RBI Guidelines to Provide Relief to EMI Payers | RBI Guidelines | Business News

The Reserve Bank of India, or RBI, has made an important choice regarding those who take out loans that may also have an impact on your EMIs. In fact, RBI has given banks the go-ahead to enact new regulations. For example, at the moment, if you are late with your loan EMI payments, the bank will charge you interest in addition to a fine. However, RBI has now decided to outlaw this Penal Interest.

RBI changes penalty law in EMI

In response to concerns over the long-standing policy of banks and non-banking financial firms (NBFCs) using penal interest as a revenue-generating tactic, the Reserve Bank of India (RBI) has imposed new laws. In cases of loan repayment defaults, banks will now be allowed to impose only "fair" penalties, according to the RBI. The use of penalties to loan accounts is forbidden by the central bank.

The Reserve Bank of India (RBI) has announced that the rules will take effect on January 1, 2024. All financial institutions that fall within the regulatory authority of the RBI would be subject to these new restrictions. This includes organizations like Exim Bank, NABARD, NHB, and SIDBI as well as other All India Financial organisations like SIDBI and NABFID. It also includes Commercial Banks, Co-Operative Banks, Non-Banking Financial Companies (NBFCs), and Housing Finance Companies.