Penal rate on a Land Loan


Dear Team,
I had taken a loan to purchase a plot in bangalore in Sep2012, the complete amount was disbursed to buy the plot. there is a industrial shed in the plot so they took an undertaking that I shall be demolishing the shed and will be constructing a residential house within 18 months of disbursement of loan else they will be charging commercial loan from day one and or they can recall the loan. Due to some reasons I was not able to start construction and the bank has started a penalty of 2% / annum this started after 2 years of loan disbursement and without my notice. after some days when I checked my statement only then I realised that there was a penal interest. Last year they have given a notice that they would be charging commercial rate of interest which is about 15%/ Annum from day one. I have given them a letter stating that my financial condition is not good and I cannot pay a heavy rate of interest on Feb2017 but there is no proper response from the bank(Branch) they say that they have sent the documents to the head office and are waiting for them to reply, the time is just passing by without any reply. In nov the staff in the bank is changed and the process has started allover again.They are not allowing me to close the account also. they are insisting that I have to pay commercial rate from the date of disbursal to close the loan. Kindly advice. it will be very helpful.

Santosh singh


Hi Santosh,

The bank may be right if this is according to the terms and conditions of the loan. We suggest that you speak to your bank and ask them about pre-closing the loan. Check your loan agreement for the pre-closure rules and charges. Check with your bank on how to place a pre-closure request.

BB Expert