No anti-competitive practices by banks in home loan sector

Ruling in Neeraj Malhotra v Deutsche Post Bank Home Finance Limited, the Competition Commission of India (CCI) recently gave its first final decision under the Competition Act, 2002. In it the CCI held that “the prepayment charges levied by banks on home loans do not fall foul of competition law”.

The question considered by the CCI was whether the decision taken by Indian Banks Association (IBA) on prepayment charges on home loans amounted to agreement (as defined under section 2(b) of the act) having an appreciable adverse effect on competition under section 3 of the act. In addition the CCI considered if the respondents had abused their dominant positions, which would violate section 4 of the act.

Background

The case was concerned with the levying of pre-payment charges by various banks on the home loans taken by consumers. The informant, Neeraj Malhotra, alleged that by levying pre-payment charges the banks were violating section 3 of the act. The informant also alleged that in doing so the respondents violated section 4 of the act on grounds of consumer interest and abuse of dominance. The informant asked the CCI to enquire into the above violations, to ensure the banks discontinue these charges and to levy a fine on all the respondent banks up to 10% of their average turnover for the last three preceding financial years.

Sunil Kumar is a partner and Shradha Dubey is a senior associate at Singhania & Partners, which is a full-service national law practice. The firm has offices in New Delhi, Noida, Bangalore, Hyderabad and Mumbai.