Housing loan
borrowers who have opted for fixed interest rates may have easier terms on
their mortgages as the Reserve Bank of India (RBI) has advised banks to revise
the penalty structure on prepayments &
charge it only on the outstanding amount.
RBI has also
recommended that banks should focus on raising long-term deposits to fund more
long-term loans to help reduce the EMI ( equated monthly instalments) burden on
housing loan borrowers.
A report on the 'Feasibility
of Introducing more Long -Term Fixed Rate Loan Products by Banks' from the Indian banking regulator RBI has
said banks should charge pre-payment penalty only on the outstanding loan
amount and not on the value of loans as is normally done.
The guideline will
help borrowers save substantial amounts if they were to prepay a fixed rate
loan. This comes after the RBI's recent mandate to banks to do away with
pre-payment penalty on floating rate housing loans.
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