LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

ghanshyam jani   21 November 2023

Foreclosure charges on cash credit limit


My father is illiterate and cannot read or understand English. In Jan 2023, my father's firm C.C. facility was taken over by HDFC bank from SBI.  They made my father sign the sanction letter without explaining all the conditions regarding charges and just orally assured my father that there wont be any hidden charges. 

My father had a personal current account with SBI. HDFC bank then imposed a penal interest of 2% because of the condition in the sanction letter about Sole Banking Partner clause. However, my father had informed hdfc officials about this SBI current account and they had verbally assured that no charges will be imposed.  

HDFC bank did not refund the extra interest charges up until after complaining to RBI ombudsman.

Similar other  hidden charges like cash deposit charges etc. were imposed which has made the experiences with the bank unsatisfactory.

Therefore my father decided to move the cc loan facilities to KOTAK BANK which enhanced the total limit amount and also offered reasonable interest rate. 

However now HDFC officials are saying that there is a foreclosure charges of 4% if loan is taken over by other bank during the tenor of loan. This charge amounts to 12 lakhs rupees which is a substantial amount. This condition effectively restricts the customer to bank unable to use other bank services.

Now the point is that my father is illiterate in ENGLISH and did not knew about this foreclosure charges at the time of signing sanction letter. 


Is there any provision in civil law which can help my father avoid these charges ?




 3 Replies

P. Venu (Advocate)     21 November 2023

The issue could be taken up with the Banking Ombudsman.

T. Kalaiselvan, Advocate (Advocate)     22 November 2023

Your father has signed the papers even though you claim that he is not literate enough or do not know English language.

Nothing prevented him from protesting about it at the time of signing the papers.

A claim in this manner at this stage may not be maintainable even if you may approach consumer court to get your grievances redressed.

However you can consult a local lawyer and proceed in the manner which would give you some rlelief

LCI Thought Leader Rajesh Tandon ( Col (Retd))     03 February 2024

Hi, there are three aspects to be covered in your case

Lack of Informed Consent

Based on the information provided, it appears that your father may have been denied informed consent when he signed the sanction letter with HDFC Bank. If your father was not adequately informed about the terms and conditions of the loan, including the foreclosure charges, he may have grounds to challenge the validity of the agreement.

Verbal Assurances by Bank Officials

While verbal assurances from bank officials can be helpful in understanding loan terms, they are not legally binding. The terms and conditions of the loan are typically outlined in the written agreement, and it's crucial to carefully review these documents before signing.

Civil Law Provisions

There are various civil law provisions that may be applicable in your father's case. For instance, the Indian Contract Act, 1872, protects individuals from entering into contracts where there is misrepresentation or concealment of material facts. Additionally, the Consumer Protection Act, 2019, safeguards consumers from unfair or deceptive practices by banks and other service providers.

Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register