CCI notice to banks over home loan pre-payment penalty

Last Updated: Wednesday, January 20, 2010 - 21:15

New Delhi: Competition watchdog CCI has
asked about two dozen banks and housing finance companies,
including SBI, HDFC, ICICI Bank and LICHF, to explain their
move of imposing penalty on borrowers for pre-payment of home loans.

The Commission, according to official sources, has sent
notices to major home loan players after examining a report of
Director General (Investigations) which found evidences
against banks, which also include public sector lenders Punjab
National Bank and Bank of Baroda, for misusing their dominant
position and entering into anti-competitive agreements.

"We have sent showcause notices to 20 banks, including
ICICI Bank, HDFC, LIC Housing Finance, Deutsche Postbank and
the Indian Banks` Association. We have also sensitised the
Reserve Bank on how the practice of charging pre-payment
penalty is hurting consumers," a senior CCI official said.

The Commission was scrutinising a complaint filed by a
customer against the practice by these banks.

Spokespersons of SBI, ICICI Bank, HDFC and LIC Housing
Finance could not be reached for comments.

The move gives hopes to thousands of borrowers of
foreclosing their housing loans without paying penalty. If the
penalty is lifted, it may also lead to borrowers` shifting
their credit to those lenders offering lower interest.

The CCI, official said, could also penalise lenders for
adopting such practices to discourage customers from pre-
paying home loans or the practice could be banned.

HDFC, for example, levies pre-payment charges ranging 0-2
percent of the amount pre-paid by a borrower.

PTI



First Published: Wednesday, January 20, 2010 - 21:15

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