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Cash credit account penal interest.

deevam jain (practice) (25 Points)

02 July 2016

Hello Sir, I have a Cash Credit account in State Bank Of India. On the last day of Every month, some amount under name of penal interest is charged to my account. on asking from bank authorities, they reply that it is due to late submission of stock statement which are submitted on 1st date of every month. I just want to ask the reason of charging penal interest to my account. Thanks

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4 Replies

Milind M. Kulkarni (Practicing CA) (583 Points)
Replied 02 July 2016

If stock statements are submitted with delay, banks charge penal interest from the borrower. However in your case, you have mentioned that these statements are submitted on 1st of the next month every time. Normally bank allows 1 week to 10 days time to submit stock statements after a month is over. If you submit it on 1st, I don't know how early they expect you to submit; or is it that you submit them for the month before the one which is completed?

You have to speak openly with the bank and get this clarified. If they are charging it unreasonably from you, you have ample choices to shift to another bank if you have a good track record of CC account operation.

SSG (1936 Points)
Replied 02 July 2016

Please check the sanction letter. At times banks do charge penal interest for non-fulfillment of any term/condition of the agreement. In some of the cases in SBI, bank software do charge penal interest for non-utilisation of the limit upto certain extent.If still the matter is not clear, you may ask in writing from the sanctioning authority. If bank agree you can make written request for reversal of penal interest.