Banks can’t go back on terms

Pushpa Girimaji

When I took a housing loan from my bank, I was told that I would be charged an interest of 8 per cent in the first year. The bank’s letter on the loan also made this clear and I chose this bank only because of this offer. However, the bank has charged me 9.25 per cent interest on the ground that it had made a mistake in calculating the interest rate and that the actual rate of interest was 9.25 per cent. My question is: Can a bank charge more than the rate of interest mentioned in the loan agreement? The manager says that there was a delay in getting the communication from the head office on the interest rate and that’s how the mistake happened. 

In this age of electronic communication, this explanation is hard to believe. In any case, the bank cannot go back on the terms of the contract. If it has made a mistake, then it has to take responsibility for it. It cannot alter the terms of the contract signed with you. So tell the bank to refund with interest, the excess amount charged from you. 

I have spoken to the manager many a time and have also complained in writing, but the bank is not willing to make amends. What is my option now and how do I go about it? 

Please write to the nodal officer of the bank. He should be able to resolve this issue immediately. If he fails to do that, I would suggest that you lodge a complaint with the banking ombudsman. You can get the contact details of the ombudsman from the bank itself. Even otherwise, the website of the Reserve Bank of India gives you the contact details of the ombudsmen in the country. The procedure is simple and you can file your complaint online. Just make sure that you send a copy or image of the loan agreement and your account details showing deduction of the loan amount.

Let me quote for your benefit, two somewhat similar cases decided by the banking ombudsman and reported in the latest annual report of the banking ombudsman scheme. In the first case, the complainant had taken a home loan at 8.50 per cent interest per annum, to be reset every five years from the date of disbursement of the first installment. However, after the first year, the rate of interest was changed to 9.50 per cent and then modified to 10 per cent and 12.20 per cent by the bank, without even informing the consumer. When asked about it, the bank said that the rate of interest was actually 9.25 per cent , to be reset every five years. However, in the letter given to the customer, the bank had erroneously indicated the rate of interest as 8.50 per cent and had collected the installments at that rate for one year. It was therefore recovering the interest due from the customer as per the actual rate of 9.25 per cent!. 

The ombudsman directed the bank to calculate interest at the rate mentioned in the agreement-8.50 per cent for five years and refund the excess amount charged from the customer.

In another complaint, a state government entity deposited Rs 8.10 crore as fixed deposit for 90 days on the basis of the bank’s offer of 8.8 per cent interest and 1 per cent penalty for premature withdrawal. Due to some exigency, the entity had to withdraw the money before the completion of 90 days. However, when it did so, the bank charged a penalty of 2 cent for premature closure. Here again, the bank’s justification was that it had erroneously quoted one per cent as penalty in the offer document because of a clerical error! 

The banking ombudsman observed that the complainant had asked for a quotation from the bank before placing the funds in a fixed deposit. And after mentioning the penalty as one per cent in that quotation, the bank cannot revise the penalty rate. The bank was advised to calculate the penalty for premature closure of FD at one per cent and refund the excess amount deducted, along with savings bank (SB) rate of interest, calculated from the date of deduction till the date of refund.