Judicial review over banking policies requires deference to regulatory authority unless proven arbitrary or unconstitutional.

1.The petitioner is a senior citizen. In this writ petition his prayer is for issuance of writ of mandamus or order or direction to the Reserve Bank of India (RBI) and Government of India to ensure that the banks revise their paltry 4% or 4.5% interest rates and pay at least 12% interest on the deposits. The petitioner also prays that the said respondents be refrained from penalising the deposits when they cannot maintain bank's self - determined minimum balance. The aforesaid prayers are sought in view that RBI is regulatory authority for the banks under S. 35 - A of the Banking Regulation Act, 1949 and it has authority to decide interest rates and banking policy in the interest of public and depositors.

2. Mr. M. B. Kotak, the learned counsel for the petitioner strenuously and vehemently argued before us that the social welfare is the constitutional duty of the State. In India no welfare work is done for aged except retiring them from work and making them dependent upon others. There is no social security system. Old aged is refuge of variety of illnesses. Forty per cent of the ageds in India live under poverty line. The medical care for aged is almost negligible. The number of senior citizens in India exceeds 7.5 crore. In this background, it is the constitutional duty and obligation of the regulatory authority like RBI and policy makers to ensure that reasonable rate of interest is given by the banks on the deposits. It is also contended by Mr. M. B. Kotak, the learned counsel for the petitioner that by not giving adequate and reasonable interest on the deposits, the banks are virtually exploiting the depositors. He would urge that the bank must not be allowed to penalise the account holders if their balance falls below minimum balance which is arbitrarily fixed by them.

3. Mr. M. B. Kotak placed reliance on State of Haryana v. Darshana Devi , 1979 ACJ 205 : (AIR 1979 SC 855) in support of his submission that it is a public duty of each branch of the State to obey the rule of law and uphold the tryst with the Constitution by making rules to effectuate legislation meant to help the poor. He pressed into service Sovintorg (India) Ltd. v. State Bank of India, 1999 CCJ 1142 in support of his submission for higher award of interest. He also cited Panjikaran Paulose Joseph v. Kusum Vithal Patil , 1993 (1) ACJ 242 wherein it was held that the liability to pay interest is upon those who had have had the use of money which legitimately belonged to the claimants. In support of his submission that judiciary is respected not on account of its power to legalize injustice on technical ground, but because it is capable of removing injustice and is expected to do so. Mr. M. B. Kotak referred to Collector, Land Acquisition v. Katiji , 1987 (2) SCC 107 : (AIR 1987 SC 1353). He also referred to M. S. Grewal v. Deep Chand Sood , 2001 (3) ACJ 1719 : (AIR 2001 SC 3660) to buttress his point that law Courts exist for the society and they have an obligation to meet the social aspirations of citizens and law courts must also respond to the needs of the people.

4. In response to the writ petition, initially counter - affidavit was filed by RBI on 4-7-2002, but later on supplementary affidavit was filed on 25-4-2003. By way of reply affidavits, RBI has submitted that fixation of interest rate of savings bank accounts is in tune with the monetary and credit policy and the policy statements. The interest rate is fixed taking into account not only the monetary and credit situation of the country but also the banking scenario at