Allahabad HC concerned over banks charging ‘very high’ rates of interest

Prayagraj, Jan 24 – The Allahabad High Court has observed that despite guidelines issued by the Reserve Bank of India (RBI), banks are imposing arbitrarily high interest rates on their customers.

A bench of Justice Mahesh Chandra Tripathi and Justice Prashant Kumar observed this while disposing of a petition filed by one Manmeet Singh.

The court observed, “Surprisingly, RBI had been issuing guidelines but has done nothing for the implementation of the same. They have just been a mute spectator allowing the banks to charge arbitrarily a very high rate of interest.”

Further discussing RBI’s responsibility as the banking regulator in the country, the court said, “Even if the benefit of doubt is given to the bank that they are free to charge the interest rate, but it is duty of the RBI to see that the customers are not inconvenienced by huge rate of interest charged by the banks.”

The petitioner stated before the high court that he had obtained a Rs 9 lakh loan from Standard Chartered Bank with a variable interest rate of 12.5 per cent per annum.

After repaying the entire amount, the petitioner requested a ‘no dues certificate’ and property document release from the bank, which were promptly provided.

Later, on closing the loan account, the petitioner discovered an unauthorised debit of Rs 27 Lakh. At 12.5 per cent interest per annum, the amount to be paid was a little over Rs 17 lakh. Therefore, he filed a complaint with Standard Chartered Bank.

Petitioner sought resolution from the banking ombudsman of the RBI. However, the petitioner’s complaint was closed without providing him with a copy of the bank’s reply.

Petitioner’ plea was that the banking ombudsman had closed the complaint without giving any opportunity to the petitioner to present his case.

Advocate Utkarsh Srivastava, appearing for petitioner, argued that interest for the loan was charged at the rate of 16-18 per cent, instead of 12.5 per cent which the petitioner had agreed to pay.

amita/dpb

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