RBI asks banks to disclose information on loan processing charges to borrowers
13 Nov 2010
Reserve Bank of India has asked banks to transparently disclose to the borrower all information about fees or charges payable for processing the loan application in order to bring in fairness and transparency in dealings.
Banks should disclose the amount of fees refundable if loan amount is not sanctioned / disbursed, pre-payment options and charges, if any, penalty for delayed repayments if any, conversion charges for switching loan from fixed to floating rates or vice versa, existence of any interest reset clause and any other matter which affects the interest of the borrower, RBI said in a notification to banks.
RBI has also asked banks to display such information on their websites for all categories of loan products.
In effect, banks must disclose 'all-in-cost' charges involved in processing / sanctioning loan applications in a transparent manner to enable the customer to compare the rates and charges with other sources of finance.
Also, RBI said, banks must ensure that such charges / fees are non-discriminatory.
As far back as March 2007, RBI had issued guidelines to banks advising them that loan application forms in respect of all categories of loans irrespective of the amount of loan sought by the borrower should be comprehensive.
