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I took a home loan from a bank in December 2005, at a fixed rate of interest of 7.75 per cent on the condition that it would be revised every third year as per the prevailing interest rates and I would be given notice of such a change with an option to terminate the loan account. In December 2008, the bank revised the rate to 8.5 per cent, but without any prior intimation. Then in November 2011, I got a letter from the bank saying that by mistake, they had charged me from 2008, 8.5 per cent instead of 12 per cent and I now owe them Rs 73,000. What do I do ? First and foremost, the bank is guilty of violating the terms of the loan agreement signed with you. Second, it is also guilty of trying to impose a revised interest rate retrospectively on you. Write to the nodal officer of the bank immediately. If he does not resolve the issue satisfactorily, send a complaint to the Banking Ombudsman - you will find the details of the Ombudsman on the RBI website: www.bankingombudsman.rbi.org.in .You can complain online. The resolution of disputes before the Ombudsman is quite simple and quick. You also have the option of going to the consumer court, but you cannot go to both the fora simultaneously. Let me quote a case decided by the apex consumer court in January last year on a somewhat similar issue. Here, the complainant was a former employee of the bank, who had taken a home loan. When he opted for premature retirement, the bank got him to sign an agreement converting the loan into a regular home loan (given to non-employees ), subject to periodic revision depending on the market rates. As per the prevailing rate at that time, the interest payable was 13 per cent. In 2004, when the interest rates came down to 8.25, the complainant sought a downward revision of the interest rate and after a prolonged correspondence lasting almost a year, the bank agreed to do so and, accordingly, reworked the EMI. Then suddenly in 2006, the bank informed him that his interest rate could not have been changed from 13 per cent and that he had to pay Rs 53,640 towards the difference in interest payable by him. When questioned by the consumer court, the bank argued that the terms of the loan stipulated a "fixed rate" of interest, which could only be revised upwards! Pointing out that if the interest could be revised upwards, it was not a fixed rate and could be brought down too, the National Consumer Disputes Redressal Commission held that the bank was not justified in charging a fixed rate in violation of the terms of the agreement. It, therefore, upheld the verdict of the lower consumer courts directing the bank to charge only the floating rate of interest (and not 13 per cent), refund Rs 53,640 to the consumer, pay Rs 5,000 as compensation and also pay costs. (State Bank of India vs Shri N.K.Sharma, RP No 4403 of 2010, decided on January 4, 2012).
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