Car loan fraud for preclosure?

Question

Hi All, I have a CAR Loan taken for 3.5 Lacs against MARUTI WAGONR. Due to personal Reasons I wanted to opt for PRE-Closure of my loan. which is lke 16 months before. As of now my outstading balance is 2.13 lacs including the rate of interest for the 16 months. As i am going close the loan now (that would be 16 months earlier) the bank wanted me to pay the total of 2.13 lacs for the entire 16 months period with interest amount though i am paying earlier. This is total fraud as it shouldnot be because normally as its a preclosure they should only take the preclosure charges on the outstanding principal amount and not on the outstanding total amount(including the interest). My question here is what is the point of preclosure if i have to pay the amount for the entire period which is 16 months. This is absolute Bank fraud between the Maruti Show room and the Bank. I will take this to the Prime ministers office for sure if i dont get the justice here.

 

Answer 1

Dear Mahidhara,

At the outset, let me clarify that this site is designed by a group of senior Banking Professionals to assist Bank Customers at large to provide guidance for resolution of any complain/query/grievance in respect of financial services. This site does not belong to any Bank or a regulator, which may please be noted.

As regards your complaint, it terms of RBI guidelines banks are  not permitted to charge foreclosure charges/pre-payment penalties on home loans on floating interest rate basis. It appears that levy of pre-payment penalty on vehicle loans is left to the discretion of banks. However, in terms of RBI Master Circular on Customer Service, levy of foreclosure charges/pre-payment penalty on floating rate term loans by banks on floating rate term loans sanctioned to individual borrowers is prohibited. 

Car loan availed by you is essentially a term loan and accordingly, you should get the benefit. You may write to Nodal Officer of your bank and seek clarification quoting the RBI Master Circular. Depending on the response you can decide the next course of action like escalating your grievance to the Banking Ombudsman etc.

 

Regards

 

J R Mohandas