SC seeks RBI affidavit on borrowers' rights in 4 weeks

New Delhi: The Supreme Court on Monday asked the Reserve Bank of India to file an affidavit stating whether its circulars require banks to furnish borrowers with signed loan documents and if the lenders are under obligation to inform borrowers about interest rate fluctuations and provide them with annual loan statements.

A bench led by Justice Sanjiv Khanna, while seeking the central bank's response in four weeks, observed that "there has to be a complete transparency."

The apex court was hearing a Punjab National Bank's (PNB) appeal against the Punjab and Haryana High Court's judgment that quashed PNB's demand notice issued to Guru Nanak Engineering Works under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi Act) and asked the lender to classify its NPA account as standard and also refund interest.


The SC bench, while staying the HC order, allowed Sarfaesi and DRT proceedings to continue in accordance with law. "The impugned judgment is wholly unjustified. It will paralyse the entire debt recovery system because such kinds of judgments lead to uncertainty in the entire banking industry," the lender argued.

PNB argued that overcharging of interest was a pure question of fact. "The HC without even properly considering the terms and conditions of the private contract with the borrower rendered the impugned judgment on a perverse premise that petitioners overcharged the respondent in terms of interest, which is apparently against the record," according to the appeal.