New Guidelines (Draft Circular February 2025)
- No foreclosure or prepayment penalties on floating rate loans sanctioned to individuals (non business purposes).
- Business Loans
- i. Penalty A floating rate loan would not attract a penalty for individual borrowers.
- ii. Applies to all lenders except Tier I & II Primary (Urban) Cooperative Banks and Base Layer NBFCs.
- Objective
- Flexibility from the borrower side
- Reduction of financial burden on individuals and MSEs
- Lending practices to be fair
These measures continue RBI’s legacies of welfare and importance actions to improve consumer protection and transparency in the financial sector.
