Bank asking forecloser charges

Jay Shah (Querist) 01 September 2020 This query is : Resolved
We were enjoying cash credit limit from axis bank since 2017 and now on 15 august 2020 it was due for renewal but now we don't want to renew the limit and close the limit , we have already paid all the dues . We have ask bank for closer of limit in reply they are asking for foreclosure charges I want to know can they ask for any charges as at time of renewal we asking closer and not in between of the limit and we paid all payment by own fund and there is no take over of limit And bank is not giving proper reply and keep on delaying So what should I do and are they liable for any foreclosure charged Please guide me

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A customer is questioning Axis Bank's demand for foreclosure charges on a cash credit limit that was due for renewal. Having paid all dues and not opting for a takeover, they believe these charges are unjustified, especially since the limit wasn't closed mid-term. The discussion suggests that foreclosure charges typically apply to term loans, not demand-based cash credit facilities, and advises escalating the complaint to the bank's Chairman or the Banking Ombudsman if the charges are deemed unfair or against procedure.

Isaac Gabriel (Expert) 01 September 2020
In fact the banks usually get undertakings from borrowers fo penalty if the said loan/ cash credit is forwclosed in advance.

Dr J C Vashista (Expert) 02 September 2020
Procedural question, which do not involve any dispute for consideration and obligation.

Advocate Bhartesh goyal (Expert) 02 September 2020
Though it is procedural query even if you have any grievance or complaint against act of bank may approach Banking Ombudsman.

Rajendra K Goyal (Expert) 02 September 2020
If you want to repay the loan before the loan tenure, the lender may levy a prepayment penalty, which is called foreclosure charges.

Such charges are taken by the lenders on term loans, when loan repaid before the agreed term.

In present case the loan taken is not a term loan but a cash credit account in which the loan is repayable on demand and not after agreed terms.

In Cash Credit limit Bank charges commitment charges if the limit is not used fully.

Charges are unfair / not justified / against procedure / taken without understanding the instructions, lodge complaint with the Chairman later to Banking ombudsman or move to court.

Rajendra K Goyal (Expert) 02 September 2020
Economic times news item:
NBFCs shall not charge foreclosure charges/pre- payment penalties on any floating rate term loans sanctioned for purpos77es other than business to individual borrowers, with or without co-obligants," the central bank said in a notification, without specifying from when the new ruels will be effective.

It can be noted that in May 2014, the RBI had barred commercial banks from charging such fees or penalties from individual borrowers with mortgage loans. But banks are free to charge same on non-secured loans like personal loans.

Read more at:

https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-bans-nbfcs-from-charging-loan-foreclosure-penalties/articleshow/70502170.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Rajendra K Goyal (Expert) 02 September 2020
Repeated query;
https://www.lawyersclubindia.com/experts/bank-asking-forecloser-charges--721801.asp

https://www.lawyersclubindia.com/experts/bank-asking-forecloser-charges--721806.asp

https://www.lawyersclubindia.com/experts/bank-asking-forecloser-charges--721796.asp

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