Don’t penalise customers for pre-closing hoousing loans: NHB to HFCs

Mr R.V. Verma

The NHB  (National Housing Bank) has directed all housing finance companies to ensure uniformity in floating interest rates loans to old and new customers.

The Bank, which is the regulator and supervisor of housing finance companies (HFCs), also said these companies should not charge pre-payment penalty on pre-closure of housing loans, subject to certain situations.

According to Mr R.V. Verma, CMD, NHB, “The directive to ensure uniformity in floating interest rate loans charged to old and new customers with the same risk profile is aimed at bringing efficiency in the home loan market. This will give borrowers the choice to move to a lender charging lower interest rate,”

On pre-closure of home loans, NHB said a floating interest rate home loan can be pre-closed through any means – by borrowing from a bank or HFC or non-banking finance company or a financial institution – while a fixed interest rate home loan can be pre-closed only from the borrower's own sources.

In order to ensure that pricing of housing loans by all lenders is transparent, non-discriminatory and objective, Mr. R.V. Verma felt that it would be advisable for the banking system to also follow the new norms.

Mr K. Unnikrishnan, Deputy Chief Executive, IBA (Indian Banks' Association), told "Banks' feedback on uniformity in interest rates and pre-payment penalty will soon be conveyed to the RBI (Reserve Bank of India.)

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