Loan Borrowers will get relief from this order of RBI: Now banks will not be able to impose arbitrary fine for non-payment of loan installments
If you have missed the loan repayment and have not been able to pay on the due date, then the Reserve Bank has given you relief.
Now banks or NBFCs will not be able to charge arbitrary fine for delay in paying installments of home, car or other loans.
The Reserve Bank has changed the rules, giving huge relief to crores of people of the country who have taken loans.
The Reserve Bank of India (RBI) has expressed concern over the trend of using “penal interest” by banks and non-banking financial companies (NBFCs). The Central Bank has implemented the changed rules in this regard.
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According to the new RBI rules, banks can impose only “reasonable” penal charges on customers who delay loan payments.
On Friday, the Reserve Bank announced “Fair Lending Practices-Punitive Charges on Loan Accounts”.
In this, the Reserve Bank said that from January 1, 2024, banks and other lenders will not be allowed to charge penal interest.
The Central Bank has issued a notice according to which, if the borrower does not comply with the terms of the loan contract, a “penal fee” may be charged from him. This will not be made penal interest.
Fine will no longer be added to interest
In the current system, penal interest on default by banks and NBFCs in installments is added to the interest rates charged on advances.
The Reserve Bank is worried about this. Also, the Reserve Bank has clarified that the penal charge should be fair.
It should not be biased towards any product or loan. The notification states that no additional interest will be given on such charges.
However, the instructions of the Central Bank will not be applicable on business credit, external commercial loan, credit card etc.
The Central Bank said, “The intention of imposing punitive interest/fees is to inculcate a sense of discipline in the borrower regarding the loan.” Banks should not use it as a means to increase revenue.
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