A one-time, non-refundable fee of 0.5% to 4% plus 18% GST can reduce your net disbursal and lift your true borrowing cost. The amount varies by lender and borrower profile, and may be waived during special promotions.
Personal loan processing fees are back in focus for Indian borrowers as banks and NBFCs detail charges that add up quickly. As of August 2025, most lenders levy a one-time fee between 0.5% and 4% of the sanctioned amount, plus 18% GST. Big names including HDFC Bank, ICICI Bank, SBI, Kotak and Bank of Baroda publish these ranges on their websites, though terms can change without notice.
Why lenders impose a processing fee
- It covers administrative work such as KYC, employment and income verification, and credit checks.
- It helps lenders recover origination and onboarding costs and sustain lending operations.
- It compensates for resources used to evaluate eligibility and price risk.
- It is typically charged upfront at disbursal and is not refundable if you cancel later.
How the fee is applied
- Most lenders either deduct the fee from your sanctioned amount and credit the net balance, or ask you to pay it at disbursal.
- GST at 18% applies to the fee amount.
- You usually pay interest on the full sanctioned principal even if the fee is deducted from the payout.
- Minimum or capped fees can make small loans relatively expensive.
Example: what it costs in rupees
- Sanctioned loan: ₹3,00,000
- Processing fee: 2% = ₹6,000
- GST at 18% on fee: ₹1,080
- Total fee: ₹7,080
- If deducted from disbursal, you receive ₹2,92,920 but EMIs are calculated on ₹3,00,000.
Personal loan rates and fees at major banks
| Bank | Interest rate (per annum) | Processing fee |
|---|---|---|
| HDFC Bank | 10.90% to 24% | Up to ₹6,500 or 0.5% to 2.5% of the loan amount |
| ICICI Bank | 10.60% to 16.50% | Up to 2% of the loan amount + GST |
| SBI | 10.30% to 15.30% | Up to 1.5% of the loan amount, min ₹1,000 |
| Kotak Bank | 10.99% onwards | Up to 5% of the loan amount + GST |
| Bank of Baroda | 10.90% to 18.75% | 2% of the loan, ₹1,000 to ₹10,000 |
Note: Rates and charges are illustrative. Check each lender’s official website for current terms.
Impact on borrowers and the market
- The fee raises your effective cost and can narrow the gap between low-rate and mid-rate offers.
- Net disbursal falls if the fee is deducted upfront, which matters if you need a specific amount in hand.
- Strong credit profiles sometimes qualify for lower fees or limited-time waivers, often during festive campaigns.
- NBFCs and some private banks may set higher upper limits than public sector banks, reflecting different cost structures and risk appetites.
Personal loans remain a popular way to fund medical expenses, travel, wedding costs and debt consolidation. Digital onboarding and instant approvals have sped up disbursals, but origination costs still exist. Processing fees have long been standard across banks and NBFCs, typically in the 0.5% to 4% band, with GST added on top. Lenders occasionally run promotional waivers to compete for creditworthy customers.
Step-by-step guide: keep your processing fee in check
- Read the fine print: confirm the exact fee and GST in the sanction letter.
- Do the math: calculate the rupee fee and your net disbursal before you accept.
- Compare across lenders: look at total cost including fee, rate, tenure and other charges.
- Ask for a waiver or cap: strong credit score and a prior relationship can help.
- Time your application: check festive or targeted offers that reduce or waive the fee.
- Watch minimums: small loans can be hit by minimum fee floors that lift the effective cost.
- Check refund and cancellation terms: processing fees are generally non-refundable even if you cancel.
Processing fees are standard in personal lending and are likely to remain. Expect targeted waivers during campaigns and for top-tier customers. Before you sign, compare total costs, confirm how the fee is collected and ensure the net disbursal meets your need. If you have solid credit, negotiate. For the latest rates and charges, rely on each lender’s official schedule.
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