Adarsh Malhotra (Director) 22 August 2012

Can bank charge interest on npa

Bank had sanctioned a secured term loan of Rs 100 lacs for construction of a building. Due to delay in completion of building, bank had recalled its loan after disbursing a loan of 20 lacs. On 30th June Bank had classified the loan as NPA with an overdue of Rs 12 lacs and total outstanding including interst, penal interst of rs 25 lacs as on 30.6.12. On 5th july Bank had issued notice of SERFASEI. On 22 nd August 2012, firm had deposited with Bank Total outstanding of Rs 25 lacs as on 30.6.12. Can the Bank charge interst for the period from 1st july to 22nd august, if yes then on which amout whether the total outstanding or overdue amount as on 30.6.12. Pl quote circulars of RBI in this regard.

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JT Rajasuriya, Chennai (Advocate 98410 53790) 22 August 2012

The interest will be on the total outstanding. But you can ask the Bank to give the complete working sheet of interest, etc. to find out if the said calculations are as per RBI guidelines.

Ajit Singh Cheema (practising Advocate) 23 August 2012

The interest does not stop applying on the account becoming NPA. On the account becoming NPA , the interest does not stop applying . The only difference is that the interest is charged but it is not taken to the income of the bank , until it is recovered .Please note that debit balance outstanding shall not include , interest to be charged for the period 01.04.2012 to 30.06.2012 and for that matter for the period 01.07 .2012 to 22.08.2012..But the interest from 01.04.2012 to 22.08.2012 will be charged at the time the amount is recovered, on the balance of loan a/c outstanding day wise.