Approved by the Board on [date to be supplied]. Published under the Reserve Bank of India’s directions requiring non-banking financial companies to disclose their interest rate model.
Draft for compliance review. This page is a structured starting point based on the standard RBI requirements for this policy. It is not legal advice. It must be reviewed by your compliance adviser, completed where marked, and adopted by the Board before publication.
1. Purpose
The Reserve Bank of India requires every non-banking financial company to adopt a Board-approved interest rate model, to disclose the approach to gradation of risk, and to make the annualised rate available to the borrower. This document sets out ours.
2. How the rate is arrived at
The rate offered to a borrower is built from the following components:
- Cost of funds — our own borrowing cost, and the opportunity cost of deploying own funds.
- Operating cost — the cost of appraisal, valuation, documentation, custody where applicable, and servicing the account through its life.
- Risk premium — determined by the gradation of risk set out in section 3.
- Tenure premium — longer facilities carry more uncertainty and are priced accordingly.
- Margin — a reasonable return on capital employed.
3. Gradation of risk
Two borrowers taking the same product may be offered different rates. The factors that move a rate up or down are:
- Nature, quality, liquidity and enforceability of the security offered
- Loan-to-value ratio
- The borrower’s credit history, bureau record and past conduct with us
- Demonstrated repayment capacity and stability of income or business receipts
- Tenure and repayment structure requested
- End use of funds, and whether it is productive or consumption expenditure
- Whether the borrower is an existing client with a satisfactory record
A gold loan against ornaments in our custody is at the secure end of that scale. An unsecured facility to a borrower with a short track record is at the other. The gap between the two is deliberate and explainable.
4. Indicative rate ranges
The annualised rate applicable to your facility is stated in the sanction letter and the loan agreement before you sign. The ranges below are indicative only.
| Product | Annualised rate range | Processing fee |
|---|---|---|
| Gold & Silver Lending | [to be supplied] | [to be supplied] |
| Automobile Finance | [to be supplied] | [to be supplied] |
| Real Estate Finance | [to be supplied] | [to be supplied] |
| Corporate Finance | [to be supplied] | [to be supplied] |
| Micro-Financing | [to be supplied] | [to be supplied] |
5. Method of application
Interest is applied on a [reducing balance / flat — specify per product] basis and is charged at the rests stated in the loan agreement. The method of application, not merely the rate, is disclosed in the sanction letter, because the two together determine what you actually pay.
Interest rates are annualised so that a borrower can compare our offer with any other. We do not quote monthly rates without also stating the annualised equivalent.
6. Other charges
| Charge | Amount | When it applies |
|---|---|---|
| Processing fee | [to be supplied] | At sanction |
| Documentation charges | [to be supplied] | At execution |
| Valuation charges | [to be supplied] | Where an external valuer is engaged |
| Penal charges | [to be supplied] | On the amount in default |
| Cheque / mandate dishonour | [to be supplied] | Per instance |
| Statement of account | Nil | — |
| Foreclosure charges | [to be supplied] | See section 7 |
7. Penal charges and foreclosure
- Penal charges are levied on the amount in default, are reasonable and proportionate, are not capitalised, and no further interest is computed on them.
- Penal charges are disclosed in bold in the sanction letter and the loan agreement.
- No foreclosure charges or pre-payment penalties are levied on floating-rate term loans sanctioned to individual borrowers for purposes other than business, in accordance with RBI directions.
8. Changes
Changes to interest rates and charges are applied prospectively only. Affected borrowers are given notice in a language they understand. This policy is reviewed by the Board at least annually and the current version is always the one published here.
9. Questions
If you do not understand how your rate was arrived at, ask us. You are entitled to an explanation, and we would rather give it than have you sign something you have not followed. Write to support@heeraafinancials.com.