# Can a bank charge me for closing my MSME floating rate loan early?

Canonical: https://senseible.earth/answers/prepayment-charges-msme-floating-rate-loan

For floating rate business loans to micro and small enterprises sanctioned or renewed from 1 January 2026, most commercial banks cannot charge for prepayment, full or partial. Small finance banks, regional rural banks, some co-operative banks and mid-layer NBFCs cannot charge on loans up to Rs 50 lakh.

## The 2025 Directions in brief

RBI's Pre-payment Charges on Loans Directions, 2025, issued in July 2025, apply to loans sanctioned or renewed on or after 1 January 2026. For floating rate loans to individuals and micro and small enterprises for business purposes, the rule depends on the type of lender.

## Which lender, which rule

- Commercial banks (other than small finance, regional rural and local area banks), Tier 4 urban co-operative banks, upper-layer NBFCs and all-India financial institutions: no prepayment charge.
- Small finance banks, regional rural banks, Tier 3 urban co-operative banks, state and central co-operative banks and middle-layer NBFCs: no charge on a sanctioned amount up to Rs 50 lakh.
- Other lenders and larger loans: the charge in your sanction letter and Key Facts Statement applies.

## What else the rule says

- It applies whatever the source of the money used to prepay, your own funds or a refinance from another lender.
- No minimum lock-in period can be imposed before you prepay these loans.
- Any charge that does apply must be disclosed in the sanction letter, the loan agreement and the KFS. A charge that was not disclosed cannot be levied.
- Fixed rate loans, and loans sanctioned before 2026, follow the terms you signed.

## Before you prepay

1. Check the sanction date and whether the loan is floating or fixed.
2. Find your lender's category on its website or in RBI's lists.
3. Ask for a written foreclosure statement showing principal, interest to date and any charge, and challenge a charge the rules do not allow.

## What Senseible does here

For a green or energy loan you might refinance into, Senseible's green loan readiness check organises the bill-backed evidence a lender reviews. The new lender sets its own terms.

- [Key Facts Statement for an MSME loan](https://senseible.earth/answers/key-facts-statement-msme-loan)
- [Energy efficiency loan: EMI vs savings](https://senseible.earth/answers/energy-efficiency-loan-emi-vs-savings)
- [Green loan readiness check](https://senseible.earth/green-loan-check)

Sources: [RBI (Pre-payment Charges on Loans) Directions, 2025, issued 2 July 2025](https://www.rbi.org.in)

Last reviewed 2026-10-19. Lender categories, the Rs 50 lakh limit, no lock-in and the 1 January 2026 start are from the RBI (Pre-payment Charges on Loans) Directions, 2025 of 2 July 2025; RBI has been consolidating directions, so check the current reference. Checked 2026-10-19.