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Innocent Borrower trapped by Bank Sharks During the recent years unprecedented boost in the financial status of Indian upper and lower middle classes has been noticed, particularly the soaring graph of their salaries has encouraged them with higher ambitions as well as more lavish, comfortable and secure life styles, which are now within their financial reach. There is always a surge for finding more and more lavish and comfortable lifestyles for themselves and their family. They feel requirement of a comfortable ride to office in a luxurious vehicle and a residential house of their own, filled with ultra modern amenities. The desire to acquire the superior status and lifestyle by the common man has created a vast field to generate huge profits by financial institutions. Due to this desire to upgrade their status and lifestyle these enthusiastic people need to avail Bank Loans such as Home Loan, Auto Loan, Personal Loan etc. To take advantage of such need these financial institutions swiftly step in to reap massive reward from ready harvest. These financial institutions are mostly foreign or private Banks who promptly appear on the surface through their agents to gain maximum benefit out of the people’s desire by charging hefty interest and surreptitiously adding various other charges on various pretexts. In the past years these Banks, with concealed but meaningful support from the Government Ministries and regulatory bodies, have increased their charges manifold. The Government bodies impliedly endorse their support as they get increased amount of Service tax on such exaggerated Charges. These Charges ultimately attack the already sinking budget of the unfortunate customers who become hapless victims and ultimately ruin themselves. Unfortunately, there is no one to check their malpractices. The Redressal Forums such as Consumer Courts and Banking Ombudsmen etc. also fall helpless as they are invariably shielded by Banks’ rules and schedule of Charges. Once the Borrower chooses to pay interest on floating rate basis, the Banks unilaterally increase the interest rate several times during the tenure of loan Repayment and even increase the tenure period, but seldom decrease it as per adjustment of interest rates in the market from time to time. At the time of accepting Loan Applications, the Banks use a self prescribed loan agreement kit which their agents get signed from the borrowers hurriedly without giving them any opportunity to understand and scrutinize the same. In their eagerness to get a prompt loan the borrowers sign the documents simply at the behest of these Agents. Simultaneously, these cunning bank agents, due to their greed of hefty commissions, secretly get a Loan Repayment Assure/risk Insurance Application form signed by the borrowers clandestinely, without even informing them the nature of such Form, without his former consent or knowledge. This instrument unfortunately hurts the borrower by levying an Insurance Cover for the entire loan period. The Premium of this insurance cover is automatically added to the principal loan amount to be recovered from the borrower in the form of increased Loan Repayment EMIs, which may cost at many times of the insurance premium, depending on the tenure of repayment. For example, if a borrower ‘X’ has approached a particular Bank and applied for a Home loan of Rs.20,00,000/- for a tenure of 20 years. The matter was discussed with an Agent of the Bank and the deal was finalized, but there was not an iota of talk regarding ‘Home Assure’ Insurance Policy which was intended to be secretly provided through the Bank/Agent to the borrower for the entire loan amount and for the entire tenure of repayment. Since the borrower was never informed about providing such an Insurance Cover and the form of Insurance application was stealthily got signed by the Agent from the borrower along with the blank kit of Loan Application forms., The amount of Insurance premium charged was Rs.51,780/-. The borrower was shocked when he received the repayment schedule with this additional hefty amount demanded from him as Insurance Premium charge over and above the actual loan amount of Rs.20,00,000/-, raising the total principal loan amount to Rs.20,51,780/-. The effect of this mischief will be that even after the borrower has paid 30 EMIs of approx. Rs.24,000/- per month, i.e. in toto Rs.7,20,000/- the balance Principal loan amount payable by the borrower will still remain the same, i.e. Rs.20,00,000/-. This is because the borrower has to dissolve the secretly added Loan amount of Rs.51,780/- being Insurance Premium fraudulently got extracted from him will dissolve in approx. first 30 EMIs. Thus, the borrower will have to pay an extra amount of Rs.7,20,000/- against the deceptively forced Insurance cover provided to the borrower. All the borrowers should consider this aspect very minutely and carefully before taking any Bank loan to avoid such malpractices. Written in public interest by : Atul Kumar

Posted by on 29 Nov, 2009 at 05:23 AM