Interest Rate Policy
Document Number: TC-POL-IRP-Dated- 25/10/2019
Version : 1.0
Interest Rate Policy
Table of Contents
2. OBJECTIVE OF THE POLICY
3. REVIEW OF POLICY
4. ORGANISATION STRUCTURE
a. BOARD OF DIRECTORS
b. ASSET LIABILITY COMMITTEE
5. INTEREST RATE MODEL
6. PRINCIPLES AND PROCEDURES FOR CHARGING FINAL INTEREST RATE
7. OTHER CHARGES
8. COMMUNICATION FRAMEWORK
As per the Reserve Bank of India directions, Board of each NBFC shall approve an Interest rate model that is applicable for the Company, taking in to account relevant factors such as cost of funds, margin and risk premium etc., and determine the rate of interest to be charged for loans and advances. Further, the directive states that the rate of interest and the approach for gradation of risk and the rationale for charging different rates of interest for different category of borrowers should be communicated to the borrowers / customers in the sanction letters issued to them. Board of Directors at their meeting held on 12th June, 2019, had adopted the interest rate model of the Company.
2. Objective of the policy
To arrive at the benchmark rates to be used for different category of customer segments and to decide on the principles and approach of charging spreads to arrive at final rates charged from customers.
3. Review of Policy
The Policy shall be reviewed once in a year or in between if required due to changes required in the model, for example any addition/deletion of a particular component forming part of benchmark calculation.
4. Organisation Structure
a. Board of Directors
The Board of Directors shall have oversight for the interest rate Policy of the Company. In order to ensure effective implementation of the Interest Rate Policy, the Board may delegate the implementation of the Policy and its operational aspects to the CEO and/or ALCO as deemed fit.
b. Asset Liability Committee
ALCO shall be responsible for taking decision to change the benchmark rate. The ALCO meeting will be held on a monthly basis and any changes / status quo in the benchmark rate would be discussed and decided by the members of the ALCO and would be put up to the Board in subsequent meeting.
Business can have their internal pricing policies under the overall framework of board approved interest rate policy for company in deciding the spreads to arrive at final rate. Changes to business level internal pricing policies, if any, would need to be approved jointly by any -two officers of the Company as per the matrix below:
5. Interest rate Model
The Company lends money to its customers through Fixed rate loans. The Company lends money through various products to cater the needs of customers.
Fixed rate loans are not linked to benchmark but are decided based on their COF (allocated through Fund transfer pricing), Operational expenditure, Business related risks and desired ROE/ROA. Factors affecting calculation of spreads to arrive at final rate are mentioned below.
6. Principles and procedures for charging spreads to calculate final rate
The rate of interest for loans for various schemes thereunder is arrived after adjusting for spread by the relevant business segment. Factors taken into account by businesses for calculating spreads are as follows:
Interest rate risk
Credit and default risk in the related business segment
Historical performance of similar clients
Profile of the borrower
Repayment track record of the borrower
Secured Vs unsecured loan
Ticket size of loan
Tenure of Loan
Location delinquency and collection performance
Customer Indebtedness (other existing loans)
The rate of interest for the same product and tenor availed during same period by different customers need not be the same. It could vary for different customers depending upon consideration of all or combination of above factors.
7. Other Charges
Besides interest, other financial charges like processing fees, origination fees, EMI bouncing charges, late payment charges, re-scheduling charges, pre-payment / foreclosure charges, part disbursement charges, charges for issue of statement account etc., would be levied by the company wherever considered necessary. Besides these charges, stamp duty, service tax / GST and other cess would be collected at applicable rates from time to time. Any revision in these charges would be implemented prospective basis with due communication to customers. These charges would be decided upon by the respective business / Function heads in consultation with Operations, Finance, Compliance and Legal Heads.
8. Communication Framework
The Company will communicate the effective rate of interest -to customers at the time of sanction / availing of the loan through the acceptable mode of communication.
Interest Rate Policy would be uploaded on the website of the company and any change in the benchmark rates and charges for existing customers would be uploaded on the web site of the Company.
Changes in the rates and charges for existing customers would also be communicated to them through various modes communication such as website updation, email, letters, SMS, etc.
We will put annualised rate of interest in the agreement. We will also communicate annualised rate of interest through other means like email / Text messages etc.
We will put this policy on our website as well.
9. Amendments to the Interest Rate Policy
The Board hereby authorizes the CEO to review and make appropriate changes to the Interest Rate Policy from time to time basis the money market scenario in the Country which includes the upward / downward revision in interest rates applicable to various loan products and the relevant charges applicable for such loan products.
We request the Board of Directors to review, make a note of this Policy and approve for implementation of this Policy framework across the product range of the Company.