Treat all home loan customers alike

The Damodaran committee on bank customer service has recommended that they do not discriminate between new and old home loan customers with identical risk profiles, on the basis of interest rate offers.

According to the report, which has been given to the Reserve Bank of India, banks should allow customers to switch their loans from floating rates to fixed rates and vice-versa at least once during the tenure, “at an appropriate and reasonable fee”, to enable borrowers to take advantage of favourable interest rates.

“In a floating interest rate scenario, when an entire class of borrowers has the same characteristic and risk level, the point of entry in time (old customers and new customers) should not create discrimination in the interest rate offered to customers,” the report said.

The report is also against “exorbitant penal rates” towards foreclosure and switching of home loans to other banks. “Banks should not impose exorbitant penal rates towards foreclosure of home loans and a policy should be devised to ensure the customer is not denied opportunity to enhance his economic welfare by making choices such as switching to other banks/ financial entities to enjoy the benefits conferred by market competition,” the report said.

Title deeds should be returned to the customers within 15 days of the closure of loans and in case of any delayed return or loss of title deed, banks should compensate adequately.

In the case of education loans, the regulator said it should be properly priced, to ensure no bright student was denied one.

“The criteria for giving such loans should be well publicised through website or advertisements to ensure transparency and non-discrimination in sanction,” the report added.