Borrowers will not be fined on pre-payment penalties on all floating rate term loans
Updated: May 07, 2014 01:17:37pm
Mumbai, May 7 (KNN) Banks will not be permitted to charge for foreclosure or pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, RBI today said.
In floating rate loans, the interest rates and monthly instalment amount fluctuates according to rise and fall in the market interest rates.
While proposing certain measures for consumer protection, the apex bank 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, RBI said.
RBI in its first bi-monthly monetary policy statement last month said that consumer protection is an integral aspect of financial inclusion. The Reserve Bank proposes to frame comprehensive consumer protection regulations based on domestic experience and global best practices.
In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Banks should also not take undue advantage of customer difficulty or inattention. (KNN/SD)
In floating rate loans, the interest rates and monthly instalment amount fluctuates according to rise and fall in the market interest rates.
While proposing certain measures for consumer protection, the apex bank 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, RBI said.
RBI in its first bi-monthly monetary policy statement last month said that consumer protection is an integral aspect of financial inclusion. The Reserve Bank proposes to frame comprehensive consumer protection regulations based on domestic experience and global best practices.
In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Banks should also not take undue advantage of customer difficulty or inattention. (KNN/SD)
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