India Consumer: Banks levying charge on pre-payment

You have a loan from a regular private sector bank, and your loan is for a 15 year period. Most people I know, including you, will not want to have the loan continuing for the full period of the loan, and would rather do prepayments as much as possible. However, banks apparently charge an interest for the stupid thought of returning their money to them. And it also emerges that the RBI is fine with things, as long as the banks do not charge too heavy a penalty (link to article)

A few days ago, the RBI had apparently sent a reply under RTI that it did not really approve of banks charging a penalty for pre-payment; the latest clarification was meant to even remove this statement. The RBI is stating a more hands-off policy, since these are private banks with their own management; apparently the RBI expects that market competition is enough to ensure that banks do not heavily over-charge, and that they should not charge customers more than their standard rates

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