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.
