An RBI panel on pricing of loans by banks has mooted penalty for banks that harass customers by delaying transfer of loans from one to the other. The report submitted by the panel headed by formere deputy governor of the central bank Anand Sinha says the Indian Banks’ Association should evolve a set of guidelines for easier and quicker transfer of loans, particularly mortgage/housing loans. There could also be penalties for banks which do not cooperate with borrowers in this regard, the panel suggested adding that it also recommends doing away with processing fee for shifting within the same bank from one type to another and an industry benchmark base rate for borrowers. Banks will also have to give their customers the choice of prepaying and exiting a loan, if the recommendations of this committee are implemented. The recommendations also say banks will have to give customers the benefit of interest reduction on the principal in case of prepayment of loans. This benefit should be given on the day the money is received by the bank without waiting for the next EMI cycle date to effect the credit. To ensure convenience of customers, the committee has also recommended that banks reset the interest rate charged on floating rate loan on dates that are fixed in the covenant, irrespective of changes made to the base rate within the reset period. The committee has also asked the IBA to develop a new benchmark for floating interest rate products, namely, the Indian Banks Base Rate or IBBR, which may be collated and published by IBA on a periodic basis.
