Subhra Prasanta Das
Kolkata, 28 February
The way Muthoot Finance, one of India’s largest gold financing companies, is
taking money from its clients in the name of security charge and administrative charges is illegal, says
the Reserve Bank of India (RBI).
The RBI has stated in its letter, dated 6 January 2014, to two complainants, Mr Aparup Kumar Bhattacharya and his brother Mr Shyamal Bhattachrya, that such charges are clear violations of RBI’s guideline of Fair Practices Code for Lenders which says in its "Loan appraisal and terms/conditions" section that the lender should convey to the borrower the terms and conditions thereof and keep the borrower’s acceptance of these terms and conditions given with his full knowledge on record.
The financing company has been charging an extra amount of Rs. 20-Rs. 40 every month from its customers while they come to pay their interest or the amount payable every month for the gold loan that had already been taken.
In most of the cases, the company doesn’t even mention on the slip as to why that extra amount is being charged. No such administrative or security charges are mentioned in the sanction letter issued by Muthoot at the time of sanctioning the loan.
The brothers, who took a gold loan from the company’s Garden Reach branch, last year, wrote to the regional manager of Muthoot Finance, Kolkata seeking clarification on these charges but didn’t receive any reply from them.
The brothers then lodged a complaint with the RBI, Kolkata which directed their complaint to RBI, Thiruvananthapuram in October last year as Muthoot Finance is registered in Thiruvananthapuram.
In the letter, RBI, however, advised the complainants to settle the matter "amicably" with the aforesaid Non-bank financial company (NBFC).
As per the letter RBI has also advised Muthoot Finance to refund the amount collected as administrative charges to the complainants.
The letter, however, does not indicate whether any action will be taken against the company or not. It also does not say whether money will be refunded to all the borrowers across the country who have been paying an extra amount every month as administrative or security charges despite stating that Muthoot Finance has violated its FPC guideline.