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

Economic Times

Economic Times · 1d ago

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

The Reserve Bank of India (RBI) has instructed banks and financial entities to eliminate pre-payment penalties on floating-rate loans to individuals and micro, small enterprises. Effective January 1, 2026, this directive aims to align with existing guidelines prohibiting pre-payment charges on non-business loans, fostering accessible financing. The RBI's move followed supervisory findings of inconsistent practices among lenders, causing customer grievances. This applies to loans across numerous banking institutions, excluding certain cooperative and rural banks.

Related News

Pre-paying loans will get easier, as RBI abolishes charges for advances on business loans

YourStory

YourStory · 1d ago

Pre-paying loans will get easier, as RBI abolishes charges for advances on business loans

The Reserve Bank of India (RBI) has directed banks and lenders to abolish pre-payment charges on floating-rate loans and advances, including for business purposes, intended for individual borrowers and micro and small enterprises (MSEs). This directive applies to loans sanctioned or renewed after January 1, 2026. The move aims to standardize practices and reduce grievances from MSEs regarding pre-payment charges, enhancing accessible and affordable financing options for them without penalty burdens.

Gold loan risks: RBI exposes irregularities, borrowers beware

Money Control

Money Control · 8m ago

Gold loan risks: RBI exposes irregularities, borrowers beware

- The Reserve Bank of India (RBI) has identified irregularities in granting gold loans, including lack of transparency during auction on default and inadequate due diligence. - The gold loan segment has experienced significant growth, with public sector banks accounting for a majority of the loans in recent years. - Borrowers should conduct research and verification, understand loan terms, and be aware of red flags when availing gold loans. - Essential precautions to take include studying loan offers, comparing interest rates and charges, and being cautious of unsolicited offers with hidden terms. - Lenders have been given three months to review their policies and practices related to gold loans and take corrective measures. Non-compliance may result in supervisory action from the RBI.

RBI directs NPCI to certify 4-5 banks for Paytm UPI migration

Inshorts · 1y ago

RBI directs NPCI to certify 4-5 banks for Paytm UPI migration

The RBI has advised National Payments Corporation of India (NPCI) to consider the request of Paytm parent One97 Communication to become a Third-Party Application Provider for UPI transactions. For the seamless migration of the '@paytm' handle to other banks, NPCI may facilitate the certification of 4-5 banks as Payment Service Provider banks to process high-volume UPI transactions.

Surge in tiny personal loans sparks Indian central bank concern

Reuters · 1y ago

Surge in tiny personal loans sparks Indian central bank concern

India's central bank has expressed concerns over the surge in borrowing by low-income consumers for small personal loans. The Reserve Bank of India (RBI) seeks to tighten controls and implement stricter measures to prevent defaults. Delinquency rates for loans under INR 50,000 are significantly higher than the overall retail loan ratio, leading to worries about potential risks for borrowers. The rise in small loans has outpaced overall bank credit growth, prompting the RBI to monitor certain categories of personal loans. Non-bank financial companies are the largest lenders to this segment, with the possibility of exposure for banks as well.

Paytm Tentative Timeline To Restart Loan Sanctioning Ends On Feb 14

OutlookIndia

OutlookIndia · 1y ago

Paytm Tentative Timeline To Restart Loan Sanctioning Ends On Feb 14

Fintech firm Paytm's timeline to resolve operational challenges and restart sanctioning new loans is set to end on February 14. Paytm, affected by RBI restrictions on Paytm Payments Bank Limited (PPBL), plans to resolve the challenges before returning to normal operations. It needs to migrate repayments linked to PPBL to other banks to avoid disruption. In the last quarter of 2023, Paytm distributed loans worth Rs 15,535 crore to merchants, individuals, and through postpaid loans.

Wall Street banks resurge in second-lien loan market amid high demand

Economic Times

Economic Times · 21d ago

Wall Street banks resurge in second-lien loan market amid high demand

Wall Street banks are re-entering the market for second-lien loans—considered riskier corporate debt—due to growing demand from private credit firms and conventional investors. These loans, typically priced higher than first-lien loans, now attract enough interest to offer competitive interest rates. Banks profit from syndicating these loans, which were previously dominated by direct lenders, helping reduce borrowing costs for issuers. Recent transactions have seen strong demand, indicating robust investor interest in riskier debt.

Instamojo pulls the plug on payment biz

Entrackr

Entrackr · 1y ago

Instamojo pulls the plug on payment biz

Instamojo, an Indian payment aggregator, has discontinued its payments business after its license application was rejected by the Reserve Bank of India (RBI). The RBI cited Instamojo's failure to meet eligibility criteria for the rejection. The company has now partnered with licensed payment aggregators for its aggregator and payouts function. It plans to reapply for the license in the next financial year. Despite the shutdown of its payments business, Instamojo aims to remain profitable in FY24 through its transition to a full-stack commerce enabling platform for D2C businesses.

Indian banks to ask regulator to not raise provisioning for infra loans

Money Control

Money Control · 1y ago

Indian banks to ask regulator to not raise provisioning for infra loans

The Indian Banks' Association (IBA) plans to ask the Reserve Bank of India (RBI) not to increase provisioning for infrastructure project loans. The RBI recently proposed a sharp increase in the amount of capital that banks and non-banking financial companies should set aside for such loans. The IBA argues that this blanket 5% provisioning requirement would increase the cost of implementing projects and hurt project financing. It suggests that additional provisioning requirements should be brought in only in case of delays in project completion. The IBA is expected to send a formal request to the RBI before the deadline of June 15th.

Banks back status quo on co-lending

Economic Times

Economic Times · 22d ago

Banks back status quo on co-lending

Banks have approached the Reserve Bank of India (RBI) seeking continuation of the existing co-lending model with non-banking finance companies (NBFCs). The RBI's draft guidelines propose modifying the model to have banks and NBFCs jointly originate and disburse loans, instead of NBFCs originating loans independently. Banks argue for retaining flexibility with both models, as the current model allows them to selectively fund loan portfolios, thus maintaining liquidity and efficiency.

RBI Flags High Delinquency Levels For Fintech Lenders In Below INR 50K Loan Category

Inc42 · 1y ago

RBI Flags High Delinquency Levels For Fintech Lenders In Below INR 50K Loan Category

Non-banking financial company (NBFC) fintech lenders have the largest share in sanctioned and outstanding amounts for loans under INR 50,000, but also have the second highest delinquency levels, according to the Reserve Bank of India (RBI). The RBI warns that unsecured lending needs strict monitoring, as over half of borrowers in the personal loans category have three active loans at origination. Additionally, the RBI's decision to increase risk weight for certain consumer credit segments has slowed down the growth rate for consumer credit.

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