Order Name: Vijay Kumar Gupta vs DCB Bank Limited
In a recent ruling, the District Consumer Disputes Redressal Commission-VII, South-West Delhi, has found DCB Bank in breach of loan terms and RBI guidelines for charging an individual borrower a foreclosure fee. The bench, including Suresh Kumar Gupta (President), R.C. Yadav (Member) and Dr Harshali Kaur (Member), found that the Bank wrongly labeled an individual loan as a business loan to justify these charges.
Let me break down the specifics of the case for you.
The complainant, Mr. Gupta, had taken out a home loan of 85 Lakhs from DCB Bank’s Karol Bagh Branch. The loan, backed by a property in New Delhi, had repayment terms of 180 monthly installments of Rs. 91,341/- each, starting from December 4, 2017, and ending on November 4, 2032. Mr. Gupta was slapped with a 4% foreclosure fee when he asked for an early settlement, even though the loan terms did not mention such charges for individual borrowers.
Despite trying multiple times to resolve this with the Bank, Mr. Gupta received no satisfactory response. Feeling wronged, he decided to take the matter to the District Consumer Disputes Redressal Commission-VII, South-West Delhi.
Defending their actions, the Bank claimed that the loan given to Mr. Gupta was a business loan, not a home loan. As per the sanction letter’s terms and conditions and RBI guidelines, foreclosure charges are acceptable for business loans. They argued that the loan was commercial as it included co-obligants and co-borrowers – Mr. Gupta, his wife, and their firm ‘Gupta Vijay K. and Co.’
However, the District Commission disagreed with the bank’s argument. They pointed out that RBI guidelines prohibit banks from charging foreclosure fees on floating-rate term loans given to individual borrowers. They also noted that the Bank did not sufficiently explain why they classified the loan as a business loan, especially since it was not granted solely to the firm. The loan was given to Mr. Gupta and his wife, suggesting it was an individual loan, not a business loan.
In conclusion, the District Commission found DCB Bank guilty of unfair trade practices and deficient service. They ordered the Bank to repay Mr. Gupta the amount of Rs. 388,951.93/-, along with a 10% per annum interest from the date of filing the complaint until payment. Furthermore, the Bank was instructed to pay Mr. Gupta Rs. 50,000/- as compensation and litigation charges.
This judgment serves as a crucial reminder to banks and other financial institutions about the importance of adhering strictly to the terms and conditions of their loan agreements and RBI guidelines.
