June 22, 2024 06:05 (IST)
Follow us:
facebook-white sharing button
twitter-white sharing button
instagram-white sharing button
youtube-white sharing button
Centre notifies stringent anti-paper leak law amid exam mess, accused to face jail term, fine up to a crore | Maharashtra Congress chief Nana Patole alleges cracks on Atal Setu, BJP hits back | Amid paper leak row, CSIR-UGC-NET exam scheduled for next week postponed | Renukaswamy murder: Darshan Thoogudeepa borrowed Rs. 40 lakh from friend, paid other accused to destroy evidence, say cops | Liquor policy case: Delhi HC stays Arvind Kejriwal's bail till ED plea hearing
RBI issues guidelines to recalibrate floating rate loan EMI
Photo courtesy : UNI

RBI issues guidelines to recalibrate floating rate loan EMI

| @indiablooms | 18 Aug 2023, 09:26 pm

Mumbai: The Reserve Bank of India (RBI) on Friday released comprehensive guidelines for the recalibration of interest rates for equated monthly installments (EMIs) in floating interest loans.

According to these guidelines, all registered entities (REs) are required to effectively communicate to borrowers the potential consequences of alterations in the benchmark interest rate on their loans.

This communication should encompass the resultant adjustments in both EMI amounts and the loan tenor.

“Any increase in the EMI/tenor or both on account of this shall be communicated to the borrower immediately through appropriate channels,” RBI said in a release.

During its monetary policy review on August 8, the central bank indicated its intention to release the guidelines for this matter soon.

The Reserve Bank of India (RBI) emphasized that all registered entities (REs) must ensure the implementation of the instructions for both existing and new loans by December 31, 2023.

"All existing borrowers shall be sent a communication, through appropriate channels, intimating the options available to them."

Further, the Central bank also asked banks to provide borrower an option to switch over to a fixed rate as per their Board approved policy, and also specify how many times a borrower is allowed to switch during the tenor of the loan.

They should also be given the choice to opt for enhancement in EMI or elongation of tenor or for a combination of both options; and to prepay, either in part or in full, at any point during the tenor of the loan, RBI said in the guidelines.

In line with these guidelines, borrowers should be provided with the option to choose an increase in their equated monthly installments (EMIs), an extension of the loan tenure, or a combination of both.

Moreover, borrowers should have the freedom to make partial or complete prepayments at any point during the loan tenure, as outlined in the RBI's guidelines.

The registered entities (REs) are required to provide complete transparency by disclosing all relevant charges associated with the loan switch from a floating to a fixed interest rate, as well as any other service charges or administrative costs.

In addition, the RBI has instructed all REs to furnish a statement at the conclusion of each quarter. This statement should encompass comprehensive details including the total recovered principal and interest up to the current date, the remaining number of EMIs, and the annualized rate of interest or Annual Percentage Rate (APR) for the entire loan tenure.

It is recommended that these statements be presented in a straightforward and easily comprehensible manner, ensuring that borrowers can readily understand the information provided by the registered entities.

Support Our Journalism

We cannot do without you.. your contribution supports unbiased journalism

IBNS is not driven by any ism- not wokeism, not racism, not skewed secularism, not hyper right-wing or left liberal ideals, nor by any hardline religious beliefs or hyper nationalism. We want to serve you good old objective news, as they are. We do not judge or preach. We let people decide for themselves. We only try to present factual and well-sourced news.

Support objective journalism for a small contribution.