The Reserve Bank and Banking Ombudsmans' offices have been receiving several complaints regarding levying of excessive interest and charges on certain loans and advances. In this connection, a reference is invited to Reserve Bank's Master Circular DBOD. Dir.BC.5/ 13.03.00/2006-07 dated July 1, 2006 advising banks to have an objective and transparent policy approved by their Boards for the purpose of fixing interest rates on loans and advances. In the case of short-term advances granted to small and marginal farmers, Reserve Bank has also advised banks (vide paragraph 10.2 of master circular referred to above) to ensure that interest applied does not exceed principal amount. It will be appreciated that though interest rates have been deregulated, rates of interest beyond a certain level may be seen to be usurious and can neither be sustainable nor be conforming to normal banking practice.

In this regard, comments are solicited from the public on the policies that may be adopted to ensure interest rates charged by regulated entities are not excessive.

The Reserve Bank and Banking Ombudsmans' offices have been receiving several complaints regarding levying of excessive interest and charges on certain loans and advances.