No Additional Charges for Prepaying Loans from January 2026, Says RBI
The Reserve Bank of India (RBI) has announced that from January 1, 2026, borrowers will not be required to pay any additional charges for repaying loans before their due date. The decision applies to retail loans, including home, personal, vehicle, and education loans, as well as business and industrial loans.
Under the new rules, banks, non-banking financial companies (NBFCs), and housing finance companies will be prohibited from levying foreclosure or prepayment penalties on borrowers who choose to settle their loans early. The move is aimed at enhancing borrower convenience, improving financial flexibility, and fostering competition among lenders.
According to RBI guidelines, the decision will benefit millions of borrowers by allowing them to close loans ahead of schedule without incurring extra costs. This is particularly significant for customers who wish to switch lenders for better interest rates or repay loans using surplus funds.
The new conditions specify that:
- Foreclosure charges will be completely eliminated.
- Borrowers will have the freedom to repay loans partially or in full before maturity.
- No hidden fees or charges will be allowed for early repayment.
RBI stated that the measure will encourage responsible borrowing and repayment habits while promoting transparency in loan agreements. Financial experts believe this will also lead to greater competition in the lending sector, ultimately resulting in lower interest rates and better service for customers.
