RBI extends the deadline for putting the rules on fines in loan accounts into effect

 RBI extends the deadline for putting the rules on fines in loan accounts into effect

RBI extends the deadline for putting the rules on fines in loan accounts into effect

A circular on "Fair Lending Practices - Penal Charges in Loan Accounts" was released by the central bank in August, with the announcement that it will take effect on January 1, 2024.

The deadline for banks and non-banking financial institutions (NBFCs) to apply the amended guidelines for imposing punitive penalties on loan accounts was extended by the Reserve Bank of India (RBI) on Friday. The new deadline is April 1, 2024. A circular on "Fair Lending Practices - Penal Charges in Loan Accounts" was released by the central bank in August, with the announcement that it will take effect on January 1, 2024.

According to the RBI, "some regulated entities (REs) have requested clarifications as well as additional time to reshape their internal mechanisms as well as implement the circular, so the deadline for implementation the aforementioned directions has been extended by three months." The choice has already been made.

As a result, banks and other NBFCs that are subject to regulation have been requested to make sure that these guidelines are followed for any new loans obtained starting on April 1, 2024. According to the RBI, the new punitive charge regime for current loans shall be applied on the next review/renewal date, which falls on or after April 1, 2024, till June 30.

The Reserve Bank changed the guidelines on August 18 in response to concerns about the ways that banks and NBFCs were utilizing punitive interest as a way to increase income. These will limit the penalties that lenders may use for loan default to just "reasonable" ones. It was reported that beginning of January 1, 2024, banks and other lending organizations will not be permitted to levy criminal interest.