Reserve Bank of India (RBI) has once again issued circular dated 02.08.2019 clarifying that banks shall not charge foreclosure charges or pre-payment penalties on any floating-rate term-loan sanctioned for purposes other than business to individual borrowers with or without co-obligant(s). Earlier about a decade back, RBI in an RTI response dated 03.09.2009 had clearly stated that RBI does not approve policy of charging penalty or foreclosure charges.
In this period of ten years, RBI had waived concept of foreclosure-charges in a phased manner rather than totally like starting from such waiver only for home-loans. But even the latest circular dated 02.08.2019 has not completely met with RBI policy of not approving foreclosure-charges as revealed in ten-years old RTI response dated 03.09.2009. Latest circular dated 02.08.2019 is applicable only in respect of banks that too not in respect of business-loans. In continuation of RBI policy of giving undue favours to Non-Banking-Financial-Companies NBFC, latest circular dated 02.08.2019 is not applicable on NBFCs.
RBI must stick to its ten-year old stand of not approving basic concept of foreclosure charges since such an anti-public concept deprives people of getting rid of being loan-burdened. RBI should issue a fresh unconditional circular abolishing basic concept of foreclosure-charges even for business-loans and NBFCs for all types of loans.
SUBHASH CHANDRA AGRAWAL