Penal Interest and Additional Interest (Priority Sector):

Advertisement

Penal interest is charged over and above the regular / applicable interest rate of the borrower when the borrower fails to comply with one or more stipulated terms and conditions without any explicit approval / concurrence of appropriate authority. Bank also charges additional interest over and above applicable / regular interest for any adhoc credit facilities, disbursement of credit facilities pending compliance of certain terms and conditions. The additional or penal interest rates are stipulated to act respectively to cover additional risk horizon and a punitive measure for disciplining the borrower with intention to deter the borrowers from remaining non-compliant. The bank shall levy penal and additional interest as follows:

        i.            No penal interest shall be charged for advances under priority sector up to a certain amount.

      ii.            For advances over that amount the bank shall charge overall penal and additional interest upto 2% p.a. over the applicable / regular interest rate.

    iii.            The zonal heads of the Banks will be authorized to waive/relax levy of penal/additional interest in respect of borrowers accounts falling upto their sanctioning powers.

    iv.            The Chairman and Managing Director / Executive Director may consider to waive / relax levy of penal / additional interest in other accounts on case specific merits.

Penal rate is charged for pre-payment of the loan in certain case. For committing default in payment of installment of term loan, penal rate charged varies from 1% to 3% and for working capital it is 2%. In case of delay in paying installments, a penal interest of 2% is charged on the default amount. Penal interest rate is charged if the borrower does not give installment on time or commits default in submitting the stock statement. The penal rate charged is normally 2%. Financial institutions levy a penal interest on the borrowers who default on interest payment in spite of having the ability to pay.

Rebate: Financial institutions may grant a rebate in the interest payment to borrowers who are willing to pay but do not have the ability to pay.

Waive: Financial institutions may also waive off some part of the interest payment to borrowers who are not in a sound financial position.

Concessional Rate:

There is concessional rate offered for the people in backward areas and also the norms relating to the sanctioning of the loan are also relaxed.

Advertisement
The following two tabs change content below.
We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]
10 Comments
  1. PAWAN KUMAR 7 years ago

    SIR,
    I WANT TO ASK THAT IF AN OVERDRAFT LIMIT EXCEEDS THAN IT’S SANCTIONED AMOUNT , ON WHAT AMOUNT WILL PENAL INTEREST @2% WILL BE CHARGED BY THE BANK ?
    1. ON THE AMOUNT EXCEEDING TH ELIMIT,
    2. ON THE TOTAL OUTSTANDING AMOUNT OF LIMIT.
    PLEASE REPLY IF POSSIBLE.
    THANKING YOU.

  2. corn hole skins 2 months ago

    … [Trackback]

    […] Find More Info here to that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  3. … [Trackback]

    […] Find More Information here to that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  4. … [Trackback]

    […] Find More Info here on that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  5. kampala 1 month ago

    … [Trackback]

    […] Find More Info here to that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  6. 조커카지노 1 month ago

    … [Trackback]

    […] Info on that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  7. new york seo 1 month ago

    … [Trackback]

    […] Information to that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  8. 토토사이트 3 weeks ago

    … [Trackback]

    […] Find More on to that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  9. … [Trackback]

    […] Information on that Topic: bms.co.in/penal-interest-and-additional-interest-priority-sector/ […]

  10. Trackback

    Interesting post

Leave a reply

Your email address will not be published. Required fields are marked *

*

*

BMS.co.in is aimed at revolutionising Bachelors in Management Studies education, also known as BMS for students appearing for BMS exams across all states of India. We provide free study material, 100s of tutorials with worked examples, past papers, tips, tricks for BMS exams, we are creating a digital learning library.

Disclaimer: We are not affiliated with any university or government body in anyway.

©2020 BMS - Bachelor of Management Studies Community 

A Management Paradise Venture

Ask Us On WhatsApp
or

Log in with your credentials

or    

Forgot your details?

or

Create Account