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Interest Rate Policy

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RBI, under Section 45 L of the Reserve Bank of India Act, 1934, issuing Notification No. DNBS. 204 / CGM (ASR)-2009 on January 2, 2009, directing NBFCs to implement an Interest Rate Policy to regulate the excessive interest charged. In compliance, [Insert name of the NBFC]. (referred to as "the Company") has formulated the following Interest Rate Policy, with the Board of Directors and the Management Team responsible for its fair and equitable implementation.
 

The Company commits to adopting RBI-prescribed best practices and adjusting the Interest Rate Policy as needed to align with these standards.

Key Points of the Interest Rate Policy:

 

  1. Determination of the base interest rate involves considering various factors such as fund costs, margins, risk premiums, administrative expenses, and profit margins. This base rate will be periodically reviewed.

  2. Interest rates for each loan account will be evaluated based on multiple parameters including tenure, borrower's profile, repayment capacity linked to cash flows, asset value concerning the loan, collateral provided, and the borrower's past repayment history.

  3. The Company will transparently disclose the interest rate, risk gradations, and reasons for charging different rates to various borrower categories in the loan application form and explicitly communicate these in the sanction letter.

  4. At the loan sanction stage, the Company will inform the borrower about the loan amount, annualized interest rate, application method, tenure, and instalment amount (monthly/quarterly). Additionally, the Loan Agreement will mention other charges like processing fees, interest on delayed payments, and check bouncing charges.

  5. The Company will explicitly state the annualized interest rate to ensure borrowers are fully aware of the precise rates applicable to their accounts.

  6. A fair profit margin will be included to determine the leading rate.

This Interest Rate Policy aims to ensure fairness, transparency, and adherence to responsible lending practices by considering various financial factors and borrower-related parameters in determining interest rates for loans and advances.

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