In the month of October, 2023, the Reserve Bank of India (RBI) penalised two of the most prominent banks in the country for violating norms while dealing with customers.
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Consumers have been reporting instances of being force-sold insurance policies along with the disbursement of loans, banks not providing support while closing the loan account balance, facing difficulty receiving property documents even after the closure of loans and what not.
What problems do customers face?
My own father struggled while getting his personal loan closed from one of the top private banks. Calls to customer care were kept on hold forever. Not just that, we had to find the email of their personal loans India head and even that didn’t work with one email.
But why would banks do that? Every day your loan is outstanding with them, they keep adding interest income.
The same is true with force selling insurance. Every sale makes them a hefty commission. And of course, as we all know, they all have targets flowing from the top.
Banks often force sell insurance along with insurance with pull products like loans. They tell you that you will have to buy insurance when your home’s registry date is due in the next few days. That is not the time when you can refuse and go to other banks.
The regulators have already put many regulations in place but the problem is that customers do not know of a problem redressal mechanism.
For instance, in the Financial Year (FY) 2021-22, 2.91 crore life insurance policies were sold; however, only 25,716 complaints were registered on account of unfair business practises (source: IRDAI Annual Report, FY22).
So for now, we, as customers, should be aware of the redressal mechanisms available to us.
Process of lodging complaints with the Ombudsman
Mrs. Aparna Ramachandra, founder of RectifyCredit, shared that as the first step, one needs to speak to the customer care of the banking entity.
If that doesn’t work, then the customer should connect with the Greivance Redressal Officer (GRO) of the concerned bank.
The details of customer care numbers and GROs are available on the websites of NBFCs and banks.
If you do not receive a response from them within 30 days of making the complaint or if the bank’s response is not satisfactory, then, as per the Reserve Bank – Integrated Ombudsman Scheme, 2021, you may lodge a complaint to the RBI Ombudsman using the CMS portal (https://cms.rbi.org.in).
Mr. Kanishk Harbhajanka, a Delhi-based Chartered Accountant, was aggrieved for not receiving his property documents even after closing his outstanding loan balance. He told us that banks acted swiftly when he complained about the same and not just this, but they delivered the documents to the branch nearest to his home.
One may go through the exclusions under the scheme before lodging a complaint with the RBI-Ombudsman.
This scheme applies to not just banks but NBFCs as well.
RBI’s new directions to Banks / NBFCs on “Responsible lending conduct for release of movable / immovable property documents on repayment/ settlement of personal loans”
In fact, if the due date of your release of documents falls on December 1, 2023, or later, then the banks must give your documents within 30 days.
In case of delay in releasing original movable / immovable property documents or failing to file a charge satisfaction form with the relevant registry beyond 30 days after full repayment / settlement of the loan, the banks / NBFCs shall communicate to the borrower the reasons for such delay.
In cases where the delay is attributable to the banks / NBFCs, they shall compensate the borrower at the rate of ₹5,000/- for each day of delay.
In case of loss/damage to original movable / immovable property documents, either in part or in full, the banks / NBFCs shall assist the borrower in obtaining duplicate / certified copies of the movable / immovable property documents and shall bear the associated costs, in addition to paying compensation of ₹5,000/- for each day of delay.
However, in such cases, an additional 30 days will be available to the banks / NBFCs to complete this procedure and the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days).
Conclusion
Thus, it is very important for the customers to understand what are their rights and how to escalate to the relevant authorities in case of delay from the side of banks / NBFCs.
