Levy of Penal Interest in Loss and Fraud Cases Other Than POSB – Department of Posts OM dated 11.08.2026

OFFICE MEMORANDUM

Dak Bhawan, New Delhi
Dated the 11th August, 2026

Subject: Levy of Penal lnterest in loss and fraud cases other than POSB i.e. shortage of office cash, Misappropriation of cash in transit and unauthorized drawing from bank - reg.

The undersigned is directed to refer to the subject cited above and to say the following framework for levy of penal interest shall be applicable in loss and fraud cases other than POSB i.e. shortage of office cash, misappropriation of cash in transit and unauthorized drawing from bank:

Cases involving negligence or error, where no criminal intent or personal gain is established: Penal interest up to 2% per annum above the prevailing GPF interest rate [prevailing GPF rate + 2% per annum].

Cases involving deliberate Misappropriation, Fraud, Criminal Breach of Trust, unauthorized use of Government money or other acts indicating personal gain: Penal interest up to 2% per annum above double the prevailing GPF interest rate [(2 x prevailing GPF rate) + 2% per annum].

The "prevailing GPF rate" means the rate of interest allowed by the Government on the General Provident Fund balance of its employees, as notified from time to time by the Ministry of Finance.

Within the ceilings specified above, the actual rate in each case shall be determined by the competent authority having regard to the nature, gravity and circumstances of the irregularity, the extent of financial loss, the period money remained outside Government custody, the degree of culpability/intent, and the principles contained in Rules 33 to 38 of the GFRs, 2017. The rate so determined shall not be lower than the prevailing GPF rate, and shall be reasonable and proportionate.

The Competent Authority and Advisory Body for determination of actual rate shall be as under:-

Case Jurisdiction	Competent Authority	Advisory Body
Cases at Circle Level	Head of the Circle (HoC)	Circle Internal Financial Advice (CIFA)
Cases dealt with at Directorate	Competent authority at Directorate level	Integrated Finance Wing (IFW) of the Directorate

Once determined, the penal interest rate shall remain fixed for the entire recovery period and shall not vary with subsequent revision of the GPF rate.

F. No. PO-2111/2025-PO-DOP

Government of India
Ministry of Communications
Department of Posts
(PO Division)

For this purpose, the applicable GPF rate shall be the rate prevailing on the date on which the competent authority determines the penal interest rate.

Total accumulated penal interest shall not exceed the principal amount of the loss, to guard against usurious or disproportionate accumulation in protracted recovery cases.

The order determining penal interest shall be a reasoned speaking order, indicating the category of irregularity, the rate of penal interest and reasons therefor, the chargeable period, the amount recoverable, and the CIFA/IFW advice relied upon.

Before determination, the delinquent official shall be given a reasonable opportunity to make a representation within 15 days (extendable to 30 days at the discretion of the competent authority) from the date of communication; if no representation is received within the prescribed period, the competent authority may decide the matter on the basis of available records.

Penal interest shall be calculated on a simple-interest basis, chargeable from the date of occurrence of the loss/misappropriation until the date of recovery (excluding the day of repayment), on the reducing outstanding principal in cases of installment recovery, using the following formula:

Penal Interest = (Outstanding Principal Amount x Number of days x Applicable Penal Interest Rate) / 365 (366 in a leap year)

Recovery of penal interest shall be independent of, and shall neither preclude nor be affected by, disciplinary or criminal proceedings. Where the delinquent official retires or is about to retire, recovery may be effected from Death-cum-Retirement Gratuity (DCRG) in coordination with the concerned PAO/DDO, subject to applicable pension rules.

Recovery from legal heirs of deceased officials shall continue to be governed by applicable statutory provisions. No Loss Certificate (LC) issue shall continue to be governed by existing administrative instructions.

The instructions shall apply prospectively, to all cases where the penal interest rate has not been finally determined as on the date of issue this Office Memorandum.

This issues with the approval of the Competent Authority.

To
The Chief Postmasters General, All Circles

Copy to:-

1. All Sr. DDGs, D/o Posts.
2. All DDGs/ JS&FA, D/o Posts.

(P K Tyagi)
Director (PO)
pk.tyagi13@nic.in