Bank Loans

To achieve greater transparency Reserve Bank of India (RBI) has asked the banks to provide a range of information to the borrowers, including reasons for rejecting any applications for any loans.The rule is now applicable to credit cards also.

The instructions which were applicable for the loan amounting Rs. 2 lakh will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower.

"Necessary modifications in the Fair Practices Code based on the above instructions, with the approval of the board, should be carried out by April 30, 2007. The modified Fair Practices Code
should be placed on the bank's/FI's web site and also given wide publicity," said the RBI.

Earlier, the central bank had advised that loan application forms in respect of priority sector advances up to Rs. 2 lakh should be comprehensive and should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower. This was to facilitate a meaningful comparison with other banks and
to take informed decision by the borrower.

The banks/financial institutions (FI) were also advised that in the case of small borrowers seeking loans up to Rs. 2 lakh the lenders should convey in writing, within stipulated time, the reasons which, in the opinion of the bank/FI have led to the rejection of the loan applications.

On a review, it has been decided that in case of all categories of loans irrespective of any threshold limits, including credit card applications, banks/FIs should convey in writing the reasons which, in the opinion of the bank/FI have led to rejection of the loan applications.

[Source : Financial Express, March 7, 2007]