RECOVERY OF PENAL INTEREST

As per guidelines issued by the RBI, the collecting branches are required to remit the CBEC collection along with Scrolls/Challans to the Focal Point Branch at the beginning of next working day. The Focal Point branches settle these receipts on day to day basis with the Reserve Bank of India, Central Accounts Section, Nagpur through their Link cells at Nagpur (GAD, Mumbai in the case of SBI) for credit to the account of Concerned Ministry/department. The RBI has further permitted a uniform transit period not exceeding 5 (for local branches) and 9 (for outstation branches) days inclusive of holidays for transfer of CBEC collection from the date of collection of the dues at the collecting branches to credit into Government Account at the RBI, CAS, Nagpur. With the computerisation of revenue accounts, delay reports are generated, which helps in taking up the cases of delayed remittances with the concerned PSB for payment of penal interest.

Earlier, the rate of penal interest to be charged on remittance of an amount of over Rs. One crore delayed for more than one month (30 days), as fixed by RBI was @ 5%.

The Public Account Committee in its 98th Report (1996-97), 10th Lok Sabha on Union Excise Duties - System Defects in the working of Chief Accounts Offices, Para 74 had recommended that -

(a) There is a scope for upward revision of interest on delayed remittance of Govt. receipts by the Public Sector Banks and they would, therefore, recommend that the penal rate should be equivalent to at least the rate of interest payable on treasury bill of similar days.

(b) Penal interest should be levied on all cases of delayed remittances instead of the existing stipulation for levy of such interest in receipt transactions involving Rs. one crore and above only.

The norms for levy of penal interest on delayed remittances and excess/double reimbursement have been made more stringent with effect from 01.08.2000.

As per instructions issued by the CGA and RBI applicable upto 31.07.2000, interest was levied on all Delayed Remittances into Govt. account beyond a period of 15 days, provided the amount involved was Rs.10 lakhs and above. However, interest was levied on all delayed remittances if the period of delay exceeded 30 days. The rate of interest applicable in the case of delayed remittances was based on the average cut off rate for 91 days auction treasury bills during the last quarter. In the case of Excess/double reimbursement penal interest was levied on Rs.10 lakhs and above, but the liability of the Bank started from the 8th day of obtaining the Excess/double reimbursement, at the Bank rate intimated by RBI from time to time.