The Reserve Bank of India (RBI), in a bid to usher in the Fair Practices Code for Lenders, has cautioned scheduled commercial banks and financial institutions against using margin and security stipulation as a substitute for due diligence on credit worthiness of the borrower.
Further the central bank is seeking put in place a transparent regime whereby the borrowers are fully aware of the terms/conditions of the creditor.
As per the final guidelines on fair practices code for lenders, loan application forms in respect of priority sector advances up to Rs 2.00 lakh should be comprehensive.
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It should include information about the fees/charges, if any, payable for processing, etc so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.
Banks and financial institutions should devise a system of giving acknowledgement for receipt of all loan applications.
Time frame within which loan applications up to Rs 2 lakh will be disposed of should also be indicated in acknowledgement of such applications.