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The HDFC Chairman, Mr Deepak Parekh, has expressed disagreement over the present regulatory thinking on allowing complete waiver of all prepayment charges.
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 pre-payment charges, why are we not allowed to charge pre-payment 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… looking forward rather than trying to protect your book, rather to control your book and rather than keep your customers within your ambit. I don’t think it is a good sign," he said.
Mr Parekh hoped that regulators would realise that there may be greater ‘substitutional’ housing finance and not ‘incremental’ housing finance taking place if prepayment charges are completely waived.
“Certainly this (greater substitutional housing finance) was not what one wants for the system,” he added. National Housing Bank (NHB), which is the housing finance regulator, has stipulated that no pre-payment penalty should be levied as long as pre-payments are done from a customer’s own resources.
The Reserve Bank of India recently floated a proposal that seeks to ban levy of pre-payment charges on floating rate loans.
Banks have sought time to respond to the RBI proposal prohibiting recovery of pre-payment charges on floating rate loans.
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