RBI bans additional punishing interest on defaulted loans

  • The Reserve Bank of India (RBI) calls for penalty atop loan rate be treated as ‘penal charges’, not ‘penal interest’.
  • RBI urges banks not to use penalties as revenue-boosters but as tools for fostering credit discipline.
  • These instructions apply from Jan. 1, exclude credit cards, trade credits, external commercial borrowings and structured obligations.
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