I have opted for an OD Account (overdraft facility) from a nationalised bank of 950000.The loan was sanctioned in January and so far I haven’t withdrawn any fund other than the insurance money that was debited. Obviously I took the loan for business purpose which I will be using definitely.But since i haven’t made transaction as of now bank is pestering me to make transactions and also accusing me of wasting govt money.Question is:
1. can bank penalise me or impose a fine?
2. Have I done anything wrong?
p.s: i could not utilise the fund because of lack of business opportunities.I want to be a disciplined customer and hence use the fund wisely.
- They can’t penalize you for not using your OD account. It is purely your wish.
- They can’t force you to use it. If they force, then raise the complaint against them. It is purely your wish of when to use and when NOT.
- Wasting Govt. money?? A big lie. It is not the Govt. money, but bank’s. They want to earn income by forcing you to be in debt trapped.
If they still insist, then raise the complaint against Bank with Banking Ombudsman and RBI.
Thank you sir a ton. I was a bit worried.so the first person that came to my mind was you.i cant thank you enough.your reply has certainly boosted my confidence.
Another question that i have is:
I was told by someone that for OD loans insurance money that they debited was on the property mortgaged which is one time till i close my account and not for fire insurance which they used to debit every year for a previous cc account.so is it true that insurance money is debited only once for OD accounts?
I am not sure of the product. Also, it is not obligatory that you must buy the product which they chose. Let me know the product name.
its united bank of india mortgage loan.
Check the premium payment schedule and features available on policy document.
yes bank can penalise you.. it is called commitment charges.. bank has allocated the amount for your business.. and if you are not using bank’s margin it means either you have lot of current assets or your business is not running…
and yes insurance charges are one time in OD account as bank insures the property mortgaged .. in CC bank insures the stock mortgaged which has to renewed every year
Thanks for your opinion.but sir is saying a different thing totally. And as for commitment charges do you mean that they will charge interest or is there something more than they can do?
I am a banker, commitment charges are 1 % of unused amount.. and every bank cam charge it.. but mostly they do not, but as you haven’t availed any limit they can charge you
Thanks.May i know what is the stipulated time that banks have to make transactions after which they can charge since they havent yet given me a sanction letter nor did they mention terms and conditions.
p.s:my loan was sanctioned in January
To both of U-If the charges are disclosed and make sure that customer know it, then let them charge. Charging at one situation and not in another situation is completely illegal. Charges must be uniform to all customers (irrespective of you use that facility or not). But forcing the client to use the CC account is completely WRONG. Also, they can’t say that customer WASTING Govt’s money. It is illegal. Regarding insurance, it is again a customer right to buy it from anyone. Bank can’t force him to buy a product which they suggest. This is what I am pointing.
yes sir i do get your point
@Staff you don’t get bank’s point.. if someone is not using CC account it means he has given wrong info to Bank.. CC limit is sanctioned on your balancesheets.. you commit to route all transactions through the account.. and he has already signed the documents knowingly or unknowingly that he will pay 1% commitment charges. bank not only can but will force you to use CC account, because bank has 80% margin (partnership) in working limit.. plz don’t misguide him
PSMangat-Just show me a ruling or notification of RBI, which states that Banks MUST FORCE customers to use the CC limit, then I agree with your point. Even at least a document of any bank which claims that they have rights to force customer. If charges disclosed then I don’t have issue, which I already said. But FORCING a client? Is he did robbery?
For your information, I am not misguiding him. But you are by saying that bank can FORCE customer to use CC. Strange, but give me a valid proof to accept your views of thought 🙂
bro then you don’t know what OD-CC limits are … these are not normal loans, these are working limits, which are properly justified with nayak committee method and second method of lending, if a person has lot of current assets bank can not give him CC-OD limits.. he has approached the bank by showing his balancesheets that this much amount is short for his working cycle and bank financed that part.. now if he’s not using the limit then either he’s is not doing the business or he has lot of current assets which were hided in his balancesheets.. p.s. I hope you will chalange it in court ..
PSMangat-I know the difference between normal loans and OD-CC Loan. There is a difference. You can’t combine both normal loan to OD-CC loan. Your both links not specify of what I am pointing. I am pointing that Banks not authorized to force client on utilizing the CC limit. It is purely the borrower wish. Can you provide the link to this issue?
my both links clearly tell the reason why bank want you to use the OD CC limits and if you don’t use it pay commitment charge.. what else you want to ask?
has been observed that in several CC/OD accounts average utilization of limit is less than 60%. Under the circumstances our funds to that extent remain in short term investment, which generate 7 to 8% interest.
PSMangat-I don’t think so of your links. It is bank’s concern of keeping liquidity at it’s best. For that purpose banks can’t force customer to use the money and pay the interest higher than they get from keeping it for short term deposits. I am asking specific RBI or Bank ruling. Not hypothetical theories.