The Kerala High Court has set aside an order of the Banking Ombudsman. The Ombudsman had rejected a borrower’s complaint about an increase in interest rate on a gold loan.
The petitioners obtained certain credit facilities by pledging gold ornaments with South Indian Bank through its different branches. The petitioners contended that the rate of interest which ought to have been satisfied by them was 14.5% alone; however, the bank unilaterally increased the same to 17%, in total disregard of the guidelines issued by the Reserve Bank of India.
The petitioners submitted complaint before Banking Ombudsman. The Bank also submitted their written statement. Later, the Ombudsman issued a finding that the Bank had sanctioned the cash credit facilities to the petitioners below the BPLR, which was changed to the above base rate, and the same was also communicated to the petitioners from time to time, and therefore, the allegations raised by the petitioners were incorrect.
In such circumstances, exercising the power under Clause 13 (1)(a) of the Banking Ombudsman Scheme, 2006 (hereinafter referred to as the ‘Scheme’), the complaint filed by the petitioners was rejected. This rejection order was challenged before the High Court.
The Court noted that the Ombudsman had earlier directed the bank to produce its credit policy and a table showing the interest rate structure, and had assured that the complaint would be adjudicated after receipt of the information. However, the impugned order did not disclose whether the information was received or whether it was communicated to the petitioners. The court further noted that the impugned order had been issued in the form of a letter and signed by an unnamed officer attached to the Reserve Bank of India.
Holding the order unsustainable, the court allowed the writ petition, set aside the impugned order and directed the Ombudsman to pass fresh orders on the complaint in accordance with the observations in the judgment, within four months
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