What changed
The Government of India, based on a committee review, superseded earlier instructions with a revised procedure effective January 1, 2007. The key change is that delayed period interest is now calculated from the day following the put-through date, not from the transaction date. For transactions below Rs.1 lakh, a tiered interest rate applies: Bank Rate for delays up to 5 calendar days, and Bank Rate + 2% for longer delays.
What it means for you
Banks handling government receipts must now carefully track the put-through date to avoid interest penalties. The tiered interest structure for smaller transactions incentivizes faster remittance. Quarterly reviews by government accountants could lead to authorization reviews if delays exceed 5% in two successive quarters, increasing compliance pressure.
What you must do
- Ensure your bank's systems calculate delayed period interest from the day after the put-through date, not the transaction date.
- Implement internal controls to monitor remittance timelines for both local (T+3) and outstation (T+5) transactions.
- Prepare for quarterly reviews by Principal Chief Controllers of Accounts; keep delay rates below 5% to avoid escalation.
- Accelerate Core Banking Solution (CBS) and electronic modes implementation to improve remittance efficiency.
Who it affects
Public sector banks dealing with government business, All banks handling government receipts, Bank branches collecting government revenues, Focal point branches settling with RBI's Central Accounts Section
What is the new interest rate for delayed remittance of government receipts?
For transactions of Rs.1 lakh and above, delayed period interest is Bank Rate + 2%. For transactions below Rs.1 lakh, interest is Bank Rate for delays up to 5 calendar days, and Bank Rate + 2% for delays beyond 5 calendar days.
How is the delay period calculated under the revised procedure?
The delay period starts from the day following the put-through date (the date of settlement with RBI's Central Accounts Section), not from the transaction date. The put-through date itself is excluded from the time limit.
What happens if a bank has high delay rates in two successive quarters?
If delays are 5% or more for the bank as a whole or any branch in two successive quarters, the Principal Chief Controller of Accounts will forward a recommendation to the Controller General of Accounts for review of the bank's authorization.