Pvt banks levying steep foreclosure fees: MSMEs

NEW DELHI: An association representing nearly two million small enterprises in India has accused top private banks of levying steep charges to foreclose their loans, at a time many of these firms are facing severe input pressures due to rising commodity prices. Hidden charges levied by banks are putting severe pressure on working capital, said Anil Bhardwaj, secretary-general, Federation of Indian Micro and Small and Medium Enterprises (FISME). Foreclosure charges are levied by lenders when customers seek to close loans before the end of their tenure. The federation has raised the issue with the Union MSME ministry, Bhardwaj said.

“If an unsatisfied MSME customer wants to leave the bank, whether because of excessive interest rates or laxity in services, private sector banks levy heavy penalties in the form of foreclosure charges. In the last month alone, nearly 50 cases have been reported to the FISME. In order to deter the exiting MSMEs, private sector banks have invented another penalty clause: non-compliance charges.

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