FAIR PRACTICES CODES AND

LENDERS LIABILITY

BY:

VARSHA PANWAR

Lender Liability is any alleged wrongful action or inaction by the

lender, alleged contractual breach or defect, or alleged breach of any

statute, regulation or the common law that TENDS to provide the

borrower, guarantor ,grantor or one standing in their shoes with a

claim and/or a defense to an action.

GUIDELINES BY RBI

i) Applications for Loan

In the loan application form, the Bank shall provide comprehensive information including information about fees and charges if any payable for processing and amount of such fees refundable in case of non acceptance of application, prepayment options and other matter which affects the interest of the borrowers, of all categories of loans, irrespective of the amount of loan sought by them.

ii) Processing

•The Bank shall provide acknowledgement for receipt of all loan applications indicating the time frame within which the application will be disposed of.

The loan application will be disposed of as details below:

UP TO RS 2500WITHIN 2 WEEKS

BEYOND RS 2500 AND LIMITS WITHIN RS 1.CRORE WITHIN 3 WEEKS

BEYOND RS 1.CRORE AND LIMIT WITHIN Rs 5.CROREWITHIN 5 WEEKS

ABOVE Rs 5.CROREWITHIN 6 WEEKS

ADHOC LIMITWITHIN 2 WEEKS

THE ABOVE TIME FRAME FOR DISPOSAL IS FROM THE DATE OF RECEIPT OF LOAN APPLICATION COMPLETE IN ALL RESRECT.

•The Bank shall verify the loan application and if additional details / documents are required, these will be sought from the applicant.

•For all categories of loans and irrespective of any threshold limits, the Bank will be expected to process the application without delay. In case the application is turned down, the Bank will convey in writing to the applicant the reasons for rejection within one month.

•The applicable processing charges will be collected in two stages ie: 1. 50% at the time of appraisal and reaming 50% at the time of

execution of the documents2. If the application is rejected then 50% proposal charges collected at

the time of appraisal will be refunded

iii) Loan Appraisal and Terms and Conditions

The sanctioning authority will be expected to ensure proper assessment of the credit application as per the extant instructions and credit policy of the bank. All the terms and conditions and other caveats will be duly communicated by an authorized official of the Bank to the customer in writing.The acceptance of the customer will be obtained on the sanction letter with the customer's signature under the caption

"I/WE ACCEPT ALL THE TERMS AND CONDITIONS WHICH HAVE BEEN

READ AND UNDERSTOOD BY ME/US".

A copy of the loan agreement along with all the enclosures quoted in the loan agreement will be furnished to the customer at the time of issue of the sanction letter.The sanction letter / loan agreement will clearly state that the credit facilities will be extended solely at the discretion of the Bank and also include approval and disallowance facilities such asDrawings beyond the drawing power / sanctioned limits.

Honoring of cheques issued for the purpose other than specifically stipulated in the sanction.Drawings in an account once it is classified as NPA.No drawings will be allowed in case of non-compliance of the terms and conditions by the borrower.Meeting further requirements of the borrower on account of growth in business will be subject to proper review of the credit limits.

iv) Disbursement of loans including changes in terms &

conditions

The disbursement will be done immediately on compliance of all the terms and conditions of the sanction by the borrower and the branches need not refer to the sanctioning authority for disbursement.Any changes in the terms and conditions of the sanction such as interest and charges will be notified to the borrower before effecting the changes.Any changes in interest rate and charges will be effected only prospectively after giving due notice to the borrower.

v) Post disbursement supervision

Post disbursement supervision, particularly in respect of loans upto Rs. 2 lacs, would be constructive with a view to taking care of any genuine difficulties that the borrower may face.

Before taking a decision to recall/accelerate payment or performance under the agreement or seeking additional securities the Bank would give reasonable notice to the borrower.

All securities pertaining to the loan would be released on receipt of full and final payment of the loans subject to any legitimate right or lien and set off for any other claim that the Bank may have against the borrowers. If such right is to be exercised, borrowers would be given due and proper notice with requisite details.

vi) OTHER GENERAL PROVISION

The Bank would refrain from interference in the affairs of the borrower except for what is provided in the terms and conditions of loan sanction documents (unless new information, not earlier disclosed by the borrower, has come to the notice of the Bank as lender).

Bank will not discriminate on the grounds of gender, caste or religion in its lending policy and activity.

In the case of recovery, Bank would resort to the usual measures as per laid down guidelines and would operate within the legal framework. Bank is already having a Model Policy on Code for Collection of Dues and Repossession of Security.

The lenders should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc.

In case of request for transfer of borrowal accounts, either from the borrower or from a Bank/Financial Institution, the Bank as consent or otherwise shall be conveyed within 21 days from the date of receipt of request.

vii) Complaints :

In case of any complaint/grievance, the applicant/borrowers will have to inform in writing the concerned branch. The Branch Officials shall immediately take up the matter for redressal.

vii) Redressal :In case of complaints received, the branch would report the matter with full details within 7 days from date of receipt, to Regional/Zonal Head, who would take all necessary steps to redress and resolve the grievance/dispute, within a maximum period of 30 days.In order to enhance value and relevance to the borrowers this code would be under review from time to time. The Bank would, therefore, greatly value any suggestions for improvement.

LENDER LIABILITY

ACTION IN GENERAL

Breach of Loan Commitment

Fraud

Interference

Negligence

Good Faith

Fiduciary Duty

Direct Liability as Principal

Control

Environmental Liability

Lender's Checklist

RICO Requirements

Economic Duress

Prima Facie Tort

Duty of Confidentiality

Securities Law Liability

Duty to Insure

CONSTRUCTION LENDER LIABILITY

Additional Liability Issues

Inspections

Construction Defects

Disbursements

Liability to Contractors

Minimizing Liability

THANK YOU