Floating-rate loans can be pre-closed through money raised from any source, the directive says. In the case of loans on fixed rates, the accounts can be closed using money raised by the borrower only from his or her own source — any source other than a loan from a bank, housing-finance company, non-banking finance company, or financial institution.

Some time ago, the RBI issued a directive to banks, as part of efforts to improve customer service, to stop levying pre-closure charges on home loan, though the Indian Banks' Association has argued against the move. The directive, applicable to home loans on floating rates, has brought bankers together against the move.

The apex housing bank's directive came in pursuance of feelers put out to housing-finance companies exactly a year ago on the issue of pre-closure charges. The bank also warned housing financial institutions against offering different floating rates to their old and new customers.

The directive said: “Several representations/complaints have been received by the National Housing Bank against such practice … It is accordingly advised that the HFCs [housing-finance companies] should ensure uniformity in rates on a floating-rate basis charged to their old and new customers with the same risk profile, irrespective of the time of entry of the borrowers in the market.”

The bank observed that charging a higher interest on earlier borrowers in relation to the new customers put the former at a disadvantage and the practice was discriminatory. For the growth of a healthy housing finance system, it was important that pricing of products be transparent and non-discriminatory.