INTEREST GRADATION POLICY
The Reserve Bank of India (RBI) vide its Notification No. DNBS. 204 / CGM (ASR)-2009 dated 2 January 2009 and vide its Guidelines on Fair Practices Code for NBFCs, as amended from time to time (RBI Regulations), has directed all NBFCs to make available the rates of interest and the approach for gradation of risk on web-site of the companies.
In compliance with the requirements of the RBI Regulations mentioned above and the Fair Practices Code adopted by SelFin India Financial Services Pvt. Ltd. (SelFin), SelFin has adopted this Interest Rate Policy broadly outlining the Interest Rate Model and the Company’s approach of risk gradation in this regard for its lending business.
Objectives of the Policy
This Policy outlines SelFin’s Interest rate Model and approach to the gradation of risks. The primary objectives of the Policy are as follows:
To prevent the charging of excessive interest rates;
To enable Customers, know on what basis the interest rates that will be charged on the loan amount per annum.
To enable Customers, know the conditions upon which the interest rates are arrived at.
Application of the Code
This policy is applicable to all customers and persons seeking to obtain loans (the “Customer”) from SelFin. The policy is available on our website www.selfinindia.com.
Interest Rate Model
SelFin’s business model is geared at providing credit only to customers meeting the benchmarks set by SelFin. The interest rate chargeable to each loan account is assessed on a case by case basis, upon an evaluation of factors which are considered below:
Tenure of the Loan & Payment Terms – SelFin takes the term of the loan and terms of payment of interest into consideration in evaluating interest rates;
Internal and External Costs of Funds – The cost of sourcing the funds for providing loans to customers (external cost of fund) and the expected return on equity (internal cost of funds) are also considered;
Internal cost loading – factors such as the costs of doing business, the complexity of the transaction, capital risk involved, size of the transaction, location of the customer etc. are also given a consideration;
Credit Risk – the risk of credit loss cost is also taken into consideration in assessing the interest rate chargeable on loan accounts. SelFin’s internal assessment of the credit strength of a customer is also taken into consideration in determining the amount of credit risk cost applicable to the said customer.
Structuring Premium – In the event that there is a significant structuring element regarding the collateral or other aspects of transaction structure, SelFin may apply a premium to the loan.
Market Dynamics – the prevailing interest rates offered by other NBFCs for similar products / services as offered by SelFin shall be taken into consideration in assessing chargeable interest rates. The forecasts and analysis of “what if” scenarios are also relevant factors for determining interest rates to be charged.
Other relevant factors such as matching tenure cost, market liquidity, relevant RBI Policies, stability of customers’ earnings and employment history, subvention and subsidies available, deviations permitted, further business opportunities, external ratings, industry trends, switchover options etc. may also be considered by SelFin in determining the interest rate to be charged upon customers.
Approach for Gradation of Risk (AGR)
The factors which are considered in assessing a customer’s risk premium are assessed as follows:
- The profile, financial stability and market reputation of the customer
- Inherent nature of the product, type / nature of facility, loan to value of asset financed;
- History and duration of relationship with the customer, past repayment track record and historical performance of similar clients;
- Group strength, overall customer yield, future potential, repayment capacity based on cash flows and other financial commitments of the customer;
- Nature and value of primary and secondary collateral / security;
- Type of asset being financed, end use of the loan represented by the underlying asset;
- Interest, default risk in related customer segment;
- The relevant RBI guidelines and other applicable laws;
- Any other factors that may be relevant for the gradation of risks on a case by case basis.
Non-Applicability of the Approach for Gradation (AGR)
SelFin reserves the right to determine which of the approaches to the gradation of risks (AGR) it adopts for all its customers. SelFin undertakes to abide by the stipulations in this policy in reaching decisions on applicable interest rates.
Rate of Interest
SelFin shall calculate its interest rate according to the 30/360-day count convention.
The rate of interest for the same product and tenure availed during same period to different customers may differ depending on the result of an application of the conditions listed in this policy.
Processing Fees / Other Charges
Nothing in this policy shall be deemed to deprive SelFin of its rights to make necessary charges on a customer as may arise from the said customer’s loan account. Such charges include but are not limited to processing fees, bounced back cheques Debit fee, loan termination fees, field collection charges etc. And such other charges arising from a customer’s loan account as SelFin may levy against a customer.
For doubt avoidance, service tax, levies, cess and other taxes arising from the loan account shall be payable by the customer at applicable rates.
Penalty Interest Rate / Charges
Besides the annualized interest, SelFin may levy additional interest for ad hoc facilities, penalty interest / default interest for any delay or default in making payments of any dues as agreed between the customer and SelFin in the loan agreement. The details of Penalty Interest charges for late repayment will be mentioned in bold in the loan agreement and the sanction letter.
Policy display and availability
Appropriate disclosure regarding this Interest Rate Policy shall be made on the Company website www.selfinindia.com.
Review and Revision
Any revision in the Company’s interest rate applicable to business would be reviewed by the Board of Directors/Management Committee and recommended to the MD for approval.
This Policy shall be effective from 01 April 2019