[Resolved]  Standard Chartered Bank — NEVER TAKE HOME SAVER LOAN from SCB

Address:

Bangalore, Karnataka

i'd taken in HOME SAVER LOAN from SCB in 2006. At the time of taking loan i was told that i should deposit all my excess amount above the EMI amount, which will effectively reduce the principal outstanding and help reduce the interest cost and home loan tenure.

So i made the home saver account as my SALARY account as i do not invest the idle money all the time. So why not let it be parked in the home saver linked account. This will reduce the principal balance on a daily basis and i'll pay less interest on the loan.

So even though the home saver interest rate is actually 0.5-1% higher than the normal loan rate from the same bank, i opted for the home saver option thinking that i'll save interest. So last 5 years the bank had been sending me statement showing how parking excess deposit above the EMI amount had helped me reduce the interest cost and there by shown as "Interest saved" in the form of higher "Available Balance". My excess deposit is shown as "Current Balance".

So mathematically "Available Balance" = "Current Balance" + "Interest Saved". One important thing to note here is that bank does not give any current interest on the excess fund (in other bank it is about 3.5 - 4% on savings account).

So if my principal outstanding was 30 lakh in the first month of loan period and i had deposited 2 lakh then bank calculated the home loan interest on 30-2 = 28 lakh. This helped me save some interests which had been accumulating over the 5 years period. But i did not earn any current interest rate on 2 lakh, which i would have earned, if that amount would have been parked in other savings account, say in SBI.

This calculation is done on a daily basis and over the last 5 years period, i'd saved about 1.5 lakh interest savings. So when on Jan-2011 the net principal outstanding became ZERO and since i'd surplus "Available Balance" (it showed as CR. and not debit), the bank started debiting the EMI from the "Available Balance", which is nothing but "Current Balance" + "Interest Saved". So from Feb-2011 till May-2011 the entire "Interest Saved" amount of 1.5 lakh was wiped out. When i confronted with the bank that the principal outstanding was ZERO on Jan-2011 then my loan should have been closed and i should have been returned the entire "Available Balance", they are now telling the "Interest Saved" portion in "Available Balance" is not your money and it is only reference calculation because of your excess deposit. So while closing the loan this amount will be retained by the bank and only "Current Balance" amount will be returned.

I feel like being cheated here by the bank because :

1) I paid higher interest in home saver loan, which is 0.5 to 1% higher than any conventional home loan rate.

2) I did not earn any interest on my excess fund, which is say 3.5 - 4% in SBI.

3) Every day i'll have say 2-3 lakh cash balance in bank account which did not earn any interest. In addition, bank also wiped out the entire interest saving portion as well.

If i would have known that this way the interest saving amount would be adjusted from "Available Balance", month after month as EMI, when my net principal balance becomes ZERO then i would not have opted for this product. Now i am thinking of first approaching RBI ombudsman and if not resolved then may think of consumer case. I think SCB misleading the home saver customer with this type of product where in customer is paying higher interest than regular home loan product and also no interest rate is being paid on excess deposit fund, which other banks generally pay on current account @ 3.5-4%. I would have parked the excess fund in other savings account which would have earned 3.5-4%.

I want to know, is it OK for the bank to retain the interest saved amount. This home saver product was promoted as everything beneficial for the customer. Can you also let me know what is the beneficial to the bank because of this product. I think the benefit to the bank would be loss to the customer for sure. Is this product mis-sold and mis-leading as it is happening in ULIP insurance products