Loan Interest Charged Wrongly? How to Request a Review
Think your lender overcharged interest? Learn how to recheck the maths, which RBI rules apply and how to request a written interest review and refund of excess.
In this article (9 sections)
If your loan statement shows more interest than your EMI schedule suggests, you can ask the lender for a formal, written recalculation. Collect your sanction letter, Key Facts Statement (KFS) and full account statement, check the maths month by month, and send the lender's grievance officer a specific request naming the disputed entries. If the lender does not fix it within 30 days, the RBI Integrated Ombudsman can.
This guide explains where interest errors usually come from, how to check the numbers yourself, and how to word your request. Rules are stated as of October 2026.
Where interest errors usually come from
Most disputes fall into a few patterns. RBI itself listed several of them in its circular "Fair Practices Code for Lenders – Charging of Interest" dated 29 April 2024, after its inspections found lenders charging interest in ways that were not fair.
| Problem | What you see | RBI position |
|---|---|---|
| Interest from sanction or agreement date | First EMI or broken-period interest is higher than expected | Interest should run from the date of actual disbursement |
| Interest from cheque date | Cheque handed over days after its date | Flagged as unfair; excess to be refunded |
| Full month's interest for part of a month | Interest for 30 days though money was out for 12 | Flagged as unfair |
| Advance EMIs, interest on full amount | One or two EMIs collected upfront but interest charged on full loan | Flagged as unfair |
| Rate reset not applied or applied late | Rate cut not passed on; rate rise applied early | Change must follow your loan terms and be communicated |
| Charges added to principal | Unexplained debits capitalised into the loan | Charges not in the KFS cannot be levied without explicit consent (April 2024 KFS circular) |
| Penal interest | Extra interest added on default | Under RBI's penal charges rules applied from 2024, lenders may levy penal charges, not penal interest added to the rate |
Step 1: Collect the right documents
You cannot check interest without these. You are entitled to ask for all of them:
- Sanction letter and loan agreement: rate, type (fixed or floating), benchmark, spread, reset dates.
- Key Facts Statement (KFS): RBI has required a KFS with the Annual Percentage Rate (APR) and all fees for retail and MSME loans since 1 October 2024.
- Disbursement advice: the date the money actually reached you or the seller/builder.
- Full account statement from day one, not just the last year.
- Repayment (amortisation) schedule: for floating-rate loans, RBI's August 2023 circular on reset of floating interest rates requires lenders to send a quarterly statement showing principal and interest recovered till date, EMI amount, number of EMIs left and the APR.
Most lenders let you download statements from their app or net banking. If not, request them in writing.
Step 2: Check the maths yourself
Lenders use different conventions (monthly reducing balance, daily balance, 365-day year), so small differences can be normal. You are looking for clear, repeated or large gaps.
Worked example: monthly reducing balance
Loan ₹5,00,000 at 12% a year for 60 months.
- Monthly rate = 12% ÷ 12 = 1%
- EMI = ₹5,00,000 × 1% × (1.01)^60 ÷ [(1.01)^60 − 1] = about ₹11,122
- Month 1 interest = ₹5,00,000 × 1% = ₹5,000; principal repaid = ₹11,122 − ₹5,000 = ₹6,122
- Month 2 interest = (₹5,00,000 − ₹6,122) × 1% = about ₹4,939
Each month the interest should fall a little. If your statement shows interest staying flat or rising without a rate change, ask why. Our EMI calculator produces the same schedule so you can compare month by month; how EMI is calculated explains the formula.
Worked example: interest from the wrong date
The same loan was sanctioned on 10 March but disbursed on 20 March. If your first statement charges interest from 10 March:
- Extra days = 10
- Excess interest = ₹5,00,000 × 12% × 10 ÷ 365 = about ₹1,644
That ₹1,644 is exactly the kind of excess RBI's 2024 circular asked lenders to refund.
Step 3: Check the rate itself
For floating-rate loans, the rate = benchmark (repo rate, MCLR or another external benchmark) + spread. Check:
- Was the reset applied on the reset date in your agreement?
- Did the spread change without notice?
- Was a rate cut passed on? If not, see EMI not reduced after rate cut.
Also compare the KFS APR with what you are actually paying. Fees bundled into the loan raise your real cost; loan APR and total borrowing cost shows how to read it.
Step 4: Send a specific written request
Vague complaints ("you overcharged me") get template replies. Name the months, amounts and the rule.
Sample request:
Subject: Request for review and recalculation of interest, loan account [number]
My loan of ₹[amount] was sanctioned on [date] and disbursed on [date] at [rate]% ([fixed/floating, benchmark + spread]). On reviewing my statement I find:
- Interest for [dates] appears to have been charged from the sanction date rather than the disbursement date (difference about ₹[amount]).
- Interest in [month] is ₹[amount], higher than ₹[amount] as per the repayment schedule, with no rate change communicated.
Please (a) provide a month-wise interest computation with the rate and day-count used, (b) recalculate interest from the date of actual disbursement in line with RBI's circular dated 29 April 2024 on charging of interest, and (c) refund or credit any excess to my loan account. Please share your written response and complaint reference number.
Send it to the lender's grievance redressal officer or nodal officer (details are on its website). Keep the acknowledgement.
Step 5: Escalate if needed
- No reply in 30 days, or an unsatisfactory reply: file with the RBI Integrated Ombudsman at cms.rbi.org.in, email crpc@rbi.org.in or call 14448.
- Time limit: under the Reserve Bank – Integrated Ombudsman Scheme, 2026, file within 90 days of the lender's 30-day window ending or its last reply, whichever is later.
- Compensation: there is no cap on the disputed amount itself; the Ombudsman can award up to ₹30 lakh for consequential loss and up to ₹3 lakh for loss of time, expenses and harassment.
If the lender agrees but takes months to credit the refund, see what to do when the bank is not resolving your complaint.
Your rights in summary
- Interest from the date of actual disbursement, not sanction or cheque date.
- Interest only for the period money was actually outstanding.
- Changes in rate or charges only as per your agreement and with notice; RBI's fair practices rules say changes should apply prospectively.
- A KFS with APR and all charges; nothing outside it without your explicit consent.
- On floating-rate loans, immediate communication of any EMI or tenure increase and quarterly statements.
What not to do
- Do not stop paying EMIs while the review is pending; a bounce adds charges and hurts your credit score.
- Do not rely on phone calls; every request and reply should be in writing or email.
- Do not pay "consultants" who promise to recover interest for a fee; the Ombudsman process is free.
- Do not share OTPs or passwords with anyone who calls offering to "fix" your loan.
- Do not round off small differences into a big claim; a precise, month-wise complaint gets results faster.
Key takeaways
- Get your sanction letter, KFS, disbursement advice and full statement before disputing anything.
- Check month-wise interest against the EMI schedule and the actual disbursement date.
- RBI's April 2024 circular treats interest from sanction or cheque date, and full-month interest for part months, as unfair.
- Send a specific written request with months, amounts and the rule; ask for a computation and refund.
- Escalate to the RBI Ombudsman after 30 days, within the 90-day limit.
Frequently asked questions
From which date can a lender charge interest on a loan?
From the date the money is actually disbursed to you. RBI's April 2024 circular on charging of interest flagged charging from the sanction date, agreement date or cheque date as an unfair practice and asked lenders to refund such excess interest.
Can a lender charge a full month's interest if I repay mid-month?
No. RBI observed that charging interest for the entire month when a loan is disbursed or repaid during the month is an unfair practice. Interest should be charged only for the period the money was actually outstanding.
How do I get my loan interest recalculated?
Request your sanction letter, Key Facts Statement, full account statement and repayment schedule, then write to the lender's grievance officer pointing out the exact months and amounts you dispute and asking for a written recalculation. Escalate to the RBI Ombudsman if there is no reply within 30 days.
Why did my EMI or tenure change without me asking?
On floating-rate loans, a benchmark rate change can increase your EMI or tenure. RBI's 2023 rules on reset of floating rates require lenders to tell you immediately about any increase and to send a quarterly statement showing principal and interest paid, EMI and remaining EMIs.
Does a lender have to refund excess interest?
Where RBI's supervisors found interest charged from the wrong date or for full months, RBI advised lenders to refund the excess interest and charges. If your review shows an overcharge, ask for a refund or credit to your loan account in writing.
This article is for general education and is not personalised financial, tax or legal advice. Rates and rules are as of 27 Oct 2026; confirm current terms with your lender, AMC or a qualified adviser.
