The Supreme Court has removed the 30% cap on interest rates charged by banks for late credit card bill payments.

The verdict, not welcomed by credit card users, has put an end to the 2008 ruling of the National Consumer Disputes Redressal Commission (NCDRC) that had capped the maximum interest chargeable by banks at 30% per annum.

A bench of Justices Bela M. Trivedi and Satish Chandra Sharma passed the verdict while hearing petitions filed by several banks including Standard Chartered Bank, Citibank, American Express and Hong Kong and Shanghai Banking Corporation (HSBC).

In 2008, the NCDRC had ruled that charging credit-card holders interest rates above 30% per annum for failing to make the full payment on time, or only paying the minimum amount due, amounted to unfair trade practice.

In its order, the NCDRC had said: “If the RBI is considered to be one of the watchdogs of finance and economy of the nation and the prevailing credit conditions are such as should invite its policy intervention, then, in our view, there is no justifiable ground for not controlling the banks, which exploit the borrowers by charging exorbitant rates of interest varying from 36% to 49% per annum, in case of default by the credit-card holders to pay before the due date.”

“There must be some control on such banking and financial institutions with regard to the rate of interest and to protect the consumers.... In a welfare state, the financial institutions cannot be permitted to take advantage of the financial weakness of the consumers and enrich themselves. If this is permitted, the whole purpose of the Consumer Protection Act would be frustrated,” it had noted.