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November 26, 2008 13:43 IST
Concerned over the practice of some lenders overcharging customers, the Reserve Bank of India [Get Quote] on Tuesday directed banks to inform loan seekers about all charges and processing fees in addition to interest rates in advance.RBI's move will ensure more transparency while allowing loan seekers to compare the interest rates being offered by different public and private sector banks and other financial institutions."The banks must inform 'all-in-cost' to the customers to enable him to compare the rates charged with other sources of finance," an RBI notification in Mumbai said.The central bank has also asked banks and financial institutions to ensure that all the information relating to charges and processing fees are disclosed in the application form itself.RBI has issued the notification in view of the complaints that some banks are levying various charges, in addition to processing fee, which are not initially disclosed to the borrowers.Under the guidelines of the Fair Practices Code, the RBI had in March 2007 asked banks and financial institutions that loan application forms, irrespective of the amount of loan sought by the borrower, should include all the information and charges concerning loans.
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