**Summary:**
This Reserve Bank of India (RBI) directive, reference number RBI/2019-20/30 DNBR.PD.CC.No.10103/03.10.001/2019-20, dated August 02, 2019, addresses the levy of foreclosure charges/prepayment penalties on floating rate loans by Non-Banking Financial Companies (NBFCs). The directive clarifies that NBFCs are prohibited from charging foreclosure charges or prepayment penalties on any floating rate term loan sanctioned to individual borrowers (with or without co-obligants) for purposes other than business. This updates the Master Direction - Non-Banking Financial Company Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank Directions, 2016) and the Master Direction - Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company (Reserve Bank Directions, 2016) accordingly. For further information, contact Manoranjan Mishra, Chief General Manager, Department of Non-Banking Regulation, Central Office, 2nd Floor, Centre I, World Trade Centre, Cuffe Parade, Colaba, Mumbai – 400005, India. Tel.: 91-22-22161940; Fax: 91-22-22150540; Email: cgmdnbrcorbi.org.in.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the primary regulator in this notification.
NBFCs: Non-Banking Financial Companies, the entities to which this notification is addressed.
Floating Rate Loans: The type of loans that are the subject of this notification regarding foreclosure charges and prepayment penalties.
Master Direction Non-Banking Financial Company Systemically Important Non-Deposit taking Company and Deposit taking Company Reserve Bank Directions, 2016: A regulatory document issued by the Reserve Bank of India pertaining to systemically important NBFCs.
Master Direction Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company Reserve Bank Directions, 2016: A regulatory document issued by the Reserve Bank of India pertaining to non-systemically important NBFCs.
Manoranjan Mishra: Chief General Manager at Reserve Bank of India, the signatory of the notification.
Department of Non-Banking Regulation: The department within the Reserve Bank of India responsible for this notification.
Mumbai, Maharashtra: Location of the Central Office of the Department of Non-Banking Regulation, Reserve Bank of India.
भारतीय �रज़वर् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2019-20/30
DNBR (PD) CC.No.101/03.10.001/2019-20 August 02, 2019
All NBFCs
Madam / Dear Sir,
Levy of foreclosure charges/pre-payment penalty on Floating Rate Loans by NBFCs
Please refer to paragraph 30(4) of Chapter VI of Master Direction - Non-Banking Financial
Company – Systemically Important Non-Deposit taking Company and Deposit taking
Company (Reserve Bank) Directions, 2016 and paragraph 30(4) of Chapter V of Master
Direction - Non-Banking Financial Company – Non-Systemically Important Non-Deposit
taking Company (Reserve Bank) Directions, 2016 on waiver of foreclosure charges/
prepayment penalty on all floating rate term loans sanctioned to individual borrowers.
2. It is clarified that NBFCs shall not charge foreclosure charges/ pre-payment penalties on
any floating rate term loan sanctioned for purposes other than business to individual
borrowers, with or without co-obligant(s).
3. The Non-Banking Financial Company - Systemically Important Non-Deposit taking
Company and Deposit taking Company (Reserve Bank) Directions, 2016 and the Non-
Banking Financial Company – Non-Systemically Important Non-Deposit taking Company
(Reserve Bank) Directions, 2016 have accordingly been updated.
Yours faithfully,
(Manoranjan Mishra)
Chief General Manager
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फोन: (+91-22) 22161940फैक्स:(91-22) 22150540, Email: cgmdnbrco@rbi.org.in
Department of Non-Banking Regulation, Central Office, 2nd Floor, Centre-I, World Trade Centre, Cuffe Parade, Colaba, Mumbai – 400005, India
Tel.: (+91-22) 22161940 Fax: (91-22) 22150540, Email: cgmdnbrco@rbi.org.in
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