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Interest Rate Model |
Preamble:
RBI vide its notification dated January 2,
2009 has directed all NBFC’s to prepare and
post an Interest rate model approved by
their Board on their websites which would
enable their customers to understand the
logic and methodology of the lending rates
charged to them. Further, the directive
states that the rate of interest and the
approach for gradation of risk and the
rationale for charging different rate of
interest for different category of borrowers
should be communicated to the borrowers in
the sanction letters to them. In line with
this, the following RLR model is given
below: |
| Methodology:
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Reference Lending Rate (RLR):
The RLR will be arrived at based
on the weighted average cost of
funds of our aggregate borrowing
from our Consortium bankers/
other banks or financial
institutions from whom we have
borrowings in excess of Rs 100
Crores including the processing
charges taking into
consideration the average tenure
market liquidity, refinance
avenues, etc. An additional
300-400 basis points on account
of inherent risk of our
business, operating cost and
margin is added to arrive at the
RLR. |
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In case of receivables which are
not eligible for bank finance,
we add 100 bps to 200 bps
illiquidity premium to the RLR
apart from the margin and
operating cost based on factors
like tenor, security cover etc. |
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The final lending rate will be
arrived by considering addition/
reduction to RLR based on tenure
of customer relationship, market
reputation, inherent credit and
default risk in the products and
customer per se arising from
customer segment, profile of the
customers, subventions and
subsidies available, deviations
permitted, ancillary business
opportunities, future potential,
group strength and value to
lender group, overall customer
yield, nature and value of
primary and collateral security,
past repayment track record of
the customers
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The company shall adopt discrete
interest rate model / policy
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 in point 3
above. |
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The interest rates would be
offered on fixed, floating,
variable basis. The base RLR for
the floating rates would be
decided on periodic intervals at
monthly/ bi monthly / quarterly
intervals depending upon market
volatility. |
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The interest re -set period
would be decided by the company
from time to time. |
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The interest would be charged on
monthly or quarterly rests. |
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Interest rates would be
intimated to the customers at
the time of sanction/ availing
of the loan and the EMI
apportionment towards interest
and principal dues would be made
available to the customer. |
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The interest shall be deemed
payable immediately on the due
date as communicated and no
grace period for payment of
interest is allowed. |
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Besides normal interest, the
company may levy additional
interest for adhoc facilities,
penal interest for any 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
functional / product heads. |
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Interest changes would be
prospective in effect and
intimation of change of interest
or other charges would be
communicated to customers in a
mode and manner deemed fit. |
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Besides interest, other
financial charges like
processing fees, 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. Besides
the base charges, the service
tax and other cess would be
collected at applicable rates
from time to time. Any revision
in these charges would be from
prospective effect. These
charges would be decided upon by
respective product heads in
consultation with Operations,
Finance and legal. |
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The practices followed by other
competitors in the market would
also be taken into consideration
while deciding the charges. |
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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 disbursements or
as may be decided by the
company. |
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Claims for refund or waiver of
charges/ penal interest /
additional interest would
normally not be entertained by
the company and it is the sole
discretion of the company to
deal with such requests if any.
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Any revision in the RLR would be
reviewed at the ALCO and
recommended to the MD/DF for
approval. |
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Reference Lending rate Model - |
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