The RBI on Friday (August 18) requested banks and different lenders to provide borrowers an option to switch over to a fixed fee on the time of reset of rates of interest.
In a notification, the RBI stated in respect of EMI-based floating fee private loans, within the wake of rising rates of interest, a number of client grievances associated to elongation of mortgage tenor and/or improve in EMI quantity, with out correct communication with and/or consent of borrowers have been acquired.
The RBI has requested entities regulated by it to put in place an acceptable coverage framework so as to tackle these considerations.
“At the time of sanction, REs shall clearly communicate to the borrowers about the possible impact of change in benchmark interest rate on the loan leading to changes in EMI and/or tenor or both. Subsequently, any increase in the EMI/ tenor or both on account of the above shall be communicated to the borrower immediately through appropriate channels,” RBI stated.
It additional stated that on the time of reset of rates of interest, Regulated Entities (REs) should provide an option to borrowers to switch over to a fixed fee as per their board-approved coverage.
The coverage, RBI added should specify the variety of instances a borrower will likely be allowed to switch in the course of the tenor of the mortgage.
Borrowers should even be given a selection to go for enhancement in EMI or elongation of tenor or for a mix of each choices.
They should even be given an option to prepay, both partly or in full, at any level in the course of the tenor of the mortgage.
(With PTI inputs)
