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Gaurav Deep Goel (Advocate and In House Consultant)     04 March 2012

Bank rate of interest

It is very common that both public and private sector banks charge more rate of interest than the prevailing rate of interest on various loan accounts which are being used by its customers since it is very common that the bank exploits the  term floating rate of interest and charges the same as per its desire. How this practice be checked as to what was the prevailing rate of interest at that point of time and what was rate interest charged by the bank from the loanee. 


 6 Replies

Kumar Doab (FIN)     04 March 2012

Mr. Goel has initiated interesting thread and contributions by learned experts/members shall benefit one and all that visit the forum and shall enrich the forum.

The customer must remain vigilant, from day 1. The loan detail/brochure/ printout shall be procured. Every BM has it. The loan application should be carefully studied and it is usually expressed in loan application that customer may strike out the clauses which are not acceptable and applicable e.g. in Canara Bank. Customer should enclose a covering letter with loan application citing the queries if any, acceptance and non acceptance of each term, terms customer want to fix on bank e.g. all communication, new terms and conditions, changes/amendments, new rates, etc from bank shall be supplied on letter head of the bank under original seal and signature of BM and seek acceptance and nothing shall be applicable till acceptance is given by customer. If the bank proceeds arbitrarily, submit a representation in writing and even if it is so let the contract end. Banks and BM are scouting for customers and in today's era of competition there is a scarcity of customers and good customers are rare to find. Bank can not apply new rate on a phone call, it has to be by a letter from HO of the bank and each BM shall have a copy. RBI has set out the terms of deciding the ROI and bank has to adhere to it. Obtain RBI circulars (available on RBI website) and know the nuances of RBI/BCSBI guidelines.

Demand monthly loan a/c statement and point out the anomalies then and there in writing under acknowledgment and demand reply in writing by redg/speed post. Demand the bank to give in writing the mathematical formulae applied for calculations by computer and whether it is approved by RBI?

Community should gather judgments and provide to aggrieved.

Form local communities and help each other by providing guidance and support. In case of default by bank all community member must join and visit the bank together. This exercises pressure for fair dealing and quick response, and moreover the complainant/aggrieved shall have witness.  Vigilant customers are able to get the excess charges reversed.

DEFENSE ADVOCATE.-firmaction@g (POWER OF DEFENSE IS IMMENSE )     04 March 2012

There are many simple tactics to come out of any cheque bounce case, engage a proper advocate.

akash kapoor (*************)     05 March 2012



Kumar Doab (FIN)     05 March 2012

Mr. Kapoor has given valuable advice and furthered the discussion.  Valuable advice and illustration by  learned experts/members is sought to enrich the forum. The clarity on the subject shall help many who visit the forum.

Each customer of the bank is not a borrower implying total number of borrower in a bank is much less as compared to toal number of customers in a bank. Banks do not inform borrower by letter thru redg/speed post (prrof of  dispatch/delivery as acceptable to courts) and in many instances resort to claiming letter was sent by normal post. Can the banks be allowed to use mode of dispatch other than redg/speed post and in specific normal/ordinary post.

Usurious Loans Act, 1918

"The object of this Bill is to prevent the Civil Courts being used for the purpose of enforcing harsh and unconscionable loans carrying interest at usurious rates.”

“Those amendments had' the effect of conferring on the Courts in India equitable jurisdiction in cases relating to usurious contracts in which the element of undue influence is established, but where undue influence cannot be established the result has been to emphasize the rigidity of section 2 of the Usury Laws Repeal Act (XXVIII of 1855), however exorbitant the demand, and however unconscionable the bargain.”

2. Definitions.

In this Act, unless there is anything repugnant in the subject or context,-

(1) "interest" means rate of interest and includes the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or otherwise.

Attached File : 512575601 usurious loans act 1918.doc downloaded: 66 times

Naresh Kumar Jindal (Senior Executive)     14 March 2012


I have a query regarding floating rate of interest being charged by the banks.

I took a Housing loan from deutsche post bank in the year 2009 @9%. and they started increasing their rate of interest from sept 2010 and now they are charging the rate of interest @12% to me. Even they have not given any information on increasing the rate to me. Last week, when i asked them what is the rate of interest i am being charged now they send me the repayment schedule.

As my loan was on floating rate of interest, i can understand that they have increased it. however, even in the peak times they offered the fresh loans to their customers not more than 11.25% and now they are offering fresh loans to their customers @10.5%.

I told them why you are charging a higher rate of interest to me when your existing rate of interest is 10.5%. however, bank is arguing that this is for the fresh loans. whereas, i am of the view that since bank is charging me the floating rate of interest, i should be charged as per their prevailing rates.

however, bank is reluctant to this and asking to opt for the conversion scheme by paying 1% as charge and they will convert my loan to 11% rate of interest.

I think this is totally wrong practice by the bank. Can somebody guide what should I do?

Waiting for the kind advise.


Naresh Kumar Jindal


Gaurav Deep Goel (Advocate and In House Consultant)     14 March 2012

Yes Mr. Jindal thats the query i am after but i am not able to get any satisfactory answer

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