New Delhi: The Delhi State Consumer Disputes Redressal Commission has ordered Citi Bank to refund Rs 12,91,248 to a woman after finding that it charged excess interest on her home loan.
The bank must also pay Rs 1 lakh as compensation and Rs 50,000 towards litigation costs.
Higher Interest
The woman had taken the home loan at an agreed interest rate of 12% per annum. However, the bank gradually increased the rate and charged as much as 16.5% during certain periods.
The commission found that the bank recovered Rs 12,91,248 in excess interest up to May 2017.
The order was passed on August 6, 2026, nearly nine years after the complaint was filed in 2017.
RBI Option
In April 2010, the Reserve Bank of India introduced the Base Rate system for bank loans. Borrowers with older loans were supposed to be offered an option to shift to this system.
Such a switch could have reduced the woman’s interest burden. However, Citi Bank neither informed her about the RBI circular nor offered her the option to change the interest system.
The commission said borrowers cannot be expected to know every RBI circular. Banks have a duty to explain important regulatory changes and available choices to their customers.
Consent Needed
The commission also noted that a bank cannot unilaterally increase the interest rate on an existing loan without the borrower’s consent.
It relied on earlier court and consumer commission rulings that supported this principle.
The bank’s actions were held to be a deficiency in service and an unfair trade practice.
Refund Ordered
Citi Bank must refund Rs 12,91,248 with 6% annual interest from June 2017 until payment, provided it pays by October 5, 2026.
If the deadline is missed, the interest rate will increase to 9 percent for the default period.
The commission, headed by Justice Sangita Dhingra Sehgal along with Member Pinki, also awarded Rs 1 lakh for mental agony, harassment and financial hardship, besides Rs 50,000 as legal costs.
