State Bank of India (SBI) has decided to abolish pre-payment charges on home loans, giving some succour to borrowers who want to foreclose their accounts.
“We have decided to do away with the pre-payment charges on all kinds of housing loans with immediate effect,” a senior official of the bank told PTI.
The bank had been charging pre-payment penalties only on housing loans with floating interest rates taken before May, 2011, the official said.
It had been charging about 2 per cent of the outstanding amount as penalty if the borrowers opted to foreclose their loans.
At present, some banks are charging up to 2 per cent as pre-payment penalty on the loan outstanding, if a borrower settles the full payment before maturity by switching over to another lender.
No pre-payment fine is charged if the borrowers pay using their own funds. It may be noted that the Reserve Bank of India has indicated that it would scrap prepayment penalties charged by banks.
