New Delhi: An investigation has been ordered by the Monopolies and Restrictive Trade Practices Commission (MRTPC) on different banking practices, which the commission thinks as unfair. Banking practices such as the way banks compute their interest rate on home loans, delay in transferring the benefits of reduction in floating rates to the customers, the discrimination between existing and new customers etc. have all attracted the commission's attention and the investigation wing of the commission headed by Director General of Investigation and Registration (DGIR) has swung into action.

The fact that the banks, instead of following an external market linked reference rate have their own mechanism to compute a reference rate and the person who opts for a floating rate loan from such a bank is deprived of the 'true benefits' of a floating rate loan has not gone well with commission. In this scenario the floating rate doesn't move according to market forces and is rather a 'manipulated' one.

Another thing that has irked the MRTPC is that when it comes to raising interest rates due to any fluctuations in floating rate and increase in costs of funds, the banks are very prompt and in a situation where the market conditions drive the interest rate in the downward direction, the benefits are not passed on to the customers readily.

MRTPC has also taken a strong exception to the fact that in a bid to attract new customers and beat the competition , banks are willing to offer reduced rates to new customers including a discount in processing fees etc, while existing customers are often ignored. This particular phenomenon was witnessed during the festive season when the major banks in India offered home loans and other retail loans to new customers at a discounted rates while the older customers were left out. Axis Bank was the only financial institution, which passed the benefits of a discounted rate to its existing customers also.

The issue of fixed interest rates, how often they are changed and how transparent the banks are in communicating the details about such 'fixed' interest rates also caught the attention of the commission. The investigation will be completed in about two months time and will infuse a sense of accountability into the banking system in India.