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Penal interest on term loan by state bank of india

S.PARTHASARATHY (DGM-Finance Kamachi Industries Limited.) (28 Points)

24 December 2016

Is Penal Interest is calculated on the IRREGULAR / OVERDUE amount or on the ENTIRE OUTSTANDING AMOUNT ? SBI OFFICIALS ARGUES, AS PER THIER CIRCULAR, it is on "ENTIRE TERM LOAN OUTSTANDING AMOUNT" . However, we contend, it is on OVERDUE/IRREGULAR portion only.

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ankita gandhi (student) (5908 Points)
Replied 24 December 2016

Go through that circular. Read it carefully, it will help u. And even in audit report give comment like as per this circular number...
And yes check whether circular is applicable fpr said term loan and it's time period for applicability.

ankita gandhi (student) (5908 Points)
Replied 24 December 2016

And bank officials to keep their point are under obligation to provide u such circular

S.PARTHASARATHY (DGM-Finance Kamachi Industries Limited.) (28 Points)
Replied 24 December 2016

As far as State Bank of India is concerend, there are many Circulars applicable to various segments/category for various period of time. The Bank Officials will pick up the circular, which are in favour of them. We (borrower) will select the SBI Circular in favour of us.

CIRCULAR A

In one of the SBI Circular "ADVANCE RELATED TO SERVICE CHARGES (C&I, SME AND AGL SEGMENT" ) - Point No: 19

“ Penal interest is not applicable in case of Sick units under Rehabilitation /

restructured accounts under CDR / JLF and non-compliance on account of

Natural calamities/ extraneous reasons – As may be decided in CDR / JLF).”

Our company loan is a "Restructured account under CDR". However, no decided in the Joint Ledger Forum regarding the non-applicablity of penal charges.

CIRCULAR B:

Pls. see another circular of SBI "REVISED SERVICE CHARGES W.E.F. 1/06/2015 - Point No; 19 (vii) (a)

"Term Loan -> Non-payment of Interest / Instalment -> In addition to 1 % p.a. penal interest on entire outstandings for period of default, flat penalty ( penal interest) of Rs 1000/- for each day of delay beyond due date of payment"

Now, from borowwer side, we refer to Circular A, i.e. Penal Interest NOT APPLICABLE, because, our "Term Loan is a restructure loan under CDR"

However, Bank will take up Circular B, where in No such wording as in Circular A for not charging Penal Interest. Instead, as per Circular B, 1% Penal Interest on the ENTIRE OUTSTANDING.

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Hope, I made my point clear.

if not, ignore all the above and reply to the below query:

For a Term Loan under "Corporate Debt Restructure scheme(CDR)", which SBI Circular to see...? Is SBI is correct in Charging Penal Interest on CDR-Term Loan ?, if yes, then on OVERDUE AMOUNT OR ENTIRE AMOUNT...