Allow housing finance cos to levy prepayment charges: Deepak Parekh

Our Bureau Updated - November 12, 2017 at 09:43 PM.

Mr Deepak Parekh, Chairman, HDFC

HDFC Chairman, Mr Deepak Parekh, disagrees with the present regulatory thinking on allowing complete waivers of prepayment charges.

The Reserve Bank of India (RBI), which is the banking regulator, had recently floated a proposal that seeks to place a ban on levy of prepayment charges on floating rate loans. Banks have sought time to respond to this RBI proposal prohibiting recovery of prepayment charges on floating rate loans.

The National Housing Bank (NHB), which is the housing finance regulator, has already stipulated that no prepayment penalty should be levied on a home-loan borrower when the prepayments are made from a customer's own resources.

Serious problems may arise if there is complete waiver of all prepayment charges, Mr Parekh said at a CAFRAL-NHB roundtable on housing finance here on Friday.

“If our lenders are charging us prepayment charges, why are we not allowed to charge prepayment charges? If one bank doesn't, every bank will have to... This is our source of income. We want to do more work in the future… I don't think it is a good sign,” he said.

If a loan is prepaid because it is being commercially refinanced and there are no prepayment charges, then there could be a situation where there will be greater ‘substitutional' housing finance and not ‘incremental' housing finance taking place, Mr Parekh said.

“Certainly this was not what one wants for the system,” he added. HDFC is the largest housing finance company in the country.

> krsrivats@ thehindu.co.in

Published on October 7, 2011 15:49