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
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.
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.
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.
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).