The Supreme Court on Monday asked RBI to examine within six weeks the steps being taken for proper implementation of the marginal cost of funds based lending rate (MCLR) regime and whether repo rate benefits are being passed on to customers by the banks.
A bench led by Chief Justice Ranjan Gogoi asked RBI to consider the issue and give its response within six weeks to NGO Moneylife Foundation, which has raised the issue with the banking regulator in October last year. It also left it open for the NGO to approach the court if it was aggrieved with the RBI’s response.
The NGO through senior counsel Shyam Divan alleged that the manner in which individual banks and NBFCs were implementing interest directives especially the floating rate loans was “arbitrary and discriminatory” and in violation of a citizen’s fundamental rights.
Challenging the manner of implementation of the Reserve Bank of India (Interest Rate on Advances) Master Directions 2016 by banks in the country, Moneylife said that there was tremendous opacity in the floating rates calculated by the banks in respect of their customers and RBI despite having knowledge of the malpractices is refusing to issue and enforce appropriate directions that the benefits should be passed on to the consumers.
Stating that the wrongful practices deserved to be curbed forthwith, it said that the banking companies and NBFCs should publish the methodology of setting the rate of interest and particulars on their websites on a weekly basis. “At a given time, there is huge disparity in the interest being charged from old customers and new customers. New customers are being offered loans on a floating rate of interest at a rate that is much lower than existing customers with respect to similar small loans in the fields of housing, education and consumer goods. Effectively, the banks are changing the rate for one set of customers not the others. This is gross discrimination in as much as it is in the teeth of equal protection of law enshrined under Article 14 of the Constitution of India,” the PIL said.