SBI, ICICI Waive off penalty on pre-payment of housing loans
State Bank of India (SBI), has cut off pre-payment charges on home loans, giving some succour to borrowers who want to foreclose their accounts.
“We have decided to do away with pre-payment charges on all kinds of housing loans with immediate effect,” a senior official of the bank said. The bank has been charging pre-payment penalties only on housing loans with floating interest rates taken before May, he added.
It has been charging about two per cent of the amount due as penalty if, borrowers opted to foreclose their loans. ICICI Bank has also waived off pre-payment charges on floating rate home loans irrespective of the borrowers’ source of funds used to repay the loans. The bank was so far charging 2-4 per cent penalty on pre-payment of housing loans. Other banks are also likely to follow.
The total home loan of SBI rose to Rs 92,383 crore at the end of September, against Rs 86,769 crore in March. At present, some banks are charging up to two per cent as pre-payment penalty on the outstanding loan, if a borrower settles the full payment before maturity by switching to another lender. No pre-payment fine is charged if borrowers pay using their own funds.
This development comes after theReserve Bank indicated indicated it would scrap prepayment of penalties charged by banks.
“It is proposed to implement the recommendations of the Damodaran Committee, as also the action points which were identified by theIndian Banks’ Association and Banking Codes and Standards Board of India in the last Banking Ombudsmen conference,” RBI had said in its mid-year credit policy review.
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