Start with when funds actually became outstanding
A sanction letter is not evidence that the entire sanctioned amount was disbursed on that date. For an interest review, rebuild the actual principal and event dates before comparing the lender’s debit. RBI identifies charging before actual disbursement, charging for a full month despite a mid-month event, and ignoring advance instalments in the principal base as unfair practices requiring corrective attention.
Current framework and lender population
This article addresses commercial banks within paragraph 3 of the RBI Commercial Banks – Miscellaneous Supervisory Directions, 2026, issued on 31 July 2026 and displayed as updated on 1 October 2026 when checked on 24 October 2026. Their defined population excludes Small Finance Banks, Payments Banks and Local Area Banks. Do not assume that this particular direction’s definition is the current rulebook for every lender.
Chapter V, paragraphs 13–15, addresses fair charging and corrective action. It also flags EMIs on sanctioned rather than actually disbursed amounts without borrower knowledge or consent, and failure to communicate changes to the original KFS amortisation schedule with each part-disbursement. The earlier 29 April 2024 RBI circular on charging of interest records the supervisory concerns and the direction to review practices. Its broader original addressee list should not be substituted for the population of the 2026 direction used here.
Turn statements into a principal-event ledger
Capture sanction, agreement, actual transfer, cheque delivery, each drawdown and each principal repayment separately. Use bank confirmations and the lender’s transaction ledger to establish the effective event. In a cheque case, the printed date alone does not resolve a delay before delivery to the customer. For a transfer made directly to an agreed vendor on the borrower’s behalf, document the actual disbursement facts rather than assuming that only a credit to the borrower’s personal account can count.
| Event | Evidence | Reconciliation consequence |
|---|---|---|
| Sanction or agreement | Approval and executed contract | Do not substitute for actual disbursement. |
| Disbursement or tranche | Transfer confirmation or cheque-delivery record | Start the supported principal interval. |
| Principal repayment | Value-dated lender posting | Reduce the relevant outstanding balance. |
| Advance instalment | Allocation between principal, interest and charges | Avoid assuming the entire receipt is principal. |
| Rate reset | Contractual benchmark and effective date | Split the interval if the rate changes. |
Separate a diagnostic model from contractual interest
The six workings below use simple interest at an assumed 12% a year, an actual/365 basis, and intervals that include the start date and exclude the end date. These conventions make the arithmetic reproducible; RBI’s cited chapter does not impose 12%, actual/365 or this boundary convention on every loan. Actual pricing, compounding, rate resets, business-day treatment and receipt allocation must be checked against the agreement and applicable directions.
An EMI contains more than principal. A repayment received in advance should be analysed using its actual allocation rather than mechanically subtracting the full instalment from principal. Conversely, leaving principal unchanged after a supported principal reduction can overstate interest. Keep interest corrections separate from lawful fees and from any distinct complaint about disclosure or consent.
How to present a bank correction request
Provide the event ledger, statement debit, reconstruction and documents supporting each difference. Identify whether the problem is date, principal, rate, allocation or an undisclosed schedule change. Ask for a reasoned reconciliation and the appropriate correction; the model’s numerical difference is not itself a binding refund order. Record any credit actually received and the remaining dispute. Do not promise an automatic compensation multiple or universal turnaround period absent a separately verified applicable rule.
Worked illustrations
The following illustrations use fictional facts. Amounts and assumptions are stated separately from legal requirements.
Illustrative example 1: Sanction before transfer
₹10,00,000 is sanctioned on 1 October 2026 and actually transferred on 11 October. The period from sanction to transfer is 10 days. Charging the full principal for those extra days produces ₹10,00,000 × 12% × 10/365 = ₹3,287.67 in the assumed model. The sanction date does not prove disbursement.
Illustrative example 2: Cheque date and delivery
A ₹6,00,000 disbursement cheque is dated 5 October but delivered on 9 October. The difference is 4 days. The modeled interest for that gap is ₹6,00,000 × 12% × 4/365 = ₹789.04. Retain delivery evidence and resolve actual disbursement rather than using the cheque date mechanically.
Illustrative example 3: Mid-month disbursement
₹12,00,000 is outstanding from 16 October to 1 November, a 16-day interval. Modeled October interest is ₹6,312.33. A full 31-day October charge would be ₹12,230.14, producing a difference of ₹5,917.81. A monthly billing cycle does not by itself establish that principal was outstanding all month.
Illustrative example 4: Two actual tranches
₹5,00,000 is disbursed on 1 October and another ₹3,00,000 on 16 October. To 1 November, the respective periods are 31 and 16 days. Interest is ₹5,00,000 × 12% × 31/365 plus ₹3,00,000 × 12% × 16/365 = ₹6,673.97. Charging ₹8,00,000 for all 31 days gives ₹8,153.42, a ₹1,479.45 difference after final rounding.
Illustrative example 5: Principal repayment during the month
Principal is ₹8,00,000 from 1 to 11 October, then ₹6,00,000 from 11 October to 1 November after a ₹2,00,000 principal repayment. The intervals are 10 and 21 days. Modeled interest is ₹6,772.60, compared with ₹8,153.42 if the reduction is ignored; the difference is ₹1,380.82.
Illustrative example 6: An advance amount with proven principal allocation
An opening ₹10,00,000 principal is reduced by a separately established ₹50,000 principal component at the start of a 30-day interval. Using ₹9,50,000 gives ₹9,369.86 interest. Using ₹10,00,000 gives ₹9,863.01, a ₹493.15 difference. This example assumes the ₹50,000 is principal, not a gross EMI containing interest or fees.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Confirm the lender and applicable directions. | Bank legal identity and regulatory population. |
| 2 | Read pricing and calculation terms. | Loan agreement, KFS and rate-reset terms. |
| 3 | Separate sanction from actual disbursement. | Approval date and funds-transfer evidence. |
| 4 | Verify cheque delivery where relevant. | Delivery acknowledgement and disbursement record. |
| 5 | List every actual tranche. | Value-dated principal-event schedule. |
| 6 | Allocate receipts correctly. | Principal, interest and charge split. |
| 7 | Rebuild interval interest independently. | Rate, day-count, boundary and rounding working. |
| 8 | Check part-disbursement communications. | Original and revised amortisation schedules. |
| 9 | Quantify statement differences. | Debit comparison with supporting documents. |
| 10 | Track correction through settlement. | Bank response, adjustment entry and residual dispute. |
Sixteen practitioner FAQs
1. Is interest from sanction always justified by the agreement date?
RBI flags charging from sanction or execution instead of actual disbursement as an unfair practice.
2. Does a cheque’s date prove funds were delivered?
No. A delay in handing over the cheque is specifically relevant to the RBI concern.
3. Does the rule fix one interest rate for all borrowers?
No. Rate pricing and fairness of the accrual base are different issues.
4. Does this article prescribe actual/365 for every loan?
No. It is the explicit model assumption used to make the examples reproducible.
5. Why are interval boundaries stated?
Including or excluding an event date changes day counts; the actual contractual and applicable basis must be identified.
6. Can a bank bill for the entire month after a late drawdown?
RBI flags full-month charging instead of the actual outstanding period. Reconstruct the specific facts.
7. Is the sanctioned limit the same as the disbursed balance?
No. Compare actual tranches and the lender’s ledger with the limit.
8. What is the concern with part-disbursement EMIs?
The current direction flags charging on sanctioned rather than actual disbursement without borrower knowledge or consent.
9. Must changed amortisation schedules be communicated?
The direction expressly flags failure to communicate changes with each part-disbursement to the original KFS schedule.
10. Can the full EMI always be deducted from principal?
No. Identify its principal component and the allocation of interest and charges.
11. What if a repayment was received but posted later?
Retain receipt and value-date evidence and ask the lender to explain the treatment before fixing the disputed interval.
12. Can a direct vendor payment be a disbursement?
Examine the authorised payment and actual facts; a borrower-account credit is not the only possible evidence.
13. Is every modeled difference automatically refundable?
It is a supported reconciliation claim, not an automatic adjudication. Resolve the factual and contractual basis.
14. Does this 2026 direction cover every NBFC?
No. This article uses a specifically defined commercial-bank direction; other lender categories need their current applicable rulebook.
15. Are Small Finance Banks in this defined population?
Paragraph 3 excludes them from this particular direction’s commercial-bank definition.
16. What should an accountant retain after a bank credit?
The response, corrected statement, allocation, interest working and evidence of any unresolved balance.
Conclusion
A sound interest challenge starts with actual disbursement and principal events. Agree the calculation basis, isolate the precise difference and retain evidence of the bank’s correction before treating the matter as closed.