Woman took a home loan at 12% interest, but Citi Bank charged up to 16.5% and recovered Rs 12.9 lakh extra; consumer commission orders refund and Rs 1 lakh compensation

Citi Bank has been ordered to refund Rs 12,91,248 to a home loan borrower by the Delhi State Consumer Disputes Redressal Commission, which found the bank charged interest at rates up to 16.5 per cent per annum against an agreed rate of 12 per cent, and failed to inform her about an RBI circular that entitled her to switch to a lower rate system.

The order was passed on 6 August 2026 in a complaint filed in 2017, nearly nine years after the matter was first brought before the commission.

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What interest rate did Citi Bank agree to charge?

The complainant took a home loan from Citi Bank under an agreement that set the interest rate at 12 per cent per annum. Over the course of the loan, the bank raised the rate progressively, at points charging as high as 16.5 per cent per annum. The excess amount recovered from the complainant up to May 2017, calculated against the agreed rate of 12 per cent, came to Rs 12,91,248.

What did the RBI circular say, and why does it matter here?

In April 2010, the Reserve Bank of India issued a circular introducing the Base Rate system for bank lending. Under this system, borrowers on older loan agreements were to be given the option of switching to the Base Rate, which in many cases would have resulted in a lower effective interest rate than what they were paying under legacy pricing structures.

The commission found that Citi Bank neither informed the complainant about this circular nor offered her the option to switch. The commission relied on several prior rulings, including decisions of the State Commission, Kerala, which held that a consumer cannot be expected to know RBI circulars and that it is the duty of the bank to inform the borrower about regulatory changes and the options available under them.

The commission found that had Citi Bank informed the complainant about the RBI circular and offered the option of switching to the Base Rate, her interest burden could have been substantially reduced during the relevant period.

Can a bank raise home loan interest without the borrower's consent?

The commission addressed this directly. It relied on the judgment of the Allahabad High Court in Manmeet Singh versus Union of India and the ruling of the State Commission, Punjab in ICICI Home Finance Ltd. versus Jarnail Singh, both of which held that enhancement of the rate of interest on an existing loan requires the consent of the borrower and that unilateral enhancement without such consent is impermissible.

The commission held that Citi Bank's conduct in charging interest at rates higher than agreed, without consent and without disclosing the regulatory option available to the complainant, amounted to deficiency in service and unfair trade practice.

What did Citi Bank say in its defence?

The case record does not reflect any successful rebuttal from Citi Bank on the core findings. The commission noted the bank's failure to inform the complainant about the RBI circular as an admitted fact and found no justification for the excess interest charged over the loan period.

What has the commission ordered Citi Bank to pay?

The commission directed Citi Bank to refund Rs 12,91,248 to the complainant, the full amount of excess interest recovered up to May 2017, along with interest at 6 per cent per annum calculated from June 2017 until actual realisation, provided the entire amount is paid on or before 5 October 2026.

If Citi Bank fails to pay by that deadline, the interest rate on the outstanding amount rises to 9 per cent per annum for the period of default until full realisation.

In addition, the bank has been directed to pay Rs 1,00,000 as compensation for mental agony, harassment, and financial hardship, and Rs 50,000 towards litigation costs.

The commission was presided over by Justice Sangita Dhingra Sehgal, President, and Member Pinki.

Check the case judgement here: