The Reserve Bank of India has flagged the issue of wide variations in the rate of interest charged to retail borrowers by banks even when the loan was sanctioned on the same day. The central bank said the practice reflected that there is no transparency in the system.
Under existing instructions, all categories of loans (with certain specified exemptions) are to be linked to the base rate from July 2010. “It is expected that the final rate of interest charged to the borrower will include product and customer-specific charges and will be reasonable and transparent.
“However, this wide variation in rates of interest cannot possibly be attributed to customers’ risk profiles. Such a practice may be reflective of opaqueness in the system,” the RBI said in its monetary policy report.
The central bank said banks should have a “management oversight on such practices and also frame policies that ensure pricing of loans, especially retail loans, is transparent, realistic, and related to the risk perception of the borrowers”.
Also, under core banking solution, banks are expected to stop differential pricing for non-home branch customers and treat customers uniformly at any sales or service delivery point, the RBI said.
The central bank said it had observed that some banks are discriminating against customers on the basis of one branch being designated as the ‘home branch’ where customers are not charged for products or services but are charged in other branches for the same products or services.
In this regard, banks have been advised to “follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches”.