RBI Pre-payment Charges Directions 2025: Who Pays What
Why in the news
The Reserve Bank of India set uniform rules on fees for closing loans early. The goal is easier access to affordable credit for Micro and Small Enterprises and fewer borrower complaints.
Key facts
- Directions come into force on 1 January 2026.
- They cover commercial banks (not Payments Banks), co-operative banks, NBFCs (including NBFC-UL and NBFC-ML) and AIFIs.
- A pre-payment charge is a fee for repaying early, offsetting the lender’s lost interest.
- Rules hold whether money comes from own funds or a refinance, with no minimum lock-in.
Floating-rate loan rules
| Borrower and lender | Charge |
|---|---|
| Individual, non-business loan | None |
| Business loan to individual or MSE from commercial banks (except SFBs, RRBs, LABs), Tier-4 UCBs, NBFC-UL, AIFIs | None |
| Same, from SFBs, RRBs, Tier-3 UCBs, State and Central co-operative banks, NBFC-ML | None up to ₹50 lakh |
Other provisions
- Cash credit/overdraft: no charge if the borrower gives advance notice of non-renewal and closes on the due date.
- Charges must be shown in the sanction letter, agreement and Key Facts Statement.
- Waived charges cannot return; none if the lender initiates pre-payment.
Exam angle
- Effective date: 1 January 2026.
- Terms: KFS, AIFI, NBFC-UL, pre-payment penalty.