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Banks withdraw foreclosure charges after MSMEs decide to involve Banking Ombudsman

Updated: Jun 26, 2023 04:57:15pm

Banks withdraw foreclosure charges after MSMEs decide to involve Banking Ombudsman

New Delhi, June 26 (KNN) Two private lenders Infrastructure Development Finance Company (IDFC) First Bank Ltd., and Karur Vysya Bank Ltd., (KVB) have decided to reverse their decision on foreclosure charges unfairly imposed on their MSME customers.

Federation of Indian Micro and Small & Medium Enterprises (FISME) is pro-actively involved in resolving such issues faced by MSMEs and has provided extensive support in these two cases.


Sethia Handicrafts in Jodhpur had complained that IDFC was not cooperating in the closure of their account and imposing foreclosure charges.

The bank reversed its decision after being reminded of RBI’s guidelines that banks have been advised to continue to follow their commitment to MSMEs as failure to adhere to the Code can be a ground for approaching Banking Ombudsman.

According to the Code of Bank’s Commitment for Micro and Small Enterprises’ which was adopted by all commercial banks in 2012, Banks had committed that they would ‘permit prepayment of fixed rate loans up to Rs 50 lakh without levying any pre-payment penalty and also ‘permit prepayment of floating rate loans without levying any prepayment penalty’.

For operational reason IDFC has requested the MSME unit to apply for FCL after the next EMI is recovered.

Similar case of Rathna Sweets in Tirupathur, Tamil Nadu has recently been settled after private lender Karur Vysya Bank Ltd., (KVB) agreed to waive off the pre-closure charges. (KNN Bureau)


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