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“It is not appropriate for a bank to use technical provisions with the customer to enhance monthly instalments unreasonably,” RBI Governor Y.V. Reddy said at the customary post-monetary policy press conference. The matter attracted the att ention of the RBI after it received several complaints in this regard. “A number of complaints have been received, and we have asked banks to internally look at it. We may also have to ensure that we create certain rights for the customers if there is an unfair one-sided contract,” he said.

“Banks are obliged to explain and justify the revision in interest rates, and also correspondingly ensure that there is a symmetrical provision for a rollback if the interest rates come down,” he pointed out.

In the absence of a global benchmark, some banks which have floating rates have pegged them to a rate determined by them. There were some provisions in the fixed rate contract under certain circumstances to change the rate apart from provision to extend the maturity while keeping the monthly instalments constant, Mr. Reddy observed. - PTI

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