Court advises banks against levying penalty on customers

The Karnataka High Court on Tuesday advised banks not to levy penal charges on customers for not maintaining minimum balance in their account until the Reserve Bank of India (RBI) comes out with relevant parameters after examining the recommendations of M. Damodaran Committee on “customer services in banks”. The Division Bench comprising Chief Justice J.S. Khehar and Justice Ashok B. Hinchigeri chose not to issue a direction on the issue observing that the matter involved financial implication. Meanwhile, the Bench made it clear that in the event the banks continue to charge penal charges – which may be arbitrary and discriminatory – such a levy would be subject to the decision of the RBI. The High Court issued these directions while disposing of a public interest litigation by Bangalore-based senior citizen T.S. Muthukrishnan which charged that the penal charges levied on customers for non-maintenance of minimum balance in their account was illegal and unconstitutional. When the petition was pending in the High Court, the RBI had told the High Court it had constituted a committee headed by the former chairman of SEBI M. Damodaran to look into customer service issues in banks. The RBI informed the court that it had sought customers' suggestions on the committee's recommendations. It would take a final decision once it received them.