All Scheduled Commercial Banks
/ All India Financial Institutions
on Fair Practices Code for Lenders
refer to our Circular DBOD. Leg. No.BC. 104 /09.07.007/2002-03 dated May 5, 2003
wherein guidelines were issued to banks / FIs for framing the Fair Practices Code
In terms of Para 2 (i) (a) of the above Circular, banks / FIs were advised that
loan application forms in respect of priority sector advances up to Rs.2.00 lakhs
should be comprehensive and should include information about the fees/charges,
if any, payable for processing, the amount of such fees refundable in the case
of non-acceptance of application, pre-payment options and any other matter which
affects the interest of the borrower, so that a meaningful comparison with that
of other banks can be made and informed decision can be taken by the borrower.
3. With a
view to achieving greater transparency and in the light of experience gained,
it has been decided that the above instructions will be applicable to all loan
applications in respect of all categories of loans irrespective of the amount
of loan sought by the borrower. Banks / FIs are advised to work out a transparent
policy in this regard with the approval of their Board.
Further, in terms of Para 2 (i) (d) of the above Circular dated May 5, 2003, banks
/ FIs were advised that in the case of small borrowers seeking loans up to Rs.
2 lakhs the lenders should convey in writing, within stipulated time, the main
reason/reasons which, in the opinion of the bank / FI have led to rejection of
the loan applications.
On a review, it has been decided that in case of all categories of loans irrespective
of any threshold limits, including credit card applications, banks / FIs should
convey in writing the main reason / reasons which, in the opinion of the bank
/ FI have led to rejection of the loan applications.
Necessary modifications in the Fair Practices Code based on the above instructions,
with the approval of the Board, should be carried out by April 30, 2007. The modified
Fair Practices Code should be placed on the bank's / FI's website and also given
Chief General Manager-in-Charge