Reserve Bank Of India's Directive To Lenders

The Reserve Bank of India directed all lenders to review their practices that have to do with disbursal of loans and charging of interest, according to a circular released on Monday. "... such non-standard practices of charging interest are not in consonance with the spirit of fairness and transparency while dealing with customers. These are matters of serious concern to the Reserve Bank." So, what are these practices that the central bank is speaking about? Charging of interest from the date of sanction of a loan agreement and not from the date of actual disbursement of funds, charging of interest from the date of the cheque, but the actual customer only getting the cheque several days later, in case of disbursal or repayment of loans, some lenders charged interest for the entire month instead of for the period where the loan was outstanding.