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?