RBI’s big decision: Pre-payment charge will not have to be given on such loan, applicable from this date
The central bank, ie RBI, has directed banks and other lenders including NBFCs that they should not charge any pre-payment charge i.e. pre-paying charge from individuals and micro and small enterprises (MSE), which also have business objectives. These instructions issued by the Reserve Bank of India (RBI) on Wednesday will apply to all loans and educated on or after approved or renewed on 1 January 2026.
What did RBI say in a circular issued
According to the news, the RBI said in a circular issued that the availability of easy and economical finance is the most important for micro and small enterprises (MSE). However, the Supervisory Reviews of the Reserve Bank have indicated different practices between regulated institutions (RE) regarding the imposing pre-paying fees to MSE in case of approve loan, leading to customers’ complaints and disputes. The Central Bank has issued 2025 instructions, 2025 instructions, 2025 instructions, 2025 on the Indian Bank of India.
What are the instructions for banks
The RBI has said that for all loans given to individuals and MSEs for commercial purpose, with or without co-teachers, a commercial bank (except for the Small Finance Bank, Regional Rural Bank and Local Area Bank), a Tier 4 Primary (Urban) Cooperative Bank, an NBFC-UL and an All India Financial Institute will not impose any pre-paying charges. It also states that for all the loans given to individuals other than business, with or without co-teachers, a regulated unit (RE) will not impose pre-paying fees.
Limit is fixed for these banks
Small Finance Bank, Regional Rural Bank, Tier 3 Primary (Urban) Cooperative Bank, State Cooperative Bank, Central Cooperative Bank and NBFCML will not impose any prior payments on loans with sanctioned amount/limit of up to Rs 50 lakh. The RBI also said that these criteria would apply regardless of the source of money used for prior-paying of the loan, whether partially or completely, and without any minimum lock-in period.
In case of cash loan/overdraft facilities, if the borrower informs RE about its intentions not to renew the facility before the fixed period in the loan agreement, no prior-paying fee will apply, provided that the convenience is closed on the due date.
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