(a) whether some Banks like Citi Bank, ICICI Bank, etc., are luring common people by offering loans
without interests in the beginning, but later on charge huge interests;
(b) if so, the reasons therefor;
(c) whether thousands of innocent people get trapped by the false promises of these banks;
(d) if so, whether the Government has no control over these banks;
(e) if so, the reasons therefor; and
(f) the steps taken by the Government to check these malpractices?
FINANCE MINISTER (SHRI P. CHIDAMBARAM)
(a) to (f): A statement is lai4 on the Table of the House.
STATEMENT FOR LOK SABHA STARRED QUESTION NO.260 FOR 17TH DECEMBER 2004 REGARDING LOAN BY BANKS
TABLED BY SHRI GURUDAS KAMAT.
(a) to (f): It was brought to the notice of the Reserve Bank of India (RBI) that some banks had been
providing low / zero percent interest rates on advances for consumer durables to borrowers through adjustment
of discounts available from manufactures / dealers of consumer goods. RBI had examined the issue and conveyed
its advice to the banks that such loan schemes lacked transparency in operations and distorted the pricing of
loan products. These products also did not give an accurate picture to the customers regarding the applicable
interest rates. Banks were, therefore, advised to refrain from offering such products vide RBI circular dated
19th August, 2002. The banks have also been cautioned to refrain from linking their names in any form / manner
with any incentive based advertisements where transparency regarding interest rates is lacking. All scheduled
commercial banks including private sector banks are required to follow the guidelines and directions issued by
the regulator, i.e. the Reserve Bank of India, on all aspects of operations including loans to borrowers for
various purposes.