RBI's master circulars on Interest on Advances clearly stipulate that
(1) No floating rate loan products must be given by any bank with reference to its own Benchmark Prime Lending Rate (BPLR) but it must always be linked to an external rate of interest, and
(2) There must be an enabling clause in all loan agreements stating that rate of interest shall be reduce or increased in accordance with increase or reduction in rate of interest by RBI from time to time.
In actual fact, most banks incl HDFC and ICICI have prepared their loan agreements without any reference to any external rate of interest but only linked to their internal BPLR which is direct violation of RBI's directives. They increase their BPLR whenever RBI increase the rate but do not reduce it whenever RB I is reducing it, with the result that spread of actual interest charged vis-v-vis RBI's rate keeps increasing from the time loan was taken.
It seems even RBI is not keen to enforce its writ on these banks. My complaints to Banking Ombudsman has not been entertained by them, and even my letter to RBI Governor has not been responded. It seems I am left with no option but to challenge validity of Interest Clause in the loan agreement in a court of law.
Now, I need your learned advise on how to go about it as to whether it could be challenged in a High court or has to be challenged in District court or DRT? Also, whether we can claim that since Interest clause itself is illegal, all interest debited to my account should be reversed, and a compensation for bank's coercive action of recovery be awarded as well?
Kindly advse.
