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Kavita, 31, a software developer in Bengaluru, paid her last EMI on a ₹75,000 digital loan in March. She received an in-app notification saying "Loan Closed."
In April, she received an SMS: "Outstanding amount on your loan account: ₹1,247. Please pay immediately to avoid late charges."
She ignored it, assuming it was a system error. In May: "₹1,247 outstanding + ₹350 late fee = ₹1,597 due."
She had never agreed to these charges. She did not know what they were for. But she was being told she owed money — and that the amount was growing.
This is more common than you think. And you are not obligated to pay charges that were not in your original loan agreement.
What Charges Are Legally Permitted After Loan Closure?
None — with very narrow exceptions.
Once you have paid all EMIs (or closed the loan via prepayment or OTS), no new charges can be imposed. The exceptions are:
Charges that were overdue at the time of your final payment: If you owed a late fee from a previous month that was not paid, this may remain outstanding after your final EMI. But it must have been in your original KFS and must have been clearly communicated to you at the time it was incurred.
Bounce fee from your final EMI: If your last EMI payment bounced and you were charged a bounce fee, this can remain outstanding if you subsequently paid the EMI by another method but not the bounce fee.
Prepayment notice period interest: For some loans, if you prepay without the required notice period, interest for the notice period may be charged. This must be in your KFS.
What is NOT permitted: Any new fee, any new interest, any "account maintenance charge," any charge not disclosed in your original KFS or loan agreement.
Why This Happens: Three Common Causes
Cause 1: Incorrect Final Balance Calculation
Some lenders' systems calculate the final EMI assuming payment on the exact due date. If you pay one day late (even by hours due to processing time), the system calculates one extra day of interest. This small amount remains as "outstanding" after all regular EMIs are paid.
How to handle: Ask for a full ledger statement showing every transaction on your loan account. If the outstanding amount is legitimate (unpaid daily interest from a late payment), calculate whether it is correct and pay it. If you believe the calculation is wrong, dispute it.
Cause 2: Insurance Policy Charges
If your loan had bundled insurance, some policies have annual renewal premiums. If the insurance was structured as a separate policy (not a one-time premium), you may be receiving renewal notices that look like loan charges.
How to handle: Check whether you received an insurance policy document with your loan. If the insurance has renewed automatically, you can cancel it under the insurance policy's terms (IRDAI free-look period applies to renewals). This is separate from your loan.
Cause 3: Fraudulent Post-Closure Charges
Some predatory lenders create spurious charges to extract additional payments from borrowers who will pay to make the harassessment stop. This is illegal.
How to handle: Do not pay without a detailed, written explanation of every charge. File with the RBI Ombudsman.
How to Get Your NOC (No Objection Certificate)
After full loan repayment, you are entitled to a No Objection Certificate (NOC) — a formal document from the lender confirming that the loan is closed and there are no outstanding dues.
What the NOC must contain: Your name and loan account number Original loan amount Date of full repayment / closure Statement that no dues are outstanding Lender's signature and stamp
How to demand it:
Send this message to the lender's Nodal Officer:
"Loan account [NUMBER] was fully repaid on [DATE]. I request the issuance of my No Objection Certificate (NOC) confirming zero outstanding balance, as required by RBI norms. Please provide this within 7 working days. Failure to do so will result in escalation to the RBI Ombudsman."
Timeline: Lenders must provide NOC within a reasonable period (typically 7–15 working days). If they delay or charge a fee for the NOC, this is an RBI violation.
What to Do If You're Being Asked to Pay Charges You Don't Recognise
Step 1: Do NOT pay until you understand the charge. Paying an illegitimate charge without disputing it can be used as acknowledgement that you owed it.
Step 2: Request a detailed account statement showing every debit, credit, and charge from loan origination to date.
Step 3: Compare each charge against your original KFS. Anything not in the KFS should not have been charged.
Step 4: Send a written dispute: "I dispute the outstanding amount of ₹[X] on loan account [NUMBER]. Please provide a detailed breakdown of this amount with reference to the charges listed in my Key Facts Statement. I will pay any legitimate outstanding amount within 7 days of receiving this explanation."
Step 5: If the lender continues to report this as overdue to CIBIL while a dispute is open, file with the RBI Ombudsman immediately. Lenders cannot legally report disputed amounts as overdue while the dispute is under investigation.
CIBIL Protection During a Post-Closure Dispute
If a lender reports a disputed amount to CIBIL, causing your score to drop, you have two simultaneous remedies:
CIBIL dispute (cibil.com) — flag the account as under dispute RBI Ombudsman complaint — the lender must not report disputed amounts as default
Both can result in the entry being removed and, in the case of the Ombudsman, compensation for the score damage.
HeyZ AI can draft your post-closure dispute letter and NOC demand — free at www.sahisujhav.com
If your lender is reporting false outstanding amounts to CIBIL, HeyZ AI helps you file with both CIBIL and the RBI Ombudsman simultaneously.
PILLAR 2: Harassessment & Recovery Agent Rights 10 Articles | SahiSujhav.com
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