Interest Rate Policy and Gradation of Risk

The Reserve Bank of India has, through its circulars, advised Non-Banking Financial Companies to adopt appropriate internal principles and procedures for determining interest rates, processing charges and other charges, and to make the approach to gradation of risk available to borrowers.

Keeping these guidelines in view, together with good governance practices, the Company has adopted the following internal guidelines, policies and procedures in relation to interest rates for its lending business.

The base interest rate is arrived at on the basis of the weighted average cost of funds, a risk premium, and other costs such as administrative expenses and profit margin. The base interest rate applicable to each loan account is assessed on the basis of several parameters, including:

• The nature of the lending — for example, whether secured or unsecured — and the tenure of the loan.
• The nature and value of any security or collateral offered by the customer.
• The risk profile of the customer, including qualifications, stability of income and employment, financial position, past repayment track record, credit reports, the customer relationship and future business potential.
• The inherent credit and default risk in the relevant product or customer segment.
• Industry trends and offerings by comparable lenders.

The base interest rate is reviewed periodically by the appropriate internal committee. Rates for the same product and tenure availed during the same period by different customers need not be uniform, and may differ depending on a combination of the factors listed above.

The Company will inform the borrower of the loan amount, the annualised rate of interest and the method of its application at the time of sanction, along with the tenure and the amount of the monthly instalment. Other charges — such as processing fees, additional interest on delayed payments and cheque-bounce charges — will be set out in the sanction letter or loan agreement.

The rate of interest applicable to each loan account is subject to change as circumstances warrant and to the Company’s perceived risk on a case-to-case basis.

Claims for refund or waiver of charges, penal interest or additional interest will not ordinarily be entertained, and any such request is dealt with at the sole discretion of the Company.