According to the norms formulated by RBI,a penalty, if charged for non-compliance with the material terms and conditions of the loan contract by the borrower, should be categorized as ‘penal charges’.Furthermore,the central bank has deferred the implementation of norms regarding penal charges levied by banks and financial institutions to_________ , for new loans. 

Solution

The Reserve Bank of India (RBI) has deferred the implementation of norms regarding penal charges levied by banks and financial institutions to April 1, 2024, for new loans. According to the norms, a penalty, if charged for non-compliance with the material terms and conditions of the loan contract by the borrower, should be categorized as ‘penal charges’. These charges shall not be levied in the form of ‘penal interest’ added to the interest rate on advances. Furthermore, no additional interest should be computed on such charges.