This document outlines guidelines for fair lending practices and lender liability according to the Reserve Bank of India (RBI). It discusses how lenders should process loan applications within certain timeframes depending on loan size. It also covers how lenders should appraise loans, communicate terms and conditions to borrowers, disburse loans, conduct post-disbursement supervision, handle complaints, and minimize liability issues. Lenders must avoid discrimination, harassment of borrowers, and handle recovery and security release appropriately according to the guidelines.
2. Lender Liability is any alleged wrongful action or inaction by the
lender, alleged contractual breach or defect, or alleged breach of any
statute, regulation or the common law that TENDS to provide the
borrower, guarantor ,grantor or one standing in their shoes with a
claim and/or a defense to an action.
4. i) Applications for Loan
In the loan application form, the Bank shall provide comprehensive
information including information about fees and charges if any payable
for processing and amount of such fees refundable in case of non
acceptance of application, prepayment options and other matter which
affects the interest of the borrowers, of all categories of loans,
irrespective of the amount of loan sought by them.
5. ii) Processing
•The Bank shall provide acknowledgement for receipt of all loan applications indicating
the time frame within which the application will be disposed of.
The loan application will be disposed of as details below:
UP TO RS 2500
WITHIN 2 WEEKS
BEYOND RS 2500 AND LIMITS WITHIN RS 1.CRORE
WITHIN 3 WEEKS
BEYOND RS 1.CRORE AND LIMIT WITHIN Rs 5.CRORE
WITHIN 5 WEEKS
ABOVE Rs 5.CRORE
WITHIN 6 WEEKS
ADHOC LIMIT
WITHIN 2 WEEKS
THE ABOVE TIME FRAME FOR DISPOSAL IS FROM THE DATE OF RECEIPT OF LOAN
APPLICATION COMPLETE IN ALL RESRECT
.
6. •The Bank shall verify the loan application and if additional details /
documents are required, these will be sought from the applicant.
•For all categories of loans and irrespective of any threshold limits, the
Bank will be expected to process the application without delay. In case
the application is turned down, the Bank will convey in writing to the
applicant the reasons for rejection within one month.
•The applicable processing charges will be collected in two stages ie:
1. 50% at the time of appraisal and reaming 50% at the time of
execution of the documents
2. If the application is rejected then 50% proposal charges collected at
the time of appraisal will be refunded
7. iii) Loan Appraisal and Terms and Conditions
The sanctioning authority will be expected to ensure proper assessment of the
credit application as per the extant instructions and credit policy of the bank.
All the terms and conditions and other caveats will be duly communicated by an
authorized official of the Bank to the customer in writing.
The acceptance of the customer will be obtained on the sanction letter with the
customer's signature under the caption
"I/WE ACCEPT ALL THE TERMS AND CONDITIONS WHICH HAVE BEEN
READ AND UNDERSTOOD BY ME/US".
A copy of the loan agreement along with all the enclosures quoted in the loan
agreement will be furnished to the customer at the time of issue of the sanction letter.
The sanction letter / loan agreement will clearly state that the credit facilities will be
extended solely at the discretion of the Bank and also include approval and
disallowance facilities such as
Drawings beyond the drawing power / sanctioned limits.
8. Honoring of cheques issued for the purpose other than specifically stipulated in
the sanction.
Drawings in an account once it is classified as NPA.
No drawings will be allowed in case of non-compliance of the terms and conditions
by the borrower.
Meeting further requirements of the borrower on account of growth in business
will be subject to proper review of the credit limits.
iv) Disbursement of loans including changes in terms &
conditions
The disbursement will be done immediately on compliance of all the terms and
conditions of the sanction by the borrower and the branches need not refer to the
sanctioning authority for disbursement.
Any changes in the terms and conditions of the sanction such as interest and
charges will be notified to the borrower before effecting the changes.
Any changes in interest rate and charges will be effected only prospectively after
giving due notice to the borrower.
9. v) Post disbursement supervision
Post disbursement supervision, particularly in respect of loans upto Rs. 2 lacs, would
be constructive with a view to taking care of any genuine difficulties that the borrower
may face.
Before taking a decision to recall/accelerate payment or performance under the
agreement or seeking additional securities the Bank would give reasonable notice to
the borrower.
All securities pertaining to the loan would be released on receipt of full and final
payment of the loans subject to any legitimate right or lien and set off for any other
claim that the Bank may have against the borrowers. If such right is to be exercised,
borrowers would be given due and proper notice with requisite details.
10. vi) OTHER GENERAL PROVISION
The Bank would refrain from interference in the affairs of the borrower except for
what is provided in the terms and conditions of loan sanction documents (unless new
information, not earlier disclosed by the borrower, has come to the notice of the Bank
as lender).
Bank will not discriminate on the grounds of gender, caste or religion in its lending
policy and activity.
In the case of recovery, Bank would resort to the usual measures as per laid down
guidelines and would operate within the legal framework. Bank is already having a
Model Policy on Code for Collection of Dues and Repossession of Security.
The lenders should not resort to undue harassment viz. persistently bothering the
borrowers at odd hours, use of muscle power for recovery of loans, etc.
In case of request for transfer of borrowal accounts, either from the borrower or
from a Bank/Financial Institution, the Bank as consent or otherwise shall be conveyed
within 21 days from the date of receipt of request.
11. vii) Complaints :
In case of any complaint/grievance, the applicant/borrowers will have to
inform in writing the concerned branch. The Branch Officials shall
immediately take up the matter for redressal.
vii) Redressal :
In case of complaints received, the branch would report the matter with full details
within 7 days from date of receipt, to Regional/Zonal Head, who would take all
necessary steps to redress and resolve the grievance/dispute, within a maximum
period of 30 days.
In order to enhance value and relevance to the borrowers this code would be under
review from time to time. The Bank would, therefore, greatly value any suggestions for
improvement.
13. Breach of Loan Commitment
Fraud
Interference
Negligence
Good Faith
Fiduciary Duty
Direct Liability as Principal
Control
Environmental Liability
Lender's Checklist
RICO Requirements
14. Economic Duress
Prima Facie Tort
Duty of Confidentiality
Securities Law Liability
Duty to Insure
CONSTRUCTION LENDER LIABILITY
Additional Liability Issues
Inspections
Construction Defects