No prepayment charges on floating rate business loans to micro and small enterprises No foreclosure charges
Lenders cannot charge a micro or small enterprise for paying off a floating rate business loan early, in part or in full, on loans sanctioned or renewed from 1 January 2026.
Last updated on
- Status
- Open
- Run by
- Reserve Bank of India
What you get
- No prepayment charge from commercial banks other than small finance, regional rural and local area banks, from Tier 4 urban co-operative banks, upper layer NBFCs or all India financial institutions, whatever the loan size
- No prepayment charge from small finance banks, regional rural banks, Tier 3 urban co-operative banks, state and district co-operative banks and middle layer NBFCs on loans up to ₹50 lakh
- Covers part or full prepayment, whatever the source of the money, with no minimum lock-in period
- No charge on a cash credit or overdraft if you tell the lender, within the time in the agreement, that you will not renew, and close it on the due date
- No charge if the lender asks you to repay early
- Any prepayment charge that can apply must be stated in the sanction letter, the loan agreement and the Key Facts Statement, or it cannot be charged
- A lender cannot later charge fees it had waived
Who can apply
- Micro and small enterprises.
- Floating rate loans sanctioned or renewed on or after 1 January 2026
- The borrower is a micro or small enterprise, or an individual borrowing for business
- Fixed rate loans follow the lender's own policy, and any charge must be worked out on the amount prepaid
How to apply
- Before signing, check the sanction letter and Key Facts Statement for any prepayment charge
- If you are charged for prepaying a floating rate loan covered by the rule, ask the lender in writing to reverse it
- If the lender does not reply within 30 days, or you are not satisfied, complain to the RBI Ombudsman at cms.rbi.org.in
In person, your lender's branch
In Kerala, applies to all commercial banks in Kerala with no size limit, and to Kerala Bank, Kerala Grameena Bank and small finance banks on loans up to ₹50 lakh.
Where we found this
An independent guide by The Company of Four, not a government website. Schemes change often, so check every detail on the official website before you apply. Links marked ↗ open external websites that we do not run, and we are not responsible for their content. Seen something out of date? Tell us and we will look into it.