Wednesday, June 19, 2024

Interest rate change: Do banks have to inform borrowers individually? Here’s what consumer court said

For the past few months, banks have been revising interest rates on loans in line with the Reserve Bank of India’s repo rate hikes. But are they liable to inform the borrowers individually if there’s a change in the interest rate? The national consumer court has answered this in a latest ruling.
The National Consumer Disputes Redressal Commission (NCDRC), in a landmark ruling, said that lenders are not required to intimate borrowers personally about an automatic change in interest rates under the floating rate plan. This is because the borrowers have already agreed to any such revision while executing loan agreements with banks, the court held.
Such information on the bank’s website will be considered as a deemed notice, the NCDRC added.
ICICI Bank vs Vishnu Bansal case
The court also put aside an order by a state consumer court which said the opposite. NCDRC presiding member Dinesh Singh and member Karuna Nand Bajpayee said “a bank can increase or decrease the rate of interest under the floating rate of interest provided for in the loan agreement executed between the bank and the complainant (borrower) and any additional or further consent from the latter was not required, the same having already been agreed to in the loan agreement itself.”
“… findings of deficiency or unfair trade practice on the part of the bank cannot sustain,” it held in the ICICI Bank vs Vishnu Bansal case, according to a report in Economic Times.

While the bank, in this case, was open to pay Rs 1 lakh compensation to the complainant as goodwill and service gesture, without any acceptance or concession of ‘deficiency’ or ‘unfair trade practice’, the court noted that the lender had pointed out the dates of putting out the relevant notifications on its website. ICICI Bank even presented the dates of sending the reset letters to the complainant, the court noted, even though they were from the 2006 to 2008 period.
The consumer forum has instructed the state commission to release the amount deposited by the bank with interest to the complainant. The order can be appealed before the Supreme Court.
What is the case about?
India’s 2nd largest private sector bank ICICI Bank had appealed against a May 2021 order by the Delhi consumer commission in which it held lenders can’t revise home loan interest rates without the borrowers’ consent. Any automatic change in interest rates amounts to “unfair trade practice”, the order added.
The commission had also necessitated that banks seek their consent whenever home loans interest rates were being tweaked under the floating rate of interest plan.
Appealing against this order before the national forum, the private lender contended that the interest rate and the number of equated monthly instalments were hiked only in terms of the loan agreement which provided for floating rate of interest and the borrower had signed the same after reading.
Complainant Bansal, on the other hand, stated that had he been informed about rate hikes by the bank, he would have taken steps to get his loan transferred to another bank.

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