New Delhi, Mar 7 (KNN) State Bank of India (SBI), India’s leading public sector bank has reiterated its policy of not-levying foreclosure/ pre-payment charges on Micro and Small Enterprises (MSEs).

In a reply to Federation of Indian Micro and Small & Medium Enterprises (FISME), the Chief General Manager of SBI K. Sampath has clarified that SBI has all the processes in place to ensure compliance of Reserve Bank of India’s (RBI) instructions.

“The Bank has laid down instructions for not levying prepayment charges on floating rate term loans sanctioned to micro and small enterprises as defined under MSED Act 2006, irrespective of limit/ outstanding and even in cases of takeover by other banks/ FIs,” CGM SBI replied.

FISME has written to all public and private sector commercial banks following recent RBI’s clarification that levying of foreclosure charges on MSEs against the spirit of Bank Code for MSEs. 

RBI had made it clear to all Banks during the 27th Standing Advisory Committee of RBI held in Kolkata in December 2022 that Bank Code for MSEs was valid and its violation by any Bank could be a fit case to file a complaint to the Banking Ombudsman. 

Post Covid-19, a large number of cases had been reported to FISME by MSMEs where a few private sector banks imposed prepayment charges if the borrower expressed interest to change the Bank. 

After FISME’s campaign, while private Banks like ICICI have dropped the prepayment clause altogether from sanction letters, Banks like Axis, HDFC etc continue to defy the Banks Code for MSEs.  (KNN Bureau)