Business Standard

CCI rejects cartelisation charges against 12 banks

It was alleged that the banks not only offered the gold loan product at the rate of 4% but also shut their eyes to the end use of the loans offered

Press Trust of India New Delhi
The Competition Commission (CCI) has rejected Muthoot Mercantile's allegations that 12 commercial banks including SBI, Canara Bank and IDBI formed a cartel for offering and marketing gold loan prod ucts.

The allegations were also made against Indian Overseas Bank, The Federal Bank, South Indian Bank, Central Bank of India, Syndicate Bank, Vijaya Bank, Dhanlaxmi Bank, State Bank of Travancore and Catholic Syrian Bank.

A complaint filed by Muthoot Mercantile, a gold financing firm, had alleged that the 12 scheduled commercial banks had entered into an anti-competitive arrangement to determine the price and control the gold loan business.

The complainant had alleged that such an agreement had caused detrimental effect on it and other Non-Banking Financial Companies (NBFCs) dealing in gold loan.
 

Noting that there was no evidence of cartelisation by the banks, the Competition Commission of India (CCI) in a recently released order said that "no case of contravention of the provisions of...The (Competition) Act is made out against the opposite parties and the information is ordered to be closed".

"It may be observed that parallel behaviour needs to be substantiated with the additional evidence or the plus factors to bring it into the ambit of prohibited anti-competitive agreements," CCI said in the order.

"There is nothing on record to even prima facie persuade the Commission that the alleged agreement has been arrived at by the opposite parties in concert," it added.

Muthoot had alleged that by forming a cartel and launching a new product -- agri-gold loan -- at the rate of 4 per cent, the banks had caused adverse effect on the gold loan business of NBFCs.

It was the case of Muthoot that under the garb of 'Interest Subvention Scheme', the banks had joined hands and reached the agreement to exploit the Scheme to determine the price and control the gold loan business.

It was alleged that the banks not only offered the gold loan product at the rate of 4 per cent but also shut their eyes to the end use of the loans offered.

In this regard, it was stated that RBI in 2012 took note of this co-ordinated circumvention of its norms stipulated for 'Interest Subvention Scheme' by the banks.

The banking sector regulator had advised the banks to strengthen their systems for pre-sanction scrutiny and post- disbursement supervision, among others.

Muthoot had alleged that the note of caution sounded by RBI was completely disregarded by the banks indicating strong anti-competitive arrangement.

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First Published: Jan 05 2015 | 4:50 PM IST

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