Old and new home loan borrowers, if have similar risk profiles, then they should be treated by banks equally. This is a recommendation which has been given by the special committee set up by Reserve Bank of India to look into customer care service of banks.
Parity amongst old and new customers based on interest rate offers should not be there, suggested the Damodaran committee.
The report by the committee recommends banks to allow switching between floating to fixed rate loan and vice versa atleast for one time during the entire tenor of the loan. This should be allowed "at an appropriate and reasonable fee" so that the customer can avail benefit of the prevailing interest rates.
"In a floating interest rate scenario, when an entire class of borrowers has the same characteristic and risk level, the point of entry in time (old customers and new customers) should not create discrimination in the interest rate offered to customers," the report said.
It also made its recommendation regarding preclosure penalty charges issued by banks on customers. "Banks should not impose exorbitant penal rates towards foreclosure of home loans and a policy should be devised to ensure the customer is not denied opportunity to enhance his economic welfare by making choices such as switching to other banks/ financial entities to enjoy the benefits conferred by market competition," the report said.