| Category | Details |
|---|---|
| Event | RBI bars prepayment penalties on floating rate loans for MSEs |
| Date of Notification | July 3, 2025 |
| Effective From | January 1, 2026 |
| Applicable To | Banks and NBFCs (Non-Banking Financial Companies) |
| Exemptions | Small Finance Banks (SFBs), Regional Rural Banks (RRBs), Tier-3 Urban Cooperative Banks, State/Central Cooperative Banks, Middle-layer NBFCs (already cannot charge prepayment fees for loans ≤ ₹50L) |
| Loan Types Covered | Floating rate loans sanctioned/renewed on or after January 1, 2026 |
| Cash Credit/Overdrafts | No prepayment fees if borrowers inform lenders beforehand and close accounts on due dates. |
| Background | - Divergent lender practices and restrictive clauses observed.- Customer complaints and contractual disputes prompted RBI intervention.- Prepayment penalties on retail loans already removed. |
| Objective | - Facilitate affordable credit for MSEs.- Eliminate unfair refinancing barriers.- Enhance transparency and competition. |
| Significance | - Boosts financial mobility for MSEs.- Promotes competitive credit markets.- Supports financial inclusion and economic resilience of MSEs. |
Workflow
Login
Contact Counsellor