If you have taken a loan and you have not been able to repay it, then there are different types of charges levied by the bank. In such a situation, it directly affects your total outstanding amount and then it goes on increasing. Regarding this, now the Reserve Bank of India i.e. RBI has made a new rule. Actually, under this, instructions have been issued to ensure transparency in the disclosure of penalties and interest rates in loan accounts. Under this new rule, in cases of non-payment of the loan, now banks will be able to levy only penalty charges i.e. 'reasonable' penal charges on the concerned customer. You can learn about this rule in more detail in the next slides...

Understand the rules in simple words: -
Number 1
The Reserve Bank of India, while changing the penalty rules on loan accounts, has ordered that now the country's banks and non-banking financial companies ie NBFCs will not be able to use 'interest penalty' as a way to increase income. You can understand it in simple words that if a borrower is not able to pay the EMI on time or the EMI bounces, then a fine can be imposed on him but interest will not be charged on that fine.

Number 2
As per the new rule, if a penalty is imposed on a customer for non-compliance with the terms and conditions of the loan, it will be treated as a 'penal fee'. Also, interest on advances to be added to the rate will not be charged as 'penal interest'. In such a case, no separate interest will be calculated on the charges. However, this will not affect the normal process of interest compounding in the loan account.

The new rule will be applicable from these days
This decision of RBI will benefit crores of people. On the other hand, if we talk about the date of implementation of this rule, then these guidelines will be effective from 1 January 2023 i.e. from this day these new rules will come into force and all banks will have to follow them.

To whom and what will be benefited?
As soon as this rule of RBI is implemented, those customers who miss paying EMI will be benefited.
Banks will not be able to impose arbitrary penalties on customers who do not pay EMI
The bank has made it clear that the penalty imposed should not exceed a limit.

The new rule will apply to these institutions:-
Commercial bank
Cooperative bank
NBFC Companies
Housing finance companies
Exim bank
NABARD
NHB
SIDBI

Where will it not apply?
This rule issued by RBI will not apply to credit cards, external commercial borrowings, and trade credit. In such a situation, this will not be a new rule for the customers associated with these services.

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