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INDIA BUSINESS WORLD - 1st FEBRUARY - TO - 15th FEBRUARY - 2009
BANKS CAN CHARGE UP TO 49% ON CARD DUES, SAYS SUPREME COURT
THE Supreme Court has stayed a consumer court order restraining banks from charging interest rates in excess of 30% per annum from credit card holders.
Banks are now free to charge an annual interest rate of up to 49% from credit card customers for late payment. A three member bench headed by Justice BN Agrawal put on hold the National Consumer Disputes Redressal Commission's order on the pleas of various banks.
Citibank, HSBC, American Express Bank and Standard Chartered Bank had sought a stay on the commission's order, saying the ceiling on interest rates had affected the country's monetary policy.
“The facility of credit cards is availed of without any interest for a certain stipulated period and it is only after the expiry of that period that interest is levied on a credit card account for non-payment or late payment of dues. It is also relevant to note that credit card transactions de-facto constitute unsecured credit availed of," Citibank said in its petition.
Citibank, in its application, further submitted that the order of the commission had far-reaching implications on the credit card business since the rate of interest charged for a particular credit facility is driven by the cost of funds and credit and the risks and expenses incurred by the issuer bank. Therefore, placing a restriction on interest rates for delayed payment by card holders would lead to significant losses for banks, it pointed out.
Similar pleas were put forward by other banks on the issue
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