RBI gave a big relief to crores of people who took loans, pulled up the banks

Breaking News, Digital Desk-  Are you troubled by the heavy penalty interest rates of banks for not repaying the loan? The Reserve Bank of India (RBI) has brought relief for you. 

RBI has criticized the banks for making arbitrary recovery in the name of penalty interest rates. Now, RBI has brought a proposal to save borrowers from these high rates. In a draft circular, RBI has said that the penalty should be charged as a fee and not recovered as compound interest. 

Banks were acting arbitrarily

The Reserve Bank of India (RBI latest update) has given banks the right to impose penalties on borrowers, but it has found that some banks are misusing it as a revenue-raising tool. 

RBI has said in a draft circular that many banks charge penal interest rates in addition to the applicable interest rates. RBI has clarified that penal interest above the basic interest rate should not be used for revenue growth. Reviews have also found that the rules for imposing penalties vary among banks, leading to customer complaints and disputes. (RBI Rules)

There will be no penalty in the form of interest rate-

RBI (Reserve Bank of India) has proposed that now the penalty in case of default will not be charged in the form of penalty interest rate. 

The circular said that regulatory guidelines on determination of interest rates, including the conditions for resetting interest rates on loans, should be strictly followed. Also, institutions will not introduce any additional component for the interest rate.

Relief to borrowers-

The circular said that there will be no capitalization of penalty charges, meaning no further interest will be charged on such charges. Till now, borrowers have to pay interest on the penalty money as well.