The Reserve Bank of India (RBI) has invited comments on its draft circular titled “Responsible Lending Conduct – Levy of Foreclosure Charges/ Pre-payment Penalties on Loans.” The move is part of a broader effort to review existing regulatory guidelines on foreclosure charges and pre-payment penalties, as announced in the Statement on Developmental and Regulatory Policies on October 9, 2024.
The draft circular seeks to address concerns regarding fair lending practices and ensure transparency in loan repayments. Stakeholders and members of the public can submit their comments and feedback via email until March 21, 2025. The RBI has stated that the final guidelines will be issued after considering the inputs received from various stakeholders.
This review is expected to bring greater clarity and consumer protection in loan repayment policies, particularly regarding the charges levied on borrowers for prepaying their loans.