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Guidelines for Penal Charges on Loan Defaults
August 22 , 2023
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- RBI has issued the notification titled ‘Fair Lending Practice - Penal Charges in Loan Accounts’.
- It covers commercial and other banks, Non-Banking Finance Companies (NBFCs) and other lenders.
- It aims to ensure reasonableness and transparency in disclosure of penal interest.
- When a customer defaults or is not able to comply with the terms of borrowing, lenders can levy penalty.
- But from the beginning of 2024 they will not be allowed to charge any interest on such penalty.
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