Levy of foreclosure charges/pre-payment penalty on Floating Rate Loans by NBFC

RBI/2019-20/30
DNBR (PD) CC.No.101/03.10.001/2019-20

August 02, 2019

All NBFCs

Madam / Dear Sir,

Levy of foreclosure charges/pre-payment penalty on Floating Rate Loans by NBFCs

Please refer to paragraph 30(4) of Chapter VI of Master Direction - Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and paragraph 30(4) of Chapter V of Master Direction - Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 on waiver of foreclosure charges/ prepayment penalty on all floating rate term loans sanctioned to individual borrowers.

2. It is clarified that NBFCs shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned for purposes other than business to individual borrowers, with or without co-obligant(s).

3. The Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and the Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 have accordingly been updated.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager