Prepayment charges on cash credit account

Rahul Agrawal (Querist) 03 December 2013 This query is : Resolved
I would like to know whether Banks can charge prepayment charges on Cash Credit Account

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R.K Nanda (Expert) 03 December 2013
state full facts.

Rahul Agrawal (Querist) 03 December 2013
I have Cash Credit Account with HDFC Bank for more than 15 months. In the sanction letter there no clause of prepayment charges. Yes Bank is offering us enhanced limit with lower interest rates. We asked for the same with HDFC Bank. They said they cant enhance the limit or decrease the interest rate. Now we received a sanction from YES Bank. We requested HDFC Bank to close the cash credit account. They say they will charge a prepayment charges @ 4% of the sanctioned limit. I argued it is not there in the sanction letter. They say it is written in the Master Agreement. I wanted to know is it legal to charge prepayment on Cash Credit Account, as this loan is demand loan and not an EMI loan.

BAALASUBRAMANNYAMM (Expert) 03 December 2013
Every bank is collecting pre-payment charges in almost all the loans. Some times it is exceptional in mortgage loans, that too the pre-payment amount should be from his self procured, but not taken from other financial institutions or other sources.

Rajendra K Goyal (Expert) 03 December 2013
Search the contents of master Agreement and the charges mentioned by the Bank on their site.

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http://www.lawyersclubindia.com/experts/Banking-334941.asp#.Up2qiOKLq_J