Explainer: How RBI’s rules on penal charges will help loan borrowers

Hiral Thanawala • April 03, 2024 / 13:13 IST

RBI’s rules on penal charges came into effect April 1. Earlier some banks, NBFCs and HFCs use penal rates of interest over and above the applicable ones, in case of defaults. Now, the RBI guidelines prohibit financial institutions from charging penal rates on loan defaults.

The RBI has prohibited financial institutions from charging penal rates on loan defaults or non-compliance with credit terms.

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