I have been a regular reader of Moneylife and really like the way you expose the irregularities, inefficiencies and grievances faced by the common man. In this context, I want to bring to the notice of your readers the bureaucratic procedures and attitude of the employees of State Bank of India (SBI) towards their loan applicants. I waited for the entire procedure to get completed so that I could convey my painful experience of getting a housing loan.
I am a chartered accountant working as a finance manager in a multinational company. I applied for a loan on 25 September 2009 when the SBI representative came to collect all my documents. He advised us not to call them for at least 10 days, which was the minimum processing time. After two weeks, we called to check the status but our calls went unanswered. On consulting the branch where we made our initial loan enquiry, we were directed to another branch that processed all loans applications.
When I approached it to enquire about my application, they yelled at me for pestering them and said they would call us when the application was processed. After a week we went to the branch again. This time, they asked me to get an estimate of the construction cost from a prescribed valuer; this took four-five days and I had to pay a service fee.
Even after I gave the valuation report, nothing moved. When I went to the branch again, I was asked to get legal advice from a prescribed legal advisor, who told me to get an encumbrance certificate (providing details of the property transaction) and a duplicate title deed of the property. I got the legal advice and submitted it to the branch and waited another 10 days. When I finally inquired, there was a new requirement. I was asked to get details of my previous employment, since they wanted a two-year service record. I argued that I had already submitted income-tax returns for three years, but nothing stands before the SBI bureaucracy. I produced the documents and was again asked to wait.
A week later, I went to the branch again and was asked to come back in two days (a Saturday) to sign the final documents. I reached the branch at 10am and was made to wait. At 12.30pm, the manager called us urgently and told us to pay ‘stamp duty fee’, which was 0.5% of the loan amount.
Surprised, I asked why I was being charged this fee. The manager said that if I defaulted on repayments, the bank would need to pay stamp duty to file a case in court, which they were collecting in advance, in anticipation of a default. I was shocked; there was no question of my defaulting on the loan and I am not sure if all banks follow this practice. By then it was 1.00pm and the bank closed for the day. Clearly, the manager was only buying time since his processing work was not complete. I paid the stamp duty but felt disgusted at the assumption that I could become a defaulter.
I was now asked to take all the loan papers to another manager for review—I felt like a schoolboy taking test papers to the teacher. This manager had a new list of requirements. When I asked why these were not sought earlier, he shouted back that I should have known the procedures. He wanted a fresh encumbrance certificate (although I had provided one two weeks earlier). What if I had mortgaged the property with someone in the past two weeks? The SBI bureaucracy won again. It took me a week to get the new certificate.
Next, the bank asked for details of the bank account to which the loan amount was to be transferred (again on a Saturday). We were made to open a new savings account, jointly in the name of my father and myself. I was told that SBI does not allow new accounts to be opened on Saturday (is this an RBI rule?). When I protested, he yelled at the top of his voice saying that if I needed the housing loan, I had to come another day or ‘get lost’.
Two days later, I was told that my loan had been sanctioned, but the story didn’t end there. When we went to the branch, we were told to submit bills to get the loan disbursed. Since we had already spent
Rs4 lakh on construction, we produced the bills. But they wanted receipts with revenue stamps, not just bills/vouchers. I am still in the process of getting these and hoping that I will finally get the loan disbursed.
Let me highlight various loopholes that are detrimental to SBI and to loan-seekers:
- Asking customers to submit crucial documents (legal advice, encumbrance certificate, etc) could be dangerous because they could easily get a fake certificate. The bank must get these independently.
- SBI advertises 0% processing charges, but customers are asked to pay for the valuation certificate, legal advice, encumbrance certificate and stamp duty which, in my case, was 1.2% of the loan amount. Is this not cheating? A private bank would have charged me 0.5% processing charges and sanctioned the loan without any hassle. Won’t SBI lose customers and business due to such practices?
- How can SBI assume all borrowers will default and make them pay stamp duty? Is it increasing government revenues through stamp duty?
- If SBI treats educated professionals so badly, what is the plight of those who don’t understand financial jargon and procedures?
I request you to take these issues up and help people who are exploited. I don’t know when our banking and financial systems will become hassle-free and transparent. I want to raise my voice and hope to make a difference even though it may not solve the problem immediately.
Kalyan Chakravarthy, Hyderabad, by email