About Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025:
- It prohibited banks and other regulated lenders from charging prepayment penalties on floating-rate loans availed by individuals for non-business purposes.
- It benefits borrowers of home loans and other floating-rate loans, allowing them to repay loans ahead of schedule without additional fees.
- These new rules will be enforced on all loans which are sanctioned or renewed on or after January 1, 2026.
- The directive will apply to commercial banks and regulated entities (REs) such as NBFCs, excluding specific banks like Small Finance Banks and Regional Rural Banks unless they issue loans up to Rs 50 lakh.
- The exemption applies regardless of whether the loan is repaid fully or partially, the source of funds, or the presence of co-obligants.
- It also includes dual and special rate loans if they are on a floating rate at the time of repayment.
- No minimum lock-in period is required.
- For loans not covered under this rule, lenders must disclose any prepayment charges in the sanction letter, loan agreement, and Key Facts Statement.
- Should a bank fail to include this information, it cannot levy any prepayment charge.
