Loan borrowers alert! 4 ways banks are making fool out of customers

financialexpress.com:

If you are a loan borrower, the RBI’s latest revelations on banks’ loan activities might concern you! The apex bank has observed that banks have not been fair and transparent when it comes to handling of loan disbursement and repayment.

During the course of the onsite examination of banks, the RBI came across instances of lenders resorting to certain unfair practices in charging of interest. The onsite examination of banks conducted before March 31, 2023.

Here are 4 ways banks are overcharging customers on loans:

Also Read: 5 Money Changes in May 2024: New savings account charges, credit card rules and special FD deadlines – All you need to know

Fair Practices Code for Lenders – Charging of Interest

The guidelines on Fair Practices Code issued to various banks advocate fairness and transparency in charging of interest by the lenders, while providing adequate freedom to regulated entities (REs) as regards their loan pricing policy.

The RBI’s latest circular said that 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.

“These are matters of serious concern,” the Reserve Bank said. “Wherever such practices have come to light, RBI through its supervisory teams has advised REs to refund such excess interest and other charges to customers. REs are also being encouraged to use online account transfers in lieu of cheques being issued in a few cases for loan disbursal.”

Therefore, in the interest of fairness and transparency, all banks are directed to review their practices regarding mode of disbursal of loans, application of interest and other charges and take corrective action, including system level changes, as may