RBI Policy
Moots non-levy of foreclosure charges on micro, small cos loans
This story was originally published at 13:47 IST on 9 October 2024
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MUMBAI – The Reserve Bank of India has decided to broaden the scope of regulations to micro and small enterprises loans, which restrict banks and non-banking finance companies from leving any foreclosure charges or pre-payment penalties on floating rate term loan to individual borrowers, Governor Shaktikanta Das said in his monetary policy statement detailed Wednesday.
Das said the central bank has taken several measures over the years to safeguard consumer's interest, and as part of these measures, banks and NBFCs are not permitted to levy foreclosure charges or pre-payment penalties on any floating rate term loan sanctioned to individual borrowers for purposes, other than business.
"With a view to safeguard customers' interest through better transparency and customer centricity by lenders, it has been decided to broaden the scope of such regulations to cover loans to Micro and Small Enterprises (MSEs) extended by the Regulated Entities of the Reserve Bank," Das said.
The governor said a draft circular in this regard will be issued for public consultation. End
Reported by Richard Fargose
Edited by Manisha Baxla
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