The Reserve Bank of India (RBI) recently issued Fair Practices Code guidelines to ensure that lenders charge interest only from the date of actual disbursement of funds. This move follows an annual inspection revealing instances of unfair practices by lenders. The new regulation mandates that interest is charged only for the duration of the loan’s outstanding balance, rather than for the whole month. This change can significantly lower loan costs for borrowers, although it has resulted in substantial financial losses for banks.
Loan Rates: RBI’s New Diktat Lowers Loan Costs for You, but Banks Lose Hundreds of Crores
Processing Fees and Part Payment Charges of Home Loans from Top Banks
State Bank of India (SBI) Home Loan Processing Fee
- Processing Fee: 0.35% of the loan amount plus applicable GST
- Minimum: Rs. 2,000 plus GST
- Maximum: Rs. 10,000 plus GST
HDFC Bank Home Loan Charges
- Processing Fee: Maximum of 1% of the loan amount (Minimum: Rs. 7,500)
- Premature Payment Charges:
- Adjustable Rate Loans (ARHL) and Combination Rate Home Loan (CRHL): No prepayment charges for individual borrowers unless the loan is for business purposes.
- Fixed Rate Loans: 2% prepayment charge plus applicable taxes/statutory levies on the amounts being prepaid, except when the prepayment is made through own sources.
ICICI Bank Home Loan Charges
- Processing Fees: 0.50% – 2.00% of the loan amount or Rs. 3,000, whichever is higher.
- Prepayment Charges:
- Fixed Interest Rate Loans: 2% on home loan, home improvement loan, land loan, and top-up home loan; 4% on non-home loans (e.g., Loan Against Property, Non Residential Premises).
- Adjustable Interest Rate Loans: No prepayment charges on home loans, home improvement loans, and land loans for individual borrowers. 2% prepayment charge on top-up home loans for business purposes.
- Priority Sector Lending: No prepayment charges for loans booked under priority sector lending if the borrower is a Micro or Small Enterprise.
Kotak Mahindra Bank Home Loan Charges
- Processing Fee (Salaried): 0.5% of the loan amount plus taxes and any other applicable statutory dues.
PNB Housing Home Loan Charges
- Processing Fee: 1% of the loan amount applied for plus GST
- Prepayment Charges:
- Floating Rate of Interest: No prepayment charges if the property is in the name of an individual. For non-individual entities, a 2% charge of the principal paid plus GST is applicable.
- Fixed Rate of Interest: No prepayment charges if the property is in the name of an individual and payment is made from own sources. If payment is made by a third party or the property is in the name of a non-individual entity, a 3% charge of the principal prepaid plus GST is applicable.
Impact on Loan Costs and Bank Revenues
The new RBI guidelines are expected to lower loan costs for borrowers by ensuring that interest is charged only from the date of actual disbursement. However, this regulatory change has led to significant revenue losses for banks, amounting to hundreds of crores. Borrowers can benefit from these new rules by paying attention to the specific charges and fees associated with their home loans.
Conclusion
The RBI’s new guidelines on loan interest charges are a positive development for borrowers, potentially reducing their loan costs. However, it’s important to compare the processing fees and prepayment charges across different banks to make an informed decision. As the financial landscape evolves, staying updated with the latest regulations and charges is crucial for managing loan costs effectively.
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