RBI gets notice on defaulters

Published Jan 11, 2014, 1:32 pm IST
Updated Mar 19, 2019, 5:47 am IST
The AP High Court has issued notices to the Reserve Bank of India (RBI) seeking an explanation.

Hyderabad: The AP High Court has issued notices to the Reserve Bank of India (RBI) seeking an explanation for fixing low interest rates for deposits and exorbitant rates for borrowings.

The court also decided to examine complaints by customers of various banks for declaring them as willful defaulters in the event of failing to pay one or two installments and for reporting them to the RBI and also Credit Information Bureau Limited.


A vacation Bench comprising Justice L. Narasimha Reddy and Justice Challa Kodandaram was dealing with a petition by M/s Bezawada Motor Pvt Ltd, challenging a notice issued by the Indian Bank to auction its properties for defaulting on a loan of Rs 5 crore.

C.V. Bhaskar Reddy, counsel for the petitioner, told the court that the bank had readjusted the loan in December 2012 and his client was prepared for a one-time settlement by paying Rs 6 crore, but the bank had refused to accept his proposal on the ground that the property which was pledged with the bank as security would fetch more than the offer given by his client.


After the refusal of the proposal, the petitioner had approached the Debt Recovery Tribunal and the bank had sought for an adjournment and the Tribunal had adjourned the case. Despite this, the bank had issued a notice for auction of the properties, he added.

Reacting to the submission, the Bench sought to know from bank counsel about interest charges on borrowings. The counsel replied that the figure was 14.75 per cent to 15.75 per cent per annum.

The Bench noticed that there was huge gap between the interest offered by banks on deposits and that charged on loans and asked the the RBI to explain the reasons behind the imbalance. It impleaded the RBI as one of the respondents to the petition.


The Bench also set aside the auction notice and posted the case to January 31. Another petition dealt by the Bench was by M/s Sree Venkateswara Art Films seeking a direction to the UCO Bank not to report the status of its account to the RBI and CIBIL.

The petitioner’s counsel informed the court that even in cases of one or two installments being defaulted, many banks were declaring the borrowers as willful defaulters and reporting them to the RBI and the CIBIL.

He said once a borrower went on CIBIL records as a defaulter, he would not get loans from any other bank in the country. The Bench noticed that several writ petitions with similar pleas were pending before the court and decided to examine the cases in detail.


Location: Andhra Pradesh