New Delhi: The Reserve Bank of India (RBI) has given great relief to the borrowers. While giving relief to those who do not deposit loan instalments on time, the Reserve Bank has also reprimanded the banks. According to RBI, banks should not recover the penalty in the form of interest rates. RBI has also issued a draft circular regarding this. This will provide relief to the borrowers.

RBI has told banks that the penalty for delay in loan instalments should be levied as a fee and not as compound interest. According to RBI, it has given banks the right to impose fines on those who delay loan instalments, but banks are misusing it. RBI has spoken

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The RBI has issued a draft circular saying that it has been observed that many regulated entities charge penal interest rates. These are in addition to the applicable interest rates. The circular said that in addition to the original interest rate, the penalty interest rate should not be used as a revenue growth tool.

In its proposal, RBI has said in the proposal that now the penalty will not be charged in the form of a penalty interest rate on default. The circular said that the regulatory instructions on the determination of interest rates, including the conditions for reset of interest rates on loans, should be strictly followed. If this does not happen, strict action will be taken against the banks.

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