RBI directs banks, other lenders not to levy pre-payment charges on biz loans to individuals, MSEs

MUMBAI: 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 (MSEs).

The directions will be applicable to all loans and advances sanctioned or renewed on or after January 1, 2026.

In terms of extant guidelines, banks and NBFCs are not permitted to levy foreclosure charges/pre-payment penalties on any floating rate term-loan sanctioned to individual borrowers with or without co-obligant(s) for purposes other than business.