Wednesday, September 7, 2011


By on 7:26 PM

After Banks Housing finance firms too to waive prepayment fines A day after the Reserve Bank of India asked banks not to impose prepayment charges on floating-rate loans, the National Housing Board is planning to introduce similar guidelines for housing finance companies (HFCs). 

Housing finance companies, which are regulated by NHB, and do not come under the gamut of RBI were out of the banking regulator's announcement on Tuesday. The move will impact companies such HDFC, India's largest housing finance company, LIC Housing Finance, Dewan Housing Finance and others. 

“After the RBI guidelines on pre payment charges on Tuesday, we are also examining this issue (of prepayment charge),“ said RV Verma, chairman and managing director, NHB. “We feel that there should be level playing field for customers in case of prepayment charges,“ he added. He however did not give the timeline for the announcement of the guidelines. 

 Currently banks and HFCs charge around 2% of outstanding amount as prepayment penalty if a customer pays the entire amount at one go. 

 HFCs charge prepayment penalty only when a customer borrows from other financial institution to make a prepayment. “We levy charge only if the prepayment is done from third payment and not if the if the prepayment is done by customer's own savings,“ said Keki Mistry, vice-chairman and chief executive officer, HDFC. 

“The proportion of customers pre paying loan through third party is very small, so there will no significant impact,“ he added.

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