RBI clarifies on foreclosure penalty

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The Reserve Bank of India on Friday clarified that banks and non-banking finance companies cannot impose foreclosure charges/pre-payment penalties on any floating rate term loan sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s).

The central bank has done away with foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers with effect from May 7, 2014.

Courtesy: The Hindu business Online