Key Points
Taking cognisance of the numerous complaints received on the changes imposed by lenders without proper communication or consent of borrowers, the RBI has introduced a new framework for resetting floating rate loans..
When the interest rates on a floating rate loan rise, borrowers may either see a hike in their EMIs, or an extension of the loan tenor, or both..
At the time of sanctioning the loan, the lender will have to clearly communicate to the borrowers about the possible impact of a change in benchmark interest rate on the loan, leading to changes in the EMI, or loan tenor, or both..
Any subsequent increase in the EMI/tenor, or both, as a result of such changes, will have to be communicated to the borrower immediately through appropriate channels. Further, at the time of reset of interest rates, lenders will have to give an option to borrowers to switch over to a fixed rate, as per their Board-approved policy..
Banks may no longer be able to take unilateral decisions on certain aspects of the loan without taking the borrowers into confidence. Home loan borrowers with multiple years left for repayment will get a relief from the higher interest burden..
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