Federal Bank charged for higher revision on fixed home loans
By Neelima Shankar
Jun 5, 2009
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The State Dispute Redressal Commission has held the Federal Bank for unfair trade practice involving increase in the fixed interest rates on long-term fixed home loans, extended by the bank to 58 employees of Gujarat Alkalies and Chemicals Limited.

In 2006, Federal Bank opened a new branch in Bharuch district. The bank offered a fixed interest rate housing loan scheme to GACL employees. Under the scheme, GACl employees were offered home loans at a fixed rate of 8.1 percent for a tenure of 15 years. Allured by the competitive lending rates, many customers migrated to Federal Bank from other banks like HDFC, ICICI, to name a few.

The home loan scheme was approved by the bank's regional office, based in Mumbai, though the floating rates prevailing then were 12 percent. The bank extended the loan sum on behalf of the customers, but the interest rates on loans were revised from initial rate of fixed 8.1 percent to a fixed rate of 8.75 percent.

The move aggrieved the borrowers, who filed a complaint against the unfair practices of the bank. The forum presided by M G Gulabani, rejected the bank's appeal and ruled the case in favour of the GACL employees.

The Federal Bank Limited (the erstwhile Travancore Federal Bank Limited) was incorporated in 1931 under the Travancore Company's Act. The bank has been awarded for the best use of IT in retail banking by IBA and TFCI. The bank provides a slew of banking products, delivery channels and financial services like depository accounts, merchant banking, remittance services, insurance products, payment gateway and online reservation services.

The bank offers housing loans for purchase/construction of new houses, flats, land purchases and reimbursement for costs of purchased houses, up to 85 percent of the project cost for a maximum amount of Rs.3 crores. The bank also offers ‘Home Plus Loans' for existing home loan customers at concessional rates. These include ‘Privilege Personal Loan' up to 50% of the housing loan for high income group customers, personal loan up to Rs.2 lacs, two wheeler loan up to Rs.50 lacs and ‘Vidya', educational loan up to Rs.25 lacs.


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