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What is RBI Bans Compounding Penal Interest about?

The Reserve Bank of India (RBI) has issued new guidelines prohibiting banks and non-banking financial companies (NBFCs) from compounding penal interest on loans, effective January 1, 2024. The guidelines aim to ensure transparency and fairness in lending practices, preventing additional charges from being added to the interest rate due to non-compliance. Banks must disclose the terms of penal charges clearly and formulate policies in line with these regulations to enhance consumer protection.

Author

poonam

Language

EN