Principle
A penalty for non-compliance with a material term of the loan contract will be levied only as a "penal charge"; it will not be added as penal interest to the contracted interest rate. Penal charges are intended to encourage credit discipline and are not a revenue-enhancement tool.
Events and charge basis
- default or delay in paying an instalment or other contractually due amount;
- breach of a material end-use, security, insurance, information or covenant obligation specifically identified in the loan contract;
- dishonour / failure of a repayment instrument where a separately disclosed actual / service charge applies;
- other material non-compliance approved for the relevant product and explicitly disclosed.
The charge will be reasonable and commensurate with the breach, applied only to the relevant amount under default where required, and uniform for similarly situated borrowers within a product category. Charges for individual non-business borrowers will not exceed those for comparable non-individual cases for similar non-compliance.
No compounding
Penal charges will not be capitalised. No interest or fresh penal charge will be computed on an outstanding penal charge. Contracted interest may continue on unpaid principal / interest as legally permitted and stated in the loan contract.
Disclosure and communication
- Quantum and reason will appear prominently in the KFS, sanction terms and loan agreement, not merely by website cross-reference.
- The website schedule will be maintained under "Interest Rates and Service Charges".
- Reminders for material non-compliance will state the applicable charge; every levy will communicate the amount and reason.
- GST / tax treatment will follow applicable law and official clarification.
Schedule of penal charges
| Material non-compliance | Charge / calculation | Maximum / frequency | Cure or waiver authority |
|---|---|---|---|
| [INSERT EVENT] | [INSERT AMOUNT / FORMULA] | [INSERT LIMIT] | [INSERT AUTHORITY] |
| [INSERT EVENT] | [INSERT AMOUNT / FORMULA] | [INSERT LIMIT] | [INSERT AUTHORITY] |
| [INSERT EVENT] | [INSERT AMOUNT / FORMULA] | [INSERT LIMIT] | [INSERT AUTHORITY] |
| [INSERT EVENT] | [INSERT AMOUNT / FORMULA] | [INSERT LIMIT] | [INSERT AUTHORITY] |
| [INSERT EVENT] | [INSERT AMOUNT / FORMULA] | [INSERT LIMIT] | [INSERT AUTHORITY] |
Waiver, reversal and review
Authorised officials may reverse or waive a charge for system error, payment evidence, approved hardship relief, Company error or another documented reason. Operations and Compliance will periodically test consistency, complaints, reversals and income trends. The Board / [INSERT COMMITTEE] will review this policy at least annually.
RBI (NBFC — Responsible Business Conduct) Directions, 2025, provisions on penal charges, as amended.