The Allahabad High Court criticized the Reserve Bank of India (RBI) for being inactive in preventing banks from imposing high interest rates on customers, despite guidelines from the banking regulator.
Petitioner’s Loan Experience
A petitioner, Manmeet Singh, who took a loan of Rs 9 lakh from a private bank, raised concerns about the arbitrarily high interest rates imposed by banks.
RBI’s Role and Court’s Observation
The court noted that the RBI, despite issuing guidelines, acted as a “mute spectator” and allowed banks to charge excessively high interest rates. The court emphasized the RBI’s duty to ensure customers are not inconvenienced by such rates.
Petitioner’s Complaint and Banking Ombudsman
Manmeet Singh, after repaying his loan, discovered discrepancies in the amount debited by the bank. His complaint to the banking ombudsman was closed without providing him with the bank’s response, leading to the petitioner’s dissatisfaction.
Court’s Verdict on Interest Rates
The court found that the bank had consistently charged a higher interest rate without proper justification. It determined that the bank’s actions violated RBI guidelines and sent the matter back to the banking ombudsman for reconsideration.
Lack of Transparency and Court’s Decision
The court highlighted the bank’s failure to adopt a transparent method for charging interest, emphasizing the importance of notifying customers about any changes. The petitioner was not informed about the interest rate change, and the court directed the banking ombudsman to reevaluate the case, ensuring the petitioner’s right to respond to the bank’s objections.
