The court docket decided that the banking ombudsman failed considerably in adjudicating the petitioner’s case.
The court docket famous that the petitioner was persistently charged a better rate of interest all through the mortgage tenure with none obvious justification.
The Allahabad High Court has noticed that the Reserve Bank of India has been a “mute spectator” whereas banks are imposing arbitrarily excessive-rates of interest on clients regardless of tips issued by the banking regulator.
The remark was made by a bench comprising Justices Mahesh Chandra Tripathi and Prashant Kumar whereas disposing of a petition filed by Manmeet Singh who had availed of a mortgage of Rs 9 lakh from a personal financial institution.
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“Surprisingly, RBI had been issuing guidelines but has done nothing for the implementation of the same. They have just been a mute spectator allowing the banks to charge arbitrarily a very high rate of interest,” the court docket noticed.
On the RBI’s accountability as the banking regulator in the nation, the court docket mentioned, “Even if the benefit of doubt is given to the banks that they are free to charge the interest rate but it is duty of the RBI to see that the customers are not inconvenienced by huge rate of interest charged by the banks.”
The petitioner had obtained Rs 9 lakh mortgage from the Standard Chartered Bank with a variable rate of interest of 12.5 per cent each year. After repaying off the complete quantity, the petitioner requested a ’no dues certificates’ and property doc from the financial institution, which had been promptly supplied.
When Singh checked his mortgage account, he was shocked to search out that the financial institution had debited a complete of Rs 27 lakh whereas it ought to have debited, in accordance with the petitioner, about Rs 17 lakh as per the rate of interest of 12.5 per cent.
The petitioner sought decision from the banking ombudsman. However, his criticism was closed with out offering him a duplicate of the financial institution’s reply.
The petitioner’s plea was that the banking ombudsman had closed the criticism with out giving any alternative to him to current his case.
Advocate showing for the petitioner argued that curiosity for the mortgage was charged at the charge of 16-18 per cent, versus the 12.5 per cent the petitioner had agreed to pay.
On the different hand, counsel for the Standard Chartered Bank argued that the settlement explicitly outlined a variable rate of interest topic to revision each three months.
Advocate Sumit Kakkar showing for the RBI argued that it had regulated the rates of interest charged by banks, and that the charge of curiosity on loans relied on numerous exterior elements.
The court docket famous that the petitioner was persistently charged a better rate of interest all through the mortgage tenure with none obvious justification.
“The bank is trying to mask their arbitrary and illegal action by stating that the petitioner had agreed in the loan agreement to pay a floating rate of interest and RBI has allowed the bank to charge interest based on the market conditions,” the order mentioned.
The court docket additional noticed, “It determined that the bank’s imposition of a higher interest rate violated the RBI master circular dated July 2, 2007.”
The court docket additionally mentioned that the petitioner was not knowledgeable about it and consequently didn’t settle for the variable rate of interest charged by the financial institution.
“The respondent no.5 (bank) failed to provide and adopt a transparent method of charging of the interest. It has been pointed out that the respondent-bank did resort to an arbitrary methodology. As per the guidelines given by the RBI, any change in that rate cannot be applied to the customers without serving notice to him and without his consent,” the order said.
The court docket decided that the banking ombudsman failed considerably in adjudicating the petitioner’s case.
The petitioner was not afforded any probability to reply to the objections raised by the Standard Chartered Bank, it mentioned, and despatched the matter again to the banking ombudsman to resolve afresh.
(This story has not been edited by News18 workers and is revealed from a syndicated information company feed – PTI)
