Country’s one of the biggest money lender State Bank of India has announced to cut down the pre-payment charges on home loans, it may be banks is luring to borrowers those are wanted to close their accounts.
According to the senior officials of SBI said that “bank has decided to abolish prepayment charges on all kind of home loans on the higher priority basis.” Officials added that “bank will charge only to those housing loans on floating rates which has been borrowed before May2011.”
It has been charging about 2 per cent of the outstanding amount as penalty if borrowers opted to foreclose their loans.
Reportedly, till the end of September SBI’s home loan rose to Rs. 92,383 crore comparatively Rs 86,769 crore in March 2011. Currently banks are charging 2% as prepayment penalty on the outstanding loan amount, if borrower clearing the entire payment prior to due date by switching over to another lender. There will be no prepayment penalty if borrowers pay using their own funds. Recently RBI has said that “it would scrap prepayment penalties charged by banks.”