Interest on a loan or deposit for any period, including "₹2 per ₹100 per month" style rates used for private loans.
Simple interest formula
Simple interest = P × R × T ÷ 100, where P is the principal, R is the yearly interest rate in % and T is the time in years. The total amount to repay is P + interest. Months are counted as 1/12 of a year and days as 1/365 of a year.
What does "₹2 per ₹100" mean?
In many private and village loans, interest is quoted in rupees per ₹100 per month — vaddi in Telugu, byaj in Hindi, vatti in Tamil. "₹2 interest" means you pay ₹2 every month for each ₹100 borrowed:
| ₹ per ₹100 per month | Per year | Monthly interest on ₹1 lakh |
|---|
| ₹1 | 12% | ₹1,000 |
| ₹1.5 | 18% | ₹1,500 |
| ₹2 | 24% | ₹2,000 |
| ₹3 | 36% | ₹3,000 |
| ₹5 | 60% | ₹5,000 |
That is far more than a bank charges. A personal loan at 11–14% a year is roughly ₹1 per ₹100 per month, and a gold loan is often even cheaper.
Simple vs compound interest
Simple interest is charged only on the original amount. Compound interest also charges interest on interest already added, so it grows faster over long periods. Bank FDs and most loans use compounding — see the compound interest calculator.
Frequently asked questions
How do I calculate ₹2 interest per ₹100?
₹2 per ₹100 per month means 2% a month, or 24% a year. On ₹50,000 you pay ₹1,000 every month (₹50,000 × 2 ÷ 100), or ₹12,000 in a year. Choose "₹ per ₹100 per month" in the calculator and enter 2.
What is the formula for simple interest?
Simple interest = Principal × Rate × Time ÷ 100, where the rate is per year and the time is in years. For 8 months, use 8/12 years; for 45 days, use 45/365 years.
What is the difference between simple and compound interest?
Simple interest is charged only on the amount you originally borrowed or invested. Compound interest is also charged on interest already added. Over one year they are close, but over many years compound interest grows much faster.
How do I convert a monthly interest rate to a yearly rate?
For simple interest, multiply by 12: 1.5% a month is 18% a year. A yearly rate divided by 12 gives the monthly rate — 12% a year is 1% a month, or ₹1 per ₹100 per month.
Is private money-lending interest legal in India?
Money lending is regulated by state laws, which require lenders to be licensed and in some states cap the interest they can charge. Very high rates, such as ₹5 or ₹10 per ₹100 a month, can be illegal. Bank, NBFC and gold loans are usually far cheaper and safer.