(1) The principal amount of a loan shall be repaid by the account holder before the expiry of thirty-six months from the first day of the month following the month in which the loan is sanctioned:
Provided that the repayment may be made either in one lump sum or in instalments.
(2) After the principal amount of the loan is fully repaid, the account holder shall pay interest thereon in not more than two monthly instalments at the rate of one per cent. per annum of the principal for the period commencing from the first day of the month following the month in which the loan is drawn upto the last day of the month in which the last instalment of the loan is repaid:
Provided that where the loan is not repaid, or is repaid only in part, within a period of thirty-six months, interest on the amount of loan outstanding shall be charged at six per cent. per annum instead of at one per cent. per annum with effect from the first day of the month following the month in which the loan was obtained, to the last day of the month in which the loan is finally repaid.
32 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
(3) The interest on the amount of loan outstanding under the proviso to sub-paragraph (2) and any portion of interest payable, but not paid, on any loan, the principal amount of which has already been repaid within the period of thirty-six months, may, on becoming due, be debited to the holder’s account.
(4) The interest recoverable shall accrue to the Central Government.
(5) The interest on outstanding loans which are not paid before the expiry of thirty-six months or paid partly shall be debited to the holder’s account at the end of each year.
(6) In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed by the account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of final closure of the account.