Press Information Bureau
Government of India
Ministry of Finance
01-August-2014 17:03 IST
No Foreclosure Charges by NBFCS on all Floating Term Loans to Individual Borrowers

The Reserve Bank of India (RBI) does not propose to restrict foreclosure charges charged by the Non-Banking Financial Companies (NBFCs) on pre-payment of loans to a maximum of three percent at present. RBI has issued a circular dated 14th July, 2014 to all Non-Banking Financial Companies/Residuary Non-Banking Companies with regard to levy of foreclosure charges/pre-payment penalty on Floating Rate Loans, as a measure of customer protection and also in order to bring in uniformity with regard to pre-payment of various loans by borrowers of banks and NBFCs, stipulating that NBFCs shall not charge foreclosure charges/prepayment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect. The RBI has not received any such data till date regarding NBFCs non-compliance of the directions issued recently on 14.7.2014 on levy of foreclosure charges/pre-payment penalty on floating rate loans.

This information was given by the Minister of State for Finance, Smt. Nirmala Sitharaman in written reply to a question in Lok Sabha today.