Pre-payment charges on home loans
PTI report that the India’s largest lender State Bank of India (SBI) has decided to give some succor to borrowers who want to foreclose their accounts and abolish pre-payment charges on home loans. A senior official of the bank told PTI “We decided to do away with pre-payment charges on all kinds of housing loans with immediate effect.” The official said the bank has been charging pre-payment penalties only on housing loans with the floating interest rates which taken before May 2011. If borrowers opted to foreclose their loans, it has been charging about 2% of the outstanding amount as penalty.
At the end of September, the total outstanding home loan of SBI rose to Rs92, 383 crore against in March 2011 Rs86, 769 crore. Some of the banks are charging up to 2% as pre-payment penalty on the loan outstanding at present. It is will take if borrowers settle the full payment before their maturity by switching over to other lenders. If borrowers pay using their own funds, there is no pre-payment fine is charged. It noted that the Reserve Bank of India (RBI) has indicated that RBI would scrap prepayment penalties charged by the banks.
Last month, all of the housing finance companies to desist from imposing pre-payment penalty on home loan borrowers that has been directed by Housing finance regulator National Housing Bank (NHB).
