This Fair Practices Code(“the Code”), as adopted herein below, is in conformity with the Guidelines on Fair Practices Code for NBFCs as prescribed by the Reserve Bank of India vide its Circular bearing no. DNBS (PD) CC No. 80 / 03.10.042 / 2005-06 dated September 28, 2006RBI/2011-12/470 DNBS.CC.PD.No. 266/03.10.01/2011-12 dated March 26, 2012, DNBS.CC.PD.No. 320/03.10.01/2012-13 dated February 18, 2013 and RBI/2013-14/42 DNBS.CC.PD.No. 340/03.10.042/2013-14 dated July 01, 2013. The Company shall adopt all the best practices time to time as prescribed by Reserve Bank of India (RBI) and shall make appropriate modification in this Code to confirm the standards so prescribed.
This Fair Practice Code shall apply to all the products and services offered by the Company which mainly includes Loans, Guarantees and other products in the nature of Financial Assets.
- Objectives of the Code:
This Fair Practices Code would be adhered by the Company in its functioning as a Non Banking Finance Company. The code has been developed with an objective of:
- Ensuring fair practices while dealing with customers
- Greater transparency enabling customers in having a better understanding of the product and taking informed decisions
- Building customer confidence in the company
In pursuance of the directions and guidelines issued by the Reserve Bank of India (RBI) for the operation of Non Banking Financial Companies (NBFCs), the Fair Practice Code of the Company covers the following areas;
- Applications for loans and their processing
- Loan appraisal and terms/conditions
- Disbursement of loans, including changes in terms and conditions
- General provisions
- Disclosures about Interest and Approach for Gradation of Risk
- Responsibility of Board of Directors
- Grievance Redressal Mechanism.
- Periodic Review – Fair Practice Code
- Application for Loans and their Processing:
- All the Communication to the borrower shall be in the vernacular language or a language as understood by the borrower.
- Loan application forms shall include necessary information which affects the interest of the borrower that will enable the borrower to make a meaningful decision so that a meaningful comparison with the terms and conditions offered by the other NBFCs can be made and an informed decision can be taken by the borrower. The loan application form shall also indicate the documents required to be submitted with the application form.
- The Company shall devise a system of giving acknowledgement for receipt of all loan applications. Further, generally, the time frame within which the loan application will be disposed of, from the date of receipt of all the required information in full, would also be indicated in the acknowledgement.
- If any additional details / documents are required, the same shall be intimated to the borrowers immediately.
- Loan Appraisal and Terms/Conditions:
- The Company shall convey in writing to the borrower by means of approval letter /sanction letter or otherwise in English language, the amount or limit of loan approved/sanctioned - along with the terms and conditions, including annualized rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record.
- Any clause relating to penal interest charged for late repayment will be specified in bold in the Loan Agreement.
- The Company shall at the time of sanction / disbursements of loans will furnish a copy of loan agreement along with copy of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction/ disbursement of loans.
Disbursement of Loans including Changes in Terms and Conditions:
- The Company shall give notice to all its borrowers in vernacular language as understood by the borrowers of any change in the terms and conditions - including disbursement schedule, interest rates, service charges, prepayment charges etc. The Company shall also ensure that changes in interest rates and charges are affected only prospectively. A suitable provision in this regard shall be incorporated in the loan agreement.
- Decision to recall / accelerate payment or performance under the agreement shall also be in consonance with the loan agreement.
- The Company shall release all securities on repayment of its full dues or on realization of the outstanding amount of the loan of the client subject to any legitimate right or lien for any other claim the Company may have against its borrowers. If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which the Company is entitled to retain the securities till the relevant claim is settled / paid.
- General Provisions:
- The Company shall refrain from interference in the affairs of the borrower except for the purposes provided for in the terms and conditions of the loan agreement (unless new information, not earlier disclosed by the borrower, has come to the notice of the Company).
- In case of receipt of request from the borrower for transfer of borrowal account, the consent or otherwise - i.e., objection of the Company, if any - shall be conveyed to the borrower within 21 days from the date of receipt of any request. Such transfer shall be as per transparent contractual terms in consonance with law.
- In the matter of recovery of loans, the Company shall not resort to undue harassment – such as persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc. Training will be imparted to ensure that staff is adequately trained to deal with customers in an appropriate manner.
- Disclosures about Interest and Approach for Gradations of Risk:
As per directions issued by RBI, the Board of the Company shall adopt an interest rate model, as mentioned below, taking into 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.
- Rate of interest: The Company shall intimate the borrower, the loan amount
annualized rate of interest at the time of sanction of the loan along with the tenure. The
rate of interest shall be annualized rates so that the borrower is aware of the exact rates
that would be charged to the account.
The rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers shall be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter.
- Approach for gradation of risk: The rate of interest is arrived at based on the weighted average cost of funds, administrative costs, risk premium and profit margin. The decision to give a loan and the interest rate applicable to each loan account is assessed on a case to case basis, based on multiple parameters such as, borrower’s profile, repayment capacity, borrower’s other financial commitments, past repayment track record if any, the security for the loan as represented by the underlying assets, loan to value ratio, tenure of the loan, geography (location) of the borrower. Such information is collated based on borrower inputs and credit bureau. The rates of interest are subject to change as the situation warrants and are subject to the discretion of the management on a case to case basis.
- Rate of interest: The Company shall intimate the borrower, the loan amount and annualized rate of interest at the time of sanction of the loan along with the tenure. The rate of interest shall be annualized rates so that the borrower is aware of the exact rates that would be charged to the account.
Responsibility of Board of Directors:
The Board of Directors of the Company shall lay down the appropriate grievance Redressal Mechanism within the organization to resolve disputes arising in this regard, which would include having centralized team catering to the investor complaints, a dedicated email id for receipt of the complaints it would be ensured that all disputes arising out of the decisions of company’s functionaries are heard and disposed under the supervision of the Principal officer or at such next higher level as determined by the Board of Directors. The Board of Directors shall also be provided for periodical review of the compliance of the Fair Practices Code and the functioning of the Grievances Redressal Mechanism at various levels of management. A consolidated report of such reviews shall also be submitted to the Board at regular intervals.
Periodic Review – Fair Practice Code The Company shall also review and refine the Code, as may be required periodically based on its own experience and fresh guidelines, if any, to be issued by the RBI in this regard.