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NHB to soon abolish pre-payment penalty on home loans

NHB to soon abolish pre-payment penalty on home loans
PTI
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First Published: Mon, Sep 19 2011. 08 32 PM IST
Updated: Mon, Sep 19 2011. 08 32 PM IST
New Delhi: In a big relief to home loan borrowers from housing finance companies (HFCs), regulator National Housing Bank (NHB) on Monday said it will soon come out with a directive to abolish penalty on pre-payment of floating loans.
“We will soon issue a circular for doing away with pre-payment charges levied by HFCs,” NHB chairman and managing director R V Verma said after announcing 2010-11 financial numbers here.
NHB regulates 54 HFCs, including mortgage major HDFC, LIC Housing Finance and Dewan Housing Finance.
The HFCs should not levy any pre-payment charges on floating loans, he said. If pre-closure of housing loans by the borrowers out of their own sources, then there should not be any penalty, he said.
In a release issued in October, 2010, the regulator had said, “The issue of levying pre-payment penalty or pre-payment charges by HFCs on pre closure of housing loans by the borrowers out of their own sources has been considered by the NHB and it has been decided that HFCs should not charge prepayment levy or penalty in such cases.”
Meanwhile, the banking sector regulator Reserve Bank of India (RBI) has also mooted the idea of doing away with the pre-payment charges levied by banks on floating home loan.
At the same time, NHB has tightened norms for HFCs with regard to provisioning.
It has raised the provisioning requirement for doubtful assets of up to 100%. At the same time, it directed HFCs, to set aside 0.4% of the total outstanding “standard” loans as a buffer.
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First Published: Mon, Sep 19 2011. 08 32 PM IST
More Topics: NHB | Home Loan | Penalty | Pre Payment | HDFC |