Latest news with #Directions2025
Mint
17-07-2025
- Business
- Mint
Relief for borrowers as RBI's guidelines on loan prepayment to come into force from January 1
The Reserve Bank of India (RBI) has released a set of guidelines with regards to levy of prepayment charges in case of loans sanctioned to MSEs, something that tends to leave the customers disgruntled and annoyed. Read this Livemint article for details on this. Additionally, some banks impose restrictions on borrowers to prevent them from switching their loan to another lender to seek for better terms and conditions. RBI early this month released a set of guidelines titled RBI (pre-payment charges on loans) Directions 2025. These directions -- applicable to all commercial banks (excluding payments banks), cooperative banks and NBFCs -- will come into force from January 1 next year. I. These directions will be applicable to regulated entities (i.e., banks, NBFCs and others) regarding levy of pre-payment charges on all floating rate loans and advances. II. There will be no pre-payment charges for all the loans granted for purposes other than business to individuals. III. And even when the loan is disbursed for business purposes, there will be no prepayment charge in case of a commercial bank, a tier 4 primary (urban) cooperative bank, an NBFC-UL (upper layer) and an all-India financial institution. IV. Additionally, there will be no pre-payment charges on loans with sanctioned amount/limit up to ₹ 50 lakh in case of a small finance bank, regional rural bank, a Tier 3 primary (urban) cooperative bank, State Cooperative bank, Central Cooperative bank and an NBFC-ML (middle layer). V. In cases other than those mentioned above, pre-payment charges will be as per the approved policy of the RE. VI. In case of term loans, pre-payment charges -- if levied by the RE -- will be based on the amount being prepaid. VII. In case of cash credit/ overdraft facilities, pre-payment charges can be levied only on an amount which does not exceed the sanctioned limit. VIII. In case of cash credit or overdraft facilities, no pre-payment charges can be charged so long as the borrower tells the bank about his intention of not renewing the overdraft facility prior to the period as mentioned in the loan agreement. Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
The Hindu
19-06-2025
- Business
- The Hindu
RBI issues project finance directions, banks to provide 1-1.25% for projects under construction
The Reserve Bank (RBI) on Thursday issued RBI (Project Finance) Directions 2025 asking Regulated Entities (REs) to maintain general provision of 1.25% for under construction Commercial Real Estate (CRE) loans and 1% for infrastructure projects under construction. However, asset provisioning requirements will be reduced at the time of operational phase. This rate is far lower than the of provision of 5% proposed in the draft for under construction projects, 2.5% in the operational stage and 1% at cash generation stage to cover the loan. The directions have been issued to institutionalise a framework for the REs for financing project loans, while addressing the underlying risks. The directions entail adoption of a principle-based regime for resolution of stress in project finance exposures, harmonised across REs and rationalisation of permissible 'date of commencement of commercial operations' (DCCO) extensions with an overall ceiling of three and two years for infrastructure and non-infrastructure sectors, respectively. The directions provide flexibility to REs in extending the DCCO within the above ceilings, based on their commercial assessments. The standard asset provisioning requirement has been rationalised to 1% for projects under construction, which will gradually increase for each quarter of DCCO deferment. 'The requirements for under construction CRE exposures will be however, slightly higher at 1.25%,' according to the notification. 'Under construction projects where financial closure has already been achieved shall continue to be guided by the extant provisioning norms to facilitate a seamless implementation,' the notification mentions. During operational phase, the standard asset provisioning requirement will stand reduced to 1% for CRE, 0.75% for CRE-RH [Residential Housing] and 0.40% for other project exposures, respectively. The directions will come into force with effect from October 1. The RBI had issued draft guidelines on 'Prudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances - Projects Under Implementation' on May 03, 2024, for stakeholder comments. As part of the stakeholder consultation exercise, inputs / feedback were received from around 70 entities including banks, NBFCs, industry associations, academicians, law firms, individuals and the Central Government, the RBI said. The inputs/ feedback received had been examined and suitably incorporated while formalising the final Directions, it added.
