The short answer
“₹2 per ₹100 per month” means 2% of the loan amount as interest every month. Monthly interest = loan amount × rate ÷ 100. On ₹50,000 at ₹2 that is ₹1,000 a month, or ₹12,000 a year—the same as 24% simple interest per year.
This way of quoting interest—“rupees per hundred per month”, sometimes said as ₹2 sekda—is common among private financiers, money lenders, pawn brokers and gold and vehicle loan providers in India. It is simple to say, but part-months, early repayments and upfront deductions are where calculations go wrong.
The formula
Monthly interest = loan amount × rate ÷ 100
Daily interest = monthly interest ÷ 30
Interest for a period = monthly interest × months + daily interest × extra days
Yearly rate (simple) = rate × 12 %
The 30-day month is the most common convention for broken periods. Some lenders use the actual number of days in the month instead. Either is fine—what matters is that the loan agreement says which one you use, and that every calculation follows it.
Worked examples
1. Months plus extra days
₹50,000 at ₹2 per ₹100 per month, for 3 months and 10 days.
Monthly: 50,000 × 2 ÷ 100 = ₹1,000
Daily: 1,000 ÷ 30 = ₹33.33
Interest: 1,000 × 3 + 33.33 × 10 = ₹3,333.33
Total to repay: ₹53,333.33
2. Converting ₹1.50 to a yearly rate
₹1,00,000 at ₹1.50 per ₹100 per month.
Monthly: 1,00,000 × 1.5 ÷ 100 = ₹1,500
Yearly: 1,500 × 12 = ₹18,000
Equal to 18% a year in simple interest.
3. Interest deducted upfront
₹1,00,000 at ₹2, with the first month’s interest deducted at disbursement.
Deducted upfront: 1,00,000 × 2 ÷ 100 = ₹2,000
Paid out to the borrower: 1,00,000 − 2,000 = ₹98,000
The borrower still owes ₹1,00,000. Because they receive ₹98,000 but pay ₹2,000 for the month, the real cost is 2,000 ÷ 98,000 = 2.04% for that month—slightly more than the quoted 2%.
4. Settling in the middle of a cycle
₹1,00,000 at ₹1.50; the borrower repays 18 days into a new monthly cycle.
Interest for 18 days: 1,500 × 18 ÷ 30 = ₹900
Settlement amount: ₹1,00,900.
Monthly to yearly rates
| Quoted rate | Per month | Per year (simple) | Monthly interest on ₹1,00,000 |
|---|---|---|---|
| ₹1 per ₹100 | 1% | 12% | ₹1,000 |
| ₹1.25 per ₹100 | 1.25% | 15% | ₹1,250 |
| ₹1.50 per ₹100 | 1.5% | 18% | ₹1,500 |
| ₹2 per ₹100 | 2% | 24% | ₹2,000 |
| ₹2.50 per ₹100 | 2.5% | 30% | ₹2,500 |
| ₹3 per ₹100 | 3% | 36% | ₹3,000 |
Common mistakes
- Mixing monthly and yearly rates. ₹2 per ₹100 is 2% a month—24% a year, not 2% a year.
- Inconsistent broken periods. Using 30 days for one borrower and actual days for another creates disputes. Pick one and write it into the loan terms.
- Forgetting the upfront deduction. If interest is deducted at disbursement, the borrower receives less than the loan amount—record both numbers.
- Compounding by accident. Adding unpaid interest to the principal turns simple interest into compound interest. Agree in advance whether that happens.
- Moving the cycle date by hand. When interest is paid, the next due date must move by exactly one cycle; manual diaries often drift.
Money lending in India is regulated by state laws that may require a licence and can limit the interest a lender may charge. This guide explains the arithmetic only; it is not legal or financial advice.
Doing it for every loan
One calculation is easy. Hundreds of loans with different rates, cycle dates, part-payments and upfront deductions are not. Kriyex InterestAccurate runs these calculations automatically for every loan, moves the next cycle date after each interest payment, sends SMS and WhatsApp reminders, and keeps a complete ledger for each borrower with shareable PDF receipts and statements.