ARTICLE · 10 JULY 2025

AKP Banking & Finance Digest July 07, 2025

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The Reserve Bank of India ("RBI") has issued Reserve Bank of India (Pre payment Charges on Loans) Directions, 2025 ("Directions") instructing banks...

IndiaFinance and Banking

1. Regulatory Updates

1.1. India

Reserve Bank of India (RBI)

1.1.1. RBI prohibits prepayment penalty on business loans

The Reserve Bank of India ("RBI") has issued Reserve Bank of India (Pre payment Charges on Loans) Directions, 2025 ("Directions") instructing banks (excluding payment banks), Cooperative Banks, Non-Banking Financial Companies ("NBFCs") and All India Financial Institutions (AIF) to not to charge any prepayment penalty on floating rate loans for purposes other than business to individuals, and on business loans to individuals and Micro and Small Enterprises (MSEs) by most banks and NBFCs, with certain exceptions for loans above INR 50 Lakh (Indian Rupees Fifty Lakh only) in specific institutions. The direction shall be effective for all loans and advances sanctioned or renewed on or after January 01, 2026.

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