Central Information Commission
Shri.Subhash Chandra Agrawal vs Reserve Bank Of India on 21 September, 2011
CENTRAL INFORMATION COMMISSION
Club Building, Old JNU Campus,
Opposite Ber Sarai, New Delhi -110067
Tel: + 91 11 26161796
Decision No. CIC/SM/A/2011/000404/SG/14735
Appeal No. CIC/SM/A/2011/000404/SG
Relevant Facts emerging from the Appeal:
Appellant : Mr. Subhash Chandra Agrawal,
1775 Kucha Lattusha,
Dariba, Chandini Chowk,
Delhi- 110006
Respondent : Mr. Ashok Joshi
CPIO & General Manager Reserve Bank of India (RBI), Department of Banking Operations and Development, Central Office, Shahid Bhagat Singh Marg, Fort, Mumbai- 400001 RTI application filed on : 12/10/2010 PIO replied : 22/11/2010 RIA 1488 (2010-11) First Appeal filed on : 29/11/2010 Order of First Appellate Authority : 24/12/2010 Second Appeal received on : 18/01/2011 S. No. Information Sought PIO's Reply
1. Complete and detail information about The Department of Banking Operations and role of Reserve Bank of India over Development(DBOD) of RBI is entrusted with the functioning of banks; It is monitoring, responsibility of regulation of commercial banks under the regulatory, advisory or any other? provisions contained in Banking Regulation Act,1949 and the Reserve Bank of India Act,1934 and other related statutes and development of Banking policies. This includes the monitoring of banks maintaining the prescribed cash and statutory liquidity reserves, appointment of Chief Executive Officers and certain operational matters as provided in the statute.
The Department works towards promoting and fostering a sound and competitive banking system by laying down prudential regulations relating to capital adequacy, income recognition, asset classification, provisioning for loan and other losses, investment valuation, accounting and disclosure standards, asset-liability management and risk management systems.
The other important areas of regulation include licensing of new banks, expansion of foreign and domestic banks, approval of setting up of subsidiaries and undertaking new activities by commercial banks and follow-up for rehabilitation of weak banks.
2. Are private-sector banks accountable to The private sector banks are regulated under the companies RBI or any other regulatory body for their Act, 1956. RBI issues license to these banks under Section misdeeds and malpractices in this era of 22 of the B.R. Act, 1949. These banks are governed under free economy? various provisions of the B.R. Act, 1949 and RBI Act, 1934.
7. Steps taken by RBI as monitoring In terms of extant RBI guidelines, in the context of granting Page 1 of 6 authority to make banks do away with greater functional autonomy to banks, freedom has been unapproved policy of charging given to scheduled commercial banks, including public foreclosure charges/penalty on pre- sector banks, on all operational matters pertaining to payment of loans. banking transactions. Foreclosures charges are generally levied by banks as it adversely impacts their asset-liability management. With effect from September,1999, banks have been given the freedom to fix service charges for various types of service charges, banks should ensure that the charges, banks should ensure that the charges are reasonable and not out of line with the average cost of providing these services.
Further, in terms of RBI's 'Guidelines on Fair Practices Code for Lenders'(paragraph 2.4.2(i )(a) of the Master Circular dated July 1,2009 on - Loans and Advances- Statutory and Other restrictions-(copy enclosed), banks have been advised that loan application forms should be comprehensible and should include information about the fees/charges , if any, payable for processing , the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that meaningful comparison with other banks can be made and an informed decision can be taken by the borrower.
8. Other steps (even as advisory) taken by Refer to reply of query no.7 RBI after 03/09/2009 asking banks to do away with unapproved policy of charging foreclosure charges/penalty on pre-
payment of loans.
9. Any target-date by which banks will have Same as above to do away with unapproved policy of charging foreclosure charges/penalty on pre-payment of loans
10. What is the maximum interest-rate In terms of the Master Circular on Credit Card Operations of allowed to be charged on default- Banks/Circulars No. DBOD.FSD.16/24.01.01/2010-11 dated payments on credit-card dues? July 01, 2010, it has been advised that Credit Card dues are in the nature of non-priority sector personal loans and as such, up to June 30, 2010, banks were free to determine the rate of interest on credit card dues without reference to their BPLR and regardless of the size in terms of the Master Circular on Interest rates on advances. However, banks have been advised vide their circular no. DBOD.
No.Dir.BC.88/13.03.00/2009-10 dated April 09, 2010 that Base Rate system will replace the BPLR system with effect from July 01, 2010. All categories of loans should henceforth be priced only with reference to the Base Rate except:
a) DRI Advances
b) Loans to Bank's own employees
c) Loans to Bank's depositors against their own deposits.
Banks are advised to be guided by the instructions contained in the circulars dated April 09, 2010 while determining the interest rate on Credit Card dues. Banks have also been advised vide the circular no. DBOD. No. Dir. BC. Dir. BC. 93/13.03.00/2006-07 dated May 7, 2007 that they should prescribe a ceiling rate of interest, including processing and other charges, in respect of small value personal loans and loans similar in nature. The above instructions are applicable to Credit Card dues also. In case, banks/NFCs charge interest rates which vary based on the payment/default Page 2 of 6 history of the cardholder, there should be transparency in levying of such differential interest rates. In other words, the fact that higher interest rates are being charged to the cardholder on account of his payment/default history should be made known to the cardholder. For this purpose, the banks should publicize through their website and other means, the interest rates charged to various categories of customers. Banks/NBFCs should upfront indicate to the credit card holder, the methodology of calculation of finance charges with illustrative examples, particularly in situation where a part of the amount outstanding is only paid by the customer.
Further, in terms of paragraph 2.5 of RBI Master Circular DBOD. DIR. BC.No.9/13.03.00/2010-11 dated July 1, 2010 on "Interest rates on advances".
Banks are permitted to formulate a transparent policy for charging penal interest with the approval of their Board of Directors. However, in case of loans to borrowers under priority sector, no penal interest should be charged for loans up to Rs.25, 000. Penal interest can be levied for reasons such as default in repayment, non-submission of financial statements, etc. However, the policy on penal interest should be governed by well-accepted principles of transparency, fairness, incentive to service the debt and due regard to genuine difficulties of customers.
13. Steps taken by RBI to have uniform rules The banks/ NBFCs should not levy any charge that was not regarding penalties and interest-rates in explicitly indicated to the credit card holder at the time of regard to credit-cards issued by different issue of the card and without getting his/her consent. banks. However, this would not be applicable to charged like service taxes, etc. which may subsequently be levied by the Government or any other statutory authority.
14. Is RBI aware that Banks impose 'over- The RBI has no information to furnish in this regard.
limit' charges instead of blocking payment of credit-cards beyond their sanctioned limit?
16. Steps taken by RBI to have uniform As regards Scheduled Commercial Banks, with effect from rules/interest-rates by all the banks in October 18, 1994 RBI had deregulated the interest rates on interest of loan-takers presently being advances above Rs. 2 lakh and these interest rates were harassed by private and multinationals determined by banks themselves with the approval of their banks. Banks do not give advantage of Boards, subject to Benchmark Prime Lending Rate(BPLR) RBI steps to reduce interest-rates to their and spread guidelines. Individual banks therefore existing loan-takers. determined interest rates to be charged to a particular borrower subject to BPLR and spread guidelines. Interest rate on loans up to Rs. 2 lakh carried the prescription of not exceeding the BPLR.
The above guidelines based on the BPLR system has been replaced by new guidelines on the Based Rate System issued vide circular DBOD. No. DIR. BC.88/13.03.00/2009-10 dated July 01, 2010. In terms of the new guidelines, banks will determine their actual lending rate on loans and advances with reference to the Base Rate. All categories of loans will be priced only with reference to the Base Rate, which will be announced by banks after seeking approval from their respective Boards. Since the Base Rate will be the minimum rate for all loans, banks will not be permitted to resort to any lending below the Base Rate. Accordingly, the current stipulation of BPLR as the ceiling rate for loans up to Rs. 2 lakh been withdrawn.
In this regard the RBI Master Circular DBOD. DIR.BC. No.9/13.03.00/2010-11 dated July 01, 2020 on "Interest Page 3 of 6 rates on advances" is available on website www.rbi.org.in
18. Mechanism at RBI to monitor Banks The RBI have no information to furnish in this regard passing on benefits of such RBI steps to their customers/loan-takers.
19. Monitory cost or financial burden, if any, The RBI have no information to furnish in this regard on exchequer through RBI steps for reducing interest-rates for loan-takers.
20. Are such steps to reduce interest rates What is being sought is an opinion/view to be formulated by aimed only for new loan takers from the RBI which is not information as defined under RTI Act, banks? 2005.
21. Are such steps not to relieve existing loan What is being sought is an opinion/view to be formulated by takers burdened by ever increasing the RBI which is not information as defined under RTI Act, interest rates under floating rate systems? 2005.
22. Are banks allowed only for upward What is being sought is an opinion/view to be formulated by revision of interest rates under floating the RBI which is not information as defined under RTI Act, rate system? And not for reducing interest 2005. rates when interest rates may show downward trend especially due to RTI steps to relieve loan takers from interest burden?
23. Steps taken by RBI to ensure Refer to reply of question No. 16 Banks(especially private ones) reducing interest-rates for existing loans-takers as follow-up of RBI step to reduce interest burden for loan takers.
24. Is RBI aware that some Banks like Kotak The RBI have no information to furnish in this regard Mahindra Bank is charging differential-
rates of interest rising up to 50 percent per annum on bills drawn through this Bank?
25. Is any upper interest-rate fixed for Banks Refer to reply of question No. 16 to charge interest on any kind of loan/business transaction etc?
26. If yes, mention the maximum permissible Refer to reply of question No. 16 interest-rate allowed to be charged Banks.
27. Is RBI aware of malpractices in ICICI The RBI has no information to furnish in this regard.
Bank whereby this Bank has accumulated huge funds in suspense-account by cashing cheques deposited by its account-
holders having minor discrepancies like spellings, missing of account-numbers of account-number etc., rather than either tracing or informing the depositors or arranging to return the instrument without getting it cashed through clearing?
32. Total such amount in all banks in The RBI has no information to furnish in this regard.
suspense-account.
Grounds for First Appeal:
The Appellant is not satisfied with the PIO's reply to query no. 1,2,7,8,9,10,13,14,18,19,20,21,22,23,24,25,26,27 and 32.
Order of the First Appellate Authority:
For query no. 1 the FAA finds the order of the CPIO as adequate. For query no. 2, 7, 8 and 9 the FAA finds no comment on his side and finds that the appellant contention has no merit.
For query no. 10 find the information as sufficient. For query no. 13, the FAA directed the CPIO, DBOD to issue a reply clarifying this aspect. For query no. 14, 18 and 19, the FAA does not find any merit in the contention.Page 4 of 6
For query no. 20, 21, 22, 23 and 24 the FAA agreed with the reply of PIO. For query no. 25, 26, 27 and 32 the FAA do not consider necessary to comment and disposed of the appeal.
Grounds for Second Appeal:
The Appellant wants the related and sought document to be provided to him.
Relevant Facts emerging during Hearing on 17 August 2011: The following were present Appellant: Mr. Subhash Chandra Agrawal;
Respondent : Mr. Avinash, Assistant Legal Advisor on behalf of Mr. Ashok Joshi CPIO & General Manager on video conference from NIC-Mumbai Studio; " The PIO has provided most of the information but the Appellant is seeking the following specific information:
1 Queries 7, 8 & 9: If RBI has taken any steps to abolish foreclosure charges/penalty on pre-
payment of loans. The Appellant will provide photocopies of such communications. If no steps have been taken this should be stated.
2 Query-10: What is the maximum interest-rate allowed to be charged on default-payments on credit-card dues? The PIO will give specific information.
3 Query-13: If any steps has taken by RBI to have uniform rules regarding penalties and interest-rates in regard to credit-cards issued by different banks.
4 Query-28 to 32: The matter is adjourned with respect to queries 28 to 32.
The Appellant wants to appreciate the steps take by RBI subsequent to filing of present RTI application when it constituted Damodaran Committee to look into the aspects highlighted in this application."
The respondent stated that he did not have information regarding queries 28 to 32. The Commission therefore adjourned the hearing to 21 September 2011.
Relevant Facts emerging during Hearing on 21 September 2011: The following were present Appellant: Mr. Subhash Chandra Agrawal;
Respondent : Mr. Abhilash, Asstt. Legal Advisor, Assistant Legal Advisor on behalf of Mr. Ashok Joshi CPIO & General Manager on video conference from NIC-Mumbai Studio; The Appellant confirms that he has received the information with respect to queries 7, 8, 9, 10, 13, 28 & 29. The Commission directs the PIO to provide information regarding query-30 & 32 based on the information available. As regards query-31 the PIO will inform the Appellant whether RBI has taken any steps to control such practices in other private banks. If no action has been taken the Appellant suggests that RBI consider taking action.Page 5 of 6
Decision:
The Appellant is allowed.
The PIO is directed to provide the information on queries 30, 31 & 32 to the Appellant before 10 October 2011.
This decision is announced in open chamber.
Notice of this decision be given free of cost to the parties. Any information in compliance with this Order will be provided free of cost as per Section 7(6) of RTI Act.
Shailesh Gandhi Information Commissioner 21 September 2011 (In any correspondence on this decision, mention the complete decision number.) (MG) Page 6 of 6