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Foreclosure charges by NBFCs on pre-payment of loans should be fully waived off
It refers to Reserve Bank of India (RBI) proposing restriction on foreclosure-charges charged by Non-Banking-Financial-Companies (NBFCs) on pre-payment of loans to a maximum of three per cent.
RBI vide its circular dated 07.05.2014 had waived off foreclosure-charges by banks on all types of loans. RBI's-argument in support of NBFCs continuing with the practice is that while banks have social obligations, NBFCs are in lending-business only for commercial purposes!

But social obligation is only on public-sector banks, while RBI has waived foreclosure-charges by all scheduled banks including private and multi-national banks. Moreover NBFCs waived foreclosure-charges on home-loans after RBI vide its earlier similar circular dated 05.06.2012 directed only banks for waiving foreclosure-charges for home-loans. Many NBFCs are in lending business even without practice of foreclosure-charges on pre-payment of loans.

If some NBFCs can be in business without adopting practice of foreclosure-charges and all NBFCs are giving home-loans without any compulsion of foreclosure-charges, then there is no sense in making loan-takers as financial slaves by having mahajan-like practice of foreclosure-charges anywhere including at NBFCs in any type of loan.

While banks are in lending-business from their own funds, most NBFCs are financed by public-sector banks for lending-business. Since NBFCs use public-money to earn from lending-business, they must be directed by RBI to do away with anti-public practice of charging foreclosure-charges on pre-payment of loans.

If desired, NBFCs can compensate by having a major-share in processing-fees for sanctioning of loans where presently complete or major portion is for Direct Sales Associates (DSAs).

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