The provisioning norms pertaining to NBFC have been covered RBI’s Master Direction – Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 bearing circular no. DNBR.PD.007/03.10.119/2016-17 dated September 01, 2016. The policy has been updated according to this regulation and amended and updated from time to time. The notification and circular directs the Boards of all Non-Banking Finance Companies (NBFCs). SiCreva (hereinafter referred to as “NBFC”) to approve an Interest rate model for the NBFC and also to make available the rates of interest and approach for gradation of risk on website of the NBFCs.
In compliance with the said RBI directives, the policy for determination of Interest rates stands as follows:
The interest rate charged to the borrower shall be based on the following broad parameters:
- Risk profile of the borrower
- Tenor of the Loan
- Cost of borrowing funds – Internal as well as external
- Credit and default risk in the related business segment
- Historical performance of similar kind of customers
- Prevailing Interest rate trends in the money market
- Treasury bill rates and the sovereign yield curve
- Spreads between the sovereign and the AAA corporate bonds
- Prevailing Base Rate of major commercial banks
- Market scenario relating to credit risk premia / default premia including CDS spreads
- Internal Cost of doing business
- Interest rate offered by other NBFC’s in the industry
- Other factors that may be relevant in each case.
The rate of interest for the same loan product and same tenor availed during the same period by different customers need not to be standardized as it can vary for different customers based on consideration of any or a combination of above parameters.
The interest rates offered can be on fixed or variable basis and can be charged on flat or reducing balance method.The interest rate could range between eight to twenty four percent.
The interest re-set period for variable rate loans would be decided by the NBFC from time to time.
The interest could be charged on monthly or quarterly rests for different products/segments.
Interest rates would be intimated to the customers at the time of sanction / availing of the loan and EMI apportionment towards interest and principal dues would be made available to the customer.
The interest shall be deemed payable immediately on the due date as communicated and no grace period for payment of interest is allowed.
Besides normal interest, the NBFC may levy additional / penal interest for delay or default in making payments of any dues. These additional or penal interests for different products or facilities would be decided by the respective business / product heads.
The changes in the interest rates and related charges would be prospective in effect and intimation of change of interest or other related charges would be given to customers in a mode and manner deemed fit.
Besides interest, other financial charges like processing fees, origination fees, cheque bouncing charges, late payment charges, re-scheduling charges, pre-payment / foreclosure charges, part disbursement charges, cheque swap charges, security swap charges, charges for issue of statement account, customer care, credit assessment, cash handling, ECS/ Direct Debit/ ACH mandate registration/ lodgement/ handling or for any other service provided by the NBFC or cost incurred by the NBFC for the provision of services related to the loan granted to the customers. Besides these charges, stamp duty, service tax and other cess would be collected at applicable rates from time to time. Any revision in these charges would be prospective in effect. These charges for different products or facilities would be decided by the respective business / product heads in consultation with the Finance & Legal heads.
These fees and charges may vary based on asset/commodity financed, exposure limit, expenses incurred at the point of sale, customer segment and generally represent the costs incurred in rendering the services to the customer.
All such fees and charges shall be clearly communicated to the customer either by way of printing on sanction letter or by publishing on the website of the NBFC.
While deciding the charges, the practices followed by the competitors in the market would also be taken into consideration.
The NBFC may also levy and collect charges and penalties for prepayment/ foreclosure of loan by the customer, for delay or late payment of loan instalment and other dues to the NBFC and bouncing of ECS/ Direct Debit/ ACH.
The NBFC may, at its sole discretion, allow the prepayment/foreclosure of the Loan Amount subject to certain conditions and on payment of prepayment/foreclosure penalties by the Borrower.
The minimum number of instalments post which pre-payment/ foreclosure is allowed may vary based on products & tenure of loan and shall be specified in the sanction letter.
Claims for refund or waiver of charges / penal interest / additional interest would normally not be entertained by the NBFC and it is at the sole discretion of the NBFC to deal with such requests.
Any revision in the NBFC’s interest rates applicable to business would be reviewed by the Finance & Legal heads and recommended to the CEO for approval.