New Delh; While presenting the Monetary Policy, RBI Governor Shaktikanta Das has conceded the divergence of views in regulated entities on penal interest on advances.
“At present, Regulated Entities (REs) are required to have a policy for levy of penal interest on advances. The REs, however, follow divergent practices on levying of such charges. In certain cases, these charges are founded to be excessive”, he noted.
“To further enhance transparency, reasonableness and consumer protection, draft guidelines on levy of penal charges will be issued to obtain comments from stakeholders”, RBI Governor announced.
The issue of penal charges has been consistently raised by Federation of Indian Micro and Small & Medium Enterprises (FISME).
A large complaints have been reported to the national Federation mostly pertaining to Private Sector Banks.
“We are grateful to RBI for standing up for the micro and small units who have been the victim of excesses of Banks”, says Neeraj Kedia, Chairman, Banking Committee of FISME.
According to FISME, while ICICI Bank had been categorical that no-prepayment charges would be levied, most other Banks continued the mal-practice of imposing penal charges to the tune 2~4% on the entire loan amount.
“This is in spite of the Bankers’ Code for MSMEs which allows prepayment of loans without penal charges”, Neeraj Kedia added.
The official communique of FISME has hoped that besides the penal interest, the draft Guidelines would also suggest a transparent mechanism for non-compliance charges.
