RBI seeks bank ser­vices re­forms

The apex bank has spo­ken on be­half of home loan cus­tomers on var­i­ous irk­some prac­tices fol­lowed by In­dian lenders

HT Estates - - Property Classifieds - Vivek Kohli

In June 2010, the Re­serve Bank of In­dia (RBI) con­sti­tuted a Com­mit­tee un­der the chair­man­ship of M Damodaran (former chair­man, Se­cu­ri­ties and Ex­change Board of In­dia) to re­view the sys­tem of cus­tomer ser­vices in banks and to rec­om­mend mea­sures for ef­fec­tive res­o­lu­tion of cus­tomer griev­ances. In ad­di­tion to tak­ing feed­back from banks, the com­mit­tee also sought in­puts from other stake­hold­ers, in­clud­ing mem­bers of the pub­lic, bank cus­tomers, aca­demi­cians, consumer or­gan­i­sa­tions and NGOs. Re­cently, the com­mit­tee re­leased its re­port on cus­tomer ser­vice in banks. In pre­par­ing this re­port, RBI stud­ied cus­tomer care and pro­tec­tion mea­sures avail­able in de­vel­oped economies as well as preva­lent in­ter­na­tional best prac­tices in bank­ing.

Amongst other cus­tomer­centric is­sues in bank­ing ser­vices, the re­port also high­lights key con­cerns of the av­er­age cus­tomer with re­spect to home loans:

Fore­clo­sure charges that are levied by some banks on pre­pay­ment of home loans are re­sented by many bor­row­ers. As a prac­tice, fore­clo­sure charges work to de­ter bor­row­ers from switch­ing over to a com­peti­tor bank which is of­fer­ing a lower in­ter­est rate to new cus­tomers. In this re­port, RBI ob­serves that banks should not im­pose ex­or­bi­tant pe­nal rates to­wards fore­clo­sure of home loans. Rather, a pol­icy should be de­vised to help cus­tomers en­joy the ben­e­fits of mar­ket com­pe­ti­tion where they can ex­er­cise choices that con­trib­ute to their eco­nomic wel­fare.

Cus­tomers who have opted for home loans with float­ing in­ter­est rate of­ten feel they are ‘dis­crim­i­ated against’ as their banks of­fer lower in­ter­est rates to new clients. In this re­port, RBI has ob­served that a cus­tomer’s ‘point of en­try in time’ should not mat­ter when such loans are taken on a float­ing rate ba­sis. The re­port rec­om­mends ini­ti­at­ing mea­sures to stop such prac­tices that dis­crim­i­nate be­tween new and old cus­tomers hav­ing iden­ti­cal char­ac­ter­is­tics and risk pro­files.

The re­port rec­om­mends that cus­tomers should be given the op­tion to switch over from fixed in­ter­est rate to float­ing in­ter­est rate and vice versa for their home loans. This op­tion should be of­fered to cus­tomers at least once dur­ing the loan ten­ure. Also, the fee charged by banks for such a switchover should be ap­pro­pri­ate and rea­son­able.

Un­for­tu­nate cases abound where ti­tle deeds of the mort­gaged prop­erty de­posited by the cus­tomer with the bank are lost and, thus, not re­turned to them at the time of full re­pay­ment of loan amount. The re­port sug­gests that ti­tle deeds de­posited by the bank should be re­turned to cus­tomers within a pe­riod of 15 days from the loan clo­sure. Also, banks should have a pol­icy in place to com­pen­sate cus­tomers in case of loss of ti­tle deeds kept in the bank’s cus­tody as well as com­pen­sate for de­layed re­turn of ti­tle deeds to the cus­tomer.

Home loans that are backed by in­sur­ance prod­ucts should be au­to­mat­i­cally set­tled by the in­sur­ance amount, with min­i­mum in­con­ve­nience caused to nom­i­nees and heirs of the cus­tomer.

The re­port states that banks should au­to­mat­i­cally pro­vide an­nual ac­count state­ments (which con­tain

de­tails of pay­ment made to­wards prin­ci­pal and in­ter­est in­clud­ing prin­ci­pal out­stand­ing) to home loan cus­tomers with­out them hav­ing to re­quest the bank for the same.

The re­port also sug­gests that the most im­por­tant terms and con­di­tions of home loans should be clearly and leg­i­bly stated for the ben­e­fit of cus­tomers. Also, home loan doc­u­ments should be made avail­able to cus­tomers in lo­cal lan­guages.

The re­port ob­serves that

ex­plicit rules and reg­u­la­tions should be put in place which can help cor­rect these ex­ist­ing anom­alies. The re­port is a step for­ward in rais­ing aware­ness and gen­er­at­ing dis­cus­sion about mar­ket prac­tices in the home loan sec­tor which ought to be trans­par­ent, non-dis­crim­i­na­tory and ob­jec­tive from the point of view of cus­tomers. Such ac­tions taken by banks can also help ad­dress many griev­ances, thereby greatly re­duc­ing the back­log of dis­putes pend­ing in cus­tomer re­dres­sal fo­rums.


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