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loan customers need no longer worry about transferring their loans from
one bank to another. In line with the recommendations of the Damodaran
Committee on customer service in banks, the Reserve Bank of India (RBI)
on Tuesday abolished foreclosure charges, levied by banks on prepayment
of home loans with floating interest rates.
Also, banks should have a board-approved transparent policy on pricing liabilities and ensure that the variation on single-term deposits of R1.5 million and above and other term deposits is minimal.
The RBI has asked banks to initiate steps to allot unique customer identification code (UCIC) to all customers. Similarly, existing individual customers may also be allotted UCIC by end-April 2013.
UCIC will help banks identify a customer, track the facilities availed, monitor financial transactions in various accounts, improve risk profiling, take a holistic view of customer profile and smoothen banking operations for the customer.
While some of the Indian banks have already developed UCIC, there is no unique number to identify a single customer across the organisation in many banks. In this regard, the government has already initiated some measures as a working group constituted by it has proposed the introduction of unique identifiers for customers across different banks and financial institutions.
Banks have also been asked by the RBI to offer a ‘basic savings bank deposit account’ with certain minimum common facilities and without the requirement of minimum balance to all their customers. This is being done with a view to providing fillip to the financial inclusion agenda. Banks were advised in November 2005 to make available a basic banking ‘no-frills’ account with either ‘nil’ or very low minimum balance as well as charges that would make such accounts accessible to vast sections of the population.
According to the RBI's monetary policy statement 2012-13, foreclosure charges levied by banks on prepayment of home loans were resented upon by home loan borrowers, especially since banks are hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario. Also, foreclosure charges are seen as a restrictive practice deterring borrowers from switching over to cheaper available sources.
The RBI feels the removal of foreclosure charges/prepayment penalty on home loans will lead to a reduction in the discrimination between existing and new borrowers. The competition among banks will result in finer pricing of home loans with floating rate. Though many banks have, in the recent past, voluntarily abolished prepayment penalties on their floating rate home loans, there is a need for ensuring uniformity across the banking system in this regard, the policy statement adds.
As far as deposits are concerned, the RBI has stipulated that banks should not discriminate in the matter of interest rate paid on deposits, except in respect of fixed deposit schemes specifically meant for resident Indian senior citizens, etc.
Also, banks should have a board-approved transparent policy on pricing liabilities and ensure that the variation on single-term deposits of R1.5 million and above and other term deposits is minimal.
The RBI has asked banks to initiate steps to allot unique customer identification code (UCIC) to all customers. Similarly, existing individual customers may also be allotted UCIC by end-April 2013.
UCIC will help banks identify a customer, track the facilities availed, monitor financial transactions in various accounts, improve risk profiling, take a holistic view of customer profile and smoothen banking operations for the customer.
While some of the Indian banks have already developed UCIC, there is no unique number to identify a single customer across the organisation in many banks. In this regard, the government has already initiated some measures as a working group constituted by it has proposed the introduction of unique identifiers for customers across different banks and financial institutions.
Banks have also been asked by the RBI to offer a ‘basic savings bank deposit account’ with certain minimum common facilities and without the requirement of minimum balance to all their customers. This is being done with a view to providing fillip to the financial inclusion agenda. Banks were advised in November 2005 to make available a basic banking ‘no-frills’ account with either ‘nil’ or very low minimum balance as well as charges that would make such accounts accessible to vast sections of the population.
According to the RBI's monetary policy statement 2012-13, foreclosure charges levied by banks on prepayment of home loans were resented upon by home loan borrowers, especially since banks are hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario. Also, foreclosure charges are seen as a restrictive practice deterring borrowers from switching over to cheaper available sources.
The RBI feels the removal of foreclosure charges/prepayment penalty on home loans will lead to a reduction in the discrimination between existing and new borrowers. The competition among banks will result in finer pricing of home loans with floating rate. Though many banks have, in the recent past, voluntarily abolished prepayment penalties on their floating rate home loans, there is a need for ensuring uniformity across the banking system in this regard, the policy statement adds.
As far as deposits are concerned, the RBI has stipulated that banks should not discriminate in the matter of interest rate paid on deposits, except in respect of fixed deposit schemes specifically meant for resident Indian senior citizens, etc.
Financial Express, New delhi, 18-04-2012
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