Indian Banking regulator, Reserve Bank of India (RBI) formed a Customer service committee headed by former Sebi chairman M Damodaran.
Retail bank fixed depositors need not worry their money under the mattress during crisis, such as the one in 2008, as deposit insurance, last raised in 1993, may be increased five times the limit to Rs 5 lakh.
Mr. M Damodaran said "In a floating interest rate scenario, when an entire class of borrowers has the same characteristic and risk level, the point of entry in time (old customers and new customers) should not create discrimination in interest rate offered to the customers,"
The RBI panel, which received more than 1,000 suggestions, said banks should not impose exorbitant penal rates towards pre closure of home loans to facilitate switching over to other banks or financial entities. There is a large section of home loan borrowers who feel that even with the same kind of scoring, new customers are getting better terms.
The RBI committee said "Banks should not impose exorbitant penal rates towards pre closure of home loans and a policy should be devised to ensure that the customer is not denied of opportunity to enhance his economic welfare by making choices such as switching to other banks/financial entities to enjoy the benefits conferred by market competition"
Banks now charge about 2-3% on the pre payment of a home loan, which for some customers becomes impossible to shift even if he/she is offered attractive rates by rivals.
Banks have their own arguments for incentives but yes, existing borrowers have every reason to feel this. Floating rate means the rate should be uniform for the same category of borrowers.
The report suggested banks should design products suiting the requirements of customers rather than forcing upon the bundled products.
The recommendations are great boon for customers but they will require added efficiency for banks.
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| former Sebi chairman M Damodaran. |
Retail bank fixed depositors need not worry their money under the mattress during crisis, such as the one in 2008, as deposit insurance, last raised in 1993, may be increased five times the limit to Rs 5 lakh.
Mr. M Damodaran said "In a floating interest rate scenario, when an entire class of borrowers has the same characteristic and risk level, the point of entry in time (old customers and new customers) should not create discrimination in interest rate offered to the customers,"
The RBI panel, which received more than 1,000 suggestions, said banks should not impose exorbitant penal rates towards pre closure of home loans to facilitate switching over to other banks or financial entities. There is a large section of home loan borrowers who feel that even with the same kind of scoring, new customers are getting better terms.
The RBI committee said "Banks should not impose exorbitant penal rates towards pre closure of home loans and a policy should be devised to ensure that the customer is not denied of opportunity to enhance his economic welfare by making choices such as switching to other banks/financial entities to enjoy the benefits conferred by market competition"
Banks now charge about 2-3% on the pre payment of a home loan, which for some customers becomes impossible to shift even if he/she is offered attractive rates by rivals.
Banks have their own arguments for incentives but yes, existing borrowers have every reason to feel this. Floating rate means the rate should be uniform for the same category of borrowers.
The report suggested banks should design products suiting the requirements of customers rather than forcing upon the bundled products.
The recommendations are great boon for customers but they will require added efficiency for banks.
Very GOOD Article
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