When one thinks of home loan, they generally think only of EMIs, not giving enough thought to other formalities and conditions involved. There are still some concepts that people either do not know or are not sure about. One of these is the franking charge, which is a (hidden) charge that a lender (home-buyer) must pay to the bank as part of the loan repayment.

This charge is paid with the stamp duty on the property papers. But, one needs to understand that franking and stamping are two different processes.

Stamp duty or franking charge?

Only a stamped legal document is considered valid. The stamp attaches with itself a stamp duty which is a government tax levied on property documents such as sale deed, transfer of property etc. Generally, the stamp duty is anywhere between 4-10 percent of the property value, but it may vary from state to state.

Did you know that the stamping process has a name? Franking is the process of stamping property documents, and franking charges are the charges involved.

While the stamp duty is the value of the stamp, franking is the value of putting the stamp on paper.

There are some facts one must know about franking-

• Franking charges are applicable on sale and loan agreements
• Franking agencies, such as banks and other agents, charge a fee for providing these services. In Maharashtra, this fee is set at 0.1 percent of the sale value or loan amount
• The franking charge can be deducted from the stamp duty. If the stamp duty of a document is 5.6 percent of the total value, and the franking charge is 0.1 percent, then the buyer has to pay 5.5 percent stamp duty
• According to a directive issued by Reserve Bank of India (RBI) in 2015, banks need to include stamp duty, registration charges, and other documentation charges while calculating a borrower's loan eligibility in cases where the property cost is up to Rs 10 Lacs
• Some banks ask for cash payments for small administrative charges
• Franking charges and its related rules may vary from state to state, or even within different banks or agents
• Banks offer franking services only for certain hours of a working day