BANKS NOT READY TO WITHDRAW PREPAYMENT PENALTY ON FORECLOSURE

Last month, Competition Commission of India (CCI), the apex body that operates to sustain and promote competition, sent notices to atleast 15 banks, NBFCs and IBA seeking explanation on why they penalise borrowers who choose to foreclose loans. In the communication, CCI is understood to have observed that loan prepayment penalties will suppress the competition in the homeloan market by limiting the chances of a borrower to switch their loan to another lender. 


Banks have expressed concern over the Competition Commission's intervention on home loan prepayment penalty issue as they fear that this would put pressure on their costs, increase risk and even lead to higher lending rates.


Banks which have been asked to explain this matter include SBI, ICICI Bank, Axis Bank, PNB, Canara Bank, IOB, 
Indian Bank, OBC, HDFC Bank amongst others. Besides, home financiers like HDFC and LIC Housing Finance were also served notices by CCI.


Source: http://economictimes.indiatimes.com/personal-finance/loan-centre/home-loans/home-loans-news/Banks-not-ready-to-withdraw-prepayment-penalty-on-forclosure/articleshow/5526544.cms