Stop unfair practices & charging extra interests, RBI slams Banks & Lenders
RBI – Reserve Bank of India instructed the banks & non-bank lenders to evaluate few of their operations & practices regarding the interests & other excess charges applying to borrowers with their system of loan disbursal.
RBI stated that the practices on lending would be in the notice of transparency & fairness & the instruction comes after RBI spotted incidents where the lenders were concerning about several “unfair practices in charging of interest”.
It notices that few of the lenders in the market have been charging excess interest from the loan sanctioned date or execution date, instead of the actual date of fund disbursements to the users. Likewise, RBI also spotted that few lenders were charging the rate of interest from the cheque issuance date, even the cheque was issued to the borrower after several days.
Regarding to this matter, the regulator RBI says, “The guidelines on fair practices code issued to various regulated entities (REs) since 2003, inter-alia, advocate fairness and transparency in charging of interest by the lenders, while providing adequate freedom to REs as regards their loan pricing policy”.
Further it adds, “In the case of disbursal or repayment of loans during the course of the month, some REs (regulated entities) were charging interest for the entire month, rather than charging interest only for the period for which the loan was outstanding”.
Also, RBI found that in few cases, the banks & lenders were charging additional installments in prior but calculated the total amount of loan for charging interest amount.
It says, “These are matters of serious concern to the Reserve Bank. These and other such non-standard practices of charging interest are not in consonance with the spirit of fairness and transparency while dealing with customers”.
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