RBI Rules: If wrong interest is taken, return it immediately

New Delhi. The Reserve Bank of India has once again cracked the whip on financial institutions along with lending banks. It said, the institutions which have wrongly charged additional interest should immediately take action and return it. These institutions are resorting to unfair methods in charging interest. This is completely wrong.

Guidelines have been issued to regulated entities (REs) from time to time since 2003, the RBI said in a circular issued on Monday. These include fairness and transparency on loan pricing policy. There is clarity regarding appropriate behaviour. During its scrutiny of REs for the financial year ending March 31, 2023, RBI has found instances of some unfair practices in charging interest by lenders. RBI has mainly raised concerns about unfair practices in fairness and transparency.

All RE loans should review their practices with respect to method of disbursement, application of interest and other charges, the central bank said. Make changes at the system level. Take necessary corrective action on the issue of interest recovery. RBI said, during onsite verification, it was found that the RE charged interest from the date of loan sanction or the date of loan agreement. Whereas interest should be charged from the time the customer has received the loan.

RBI said, such cases have also come to light, where interest was charged from the date of cheque. Whereas the check was given to the customer after several days. Some institutions have taken full interest for the month in which the loan was given. In some cases, institutions take one or more installments from the customer at the time of giving the loan, but interest is charged on the entire loan. In some cases, REs are being encouraged to use online transfers in lieu of checks issued for loan disbursement.