Central Bank Drops Pre-payment Charges on Home Loans

Dec. 12, 2011 - PRLog -- Central Bank of India has decided to waive pre-payment penalties on floating rate housing loan with immediate effect.

“In deference to the Reserve Bank of India’s suggestions, the bank has decided to waive penalty on pre-payment of all floating rate housing loans irrespective of the source of funds of the borrowers,” Central Bank of India said in a statement.

With this waiver, there will be no pre-payment penalty on all floating rate home loan of the bank for both new as well as existing borrowers, the Central Bank of India Chairman and Managing Director, Mr M.V. Tanksale, said.

The Mumbai-based state—owned lender had already waived pre-payment penalty on foreclosures where the borrowers were making payments from their own sources.

Last month, State Bank of India and ICICI Bank decided to abolish prepayment penalty.

Housing finance companies has already been barred from charging foreclosure charges.

In October, the sector regulator National Housing Bank (NHB) directed all the housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers.

The levy of charge on borrowers for pre-closure of housing loans by housing finance companies has been considered further by the NHB in the light of subsequent developments and it has been decided that hereafter, housing finance companies should not charge a pre-payment levy or a penalty on pre-closure of housing loans, the regulator had said in a notification.

In addition, the NHB has also directed all the housing finance companies to have a uniform and not differential rates of interest for old and new borrowers that have the same credit or risk profile.

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