
The Supreme Court has ruled that banks can charge interest rates exceeding 30% on credit card dues, setting aside a 16-year-old National Consumer Disputes Redressal Commission (NCDRC) verdict that deemed such high interest rates an unfair trade practice. The NCDRC had previously held that charging interest rates above 30% per annum was excessive and amounted to the exploitation of consumers. However, the Supreme Court, in its judgment delivered on December 20, 2024, declared the NCDRC’s observations as “illegal” and inconsistent with the Banking Regulation Act, of 1949.
Justices Bela M Trivedi and Satish Chandra Sharma stated that the NCDRC’s ruling interfered with the powers delegated to the Reserve Bank of India (RBI). The court emphasized that there was no misrepresentation by the banks to deceive credit card holders and that the concept of “deceptive practice” was absent in this case. The court further clarified that the NCDRC did not have jurisdiction to rewrite contractual terms agreed upon by the banks and the customers.
The court agreed with the RBI’s submission that there was no need for the central bank to act against any specific bank regarding the interest rates, as the rates were in line with RBI’s guidelines. It also highlighted that credit card holders were adequately informed of the terms and conditions, including the interest rates when availing of the credit card facility. The ruling emphasized that the banks’ interest rates, determined by financial policies and communicated to consumers, could not be deemed unconscionable or unilateral.
The decision came after appeals were filed by Citibank, American Express, HSBC, and Standard Chartered Bank against the NCDRC’s 2008 ruling, which had held that the interest rates charged by these banks, ranging from 36% to 49% per annum, were exploitative. The Supreme Court’s ruling aligns with the principle that consumers are expected to be aware of the terms of credit card agreements and cannot later dispute the interest rates once they have agreed to the conditions laid out by the banks.