Judicial review of banking policy is limited where RBI's interest-rate decisions are based on relevant economic factors.

Writ interference with RBI banking policy was held inappropriate because fixation of savings bank interest rates falls within expert economic and fiscal judgment under the Banking Regulation Act, 1949. Section 35A empowers RBI to issue directions in public interest, in the interest of banking policy and to protect depositors. Judicial review is limited in economic policy matters and will lie only if the policy is contrary to statute, arbitrary, discriminatory or mala fide. As the impugned policy considered relevant factors such as depositor interests, market conditions, Government securities yields and comparative international rates, the challenge was rejected and no restraint on minimum balance charges was granted.

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Issues: Whether the Court should interfere in writ jurisdiction with the Reserve Bank of India's banking policy fixing savings bank interest rates and declining to direct higher interest or restraint on minimum balance charges.

Analysis: The Banking Regulation Act, 1949 treats banking policy as policy framed by the Reserve Bank in the interest of the banking system, monetary stability and sound economic growth, having regard to depositors' interests, the volume of deposits, other resources of banks, equitable allocation and efficient use of those resources. Section 35A of the Banking Regulation Act, 1949 empowers the Reserve Bank to issue directions in public interest, in the interest of banking policy, and to protect depositors. The fixation of interest rates was held to lie within expert economic and fiscal judgment. In matters of economic policy, judicial interference is warranted only where the policy is shown to be contrary to statute, arbitrary, discriminatory or mala fide. The impugned policy was found to have considered relevant factors, including depositor interest, prevailing market conditions, Government securities yields and comparative international rates.

Conclusion: The challenge to the Reserve Bank's policy was rejected; the Court declined to interfere and held that the policy could not be struck down as arbitrary, discriminatory or mala fide.

Ratio Decidendi: A court exercising writ jurisdiction will not interfere with an expert economic policy decision, including banking policy on interest rates, unless it is shown to be contrary to law, arbitrary, discriminatory or mala fide.

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