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Loan Late Fee & Penal Interest Calculator

Penal interest on an overdue amount. Indian regulation requires penal charges on loans to be levied as flat charges rather than capitalised into the rate, which changes how they accumulate.

Also called: late payment interest, default interest calculator.

₹
%
%
Interest basis
Total interest
₹7,192

₹7,192 over 75 days: ₹6,164 at the contractual rate and ₹1,027 in penalty. That is ₹96 a day and 14% annualised.

Contractual interest
₹6,164
Penal component
₹1,027
Accruing per day
₹96
Combined annual rate
14%
Total now due
₹2,57,192
On penal charges
Indian regulation requires penal charges on loan accounts to be flat charges rather than a capitalised penal rate.
How this is calculated
Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

The penal rate is added to the contractual rate for the days the payment is overdue. The Reserve Bank has directed that penal charges on loan accounts be levied as charges rather than as a penal rate of interest capitalised into the balance, which prevents penalties compounding into further penalties. The distinction matters over long delays: capitalised penalties grow on themselves and flat charges do not.

the penal rate adds to the contractual rate for the overdue period
r_c
Contract rate
r_p
Penal rate

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

seventy-five days overdue

Amount overdue
₹2,50,000
Contractual rate
12%
Additional penal rate
2%
Days overdue
75
Interest basis
Simple

Total interest₹7,192

2,50,000 x 12% x 75/365

Open this example

no penal rate leaves only contract interest

Amount overdue
₹2,50,000
Contractual rate
12%
Additional penal rate
0%
Days overdue
75
Interest basis
Simple

Total interest₹6,164

boundary

Open this example

Method and limits

What it assumes

  • A single overdue amount for a continuous period.

What it deliberately does not model

  • Actual penal terms are set by the contract and vary considerably.
  • Regulatory treatment differs between loan accounts and other receivables.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Can a bank compound penal interest?
On loan accounts, Indian regulation requires penal charges rather than a capitalised penal interest rate, which prevents penalties earning further penalties.