RBI New Guidelines: Important news for loan takers. According to the new guideline from RBI, the borrower has got some relief… Read the full news to know the complete information related to this latest update.
RBI issues Draft on Penal Charges in Missing Loan EMI: Have you taken loan from any bank or financial institution? Have you also missed paying the loan installment ie EMI on time? If so, then this news is of your use.
Reserve Bank of India i.e. RBI has taken an important step to give great relief to the people taking loans from various banks and financial institutions. In order to give more transparency to the customers in loan related matters, the Central Bank of the country has prepared a new draft regarding Penal Charges.
Banks or Financial Institutions or Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) charge huge interest along with compounding if the loan amount is not repaid within the stipulated time or on delay. Keeping all these aspects in mind, RBI has prepared a new draft. Experts say that this new rule of RBI will greatly benefit the borrowers. Expressing his argument, he said that many banks will now charge penal interest instead of penal charges for delay in repayment.
These are the new rules-
- RBI’s draft includes penal charges to be charged through banks and other financial institutions, interest rate on late payment, terms and conditions of hefty penalty charges, revision of interest rate as per regulated orders and much more.
- In a recent notification released on the Central Bank’s website, RBI has asked banks, NBFCs and housing finance companies (HFCs) to give their opinion on this draft by May 15.
- What will be changed regarding penalty charges – In the recent draft, RBI’s focus has been more on penalty charges. The Central Bank has noticed that banks are using the freedom given by RBI to impose fines to increase their revenue.
- Generally, in case of default in repayment of loan amount on behalf of the customers who have taken loan from the bank, instead of penalty charges, the loan issuing banks impose penalty interest, which is compounding. On this, RBI says that the penalty should not be imposed in the form of interest.
- On the loan default penalty, RBI said that its purpose is to create a sense of credit discipline among the borrowers and not to increase the revenue. It is being told that many cases have come to the fore from the customers regarding the penal charges. Apart from a large number of related complaints, many disputes have also come to the fore between banks and customers.
- In this draft, it has been ensured that the penalty will not be applied as ‘Penal interest’. At present, banks charge penalty on the basis of compounding interest in penalty interest.
- According to the RBI guideline recorded in the draft, the penalty charges will have to be clearly mentioned in the terms and conditions section. At present, most of the borrowers do not know and understand how the penalty interest is calculated.
