Sep 17, 2005 10:23 PM
4995 Views
(Updated Sep 17, 2005 10:25 PM)
When you take a loan against a foreign currency deposit, in a nationalized bank like Canara Bank, you are informed by banks that the loan interest rate will be 2% more than the fixed deposit interest rate for your foreign currency deposit.
For example, if for your deposit in GBP, the bank gives you 4.5% per annum, you assume that for the loan in INR you take against this deposit, the interest rate will be 6.5%. But it is 9.75%, monthly compounding. This is because the rates are 2% more than 7.75%. No one told what this 7.75% was for, at the time of taking the loan, just 2% above your fixed deposit rate.
My wife was informed by the Canara Bank official, while taking the loan that, there is no method to pay back the interest on a monthly basis!.
Can this be so? Will any financial arrangement by any institution not allow one to make payments against one's liability, any time one wishes?
This to me felt as if partial information is given in order to enable the bank accumulate more interest on the loan, without giving an opportunity to pay back interest and thus avoiding compounding of interest.
