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RBI issues guidelines for penal charges in loan accounts to ensure transparency and credit discipline. The new rules will be effective from January 1, 2024.
Penal charges are additional charges a lender levies on a borrower in case of non-compliance with the payment schedule. RBI has told lenders that no further interest can be computed on such charges.
The RBI has issued a circular on August 18, 2023 to penal charges that banks and other lending institutions can charges in case of non-compliance of loan contract with the borrower. The new guidelines will be effective from January 1, 2024.
The new set of rules, which come into effect from January 1, 2024, are being introduced to promote fairness and transparency in the lending sector.
The Reserve Bank of India (RBI) has released fresh directives targeted at regulated entities (REs) concerning punitive fees within loan accounts. The goal