1. Preamble:

RBI vide its master direction RBI/DoR/2023-24/106 DoR.FIN.REC.No.45/03.10.119/2023-24 dated 19 October 2023 (Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023) has directed NBFCs to have a documented Interest Rate Model Policy approved by the Board of Directors, which would lay down internal principles and procedures in determining interest rates and other charges on the loan products offered by NBFCs. The company shall follow the guidelines mentioned in the Fair Practice Code guidelines as issued by RBI from time to time and as adopted by the company through its Fair Practice Code Policy. Any regulatory changes in this regard will stand updated in the policy from time to time.

2. Objective:

Through this policy Company has laid down appropriate internal principles and procedures in determining the range of interest rates that shall be applicable to various customers. The Company will apply the best industry practices so long as such practices do not conflict with or violate RBI guidelines.

3. Interest Rate Model:

Interest Rate Model defines the basis on which the interest rate range shall be arrived at for various loan products. The model takes into consideration the constituents which are defined based on the various operational expense line items and the premium expectations from the business.

The pricing to the customer shall have below components

The following items shall form a part of the Base rate –

  • Weighted Average Cost of Capital (WACC) – This includes the weighted average cost of borrowings and the cost of shareholders’ equity.
  • Estimated Operational Expenses – It includes estimated fixed and variable operations cost including employee expenses, administration expenses, sales and marketing expenses etc.
  • Standard provisions on the loans and advances

These costs are collectively referred to as a ‘Base Rate’.

ALCO committee of the company will review the base rate as and when required.

The principles and methods for assigning spread, consider the risk involved with each customer. This gradation is essential for setting appropriate risk premiums, which depend on factors such as loan size, type and worth of collateral, borrower’s profile, credit score, repayment history, and indebtedness. Interest rates may vary for the same product based on these considerations, falling between 10.5% and 36% p.a. Occasionally, the Company might offer special promotional interest rates approved by the management, which are subject to change based on prevailing circumstances and at management discretion.

The company lends money through both fixed and floating rate interest. For loan tenors > 5 years the company will endeavor to offer Floating rate of interest to customers. Details of various products and nature of interest rates offered by the Company are as under

At the time of sanction of floating rate loans, Company shall consider the repayment capacity of borrowers to ensure that adequate headroom/ margin is available for elongation of tenor and/ or increase in EMI, in the scenario of possible increase in the external benchmark rate during the tenor of loan.

At the time of reset of base rate, customers with floating rate personal loans will be provided option of

  1. switch over to a fixed rate with applicable rate swap charges. During the tenor of the loan the borrower can switch from fixed to floating rate only once.
  2. enhancement in EMI or elongation of tenor or for a combination of both options; and,
  3. to prepay, either in part or in full, at any point during the tenor of the loan with applicable charges as per schedule of charges.

All applicable charges for switching of loans from floating to fixed rate and any other service charges/ administrative costs incidental to the exercise of the above options shall be disclosed in the sanction letter and at the time of revision of such charges/ costs by the Company from time to time.

4. Other Charges

In addition to interest, the company will levy additional financial charges such as processing fees, application fees, charges for cheque dishonor, late payment charges, fees for rescheduling, charges for early payment or closure, charge for cheque or security swaps, and other related fees as deemed necessary. Additionally, stamp duties, service tax, and any cess will be charged as per applicable rates. Any revision in these charges would be from prospective effect. The respective business or product leaders will set these charges in coordination with the Operations, Finance, and Legal departments.

5. Communication to Customers

  • The company shall intimate the borrower the annualized Rate of Interest at the time of sanction of the loan along with the tenure and amount of monthly installment.
  • The customer shall also be informed about the Interest rate model policy that the customer can visit the company website for referring the policy and any change in the benchmark rates and charges for existing customers would be uploaded on the web site of the Company.
  • At the time of sanction, the borrowers will be informed about the possible impact of change in benchmark interest rate on the loan leading to changes in EMI and/or tenor or both.
  • Any changes in the rates and charges for existing customers would also be communicated to them through either e-mail or letter or SMS.
  • Statement of account will be made accessible to the borrowers, through app of the Company or email or text message or any other acceptable mode of communication.

6.  Review of Policy

This document shall be approved by the Board of Directors and shall be reviewed at least annually.