I had taken a vehicle loan from State Bank of Patiala in December 2008. Loan period
of the loan was four years. However, I could repay the entire loan only in nine
months time, due to increase of my salary and receipt of salary arrears, on account
of pay revision.
When I asked for NOC form SBP, Bank Manager informed that penal interest @ 2% has
been charged on account of pre-payment of loan and Rs. 3,565/- has been charged on
account of penalty. I am really astonished to know that I have been charged for
making timely repayment (even before time).
As I have repaid the loan from my own sources (salary arrears, savings etc.),
whether charging of penal interest for prepayment, is correct? (despite of the fact
that there was a clause of pre-payment penalty in the agreement -which was told by
the bank manager.)