New Delhi, Feb. 24 -- The Reserve Bank of India (RBI) has released a draft circular intended to direct banks not to levy foreclosure charges/ pre-payment on the floating rate term loans for purposes other than business to individual borrowers.

This means when a loan borrower decides to foreclose a floating rate loan or prepay it, the bank will not be permitted to impose any charge or penalty.

These rules will be part of the responsible lending conduct of banks. To make changes in the circular, RBI has invited comments and feedback by the stakeholders and members of public on the draft circular by March 21 through email.

Afterwards, a final circular will be issued after factoring in comments from public and stakeholders.

I. Banks will ...