RBI changed the rules of personal loan. Now it is mandatory to pay fixed interest rate. The whole system has changed from today.
The Reserve Bank of India (RBI) took an important decision on Friday and directed the banks to All EMI based personal loans in category fixed interest rate Make it mandatory to provide the option. This decision will provide relief to crores of borrowers, especially those who are troubled by the continuously rising interest rates.
What is the new rule of RBI?
- Now all banks and financial institutions (Regulated Entities – REs) will have to offer fixed interest rate option on personal loans.
- this rule All types of EMI based personal loans Will apply whether it is linked to an external benchmark or an internal benchmark.
- loan approval Information about Annualized Rate of Interest or Annual Percentage Rate (APR) at the time of Key Fact Statement (KFS) And loan agreement I have to pay.
- If there is any change in EMI or tenure during the loan tenure, the same will be informed to the borrowers from time to time.
Why is the option of fixed interest rate important?
RBI had instructed banks in August 2023 to provide loan to borrowers paying EMIs. fixed interest rate Or give the option to extend the loan tenure.
- rising interest rates on debtors due to negative amortization The risk of Negative Amortization had increased.
- In this, the EMI is so low that it is not able to cover even the interest amount, due to which the principal amount keeps increasing continuously.
- May 2022 Since till now RBI has increased the repo rate 250 basis points There has been an increase of Rs. 1000, which has affected the EMI and loan cost.
Responsibility of banks and financial institutions
- All banks and NBFCs should inform their customers at the time of interest rate changes. Option to switch to fixed rate Will have to give.
- every three months Customers will have to provide a statement in which the amount of principal and interest paid so far, the EMI amount, the number of EMIs remaining and the annual interest rate for the entire tenure of the loan will be given.
What will be the benefit to the borrowers?
- There will be relief from the sudden increase in EMI.
- fixed rate loan The interest rate remains fixed, due to which there is no instability in EMI.
- customers in a better way economic planning Will be able to make.
- Negative amortization will be avoided, which will not increase additional burden on the principal amount.
Advice for Borrowers
- If your loan floating rate But if you want fixed rate Can switch in.
- In fixed rate EMI remains constant, but in floating rate EMI can increase or decrease depending on the market.
- Before switching, be sure to check the terms and procedures with your bank.
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