‘RBI’s loan prepay fee ban to hit NBFCs more than banks’, BFSI News, ET BFSI
MUMBAI: PNB Housing Finance and Aditya Birla Capital are anticipated to be among the many worst hit by RBI’s proposal to take away foreclosure charges on loans to small companies. Amongst banks, Axis, IndusInd & Kotak Mahindra may even see a better influence as charges account for a better a part of their complete revenue in comparison with friends.
Final week, RBI introduced plans to waive prepayment fees on floating rate loans as much as Rs 7.5 crore per borrower. The brand new norms will apply whatever the supply of funds used for foreclosures or prepayment, whether or not partial or full.
Based on an IIFL report, the proposed transfer aligns with current guidelines for house loans and is predicted to scale back profitability for retail mortgage in opposition to property (LAP), SME, and enterprise loans resulting from elevated competitors. These segments account for 5-25% of the property below administration for non-banking monetary corporations and housing finance corporations.
The change may intensify competitors, significantly within the fixed-rate non-housing mortgage phase of inexpensive housing finance corporations, as bigger NBFCs might compete on charges. The proposal removes prepayment fees with no minimal lock-in interval for floating price loans to people and MSMEs as much as Rs 7.5 crore, together with stability transfers. It additionally applies to dual-rate loans (fastened + floating) if the mortgage is floating on the time of foreclosures or prepayment.
The elimination of exit obstacles is predicted to drive increased competitors, decreasing profitability within the affected segments. Higher-rated NBFCs with decrease prices of funds would possibly mitigate the influence by attracting higher-yielding prospects by way of stability transfers from smaller friends.
PNB Housing Finance and Aditya Birla Capital are more likely to be probably the most impacted, with 27% and 26% of their AUM in floating-rate MSME and LAP loans, respectively. A Macquarie report by Suresh Ganapathy highlighted comparable issues, noting that the draft round proposes eradicating foreclosures fees and prepayment penalties on MSME loans below Rs 7.5 crore and particular person loans.
