In a significant step, the Reserve Bank has abolished the foreclosure charges, more commonly known as prepayment penalty on home loans.
So, consumers of home loans will not have to pay any charges if they wish to prepay their existing home loans. Home loan consumers not happy with their bank can switch their loan to another bank without having to pay 1-2% prepayment penalty charged by many banks currently.
This will apply for loans taken on floating interest rate, where rates move up or down according to the base rate.
"In one go to cut 50 basis points and to abolish the prepayment penalty... I think it will benefit the aam aadmi," Pradeep Jain, chairman of Parsvnath Developers told NDTV Profit today.
The move is aimed to remove the discrimination between existing and new borrowers, RBI said. It will also result in better pricing of home loans with floating rate, the central bank added.
Many banks have already done away with pre-payment penalties on their floating rate home loans but the RBI regulation will ensure uniformity across the banking system.
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