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Bank fair practice for lenders

 

BANK'S POLICY ON FAIR PRACTICES CODE FOR LENDERS

1.    OBJECTIVE OF THE POLICY

The primary objective of the policy is to promote better understanding between the borrower and the Bank, develop cordial relationship and also create healthy lending practices. The policy would apply prospectively to all advances irrespective of the amount of loan. The 'Policy on Fair Practices Code for Lenders', broadly, covers the following:

1.1.    Providing Information to the borrower in the Loan Application Form about the Fee/Charges on processing of loans, pre-payment options, refund of fee etc.

1.2.    Acknowledgement to the Application

1.3.    Scrutiny of the Loan Application

1.4.    Appraisal and Assessment of the limits, Terms and Conditions, margin stipulations, etc.

1.5.    Time frame for disposal of Application.

1.6.    Types of fees / Charges being presently levied by the Bank and the stage at which the same is levied, refund of process fees in case of non-acceptance of application, Pre-payment options, etc.

1.7.    Reasons for Rejection or Non-acceptance of the Application

1.8.    Grievances Redressal System

2.    PROVIDING INFORMATION TO THE BORROWER IN THE LOAN APPLICATION FORM: FEE/ CHARGES ON PROCESSING OF LOANS, PRE-PAYMENT OPTIONS, REFUND OF FEE ETC.

2.1.    The Bank has three types of loan application forms:

i.  LF1-Common for Industrial & Conventional Loans except Retail Credit & agricultural Loans

ii.  LF2- Loan Application-cum Appraisal / Sanction Form for all Retail Schemes

iii.  LF3- Loan Application for Agricultural Loans

2.2.    The Bank will enclose as an allonge attached to the application giving details of:

i.  Fee/Charges, if any, payable by the borrower for processing

ii.  The amount of such fees refundable in the case of non-acceptance of application

iii.  Pre-payment options including penalty on pre-payment.

iv.  Check list in respect of information/papers required by the Bank for considering loan.

v.   Any other matter which affects the interest of the borrower such as availability of subsidy, Interest reset clause, etc.

vi.   "All in cost" charges to the borrower involved in processing/sanction of loan application.

vii.   Conversion charges for switching loan from fixed to floating rates, if any, or vice versa.

The above measure would facilitate the borrower to have a meaningful comparison with other banks and take informed decision.

3.     ACKNOWLEDGEMENT OF LOAN APPLICATION

3.1.    The Bank will provide acknowledgement of the loan applications received from borrower immediately on receipt of duly filled in Loan Application Form as per Appendix-A enclosed.

4.    SCRUTINY OF THE LOAN APPLICATION

4.1.    The Bank will scrutinize the Loan application submitted by the applicant and additional information, if any, required should be called promptly to facilitate expeditious disposal of the application.

5.    APPRAISAL AND ASSESSMENT OF THE LIMITS, TERMS AND CONDITIONS, MARGIN STIPULATIONS, ETC.

5.1.    The Bank will properly appraise and assess the loan proposal in line with the guidelines issued from time to time including terms and conditions to be complied with, margin stipulations as laid down, and the sanction shall be conveyed to the applicants.

6.    CONVEYING THE TERMS AND CONDITIONS OF SANCTION OF LOAN TO THE BORROWER AND KEEP BORROWER'S ACCEPTANCE OF THE SAME

6.1.    The Bank will convey to the applicant the credit limit along with the Terms & Conditions thereof and other caveats governing credit facilities arrived at after negotiation with the applicants and duly certified by the authorized official. The Bank will also keep the borrower's acceptance of these terms and conditions given with his full knowledge on record.

6.2.    The Bank will clearly stipulate credit facilities which are solely at its own discretion. These may include approval or disallowance of facilities, such as:

      i.   Drawings beyond the sanctioned limits,

      ii.   Honouring cheques issued for the purpose other than specifically agreed to in the credit sanction,

      iii.  Disallowing drawing on a borrowal account on its classification as a non-performing asset or

      iv.  On account of non-compliance with the terms of sanction. It is further stated that Bank does not have an obligation to meet further requirements of the borrowers on account of growth in business etc. without proper review of credit limits.

7.    TIME FRAME FOR DISPOSAL OF APPLICATION

The time frame for disposal of loan applications will be adhered to.

Time frame for disposal of loan applications relating to MSE (Micro and Small Enterprises) borrowers

7.1.    The time frame for disposal of loan applications of MSE borrowers in line with BCSBI-Code of Bank's Commitment to Micro and Small Enterprises (MSE) is as under:

SIZE OF LIMIT

TIME NORMS FOR DISPOSAL

Loans upto `5 Lacs

Within two weeks of receipt of loan application provided it is complete in all respects and duly accompanied by a check list.

Loans above `5 Lacs and upto `25 Lacs

Within three weeks of receipt of duly completed loan application provided it is complete in all respects and duly accompanied by a check list.

Loans above `25 Lacs and upto `1 Crore

Within four weeks of receipt of duly completed loan application provided it is complete in all respects and duly accompanied by a check list.

Loans above `1 Crore

Within six weeks of receipt of duly completed loan application provided it is complete in all respects and duly accompanied by a check list.

Time frame for disposal of loan applications relating to other than MSE borrowers

7.2.    The time frame for disposal of loan applications of other than MSE borrowers in line with the BCSBI-Code of Bank's Commitment to Customers is as under:

Credit Limits upto `20 Lacs to other than MSE borrowers

Proposal for

Export and Non Export Credit

Sanction of fresh/enhancements

30 days

Renewal of existing credit limits

21 days

(*)Sanction of adhoc credit facilities

7 days

(*) Sanction of adhoc credit facilities shall be subject to guidelines issued from time to time

Credit Limits above `20 Lacs to other than MSE borrowers

Proposal for

Export Credit

Non-Export Credit

Sanction of fresh/enhancements

30 days

45 days

Renewal of existing credit limits

21 days

30 days

(*)Sanction of adhoc credit facilities

7 days

15 days

(*) Sanction of adhoc credit facilities shall be subject to guidelines issued from time to time.

7.3.    The branches should ensure that the loan application provided to the prospective borrowers includes check-list of papers /documents required for appraisal of the proposal.

7.4.    The Loan applications received by the branches should be acknowledged on the day of receiving the application at the branch after ensuring that the loan application is complete in all respects and is accompanied with papers /documents required for appraisal of the proposal as per check-list.

8.    TYPES OF FEES/CHARGES BEING PRESENTLY LEVIED BY THE BANK

For total Credit Limits (Fund Based + Non Fund Based) upto `1.00 Crore

Process fee is charged after the sanction of the credit facility and in case of disbursement only.

For total Credit Limits (Fund Based + Non Fund Based) above `1.00 Crore

50% of the applicable process fees shall be charged before conveying sanction (process fee already recovered at the time of NBG approval may be set off out of this portion of the process fee) and remaining 50% shall be recovered before disbursement. This should be made clear to the borrower at the time of accepting loan application. 

9.    PREPAYMENT OPTIONS FOR THE BORROWER

9.1.    In case of Housing Loans, no pre-payment penalty shall be applicable. In none of the occasions the pre-payment penalty will be applied in the account, even the borrower opts to switch his home loan account to other bank/financial institution.

9.2.    In cases of other term loans, if the loan is prepaid by the borrower (other than individual borrower) for shifting to other Bank/FI, pre-payment penalty of 2% of the total outstanding shall be levied by the Bank as per the sanction.

9.3.   In case of a Working Capital Loan is prepaid by the borrower (other than individual borrower) for shifting to other Bank/FI,onetime pre-payment charges of 1% of the total sanctioned limit shall be levied. 

10.     COMMITMENT CHARGES

10.1.     Working Capital Limits

•  For WC - fund based limits of `5.00 Crore and above with quarterly average utilization level less than 70% at the rate of 0.50% p.a. of unavailed limits to be levied quarterly on average unavailed amount.

  10.2.     Term Loan over `10.00 Crore

•  For Term Loan of over `10.00 Crore with utilization level less than 50% at the rate of 0.25% p.a. of unavailed portion.

•  Utilisation level in relation to short drawls as per draw down schedule.

•  Commitment charges shall be levied on quarterly basis.

10.3.     Exempted cases for levying commitment charges

The commitment charges shall not be levied on the following limits:

•  WC - fund based limits of less than `5.00 Crore

•  Term Loan upto `10.00 Crore

•  Working capital limits sanctioned to sick / weak units

•  Limits sanctioned for export credit (both pre-shipment and post-shipment) as well as against export incentives viz. duty drawback, cash compensatory support, etc.

•  Inland bill limits extended by way of bills purchased / discounted or overdraft / cash credit limit / sub-limit against bills for collection.

•  Credit limits granted to commercial banks, financial institutions and co-operative banks including land development banks.

11.     REASONS FOR REJECTION OR NON-ACCEPTANCE OF THE APPLICATION

The Bank will communicate in writing the reasons which in the opinion of the Bank has led to rejection of the loan application.

12.      FURNISHING COPY OF LOAN AGREEMENT

The Bank will furnish a copy of the loan agreement along with a copy of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction/disbursement of loans at borrowers cost.

13.      GRIEVANCES REDRESSAL SYSTEM

The Bank has set up a Grievance Redressal System. In case of any dispute/ grievances, the same shall be disposed off as under:

SN

SANCTIONING AUTHORITY

GRIEVANCES REDRESSAL AUTHORITY

1.

Branch Incumbent/Cluster Head

Respective Cluster Monitoring Head (Branch Business / Classic Branch)

2.

Cluster Monitoring Office

General Manager (of the respective Credit Vertical)

3.

Head Office

General Manager (of the respective Credit Vertical/ Executive Director/Managing Director and Chief Executive Officer

 

14.     DISBURSEMENT OF LOANS INCLUDING CHANGES IN TERMS AND CONDITIONS

14.1.     The Bank will ensure the timely disbursement of loans sanctioned in conformity with the terms and conditions governing such sanction. The Bank will also give notice of any change in the terms and conditions including interest rates, service charges etc.

15.      POST DISBURSEMENT SUPERVISION

15.1.     The Bank will supervise the post disbursement of loan particularly in respect of loans upto `2 Lacs with a view to taking care of any 'lender-related' genuine difficulty" that the borrower may face.

15.2.     Before taking a decision to recall / accelerate payment or performance under the agreement or seeking additional securities, the bank will give notice to borrowers, as specified in the loan agreement or a reasonable period, if no such condition exists in the loan agreement.

16.      RELEASE OF SECURITIES

16.1.     The Bank will release all securities on receiving payment of loan or realization of loan subject to any legitimate right or lien for any other claim the bank may have against borrowers. If such right of set off is to be exercised, the bank will give notice about the same with full particulars about the remaining claims and the documents under which the bank is entitled to retain the securities till the relevant claim is settled /paid.

17.     GENERAL

17.1.     The Bank will restrain from interference in the affairs of the borrowers except for what is provided in the terms and conditions of the loan sanction/documents (unless new information, not earlier disclosed by the borrower, has come to the notice of the bank).

17.2.     The Bank will not discriminate on grounds of sex, caste and religion in the matter of lending. However, this does not preclude lenders from participating in credit-linked schemes framed for weaker sections of the society.

17.3.     In the matter of recovery of loans, the Bank will not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc.

17.4.     The Bank will convey its consent or otherwise objection within 21 days from the date of receipt of request for transfer of borrowal account, either from the borrower or from a bank/financial institution, which proposes to take-over the account.