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Rahul Agrawal (MANAGER)     30 August 2012

Bank charging foreclosure charges

Dear Sirs

I have working capital facility with Dhanlaxmi Bank Ltd for more than 12 months. Now I want to close the account with them. As per sanction letter there is a clause of

Foreclosure charges will be charges @ 2% if within 12 months and 1% for balance of the months.

Now while closing the account they are charging me 1% of the sanctioned amount towards foreclosure charges. My argument with the bank is that, they are confusing themselves with foreclosure charges and prepayment charges. Foreclosure charges will be applicable only when i default the payment and the bank starts any recovery proceedings against me.

Whereas working capital provided to me is only for 12 months term and it is renewal every year. There is commitment charges which we are paying, now they also want pre-payment charges.

 

I wanted to know, whether my argument is right or wrong.



Learning

 2 Replies

RAKESH PIPRODIA (ADVOCATE)     30 August 2012

There is a judgement from the Bombay High Court that " there is no presumtion in law that bank officers are always loyal". and another that " at any point of time you can ask for the details of the amount charged by the bankers and also can challenged the same if required".

Prasun Chandra Das (Banker)     06 September 2012

The Bank is correctly charging you, as per the information provided by you. If you are closing the entire loan, it is foreclosure. So foreclosure charges will be applicable. I don't think the term 'prepayment charges' is applicable for a CC loan, which is a running credit facility. Otherwise, any credit by you to the CC a/c will imply a prepayment and attract prepayment charges!! Both foreclosure and prepayment charges are applicable for a term loan, which a CC facility is not.

Neither foreclosure not prepayment charges are related to loan default.


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