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When you apply for a loan, banks are supposed to inform you about the charges that they levy towards processing of the loan and all the terms and conditions governing the loan. But usually it never works that way and banks are known to spring a surprise on the customer about some charge or the other at a later date. Similarly, you are asked to supply supporting documents for every statement that you make in the loan application form. But if you ask your loan officer for a copy of the completed application form along with the enclosures (which the bank is supposed to give voluntarily) he’ll look at you as if you are asking for the moon. Banks, which don’t tolerate even a day’s delay in receiving the instalment towards the loan repayment, don’t show the same alacrity when it comes to their duty towards the customer. In respect of vehicle loans, for example, they don’t bother to release the vehicle from hypothecation once the loan is repaid. They expect the consumer to run around for it. They keep important documents such as share certificates and title deeds of properties as security against the loan, but do not give the customer, a proper receipt for them. Once the loan is repaid, they are supposed to return all the papers given to them as collateral without any delay. But here again, banks are known to take their own time in completing this formality. In fact consumer courts have dealt with cases where such documents have even been lost. Ironically, the banking regulator, the Reserve Bank of India, has issued specific instructions regarding the duties of banks vis-`E0-vis loan applications, loan disbursals and related matters. But these are followed more in their breach. Way back in 2003, RBI issued guidelines for the banks on the issue in the form of "Fair Practices Code for Lenders" and asked all banks and financial institutions to duly adopt and follow these stringently. But I am yet to come across a bank that gives a customer applying for a loan, a copy of its Fair Practices Code for Lenders. As per the code, the banks are supposed to furnish voluntarily, a copy of the completed application form along with all enclosed documents. They are also expected to tell you in advance, the charges that you incur for processing of the loan, the rate at which the interest would be charged, pre-closure penalties if any, the processing fee that may be refunded in case the application is rejected and let you know about the grievance redress machinery. In fact, in August last year, the Reserve Bank of India reminded the banks that they have to put in writing all the terms and conditions governing the credit facilities, have the agreement certified by an authorised bank official and furnish a copy of this and also copies of all the enclosures in the loan agreement to the borrower, without his or her asking for it. Failure to do so amounted to unfair trade practice, the regulator said. So, while taking a loan make it a point to remind the bank officials of the code and ensure that they follow it. Banks that flout or ignore the fair practices code are not just guilty of unfair trade practice, but also of deficiency in service and are liable for the consequences of such action. In other words, if you suffer loss or injury as a result of such deficient service, you can seek compensation under the Consumer Protection Act. Banks that fail to return in good condition and in good time, the pledged papers, are also guilty of negligent service. In the case of C.L. Khanna vs Dena Bank (OP no 70 of 2002, decided on September 2, 2005) the apex consumer court made it clear that once the loan is repaid, banks should not delay the return of the pledged documents. Failure to return the papers or delay the return constitutes deficiency and consumers are entitled to compensation for any loss or injury caused as a consequence, the consumer court said. In this case, the bank had lost the original title deed pertaining to the property pledged with it. The apex consumer court in this case not only asked the bank to pay a hefty compensation to the consumer, but also directed the bank to help the consumer get duplicate deeds made. In the case of Thukaram Anantha Shet vs. The Manager, Karnataka Bank Limited (Revision petition number 255 of 2001, decided on January 10, 2006) too, the National Consumer Disputes Redressal Commission emphasized that "returning pledged documents shall be part of the services to be rendered by the bank" and failure to return them constituted deficiency in the service rendered by the bank. In this case a guarantor had filed a case alleging that his papers had not been given back to him.
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