RBI Issues Circular On Levying Unfair Interest Charges On Customers

Since April 2020 the focus of our policymakers has been to provide relief to the common man in this protracted season of distress. When the second wave was ravaging the country, RBI governor Shaktikanta Das, in early May, announced the creation of a special liquidity pool of Rs 50,000 crore to help citizens with loans for treatment and ramping up healthcare infrastructure.

Following that announcement nine banks, all state-run entities, started offering personal loans for the treatment of Covid victims. So far private sector banks have stayed away from these loans.

Though these loans technically fall into the category of personal loans, they are special since they are meant for the treatment of Covid patients. Since these have been expressly designed for providing relief, banks are charging interest rates that are lower than the regular personal loans. The rate of interest on these loans are in the range of 6.85% (Bank of India) and 9.5% (Indian Bank). State Bank and Punjab National Bank are offering 8.5%.

The interest is far lower than the rate on regular personal loans that one usually takes to fund consumption in normal times. The regular personal loans charge interest rates that are much in excess of 10%. Moreover, almost all the PSU banks have decided not to accept any processing fee for these loans.

It would be a shame if the private sector banks stay away from this concessional credit created to offer relief to the common man. Compared to FY20, all the major private sector banks made handsome profits in FY21, when the economy was scalded by the pandemic. The country is yet to emerge out of the second wave and the third one seems round the corner. If the customer gives the banks profits even in the worst of nightmares, he rightfully deserves relief as well.