The Reserve Bank of India has said that banks should consider the possibility of allowing them to pre-pay floating rate term loans without any penalty
The Reserve Bank of India, in its first bi-monthly policy had said that banks should allow customers to prepay floating rate term loans without any penalty. Similarly, the central bank has asked bank not to levy penalty charges on non-maintenance of minimum balance in savings account.
"In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Banks should also not take undue advantage of customer difficulty or inattention," RBI said in the policy statement.
According Dr Raghuram Rajan, governor of RBI, the central bank is envisaging a number of measures to protect consumers. “For example, banks should not levy penal charges for non-maintenance of minimum balance in ordinary savings bank account and inoperative accounts, but instead curtail the services accorded those accounts until the balance is restored," he said.
Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit the services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level, RBI said.
Further, banks should limit the liability of customers in electronic banking transactions in case where they are not able to prove customer negligence.
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The second suggestion that levy penalty to savings bank accounts for non maintenance of minimum balance to abolished instead services rendered to be curbed, is good suggestion.
All Banks to examine the above suggestions to improve the customer service and encourage borrowers for timely/early liquidating of loans. Small savings depositors will be encouraged for better banking and the penalty every month will eat away the small balance held, depriving the small savings depositors to lack for having an account.