RBI may take banks to task for penalising loan prepayments

The Reserve Bank of India has voiced its displeasure with a section of banks levying high prepayment penalties on foreclosure of housing loans, according to The Economic Times.

February 04, 2011 / 18:02 IST

The Reserve Bank of India has voiced its displeasure with a section of banks levying high prepayment penalties on foreclosure of housing loans. According to The Economic Times, the RBI is considering telling banks to ease the burden on home loan borrowers willing to prepay the loan in its entirety, even as the Competition Commission of India finds such penalties legally valid.

The newspaper reports that banks like ICICI ask borrowers to pay up to 2% of the outstanding balance plus service tax and surcharges in case of full prepayment. IndusInd Bank charges up to 4% of the principal outstanding in some cases. However, SBI spares its home loan borrowers from paying prepayment charges but levies a penalty if the money repaid comes from borrowed money.

Source: The Economic Times

first published: Feb 4, 2011 06:00 pm

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