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The RBI stated that the transition to the new punitive charges regime should occur on or after April 1, 2024, but no later than June 30, 2024 in the case of existing loans.
The RBI has released a circular extending the deadline to implement the revised guidelines on how banks, NBFCs are charge penal interest and penalty charges on loan accounts. The deadline has been extended by three months for new loan accounts opened on or after April 1, 2024. Read on to know more about it.
Bajaj Finance had in a filing last month said that the RBI in its order dated November 15 directed the NBFC to stop sanction and disbursal of loans under its two lending products.
The Reserve Bank of India (RBI) in August had instructing banks not to use penal interest rates as a revenue enhancement tool but rather to instill credit discipline. The RBI's guidelines are set to take effect on January 1, 2024. However, some banks seek a three-month deferral, arguing that penal interest rates promote better credit discipline. They also seek clarity on GST implications for penalties on stressed accounts.
The new announcement comes after RBI, in September 2022, issued guidelines on protecting borrowers. As per the guidelines issued last year, lenders were required to inform customers about the cost of taking the loan. Lenders are now required to issue a Key-Fact Statement to the borrower before any loan is given.