Interest Rate and Service Charges

INTRODUCTION

The Reserve Bank of India (“RBI”) vide its Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023, as updated from time to time, (“SBR-MD”), requires non-banking financial companies to adopt an interest rate model, taking into account relevant factors such as cost of funds, margin and risk premium and determine the rate of interest to be charged for loans and advances. Respo Financial Capital Private Limited (“Company”) is a non-banking finance company that offers unsecured personal loans to its customers/ borrowers.

In order to ensure its standards of transparency, in conformity with the stipulations of the RBI’s directives and in compliance with the requirements of RBI mentioned above and the fair practices code adopted by the Company, the Company has adopted this interest rate policy for determining interest rates, processing and other charges and broadly outlining the interest rate model of the Company and the Company’s approach of risk gradation in this regard for its lending business (“Interest Rate Policy”).

This Interest Rate Policy should always be read in conjunction with RBI guidelines, directives, circulars and instructions, including the SBR-MD. The Company will apply best industry practices so long as such practice does not conflict with or violate applicable laws or RBI guidelines.

This Interest Rate Policy applies to clients/ customers/ borrowers whose loans are booked in the Company.

KEY OBJECTIVE 

• To arrive at interest rate to be used for different categories of borrower.
• Communicate the annualised rate of interest to the borrower along with the approach for gradation of risk and rationale for charging different rates of interest to different categories of borrowers.
• Make available the rates of interest and the approach for gradation of risks on the website of the companies.

INTEREST RATE MODEL AND RISK GRADATION

The interest rate to be charged to the borrower for the loans will be decided keeping in view the RBI’s guidelines.

1. Interest rate will be arrived based on the following broad parameters:

a. Risk profile of the borrower determined by the Company;
b. Interest rate trend prevailing in the money market;
c. Nature of loan product;
d. Cost of borrowing;
e. Interest rate charged by competitors;
f. Historical track record of the borrower with the Company, if any;
g. Administrative cost and profit margin;
h. Tenor of loan and repayment terms;
i. End use of the loan;
j. Applicable laws/ regulatory stipulations, if applicable, and any other factors that may be relevant in a particular case;
k. Performance of the borrower with respect to other/ past loans availed by the borrower from other financial institutions.

2. The risk gradation applicable to a customer will be assessed inter-alia based on the following factors:

a. profile and market reputation of the borrower,
b. overall customer yield, future potential, repayment capacity based on cash flows and other financial commitments of the borrower, mode of payment
c. regulatory stipulations, if applicable, and any other factors that may be relevant in a particular case,
d. location of the borrower,
e. external credit score/ rating of the borrower e.g. CIBIL score,
f. performance of the borrower with respect to other/ past loans availed by the borrower from other financial institutions.

3. The borrower is charged an annual rate of interest, details of which are specified on the Company’s website, as updated from time to time. The approach for risk gradation is also displayed on the Company’s website, as updated from time to time.

4. The Company will follow appropriate internal principles and procedures, in line with applicable laws and regulations, in determining interest rates, processing fees and other charges in line with this Interest Rate Policy.

5. The decision to give a loan and the rate of interest thereon are carefully assessed on a case-to-case basis based on multiple factors which may include the borrower’s cash flows, credit and default risk associated with borrower, other financial commitments, credit record etc. Such information is gathered based on personal information (age, employment type, income etc.) provided by the borrower, credit report, market intelligence and any other information as available to Respo.

6. The Company will follow the interest rate model adopted and approved by the board of directors (“Board”) in this Interest Rate Policy and will be made available on the website. The rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers will be disclosed in the application form and communicated explicitly in the sanction letter.

7. Interest rate would be intimated to the borrower at the time of sanction / availing of the loan. The interest rate charged to borrower is subject to change as per (i) any change in applicable laws; (ii) regulations and directions issued by RBI; or (iii) at the discretion of management of Respo based on the variables as set by the management of Respo in this Interest Rate Policy. Any change in interest rate charged will be communicated to the customer separately and will only be applicable prospectively. Any updates with respect to rates of interest, approach for gradation of risks will be reflected on website of the Company and on other platforms where such information may be displayed.

8. The total interest payable to the borrower through the life of the loan will be disclosed in the key fact statement, sanction letter and the loan agreement.

9. The rate of interest will be annualised rate so that the borrower is aware of the exact rates that would be charged to the account.

10. The Company will share/ make accessible to its customers, through appropriate channels, a simple and easy to understand statement at the end of each quarter which will at the minimum, enumerate the principal and interest recovered till date, EMI amount, number of EMI’s left and annualized rate of interest/ annual percentage rate for the entire tenor of the loan.

11. The Company will ensure that the charging of interest is from the date of actual disbursement of the funds to the customer.

12. In the case of disbursal or repayment of loans during the course of the month, the Company will charge interest only for the period for which the loan was outstanding.

13. If the Company is collecting one or more instalments in advance, it will ensure not to reckon the full loan amount for charging interest.

FEES AND CHARGES

Other financial fees and charges for the loans like processing fees, operating charges like cheque bouncing charges, late payment charges, re-scheduling charges, pre-payment/ foreclosure charges, charges for issue of statement of account etc., would be decided by an internal working group (consisting of the CEO and any one of the CRO, CFO, COO) approved by the Board of the Company (“Internal Working Group”), considering market practices and legal charges like stamp duty, service tax and other cess would be collected at applicable rates from time to time and would be decided upon by the Internal Working Group.

Further, with respect to implementation/ levy of fees and charges, the Company will ensure that:

• A clear and transparent communication is made to the customer about all fees and charges as part of loan agreement/ sanction letter;

• Any upfront fees and charges that is not communicated in the agreement should not be imposed on the customer for availing the loan product; and

• Any change in contingent / service charges or introduction of new contingent / service charge should be implemented only prospectively except for change on account of regulatory/ statutory changes.

PENAL CHARGES

This Interest Rate Policy is to be read in conjunction with the Company’s policy on penal charges.

Claims for refund or waiver of charges/ penal charges/ additional interest would be at the sole discretion of the Company. The Internal Working Group will have the authority to decide on waiver of charges/ penal charges, etc.

DISCLOSURE

Appropriate disclosures, in line with the SBR-MD, regarding this Interest Rate Policy will be made on the Company website.

POLICY REVIEW

This Interest Rate Policy will be reviewed and updated periodically for any changes and be approved by Board.