Banks are required to disclose “all in cost” (inclusive of all charges) involved in processing/sanction of loan application in a transparent manner to enable customers to compare the rates/charges with other sources of finance, the Reserve Bank of India said in a notification.
With a view to bringing in fairness and transparency, banks have to disclose to borrowers all information about fees/charges payable for processing the loan application, the amount of fees refundable if loan amount is not sanctioned/disbursed, pre-payment options and charges, if any, penalty for delayed repayments if any, conversion charges for switching loan from fixed to floating rates or vice versa, existence of any interest reset clause and any other matter which affects the interest of the borrower.
Processing fees
In its guidelines on Fair Practices Code for Lenders, the RBI said that all information relating to processing fees/charges should also be displayed in the Web site of the banks for all categories of loan products.
The RBI has flagged the issue of transparency and fairness in lenders' dealings with borrowers as it has come across cases wherein some banks had levied in addition to a processing fee, certain charges that were not initially disclosed to the borrower. Levying such charges, subsequently, without disclosing the same to the borrower is an unfair practice.
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