Rules3 min read · Updated 17 October 2026
Is there a prepayment charge on a floating-rate home loan?
RBI bars prepayment charges on floating-rate loans to individuals sanctioned or renewed from 1 January 2026. What it covers, what it does not, and what to check.
What the rule says
The directions cover commercial banks (not payments banks), co-operative banks, NBFCs and All India Financial Institutions. For a floating-rate loan to an individual for a non-business purpose, with or without a co-borrower, the lender shall not charge for prepayment. This holds whether you prepay part of the loan or all of it, and whatever the source of the money. There is no minimum period you must wait first.
A home loan you live in, or buy to let, is a loan for a non-business purpose in the usual sense. If you are unsure how your lender classed your loan, ask in writing.
Which loans it covers
| Your loan | Prepayment charge? |
|---|---|
| Floating rate, individual, non-business, sanctioned on or after 1 Jan 2026 | Not allowed under the RBI directions |
| Floating rate, sanctioned before 1 Jan 2026 | The directions are tied to sanction or renewal date, so check your loan agreement and the rules that applied when it was sanctioned |
| Fixed rate | Set by the lender's policy. It must be disclosed up front, and is charged on the amount prepaid |
| Loan that is fixed for some years and then floating | Depends on whether it is floating at the time you prepay |
What is not a prepayment charge
The ban is on a prepayment charge. It does not remove other costs, so look for these separately in your papers:
- Processing or administrative fees for a balance transfer, rate conversion or a changed loan record.
- Legal and technical charges at the new lender if you move your loan. See balance transfer costs.
- Interest up to the day you prepay.
What to check in your own papers
- Open the sanction letter and your Key Fact Statement. See how to read a KFS. Find the line on prepayment or foreclosure charges.
- Check the sanction date and whether the rate is floating.
- If the papers show a charge on a loan the rule covers, write to the lender and ask them to point to the clause that allows it. Keep the reply.
- If it is not settled, the Terms of your lender will list a grievance route, and you can then use the RBI complaint portal.
What it means for you
For a covered loan, part-paying is free of penalty, so the question is only whether the money does more in the loan than elsewhere. See reduce EMI or reduce tenure and the prepay or invest calculator.
Common questions
Can a bank charge me for part-paying a floating-rate home loan?
Not if the loan is covered by the RBI directions: floating rate, to an individual, for a non-business purpose, sanctioned or renewed on or after 1 January 2026. The ban applies to part and full prepayment.
Does the 2026 rule apply to my older home loan?
The directions apply to loans sanctioned or renewed on or after 1 January 2026. For an older loan, read your loan agreement and ask your lender in writing whether any charge applies.
Is there a lock-in period before I can prepay?
Not for loans the directions cover. The rule says the ban applies without a minimum lock-in period.
What about a fixed-rate home loan?
Fixed-rate loans fall under the lender's own policy. The charge, if any, must be stated in your sanction letter and loan agreement, and cannot be charged if it was not disclosed.