No Prepayment Penalties : NHB

National Housing Bank acts tough on Housing Finance Companies

Asks all registered Housing Finance Companies to stop levying penalties on borrowers for pre-closure of loans

Mumbai: In a strongly-worded circular recently issued to all registered Housing Finance Companies (HFCs), the National Housing Bank (NHB), has decreed that henceforth HFCs cannot charge pre-payment levy or penalty from the borrowers when the housing loan is pre-closed by them out of their own sources. Furthermore, the NHB has ordered all HFCs to ensure compliance with the above rule, failing which it has threatened of punitive action on the disobeying organization under provisions of the National Housing Bank Act,1987 on grounds of non-compliance.
The NBH has also mentioned in the circular that the issue of levying pre-payment penalty or pre-payment charges by housing finance companies on pre closure of housing loans by the borrowers out of their own sources was under consideration for quite some time now and it has been finally decided that housing finance companies should not charge prepayment levy or penalty in such cases. The rule comes as a considerable respite for borrowers, who were expecting to have some liberty & discretion in managing their home loans. Since home loans have become an integral component of residential property trnsactions, HFCs so far could exploit the demand situation to their favour. But with the NHB order coming this way, borrowers can now breathe easily.





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7 thoughts on “No Prepayment Penalties : NHB

  1. I have a housing loan from HDFC. On contacting HDFC regarding the guideline issued by National Housing Bank in respect of the waiver of prepayment charges, they have informed that prepayment charges would be applicable as per the terms & conditions of the agreement entered into at the time of availment of the housing loan.

  2. Banks are still imposing penalty on pre-closure of housing loans. I have loan with ICICI , when contacted for pre-closure of loan they gave me a letter with 2.21% penalty. NHB should take action on all such banks no complying its directives

  3. If someone can kindly help with the details of the circular so covered by National Housing Bank above and in case of failure to comply with the provisions by registered HF Companies/Banks attract any penal actions , if so ,what?

  4. This order of NHB has lacuna, I dont understand why partial prepayment are subject to penalty and only full prepayment are not subject to penalty.

    The order is not for masses..

  5. Banks are still imposing penalty on pre-closure of housing loans. I have loan with ICICI , when contacted for pre-closure of loan they gave me a letter with 2.21% penalty. NHB should take action on all such banks no complying its directives and bank says till not received National Housing Bank circular for Loan pre payment pently free.

  6. Going thru theseexperiences i feel one shouldnot sign an agreement with the hfc if it mentions a prepayment penalty.Recently when my loan was sanctioned such a condition was there in the sanctlon letter and d officer of the icicihfc refused to mention this clause of prepayment from ownresources being free from such a penalty and just asked me to refer to the hsb’s circular regarding the same.What should i do now if they renage from the oral assurance when i prepay my loan from my capital gains?

  7. whether, prepayment penalty has not been waived on the mortgage loan for the Housing Finance Company who loaning under National Houshing Bank policy, if ye, than intimate me circular No. & date of issuance.

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