Penal Interest Rate on Delayed Govt Remittances Unchanged at 8%
Current · Source: Reserve Bank of India · RBI/2007-2008/182 · issued 08 Nov 2007 · ~1 min read
Quick answerRBI has confirmed that the penal interest rate on delayed remittances and excess/double reimbursement for government accounts remains at 8% (Bank Rate + 2%) until further notice. No change from the May 2007 circular.
The rule, in the simplest words
If a bank is late in sending government money or takes extra money by mistake, it must pay a penalty of 8% interest per year.
This 8% rate is made of the Bank Rate (6%) plus an extra 2%.
The rule has not changed since May 2007, so banks must keep using this same penalty.
Banks that handle government accounts must update their systems and train staff to follow this rule.
How it plays out — a real example
A forex & trade-finance officer in Indore processes a government tax remittance but accidentally delays it by 10 days. Because of this rule, the bank must pay 8% interest on the delayed amount, so the officer double-checks all remittance deadlines to avoid extra costs.
What changed
This circular, dated November 8, 2007, reiterates that the penal interest rate on delayed remittances and excess/double reimbursement for government accounts stays at 8% per annum. It confirms no revision from the earlier May 23, 2007 circular on the same subject.
What it means for you
Banks handling government accounts must continue to apply the 8% penal rate for any delays in remitting government funds or for any excess/double reimbursements claimed. This rate is fixed at Bank Rate plus 2%, providing a clear penalty structure. Non-compliance will attract this interest charge, impacting operational costs for banks with processing lags.
What you must do
Ensure your systems apply the 8% penal interest rate on delayed remittances of government funds.
Review and update internal processes to prevent excess or double reimbursement claims.
Train staff handling government accounts on the unchanged penal rate and compliance requirements.
Monitor remittance timelines to avoid incurring penal interest charges.
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., All banks handling government accounts
❓ Common questions
Is this circular still in effect?
The source text does not indicate withdrawal status for this specific circular. The header lists withdrawal dates for multiple circulars, but no explicit statement applies to this one. Refer to current RBI directives for the latest penal rate.
📜 Read the original circular — full text as issued by RBI
RBI/2007-2008/182
DGBA.GAD.No.5181/ 42.01.011 /2007-08
November 8, 2007
The Chairman & Managing Director/Managing Director
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.
Dear Sir,
Maintenance of Government Accounts – Penal Interest on delayed remittances and excess/double reimbursement
Please refer to our circular No. RBI/2007/410 (DGBA.GAD.No.H.16665 /42.01.011 /2007-08) May 23, 2007 on the captioned subject.
2. We advise that the rate of interest on delayed remittances and double/excess reimbursement would remain unchanged at
8% (i.e. Bank Rate 6% + 2%) till further instructions.
Yours faithfully,
(M.T.Varghese)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/182 · issued 08 Nov 2007. The plain-English explanation above is BankPulse’s own independent summary.
Ensure your systems apply the 8% penal interest rate on delayed remittances of government funds.
📜 Compliance
Review and update internal processes to prevent excess or double reimbursement claims.
Train staff handling government accounts on the unchanged penal rate and compliance requirements.
Monitor remittance timelines to avoid incurring penal interest charges.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (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., All banks handling government accounts), your first concrete step on “Penal Interest Rate on Delayed Govt Remittances Unchanged at 8%” is: “Ensure your systems apply the 8% penal interest rate on delayed remittances of government funds.” (RBI issued this 08 Nov 2007).
Circular: RBI/2007-2008/182 -- Penal Interest Rate on Delayed Govt Remittances Unchanged at 8%
Issued: 08 Nov 2007
Action required: Ensure your systems apply the 8% penal interest rate on delayed remittances of government funds.
Action required: Review and update internal processes to prevent excess or double reimbursement claims.
Action required: Train staff handling government accounts on the unchanged penal rate and compliance requirements.
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3953&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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