To safeguard consumer interest through better transparency and customer centricity by lenders, the Reserve Bank of India (RBI) has decided to broaden the scope of the regulation on ‘responsible lending conduct – levy of foreclosure charges/pre-payment penalties on loans’ to cover loans to micro and small enterprises (MSEs) extended by the regulated entities of the Reserve Bank.

As per the current guidelines, banks and NBFCs are not permitted to levy foreclosure charges/ pre-payment penalties on any floating rate term loans sanctioned to individual borrowers with or without co-obligant(s), for purposes other than business.

A draft circular in this regard shall be issued for public consultation, RBI Governor Shaktikanta Das announced on Tuesday as part of his statement on various developmental and regulatory policy measures.