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Prepayment penalty guidelines still due to come: RBI


Prepayment penalty guidelines still due: RBI
Are you planning to prepay your floating-rate home loan? Then just wait till the Reserve Bank of India (RBI) comes out with its guidelines regarding the prepayment.

Early September, Banking Ombudsmen had put their suggestions to RBI that floating-rate home loan borrowers should be waived off prepayment penalty as they already pay high interest rates in times of rising rates scenario.


RBI also took positively but hasn't yet come out with any guidelines or directions.

RBI said that the Indian Banks' Association (IBA) is likely to give its views regarding the removal of prepayment penalty on floating-rate loans by the end of this month, following which the RBI would come out with the guidelines.

“Till now, it is only a recommendation being considered by the RBI. Based on the formal response of the IBA, our regulatory department would then take a considered view and then communicate the guideline or the instructions of the RBI on this to all the banks,” Mr M. Rajeshwar Rao, Chief General Manager of RBI, and the Banking Ombudsman, said on Wednesday.

At present, the prepayment penalty charges on floating-rate loans varies from 1% - 5%.

Banks have been asked to examine the proposal and the IBA is expected to come out with views by the end of this month, Mr Rao added.

Read more about: rbi home loan prepayment penalty
Story first published: Wednesday, September 28, 2011, 13:27 [IST]
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