RBI New Rules on Loan: The central bank has banned imposing penalty on loan accounts. Along with this, RBI has said that the new rule will be implemented from next year. This new rule of RBI will be applicable to all banks.
Reserve Bank of India: Reserve Bank of India (RBI New Rules) has given great relief to crores of people. RBI has changed the rules regarding penalty and interest rates applicable on loan accounts. The Central Bank has banned imposing penalty on loan accounts. Along with this, RBI has said that the new rules will be implemented from next year. This new rule of RBI will be applicable to all banks. The new rules will be applicable on all banks like commercial, NBFC, co-operative banks, housing finance companies, NABARD, SIDBI.
RBI issued rules
The Reserve Bank of India (RBI) has expressed concern over the trend of banks and non-banking financial companies (NBFCs) using ‘penal interest’ as a means of increasing their revenue. The Central Bank has issued revised rules in this regard. Under the new rules, in case of default in loan payment, banks will now be able to impose only ‘reasonable’ penal charges on the concerned customer.
New rules will come into effect from January 1, 2024
In the notification issued on Friday regarding ‘Fair Lending Practices – Penal Fees on Loan Accounts’, the Reserve Bank said that banks and other loan institutions will not have to charge penal interest from January 1, 2024. Will not be allowed.
Central Bank said this
In the notification of the Central Bank, it has been said that if the borrower does not comply with the terms of the loan contract, a ‘punitive fee’ can be charged from him. This will not be imposed as penal interest. Penal interest is added to the interest rates charged on bank advances. Along with this, the Reserve Bank has clarified that the punitive fee should be appropriate. It should not be biased towards any loan or product category.
Additional interest will not be calculated
The notification states that there will be no capitalization of the penal fee. Additional interest will not be calculated on such charges. However, these instructions of the Central Bank will not apply to credit cards, external commercial loans, trade credit etc. The central bank has said that the intention of imposing punitive interest/fees is to inculcate a sense of discipline in the borrower regarding the loan. This should not be used by banks as a medium to increase their revenue.
