Interest Rate Policy

This Policy lays down the Company’s interest-rate model, the approach for gradation of risk and the basis for other charges, so that rates of interest are fair, transparent and communicated clearly to borrowers. It applies to all loan products of the Company, whether sourced and serviced directly or through any Loan Service Provider (“LSP”) / Digital Lending App, and is not specific to any product, partner or LSP.

The Board has adopted an interest rate model under which the rate of interest for each product and borrower is determined on an annualised basis, having regard to the following components:

• cost of funds, including the cost of capital deployed
• customer-acquisition and servicing costs, including fees payable to any LSP, which are borne by the Company
• administrative and operational costs
• credit-risk premium, reflecting the borrower’s risk profile and expected losses
• the tenor of the loan, prevailing market conditions and a reasonable margin.

Interest is computed on a reducing-balance basis and expressed as an annualised rate. Where a processing fee is deducted upfront from the loan amount at disbursal, the full sanctioned loan amount is booked as principal and is disclosed as such in the KFS. Rates of interest may change as warranted by movements in these components; any revision is effected under the Board-adopted interest rate model, is disclosed to the borrower before loan acceptance and, in respect of existing loans, is applied only prospectively.

Other charges. All fees and charges, including the processing fee, are levied only as disclosed in the KFS.

Penal charges. Where the borrower fails to comply with a material term or condition of the loan contract, the Company may levy a penal charge, in conformity with Paragraph 30 of the RBC Directions, on the following principles:

• (a) Penal charges are levied as charges and not in the form of penal interest added to the rate of interest; the Company does not introduce any additional component to the rate of interest.
• (b) Penal charges are levied only on the amount under default, are reasonable and commensurate with the non-compliance, and are not used as a revenue-enhancement tool.
• (c) Penal charges are non-discriminatory within a given loan / product category. Penal charges for individual borrowers availing loans for purposes other than business are not higher than those applicable to non-individual borrowers for similar non-compliance.
• (d) Penal charges are not capitalised: no further interest is computed on such charges, and no additional or fresh penal charge is levied on the outstanding amount of penal charges. The normal compounding of interest at the contracted rate in the loan account is unaffected.
• (e) The material terms and conditions whose breach may attract a penal charge, and the quantum of the charge, are defined in the Board-approved schedule of charges read with the Company’s Credit Policy, and may vary from one product to another.
• (f) The quantum and the reason for penal charges are disclosed to the borrower upfront in the loan agreement (in bold) and in the KFS, and are displayed on the Company’s website under “Interest Rates and Service Charges”. Reminders sent to the borrower for non-compliance state the applicable penal charges, and any instance of levy of penal charges and the reason therefor are communicated to the borrower.
• (g) Any levy of penal charges is effected on a rule-based, system-driven basis; any waiver is granted only under a documented process, with the reason recorded. Applicable taxes on penal charges are levied in accordance with the instructions of the Central Board of Indirect Taxes and Customs.

These principles apply uniformly to all loans, irrespective of the LSP through which the loan is sourced or serviced.

Pre-payment. Pre-payment and foreclosure charges, if any, are levied only as disclosed in the KFS and in accordance with Paragraph 34 of the RBC Directions.

Where loans are sourced or serviced through an LSP, this Policy and the interest-rate model apply uniformly. Fees and charges payable to the LSP are paid directly by the Company and are not charged to, or collected from, the borrower. All repayments and other borrower receipts flow directly into the Company’s bank account, without any pass-through account or pool account of the LSP or any other third party. The Company remains the lender of record and is responsible for compliance with this Policy.