Whether banking services come under the purview of the Consumer Protection Act, 2019? by VEDANT JAIN at LEXCLIQ

The Consumer Protection Act 2019, provides the safeguards to consumers for the goods and services being provided to them and under the act, the term service includes within its ambit the banking sector under Sec. 2 (42) of the act. The provision is made for the consumers to resolve the problems and issue related to the banking services. It may include receiving deposits in various accounts and schemes, lending money, providing agency services e.g. payment of premium against an insurance policy, locker services, debit and credit cards, bank guarantees, bank drafts etc. Therefore in banking transactions, a customer of a bank who has a bank account with the bank or a person who purchases a bank draft hires a locker facility or obtains a bank guarantee from a bank are all “consumers” and can prefer complaints under the Act for “deficiency in service” on the part of the bank or for “restrictive trade practice” or “unfair trade practice” adopted by the bank.

In the previous legislation, a complaint could be filed only if an unfair trade practise or a restrictive trade practice was adopted by any trader or service provider. Now “unfair contract” has also been added which further broadens the ground to file complaints and allows consumers to challenge contracts that are unfair, unilateral and unreasonable. These provisions would directly impact financial institutions such as banks.

In Punjab and Sind Bank vs. Manpreet Singh [1994 (3) CPJ 532], it was held by the Punjab State Commission that a savings bank account holder is a consumer under the Act. It was observed that the difference in the lending and borrowing rates is the consideration for rendering service by the bank. It was also observed that even if the bank does not charge for providing cheque facility to the account holder, it cannot be said that the same is given without consideration. Actually, the cheque book facility is obtained by the depositor in consideration of his putting funds at the disposal of the bank.

In Vimal Chandra Grover vs. Bank of India [AIR 2000 SC 2181], it was argued before the Supreme Court on behalf of the bank that the appellant, who took overdraft facility from the bank by pledging shares, is not a consumer within the meaning of the Consumer Protection Act. The Supreme Court repelled the arguments of the bank and held that the bank is rendering service by providing overdraft facilities to a consumer, which is not without consideration. A bank is charging interest and other charges as well in providing the service. Provision for overdraft facility is certainly a part of the banking and falls within the meaning of “service” as provided in the Act.

Banks not only need to make sufficient disclosures on all aspects of their functioning and operations but also have to play a proactive role in educating customers on the products offered, the operational techniques, risks involved, safeguards and redressal options available. Banks need to maintain transparency in pricing, service charges, fees, and penalties. Hence, the development of the overall banking sector in India depends on how effectively the banks maintain the fiduciary relationship with their customers.

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