The Reserve Bank of India (RBI) in its RBI (Pre‑payment Charges on Loans) Directions, 2025 (issued 2 July 2025) has significantly clarified how foreclosure or pre-payment charges (often called “foreclosure fees”) may or may not be levied by lenders in India. So, what are the RBI guidelines on foreclosure charges on personal loans? The rules are designed to protect borrowers, especially individual retail borrowers and small businesses, from unfair or opaque charges.
What are the RBI Guidelines for Personal Loan Prepayment Charges?
For loans taken by individuals for non-business purposes (such as personal loans, car loans, education loans) the RBI has stated that no pre-payment or foreclosure charges shall be levied, irrespective of whether there is a co-obligant or not.
Additionally, these Directions apply to all loans sanctioned or renewed on or after 1 January 2026.
The guidelines also say that for loans taken for business purposes by individuals or by Micro & Small Enterprises (MSEs), the rules depend on what type of lender the regulated entity is, and the size of the sanctioned limit.
For certain banks/NBFCs no charges are permitted; for some smaller lenders, the exemption is only for loans up to Rs. 50 lakh.
Importantly, the RBI mandates transparent disclosure I.e., any applicable pre-payment charges must be clearly stated in the sanction letter, the loan agreement and, where applicable, in the Key Facts Statement.
Also, lenders cannot impose retrospective charges that were previously waived, nor can they apply a charge in cases where the pre-payment/foreclosure was initiated by the lender itself (for example due to restructuring).
This is all about the RBI guidelines on foreclosure charges on personal loans.
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What are the RBI Guidelines on Foreclosure Charges on Personal Loan?
priya
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2025-11-11T08:25:14+00:00 2025-11-11T08:25:16+00:00Comment
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