Home loan borrowers are often left at sea when their banks reset the tenor of the loans without proper communication to them.
However, now help is at hand as the Reserve Bank of India (RBI) has made it mandatory for banks and home loan providers to clearly communicate with the borrowers for resetting the tenor and provide options of switching to fixed-rate loans or foreclosure of loans.
“The supervisory reviews undertaken by the Reserve Bank and the feedback and references from the public have revealed several instances of unreasonable elongation of the tenor of floating rate loans by lenders without proper consent and communication to the borrowers. To address the issue, it is proposed to put in place a proper conduct framework to be implemented by all REs to address the issues faced by the borrowers,” RBI said.
New framework
The RBI will come out with a framework allowing borrowers to switch to fixed interest rate from floating interest rate, a move that would provide relief to borrowers of home, auto and other loans reeling under the impact of high interest rate.
Unveiling the bi-monthly monetary policy, Reserve Bank Governor Shaktikanta Das said under the framework, to be put in place shortly, the lenders will have to clearly communicate with the borrowers about tenor and EMI.
“The framework envisages that lenders should clearly communicate with the borrowers for resetting the tenor and/or EMI, provide options of switching to fixed rate loans or foreclosure of loans, transparent disclosure of various charges incidental to the exercise of these options, and proper communication of key information to the borrowers,” he said.
The detailed guidelines in this regard would be issued shortly, he said.
