Jammu and Kashmir Bank has stated that the fees charged for unused credit, known as commitment charges, are a standard industry practice and are applied to sanctioned loan amounts that have not been used up to a certain point.
The Kashmir Economic Alliance recently expressed concern over Jammu and Kashmir Bank’s decision to impose commitment charges on borrowers. The alliance requested that the bank intervene and reconsider this decision.
Jammu and Kashmir Bank’s General Manager Credit, Ashutosh Sareen, issued a statement stating that the bank has a history of providing need-based finance to empower people and businesses over its 84-year history.
Quick Answer: What is Commitment Charge
- A commitment charge is a fee applied to an approved, but unused, credit line.
“We have stood with our esteemed customers through thick and thin of times across our operational geographies, be it by way of extending facilities under 2014 floods rehabilitation package or GECL and restructuring program under Resolution Framework 1.0 and 2.0 during Covid19 pandemic,” he said.
Sareen stated that the commitment charges, which are a standard industry practice, are applied to the unused portion of approved loan amounts and only up to certain limits. These fees are being charged in response to the concerns expressed by some borrowers.
“But J&K Bank was not levying these charges till recently due to pandemic and other issues which had led to adverse audit observations.”
Sareen added that the bank has now automated the process of applying commitment charges.
“Having said that, since we believe our borrowers are an extended part of J&K Bank Family, we would request them to utilise all the sanctioned funds to enhance their businesses and earn more for themselves and those they employ in their enterprises.”
He also mentioned that as a goodwill gesture, the bank recently reduced its interest rates by 0.5%-1% for all borrowers across all business sectors, effective December 1, 2022.
“Besides, for the convenience of its customers the Bank shall continue to review its policies that includes to ease the loan processing mechanism, reduce interest rates and other charges especially in MSME and trade sector so as to minimize the cost of finance to its borrowers,” he added.Facebook or follow us on Twitter and Instagram. Subscribe us on Telegram and never miss a update!
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