Prepayment charges on cash credit account

This query is : Resolved

Pranay Saraf (Querist)
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20 December 2016 I was looking to takeover my cash credit loan from hdfc bank to axis bank. Having completed all formalities, HDFC bank has claimed that they will charge me @4% of total loan limit as pre payment charges.
From the limit information that I have gathered, banks must not levy such charges as per notification no. RBI/2013-14/582
DBOD. Dir.BC.No.110/13.03.00/2013-14

The cc account is a floating rate account in the sense that it is linked to the base rate. It would qualify in the corporate sector as well. The only problem with the same is that i am using the funds from axis bank to repay the loan of hdfc bank. In my research, i had found that if the funds are repaid using own funds, the primary lender has no option but to release property documents. However, i am not assured about the source and logic of the same.

The sanction letter reads that
1) HDFC bank would levy annual charges, pre closure charges and penal charges in case of an event of default, as per the facility documents/ Master facility Agreement/term loan agreement.

2)working capital facilities are payable on demand and are subject to annual renewal. Renewal documents are to be submitted 60 days prior to the due date as mentioned above. Banks reserve the right to charge an additional interest @2% in case the documents are not submitted within the due date. This would be over and above any additional charge/penal rate, if any, that may have been levied to the Borrower.

Will i get relief if i approach tax ombudsman or consumer court?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 December 2016 Cash credit is a working capital facility can be repaid without any closure charges. Take the case with Bank Ombudsman.

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