MUMBAI: Bank customers will not be subjected to excessive and unreasonable penal charges levied by the lenders as the RBI will soon release the guidelines for such charges. Banks charge penal charges on consumer loans in case of early pre-payments, minimum balances, check bounces and EMI payment delays.
“Currently, Regulated Entities (REs) are required to have a policy for levy of penal interest on advances. The REs, however, follow divergent practices on levying of such charges. In certain cases, these charges are founded to be excessive,” said RBI Governor Shaktikanta Das while announcing the monetary policy.
“To further enhance transparency, reasonableness and consumer protection, draft guidelines on levy of penal charges will be issued to obtain comments from stakeholders,” he added. The central bank has said that any penalty imposed by regulated entities will be “reasonable & transparent” and that lenders should not use it as a revenue enhancement tool.
“The supervisory reviews done by RBI have revealed that most banks use the penal rate on top of the interest rate in case of payment defaults and non-compliance of terms and conditions,” Deputy Governor M Rajeshwar Rao said while addressing mediapersons. “The reviews indicated that there were excessive charges in some cases, so we are trying to frame guidelines to ensure a transparent and uniform approach to this issue.”
Meanwhile, as part of RBI’s gradual move towards normalising liquidity and market operations, the central bank has decided to restore market hours for the Government Securities market to the pre-pandemic timing of 9 am to 5 pm.
“Moreover, as part of our ongoing endeavour to further develop the government securities market, we propose to permit lending and borrowing of G-secs,” Das said. This, the governor added will provide investors with an avenue to deploy their idle securities, enhance portfolio returns and facilitate wider participation.