December 26, 2024: In a landmark judgment, the Supreme Court of India has ruled that banks can charge interest rates exceeding 30% on unpaid credit card dues, overturning a 2008 decision by the National Consumer Disputes Redressal Commission (NCDRC). The earlier ruling had labeled such high rates as unfair trade practices.

A bench comprising Justices Bela M. Trivedi and Satish Chandra Sharma clarified that interest rate policies fall within the ambit of the Reserve Bank of India's (RBI) regulatory framework. The court emphasized that the Banking Regulation Act, 1949, provides banks with the autonomy to set interest rates, as long as they adhere to RBI guidelines.

The court noted that credit card agreements are transparent, with terms including interest rates and penalties disclosed upfront to applicants. "Credit card holders are fully aware of the applicable charges at the time of entering into the agreement," the bench stated, adding that such agreements cannot be considered exploitative if accepted mutually by both parties.

Significantly, the court ruled that the NCDRC does not have the authority to modify or rewrite the terms of these agreements, reaffirming the sanctity of contractual terms under the law.

The decision is likely to impact cardholders struggling with overdue payments, as banks are now empowered to levy steep interest rates, which can exceed 36% annually in some cases. Financial experts caution consumers to prioritize timely payments to avoid substantial financial strain.

The judgment also reinforces the RBI's role as the sole regulatory authority for bank interest rates. The court observed that there was no evidence of banks violating RBI policies, underscoring the central bank’s effective oversight.

This ruling is expected to have far-reaching implications for both consumers and financial institutions, solidifying the legal framework governing credit card interest rates in India.