+14.5% ST of my outstanding.Applicant is my Father and co applicants are me and my mother. Iam serviced my loan in floating rate only. How can they charged me. Kindly advice me to recover the charges from them ???

    Thanking you.

    • T Ramreddy says:

      Sir I have taken loan of Rs 3,10,,00,000 in May 2013 under loan rental discount(LRD) from ICICI Bank with floating rate of interest with repeated requests Bank not agreed to lower the rate of interest Axis Bank come forward to takeover this loan at lower rate of interest I want change over to Axis Bank loan to save Rs 35,000/- per month on the interest only. Icici in their sanction letter 4% prepayment is applicable.
      Please advise us prepayment charges applicable to us or not? Please reply

  10. POONAM TYAGI says:

    SIR, I HAVE TAKEN A LOAN AGAINST PROPERTY in my PROPEIRTORYSHIP FIRM FROM Indiabulls Housing Finance FOR Rs.9000000 WHICH I HAVE TO FORECLOSE. Indiabulls HAS CHARGED ME 5.62% PRE-CLOSURE CHARGES. REQUEST PL ADVICE IF ANY NOTIFICATION IS THERE TO GET OUT OF THESE FORECLOSURE CHARGES. FURTHER PLEASE ADVICE IF IT IS ALSO COVERED UNDER THE NOTIFICATION NO.RBI/2013-14/ 582.

  11. rajesh bante says:

    dear sir
    myself taken a loan of Rs.1 core for industry,after one year again put up loan for Rs.21.50 which is sanctioned but not disbuds and against that additional mortgage also done,now what to do?

  12. varghese says:

    i have a lap at india bulls,i am a properitor.applicant is the company and me .As i am the properitor of the company or the only owner of the company ,as per the new circular
    the preclosing charge on my lap with the india bulls can be levied. because the charge is 5.7 is their preclosing charge rate .could you please advise me on the same ,

    thanking you,
    varghese

  13. Naresh Kumar says:

    I taken lap loan from India bull on this base of sole proprietors
    please tell us about foreclosure is applicable or not on urgent bases

    they are charges About 5.70% foreclosure near about 3 lacs

    please help us

  14. ARUN AGRAWAL says:

    LOAN AGAINT HOUSE ….MORTGAGE LOAN PAR HUF KE KAARAN FORCLOSER CHAGRES LAGTE HAI KYA ?? PLZ COMFIRM SIR .

  15. suresh n says:

    sir i had taken a loan against property at cholamandalam investment and finance company,the loan is being balance transferred to another bank because of lower interest rate, is the foreclosure charges applicable to me , applicant being me i.e my proprietoship company and co-applicant being my father pls do guide me

  16. vengat says:

    Sir I am taken a loan from ICICI Bank Interest in floating for individual name and co applicant my company. if applicable for prepayment charges?

  17. amarnath says:

    sir, I have taken loan from HDB one year back now I approached LIC home finance due to less interest rate how much percentage will be the loan closing charges

  18. Vishal Joshi says:

    Sir, we had taken loan against property considring me, my wife, my son & my proprietorship company whose proprietor is huf as applicant & co-applicant, now I want to switchover the loan and the bankers are charging penalty of 4%, as the penalty is only if pvt.ltd co or partnership company is involved proprietorship company is treated as individual only, please guide us.

  19. sandeep says:

    From 2years I am paying emi with out fail to hdb bank but 6 months back I taken top up loan bur now I want close my mortgage loan but hdb man is not provideING flore closer letter what I need to do plz lelf me 919945056369

  20. Ramesh savani says:

    Dear Sir,

    We have taken LAP from HDB FINANCIAL SERVICES LTD ON MARCH-2013 at Bhavnagar Branch (Rajkot office,Gujarat) on individual borrowing. He was given condition to credit in Firms current account and repayment for the said account.I have to foreclose this loan at this time, they will charge 4.49% on this loan. Pls advice me for this loan.What should I do? whether i have to pay or not.

  21. CS Rahul Gore says:

    This loan foreclosure criteria is not applicable to corporate customers. This is applicable to only individuals i.e. retail customers. In fact, the retail customers who have availed a loan from bank or NBFC, are falling under this catagory of non payment of foreclosure. Please refer:
    https://taxguru.in/rbi/banks-levy-foreclosure-charges-prepayment-penalties-floating-rate-term-loans-sanctioned-individual-borrowers.html

    Best Regards

  22. Nagendra dubey says:

    SIR, I HAVE TAKEN A LOAN AGAINST PROPERTY PROPERTITYSHIP FIRM FROM Indiabulls Housing Finance FOR Rs.24700000 WHICH I HV foreclose ON 19DEC14 Indiabulls HAS CHARGED ME 5.62% PRE-CLOSURE CHARGES REQ PL ADVICE HOW I CAN Rebate THIS CHARGE.

  23. JAYESH DAVE says:

    SIR,

    I HAVE TAKEN A LOAN AGAINST PROPERTITY FROM KOTAK MAHINDRA BANK FOR Rs.35,00,000
    WHICH I HV RE-PAID ON 11DEC14 BANK HAS CHARGED ME 4% PRE-CLOSURE CHARGES

    REQ PL ADVICE HOW I CAN RE-COVER THIS CHARGES FROM THEM ???

  24. rakesh poddar says:

    Rakesh Poddar asking advice:-

    I have a loan running with Edelweiss. It is a housing loan on variable rate of interest. I am the applicant and my pvt ltd company is co applicant
    I intend to transfer this loan into another bank. They are asking me to pay 2% penalty / charges.
    Please advise if liable to pay any pre payment penalty fee to Edelwiess for Foreclosure.

    • arun jain says:

      There is No clarity about INDIVIDUAL BORROWERS???

      In my case Citibank tookover my jt home loan and also provided a top up(takeover +enhancement).However they included my pvt ltd company as a co borrower (I and my wife are the only directors and shareholders in the company). Now i want to switchover to another bank.Citibank official informed me that 4% penalty will be levied for foreclosure.Are they right in demanding this prepayment penalty .The asset is owned by me and EMI also goes from my personal bank account. Pls clarify
      Arun Jain –

  25. Tushar Shah says:

    Sir i have taken Rs 20,05,825 Laks of Loan against property from HDB fin services during Mar 2014 at 15% rate of Interest. Now can I Prepayment this loan 24th Nov 2014. The Bank prepayment charge @2.25%. I was pay this charge.
    I Want refund this charge. please advise me how can i refund this charge

  26. arun says:

    Citibank tookover my jt home loan and also provided a top up(takeover +enhancement).However they included my pvt ltd company as a co borrower (I and my wife are the only directors and shareholders in the company). Now i want to switchover to another bank.Citibank official informed me that 4% penalty will be levied for foreclosure.Are they right in demanding this prepayment penalty .The asset is owned by me and EMI also goes from my personal bank account. Pls clarify
    Arun Jain
    bestbrand@gmail.com

  27. O P suther says:

    i take mortgage loan against property from hdb financial service on sept-2012. i have close loan a/c now. but company demand fore closer charge. please advise me fore closer charge payable / not payable.

  28. O P suther says:

    dear sir
    I take mortgage loan against property from hdb financial service Bhilwara rajesthan on march 2014. i have close loan a/c now. but company demand 4% fore closer charge. please advise me fore closer charge payable / not payable.

  29. O P suther says:

    i take mortgage loan against property from hdb financial service on march 2014. i have close loan a/c now. but company demand 4% fore closer charge. please advise me fore closer charge payable / not payable.

  30. Dinesh m bendale says:

    I have taken 2 loan from citibank creditcard they charge me pre close
    charges for my 1st loan is thier
    any wave off for preclose loanplz intimate
    me

  31. Jagdish says:

    Dear Sir
    I have taken a mortgage loan from Indian infoline in individual name
    The asset is owned by me and EMI also goes from my personal bank account.

    While applying for loan , my private limited company was made a co applicant to the loan.
    Now
    If I foreclose the above loan, will foreclosure charges be applicable???
    Kindly advise

    Regards

  32. subash.s says:

    SIR I HAVE TAKEN A LAP LOAN FROM HDB AND ON PRE CLOSURE ARE DEMANDING 4.5% AS PRE CLOSURE CHARGES .PLS KINDLY ADVICE

  33. subash.s says:

    SIR I HAVE TAKEN A LAP LOAN FROM HDB AND ON PRE CLOSURE ARE DEMANDING 4.5% AS PRE CLOSURE CHARGES .PLS KINDLY ADVICE.
    elektrotrade@yahoo.co.in

  34. surajbhan says:

    sir main 6 month phele aapna loan fullerton se lea tha .or ab main apna forecloser letter maang raha hoo to woh mujhe mana or dara rahe hai ki aapko nhi mill sakta forecloser kya yeh baat thik hai
    plz contach me 9582092134

  35. hasmukh patel says:

    i take mortgage loan against property from hdb financial service on sept-2012. i have close loan a/c now. but company demand fore closer charge. please advise me fore closer charge payable / not payable.

  36. V.N.MURTHY says:

    Sir,
    Please let me know whether HDB Financial Services, a Subsidiary of HDFC, is a Bank Regulated under RBI. Does the notification of July 2014 of RBI regarding waiver of foreclosure charges is applicable to loans sanctioned by HDB Financial Services, a Subsidiary of HDFC
    with regards
    V.N.Murthy

  37. Bhagya.N.Murthy says:

    Sir i have taken Rs55.00 Laks of Loan against property from HDB fin services during Dec 2013 at 14% rate of Interest. Now can I Transfer thuis LAP to other Financial Institutions at lower Interest rate without foreclosure charges. Pl enlighten me in this regard

    with regards
    Bhagya.N.Murthy

  38. Anil Kr. Bhaiya says:

    Dear Sir,
    Please clarify the notification by RBI on Levy of foreclosure charges/pre-payment penalty on Floating Rate Loan against property. I have taken a LAP from Edelweiss.

  39. Mubarak AM says:

    Sir, I have taken a loan with india bulls housing finanace.Is waiver of pre closer charges applicable inindia bulls ?( as per Rbi new notification).under what catagery does india bulls comes, is it a nbfc ?

  40. Narendra Singh Yadav says:

    Dear Sir,
    Please clarify the notification by RBI on Levy of foreclosure charges/pre-payment penalty on Floating Rate Term Loans. Is this notification applicable for personal loan.

  41. Varun Aggarwal says:

    I have a loan running with Religare Finvest Ltd.

    It is a Loan Agaisnt Property.

    I intend to pre close this loan. They are asking me to pay 2% penalty / charges.

    RBI in its Bi-Monthly Policy of April or May 2014 had advised banks not to charge customers any penalty or fee for preclosure.

    Please advise if i am eligible for this new notification and not liable to pay any fee to Religare for preclosure.

  42. CA Rushabh Shah says:

    This shall not be applicable to commercial loans provided by Non Banking Finance Companies. The said notification is applicable only to Banks regulated under the Reserve Bank of India. However, if the said Loan against Property is provided by any bank, then it is covered under this notification.

  43. HITENDRA says:

    Please clarify whether this is applicable for Commercial loan taken against Property also. Taken from say Diwan Housing ,India Bulls etc.

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