Court directs State Bank of India to pay interest at 8.5% for delayed renewal of fixed deposits, emphasizing bank's duty to adhere to its own circulars.
In a significant ruling, the Kerala High Court has directed the State Bank of India (SBI) to compensate Narayan Bharathan, a partner of Asiatic Export Enterprises, by paying interest at 8.5% per annum for a fixed deposit that was not renewed on time due to the bank’s oversight. The judgment, delivered by Justice M.A. Abdul Hakhim on July 3, 2026, mandates SBI to pay interest for the period from July 18, 2012, to May 12, 2013, on an admitted deposit of Rs.8,00,19,849.
The petitioner, Narayan Bharathan, had initially deposited Rs.7.22 crores in July 2011, which matured in July 2012. Due to a failure in automatic renewal as per SBI's own circular, the deposit remained unrenewed until the petitioner brought the matter to court. The bank had previously agreed to pay interest from May 13, 2013, to December 10, 2015, but contested the liability for the earlier period.
The court found that SBI was liable to renew the deposit automatically, as per its circular, when no specific instructions were provided by the depositor. The judgment emphasized that the bank failed to adhere to its procedural obligations, thereby necessitating the payment of interest for the period when the deposit lay unrenewed.
The court also addressed the maintainability of the writ petition, noting that despite involving contractual obligations, the matter could be adjudicated based on undisputed facts without complex factual determinations. This decision aligns with precedents where writ petitions were entertained for claims against banks under similar circumstances.
The court further highlighted that the bank’s action of transferring the amount to the Army Group Insurance Fund with retrospective effect was not appropriate, as it was done without the petitioner's eligibility or explicit request.
In its order, the court directed SBI to calculate the interest at the rate prevailing during the relevant period and credit the amount to the firm’s account within two months. This ruling reaffirms the accountability of banks to comply with their own protocols and the judiciary's role in upholding customers’ rights against banking oversights.
Bottom line:-
A bank is liable to pay interest on a fixed deposit for a period during which the deposit was not renewed due to the bank's failure to follow its own circular regarding automatic renewal of term deposits on maturity.
Statutory provision(s): Article 226 of the Constitution of India, Banking Law regarding Fixed Deposits and Interest Rates, Writ Jurisdiction principles.
Narayan Bharathan v. State Bank of India, (Kerala) : Law Finder Doc id # 2943760
