RBI directs lenders to rectify unfair practices, refund excess charges

Reserve Bank of India (RBI) has issued a directive to banks and lenders to rectify unfair practices related to charging of interest and refund excess charges to customers. Concerns were raised over some institutions resorting to unfair practices during charging of interest, prompting RBI to take corrective action.

Guidelines on Fair Practices Code, issued to various regulated entities (REs) since 2003, stresses fairness and transparency in interest charging by lenders. However, during onsite examinations, RBI identified instances of unfair practices in interest charging.

Some unfair practices highlighted by RBI include charging interest from date of loan sanction or execution of loan agreement rar than from date of actual disbursement of funds to customer. ditionally, interest was observed to be charged from date of cheque issuance, despite being handed over to customer several days later.

Moreover, some lenders were found charging interest for entire month, even if loan was disbursed or repaid during month. Ors collected vance instalments but considered full loan amount for interest calculation.

RBI expressed serious concern over such practices, stating that y are not aligned with principles of fairness and transparency in customer dealings. As a result, RBI has vised REs to refund excess interest and or charges to affected customers.

REs are also encouraged to opt online account transfers inste of issuing cheques for loan disbursals. circular issued by RBI takes immediate effect, signaling urgency of dressing se unfair practices.

directive underscores RBI's commitment to ensuring fair and transparent practices in banking and lending sector, prioritizing customer protection and integrity in financial dealings.

(With PTI inputs)