Foreclosure Charges on a Floating Rate Loan
Your bank or NBFC has charged you a prepayment or foreclosure penalty when you tried to repay your floating rate loan early. This is explicitly prohibited by RBI for all individual borrowers.
⚖️Your Rights Under RBI Regulations
Banks cannot charge any prepayment penalty on floating rate loans for individual borrowers — circular DBR.Dir.BC.10/13.03.00/2014-15.
NBFCs are also prohibited from charging foreclosure charges on floating rate loans to individual borrowers.
This applies to home loans, personal loans, auto loans, and any other retail loan on a floating rate basis.
Fixed rate loans may have foreclosure charges, but only if disclosed upfront in the loan agreement.
💰 What You Can Recover
Full refund of foreclosure charges paid with interest from date of payment.
⏱ Response Deadline
30 days for bank response to written complaint.
📋Step-by-Step — What to Do
Write to the lender citing the specific RBI circular. Attach your loan agreement showing the floating rate.
State the specific amount charged as foreclosure penalty and request refund.
If not refunded within 30 days, escalate to Nodal Officer.
File with RBI Integrated Ombudsman — this is a clear regulatory violation that Ombudsman takes seriously.
🏛 Where to Escalate If Bank Doesn't Respond
RBI Integrated Ombudsman — cms.rbi.org.in
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