The appellant-Bank filed suit in O.S. No. 61 of 2003 against the respondents for recovery of Rs. 3,94,991/- towards the loan borrowed by them for construction of house, together with interest at the agreed rate of 19.25% p.a. and penal interest at 2%. The respondents denied the suit claim and prayed for dismissal of the suit. After contest, the Trial court decreed the suit with interest at 13.5% p.a. The appellant-Bank has filed this appeal only against the rate of interest awarded by the Trial Court.

2. The claim of the Bank is that the Trial Court ought to have awarded future interest at the contractual rate at 21.5% p.a. but the Trial Court committed an error by awarding only 13.5%. In support of the claim, learned Counsel for the appellant has cited the decision in Vijaya Bank, Bangalore v S. Bhathija and Another, wherein this Court has laid down the position regarding interest in paragraph 19 as under:

"19. Thus the following position emerges in regard to interest chargeable by Banks.-

(a) Banks are entitled to interest at contract rates, subject to the ceiling or limitations placed by the Reserve Bank of India in its circulars/directives;

(b) Whenever the contract pr