Mumbai, May 26 (KNN) In a move which will help the small and medium enterprises, the RBI has asked the urban co-operative banks to allow their borrowers the possibility of prepaying floating rate term loans without any penalty.

“Accordingly, it is advised that urban cooperative 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 today said in a notification.

Floating loan products include housing, corporate, vehicle and personal loans. 

Earlier this month, RBI said in a statement, “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 in its first bi-monthly policy on 1 April 2014 had said that banks should also not take undue advantage of customer difficulty or inattention.

"In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty," RBI had said. (KNN/SD)