NHB Introduces New Rules for Home Loan Borrowers: Relief on Advance EMI Payments

The National Housing Bank (NHB) has introduced significant changes to home loan regulations, offering relief to borrowers making advance EMI payments. Under the new rules, housing finance companies must pay interest on unadjusted advance payments at the same rate as the borrower's loan. This initiative aims to enhance lending practices and protect borrowers from excessive interest charges. The NHB's measures align with the Reserve Bank of India's guidelines, promoting transparency in the financial system. As scrutiny of housing finance companies increases, these changes are expected to benefit borrowers significantly.

By Narendra Chaudhary Jul 8, 2025, 11:16 IST

Positive Changes for Home Loan Borrowers

Exciting news for home loan borrowers: The National Housing Bank (NHB) has implemented changes to home loan regulations. Under these new guidelines, housing finance companies (HFCs) are instructed that if a borrower makes an advance payment towards their EMI and it remains unadjusted in a sundry or suspense account, the HFCs must pay interest on that amount. This adjustment is expected to provide significant relief to borrowers. Notably, the interest must be paid at the same rate applicable to the borrower's home loan.

Rationale Behind the New Measures

According to reports, this initiative aims to promote sound lending practices and protect borrowers from unnecessary interest burdens. NHB has advised HFCs to focus on the quality of borrowers rather than relying on advance collections to avoid defaults.

Benefits of the New Regulations

A senior executive noted that some HFCs previously collected one or two EMIs in advance from EWS and LIG borrowers to maintain security in their accounts. However, NHB has clarified that they should either issue smaller loan amounts or be prepared to pay interest on advance EMIs. This measure is designed to alleviate the financial burden on borrowers and enhance transparency within the financial system.

Alignment with RBI Guidelines

NHB's directive aligns with the Reserve Bank of India's (RBI) transparent lending policies. Last April, the RBI mandated that interest should only be charged from the actual loan disbursement date, not from the loan agreement date. Investigations revealed that several lenders charged customers interest for an entire month, even when loans were disbursed mid-month.

Increased Oversight by NHB

NHB, which oversees and monitors HFCs, has intensified scrutiny of finance companies recently. Previously, in December 2024, it ordered all HFCs to report NPA data on the first of each month, as some lenders had delayed recording collections from previous months.