Credit card holders finally have some respite. The Supreme Court on Monday declined a stay on national consumer forum directive, which instructs the banks on not exceeding their interest rates beyond 30 percent per annum for the default payments on credit cards.

HSBC, Standard Chartered, American Express and Citibank filed the appeals against the consumer order of the National Consumer Commission. On being pressed for a stay on the order by the banks, the Bench, consisting of Justices B. N. Agrawal and G. S. Singhvi issued a notice to the Central Bank (RBI) and the NGO (Awaz) on whose request the ceiling on interest rates was forced.

According to the banks' appeal to the Supreme Court, around 27 reasons were given for charging high interest rates. It also included the charges made on calls by the service centre for persuading people to take a credit card.

Among the other reasons that the banks quote for realization through charging of penal interest - the interest rate charged by the bank or lending institution from the borrower if he misses a repayment, processing cost for setting up a new card in operating system, cost of courier and embossing the card , cost of providing phone banking and internet banking services, cost of sending monthly statements, cost of waiving charges for service reasons, cost of marketing and promotional offers, cost of rewards and loyalty programs, etc.

The banks have joined together to convince the Supreme Court for charging interest rates between 36% and 49%.

The July 7, 2007 order of the National Consumer Disputes Redressal Commission (NCDRC) had ruled that "charging of interest rates in excess of 30% per annum from credit card holders by banks for the former's failure to make full payment on the due date or paying the minimum amount due, is unfair trade practice".

However, the banks said that they are following the guidelines of the Reserve Bank of India, which is the only body that can regulate interest rates and the commission has no command to pass an order directly to the banks. Banks further confirm that the customers signed the agreement after reading the terms and conditions and thus there is no unfair trade practice. "There is no unfair trade practice as defined in the Consumer Protection Act as there is no misrepresentation."

"The National Commission has failed to appreciate that the rate of interest on defaulted or partial payments of dues is determined by taking into consideration various factors, including the risks of default, and therefore, this commission may not determine the issue as to whether the interest at the rates of 36% to 49% per annum is excessive," the banks said.