The central bank has taken a big step to give relief to the general public. The Reserve Bank of India (RBI) has asked banks and other financial institutions to provide customers with the option to choose the fixed rate of interest while fixing interest rates afresh. In a notification issued on Friday, the central bank said that it has been observed that the tenure of the loan or monthly installment (EMI) is increased when the interest rate is increased and the customers are not properly informed about it nor their consent is taken. To address this concern, the RESERVE Bank has asked the entities under its regulation to put in place a proper policy framework.
Rbi said that at the time of sanction of loan, banks should clearly tell their customers what may be the impact on EMI or loan tenure in the event of a change in the standard interest rate. The extension of EMI or loan tenure should be communicated to the customer immediately through proper channel. While fixing the interest rates afresh, banks give customers the option to choose a fixed interest rate. Apart from this, under the policy, customers should also be told how many times they will get the opportunity to choose this option during the tenure of the loan. Also, customers taking loans should be given the option of increasing the EMI or loan tenure or both. The notification said that customers should be allowed to pay the loan in full or in part before time. This facility should be available to them at any time during the tenure of the loan.
In its monetary policy review presented last week, the RBI had sought to allow borrowers to opt for fixed interest rate over floating interest rate. Reserve Bank Governor Shaktikanta Das had said that a new structure is being prepared for this. Under this, banks will have to give clear information about the tenure of the loan and monthly installment (EMI) to the borrowers.
