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

RBI/2013-14/603
UBD. CO. BPD. PCB. Cir. No. 64/12.05.001/2013-14

May 26, 2014

The Chief Executive Officers of
All Primary (Urban) Co-operative Banks

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

Please refer to our circular UBD.BPD (PCB).Cir.No.41/12.05.001/2011-12 dated June 26, 2012 on ‘Home Loans- Levy of Fore-closure Charges/ Pre-payment Penalty by UCBs’.

2. A reference is invited to Part B of the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014proposing certain measures for consumer protection. It was indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Accordingly, it is advised that urban cooperative banks will not be permitted to charge foreclosure charges/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect

Yours faithfully,

(A. K. Bera)
Principal Chief General Manager