Dear Mr. P Nair,
On seeing the news item in recent news papers I spoke to HDFC customer care executive and asked her if they still charge pre-payment penalty. She said if the loan is on floating rate then it is not charged provided the amount you prepay should be from your own source. I am a bit confused. How are they going to asecretain that the amount being prepaid is from the customer's own money? suppose you make draft from your bank account by depositing cash first into the account (assuming that you do not keep money in savings account) then how the banks are going to asertain the draft is made from your own money or from borrowed money. And even if you borrow money (of course at a cheaper rate) what the hell the bank has to do it with except recovering the loaned money from the customer. As for uniformity of rates of new customers and old customers, from my own experience, I can vouch that they increase the rate of interest every time RBI increases the repo rate/ every quater (during the last 1 1/2 years they have been continuously increasing the rate. But when the rate is decreased by RBI, in the same way, you expect commercial banks to reduce the rate of interest charged on your loan account. But it never happens because you have to follow certain procedure to reduce it. First you have to pay in cash/ cheque at least 0.25% of the principal outstanding along with application in their prescribed format + ID proof/ address proof etc. In short when rates are increased, they increase is automatically and when it is decreased they try their best not to pass it on to the existing customers. ( I am having a housing loan on floating rate with HDFC and I am writing it based on my experience). I request any of our friends who happen to be associated with/ working with HDFC to clarify the above facts for Keralite groups corroboration.
Regards,
Suresh P.M.
From: P Nair <pnair1966@yahoo.com>
To: Keralites <Keralites@yahoogroups.com>
Sent: Friday, 4 November 2011, 11:51
Subject: [www.keralites.net] Good News for Home Loan Borrowers - No need to pay prepayment penalty
To: Keralites <Keralites@yahoogroups.com>
Sent: Friday, 4 November 2011, 11:51
Subject: [www.keralites.net] Good News for Home Loan Borrowers - No need to pay prepayment penalty
Good News for Home Loan Borrowers - No need to pay prepayment penalty
The announcement of National Housing Board on 19th Oct, 2011 will bring a relief to the home loan borrowers. The decisions of NHB are as follows:
a) NHB (National Housing Board) has barred the housing finance companies (HFCs) from charging prepayment penalty on floating rate home loans. In case of the fixed rate home loan, the prepayment penalty can be charged. However, in this case, if the borrower is paying from his own sources, there will be no prepayment penalty.
b) The housing board has also directed the HFCs to maintain uniformity in floating rate between new and old borrowers.
This is certainly a favorable development for the existing borrowers as well as new borrowers of home loans. These decisions by NHB will come into effect from 19th Oct,2011 itself and will cover all housing finance companies including LIC housing finance,HDFC etc.
Prepayment penalty has been in the news for quite some time because of its inherent anti-borrower nature. It was a bottleneck for borrowers from prepaying a home loan by procuring a loan from another bank that offered better rates than the existing bank. The banking ombudsman gets a large number of complaints from borrowers on prepayment penalty. The penalty was, in some cases, as high as 4%. Banks typically charge prepayment penalty when borrowers transfer the loan to another bank. However, some banks used to charge penalty even when borrowers pay it from their own pocket.
The other major complaint for home loan borrowers was the difference in float rates charged for existing borrowers and new borrowers. This was tantamount to banks punishing existing borrowers for their being customers for a longer time. This did not make any sense except that the banks would have to maintain administrative tasks to change the terms and conditions for the existing borrowers.
These steps are part of the program that RBI is planning to implement to improve customer services at banks. There have been concerns in the past several quarters regarding the practices of banks on loan disbursement, prepayment, and rate differentials, and mismatch between change in float rates and change in policy rates. RBI's decision to eliminate prepayment penalty on fixed rate home loan in cases where the borrower pays from his or her sources is debatable
Bankers' request to reduce the prepayment penalty and not do away completely with it is also valid. However, leaving any room for prepayment penalty on floating rate home loan has the potential to bring the situation back
Best Regards
Prakash Nair
www.keralites.net          |
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