Sajit Nair 18 August 2025

Foreclosure charges on overdraft

I have a Bajaj Finserv overdraft account which is advertised and sold as a flexi loan. I was informed that based on my credit score the total limit I have been approved for was ₹17 lakhs. I was not informed that I could have a reduced limit and that it would impact the foreclosure charges. I have paid off everything I drew down from that limit with the exception of ₹400. I am being told I have to pay 4-5% of the total credit limit, roughly ₹90,000. Foreclosure charges is meant to serve as a safeguard against loss of interest earned by the company. But in case of an OD where I simply do not utilize the balance, how can I be charged for a loss of interest? How can I dispute or avoid paying such a large sum for interest that would never have accrued?

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T. Kalaiselvan, Advocate (Advocate) 19 August 2025

You may go through the loan agreement conditions and confirm the clauses that govern this foreclosure charges and then represent the same with the institution as per the conditions and get clarified.

If you are over charged and your justified demand is not accepted then you can escalate the matter through consumer commission.

Vishesh K Sapra (Advocate Supreme Court (888-215-3399)) 19 August 2025

Foreclosure charges are generally applied when a borrower closes a loan earlier than the agreed term, because the lender expects to earn interest over that period. However, in an overdraft or flexi loan facility, interest is charged only on the amount you actually withdraw and use, not on the total sanctioned limit. If you have already repaid the withdrawn amount (except for ₹400), there is no loss of future interest to the lender since you were not utilizing the remaining limit. Charging foreclosure fees as a percentage of the entire sanctioned limit, especially when it was not clearly explained to you at the time of signing, can be considered unfair and may fall under deficiency of service or unfair trade practice under consumer protection law.

You can first raise a written complaint with Bajaj Finserv asking them to waive these charges, pointing out that foreclosure charges on an unused limit are unreasonable. If they don’t resolve it, you can escalate the matter to the Banking Ombudsman (if applicable), RBI grievance redressal, or file a case before the Consumer Disputes Redressal Commission. Courts and consumer forums have often taken the view that hidden charges not properly disclosed to the customer are not enforceable.

So, you do have a good ground to dispute or avoid paying such an excessive amount.

To know further connect with me at adv.vishesh@icloud.com

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