Interest Rate Policy

  • Interest Rate Policy

Interest Rate Policy

PREFACE

The Reserve Bank of India (RBI) had vide its Circular DNBS / PD / CC No. 95/ 03.05.002/ 2006-07 dated May 24, 2007 advised that Boards of Non-Banking Finance Companies (NBFC's) lay out appropriate internal principles and procedures in determining interest rates, processing and other charges.

This was reiterated vide RBI's circular DNBS (PD) C.C. No. 133 / 03.10.001/ 2008-09 January 2, 2009, whereby which RBI advised the NBFCs to adopt appropriate interest rate model taking into account relevant factors and to disclose the rate of interest, gradations of risk and rationale for charging different rates of interest to different category of borrowers.

The policies and codes of ORICRED FINSERV PRIVATE LIMITED should always be read in conjunction with RBI guidelines, directives, circulars and instructions. The company shall apply best industry practices so long as such practice does not conflict with or violate RBI guidelines.

In order to ensure its standards of transparency, in conformity with the stipulations of the RBI's directives, the Company has adopted the following interest rate policy for determining Interest Rates, Processing and Other Charges. This Policy applies to clients whose loans are booked in the Company.

Interest rate
  • Tenure of the Loan – The interest rate charge will depend on the different kinds of loan; structure of the loan; terms of payment of interest.
  • Internal cost loading – The interest rate charged will also take into account costs of doing business.
  • Internal and External Costs of Funds - The rate of interest charged is also affected by the rate at which the funds necessary to provide loan facilities to customers are sourced normally referred to as the Company’s external cost of funds.

Internal cost of funds being the expected return on equity issued is also a relevant factor. The interest rate charged will also take into account costs of doing business.

  • Credit Risk – As a matter of prudence, bad debt provision cost will be factored into all transactions.
  • Other Factors – The rate of interest shall be based on the cost of borrowed funds, matching tenor cost, market liquidity, RBI policies on credit flow, offerings by competition, tenure of customer relationship, market reputation, cost of disbursements, inherent credit and default risk in the products and customer per se arising from customer segment, profile of the customers,stability in earning and employment, deviations permitted, ancillary business opportunities, future potential, group strength and overall customer yield, nature and value of primary and collateral securities, past repayment track record of the customers, external ratings of the customers , industry trends, switchover options, canvassed accounts etc.
  • The company may adopt discrete interest rate model whereby the rate of interest for same product and tenor availed during same period by customers would not be a standardized one but could be different for different customers depending upon consideration of any or combination of a few or all factors listed out above.
  • The annualized rate of interest would be intimated to the customer.
  • The interest rates would be offered on fixed, floating, variable basis.
  • Interest rates shall be intimated to the customers at the time of sanction/ availing of the loan and the equated instalments/Balloon Payment/Bullet payment apportionment towards interest and principal dues shall be made available to the customer.
RATE OF INTEREST
  1. Interest rates offered could be on fixed rate basis or floating / variable rate basis
  2. In case of floating / variable interest rates, the interest rates will be benchmarked as under:
    • Loans under SME & Retail Credit Segment: to MCLR Benchmark.
    • Loans under Corporate Credit Segment: to a market linked transparent benchmark, including reference rate of our bankers as maybe agreed with the borrower.
  3. The rate of interest for the same product and tenor availed during same period by different customers need not be standardized. The final lending rate applicable to each customer will be assessed based on various factors as detailed in this Policy.
  4. At present the Annualised Rate of Interest* to be charged to borrowers, at the time of sanctioning loans, shall be in the range of 12% to 30% on reducing balance basis.

*In exceptional circumstances, based on risk perception, this may fall outside the indicated range.

  1. Loan amount, Annualised Rate of Interest and tenure of loan will be communicated to the borrower in the sanction letter and the apportionment of instalments towards interest and principal dues shall be made available to the borrower.
  2. Besides normal Interest, the Company may levy additional interest for adhoc facilities/ rollover , penal interest / default interest for any delay or default in making payments of any dues. The details of Penal Interest charges for late repayment will be mentioned in the loan agreement and also communicated in the sanction letter
  3. Besides interest, other financial charges like processing charges, cheque bouncing charges, pre-payment / foreclosure charges, part disbursement charges, cheque swaps, cash handling charges, RTGS / other remittance charges, commitment fees, charges on various other services like issuing NO DUE certificates, NOC, letters ceding charge on assets/ security, security swap & exchange charges etc. would be levied by the company wherever considered necessary. In addition, the Goods and Services Tax and other taxes, levies or cess would be collected at applicable rates from time to time.
  4. The rate of interest applicable to each customer is subject to change as the situation warrants and is subject to the management’s perceived risk on a case-to-case basis.
  5. Changes in interest rates would be decided at any periodicity, depending upon change in benchmark rate, market volatility and competitor review.
  6. Intimation of change of interest or other charges would be communicated to customers in a manner deemed fit, as per terms of the loan documents. Any revision in interest or other charges would be with prospective effect.
  7. The interest re-set period for floating / variable rate lending would be decided by the Company from time to time, applying the same decision criteria as considered for fixing of interest rates.
  8. In case of staggered disbursements, the rates of interest would be subjected to review and the same may vary according to the prevailing rate at the time of successive disbursements or as may be decided by the Company.
  9. Claims for refund or waiver of charges/ penal interest/ additional interest would normally not be entertained by the Company. It is the sole and absolute discretion of the Company to deal with such requests, if any.
PROCESSING / DOCUMENTATION AND OTHER CHARGES
  • All processing / documentation and other charges recovered are expressly stated in the Loan documents. They vary based on the loan product, geographical location, customer segment and generally represent the cost incurred in rendering the services to the customers.
  • The practices followed by other competitors in the market would also be taken into consideration while deciding the charges.
  • Processing charges will be charged on case-to-case basis.
  • Goods and Service Tax and other applicable taxes shall be charged as per the guidelines issued by the Government from time to time.
PENAL INTEREST / LATE PAYMENT CHARGES

Besides normal interest, the Company may collect penal interest / late payment charges for any delay or default in making payments of any dues. These penal interest / late payment charges for different products or facilities would be decided by the Company from time to time.

APPROACH FOR GRADATION OF RISK

The risk premium will be decided on a case-to-case basis as decided by the Company. The approach for gradation of risk is based on factors such as nature of loan, creditworthiness of the borrower, nature of security, nature of the Product, type of asset being financed, borrower profile, repayment capacity, borrower’s other financial commitments, past repayment, tenure of the loan, geography (location) of the borrower, end use of the loan as represented by the underlying asset etc. Such information is collated based on the borrower’s input, credit bureau and field inspection by the Company officials. While deciding the interest rate and other charges, the rate offered by the competitors in the market would also be taken into consideration.