Co-operative bank forcing to purchase LIC endowment plan to avail loan

POSTED BY girish.maru ON March 21, 2014 8:27 am COMMENTS (6)

I am a member of govt employees co-operative bank. I wanted to apply for an ordinary loan of rs. 5 lakhs. However, the bank wants either an eight years old endowment policy or purchase a fresh lic policy (mostly lic jeevan anand) from them as the bank itself is a corporate agent to lic. No other policy of any kind less than eight years old purchased from outside agency is valid for the bank to sanction the loan.

Besides, the bank also asks for two members as sureties to the loan, which has an interest rate of 11%. Is it legal and valid as per rules and law to force someone to purchase from them or pledge insurance cover for a small and short term loan say five years? I have also come to know from other colleagues that after full repayment of loan the bank don’t return or re-assign the policies assigned to them against such loan for the purpose of future loans. Is it valid?

6 replies on this article “Co-operative bank forcing to purchase LIC endowment plan to avail loan”

  1. ashalanshu says:
    March 23, 2014 at 10:10 am

    Dear Girish, you may write to RBI or Banking Ombudsman for this.

    Thanks

    Ashal

    Reply
  2. girish.maru says:
    March 22, 2014 at 7:23 pm

    What kind of action can be taken against such a malpractice? Suggest me, because if not me somebody else of my department, my colleagues are bearing the huge load of this unfair business practice.

    Reply
  3. ashalanshu says:
    March 21, 2014 at 9:58 am

    Dear Girish, why are you opting to take loan from such bank?

    Thanks

    Ashal

    Reply
    1. girish.maru says:
      March 22, 2014 at 7:20 pm

      Thanks for the advice!

      Reply
  4. Raja says:
    March 21, 2014 at 9:15 am

    Stay away from such banks. This is unfair practice. Moreover endowment plans are useless. Try some other bank

    Reply
    1. girish.maru says:
      March 22, 2014 at 7:19 pm

      Thanks!

      Reply

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