What changed
RBI confirmed that the interest rate on delayed remittances and double/excess reimbursement for government accounts remains unchanged at 8%. This rate is calculated as Bank Rate minus 6% plus 2%. The circular supersedes the previous instruction from November 7, 2006, but keeps the same rate.
What it means for you
Banks handling government accounts must continue to pay 8% interest on any delayed remittances or excess/double reimbursements. This rate is fixed and not linked to market fluctuations, providing clarity for compliance. Lenders should ensure their systems accurately calculate and remit interest to avoid penalties.
What you must do
- Update internal systems to apply 8% interest on delayed remittances and excess/double reimbursements for government accounts.
- Review past transactions since November 2006 to ensure correct interest calculation and payment.
- Train staff handling government accounts on the unchanged rate and calculation formula (Bank Rate - 6% + 2%).
- Monitor RBI circulars for any future changes to this rate.
Who it affects
State Bank of India and its associates, All nationalised banks, Jammu & Kashmir Bank Ltd., IDBI Ltd., HDFC Bank Ltd., ICICI Bank Ltd., UTI Bank Ltd., Any bank maintaining government accounts
What is the current interest rate on delayed remittances for government accounts?
The rate remains 8% per annum, calculated as Bank Rate minus 6% plus 2%, as per RBI circular dated May 23, 2007.
Does this circular apply to all banks?
It applies to State Bank of India and its associates, all nationalised banks, Jammu & Kashmir Bank, IDBI, HDFC Bank, ICICI Bank, and UTI Bank, effectively covering all banks handling government accounts.
When did this rate become effective?
The rate was effective from May 23, 2007, and remains unchanged until further instructions from RBI.