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Fair Practice Code for Lenders
As directed by the Reserve Bank of India, from time to time through its circulars, the bank has adopted a modified Fair Practice Code for Lenders as approved by the Board of Directors. The salient features of the same are:
In the loan application form, the Bank shall provide comprehensive information including information about fees and charges if any payable for processing and amount of such fees refundable in case of non acceptance of application, prepayment options and other matter which affects the interest of the borrowers, of all categories of loans, irrespective of the amount of loan sought by them.
- The bank shall provide acknowledgement for receipt of all loan applications, indicating the time frame within which the application will be disposed of.
- The bank will verify the loan application, and if additional details/documents are required, the applicant will be asked to provide them.
- For all categories of loans and irrespective of any threshold limits, the bank will be expected to process the application without delay. In case the application is turned down, the bank will convey in writing to the applicant the reasons for rejection within one month.
- The sanctioning authority will be expected to ensure proper assessment of the credit application as per the extant instructions and credit policy of the bank. The availability of adequate margin and security will not be a substitute for due diligence on the creditworthiness of the customer.
- An authorised official of the Bank will duly communicate all the terms and conditions and other caveats to the customer in writing.
- The customer's acceptance will be obtained on the sanction letter with the customer's signature under the caption "I/WE ACCEPT ALL THE TERMS AND CONDITIONS WHICH HAVE BEEN READ AND UNDERSTOOD BY ME/US".
- The customer will be furnished with a copy of the loan agreement, along with all the enclosures quoted in the loan agreement, at the time the sanction letter is issued.
- The sanction letter/loan agreement will clearly state that the bank will extend credit facilities solely at its discretion and that drawings under the following circumstances will also be solely at its discretion.
- Drawings beyond the drawing power/sanctioned limits.
- Honouring of cheques issued for a purpose other than specifically stipulated in the sanction.
- Drawings in an account once it is classified as NPA
- No drawings will be allowed in case of non-compliance with the terms and conditions by the borrower.
- Meeting further requirements of the borrower on account of growth in business will be subject to a proper review of the credit limits.
- The disbursement will be done immediately on compliance of all the terms and conditions of the sanction by the borrower and the branches need not refer to the sanctioning authority for disbursement.
- Any changes in the terms and conditions of the sanction such as interest and charges will be notified to the borrower before effecting the changes.
- Any changes in interest rate and charges will be effected only prospectively after giving due notice to the borrower.
- Post-disbursement supervision, such as submission of periodic reports and periodic inspection, will be stipulated at the time the sanction letter is issued. The sanction letter will also mention whether the bank or the borrower will bear the cost of the inspection.
- The bank will issue advance notices to the borrowers in case it decides to recall the advance, accelerate the payment, accelerate the performance under the loan agreement, or seek additional securities.
- The bank shall release all securities on receiving payment of a loan. However, the bank may decide to exercise the right to set off any legitimate right or lien for any other claim against the borrower. In case the bank decides to retain the security, the borrower will be notified about the remaining claims and the documents under which the bank is entitled to retain the security till the relevant claim is paid/settled.
- The bank will not interfere in the affairs of the borrowers except where provided for in the terms and conditions of the loan sanction documents, such as periodic inspection, scrutiny of books of accounts, verification of stocks and book debts, and scrutiny of QIS statements.
- In case any information not disclosed earlier by the borrower has come to the notice of the bank, the bank will have the right to elicit the necessary information from the borrower and initiate action to protect its interest.
- While the bank may participate in credit-linked schemes framed for weaker sections of society, it shall not discriminate on grounds of sex, caste, or religion in lending.
- In recovering loans, the bank shall not resort to undue harassment, such as persistently bothering the borrowers at odd hours and using muscle power.
- If a request for transfer of borrowal account is received, either from the borrower or from other banks/FIs that propose to take over the loan, the bank's consent or objection, if any, shall be conveyed within 21 days from the date of receipt of the request.
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