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IF you see those eye-catching advertisements and hoardings of banks, you will think that getting a loan is the easiest thing in the world. It is only when you actually apply for one that you realise the huge gap between promise and reality. The Reserve Bank has issued clear guidelines (Fair Practices Code for Lenders) on the accountability of banks vis-`E0-vis lending practices. It has also issued guidelines on home loans, focussing on the need for transparency in the process. Yet, you find banks blatantly flouting them. They do not give a written acknowledgement for having received the loan papers. They do not clearly indicate the various charges imposed on the consumer. They do not give a time frame within which the loan would be sanctioned. They do not give copies of all the documents signed by the customer, and there is also lack of transparency on the interest charged, and also on the terms and conditions governing the loan. There have been many cases where banks have sanctioned the loans after long delays, and then failed to disburse these, resulting in people having to start the process afresh with other banks. This has also meant paying substantially more for the property, or paying huge interests on payments due to the builders. In some cases, clients have lost an opportunity to own houses of their own, thanks to inordinate delays on the part of the banks in processing the loan applications, and then denying the loans. It is no wonder that the number of complaints pertaining to loans and advances filed before the Banking Ombudsman continues to go up every year. In the year 2006-2007, for example, there were 4442 complaints pertaining to loans in general, and 709 complaints on home loans. This number went up to 7331 and 843, respectively, in the year 2008-2009, indicating an increase of 38 per cent and 11 per cent, respectively. There are also a large number of complaints on this issue before the courts, but unfortunately, there is no statistical information. However, a recent order of the apex court on the issue should cheer up customers who have gone through such a bitter and frustrating experience. It should also force banks to rethink on the way they treat people who come to them for loans. The order has its origin in the home loan application of Jagmohan Lal Mohan in 2002 to purchase a property. The bank, through a letter, informed him that it had sanctioned a loan of Rs 7 lakh. However, the bank did not disburse it on some pretext or the other, forcing him to seek the loan from another bank. When he asked the bank to refund his money, it said it would only pay back the advance EMI collected from him, but not Rs 7000 collected towards processing and administrative charges, as it had already spent this money on his application. In his complaint before the court, the complainant sought recovery of a total amount of Rs 13,300 paid by him. He also sought interest on the amount and a compensation of Rs 20,000 and costs of litigation. The district consumer disputes redressal forum, however, directed the bank to refund only Rs 5925, along with 6 per cent interest calculated from November 2000 and Rs 500 towards cost of litigation. Dissatisfied, the consumer filed an appeal before the state consumer disputes redressal commission, Chandigarh. Even though the commission commented that the bank had adopted wrong procedures in dealing with the loan application, it held that it could not interfere with its decision. It also held that the complainant was not entitled to a refund of processing charges of Rs 7000. The national commission agreed with the lower court that it was the sole prerogative of the financial institution to give or not to give the loan. However, it observed that in this case, the bank’s action in failing to disburse the sanctioned loan had caused undue harassment to the consumer, and he needed to be compensated for it. So in addition to what was awarded by the lower court, the bank should pay the consumer Rs 30,000 as compensation, besides costs of litigation of Rs 3,000, the national commission held (Jagmohan lal Mohan vs ICICI Home Finance Company, RP no 753 of 2006, pronounced on March 5, 2010).
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