New Delhi, July 3 -- In a significant move aimed at enhancing credit accessibility for micro and small enterprises (MSEs), the Reserve Bank of India (RBI) has directed all banks and non-banking financial companies (NBFCs) to refrain from levying prepayment penalties on floating rate loans sanctioned or renewed from January 1, 2026.

Federation of Indian Micro and Small & Medium Enterprises (FISME) has welcomed the move.

"It has been a long battle to convince RBI and policy makers how pre-payment charges are being used as a coercive tool by banks to dissuade MSME clients against changing banks. We welcome the decision taken by the RBI. However, we are examining the fine print", posits FISME's official communique.

Citing the critical impo...