RBI Prepayment Rules for Personal Loans
What RBI’s 2025 prepayment directions change — and why they usually don’t remove foreclosure charges on personal loans.
Updated 27 September 2026 · 8 lenders trackedWhat you need to know
RBI’s (Pre-payment Charges on Loans) Directions, 2025, issued on 2 July 2025 and applicable to loans sanctioned or renewed from 1 January 2026, bar prepayment charges on floating-rate loans to individuals for non-business purposes. Most personal loans, however, are fixed-rate — so the lender’s foreclosure charge, as disclosed in the sanction letter and KFS, usually still applies.
The rules
| Situation | Rule |
|---|---|
| Floating-rate loans to individuals (non-business) | No prepayment / foreclosure charge — any lender, part or full, from any source of funds |
| Loans sanctioned or renewed from 1 Jan 2026 | RBI (Pre-payment Charges on Loans) Directions, 2025 also bar charges on floating-rate business loans to individuals and MSEs at most banks and large NBFCs; no minimum lock-in |
| Fixed-rate loans | Lender may charge as per the sanction letter and Key Facts Statement |
| Disclosure | Any charge must be shown in the sanction letter, loan agreement and KFS; waived charges cannot be levied later |
What it means for personal loans
| Your loan | Rule |
|---|---|
| Fixed-rate personal loan (most banks, e.g. ICICI) | Not covered — lender’s disclosed charge applies |
| Floating-rate personal loan (e.g. Bank of Baroda option) | No prepayment or foreclosure charge, part or full, from any source of funds |
| Loan used for business by an individual | Floating-rate: no charge at commercial banks and large NBFCs |
| Prepayment asked for by the lender | No charge |
| Charge waived earlier | Cannot be levied retrospectively |
Lender-wise charges
| Lender | Processing fee | Prepayment / foreclosure |
|---|---|---|
| Axis Bank Personal Loan | Up to 2% of loan + GST | Foreclosure 5% + GST; part-payment 3% or 2% depending on tenure (BankBazaar) |
| HDFC Bank Personal Loan | Up to ₹6,500 + GST | Foreclosure: 4% of principal outstanding up to 24 EMIs, 3% from 25 to 36 EMIs, 2% after 36 EMIs (+ GST) |
| ICICI Bank Personal Loan | Up to 2% of loan + GST | Foreclosure and part-payment: 3% of principal outstanding if the loan is up to 24 months old; nil after 24 EMIs |
| IDFC FIRST Bank Personal Loan (FIRSTmoney) | 0% – 3.5% of loan (incl. GST); zero on select amounts | Zero foreclosure charges |
| SBI Personal Loan (Xpress Credit) | 1.50% of loan (min ₹1,000, max ₹15,000) + GST | SBI’s RTXC page lists no prepayment penalty, but aggregators report 3% of the amount prepaid on fixed-rate Xpress Credit — confirm in your KFS |
| Bank of Baroda Personal Loan | Nil for government employees with BoB salary account; others 1% – 2% + GST (min ₹1,000, max ₹10,000) | Zero prepayment charges (ClearTax); the official page is silent. On the floating-rate option RBI rules bar prepayment charges anyway |
| YES Bank Personal Loan | Up to 2.5% of loan | Foreclosure up to 4% of outstanding principal; part-prepayment allowed after 12 EMIs |
| Kotak Mahindra Bank Personal Loan | Up to 5% of loan + GST | Foreclosure 5% of outstanding principal + GST (BankBazaar) |
Frequently asked questions
My personal loan was taken in 2025. Does the new rule apply?
The 2025 directions apply to loans sanctioned or renewed from 1 January 2026. Floating-rate loans to individuals were already protected by earlier RBI instructions; fixed-rate loans follow your agreement.
How do I know if my loan is fixed or floating?
Check the KFS and sanction letter — they state the rate type and any benchmark (e.g. MCLR, repo-linked rate).
For information and comparison only. Loan terms, rates and rules change — confirm with the lender and read the Key Facts Statement before borrowing.