The RBI gave relief to borrowers as it directed banks not to levy any penalty on individual borrowers for pre-payment of floating loans. The central bank has barred banks from imposing foreclosure charges or pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.
Floating loan products include housing, corporate, vehicle and personal loans. Some banks are charging pre-payment penalty of up to 2% of the outstanding loans.
In 2012, RBI had disallowed banks from charging foreclosure charges or pre-payment penalties on home loans on floating interest rate basis. It is assumed that elimination of foreclosure charges or prepayment penalty on home loans will bring down the discrimination between existing and new borrowers and the competition among banks will result in better pricing of home loans with the floating rate.
As per the guidelines issued by the RBI, minors above 10 years of age have been allowed to open and operate independently savings bank account and use other facilities like ATM and cheque books. The central bank has taken this step with a view to promote financial inclusion and bring uniformity in opening of such accounts in banks. Earlier, minors were allowed to open fixed and savings deposit bank account with mothers as guardian.
As per the modified guidelines by RBI:
- All minors can now open a savings/fixed/recurring bank deposit account through either his/her natural guardian or legally appointed guardian.
- The minors, who have attained 10 years of age, will be permitted to open and operate savings bank accounts independently.
- The banks can also decide on the minimum documents which are required for opening of accounts by minors.
- The minor would be required to confirm the balance in his/her account as he attains majority.
- If the account is operated by the natural/legal guardian, fresh operating instructions and specimen signature of the minor will be obtained and kept on record for all operational purposes.
The RBI has asked banks not to impose penalties on customers who don’t maintain a minimum balance in any dormant account as part of a consumer protection initiative. A number of banks, including the State Bank of India, do not levy any penalty if the minimum balance is not maintained in an inoperative savings account. In 2012, the RBI directed banks not to charge customers for non-operation or activation of basic savings bank deposit accounts.
Surging Non-Performing Assets (NPAs) have rendered public sector banks such as State of India (SBI), Punjab National Bank (PNB) and Canara Bank unfit to take deposits from non-government Provident Funds (PF). As per the current rules governing investments by PFs, non-government Provident Funds (PF) are barred from being deposited in a commercial bank in case the NPAs of that bank exceed 2% of net advances. The Indian Banks’ Association (IBA) has requested the Union Finance Ministry to relax the norms pertaining to deposits by non-government provident funds and gratuity funds in scheduled commercial banks.
Conditions banks are required to meet for taking PFs deposits:
- Continuous profitability for immediately preceeding three years
- Maintain minimum capital adequacy of 9%
- Have net NPAs of not more than 2% of net advances
- Maintain minimum net worth of not less than Rs 200 crore