New Delhi, July 19 (KNN) Federation of Indian Micro, Small and Medium Enterprises (FISME) has brought private lender Axis Bank under its advocacy radar for the exploitative foreclosure issue faced by the bank’s MSME customers.

In an effort to protect the rights of MSMEs the New Delhi headquartered association has sent a letter to Amitabh Chaudhry, MD and CEO of Axis Bank raising the issue.

The MSME Association has called out the Bank for employing practices which are against the Indian Banking norms and are in complete defiance of 'Code of Bank's Commitment to Micro and Small Enterprises' (CBCMSE) of which Axis is a signatory.

Speaking exclusively with KNN on this matter, Neeraj Kedia, Chairman Banking & Finance Committee at FISME said, “Although Axis Bank is a signatory to the CBCMSE, it is charging foreclosure/ prepayment from MSMEs.”

Explaining the intent of the letter Kedia said that Axis Bank is refraining from its commitment being a signatory to the Code but FISME will ensure that the interests of MSMEs are safeguarded.

FISME has received over a dozen cases pertaining to Axis Bank out of which seven have been reported in writing, where dissatisfied MSME customers have been subjected to heavy penalties while exiting.

“The Bank officials acquire new MSME accounts promising moon. But MSMES soon discover the trap as they brace for higher interest rates, hidden costs, over charging and substandard services,” read the letter.

Realizing their folly, the moment the distraught MSMEs opt for changing bank, immediately, the foreclosure / prepayment charges are imposed. Sometimes, non-compliance charge are levied at the time of exit, it said.

FISME has suggested that the Board should seek details from Axis officials about the foreclosure charges and non-compliance collected from MSEs.

The body has asked the bank to see in how many cases the charges were collected in contravention of the CBCMSE Code and appropriate action initiated.

It has also said that the bank should prohibit levying charges at the time of leaving the bank and consider them as mala-fide and informed that inaction and nonresponsive behaviour from the bank will constrain it to issue an advisory to MSMEs in this regard.

Executive Director at RBI in Mumbai has also been apprised by the association about the cases which is said to be getting escalated to Ministry of MSME, Department of Financial Services and the central bank.  (KNN Bureau)