The central legal point established is that the Reserve Bank of India has a responsibility to regulate and prevent the prevalence of excessive interest rates charged by Non-Banking Financial Companies.

1. The petitioner, through this public interest litigation, seeks quashing of the communication, dated 03.05.2012, addressed by the Reserve Bank of India to the petitioner.

2. The petitioner had earlier filed a writ petition in W.P.(MD)No.2206 of 2012, seeking to raise the issue of allegedly exorbitant interest rates being charged from borrowing public by the Non-Banking Financial Companies (NBFCs), more specifically the 4th and the 5th respondents. A Division Bench of this Court, by order dated 24.02.2012, was not inclined to entertain the petition as a Public Interest Litigation but, at the same time, felt that the issue raised was a laudable one and thus the statutory bodies, like the Reserve Bank of India, who are to regulate non-baking institutions, are to examine the matter and the petitioner was given liberty to do so. The petitioner, thus, addressed a letter, dated 25.01.2012, to the Governor, The Reserve Bank of India, raising the same issue, to which the impugned reply, dated 03.05.2012, has been sent in the following terms:

"2. In this connection we advise that as per the extant policy, the Reserve Bank of India is not regulating/fixing the interest rates to be levied by companies registered with RBI as Non Banking Finance Companies (NBFCs), other than NBFC-Micro Finance Institution, on the loans granted by them. The rate of interest to be charged by the company is governed by the terms and conditions of the loan agreement entered into between the borrower and the NBFCs. However, in order to ensure transparency in such matters, the NBFCs have been advised by RBI to adopt a Fair Practices Code, with the approval of their Boards. The NBFCs have also been advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges."

3. We put to the learned counsel appearing for the 2nd respondent, namely the Reserve Bank of India, as to whether there is any rules/regulations framed to the NBFCs to specify any rate of interest, however oppressive it may be. The learned counsel sought to contend that the Reserve Bank of India does not specify any interest rate nor any ceiling rate. However, it does specify guidelines of Fair Practices Codes and where complaints are received, they are examined within the parameters of the guidelines.

4. We find from the typed-set of papers filed by the 2nd respondent, last set of such guidelines were issued on 18.02.2013. The issue of regulation of excessive interest charged by NBFCs has also been dealt with, by reference to Circulars issued by the Reserve Bank of India, such Circulars being dated 24.05.2007 and 02.01.2009. In the Circular dated 24.05.2007, reference has been made to the complaints received on account of excessive interest charged on certain loans and advances by NBFCs. We reproduce the same as under:

"Complaints about excessive interest charged by NBFCs:

1. The Reserve Bank has been receiving several complaints regarding levying of excessive interest and charges on certain loans and advances by NBFCs.

2. Though interest rates are not regulated by the Bank, rates of interest beyond a certain level may be seen to be excessive and can neither be sustainable nor be conforming to normal financial practice.

3. Boards of NBFCs are, therefore, advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges.

4. In this regard the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans may be kept in view.

5. NBFCs may confirm having put in place appropriate systems in the regard within a period of one month from the date of this circular to the Regional Office of this Department in whose jurisdiction they are registered."

5. We find that there is another circular, dated 22.09.2008, referring to the aforesaid Circular issued to the Regional Offices to confirm whether NBFCs have complied with th