No more penal interest: How RBI decision will help home, personal, car and other loan borrowers

Corporate Laws

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Feb 09, 2023 

In a move that will help customers, the Reserve Bank of India (RBI) has proposed to do away with the levy of “penal interest” on loan defaults by regulated entities and replace it with “penal charges”. The central bank will issue draft guidelines on the issue for comments from stakeholders soon.

In the bi-monthly ’Statement on Developmental and Regulatory Policies’ released today (February 8), the RBI said that “divergent practices” by regulated entities with regard to the levy of penal interest have led to customer grievances and disputes have been seen.

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