New Delhi: The Reserve Bank of India (RBI) has provided a lot of help to the borrowers. While giving relief to those who do not pay the loan installments on time, the Reserve Bank also reprimanded the banks. According to the RBI, banks should not recover the penalty in the form of interest. The RBI has also issued a draft circular in this regard. This is a relief for borrowers.
The RBI has told banks that the penalty for late loan installments should be levied as a fee and not compound interest. According to the RBI, it has empowered banks to impose fines on those who delay loan installments, but banks are misusing it. The RBI has spoken
The RBI has issued a draft circular saying that it has observed that many regulated entities are charging punitive interest. These are available in addition to the applicable interest rates. The circular stated that, in addition to the original interest, the penalty interest cannot be used as a means of increasing income.
In its proposal, the RBI said that the penalty will not be levied in the form of late payment interest. In the circular, it was written that the regulatory instructions for determining the interest rate, including the conditions for the loan rate reset, should be strictly followed. If this is not done, they will take strict action against the banks.
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