Team Blitz India
MUMBAI: The Reserve Bank of India (RBI) has issued a circular on how banks can levy penalties on loan accounts. The new guidelines have been issued after it has been observed that many banks use penal rate of interest, over and above the applicable interest rates.
The new guidelines will come into effect from January 1, 2024.
As per the circular issued, penalty, if charged, for non-compliance with terms and conditions of a loan contract by the borrower shall be treated as ‘penal charges’ and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest charged on the advances.
