Informist, Monday, Apr 29, 2024

--RBI:Saw lenders resorting to unfair practices in charging interest

--RBI:Regulated cos to review practices of mode of disbursal of loans

--RBI: Regulated cos to review application of interest, other charges

NEW DELHI – The Reserve Bank of India today directed all regulated entities to review their practices on the mode of disbursal of loans, application of interest and other charges and take corrective action, including system-level changes, in the interest of fairness and transparency.

The directions come in light of the central bank's onsite examination of regulated entities for the period ended Mar 31, 2023, where it came across instances of lenders resorting to certain unfair practices.

Some of the unfair practices during the examination included charging interest from the date of sanction of the loan or the date of execution of the loan agreement instead of the date of actual disbursement of the funds to the customer. Similarly, in the case of loans being disbursed through cheques, instances were observed where interest was charged from the date on the cheque, which was handed over to the customer several days later, the central bank said.

In the case of disbursal or repayment of loans during the month, some regulated entities charged interest for the entire month, rather than charging interest only for the period for which the loan was outstanding, the RBI said.

Further, in some cases, it was seen that regulated entities were collecting one or more instalments in advance but calculating the full loan amount for charging interest, the RBI said.

The central bank said that wherever such practices have taken place it has advised regulated entities through its supervisory teams to refund excess interest and other charges to customers. Further, regulated entities are also being encouraged to use online account transfers instead of cheques for loan disbursal, it said. The central bank's directions come into effect immediately. End

Reported by Pratiksha

Edited by Saji George Titus

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