The Reserve Bank of India has directed all lenders to review their practices that have to do with disbursal of loans and charging of interest, according to a circular released on Monday.
"...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 to the Reserve Bank," it said in the circular.
It has, thus, also asked these lenders to refund the excess interest and other charges to customers.
"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," RBI said.
The directive has come into effect immediately, after the RBI observed some lenders resorting to unfair practices in charging of interest.
These included:
Charging of interest from the date of sanction of loan agreement and not from the date of actual disbursement of funds.
Charging of interest from the date of cheque, but the actual customer only getting the cheque several days later.
In case of disbursal or repayment of loans, some lenders charged interest for the entire month instead of for the period where the loan was outstanding.
Collecting one or more instalments in advance from customers, but it was observed that REs were collecting one or more instalments in advance but estimating the full loan amount for charging interest.
Hence, the regulator has asked all regulated entities to not just review their practices, but also take corrective action wherever necessary. It also asked them to use online account transfers in lieu of cheques being issued in some cases of loan disbursal.
Even before this, the RBI released guidelines prohibiting all lenders from charging penal rates on loan defaults to borrowers or in cases of any other non-compliant event.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
