Happy news to all home loan borrowers that the Reserve Bank of India told banks to stop charging penal interest on prepayment of home loans for those who have taken home loan on floating interest rates.
Reserve Bank of India communicated to all banks. "It has...been decided that banks will not be permitted to charge foreclosure charges\pre-payment penalties on home loans on floating interest rate basis, with immediate effect,"
Now home loan borrowers can switch over to lower interest loan with other banks. They should not pay any extra amount to the bank for the prepayment of loan or foreclosure of their home loan. So banks also compelled to cut their interest rate to hold the home loan customers. This will increase competition between banks and the borrowers will get the benefit.
The prepayment penalty is varying from bank to bank from 1% to 2%. The National Housing Bank also urged to cut or stop pre payment penalty. Now it is from RBI and the benefit is for all home loan borrowers.
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