Don't recover pre-payment fees, banks told
Commercial banks in the country should not recover pre-payment charges in floating rate loans and they may also offer long-term fixed rate housing loans to their customers for addressing their asset liability mismatch (ALM) issues by recourse to the Interest Rate Swaps (IRS) market.
Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and, thus, banks only substitute interest rate risk with potential credit risk. However, the bank will be free to recover or charge appropriate pre-payment penalties in the case of fixed rate loans.
The above decision forms part of the 10-Action Points to improve Customer Service of banks taken at the Annual Conference of Banking Ombudsmen held in the Reserve Bank of India here on Monday last which was inaugurated by Governor Duvvuri Subbarao.
Further, banks would convey to RBI, a consensus view on the recommendations of the Damodaran Committee Report on Customer Service in banks that could be immediately implemented. In this context, Indian Banks’ Association (IBA) will standardise most important terms and conditions (MITC) for at least ten important banking transactions and circulate among banks for adaptation.
Also, banks would initiate the process of providing one view of all bank accounts of a customer including deposits, loans, with the help of available technology such as core banking solution. Banks would complete the process within one year.
Bank customers, bank officials and Banking Ombudsmen will participate in these events. Then RBI/IBA would examine the issues pertaining to monetary compensation for mental harassment suffered by bank customers.
Issues that may receive attention in the analysis would be: Whether only actual loss be considered for compensation. Whether mental harassment issues can be codified for compensation and whether compensation should be capped. Whether the policies of the banks’ boards on compensation should include mental harassment as a ground for compensation.
Furthermore, banks should issue tax deduction at source (TDS) certificates duly completed in all respects to the account holders and despatch it to their mailing address.
