The Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, aim to ensure fair lending practices and facilitate affordable credit for Micro and Small Enterprises (MSEs) by standardizing norms on pre-payment charges. Effective from January 1, 2026, these Directions prohibit Regulated Entities (REs) from levying pre-payment charges on floating rate loans for non-business purposes to individuals, and for business loans extended to individuals and MSEs, subject to the type of RE and loan amount. The provisions apply regardless of the source of pre-payment or any lock-in period. Further, REs must disclose the applicability of pre-payment charges clearly in the sanction letter, loan agreement, and Key Facts Statement (where applicable). Charges cannot be levied retrospectively or where pre-payment is initiated by the RE. These Directions override all earlier circulars specified in the Annex and are issued under various provisions of the Banking Regulation Act, RBI Act, and National Housing Bank Act.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12878&Mode=0
