Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans

Which statement about prepaying a floating-rate home loan taken by an individual borrower is correct as per RBI directions on prepayment charges?

Banks cannot levy foreclosure charges or prepayment penalties on floating-rate term loans sanctioned to individual borrowers. This RBI rule applies regardless of the source of funds used for prepayment, whereas fixed-rate loans may still carry contractual prepayment charges.

  1. ABanks may levy foreclosure charges on individual borrowers even when the loan is from own sources
  2. BPrepayment penalty is mandatory for all floating-rate loans
  3. CBanks cannot levy foreclosure charges or prepayment penalties on floating-rate term loans to individual borrowersCorrect
  4. DPrepayment is allowed only at the end of the tenure

Explanation

RBI directions bar regulated lenders from charging foreclosure charges or prepayment penalties on floating-rate term loans given to individual borrowers, irrespective of the source of funds. Fixed-rate loans may carry such charges as per the loan contract.

Did you get it right without looking?

One question tells you little. A timed set on Debt Management and Loans shows your real accuracy, how long you take and where you lose marks.

Practise Debt Management and LoansFree diagnostic mock

More Debt Management and Loans questions