RBI removes prepayment penalty on loans: Relief for borrowers

Borrowers who have taken loans from banks and financial institutions can now repay their loans early at any time. The Reserve Bank of India has prepared a new draft that prevents banks from charging penalties for early loan repayment.

No Penalty for Early Loan Repayment: RBI's Good News

Previously, banks or financial institutions charged a penalty for early loan repayment. This prepayment fee applied to loans with variable interest rates.

Bank Rules

This rule is changing soon. Now you can repay the loan at any time. No bank can charge a penalty if the loan is prepaid.

Reserve Bank

This rule also applies to small and micro enterprises. The Reserve Bank has prepared a draft for this. The final decision will be taken after consulting stakeholders by March 21, 2025.

Prepayment Fee

No lender under the Reserve Bank should charge a prepayment fee. Currently, some institutions charge a prepayment fee for variable interest rate loans.

Cannot Impose Penalty

There is no prepayment fee for loans other than business loans. Tier 1 & 2 banks, NBFCs cannot penalize individuals, MSMEs for commercial purposes.