New Delhi: The Supreme Court of India directed Reserve Bank of India (RBI) to communicate its decision on the representation over banks delaying passing on the benefit of lower interest rates to those who have taken loans at floating interest rates.
A bench of chief justice Ranjan Gogoi and justices S K Kaul and K M Joseph asked RBI to communicate within six weeks its decision to public trust ‘Moneylife Foundation’ which has filed the representation alleging that banks and FIs take tardy approach in lowering interest rates despite the central bank’s decision on the repo and reverse repo rates.
The Reserve Bank of India undertakes bi-monthly monetary policy review and sets the repo rate -- at which it lends money to the banking/financial system, setting the tone for the interest rate regime which impacts, among others, EMI for home and auto loans. Reverse repo is the rate at which it borrows money from banks. “According to the petitioner(s) it has not been informed of the result of such consideration leaving the petitioners with no option but to approach this Court.
“We are of the view that, at this stage, the Reserve Bank of India should be directed to communicate its decision in the matter covered by the representation/ letter of the petitioner(s) dated 12.10.2017 to the petitioner(s) within a period of six weeks from today,” the bench said.
It granted liberty to the trust and others to approach the court once again if they are not satisfied with the response of the RBI.
The PIL has challenged the manner of implementation of the Reserve Bank of India (Interest Rate on Advances) Master Directions 2016 by banking companies in the country.
Confining the plea to the loans taken on floating interest rates, it said so far as such home, education and consumer loans are concerned, the interest rates moved up or down depending on the interest rate situation. It said: “When RBI raises the Repo and reverse repo rates, i.e. the rates at which it lends to/ borrows from the commercial banks the interest rate on the loan would normally be expected to move up.