Penal Charges are additional charges levied by the lender on a borrower. These are payable when the borrower delays in repaying a loan or the equated monthly installment (EMI) on a loan and other financial instruments. Details of the penal charge levied on a payment default vary from banks to NBFCs. In other words, there are no fixed guidelines regulating the penal charges levied on a borrower. Generally, lenders set the terms for default in payments concerning penal charges in the agreement. However, borrowers have reported incidents were lenders have tried to extract a higher charge than what is given in the agreement.