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    Penal Charges - Union Bank of India

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    Penal Charges - Union Bank of India

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    Penal Charges_Union Bank of India

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    Penal Charges - Union Bank of India

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    Penal Charges in Loan Account

    I. Union Bank of India has introduced guidelines on ‘Penal Charges on Loan


    Account’ w.e.f. 01.04.2024 in terms of RBI notification on Fair Lending
    Practices – Penal Charges in Loan Account.

    II. The Penal Charges shall replace the existing guidelines on Penal Interest.

    The guidelines on Penal Charges are as under:

    1) If any of the conditions spelt out hereunder are observed in the borrowal account,
    the same will attract Penal charges of 1% p.a. each subject to maximum of 2% p.a.

    i. Non-compliance of terms of sanction. Till such time the terms are complied with.

    ii. Non-Submission/delayed submission of Stock Statements: submitted after 15th of


    the subsequent month. In case of consortium, timelines as defined in extant loan
    policy.

    2) In respect of the following, 2% Penal Charges to be charged:

    i. Non-Submission/delayed submission of QPR. [Non-submission of MSOD will not


    attract Penal Charges].

    ii. Return of Cheques Purchased/Discounted: from the date of purchase till


    adjustment.

    iii. Return of Bills Purchased/Discounted: from the date of purchase till adjustment.

    iv. Non-submission of Audited Financials in time: Penal charges to be charged from 15th
    November till the date of submission.

    v. Delayed submission of CMA/Renewal data (for the period beyond due date)

    vi. Delayed payment of Term Loan/DPGL installments: for the period of delay in respect
    of the installments delayed.

    -Penal charges will also be applicable to overdue EMIs

    vii. Delay in payment of UBDs: for the period of delay from due date.

    viii. Excess over limit/Drawing Power: On the amount in excess of limit / DP for the
    period of excess
    - This will not be applicable for Export facilities.

    ix. Ad Hoc facilities sanctioned.


    -Ad Hoc Export facilities will not attract Penal charges.

    Page 1 of 2
    3) In case of Base Rate / MCLR / EBLR linked loans, maximum penal charges of 2% will
    be charged.

    4) Borrowers enjoying Fund Based limits up to and inclusive of Rs 25000/= under Priority
    Sector and others enjoying Fund Based limits up to and inclusive of Rs 5000/= are
    exempt from charging Penal Charges.

    5) The aspect of penal charges in loan account shall replace the hitherto concept of
    penal interest in all the schematic/ cluster etc guidelines of Bank.

    6) There shall be no capitalisation of penal charges i.e., no further interest


    computed on such charges.

    7) Goods and Service Tax (GST) shall be applicable over and above the Penal Charges as
    per extant guidelines on applicability of GST on service charges for advances.

    8) The prescribed instructions on penal charges above are not applicable in case of
    rupee/ foreign currency export credit and other foreign currency loans.

    9) Bank has not introduced any additional component to the rate of interest.

    10) The instructions shall be implemented in respect of all the fresh loans availed
    from 01.04.2024 onwards.

    11) In the case of existing loans, the switchover to new penal charges regime shall
    be ensured on the next review/ renewal date falling on or after 01.04.2024,
    but not later than 30.06.2024.

    12) Any Further details on Applicability of Penal Charges in Loan Accounts can
    be obtained from the Branch Manager of the nearest Branch.

    Page 2 of 2

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