Prepayment on self payment and closure of cash credit

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Harsh Agarwal (Querist)
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26 August 2018 We have a sanction of INR 150 lacs as Cash Credit, INR 265 lacs as Buyers Credit and INR 35 lacs as Bank guarantee with Indusind Bank.
Our renewal date is on 30.09.2018 and we decided to repay our outstanding in Cash Credit account of approx 115 lacs on 10th July 2018 and intimated the bank by mail on the same day.
Bank guarantee was unutilized and Buyers Credit had been closed by bank and hence unutilized also.
Intimation was followed up by mails on 11th and 20th July, asking the bank formalities and steps to get back collateral papers; and also paying some amount every day by our debtors and clients.
Dissappointed with bank’s no response to mails and calls, we opened new current account in Standard Chartered bank on 31st July 2018 for future transactions but made no transactions till 10th August before repaying Indusind Bank.
On 2nd August we again mailed to Indusind bank that we will repay full amount by 10th August 2018 which we achieved also on 10th August; mailed again and asked for release of collateral papers.
On 17th August our account was unloaded with the limit and interest was debited for the period 01.08.2018 to 16.08.2018.
On 17th August we receive a mail from Indusind bank to pay 2% prepayment charges for release if collateral papers as payment before 30.09.2018 is non adherence as per santion letter.
On arguing with them that renewal date on santion letter is only 45 days from the day of closure and that the date 30.09.2018 itself is a Sunday; is it never possible for us to close our account ?
The next day we receive another mail of 18.75% penal interest due to opening of current account in another bank.

Kindly help in this regard how to get our collateral papers and not pay such unethical and misleading charges by the bank
Thank you

Harsh Agarwal

Harsh Agarwal (Querist)
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26 August 2018 Sir
We have mailed the Nodal officer and Country head of the bank on 24th August 2018 explaining the matter and asking for relief.
Requesting our legal standing on the matter to prepare ourselves if no relief is given by Nodal officer and country head.

Harsh Agarwal

Harsh Agarwal (Querist)
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16 September 2018 Awaiting any response and help

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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10 August 2024 In your situation, where you've repaid the outstanding amount on your Cash Credit account but are facing issues with prepayment charges and penal interest, here’s a structured approach to resolving the issue and understanding your legal standing:

### 1. **Review the Loan Agreement**

- **Sanction Letter:** Check the terms related to prepayment charges and closure of the account in the sanction letter or loan agreement. Verify if there are any clauses about prepayment penalties, interest rates post-closure, and the process for releasing collateral.
- **Prepayment Charges:** Confirm if the prepayment charges are applicable based on your agreement and the date of repayment.

### 2. **Understand the Bank’s Policies**

- **Prepayment Charges:** Banks often charge a prepayment penalty if you repay the loan before the due date. Review the policy to see if your repayment date falls within the permissible prepayment window.
- **Penal Interest:** Understand the reasons for penal interest, especially related to opening a new account. Typically, such charges are specified in the agreement.

### 3. **Document Communication**

- **Record of Communications:** Maintain a record of all communications with the bank, including emails and letters. This documentation will be crucial in case of disputes.

### 4. **Follow Up with the Bank**

- **Formal Request:** Send a formal letter or email reiterating your position and requesting the release of collateral papers without additional charges. Reference your previous communications and any relevant clauses from the agreement.
- **Escalation:** If there’s no resolution, escalate the issue to the higher authorities within the bank, including the Nodal Officer and Country Head, as you’ve already done. Follow up persistently.

### 5. **Legal Standing and Actions**

- **Legal Advice:** Consult with a legal professional who specializes in banking and finance. They can provide tailored advice based on your specific contract terms and local regulations.
- **Consumer Protection:** If you believe the charges are unfair or misleading, consider filing a complaint with the Banking Ombudsman or the relevant regulatory body. They can mediate disputes between banks and customers.

### 6. **Preparing for Legal Action**

- **Review Contract:** Ensure that you have a clear understanding of the contract terms regarding prepayment, closure, and charges.
- **Gather Evidence:** Collect all relevant documents, including your communications with the bank, the loan agreement, and evidence of payments and transactions.
- **Legal Consultation:** Get professional legal advice to understand your rights and options for disputing the charges.

### Key Points to Address:

- **Prepayment Charges:** Assess whether the charges are justified based on the terms of your agreement. If you have repaid before the stipulated date, ensure this aligns with the terms provided.
- **Penal Interest:** Question the legality and fairness of the penal interest, particularly if opening a new account was necessary for your business.
- **Collateral Release:** Ensure the bank follows proper procedures for releasing your collateral as per the terms of your agreement.

### Draft Communication Template

Here's a template for your communication with the bank or regulatory authorities:

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**Subject:** Request for Release of Collateral and Clarification on Charges

Dear [Bank Official’s Name],

I am writing to follow up on our recent communications regarding the closure of our Cash Credit account and the associated charges.

**Summary of the Situation:**

- **Account Details:** Cash Credit Account Number [XXXXXX]
- **Sanctioned Amount:** INR 150 lacs
- **Outstanding Repaid:** INR 115 lacs on 10th July 2018
- **Full Repayment:** Account fully repaid on 10th August 2018

We have noted the following concerns:

1. **Prepayment Charges:** We have been informed of a 2% prepayment charge for early repayment. According to our agreement, we believe we are compliant with the terms for prepayment without incurring such charges.
2. **Penal Interest:** We have been charged 18.75% penal interest for opening a new account with another bank. This seems disproportionate and contrary to the agreement.
3. **Collateral Release:** Despite multiple requests, we have not yet received the release of our collateral papers.

We request a review of these charges and a prompt release of the collateral papers. Please provide clarity on the prepayment charges and penal interest. If we do not receive a satisfactory response, we may consider escalating this matter to the Banking Ombudsman for further resolution.

Thank you for your prompt attention to this matter.

Sincerely,

[Your Name]
[Your Position]
[Your Company Name]
[Contact Information]

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This approach should help you address the situation methodically and escalate the issue if necessary.

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