The Supreme Court of India has upheld its earlier ruling that overturned a National Consumer Disputes Redressal Commission decision restraining banks from charging excessive interest rates on credit cards, court filings reveal.
After banks appealed, the high court last year struck down a commission decision to cap annual interest rates at 30% when cardholders fail to make full payment on the payment-due date. The banks appealing the commission’s decision included Citibank, Hong Kong and Shanghai Bank, American Express Bank and Standard Chartered Bank.
In January this year, the organization that had first asked the commission to cap the rates, appealed the court’s decision, saying even the benchmark fixed by the public and private banks for even unsecured financing is not more than 14% per year.
“The banks cannot be allowed to exploit the consumer by charging a higher rate of interest” on unsecured accounts tied to credit card services,” the nongovernmental organization Awaaz said in its appeal. “And for this very same reason, they are also charging fancy service charges. So the banks are exploiting and squeezing the cardholders from both the ends. And in totality, it comes to beyond 90% per annum in case of consistent default of 12 months.”
Banks concealed the fact from the Supreme court that, “though there is a de-regulation in the matter of fixing rate of interest, it was with the rider and proviso that there will be not be a charging of usurious rate of interest,” Awaaz added.
However, the Supreme Court refused to hear the appeal, noting any further rate changes first would need regulatory input from the Reserve Bank of India. “As in the current regulatory framework, the banks are within their rights to charge the current interest rates,” the court said in its ruling.
Indian Banks often charge annual rates ranging from 36% to 42% when balances are not paid in full by their due dates.
