Reveal loan processing charges: RBI

The Reserve Bank of India (RBI) on Tuesday made it mandatory for banks and financial institutions to mention in its loan applications the fees, processing charges and other details to check hidden costs and inject more transparency.

In a circular to commercial banks, the RBI also made it clear that if a loan or credit card application is rejected, the banks and financial institutions should give in writing the reasons for it. The RBI move follows complaints from customers about various hidden charges on loans.

It said that hereafter all categories of loan applications, irrespective of the amount, should clearly state information about fee, processing charges, the amount of fee refundable in case of non acceptance of application, pre-payment options and any other matter which affects the interest of the borrower.

It also wanted banks and FIs to work out a transparent policy in this regard with approval from their boards.