BANK HAS NO AUTHORITY TO CHARGE PRE-PAYMENT PENALTY FROM INDIVIDUAL AND ALSO FROM A PROPRIETORSHIP

 The Hon’ble Kerala high court has held that, A proprietary concern is nothing, but an individual trading under a trade name. A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for conduct of its affairs. The view taken in the impugned orders to the effect that the proprietor is not entitled to the waiver, since he is not a “natural person” is completely unsustainable.

The petitioner, who is the sole proprietor, is an  individual and is therefore eligible for the benefit of the waiver of foreclosure/pre-payment charges ON TERM LOAN as provided in the master circular.

Home loan customers will have greater flexibility to switch to banks that offer better rates with the banking regulator having banned lenders from charging a prepayment penalty on floating rate home loans.

For over a year, Reserve Bank of India (RBI) persuaded banks to desist from charging a prepayment fee but moral suasion from the central bank was to no avail. On Tuesday, RBI barred banks from charging any fee from a customer who wants to repay an outstanding loan and close the account.