In a pivotal decision, the Supreme Court has ruled that banks can legally charge interest rates exceeding 30% on credit card dues, affirming that such practices are within the regulatory bounds set by the Reserve Bank of India (RBI) and not considered unfair trade practices. This ruling overturns a 2008 verdict by the National Consumer Disputes Redressal Commission (NCDRC) which had categorized high interest rates as unfair.
The court, led by Justice Bela M. Trivedi and Justice Satish Chandra Sharma, pointed out that the NCDRC’s previous decision lacked legal foundation and overstepped its boundaries by attempting to rewrite the terms of credit card agreements. The justices emphasized that the terms agreed upon by banks and cardholders are transparent and made clear during the credit card application process, and thus should be honored as they are not unconscionable.
The ruling stresses the importance of transparency in the credit card application process, where banks are required to fully disclose all terms, including penalties for late payments and the potential for high interest rates on outstanding dues. It also highlights that consumers entering into these agreements are considered well-informed and consenting parties.
However, for cardholders who struggle to make timely payments, the decision may lead to higher financial burdens due to the possibility of interest rates climbing beyond 36%. This serves as a critical reminder of the need for financial discipline and the importance of timely payments to avoid escalating charges.
The judgment reinforces the RBI’s position as the central regulatory authority overseeing banking interest rates, clarifying that there was no breach of its guidelines by banks in setting these high rates.
