Home Loan Insurance - Aware Borrowers: Banking Ombudsman Report

As per an incident mentioned in the Reserve Bank of India’s (RBI) latest report on banking ombudsman, a bank actually took a loan borrower for a ride in his housing loan insurance policy.

A loan borrower had availed a housing loan from a bank, and when the loan was sanctioned he was also made to take a insurance policy. He was told that he had to pay the premium of the policy only once.

But, in reality, the bank kept deducting the premium every year from his account.

He was shocked when he noticed the deductions & raised the issue with the bank. That did not help much. Finally, he approached the ombudsman, who further looked into the matter.

The bank maintained its stance that the premiums were deducted with concurrence of the borrower to protect his heirs from the incident of the loan liability in case of the borrower's death during the term of the home loan.

The ombudsman asked the bank to provide the necessary documents. The bank said they had advised the borrower verbally and hence did not have a documented mandate.

The baking ombudsman inferred that the bank was clearly at fault and asked to refund the insurance charges as neither a mandate was taken from the borrower, nor was he informed in writing before taking the insurance policy.

Chennai - Banking Ombudsman 

Mr. U. Chiranjeevi
C/o Reserve Bank of India,
Fort Glacis, Chennai 600 001
Tele No. 044 2539 5964, 044 2539 9170, 

044 2539 9159, 044 2539 9158

Fax No. 044 - 2539 5488

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