Od penal interest by bank

Proprietor

I have obtained CC limit from a bank 4 years back. The business for which I got the loan is not good and I am not able to show required turnover. I am paying monthly interest regularly. The bank also has extended the facility on my request more than 2 times. Even though I am paying interest regularaly, the bank charge OD penal interest often to bring down my feelings. I am very sincere with bank and also reduced the limit in the past six months more than 20% of the sanctioned limit. I have written several letters asking the bank for reasons for charging OD penal interest and other querries. The bank never replied me with suitable reasons. As I feel my biz is not good and will take some time to repay the loan completely. Kindly advise me what to do?

 
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If interest is being serviced regularly & on time, bank cannot charge "overdue" penal interest. However, "penal interest" can be charged for various reasons, like non submission/delayed submission of stock statements, non compliance of any sanction terms & conditions, etc. Pls refer to your sanction letter for this. If bank is not replying to your letters, take up the matter with higher ups. If it is a nationalized bank, RTI is applicable and you can seek information through RTI. Details of higher ups/RTI should be there in the bank's website.

 
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Proprietor

Thank you Mr.Prasan Chandra Das for your prompt reply.

 
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Cash Credit is an overdraft facility, usually granted for one year and renewed normally. This facility tends to be a perennial credit facility, if properly conducted.

Normally banks stipulate several conditions while sanctioning the limit:

The limit should be availed as need-based from day to day and not be at optimum level as in loans.

The sale proceeds should be deposited into the account invariably.

Purchases should be paid by drawing cheques payable to the seller/supplier.

Proper stock register should be maintained wherein daily entries are made as to the purchases of major items in quantity as well as value and for miscellaneous items on a consolidated value basis.

Purchases and sales should be supported by bills/invoices.

Insurance of stock in trade as well as any building taken as collateral security.

Stock statements/purchase and sales statements should be submitted monthly/quarterly.

Periodical inspection by bank of stock, stock register and statements submitted at borroer's cost.

Renewal should be sought before the expiry date with trading and profit and loss account and balance sheet, duly audited, if so stipulated by law.

Income Tax, wealth tax, sales tax, CST,VAt,service tax etc should not be in arrears.

There would be many more conditions in fine print, which usually no borrower cares to read and understand.

Regarding quantum of 'drawing limit', this would be limited to value of closing stock for the previous month less margin stipulated say 25 or 30 %, but not exceeding credit limit sanctioned.

Overdue interest/penal interest is levied, for breach of major conditions: Non-submission or delayed submission of stock statement; drawing above the drawing limit or sanctioned limit as the case may be; non-submission of renewal papers in due time; non-maintenance of stock register.

In your case reasons are not known. However, the overdue/penal interest @2% can be on the amount of liability in excess of drawing/sanctioned limit as applicable, or for number of days of delay in submitting stock statement or for entire liability in case of delay in submitting renewal papers.

So, please ask the bank in writing, the reasons for charging such interest. If they don't reply or reply not to your satisfaction, within a month, make a complaint to the Banking Ombudsman.

 
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Proprietor

Dear Mr.Chandrasekharan,

Thank you for your detailed reply.

 
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Professor

 

Need Ur Suggestion


Respected Sir,

 

Please note that I booked my air ticket for 2nd Nov by Fly- kingfisher  , but unfortunately it was cancelled. When I spoke to Airport Office in Chennai counter ,  They promised me to return the fare amount immediately.  But till now they have not returned.   They also don’t have courtesy to reply. Many passengers who have booked their advance tickets are in trouble and the Fly kingfisher co did not refund the amount.

 

I would like your kind attention in this regards. Now they closed the office-counter in the chennai airport. We also don’t know whom to contact in this regard.

 

The details of the booking tickets  are as follows =

 

Name  =  Aishwarya Anand

 

Date of Journey =  2nd Nov 2012 Friday,  from Pune to Bangalore.

 

PNR  =  LXWERV

 

Ticket No  = 0902173107406

 

Cost  of the airticket  =  Rs. 3529/=

 

Booking was done on 30th Sept 2012, thro ATM card, by Dr Anand K, in Chennai, Kingfisher airport counter.

 

Please do help us.  Thanks.

 

From

Prof Dr Anand K

 

7th Jan 2012.

 

 
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The reply given my mr prasun chandra das and mr chandrasekaran is more relevant

 
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