[www.keralites.net] SBI abolishes penalty on pre-payment of housing loans

 

SBI abolishes penalty on pre-payment of housing loans

State Bank of India has decided to abolish pre-payment charges on home loans, giving some happy news to borrowers who want to foreclose their accounts. The decision from the largest lender will prompt other lenders to follow the suit
The bank has been charging pre-payment penalties only on housing loans with floating interest rates taken before May 2011. It has been charging about 2% of the outstanding amount as penalty if borrowers opted to foreclose their loans. The decision from the largest lender will prompt other lenders to follow the suit.

At present, some banks are charging up to 2% as pre-payment penalty on the loan outstanding, if a borrower settles the full payment before maturity by switching over to another lender. No pre-payment fine is charged if borrowers pay using their own funds. It may be noted that the Reserve Bank of India (RBI) has indicated that it would scrap prepayment penalties charged by banks.

Housing finance regulator National Housing Bank (NHB) has directed all housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers last month.

The levy of a charge on borrowers for pre-closure of housing loans by housing finance companies (HFCs) has been considered further by the NHB in the light of subsequent developments and it has been decided that hereafter, housing finance companies should not charge a pre-payment levy or a penalty on pre-closure of housing loans, the regulator had said in a notification. In addition, the NHB has also directed all HFCs to have uniform and not differential rates of interest for old and new borrowers that have the same credit or risk profile.

Best Regards
Prakash Nair

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www.keralites.net

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