The Supreme Court on Friday quashed the order of the National Consumer Disputes Redressal Commission (NCDRC) which barred banks from charging more than 30 percent interest on credit card dues.
A bench of Justices Bela M Trivedi and Satish Chandra Sharma overturned a 2008 decision of the NCDRC which found it an unfair business practice on the part of banks to charge interest rates of over 30 per cent on late payments to credit card users.
The court was hearing a petition challenging the NCDRC’s decision in the Awaz and others vs. RBI case in which the question before the NCDRC was whether banks can charge interest at the rate of 36 percent to 49 percent per annum to credit card users in case of default. payment within specified time; Whether such interest rates are equivalent to charging usurious interest rates and the Reserve Bank of India (RBI) is required to issue any circulars or guidelines prohibiting banks/non-banking financial institutions/moneylenders from charging interest above a certain rate.
NCDRC had said that the interest rate of more than 30 percent is considered as usurious rate.
Although the Reserve Bank of India (RBI) has instructed banks not to charge excessive interest rates, it has said that it does not have a policy to directly regulate the interest rates charged by banks and therefore the RBI has left the matter to the banks. Board of Directors of Banks. Therefore, RBI cannot be directed to issue further instructions as it is a discretionary power conferred under thr Banking Regulation Act, 1949.
The NCDRC said, “If the RBI is considered as one of the watchdogs of the nation’s finances and economy and the prevailing credit conditions invite its policy intervention, in our view, there is no. On an annual basis, credit card holders pay the amount before the specified date in case of default.
Pointing out that the RBI has issued various circulars that banks should not charge generous interest rates, the commission has failed to clarify what interest rates mean.
The detailed judgment is yet to be uploaded on the official web page of the court.
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