Mumbai, Feb. 17 -- In a major relief for micro and small enterprises (MSEs), the Reserve Bank of India (RBI) has reiterated that banks and other regulated entities cannot levy prepayment or foreclosure charges on floating rate loans availed by MSEs.

The RBI has also mandated that the applicability of prepayment charges must be clearly disclosed in the sanction letter, loan agreement and Key Facts Statement, ensuring greater transparency for borrowers.

The clarification came during the RBI Governor Sanjay Malhotra's meeting with MSME associations in Mumbai where Banking and Finance Committee Chairman of Federation of Indian Micro and Small and Medium Enterprises (FISME) Neeraj Kedia raised the industry concern that certain banks were sti...