The Allahabad High Court has said that the Reserve Bank of India remains a “silent spectator” while banks are imposing arbitrarily high interest rates on customers despite guidelines issued by the banking regulator.
The remarks were made by a bench of Justice Mahesh Chandra Tripathi and Justice Prashant Kumar while disposing of a petition filed by Manmeet Singh, who had taken a loan of Rs 9 lakh from a private bank.
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“It is surprising that RBI is issuing guidelines but has done nothing for its implementation. They are mere mute spectators and allowing banks to arbitrarily charge very high interest rates,” the court said.
On the responsibility of RBI as the banking regulator in the country, the court said, ‘Even if banks are given the benefit of doubt that they are free to charge the interest rate, it is the duty of the RBI to see that the customers are satisfied with the interest charged by the banks. The huge rate did not cause any inconvenience.
The petitioner had obtained a loan of Rs 9 lakh from Standard Chartered Bank at a variable interest rate of 12.5 per cent per annum. After paying the entire amount, the petitioner requested a ‘No Dues Certificate’ and property documents from the bank, which were promptly provided.
When Singh checked his loan account, he was shocked to see that the bank had debited a total of Rs 27 lakh, whereas according to the petitioner, as per the interest rate of 12.5 per cent, around Rs 17 lakh should have been debited. .
The petitioner sought resolution from the Banking Ombudsman. However, his complaint was closed without providing a copy of the bank’s reply.
The petitioner’s argument was that the Banking Ombudsman had closed the complaint without giving him any opportunity to present his side.
Counsel appearing for the petitioner argued that the interest for the loan was charged at the rate of 16-18 per cent, while the petitioner had agreed to pay 12.5 per cent.
On the other hand, counsel for Standard Chartered Bank argued that the agreement clearly outlined a variable interest rate subject to revision every three months.
Advocate Sumit Kakkar, appearing for RBI, argued that it has regulated the interest rates charged by banks and the rate of interest on loans depends on various external factors.
The court said that the petitioner was charged a consistently high interest rate throughout the loan tenure without any apparent reason.
The order said, “The bank is trying to hide its arbitrary and illegal action by saying that the petitioner had agreed to pay interest at floating rate in the loan agreement and the RBI had given the bank the interest rate depending on the market conditions. Allowed to recover.”
The court further said, “It was held that the imposition of higher interest rate by the bank is in violation of the RBI Master Circular dated July 2, 2007.”
The court also said that the petitioner was not informed about the same and as a result he did not accept the variable interest rate charged by the bank.
“Respondent No. 5 (Bank) failed to provide and adopt a transparent method of charging interest. It is pointed out that the respondent-bank resorted to an arbitrary method. As per the guidelines given by RBI, any change in that rate cannot be implemented without giving notice to the customers and without their consent,” the order said.
The court determined that the Banking Ombudsman had significantly failed to decide the petitioner’s case.
It said the petitioner was not given any opportunity to respond to the objections raised by Standard Chartered Bank and the matter was sent back to the Banking Ombudsman for a fresh decision.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – PTI)
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