Lok Sabha Question No. 653 (UNSTARRED), answered on 2023-02-06
Subject: Bank Loans
Ministry: FINANCE
Asked by: Bhagirath Chaudhary

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. †653

To be answered on the February 6, 2023/Magha 17, 1944 (Saka)

## Bank Loans

## †653 . SHRI BHAGIRATH CHOUDHARY:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  banks  solicit  certain  formalities  from  institutions  and  general  public  at  the  time  of sanctioning of various loans in the country, if so, the details thereof;
- (b) whether it is true that while sanctioning loans to the general public by some private banks, an arbitrary amount i.e. 5 to 10 thousand rupees is being taken as file charge;

(c) if so, whether the Government proposes to give relief to the common man by ensuring a fixed fees as file charge keeping in view the nature of the loan, if so, the details thereof;

- (d) whether sometimes even after giving photocopies and copies of necessary documents for taking loan by the common people, private banks are still charging Rs. 1500 to Rs. 2000 as document charge, if so, the details thereof;
- (e) whether  while  taking  loan  and  getting  back  the  deposit  after  repaying  the  gold  loan,  the  debtor himself/herself has to pay the fee for checking and testing of gold and if so, the details thereof; and
- (f) whether it is fair for the banks to charge the said amount arbitrarily and if not, the corrective steps being taken by the Government to stop this practice?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (DR. BHAGWAT KARAD)

(a):  Banks  take  credit  decisions  based  on  their  Board  approved  policies  and  extant  regulatory  guidelines  of Reserve Bank of India (RBI). For sanctioning of loans, banks ask for submission of documents  from borrowers and guarantors  based on loan product, activity of borrower and purpose of loan including, inter  alia ,  KYC documents, asset and liability statement, proof of income like IT returns etc, financial statements, documents related to securities offered like sale deed, encumbrance certificates etc, project report, techno economic viability report, quotations and estimates of supply, external rating, details of borrowings and statutory approvals.

(b) to (f): As per RBI master circular on customer service in banks, the decision to prescribe service charges rests with banks as per their Board approved policy and banks should ensure that the charges are reasonable and are not out of line with the average cost of providing these services. Also, RBI vide its guidelines on fair practice code for lenders, ad vised banks to inform 'all in cost' to the customer to enable him to compare the rates charged with other sources of finance. Further, with a view to bringing in fairness and transparency, banks are required to transparently disclose to the borrower all information about fees / charges including, inter alia , file charge, document charge,  fee for checking and testing of gold  payable for processing the loan application, the amount of fees refundable if loan amount is not sanctioned/ disbursed, pre-payment options and charges, penalty for delayed repayments, conversion charges for switching loan from fixed to floating rates or vice versa, existence of any interest reset clause and any other matter which affects the interest of the borrower. Such information should also be displayed and updated on the website of the banks for all categories of loan products and it should be ensured that such charges /fees are non-discriminatory.