Attention borrowers: Are you aware of the additional loan-related charges levied on you?
The Reserve Bank of India which works in the interest of borrowers has been asking entities under its supervisory framework to avoid charging any lawful charges against bank loans. The same was unearthed by the apex bank while conducting an onsite examination of REs or regulated entities for the period ended March 31.
Interest rate charges from loan sanction or loan agreement date
Some of the banks practised charging interest rate from the date of sanction of loan or date of execution of loan
agreement and not from the date of actual disbursement of the funds to the customer.
Interest charged from the date of issuancd of loan amount cheque
Similarly, in the case of loans being disbursed by cheque, instances have been observed where interest was charged from the date of the cheque whereas thecheque was handed over to the customer several days later.
Interest charged for the entire month instead of the duration for which the loan was outstanding
In the case of disbursal or repayment of loans during the course of the month, some financial entities charge interest for the entire month, rather than charging interest only
for the period for which the loan was outstanding
Entire loan amount taken into account despite one or two advance payments
There were found instances when despite collecting few of the EMIs in advance, the banking company considered the the full loan amount for charging interest.
What RBI has been doing to safeguard investors' interest?
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.