Prepayment charge checker
Check whether a pre-payment or foreclosure charge may be levied on a particular loan.
Know before you levy, and see which limb of the Directions produced the answer.
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The answer
No pre-payment charge may be levied
A floating-rate loan to an individual for a purpose other than business. Every lender the Directions reach is barred, at any sanctioned amount.
It makes no difference where the money came from. The borrower may refinance with another lender and the charge is still barred.
It applies to a part pre-payment as much as to a full foreclosure.
No minimum lock-in period may be imposed as a way of reaching the same result.
Paragraph 5(i)
On a business-purpose loan, the lender decides the answer
For a floating-rate loan to an individual or a micro or small enterprise, taken for business. A loan to an individual for anything other than business is barred everywhere on this list, at any amount — that rule has no tiers.
| Lender | May it charge? |
|---|---|
| Commercial bank, Tier-4 UCB, NBFC-Upper Layer | No — at any sanctioned amount. |
| SFB, RRB, LAB, Tier-3 UCB, State or Central co-op, NBFC-Middle Layer | No, up to ₹50,00,000 sanctioned. Above that, its own policy. |
| NBFC-Base Layer, Tier-1 and Tier-2 UCB | Its own board-approved policy — the bar does not name it. |
Where the bar applies, it applies completely. The source of the money makes no difference — a borrower refinancing with a competitor is still protected. It covers a part pre-payment as much as a full foreclosure. And no minimum lock-in may be imposed to reach the same result by another route.
Reading the limbs themselves. Paragraph 5(i) binds every lender; paragraph 5(ii) names entity classes and leaves the Base Layer out. Why that distinction is easy to misread, and what “MSE” does and does not cover, is worked through in prepayment charges after the 2025 Directions.
Where it does not apply, disclosure still does. A charge has to sit in the board-approved policy and be stated in the sanction letter, the loan agreement and the Key Facts Statement. One that was never disclosed cannot be recovered, whatever the policy says.
Where this answer comes from
This computes nothing. It applies the instrument named below to the facts you enter, and tells you which clause produced the answer, so you can go and read it rather than take this page's word for it.
It is a guide, not advice. Your own board-approved policy, your scheme terms and your auditor decide what applies to a particular account.
Source. Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025 — issued 2 July 2025, applying to loans and advances sanctioned or renewed on or after 1 January 2026. They reach all commercial banks other than payments banks, co-operative banks, NBFCs including HFCs, and All India Financial Institutions. Read the Master Direction
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