The Apex bank of the country RBI has asked the banks not to the charge loan borrowers pre-paying floating rate term loans. It has been reported with the immediate effect RBI has instructed not to charge customers with any foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to them.
After this decision of RBI the customers can avail the loan without worrying about the penalty charges of the banks. Many times customers prepay their loan when they feel that the rates on the loans are rising or they switch to some other bank which is offering the loan at a lower rate. Chairman and managing director of the Vijaya Bank reported that this a customer friendly move, made in the favour of the customers. He also stated that many times banks lose their customer due to the charging of pre-payment penalty. Banks have also been asked not differentiate among the old and new customers by offering them two different rates.