RBI Directs Banks, Other Lenders Not To Levy Pre-Payment Charges On Business Loans To Individuals, MSEs

RBI Update - Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025 - Mehta & Mehta

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 in…

RBI Directs Banks, Other Lenders Not To Levy Pre-Payment Charges On Business Loans To Individuals, MSEs

The RBI on Wednesday directed banks and other lenders not to levy any pre-payment charges on all floating-rate loans and advances, including for business purposes, availed by individuals and micro and small enterprises.The directions will be applicable to all loans and advances sanctioned or renewed on or after Jan. 1, 2026.In terms of extant guidelines, banks and NBFCs are not permitted to levy foreclosure charges/pre-payment penalties on any f…