-i- Moneylife Foundation

rmoneylAte 304.3'dFloor,HindService
OffVeerSavarkar Marg,ShivaiiPark,
Dadar(M/),Mumbai- 400 028
Premises,
lndustries

Tel.:022-49205000: f ax 022-49205Q22
lrust Registfation
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B0(G)RegistrationNo.DIT(E)/MC/80G/585/2010-
|I http://foundation.moneylife.in/

72 October2077

Dr Urjit Patel
Governor
l(eserve banK ol lndra
Mumbai

Subject:ExcessInterestChargedBy Banksunder BaseRateand MCLR Regimq

DearDr Pate1,

As vou are plobably awale, we at Moneylife have been raising the issue ol
arbitrarv anrl opaqug-policy of banks in l'espect of floating interest rates'
Borrowerswho have taken loaus on a floatlng rate basis suffel an immediate
increasein rates when rates go uP but do not get much relief when rates go
down. We have highlighted this issuein two articlesin Moneyiife magazine'

The findings of ReserveBank's Internal Study Group to "Review the Working of

the MCLR System" vindicate our stand on these issues The Group has
\\-/ highlighted that banks deviated in an ad hoc manner from the specified
methoclologiesfor calculating the base rate and the MCLR to either inJlate the
baserate or pl.eventthe base rate from falling in line with the cost of funds.
Accorclingto the StuclvGroup, "banks have beenquite slow in migrating their
existing customersto the MCLR regtnre.Most of the baselate custorlers ale
retail or small and tnedium enterprise(SME) borrowers Hence, the banking
sector'sweak passthr.oughto the baserate is turning out to be deleteriousto the
retail and SME borrowersin an easvmonetarvcvcle."

This is a seriousissue.Indeed,from the consumerstandpoint,this amounts to

n,idespreadmalpractice,which calls{or redressal.

In our view, the ReserveBank should ciirectbanksto calculatethe excessintelest

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rnoneylEfe
v I
they have charged (through arbitrary and ad hoc calculations of base rate or
MCLR) and refund the money to borrowers, especially r.etail borrowers and
SMEs.The RBI should also direct banks to set up specialheiplines to handle
complaints fi'om borlowers, whom banks have overcharged over the years. We
also requestthe ReserveBank to immediatelyissue circular/masterdirections
askingbanks and financialinstitutionsto allow existingborrowersto migrateto
MCLR ol any new systemwithout anv conversionfee or any otherchargesfor
the switCrtrover.

We are taking the liberty of attachingour articleson this issuewith this request
letter.This is alsoraisedthe issueof unfair loan agreementsand one-sidedterms
v in our Memorandum to you on issuesfacedby bank customersdated 18 March
2077.

Dr Patel,we are conJidentvou will have the issueexaminedand initiateactionat

the earliest. We lf'ok forward to active engagement and a line of
acknorvledgement
from vour office.

YoursTruly,

b-r^[-
SuchetaDalal DebashisBasu :
Founder-Trustee Founder-Trustee
MoneylifeFoundation MoneylifeFoundation

Encl:
1. ExecutiveSummaryfrom the Dr JanakRajInternalStudy Group of RBI
2. Article in BusinessStandard:"Home Loan Loot: WhoseSide is the RBI On?,'by
Debashis Basu
3. Article in BusinessStandard: "The deceit and Loot in Home Loans,,by
DebashisBasu
4. Article in Business Standard: "How opaque MCLR allows looting of
borrowers" by DebashisBasu
5. Article in Moneylife: "BanksAre FleecingTheir Customers"by SuchetaDalal
6. Article in Moneylife: "BorrowersBeware:Your Bank May Be Ripping You O{f"

Moheylife Foundation: 305,3.! Floot Hind Service tndu3rriesprcmises,OffVecr Savarkart4arg,Shivajipark, Page2 of3
Dadar (VO, Mumbai 400028.Tet:022-492O5OOO (Board Frx 022-49205022
 i,tfi*ai

InoneylEfe
Eririn-Erirriri
I
by SuchetaDalal
7. Moneylife magazine.Cover Story: ,,your Friendly Bankster,,Issue292

CC:

1 . Shri Narendra Modi '

Hon. Prime Minister of India
Prime Minister,s Office,
152,South Block, RaisinaHill,
NewDelhi-+0011

Shri Arun Jaitley,

Minister of Finance
v Ministry of Finance,
New Delhi-110011

3 . Stni Rajiv Kumar

Secretary(FinancialServices),
Department of Financial Services,
Ministry of Finance, .'
3rd floor, JeevanDeep Building
SansadMarg
New Delhi-l10001

\j

liloneylift Foundationt 305,3d Flooi Hind Service Indusries premises,Off.Vecr SavarkarMar8,Shivajipark Page3 of3
Dadar (Vy'),Mumbai 400028.Gt O22.492OSOOO (Board) F,xO22492oso22