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No fore-closure charges/pre-payment penalty on home Loans

RBI has issued a Notification to all banks that no fore-closure charges /pre payment penalty be imposed on Floating interest rates home lo...
RBI has issued a Notification to all banks that no fore-closure charges /pre payment penalty be imposed on Floating interest rates home loan. This has been done to have a uniform policy in all the Banks. Few banks have already declared not to impose such charges but remaining are not interested .After this notification from the RBI no bank can charge prepayment charges from Floating Home Loan customers.


All Scheduled Commercial Banks
(Excluding RRBs)
Dear Sir/Madam

Home Loans-Levy of fore-closure charges/pre-payment penalty

Please refer to our circular DBOD. No. Dir. BC. 56/13.03.00/2006-2007 dated February 2, 2007 on reasonableness of bank charges.

2.  In this context, attention is invited to paragraphs 81 to 83 of the Monetary Policy Statement 2012-13 announced on April 17, 2012 with regard to home loans on floating interest rates. The Committee on Customer Service in Banks (Chairman: M. Damodaran)  had observed that foreclosure charges levied by banks on prepayment of home loans are resented upon by home loan borrowers across the board especially since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario. As such, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.

3. The removal of foreclosure charges/prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and competition among banks will result in finer pricing of the floating rate home loans. Though many banks have in the recent past voluntarily abolished pre-payment penalties on floating rate home loans, there is a need to ensure uniformity across the banking system. It has, therefore, been decided that banks will not be permitted to charge foreclosure charges/pre-payment penalties on home loans on floating interest rate basis, with immediate effect.

Yours faithfully,
(Deepak Singhal)
Chief General Manager-in-Charge

COMMENTS

BLOGGER: 2
  1. My Home Loan is with INGVYSYA bank with floating Intrest Rate,Loan amount is Partly Disbursed so it is in PRE-EMI mode. i enquired with the same bank regarding no penalty for Preclosure by switching from INGVYSYA to other Bank for that they responded as even though my loan is in floating rate of intrest but it is in PRE-EMI mode so no prepayment waivers are applicable if i need to transfer they are asking 3% prepayment charges
    whether RBI had rule for prepayment penalty waiver like this?
    Kindly clarify my Doubt and provide me suggestion?

    ReplyDelete
    Replies
    1. RBI has not given any exemption for such situation ,so you should file a complaint with bank Zonal/regional office.

      Delete
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SIMPLE TAX INDIA: No fore-closure charges/pre-payment penalty on home Loans
No fore-closure charges/pre-payment penalty on home Loans
SIMPLE TAX INDIA
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