Consumer Rights » Prepayment http://ashisha.com/consumer Issues dealing with consumer rights Thu, 27 May 2010 19:07:47 +0000 en hourly 1 http://wordpress.org/?v=5014 Banks levying charge on pre-payment http://ashisha.com/consumer/2009/09/27/banks-levying-charge-on-pre-payment/ http://ashisha.com/consumer/2009/09/27/banks-levying-charge-on-pre-payment/#comments Sun, 27 Sep 2009 20:56:01 +0000 ashish http://ashisha.com/consumer/?p=286 For people who take loans from banks, there is always an urge to try and get rid of the loan early. I know a number of colleagues and friends who have taken loans to buy properties, and once they have taken a loan, there are always trying to use excess money that they have to try and reduce the amount of loan amount outstanding, and there are a number of them who pay off the money long before the final EMI is due. Banks really don’t like prepayments too much; if you are a customer who has the credit rating to retain the loan amount till the end, they would rather encourage you to pay the regular EMI’s. Banks have a loan portfolio, and a certain balance in terms of accounting for regular loan repayments. It disturbs this short term and long term money and funds forecast of the bank if their customers start pre-payment, and hence banks charge a fee for pre-payment.
A few days ago, the RBI had apparently sent a reply under RTI that it did not really approve of banks charging a penalty for pre-payment; the latest clarification was meant to even remove this statement. The RBI is stating a more hands-off policy, since these are private banks with their own management; apparently the RBI expects that market competition is enough to ensure that banks do not heavily over-charge, and that they should not charge customers more than their standard rates (link to article):

According to RBI, while banks have the freedom to levy service charges on all matters pertaining to banking transactions, including pre-payment/ foreclosure of loans, banks are required to ensure transparency in displaying information regarding such charges.
RBI said it is expected that freedom given to banks will foster healthy competition amongst banks to keep service charges at reasonable levels, which would ultimately benefit customers. It said, banks generally levy charges for foreclosure of loans as it adversely impacts their asset-liability management.

At the same time, one expects that the RBI will get involved if banks start collaborating to recover standard charges from customers.

]]> http://ashisha.com/consumer/2009/09/27/banks-levying-charge-on-pre-payment/feed/ 1 Consumer forum fines ICICI bank http://ashisha.com/consumer/2009/01/04/consumer-forum-fines-icici-bank/ http://ashisha.com/consumer/2009/01/04/consumer-forum-fines-icici-bank/#comments Sun, 04 Jan 2009 17:52:28 +0000 ashish http://ashisha.com/consumer/2009/01/04/consumer-forum-fines-icici-bank/ For some time now, consumer forums have been ruling on unfair practices carried out by banks, with ICICI Bank being one of the banks having been penalized in the past for various actions that have gone against consumer practices. In this case, a forum ruled against the bank after it was disclosed that the bank had not provided the consumer (who had taken a loan from the bank), all the details regarding the conditions and terms of the loan. The consumer had taken a personal loan from the bank, and after realizing the interest for the loan (after reviewing the EMI payments), realized that the loan was very expensive. However, closing out the loan was not as simple as one would have thought:

Pal had instituted a complaint under Consumer Protection Act saying that he availed a personal loan of Rs 40,636 from the bank in September 2006. The loan installments were Rs 2,199 each for 36 months but he was allegedly not informed about the rate of interest as well as other terms and conditions of the loan. The complaint added that the bank assured Pal that he would receive the terms and conditions at his postal address. It was averred that he received a cheque of Rs 37,719 but neither the terms of the loan were conveyed to him nor the rate of interest disclosed.
However, Pal was surprised to note from the EMI schedule that the rate of interest being charged from him was very high, which was against the guidelines issued by RBI. Unhappy with the rate of interest, he approached bank for foreclosure of loan, whereupon he was advised to complete the EMIs for at least six months in order to avail the benefit of one time settlement. It was alleged that even after receiving the full and final settlement amount, the bank illegally withdrew an amount of Rs 2,199 in year 2008 from his account as per statement.

This is something that has been in the past, many times; with the consumers either promised something else verbally and the same condition not being implemented in writing; in addition, bank officials in many cases give the impression that they are not too concerned about consumer service and make life more difficult for the bank customers.

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