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Commitment charges bank audit

Sakshi Mehta (-) (252 Points)

11 June 2021

how to calculate commitment charges .50% on unavailed limit quarterly..... example would be helpful

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CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 11 June 2021

In the case of a one-time loan, the commitment fee is negotiated between the lender and the borrower. The fee can be a flat amount, such as $1,000, or a percentage of the loan amount, such as 1%.

For an open line of credit, a formula is used to calculate the average available amount of credit on a periodic basis, often quarterly. The fee is then calculated by multiplying the average unused commitment by the agreed-upon commitment fee rate and again by the number of days in the reference period.