Penal charges: what RBI now allows lenders to levy
Penalties on default must be a reasonable flat charge, not compounding penal interest.
3 min read
What you need to know
RBI's rules require that penalties for non-compliance be levied as 'penal charges', not as penal interest added to the rate, and they may not be capitalised — no interest is computed on the penalty itself.
Charges must be reasonable, disclosed up front in the sanction letter and Key Fact Statement, and applied without discrimination within a loan category.
Continue your research
Use this guide alongside our product details and eligibility criteria before choosing a lender.
Frequently asked questions
What is the main takeaway from “Penal charges: what RBI now allows lenders to levy”?
Penalties on default must be a reasonable flat charge, not compounding penal interest.
What should I check before acting on this tax & compliance guide?
Review the practical points in the guide against your income, obligations, documents and lender requirements.
Can the information in this guide guarantee loan approval?
No. It is general educational information. A bank or NBFC makes the final decision after checking your credit profile, repayment capacity, documents and the applicable product policy.
How can iFINTRUST help after I read this guide?
An iFINTRUST advisor can review your requirement, explain the documents normally requested and help you compare suitable lending options before you apply.