Under Section 16 of the MSMED Act, the buyer owes compound interest with monthly rests at three times the RBI bank rate on any amount paid after the due date. With a bank rate of 6.75% that is 20.25% a year, about 1.69% a month compounded.
How the calculation works
The appointed day is the day after the due date. For each month (or part) of delay the outstanding balance grows by the monthly rate (annual rate ÷ 12), and interest is added to the balance so the next month’s interest is computed on the larger sum. The calculator uses whole months plus a pro-rata final part; Councils generally compute this way, and your advocate files a precise computation with the claim.
The bank rate changes with RBI policy. If the delay spans a rate change, compute each period at its own rate; the calculator takes a single rate for a quick estimate.
Using the result
Put the interest figure in your legal notice with the computation attached. Most buyers settle the principal quickly once the statutory interest is in writing, and the Facilitation Council awards it if the matter goes that far. FundRaksha’s free consultation includes a formal computation for your invoices; our fee is 30% only on recovery. Read the reference page on the interest rate.