Charging of intererst by state co-operative bank

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manohar kulkarni (Querist)
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12 November 2013 DEAR,

ARE THERE ANY SPECIAL GUIDELINES BY RESERVE BANK OF INDIA THAT, ON LOAN ACCOUNT SIMPLE RATE OF INTEREST SHOULD BE CHARGED AND NOT THE COMPOUNDED INTEREST?

IS THERE ANY LIMIT FIXED BY RBI TO RECOVER PRINCIPLE INTEREST TOGETHER FOR THE CO-OPERATIVE BANKS?

IF, YES PLEASE PROVIDE THE DETAILS AND GUIDELINES OF RBI IF ANY.

THERE WAS ONE CASE OF PRAKASH AYACHIT VS. BANK OF MAHARASHTRA REGARDING VALIDITY OF COMPOUND RATE OF INTEREST.

CAN BE THE DETAILS MADE AVAILABLE?

THANKS IN ADVANCE

Nikhil Kaushik

Nikhil Kaushik (Expert)
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12 November 2013 I am answering to the first question.

Banks are allowed to charge interest at simple or compounding interest subject to the RBI master circular on Interest on Advances. The said circular is applicable to all the banks except for Regional Rural banks.

Request other experts to deal with the second part.

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