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Our Bureau

For refusing loan, credit card applications

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Mumbai March 6 Banks and financial institutions (FIs) will now have to put in writing the reasons for refusing all loan and credit card applications.

In a notification issued on Tuesday, the Reserve Bank of India has issued guidelines for banks and FIs modifying the `Fair Practices Code for Lenders'.

"On a review, it has been decided that in case of all categories of loans irrespective of any threshold limits, including credit card applications, banks and FIs should convey in writing the main reasons which led to rejection of the loan applications," said the notification.

Banks have also been asked to work out a transparent policy (with the approval of the board) for all categories of loans. According to the new guidelines, banks will have to be open about the fees or charges payable for processing, the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower.

The borrower can then make a meaningful comparison with charges of other banks and take an informed decision, the RBI added.

Earlier, banks had to be comprehensive about their fee structure only with respect to priority advances up to Rs 2 lakh.

"With a view to achieving greater transparency and in the light of experience gained, it has been decided the instructions will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower," said the circular.

More Stories on : RBI & Other Central Banks | Credit Market | Credit Cards & Debit Cards

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