New Rules: The Reserve Bank of India (RBI) has instructed banks to implement new rules. At present, if there is a delay in the payment of EMI of the loan, then along with the fine, interest is also imposed on the penalty by the bank. But now RBI has decided to ban this Penal Interest. Let us know how this will affect you.
This will affect loan customers
If your EMI bounces, then fine can be imposed on it but banks cannot charge interest on that fine. These new rules will come into force from 1 January 2024. This also means that now the country’s banks and non-banking financial companies ie NBFCs will not be able to use ‘interest penalty’ as a way to increase income.
Why is RBI changing this rule?
In fact, loan customers were complaining for a long time that banks charge huge amount of money from them as penalty. In the data released by the government, it has been told that since the year 2018, both public sector banks and private banks have collected a penalty charge of Rs 35,587 crore from the customers in the name of non-maintenance of minimum balance in the account, additional ATM transactions and SMS services.
The central bank said that it has been observed that many Regulated Entities (REs) charge penal interest rates (Penal Charges) from borrowers in addition to the applicable interest rates in case of non-compliance of conditions by the borrower. The purpose of imposing penal interest on the part of the banks is to maintain discipline. The Reserve Bank has said that banks should not make penal interest a means of earning from interest. Keeping these things in mind, the Reserve Bank of India has issued these guidelines.
