The RBI today asked banks to immediately stop charging
penalty on the prepayment of home loans taken on floating interest rates.
The apex bank said the Damodaran committee on customer
service on banks had observed that foreclosure charges on home loans were
resented by borrowers.
This is particularly so considering that banks were found to
be hesitant in passing on the benefits of lower interest rates to the existing
borrowers in a falling interest rate scenario.
The removal of the charges or penalty will lead to a
reduction in the discrimination between existing and new borrowers. Besides,
the competition among banks will result in a finer pricing of floating rate
home loans.
Some banks were charging prepayment penalty of 1-2 per cent
of the outstanding loans.
In the monetary policy for 2012-13, the RBI had proposed “not
to permit” banks to levy the charges. It had said detailed guidelines would be
issued separately.
Earlier, the National Housing Bank had directed all housing
finance companies to desist from imposing a prepayment penalty.
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