We are a Pvt Company and our loan facility from HDFC bank of RS 20 cr appx in form of Cash credit limits. and at present, the mansion in our sanction letter foreclosure charges 2% from takeover or repay by own resources. our company under MSME act in Medium category.
so kindly clarify for Foreclosure charges do not recover by the bank to MSME company this type any notification by RBI
if any notification or information is available kindly share.
10 July 2024
As of my last update, there hasn't been a specific RBI notification that exempts MSMEs (Micro, Small, and Medium Enterprises) from foreclosure charges on loan facilities. However, MSMEs are recognized under various schemes and benefits aimed at promoting their growth and sustainability.
Here are some points to consider regarding foreclosure charges and MSME status:
1. **MSME Definition and Benefits**: MSMEs are defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. They are eligible for various benefits including priority sector lending norms, collateral-free loans for certain amounts, and interest rate concessions under schemes like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
2. **Foreclosure Charges**: Foreclosure charges are typically mentioned in loan agreements and sanction letters provided by banks or financial institutions. These charges are applicable when the borrower repays the loan earlier than the agreed-upon tenure. The purpose is to compensate the lender for potential loss of interest income.
3. **RBI Guidelines**: The Reserve Bank of India (RBI) periodically issues guidelines on loan charges, including foreclosure charges, applicable to all borrowers. As of now, there isn't a specific exemption for MSMEs from foreclosure charges in the RBI guidelines.
4. **Negotiation with Bank**: While RBI guidelines set a framework, individual banks may have their own policies and discretion on such charges. It's advisable for MSMEs to negotiate with their banks regarding waiver or reduction of foreclosure charges based on their financial health, relationship with the bank, and overall market conditions.
5. **Consultation with Financial Advisors**: MSMEs should consider consulting with financial advisors or legal experts who specialize in banking and finance to understand the implications of foreclosure charges and explore options for minimizing such costs.
6. **Updates and Notifications**: It's important to stay updated with RBI notifications and circulars regarding MSME benefits and loan charges. These can be accessed through the official RBI website or through financial news sources.
Given the specifics of your loan facility and MSME status, discussing directly with HDFC Bank and referencing applicable RBI guidelines will provide clarity on foreclosure charges and any potential waivers or reductions available to your company.
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