The Reserve Bank of India (RBI) has once again advised banks and financial institutions to ensure that all information relating to charges or fees for processing of loans should be disclosed in the loan application forms. This is applicable to all loan application forms across all categories of loans, irrespective of the loan amount.
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This will facilitate comparison of charges across lenders. The circular posted on the RBI website says, “With a view to bringing in fairness and transparency, banks are advised that they must transparently disclose to the borrower all information about fees/charges payable for processing the loan application…”
Fees to be disclosed
Lenders have been asked to disclose on their forms, any fees or charges payable to process the loan application.
If the loan amount is not sanctioned or disbursed for some reason, the amount of fees that is refundable to you is to be mentioned on the application form.
The form should carry information on prepayment options along with the charges, if any, states the circular. Details about the amount of late payment fee in case of delay in repayments and charges on switching loans from a fixed to a floating interest rate or vice versa are also to be mentioned. The lender would also have to mention interest reset clause, if any.
RBI has also advised lenders to make this information available for the public on their websites. Some lenders still don’t have information on fees and charges, especially interest rates, on their websites.
Room for negotiation
Says K.V.S. Manian, group head (consumer banking), Kotak Mahindra Bank Ltd, “With us, the application form for home loan itself is an agreement form, so all the details on fees and charges is normally there. In case of personal loan and credit cards, too, the details are on the form itself.”
But just because such details are mentioned on the application form does not mean you can’t go ahead and negotiate. Manian says, “There is always room for negotiations. It depends on the customer’s relationship with the bank.”
As per an older circular, few banks charged a fee, apart from the processing fee. This charge was not disclosed to customers initially. The current circular, addressed to scheduled banks and all India financial institutions, however, does not give any such details.
Another RBI circular on the same issue, addressed to state and central cooperative banks, mentions that few banks are still continuing these unfair practices.