Those reeling under the pressure of high interest rates can breathe a sigh of relief.
The Mumbai Suburban District Consumer Forum has held that home loan borrowers who have chosen a 'floating interest rate' option to repay their loans are entitled to the benefit of reduced interest rates, and need not pay a 'shifting fee' to the bank for this.
"The provision of opting for 'floating rates' would become meaningless, if the benefits of reduced interest rates are not extended to existing customers," said the bench comprising its president JL Deshpande and Deepa Bidnurkar.
"Not to extend the benefits of change in interest rates to existing borrowers would be exploitation of the borrower," the forum observed.
Five years ago, Malad resident Saprem Thakur had availed of a home loan of Rs8 lakh from the bank. In April 2009, he learnt that the interest rate had gone down to 9.75 % per annum, while he was repaying 12.50%.
On April 8, 2009, Thakur approached a bank official and was told to pay 0.5% of the outstanding amount as 'shifting fee', if he wanted to avail the benefit of reduced interest rate. The next day, when he went to deposit the amount, another bank official asked him to pay 1.75 % of the outstanding amount.
Angry, Thakur moved the consumer forum and sought application of a reduced rate of interest on his outstanding loan in addition to compensation of Rs 50,000.
ICICI Bank argued that the reduced interest rate was only for its new customers and old borrowers could avail the benefit by repaying the whole outstanding amount with an additional 2% as fee.
The forum found this argument contrary to the agreement between the bank and the borrower. It concluded that ICICI Bank should have extended benefit of reduced rates to the complainant immediately after the rates came down on April 1, 2009.
The forum held that failure on part of the bank not to extend benefits of reduced rate of interest to Thakur was deficiency in service, and directed the bank to charge interest at the rate of 9.75% per annum from May 2009 on his outstanding home loan. The forum also awarded a compensation of Rs 25,000 to Thakur.