Delayed Interest vs Penal Interest: Key Differences

Delayed interest is the interest that continues on an unpaid amount after its due date at the contracted rate, while a penal charge is a separate charge for not meeting specified material terms of the loan. Under RBI's directions on penal charges, a penal charge is not added to the interest rate and is not capitalised, so no further interest is calculated on it. Check your loan statement and agreement to see which amounts apply, clear any overdue EMI through My Account, and note that an overdue EMI is reported to credit bureaus.
 

• Delayed interest continues on an unpaid amount at the contracted rate until the overdue amount is paid.
• A penal charge is a separate charge under the lender's approved policy, and it is not added to the interest rate or capitalised.
• "Penal interest" is the common search term, but the RBI framework uses the term penal charges.
• Check the loan agreement, Key Facts Statement and loan statement for the amounts that apply to your account, rather than estimating them.
• An overdue EMI is reported to credit bureaus, and a later payment does not remove the earlier entry.
• Pay an overdue EMI through Make loan payments and then Missed instalments or Other overdues, and keep the confirmation.

Delayed interest is the interest that continues to apply to an unpaid amount after its due date, subject to the loan agreement. For example, when an EMI stays unpaid, the overdue amount continues to attract interest at the contracted rate until it is paid. Interest on the overdue EMI itself is therefore different from a penal charge. The amount depends on the loan terms, so check your loan statement and documents instead of using a general formula.

What is the difference between delayed interest and penal interest?

The key difference lies in why each applies and how it is treated. Delayed interest relates to an unpaid amount that stays outstanding after its due date, while a penal charge is a separate charge for not meeting specified material terms of the loan. The table compares them.

Your loan terms show whether an amount is delayed interest or a penal charge, because the treatment can differ with the agreement and the nature of the overdue amount.

What are penal charges and how are they applied?

Penal charges are separate charges that may apply when a borrower does not comply with specified material terms of a loan agreement. The lender follows a Board-approved policy for these charges, which should be reasonable and proportionate to the non-compliance. The conditions are disclosed in the loan agreement, the Key Facts Statement where applicable, or other loan communication. The exact charge for your loan is in these documents, so check them rather than assuming an amount.

Your loan statement is the most reliable place to check overdue interest, charges and the outstanding amount. You can see it in My Account or the app. Follow these steps:
 

1. Open My Account or the app and sign in using your registered mobile number and OTP.
2. Verify your details with your date of birth, where asked.
3. Go to Service and select the loan under Your Relations.
4. Open the loan details and the Statement of Account.
5. Review the overdue amount, payment history and the interest and charge entries.
6. Compare them with your own payment records, and keep your loan account number, transaction details and bank records ready.
7. If an entry or charge is unclear, raise a request through Help and Support.

What if the overdue amount is not paid?

An overdue amount stays payable until it is paid. Delayed interest continues on it at the contracted rate, and a penal charge can be applied as set out in your loan agreement. An overdue EMI is reported to credit bureaus as a Days Past Due (DPD) entry in the lender's regular reporting cycle, and a later payment does not remove the earlier entry.

To clear it, go to Service, select your loan under Your Relations, choose Make loan payments, then Missed instalments or Other overdues, and pay using UPI, net banking or a debit card. If a payment is pending, check its status before paying again.

A notice about overdue dues should be compared with your latest loan statement and answered within the stated timeline. If any figure differs from your records, raise it through Help and Support, and if it stays unresolved, escalate it through the lender's grievance route. If you cannot pay in full, contact the lender early to understand the options for your loan. Any option is subject to the lender's assessment and is not guaranteed.