In your last column, you said that the banks cannot charge more than the rate of interest specified in a loan agreement. What about fixed deposits? Can banks pay less than the promised rate of interest? Five years ago, I had deposited the proceeds from the sale of my land for a fixed period of five years in a bank. The choice of the bank was made on the basis of the interest rate and, of course, the safety of the deposit. However now, after the maturity period, the bank is offering a reduced rate of interest on the ground that they had inadvertently mentioned the wrong rate of interest. How valid is that argument?
The bank might have made a mistake or the officials might have offered a higher rate of interest just to garner your deposit, without intending to give you that rate. If it was a mistake, it is sheer negligence. If it was a deliberate ploy, then it is an unfair trade practice. Either way, the bank has to take responsibility for its action and pay you the promised rate of interest. Besides, having committed to a certain rate of interest, the bank has a contractual obligation to pay that rate and not deviate from it. So, demand that the bank pay what is due to you.
Can you quote a recent decision of the consumer court on this issue?
In Union Bank of India Vs Usha Arora and Another (RP No 1995 of 2019, decided on June 29, 2020), the National Consumer Disputes Redressal Commission looked at a similar issue. The complaint pertained to two fixed deposits — one worth Rs1 crore and the other Rs50 lakh — with a promised interest rate of 10.9 per cent.
However, when the FDs matured, the bank said the customer was only entitled to 10.5 per cent on one deposit and 10.25 on the other; 10.9 per cent, it said, was an error! The bank argued that it should not be penalised for a bona fide mistake.
While dismissing the bank’s contention and upholding the lower consumer court’s direction to the bank to pay the promised rate of interest, the National Commission observed that the bank had not only mentioned 10.9 per cent as the rate of interest on the fixed deposit receipts, but had even calculated and recorded the maturity amount. And then, as per its own admission, it realised that it had made a mistake soon after issuing the FD receipt. However, it did not inform the depositors about it.
The Commission pointed out that if the bank had informed the depositors about it even at that stage, they may have exercised the option of choosing some other bank offering a higher interest rate. So, in all fairness, the bank must pay the promised rate of interest, the Commission said.
Do exercise your right to redress either through the Ombudsman or the consumer court. I must mention that the Ombudsman too has, in a number of cases, held that banks have to pay the promised rate of interest. In one case, the bank reduced the rate of interest from 11 to 10 per cent on a 10-year-old deposit on the ground that the day it issued the FD receipt, the head office had revised the rate of interest, but the communication had not reached the branch office. The Ombudsman directed the bank to honour its commitment made in the FD receipt.
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