Lok Sabha Question No. 59 (STARRED), answered on 2023-07-24
Subject: Fee Charged by Banks
Ministry: FINANCE
Asked by: Bhagirath Chaudhary

## DRAFT REPLY

## LOK SABHA

## STARRED QUESTION NO. † *59

Answered on the 24 th  July 2023/ Sravana 2, 1945 (Saka)

## Fee Charged by Banks

## †*59 . Shri Bhagirath Choudhary:

Will the Minister of FINANCE be pleased to state:

(a) the  details  of  formalities  completed  by  various  public  and  private  banks  of  the country at the time of approving the various loans to the institutions and the common people;

(b) whether some private banks are charging arbitrary amounts like Rs.  5,000 to Rs. 10,000 as file charges while approving the loans of common people;

(c) whether the Government intends to give relief to the common people by prescribing a fixed fee for the amount to be recovered as file charge keeping in view the nature of loan;

(d) whether the amount of Rs. 1500 to Rs. 2000 is being charged by the private banks in the  name  of  documentation  even  after  receiving  the  photocopies  of  the  necessary documents for giving loans to the common people;

(e) whether the gold loan borrowers have to pay the fee for testing and inspection of gold when they seek their collateral back after repayment of the loan and if so, the details thereof; and

(f) whether the said arbitrary practice done by the banks is a fair practice and if not, the steps taken by the Government to stop them?

## ANSWER

## FINANCE MINISTER

## (SMT. NIRMALA SITHARAMAN)

(a) to (f): A statement is laid on the Table of the House.

## Statement for Lok Sabha Starred Question no. *59 for 24 th July 2023, regarding 'Fee Charged  by Banks'  by SHRI  BHAGIRATH  CHOUDHARY,  Member  of Parliament

(a) to (f): 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.

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 and banks should also take care to ensure that customers with low volume of activities are not penalised. Further, banks, as per their Board approved policies, determine charges for testing and appraisal of gold ornaments with respect to gold loans.

Also, RBI vide its guidelines on fair practice code for lenders, advised banks to inform 'all in cost' to the customer to enable him to compare the rates charged with other sources of finance.  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, 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, and lenders should ensure that such charges /fees are non-discriminatory.

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