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Updated: June 6, 2012 01:45 IST

No penalty on pre-closure of home loan

Special Correspondent
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The Damodaran Committee had observed that foreclosure charges levied by banks on pre-payment of home loans were resented by home loan borrowers. File photo
The Hindu The Damodaran Committee had observed that foreclosure charges levied by banks on pre-payment of home loans were resented by home loan borrowers. File photo

The Reserve Bank of India (RBI), on Tuesday, said that banks would not be permitted to charge foreclosure charges / pre-payment penalties on home loans on floating interest rate basis, with immediate effect.

“The removal of foreclosure charges/prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and competition among banks will result in finer pricing of the floating rate home loans,” RBI said in a notification to banks.

Though many banks have, in the recent past, voluntarily abolished pre-payment penalties on floating rate home loans, “there is a need to ensure uniformity across the banking system,” RBI added.

This has also been mentioned by the RBI in its Monetary Policy statement 2012-13 on April 17, 2012.

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I agree with Sundar. This is much awaited good move by the RBI. Also they need to
ensure the increase and decrease in the home loan rates to be in line with the RBI
rates. Consumers have been squeezed for some time from private players like ICICI
Bank.

from:  Rahul
Posted on: Jun 10, 2012 at 15:08 IST

It is indeed a welcome move by the financial regulator, that would
provide much needed relief for those intending to pre-close their loans.
Also the RBI must take steps to ensure that the banks are fast enough in
cutting down interest rates as fast as they increase, as and when the
regulator adjusts the prime lending rates.

from:  Sundar
Posted on: Jun 5, 2012 at 23:23 IST
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