Our Rights as Borrowers

As consumers of financial services, it is important that we educate ourselves on the rules and regulations of our country and are aware of our rights as borrowers. We hear so many different things from different people, that it gets difficult to separate the truth from the lies. From applying for a passport to applying for a loan, everything has a set procedure. Knowledge of these procedures will help us to get our work done in the most efficient way possible. When it comes to borrowing and paying back loans, the Reserve Bank of India (RBI) has laid down certain rules and regulations, known as the Fair Practice Code, to safeguard our interests.

Here are the laws we need to keep in mind, to make sure nobody can take advantage of us.

Laws for Loan Application Process:

1. Language: Whenever we receive any communication from a financial institution, it should be in the local language (e.g.. Marathi in Maharashtra, Tamil in Tamil Nadu), or in a language that we understand.
2. Clear Application Form: Loan application forms should have all the necessary information we require to make an informed decision. The documents required by the financial institution need to be clearly indicated on the form. The terms and conditions should also be stated on the form so that we can easily compare the offerings of one financial institution against another.
3. Receipt Acknowledgement: Once we submit our loan application, the financial institution should give us some sort of acknowledgement that they have received the application. Ideally, they should also let us know how long it will take for them to appraise our application.

Laws for Loan Appraisal Process:

1. The amount of the Loan: Once our loan application is approved, the financial institution has to let us know the amount of the loan sanctioned in writing. As mentioned earlier, the written communication has to be in a language that we understand and should include the terms and conditions of the loan.
2. Interest Charges: The rate of interest and penal interest charges for late repayment should be clearly mentioned in the loan agreement.

Laws on Disbursement of Loans:

1. Change in Terms and Conditions: If there are any prospective changes in the disbursement schedule, interest rates, services charges, prepayment charges or any other terms and conditions, the financial institution has to notify us in writing.
2. Recall/Accelerate Payments: Any decision the financial institution makes to recall or accelerate our payment or performance has to be in accordance with the terms laid down in the loan agreement.
3. Release Securities: If we have given the financial institution any security for the loan you have taken, they have to release the security once we repay all our dues. However, if we fail to clear our dues, the financial institution has the right to auction the security to recover their dues. Before taking such an extreme step, the financial institution has to notify us and allow us a stipulated time period to pay off all pending dues before auctioning the security.

General Laws:

1. Interference: Unless provided for in the loan agreement, financial institutions do not have the right to interfere in our general affairs. However, this rule will not apply if we have withheld any information from the financial institution, and that information is brought to their attention at a later time.
2. Quick Response: If we request that our loan account is transferred, the financial institution should either accept or reject our request within 21 days of receiving said request. If the request is accepted, the transfer should happen in a transparent manner and should be in accordance with the law.
3. Recovery of Loans: The financial institution cannot resort to undue harassment in order to recover their loans. They are not allowed to call us at odd hours, or physically threaten us. All financial institution's staff are expected to be adequately trained to deal with customers in an appropriate manner.
4. Grievance Redressal: Every financial institution must have an appropriate grievance redressal system in place. The purpose of this is to allow borrowers to approach the financial institution and make a complaint in the case of any Fair Practice Code terms being ignored.

It is clear that the RBI has taken valuable steps to safeguard our interests when it comes to borrowing money. However, it is also up to us to educate ourselves on our rights, so that nobody can take advantage of us. The Fair Practice Codes laid down by the RBI must be compulsorily displayed on the financial institution's website, as well as at their branch offices. Before we borrow any money from a bank or NBFC, we need to check and make sure that they comply with the Fair Practice Code, so that we don't face any problems in the future.

India Infoline Finance Limited (IIFL) is an NBFC, and a reputed name when it comes to financial solutions such as home loans, mortgage loans, gold loans, capital market finance, healthcare finance, and SME finance. IIFL has adopted the Fair Practice Code to provide transparency in all dealings with customers.