IBA may submit comments on pre-payment by Sept-end: RBI

The Reserve Bank (RBI) today said the Indian Banks' Association (IBA) is expected to submit comments by the end of this month on the proposal to do away with pre-payment charges on home loans.

"IBA is expected to submit comments on pre-payment by the end of this month," RBI Chief General Manager and Banking Ombudsman (New Delhi) M Rajeshwar Rao said here.

After receiving the comments, the RBI will go through it and take a final call on the pre-payment charges on loans taken under floating rates by customers, he said.

Earlier this month, the Banking Ombudsmen Conference suggested banks should not impose pre-payment charges on loans with floating rate of interest.

It had said banks may also offer long-term fixed rate housing loans to customers.

The conference said lenders may address their asset liability mismatch (ALM) issues by taking 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," the Ombudsmen had noted.

The banks will, however, be free to recover or charge appropriate pre-payment penalties in the case of fixed rate loans, it had suggested.

Meanwhile, Rao pointed out that the maximum complaints received from customers were card related.

He said as much as 41% of total complaints by customers are against the public sector banks in the New Delhi region which includes Jammu and Kashmir besides Haryana.

In the region, he said the Ombudsman received maximum complaints against State Bank of India followed by ICICI Bank and HDFC Bank.

The total complaints received during 2010-11 stood at 10,508 which is 13% less than in the previous fiscal (12,613).

Most complaints are received from Delhi followed by Haryana.

Banking Ombudsman Scheme of the RBI deals with any deficiency in the services by the bank and as many as 27 services are part of the scheme.

Source: Business Standard