NEW DELHI: The Supreme Court asked the Reserve Bank of India on Monday to break its 10-month silence and reveal its decision on complaints that banks do not reduce floating interest rates on existing loans for buying homes, vehicles or consumer durables proportionate to its repo rate cuts (rate at which RBI lends money to banks).
Petitioner ‘MoneyLife Foundation’ told the court that it wrote to RBI last October complaining “whenever the interest rate goes down, new borrowers are offered a lower interest rate with respect to similar small loans in the fields of housing, education and consumer goods, against principles of natural justice and equity. There is minimal or often no reduction in interest rates of old borrowers”.
MoneyLife Foundation, in its letter to RBI, had said, “There is minimal or often no reduction in interest rates for old borrowers.” Senior advocate Shyam Divan said, “Effectively, banks are charging one set of borrowers a rate of interest which is different for similarly placed earlier borrowers. This is gross discrimination and unfair banking practice.” The petitioner said according to its estimation “the wrongful loss to consumers/borrowers is well in excess of Rs 10,000 crore for denial of every 1% of the benefit (reduction in floating interest rate).”
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