The Supreme Court has overturned a 2008 National Consumer Disputes Redressal Commission (NCDRC) ruling that capped annual interest rates on overdue credit card payments at 30%. The decision, delivered by a bench of justices Bela M. Trivedi and Satish Chandra Sharma, allows banks to determine interest rates within existing regulatory frameworks.
The ruling came in response to appeals by major banks, including Standard Chartered, Citibank, and HSBC, which argued that the NCDRC lacked jurisdiction to regulate interest rates—a domain overseen by the Reserve Bank of India (RBI). The Supreme Court’s verdict emphasized that credit card interest rates are subject to market dynamics and RBI guidelines, not consumer commissions.
The NCDRC had previously criticized banks for charging annual interest rates as high as 36%-49%, calling the practice exploitative and burdensome for financially distressed consumers. It also reproached the RBI for its inaction in defining “usurious” rates and permitting compounding practices. The commission had highlighted the significantly lower credit card interest rates in developed economies, urging moderation.
In contrast, banks defended the high rates as necessary to offset risks, cover operational costs, and maintain credit availability. They argued that interest rate caps would affect profitability and limit services.
The Supreme Court acknowledged these complexities and set aside the NCDRC’s decision, reinforcing that consumer fora cannot regulate credit card interest rates. This landmark ruling underscores the balance between market freedom and regulatory oversight in India’s financial sector.
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