Overview

• RBI’s final directions ban pre-payment charges on floating-rate loans for individuals and micro and small enterprises from January 1, 2026.
• Commercial banks (excluding small finance, regional rural and local area banks), Tier-4 urban co-operative banks, NBFC-ULs and l InIndia Financial Institutions may not levy any fees on business loans under the new rules.
• Small finance banks, regional rural banks, Tier-3 urban co-operative, state and central cooperative banks and NBFC-MLs are barred from charging pre-payment fees on floating-rate loans up to Rs 50 lakh.
• Borrowers with cash-credit or overdraft facilities face no pre-payment charges if they notify lenders of non-renewal and close the account on the due date.
• All regulated entities must revise sanction letters, loan agreements and Key Facts Statements to clearly disclose whether pre-payment charges apply.