NATIONAL
CONSUMER DISPUTES REDRESSAL COMMISSION
Reserve Bank of India &
Ors.
Opposite Parties
(from the order dated 06.05.2004 in A No.1706 of 2003 of the State Commission, Madhya Pradesh)
Mukesh Rajput and Another
Respondent
BEFORE :
MRS
RAJYALAKSHMI RAO, MEMBER
MR
ANUPAM DASGUPTA, MEMBER
In C.C. No. 51 of 2007
For the Complainant : Mr.Mayur R. Shah, Advocate
For Opp.Party No.1 : Mr.H.S. Parihar, Advocate for RBI
For Opp.Party No.2 : Mr.Mahip Datta and Mr.Anil Kumar,
Advocates
For Opp.Party No.3 : Mr.Alok Tripathi, Advocate
For Opp.Party No.4 : Ms.Neha Cowshish and Mr.Rahul
Malhotra,
Advocates
For Opp.Party No.5 : Mr.Ajay Monga, Advocate with
Ms.Nidhi
Das, A/R
AND
In R.P. NO. 1913 OF 2004
Mr.Sachin Chopra,
Advocate
For the Respondent : Ms. Indu Malhotra, Sr. Advocate as
24.10.2007
Various States have enacted laws controlling charging of exorbitant rate of interest by the money-lenders. But, it is apparent that there is no restriction with regard to charging of usurious rate of interest by the Banks or Non-banking financial institutions in their money lending activity. There is also challenge to various unjustified demands such as Processing Fee, etc., and the principle of DAMDUPAT is not made applicable. Hence, complaint is filed before this Commission under the Consumer Protection Act, so as to protect the consumers from unjustified exploitation of their needs.
CONSUMER COMPLAINT NO. 51 OF 2007
This complaint is filed
by Registered Trust, namely, Awaz and consumer organization, viz., Jagrut
Nagrik and one Pradeep Kumar Thakur, against the (i) Reserve Bank of India
(RBI), (ii) HSBC, (iii) American Express Bank Ltd., (iv) Citibank and (v)
Standard Chartered Bank (Credit Card Division) contending that various
commercial banks are indulging in unfair trade practice by charging usurious
interest on the loans advanced by the Banks as well as on the amounts payable
under credit cards.
It is pointed out that :
(i)
on credit cards, the banks are
charging interest roughly at the rate of 36% per annum ;
(ii)
they are charging various financial
charges, such as, late payment fee of Rs.200/- to Rs.500/- despite the decision
of the Apex Court that penal interest cannot be capitalized and no interest can
be charged on penalty ;
(iii) the banks are charging transaction fee of 2.5% for cash advance against credit card, ATM, etc. - this is over and above the interest at the rate of 2.95% per month on credit facility; and
(iv)
late fee of 30% of the minimum due is being charged up to Rs.500/- per
month, if the credit card bill is not paid by the due date.
Various other aspects are
pointed out and a prayer is made that the banks may be restrained permanently
from charging excessive rate of interest and service charges de hors ceiling
prescribed under the RBI guidelines/circulars.
Prayer is made for refund of the excessive interest charged on the
credit cards by the respondent commercial banks.
When the Notice was
issued, learned counsel appearing on behalf of RBI, after obtaining
instructions, submitted that the RBI had not issued any guidelines restricting
the banks from charging any given rate of interest. Further, in the affidavit dated 3.10.2007, it
has been stated that -
Further, it may be emphasized that the frame to fix lending rates
without reference to BPLR and regardless of loan were granted in 9 specific
cases which include loans for purchase of consumer durables, non-priority
sector personal loans including credit card dues and loans covered by refinance
schemes of term lending institutions.
REVISION
PETITION
NO. 1913 OF
2004
When this Revision
Petition came up for hearing, it was contended on behalf of the petitioner, DCM
Financial Services Ltd., that the petitioner was charging interest at the rate
of 3% per month. In that Revision Petition,
we had issued Notice to the Central Government.
In response to the Notice, on 7.12.2006, Sr.Advocate, Mr.R.V. Sinha, on
behalf of the Union of India submitted that the RBI had to control the rate of
interest charged by the non-banking financial institutions and, at present, no
maximum limit for interest had been fixed by the RBI and hence the interest is
recovered by non-banking financial institutions on the basis of contract. In view of the aforesaid submission, in our
order dated 7.12.2006, we observed as under :
Prima facie, this stand by the Central Government appears to be
without considering the reality of life.
Consumers who are in absolute need are having no bargaining capacity and
are forced to pay interest which is unjustifiable, unreasonable and coercive.
In the present case, interest at the rate of 36% per annum is sought to be
recovered. There must be some control on
such banking and financial institutions with regard to the rate of interest and
to protect the consumers, some regulations are required to be framed. In a welfare state, the financial
institutions cannot be permitted to take advantage of the financial weakness of
the consumers and enrich themselves. If
this is permitted, the whole purpose of the Consumer Protection Act would be
frustrated.
Thereafter, the matter
was adjourned to 29.1.2007.
Subsequently, learned counsel on behalf of Union of India submitted that
Central Government has adopted certain policies with regard to the rate of
interest by the banks and the same would be filed along with affidavit.
Finally, on 1.5.2007,
after hearing the learned counsel for the Union of India and the representative
of the RBI, we passed the following order:
Fortunately,
various States have passed orders restricting money lenders from charging
interest beyond a particular limit. But,
today a statement is made by the learned counsel appearing on behalf of the
Union of India Finance Department that they have not issued any directions to
Non-Banking Financial Companies (NBFCs) restricting the rate of interest. He states that it is a matter of contract
between the parties and a needy person is left at the mercy of such financial
institutions as there is no law to the effect that the NBFCs cannot charge
interest beyond a particular rate. On
behalf of the RBI, it has been stated that they have not issued any circular
restricting the rate of interest by the NBFCs or the Banks.
From the
stand taken by the Union of India and the RBI, prima facie, it appears that the
Union of India and the RBI have given green signal to the NBFCs or the Banks to
charge rate of interest depending upon the vulnerable circumstances of the
borrower. A needy person can be
exploited without any restriction. In
our view, this is against the spirit and object of the
Consumer Protection Act and may amount to unfair trade practice.
Learned counsel for the
Learned counsel for the
It appears that consumers are left at the mercy of
exploiters. Considering the fact that
there is apparent exploitation by the NBFCs and also by certain Banks by
charging interest, which may be termed as shylockian interest or usury
practice, the matter requires serious consideration as consumers in this
country are required to be fully protected against such unfair trade practices
as per the provisions of the Consumer Protection Act.
We appoint Ms.Indu Malhotra, Advocate, [59, Lawyers
Chamber, Supreme Court of India,
The matter was then
adjourned to 18.9.2007 to see that the RBI takes appropriate steps for
controlling the usurious interest rates charged by the commercial banks and
non-banking financial institutions.
On that day, the learned
amicus curiae pointed out various circulars issued by the RBI while exercising
powers under Section 45L of the Reserve Bank of India Act, providing that
usurious rate of interest cannot be charged.
She also produced on record the Policy Statement of RBI for the year
2007-08.
We note that,
unfortunately, this was not brought to our notice by the concerned officers of
the RBI who appeared on various dates.
From the various circulars issued by the RBI, it appears that the RBI
repeatedly emphasized that usurious rates of interest cannot be charged by the
banks but it appears that there is no control on this issue and the
banks/non-banking financial institutions are exploiting the situation and the
concerned officers of RBI appear to be unaware of the same.
We would add that under
the Consumer Protection Act, charging of such rates of interest would amount to
exploitation of the borrowers needs and to a large extent amount to unfair
trade practice.
In this set of
circumstances, there is no alternative but to issue summons to responsible
officers of the RBI. Registry is
directed to issue summons to (i) Chief General Manager, Department of
Non-banking Financial Companies and (ii) Chief General Manager, Department of
Banking Operations of the RBI, to remain personally present on 10.12.2007.
Stand over to
Meantime, the commercial
banks, which have not filed their written version, shall file the same.
.J.
( M.B. SHAH)
PRESIDENT
(RAJYALAKSHMI RAO)
MEMBER
(ANUPAM DASGUPTA)
MEMBER
/sra/ 24,25
/ Court-1