It may be difficult to answer your question without detailed examination of your papers. It is better if you consult some local lawyer with your papers. But, some relevant questions would be:
What were the terms of the loan? Did such terms mention such interest? Does it mention compounded interest @ 18% with monthly rests?
What is mentioned in the award? Does it mention compounded interest @ 18% with monthly rests? If so, does it mention any specific reasoning or legal provision or contractual terms for such interest?
Prima facie, such interest appears to be harsh.
Did you challenge the award?
Cooperative banks have dual control, and the relevant state government rules may also have to be seen.
But, it is relevant to point out that for the Commercial banks (which may not include cooperative banks), the RBI circular allows monthly rests for compounding interest and it says [see this: https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9043]:
“Banks were advised to charge interest on loans/advances at monthly rests with effect from April 01, 2002. Interest at monthly rests shall be applied in case of all new and existing term loans and other loans of longer / fixed tenor. In the case of existing loans of longer / fixed tenor, banks shall move over to application of interest at monthly rests at the time of review of terms and conditions or renewal of such loan accounts, or after obtaining consent from the borrower.”
So, the details facts of your case will have to be examined by some expert by examining your papers.
Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.
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