SC to decide on banks' prepayment fee

emium are designed to protect a lender against potential losses it may incur if a loan is paid earlier, than it is contracted for. The enforceability of prepayment charges is critical for lenders," SBI said.

According to SBI, the complainant cannot contend that the bank had acted in an arbitrary manner when the loan agreement signed by her clearly stated that a prepayment charge of 2% of the amount prepaid would be levied when the loan was closed for reasons of takeover by any other bank or financial institution.