Dear Customer,
This is to inform you about an important update regarding our policy change on penal charges, in accordance with the guidelines laid down by the Reserve Bank of India (RBI). - RBI vide its Circular No. RBI/2023-24/53 dated Aug 18, 2023 on ‘Fair Lending Practice - Penal Charges in Loan Accounts’, has advised banks that a penalty, if charged for non-compliance with material terms and conditions of the loan contract, will be treated as penal charges and not be levied in the form of penal interest that is added to the rate of interest charged on the loans/advances. RBI has further advised that there will be no capitalisation of penal charges i.e. no further interest will be computed on such penal charges. However, the aforesaid will not affect the normal procedure for the compounding of interest in the loan account.
- In light of the foregoing, the provisions of the loan contract/facility agreement relating to (i) the payment/repayment obligation (including principal, interest, fees, charges) of the Borrower under the Facility; (ii) creation/perfection/furnishing of securities in terms of Transaction Documents; (iii) any credit support (including, without limitation, any guarantee or indemnity) provided/agreed to be provided in relation to the Facility (iv) any event, the breach of which is likely to have a Material Adverse Effect; (vi) compliance with financial covenants, security related covenants and information covenants; (viii) end use of the Facility, will be considered as ‘Material Terms’ of the loan contract/facility agreement and upon breach of such Material Terms, the Bank reserves the right to levy and recover Penal Charges, at its sole discretion, at the rate specified on the ICICI Website(Link provided below). Penal Charges represents the charges over and above normal interest rates/fees levied for default/breach by the borrower/customer in complying with the terms on which credit facilities were sanctioned. Upon levy of such Penal Charges, the Borrower will pay the said Penal Charges along with applicable Goods and Service Tax (GST), if any, other taxes (of any description whatsoever), charges and penalties which may be payable pursuant to applicable laws, from time to time, in relation to the loan contract/ facility agreement.
Further, there will be no capitalisation of penal charges in your loan account i.e. no further interest computed on such penal charges. However, the aforesaid will not affect the normal procedure for the compounding of interest in the loan account.
- The aforesaid penal charges are being imposed primarily to act as a deterrent against any breach/default of the facility/loan and is intended to instil a sense of financial discipline and discourage borrowers from defaulting on their obligations as specified in the loan contract/facility agreement.
- The revised charges shall be applicable to you from Jun 30, 2024. These guidelines will operate in conjunction with other ICICI Bank policies on pricing and customer disclosures.
In case of any questions or concerns regarding this change, please contact your Relationship Manager. Click here to know the list of Revised Charges |
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