1. PREFACE OF THIS POLICY
The Reserve Bank of India, vide its circular No. Ref. No. DNBS.PD/ CC. No. 95 /03.05.002/2006-07 dated May 24, 2007 and RBI/2008-09/337/DNBS(PD)/CC. No. 133/03.10.001/2008-09 dated January 2, 2009 as amended from time to time (RBI Regulations), had advised the Boards of Non-Banking Financial Companies (NBFCs) to outline appropriate internal policies and procedures to define their interest rates, processing fees, and other charges. The Direction was issued as a measure against the increasing complaints the Bank received against excessive interest rates and other charges levied by NBFCs on certain loan products.
The board of directors of SHIVAKARI FINANCE PRIVATE LIMITED (henceforth referred to as "Company" or "SFPL") has designed a detailed interest rate policy (“the Policy”) in accordance with the above mentioned circular issued by the Reserve bank of India (including amendments thereof) to disclose their internal guiding principles, interest rate model, rate of interest, gradations of risk and rationale for charging different rate of interest to their borrowers.
The Company shall take this Policy into consideration while making all of its decisions regarding the determination of interest rates and other charges applicable to its loan offerings.
2. OBJECTIVE OF THIS POLICY
The primary objective behind drafting and adopting this policy is to decide on the principles, methodology, and approach of charging spreads to arrive at final rates charged from customers and define the standard interest rates to be followed for different customer segments and loan offerings.
The SFPL through this policy charge interest rates determined in a manner as to ensure the long-term sustainability of the business by taking into account the interests of all stakeholders and developing and adopting a suitable model for the calculation of a reference rate.
3. INTERNAL RESPONSIBILITIES
- Board of Directors: The Board of Directors of the Company shall oversee this Interest Rate Policy and ensure its effective implementation. Further, the Board may delegate the responsibility of implementation of this Policy and other functioning aspects to the Chief Compliance Officer/Executive Director /or Committee as it deems fit.
4. ESTABLISHING THE INTEREST RATE
The annualised interest rate applicable to different loan products of the Company shall be determined by taking the following aspects into consideration:
- Tenure and Terms of the Loan: The annualised interest rate shall depend on the duration for each loan has been extended to a borrower (viz. daily, weekly, monthly, quarterly and yearly repayment) as well as the different terms of repayment laid down in the Loan Agreement.
- Internal and External Costs of Funds: The annualised rate of interest charged shall also depend upon the rate at which the funds are sourced to extend the loan facilities to customers, commonly known as the external cost of funds and shareholders of the company also infused the capital in the company in huge proportions and accordingly the cost of such capital being infused shall be taken into consideration while determining interest rate commonly known as the internal cost of fund.
- Internal Cost of Operations: The annualised interest rate will also depend upon the Company’s costs of conducting its business. This cost of doing business/operations includes Technology infrastructure cost, manpower cost, infrastructure cost and other administrative costs such cost is known as Opex cost.
- Credit Risk: The credit risk is related to loss of credit due to following factors such as the complexity of a loan transaction, size of the loan, geographical condition, customer segment, sourcing channels, stability in earnings and employment, financial position, past repayment track record and other factors that affect the costs associated with a particular loan account shall be taken into account before informing the final interest rate to a borrower.
- Profit Margin: The fair profit margin is on the basis of the return expected by the shareholders and the risks involved. The profit margin shall be reasonable to attract fresh capital to sustain growth and be benchmarked with comparable companies. A reasonable level of gearing shall be maintained while arriving at the shareholder return.
- Prevailing Market Practices: The Chief finance Officer/Executive Director /or AL Committee as it deems fit may also recommend a annualised rate of interest-based on the fluctuations in market trends, interest rates levied by other existing NBFCs for similar loan products or services, etc.
5. INTEREST RATE MODEL
The company lends its loans to clients shall be on Fixed Rates.
The annualised interest rate shall be calculated by the Company after taking into account, factors such as cost of funds, margin, credit risk, Opex Cost, and other costs such as administrative expenses and profit margin. The Company shall also review this base interest rate periodically.
At present the annualized rate of Interest to be charged to customers, at the time of sanctioning loans, shall be in the range as mentioned below:
Type of Credit Facility
Range of Interest
Secured Loan-Term Loan
Secured Loan-Demand Loan
Unsecured Loan-Term Loan
Unsecured Loan – Business
6. ADDITIONAL CHARGES
Besides interest, the Company may levy additional financial charges such as loan processing fees, field inspection charges, documentation charges, cheque bounce charges, ESC failure charges, penal interest charges, pre-payment/foreclosure charges, late payment fees, etc., wherever considered necessary.
Any change in the charges will inform borrowers in advance and apply prospectively.
The company can also levy penal charges or/and penal interest generally 2 to 4% per month on the outstanding amount, as may be decided by the board of directors on delayed payment of instalments.
8. OTHER PROCEDURAL ASPECTS
The Company shall adhere to the following procedural aspects with regards to the rate of interest charged on its different loan offerings:
- In compliance with its Fair Practices Code, the Company shall disclose the annualised rate of interest and its application form as well as in its Loan Sanction Letter explicitly.
- The Company shall inform the borrower about their loan amount; annualised rate of interest and other details of the loan at the time of sanctioning the loan.
- Other charges such as processing fees, the additional interest charged on delayed payments and cheque bouncing charges shall also be mentioned in the Loan Agreement and sanction letter.
- The annualised rate of interest shall be intimated to the borrower so that they are aware of the exact rates charged to the account.
- The company shall disclose “Annual Percentage Rate” or “APR”* in the Key fact statement (KFS) and Sanction letter when the company disburses its loans either through owned Digital lending app (DLA) or through the Digital lending app (DLA) of their lending service provider so that they are aware of the exact rates charged to the account.
- The Company shall display its interest rate policy and interest rate structure for each loan product on its website.
- The Company shall inform its customers about any increase in fees or charges via different communication channels such as SMS, email, and website updates,
9. REVIEW OF THIS POLICY
This Policy shall be reviewed by the Company’s Board of Directors annually, or as and when any changes are necessitated to the Policy. The Chief Compliance Officer/Executive Director /or Committee may suggest changes or modifications to the Policy and present it before the Board for its approval and adoption.