The revised fair lending practice, which prohibits banks and NBFCs from using penal charges on loan defaults as a revenue enhancement tool, will come into effect from April 1, the Reserve Bank said on Monday. Concerned over the practice of banks and non-banking financial companies (NBFCs) using penal interest as a revenue enhancement tool, the RBI on August 18 last year had modified norms, under which lenders would be able to levy only "reasonable" penal charges in case of default in repayment of loans. Banks, NBFCs, and other entities regulated by the RBI were given an extension of three months till April to implement the revised norms. In a set of frequently asked questions (FAQs), the RBI on Monday said that in the case of existing loans as well, the instructions shall come into effect from April 1, 2024, and the switchover to the new penal charges regime shall be ensured on the next review/ renewal date falling on or after April 1, 2024, but not later than June 30, 2024. On ...