Readers' Corner: Banking

While doing online banking, I saw that there was an instant loan of Rs 1.5 lakh available. To check it out, I availed the loan and funds were credited to my bank account immediately. I didn’t expect that. I don’t need that money. Is there a way I can return the money without being charged any interest or prepayment penalty? 

Banks offer instant personal loans for a select set of existing customers for whom such loans may be pre-approved. These customers can get the personal loan instantly through mobile app or internet banking. In case, a customer wants to cancel the loan, the customer can call the customer care/phone banking within a stipulated time frame of availing the loan. The stipulated time frame may differ from bank to bank. If a customer gives the request for loan cancellation within a specified time frame, processing fees along with taxes are refunded to the customer. 

I want to exchange foreign currency. I wish to know the range of commission banks charge on prepaid cards? Do some banks provide forex card at interbank rates?  I am going to the US and will be taking a dollar-denominated card. What are the fees that possibly I would need to pay for withdrawal of currency from an ATM?

Bank branch publishes the rates and, as a practice, customer should check the rates before giving the request for foreign currency exchange. Further, the margin/commission is based on the value of transaction and currency. Axis Bank, for example, offers discounted rates for higher volumes.

With regards to your question on dollar-denominated card, the typical charges for ATM withdrawal vary from bank to bank and range between $2 and $4 per withdrawal. Further, banks managing ATMs abroad are also known to charge convenience/service fee in the range of $3 to $5 which is over and above fee charged by the card issuing bank. It is advisable to withdraw cash only if it absolutely necessary. Most merchants do accept cards in the US.

When taking an auto loan, I was told that the lender would deduct the first equated monthly instalment (EMI) and then give me the loan. I find it quite strange that first EMI is deducted as soon as the loan is sanctioned. Is this a common practice? It is as good as receiving a smaller loan than promised. Is this allowed?

Auto loans across the industry are disbursed broadly under two EMI models — through one advance EMI or arrear EMI. In case of arrear EMI, the customer pays EMI for the entire tenure. However, in case if they opt for one advance EMI, the first EMI is deducted at the time of the disbursal and the subsequent EMIs follow as per the tenure. The key difference between the two models is reduced principal amount; in case of one advance EMI, customer’s principal loan amount is lowered hence customer will end up having lower interest outflow on loans in comparison to loans where arrear EMI is paid.

I was sold a credit card saying that there will be no annual charges. In the first year, the issuer charged me fees and on its own waived it. In the second year, it charged me a fee again. I when I called up the company, I was told it was free for the first and second year. I have to pay annual charges now. I asked them to reverse the charges or cancel the card. The company is not willing to do any of it. What should I do? 

As per regulatory norms,  banks are required to declare all applicable charges at the time of collecting card application. If a new fee/charge is introduced on the card then the bank is required to communicate the same to cardholders with a 30 days notice. In the given situation, you may request your bank to share a copy of the signed terms and conditions or bank communication record where the said fee was communicated to you. Depending on the communication records you may re-initiate a request for fee reversal and/or card cancellation.