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V.1.1.2022-23
VERSION CONTROL
| Version# | Purpose / Change | Modification Date | Effective date |
|---|---|---|---|
| 1 | Policy for Determining Interest Rates and Other Charges | 10th Aug, 2022 | 10th Aug, 2022 |
A Board Meeting has been conducted at Payme India Financial Services Pvt Ltd, Noida Office on 10th day of August’ 2022 wherein the Board of Directors and other stake holders had their participation for the subjected cause.
| Reviewers & Approvers | ||
|---|---|---|
| Name | Designation | Role of an Individuals |
| Mahesh Kumar Shukla | CEO | Reviewer |
| Manav Munjal | Board Member | Approver |
| Gaurav Dwivedi | Board Member | Approver |
| Vijay Lathwal | Company Secretary | Reviewer |
Background
As per the Reserve Bank of India guidelines, Board of each NBFC shall approve an Interest rate model that is applicable for the Company, taking into account relevant factors such as cost of funds, margin, and risk premium etc., and determine the rate of interest to be charged for loans and advances. Further, the directive states that the rate of interest and the approach for gradation of risk and the rationale for charging different rates of interest for different category of borrowers should be communicated to the borrowers / customers in the sanction letters issued to them.
Considering that it is quite some time since the Interest Rate Policy, per se, has been reviewed and approved by the Board of Directors of the Company, we have revisited the existing Interest Rate Policy and made suitable changes to the same. The Revised Policy is being placed before the Board of Directors for review and approval.
Role of Directors
The Board of Directors shall have oversight for the interest rate Policy of PMIFS. In order to ensure effective implementation of the Interest Rate Policy, the Board may delegate the implementation of the Policy and its operational aspects to the Chief Executive Officer and/or Executive Director, as deemed fit.
The Board of Directors at their meeting held on 10th August 2022, had adopted the interest rate model of the Company. Thereafter, the Company authorized the Managing Director to review the interest rates from time-to-time basis, the money market situation and take suitable decisions.
Objective/ Purpose Of The Amendment
The main objectives of this Policy are to:
(i) Ensure that interest rates are determined in a manner as to ensure long term sustainability of business by taking into account the interests of all stakeholders,
(ii) Develop and adopt a suitable model for calculation of a reference rate.
(iii) Enable fixation of interest rates which are reasonable: both actual and perceived.
(iv) Ensure that computation of interest is accurate, fair, and transparent in line with regulatory expectations and market practices.
(v) Charge differential rates of interest linked to the risk factors as applicable.
(vi) Facilitate transition to income recognition norms that may be stipulated by RBI in future and adoption of best practices; and
(vii) Decide on the principles, methodology and approach of charging spreads to arrive at final rates charged from customers.
Determination Of Interest Rates on Loans and Credit Facility
The Company lends money to its customers mainly through digital platforms through fixed/ variable/ reducing interest rate loans and has various products to cater to the needs of different categories of customers.
The interest rate of each product is decided from time to time, giving due consideration to the following factors:
1. Cost of Equity: To run the business, the Company has been infused with equity share capital in huge proportions, and accordingly the cost of such equity being infused should be taken into consideration.
2. Weighted Average cost of Borrowing: Since the Company borrows funds from various banks, financial institutions and other external lender(s), the weighted average borrowing cost, as well as costs incidental to those borrowings like brokerage, consultancy fees, processing fees shall be taken into consideration. The cost of borrowing varies according to market conditions thus pricing of interest rates shall be consequently impacted.
3. Credit Risk: Risk related to loss of credit due to short tenure of loan, nature of facility, ticket size of loan, geographical condition, customer segment, sourcing channels, stability in earnings and employment, financial position, past repayment track record with us or other lenders, external ratings of customers, credit reports, customer relationship, future business potential, results from digital verifications etc. Therefore, the risk of recovery of loan can be considered to be in the medium to high category and accordingly the risk premium would be reckoned.
4. Opex Cost: It includes employee expenses, office and infrastructure related fixed and variable costs, operations costs, sales, and marketing expenses, etc.
5. Profit Margin: Fair profit margin is added to arrive at the lending rate.
| Cost of Funds (Cost of Equity & Weighted Average cost of Borrowing) | XX% |
| Credit Risk | XX% |
| Opex Cost | XX% |
| Profit margin | XX% |
| Final Benchmark rate | (XX%) |
Principles And Procedures For Charging Spreads To Calculate Final Rate
The rate of interest for loans for various business segments and various schemes thereunder is arrived after adjusting for spread by the relevant business segment. Factors taken into account by businesses for calculating spreads are as follows:
The rate of interest for the same product and tenor availed during the same period by different customers need not be the same. It could vary for different customers depending upon consideration of all or a combination of the above factors.
Other Charges
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 etc., would be levied by the company wherever considered necessary. Besides these charges, stamp duty, service tax / GST and other cess would be collected at applicable rates from time to time. Any revision in these charges would be implemented on a prospective basis with due communication to customers. These charges would be decided upon by the respective business / Function heads in consultation with Operations, Finance, Compliance and Legal Heads.
Late Interest percentage (%) shall be levied on/charged from a consumer is 0.1% per day additional to the normal Rate of Interest (0.1% to 0.15% per day) applied to the respective consumer. To illustrate, if a consumer has been charged 0.1% per day as normal interest then late interest percentage (which is applicable/applied, after due date) would be 0.2% per day (0.1% normal interest + 0.1% late interest).
Late Fee & Other Charges are applicable as mentioned below:
| Bullet Loan | ||
|---|---|---|
| Loan Amount | Late fee (excluding GST) | Bounce Fee (excluding GST) |
| 0-2000 | 100 | 100 |
| 2001-5000 | 200 | 200 |
| 5001-8000 | 300 | 300 |
| 8001-10000 | 400 | 400 |
| 10000+ | 500 | 500 |
| EMI Loan | ||
| 0-2000 | 100 | 100 |
| 2001-5000 | 200 | 200 |
| 5001-8000 | 300 | 300 |
| 8001-10000 | 400 | 400 |
| 10000+ | 500 | 500 |
Communication To Customer
The Company shall communicate the effective rate of interest to customers at the time of sanction / availing of the loan through Key Fact Statement/ Sanction letter and/ or such other electronic or physical modes as may be determined by the Company. The Interest Rate Policy would be uploaded on the website of the company and any change in the interest rates and charges would be uploaded on the web site of the Company. Changes in the rates and charges for existing customers, if any, would also be communicated to them through various modes of communication such as on the website, and/or vide email, letters, SMS, etc.
Amendments To This Policy
Board is authorized to make appropriate changes to this Policy from time to time, upon the recommendation of -CEO, basis the money market scenario in the Country which includes the upward / downward revision in interest rates applicable to various loan products and the relevant charges applicable for such loan products.