Instruction Circular No.

9776/CP & RMD/2007-2008/13

Date: 24.9.2007

BANKS COMPREHENSIVE GUIDELINES/POLICY

ON INTEREST RATES ON LOANS & ADVANCES

ALLAHABAD BANK
CREDIT POLICY & RISK MANAGEMENT DEPARTMENT
HEAD OFFICE

ALLAHABAD BANK

RISK MANAGEMENT DEPARTMENT

Head Office : 2, Netaji Subhas Road, Kolkata 700 001
Instruction Circular No. 9776/CP&RMD/2007-08/13

Date : 24.9.2007

To All Offices and Branches

BANKS COMPREHENSIVE GUIDELINES / POLICY ON INTEREST RATES ON
LOANS & ADVANCES
The Reserve Bank of India and Banking Ombudsmans offices have been
receiving several complaints regarding levying of excessive interest and charges on
certain loans and advances. Although interest rates have been deregulated, yet
RBI is of the view that rates of interest beyond a certain level may be seen to be
usurious and can neither be sustainable nor in conformity with the normal banking
prudence.
2.

Accordingly, in the Annual Policy Statement for the year 2007-08 released
by RBI, it has been stated as under :
The boards of banks are, therefore, advised to lay down internal
principles and procedures so that such usurious interest, including
processing and other charges, are not charged.

3.

In this backdrop, the Board of Directors of the Bank in its meeting held on
27.08.2007 have approved the Banks Comprehensive Guidelines/Policy
on Interest Rates on Loans and Advances.

4.

The Comprehensive Guidelines / Policy on Interest Rates on Loans and

Advances as approved by the Banks Board is enclosed as Annexure-A
which inter-alia also incorporates the existing guidelines contained in
various Instruction Circulars / Manuals / Fair Practices Code for Lenders
etc. as instant reference.

5.

The Branches / Offices are advised to follow the Guidelines / Policy with
immediate effect by interacting with Instruction Circulars issued from time
to time by Head Office on interest rates for various categories of
borrowers.

6.

Hindi version of the circular follows.

( PRABIR MOULIK )
GENERAL MANAGER(CP&RMD)

ANNEXURE-A
BANKS COMPREHENSIVE POLICY / GUIDELINES
ON INTEREST RATES ON LOANS AND ADVANCES
INDEX
S.N.

COVERAGE

PAGE

Objective of the Policy

General

Benchmark Prime Lending Rate (BPLR) & Spread

Non-PLR Linked Credit Facilities

Type of Interest Rates

Levying of Additional Interest

Withdrawal Against Uncleared Effect

Interest on Loans under Consortium / Multiple Banking

Arrangement
9

Charging of Interest at Monthly rest

10

Zero Percent Interest Finance Scheme for Consumer

Durables
11

Refund of Interest

12

Interest Income Recognition

13

Interest Rate in case of Deceased Borrowal Account

14

Appropriate Charging of Interest

15

Fair Practices Code for Lenders on Interest Rate/Charges

16

Enabling Clause

10

17

Authority for Amendment in the Policy

10

18

Commencement of Implementation of the policy

10

19.

Appendix-I

11

20.

Appendix-II

12

BANKS COMPREHENSIVE POLICY / GUIDELINES

ON INTEREST RATES ON LOANS AND ADVANCES
1. Objective of the Policy :
1.1.

An objective of financial sector reform has been to ensure that the financial
repression inherent in administered interest rates is removed.

1.2.

Accordingly, in the context of granting greater functional autonomy to banks,

the Reserve Bank of India has given freedom to banks to fix the lending rates
for credit limits over Rs.2.00 lakh.

1.3.

Although interest rates have been deregulated, rates of interest beyond a

certain level can neither be sustainable nor in conformity with the normal
banking prudence.

1.4.

In the above backdrop, this Policy/ Guidelines on Interest Rates on Loans

and Advances has been framed with required transparency so as to avoid
complaints from credit customers.

2. General
2.1.

Bank should charge interest on loans/advances/cash credits/ overdrafts or

other financial accommodation granted / provided / renewed or discount
usance bills in accordance with the directives on interest rates on advances
issued by Reserve Bank of India and/or Board of Directors of the Bank from
time to time.

2.2.

The interest at the specified rates shall be charged at monthly rests as made
effective from April1, 2002 subject to the conditions laid down in Paragraph 9
hereinafter.

2.3.

The interest to be charged shall be rounded off to the nearest rupee.

2.4.

Term Loans and Working Capital advances should be clubbed together for
the purpose of determining the loan and applicable rate of interest, except in
cases specifically exempted as per RBI / Bank guidelines.

2.5.

The rate of interest for Working Capital and Term Loan upto and inclusive of
Rs.2.00 lakh which is not specifically mentioned will be charged @ BPLR.

2.6.

Service Charges and Interest Rate (other than exempted category of

advances specified by RBI ) under various heads applicable to credit related
areas shall be with reference to the norms approved by the Board from time
to time.

2.7.

In case of Short Term Loan granted to small and marginal farmers (in case of
crop loan up to 12 months & in case of other loans, loans having maturity up
to 12 months), classified as Standard Asset, the interest applied will not
exceed the principal amount.

2.8.

Consideration of all loans upto Rs. 2.00 Lacs as Small Value Loans and interest
including processing and other charges (excluding additional charges / prepayment charges / actual charges etc.)

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for such Small Value Loans would not exceed Maximum Lending
Rate (MLR).
2.9.

Total amount of Interest in NPA accounts of Short Term Loan to small and
marginal farmers not to exceed the principal.

3. Benchmark Prime Lending Rate (BPLR) and Spreads

4.

3.1.

In arriving at the Benchmark Prime Lending Rate (BPLR), Bank would take into
consideration its (i) cost of fund (ii) operating expenses (iii) minimum margin to
cover regulatory requirement of provisioning / capital charge and (iv) profit
margin.

3.2.

The BPLR and spread guidelines as approved by the Board of Directors from
time to time based on review and recommendation of ALCO of the Bank
would be complied with.

3.3.

The BPLR would continue to be the ceiling rate for credit limit upto Rs.2.00 lakh
except in certain categories of advances specified under Paragraph - 4
hereinafter.

3.4.

For loans above Rs.2.00 lakh BPLR would be the reference rate and the rate of
interest will be determined by factoring tenure premia / risk premia or the
credit score / rating based premia where applicable, market bench marks
etc. in the spread over or below BPLR.

3.5.

Interest rate for any category of borrower / loans stipulated by RBI linked to
BPLR and/or fixed rate (DRI at 4.0% etc. ) the Bank will adhere to such
prescribed rates.

3.6.

Bank may offer loans below BPLR to exporters based on RBI guidelines and
direction obtained from the Board.

3.7.

Further, Bank may offer loans below BPLR to other credit worthy borrowers
including public enterprises on the merit of each case in terms of provisions
contained in Policy on Sub-PLR Lending / Reduction in Rates of Interest
approved by the Board and its subsequent amendments, if any.

3.8.

Spread of interest rate over BPLR would be 3% at the maximum which will be
the Maximum Lending Rate (MLR).

3.9

BPLR will be made uniformly applicable at all branches of the Bank.

Non-PLR Linked Credit Facilities:

4.1.

In terms of freedom permitted by Reserve Bank of India, the Bank would

determine the rates of interest without reference/linking to BPLR and
regardless of the size in respect of following categories of loans :
a.
b.
c.

Loans for purchase of consumer durables

Loans to individuals against shares and debentures / bonds
Other non-priority sector personal loans including credit card
dues

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d.

5.

Advances / overdrafts against domestic / NRE / FCNR(B)

deposits with the bank, provided that the deposit/s stands
either in the name(s) of the borrower himself / borrower
themselves, or in the names of the borrower jointly with another
person.
e.
Finance granted to intermediary agencies (excluding those of
housing) for on-lending to ultimate beneficiaries and agencies
providing input support.
f.
Finance granted to housing finance intermediary agencies for
on-lending to ultimate beneficiaries (Intermediary agencies are
indicated in
(APPENDIX-I)
g.
Discounting of Bills.
h.
Loans / Advances / Cash Credit/ Overdrafts against
commodities subject to Selective Credit Control.
i.
Loans covered by participation in refinancing schemes of term
lending institution (Free to charge interest rates as per
stipulations of the refinancing agencies).
Types of Interest Rates :
5.1

Bank will have the freedom to offer all categories of loans on fixed, fixed with
reset, floating or floating with reset clause as approved/decided by the Board
of Directors from time to time. Any revision of interest rates whether upwards or
downwards, the effect of revised interest rate (change in BPLR and Spread)
will come into force from the date of such revision. Such revision will be
applicable on all exiting working capital and terms loans except where
specifically exempted.

5.2

The rate of interest which has been fixed with reference to BPLR and/or
market benchmark will be treated as floating rate.

5.3

Fixed Rate will not change with the change of BPLR or otherwise unless
specifically mentioned.

5.4

Fixed rate loans sanctioned with reset clause, the change in rate of interest
will take place only after the specified period for reset as per terms of
sanction. For example, if a loan is sanctioned at fixed Interest rate of 11.00 %
with reset clause of two years, the rate of interest can be increased after
expiry of two years, say to 11.25%, 11.50% (and so on) as per the decision of
the sanctioning authority.

5.5

The advances sanctioned with a reset clause and linked to BPLR, the interest
rate is reset by change in spread, after expiry of a specified period. Say an
advance is sanctioned at BPLR+1% (i.e with a spread of 1%) and the interest is
specified to be reset after one year. On expiry of one year, with the upward
bias in interest rates, bank may change the spread to 1.25%, 1.50% or 2.00 %(
and so on) as the case may be, even if there is no change in BPLR. The effect
of any change in BPLR will also affect the rate of interest.

5.6

No fixed rate interest loan be sanctioned other than by Head Office and
unless clearly specified under any scheme.

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5.7

Bank would use also external or market -based rupee benchmark interest
rates for pricing of its floating rate loan products.

6. Levying of Additional Interest :

6.1.

Additional Interest may be levied at the prescribed rate for reasons such as
default in repayment, non-submission of financial statements as provided in
(APPENDIX-II).

6.2.

In the case of under noted category of loans no additional interest should be

charged :
a.
b.
c.
d.
e.
f.
g.
h.

6.3.

Working Capital limits sanctioned to Sick/Weak Units which

have remained closed.
The borrower is affected by political disturbances, natural
calamities defaulting thereby in submission of statements under
QS/Monthly Cash Budget System.
Limits sanctioned for export credit as well as export incentives.
Drawings in excess of operating limit but within overall
sanctioned limit / Drawing Power.
Priority Sector Credit upto Rs.25,000.00.
DRI advances irrespective of amount of limit sanctioned.
Educational Loan upto Rs.7.50 lac.
Advances against NSCs/KVPs/FDRs/LIC Policies etc. provided
stipulated margin is available.

Unless and otherwise specified, the interest charge inclusive of additional

interest should not exceed MLR+2% for non-priority sector advances and it will
be Applicable Rate + 2% or MLR whichever is less for priority sector advances.
[NOTE: The words Additional Interest substitutes the words Penal Interest
hitherto mentioned in various circulars/manuals/policies of the Bank] and from
now onwards in any document and/or communication to the borrowers, the
words Additional Interest should be used in place of Penal Interest.

7. Withdrawal Against Uncleared Effect :

7.1.

Where withdrawals are allowed against cheques sent for clearing i.e.
uncleared effects (e.g. uncleared local or outstation cheques) which are in
the nature of unsecured advances, the Bank would charge interest on such
drawals also as per the directive on interest rate on advances.

7.2.

The aforesaid clause (7.1) will, however, not be applicable to the facility
afforded to depositors for immediate credits in respect of cheques sent for
collection, as a measure of customer service.

7.3

Banks Guidelines on withdrawal against uncleared effect should be

complied with.

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8. Interest on Loans under Consortium / Multiple Banking Arrangement:
8.1.

The Bank may not charge a uniform rate of interest even under a consortium
arrangement except in cases where agreed upon mutually by all member
banks for such uniform rates and/or as per decision of consortium.

8.2.

In multiple finance cases, rate of interest may or may not be in line with other
banks/institutions.

9. Charging of Interest at Monthly Rest :

9.1

Interest at monthly rests be applied in case of all new and existing Term Loans
and other loans of longer / fixed tenor, Cash Credit, WCDL, Overdraft and
Export Packing Credit Accounts.

9.2

Charging interest at monthly rests shall not be applicable to agricultural

advances for which under noted norms would be applicable.
9.2.1
9.2.2

9.3

Bank would charge interest on agricultural advances for long duration

crops at annual rests.
As regards other agricultural advances in respect of short duration
crops and allied agricultural advances such as dairy, fishery, piggery,
poultry, bee-keeping etc. bank may take into consideration due dates
fixed on the basis of fluidity with borrowers and harvesting/marketing
season while charging interest and compounding the same if the loan
installments become overdue.

The total interest debited to an account should not exceed the principal
amount in respect of short term advances granted to small and marginal
farmers as clarified below :
In case of short term loan granted to small and marginal farmers (in
case of crop loan up to 12 months and in case of other loans, loans
having maturity up to 12 months), classified as Standard Asset, the
interest applied will not exceed the principal amount.
However, in case of NPA, Suit Filed, OTS accounts, the notional interest
will be continued to be calculated, from the date of last charged
interest in the account and kept in the Record Section of NPA Ledger.

9.4

Wherever sanctioned terms stipulate interest application on simple rate like

staff/officers Housing /Conveyance Loans, Education Loan during
moratorium, the interest will be calculated at the end of every month and the
same will be
debited to separately maintained respective interest
receivable accounts. Interest application in other staff loans would be at
monthly rests except where longer rests are specified /permitted.

9.5

In case Education Loan, once the moratorium period is over, the entire
outstanding, if any, in the interest receivable section will be added back to
principal amount and compounding of interest will

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start at monthly rests and will continue till liquidation of the entire loan.
10

Zero Percent Interest Finance Scheme for Consumer Durables :

10.1.

Bank should refrain from offering low/zero percent interest rates on

consumer durable advances to borrowers through adjustment of discount
available from manufacturers/dealers of consumer goods, since such loan
schemes lack transparency in operations and distort pricing mechanism of
loan products and these products do not also give a clear picture to the
customers regarding the applicable interest rates.

10.2.

Bank should also not promote such schemes by releasing advertisement in

different newspapers and media indicating that they are promoting
financing consumers under such schemes.

10.3.

Bank should also refrain from linking its name in any form / manner with any
incentive based advertisement where clarify regarding interest rate is
absent.

11. Refund of Interest.

11.1. Permissible /admissible refund on account of correction /rectification of mistakes, if

any committed during the period of posting as incumbent-in-charge may be made by the
same official.
11.1. In all other cases, the refund will be permitted by an authority not below the
rank of General Manager.
11.2. Where loan has been allowed against Banks own Fixed Deposit Receipt
and the Branch, after maturity of the FD do not adjust the loan account
thereby interest is charged on the loan outstanding, excess interest
charged thereof in the loan account will be refunded to the customer.

11.3. Where Bank after adjustment of the loan account do not remit/credit the
remaining amount of FD to the customers account but keeps balance in
sundry creditors account or kept as Credit balance in the loan account, Bank
will compensate to the customer the interest as payable for the amount kept in
the sundry creditors account at savings bank interest rate, if and only if the
customer has not been duly informed.
11.4. Where loan has been allowed against NSCs, KVPs, LIC policy and the
Branch, after maturity of the instruments do not collect the proceeds of the
instruments in question from the concerned Post Offices/LIC offices thereby
charging of interest in the loan account is continued, excess interest so
charged in the loan account will be refunded to the customer.

11.5. In case of reversal of excess interest charged in a borrowal account due to nonadjustment of liquid securities like Fixed Deposit / NSC/KVP etc in time the
branch concerned will obtain prior approval from the respective Zonal Office.

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12. Interest Income Recognition
12.1.

Income from Non Performing Asset (NPA) is not recognized

accrual basis but is booked as income only when it is actually received.

12.2.

Thus, only till the time an advance is performing one income from the same
should be recognized on accrual basis. But, the date from which it is
classified as NPA ( i.e. it ceases to be performing ) the income is to be
accounted on realization basis not only for the current year but also interest
accrued and credited to the income account in a prior accounting period
with respect to that NPA account should be reversed or provided for in the
current accounting period , if remains uncollected.

12.3.

Interest on advances against term deposits , NSCs,KVPs,IVPs , Life Insurance

Policies may be taken into income account on accrual basis on the due
date provided adequate margins as stipulated during sanction is available
in the accounts.

12.4.

In case of NPA account where interest income has ceased to accrue, the
fees, commission and similar income to the same borrower should not be
credited to income and should be reversed or provided for to the extent to
which it is uncollected.

12.5.

In case of rescheduling or re-negotiated of outstanding debts, the fees,

commission etc. should be recognized on accrual basis over the period of
time covered by the re-negotiated or re-scheduled extension of credit. Thus,
the income would be recognized on accrual basis from the date of
reschedulement as if it was a fresh account.

12.6.

If Govt. guaranteed advances become NPA, the interest on such advances

should not be taken to income account unless the interest has been
realized.

12.7.

If any advance, including bills purchased and discounted, becomes NPA as

at the close of any year, interest accrued and credited to income account
in the corresponding previous year, should be reversed or provided for, if the
same is not realized. This will apply to Government guaranteed accounts
also.

12.8.

For the purpose of calculation of notional interest for the purpose of arriving
at Banks sacrifice on compromise, following methods will be adopted:
(a)

on

In case of written off accounts, computation of interest will cease

from the date of write off (on the balance written off). Resultantly
only notional ledger balance (i.e. the written off amount) will be total
sacrifice. However, the authority for approving OTS proposal for such
written off cases will be vested as per extant delegated authority
considering the written off amount as principal due.

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(b)

In case of all NPA (including decreed /suit filed) compromise

settlements, notional interest will be uncalculated at the rate of
existing PLR/ documented rate which ever is lower (simple basis) on
the date of negotiation or the last charged interest in the account,
which is lower. In case of decreed debts, the rate of interest will be
prevailing PLR or decrectal terms which ever is lower.

(c)

Notional interest for the purpose of processing compromise

proposals will be calculated from the date of last charged interest in
the account up to the date of proposed final payment. However,
the computation of notional interest in the Record Section of NPA
ledger will be continued to be calculated.

(d)

However, in cases where the proponent offers to pay the settled

amount in installments with PLR/ documents rate/ stipulated rate,
notional interest will be calculated only up to the period up to which
compromise sum bears no interest.

(e)

In cases where the proponent offers a rate of interest lesser than PLR
on compromise sum for repayment period, calculation of notional
interest sacrifice will be as under:
From the date of stoppage of charging of interest till the date
of settlement simple interest will be calculated at the prevailing
PLR.
For the proposed installments with interest less than PLR,
notional interest will be calculated on the difference amount
between PLR and proposed rate of interest.

13. Interest rate in case of Deceased borrowal account:

13.1.

In case of death of individual borrower/proprietor, the contract between

bank and the deceased ceased to have effect. On receipt of the
information of death, the debit balance as on the date of death should be
crystallized and legal notice is to be given to the legal heirs for recalling and
payment of the loan. In case of their failure to repay the loan, legal process
for realizing the amount by selling the securities if available is to be initiated.

13.2.

If the legal heirs come forward to repay the loan/continue with the
account, a separate account is to be opened in the name of the legal heirs
and debit balance in the loan account is to be transferred to that account
and appropriate interest is to be charged.

14. Appropriate Charging of Interest :

14.1. For any irregularities for non-compliance/non-observance of provisions under
this policy and relevant instructions issued from time to time resulting in
leakage of revenue, the branch incumbent will be held personally
responsible.

10

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15. Fair Practices Code for Lenders on Interest Rate/Charges :
15.1.

Interest rates for different loan products would be made available through
and in any one or all of the following namely ;
a.
b.
c.
d.

In our Banks web site,

Over phone, if Tele Banking services are provided.
Through prominent display in the branches and other delivery
points.
Through other media from time to time.

15.2.

Information regarding rate of interest, processing fees, service charges,

refund of charges etc. to be levied by the Bank from the borrower shall be
attached in a prescribed format along with application form while giving an
application to the borrower.

15.3.

As undertaking be obtained from the prospective borrower while accepting

application that he has been briefed about and convinced about the
charges bank will levy on pre/post sanction of the loan.

15.4.

Customers would be entitled to receive on demand periodic updates on

the interest rates applicable to their accounts.

15.5

On demand, customers can have full details of method of application of

interest.

15.6.

The bank would notify immediately or as soon as possible any revision in the
existing interest rates and makes them available in the media.

15.7.

Interest rate revisions to the existing customer would be notified within 3

(three) working days from the date of change through media.

15.8.

The bank would notify clearly about the default interest/penal interest rates
to the prospective customers.

15.9.

The bank would notify details of all charges payable by the customers in
relation to their loan account.

15.10. The bank would make available for the benefit of prospective customers all
the details relating to charges generally in respect of retail product s in the
media.
15.11. Any revision in charges would be notified in advance and would also make
available in the media.
15.12. The bank would clearly specify to charge interest and other charges,
wherever necessary and get a mandate for debiting the said account
alongwith documentation.

11

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16.

Enabling Clause :
16.1.

Following proviso should invariably be incorporated in the loan agreements

in the case of all advances, including term loans, thereby enabling the bank
to charge the applicable interest rate in conformity with the directives
issued by RBI/Bank from time to time.
Provided that the interest payable by the borrower shall be subject to the
changes in interest rates made by the Reserve Bank and/or by the Bank
from time to time.

16.2.

Any revision of interest rates whether upwards or downwards should be

given effect on all the existing advances from the date that the
directives/revised interest rate (change in BPLR and spread) come into
force, unless the directives specifically provide otherwise.

16.3.

The branches are required to inform the borrower regarding changes in

interest rates whenever made, well in time and should also preserve the
proof of delivery of acknowledgement of such information.

16.4.

Paragraphs 16.1/16.2 will not be applicable in case of Fixed Rate Loans.

17. Authority for Amendments in the Policy :

17.1.

This policy will be reviewed on annual basis by the Board.

17.2.

In the interim period, the Chairman & Managing Director and in his absence
the Executive Director is authorized to implement any guidelines/instructions
received from RBI/IBA and/or to revise/amend any clause of the policy to
cope with emerging competitive challenges with subsequent reporting to
the Board.

18. Commencement of Implementation of the Policy

18.1.

The implementation of the policy would commence with immediate effect.

12

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Appendix-I

An Illustrative list of Intermediary Agencies

1. State sponsored organisations for on-lending to weaker sections. Weaker sections include
i) Small and marginal farmers with landholdings of 5 acres and less, and landless labourers,
tenant farmers and share-croppers;
ii) Artisans, village and cottage industries where individual credit requirements do not
exceed Rs. 50,000/-;
iii) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY);
iv) Scheduled Castes and Scheduled Tribes;
v) Beneficiaries of Differential Rate of Interest (DRI) scheme;
vi) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);
vii) Beneficiaries under scheme of Liberation and Rehabilitation of Scavengers (SLRS);
viii) Advances to Self-Help Groups (SHGs);
ix) Loans to distressed poor to repay their debt to informal sector, against appropriate
collateral or group security; Loans granted under (i) to (viii) above to persons from minority
communities as may be notified by Government of India from time to time. In states, where
one of the minority communities notified is, in fact, in majority, item (ix) will cover only the
other notified minorities. These States/Union Territories are Jammu and Kashmir, Punjab,
Sikkim, Mizoram, Nagaland and Lakshadweep.
2. Distributors of agricultural inputs / implements.
3. State Financial Corporations (SFCs) / State Industrial Development Corporations (SIDCs) to
the extent they provide credit to weaker sections.
4. National Small Industries Corporation (NSIC).
5. Khadi and Village Industries Commission (KVIC).
6. Agencies involved in assisting the decentralised sector.
7. State sponsored organisations for on-lending to the weaker sections.
8. Housing and Urban Development Corporation Ltd. (HUDCO).
9. Housing Finance Companies approved by National Housing Bank (NHB) for refinance.
10. State sponsored organisations for SCs / STs (for purchase and supply of inputs to and/or
marketing of output of the beneficiaries of these organisations).
11. Micro Finance Institutions / Non-Government Organisations (NGOs) on-lending to SHGs.

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Charging of Additional Interest
S.N.
1.

Appendix-II

Parameters

Additional
Interest

Non-renewal or non-review of working capital:

2%

Where the borrower has submitted the complete proposal for renewal per due date, penal
interest will not be charged. The penal rate is applicable if the renewal /review proposal is
not submitted by the borrowers within 30 days from the due date. In case pf nonsubmission, period for penal interest will be reckoned from the due date (i.e. on expiry of
one year from the date of issue of last sanction letter to the borrower based on full review.)
2.

2%

Non-Submission of Stock Statements:

7.

The period for which penal rate of interest should be applicable, is to be reckoned from the
due date of submission till actual receipt, on the total working capital limit outstanding. A
grace period of 7 days or the time limit agreed is admissible. Penal interest will be charged
from 8th day or period as agreed from due date till date of submission.
Non-Submission of QIS-II & III(for Limit of Rs.10.00 Crore & above)
The period for which penal rate of interest should be applicable, is to be reckoned from
due date of submission till actual receipt on the working capital limit outstanding. The
Stipulated period for submission of QIS is as:1. FORM:II: To be submitted within six weeks after closing of the quarter.
2. FORM:III: To be submitted on a half yearly basis within two months from the close of
each half year.
Default in payment of monthly/Quarterly or periodical installment for term Loan.
Penal interest in such cases will be reckoned from the due date of installment and for the
amount of default.
Default in payment of monthly/Quarterly or periodical interest.
Penal interest debit not paid within 7 days of end of the month/ quarter/half year/year (as
per stipulation) for the entire period of default including grace period.
Adhoc Limits (Other than Export Credit) not paid on the due date or within the due date
permitted for the entire period of default.
Non-payment of dishonored Bills for entire overdue period.

8.

Bills remaining overdue for more than 7 days for entire overdue period

2%

9.

In case of outstanding balance in C/C, O/D account remaining in excess of sanction limit
or Drawing power for more than 7 days. Penal
Interest will be charged for overdrawn amount only and for the period from date of such
overdrawing till date of regularization.
Non-Compliance of terms and conditions of sanction

2%

Commitment Charge on the unutilized portion of the working capital limit subject to
tolerance level of 15% of such limits applicable for funded Credit limit of Rs.1.00 Cr and
above. The Exemption from the purview of commitment Charges:1. Drawing in excess of operative limit.
2. Working Capital Limit sanctioned to Sick/Weak units.
3. Limit sanctioned for Export Credit as well as incentive.
4. Inland Bill limits extended by way of bill purchase/ discount of overdraft/ Cash Credit
/Sub-limit against bill for collection.
5. Credit limits sanctioned to Commercial Banks financial institutions and Co-operative
Banks including Land development Banks.
6. In case of consortium advance the as per decision of the consortium. However the
operative limit as allocated by lead bank will be considered as operative limit.

2%

3.

4.
5.
6.

10.
11.

2%

2%
2%
2%
2%

2%

[NOTE: The words Additional Interest substitutes the words Penal Interest hitherto
mentioned in various circulars/manuals/policies of the Bank] and from now onwards in any
document and/or communication to the borrowers, the words Additional Interest should be
used in place of Penal Interest.

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