Interest Rate and Gradation Of Ris


Reserve Bank of India vide its notification No. DNBS. 204 / CGM (ASR)-2009 dated January 2, 2009 and vide its Guidelines on FPC for NBFCs DNBS.CC.PD.No.266/03.10.01/2011-12 dated March 26, 2012 have directed all NBFCs to Communicate the annualized rate of interest to the borrower along with the approach for gradation of risk and rationale for charging different rate of interest to different categories of borrowers, make available the rates of interest and the approach for gradation of risks on the web-site of the companies.

Rate of interest:

The Company intimates the borrower, the loan amount and rate of interest at the time of sanction of the loan along with the tenure and amount of monthly installment.

Methodology and Approach for Gradation of Risk:

a) The rate of interest is arrived at based on the weighted average cost of funds, administrative costs, risk premium and profit margin.
b) The decision to give a loan and the interest rate applicable to each loan account is assessed on a case to case basis, based on multiple parameters such as the type of the asset being financed, borrower profile, and repayment capacity, borrower’s other financial commitments, past repayment track record if any, the security for the loan as represented by the underlying assets, loan to value ratio, mode of payment, tenure of the loan, geography (location) of the borrower, end use of the asset etc. Such information is collated based on borrower inputs, credit bureau and field inspection by the company officials.
c) The rates of interest are subject to change as the situation warrants and are subject to the discretion of the management on a case to case basis.
d) The interest rate would be reviewed periodically by the ALM committee.
e) The company offers fixed rate of interest to the customers.
f) Besides interest, other financial charges like processing fees, cheque bouncing charges, foreclosure charges, cheque swapping charges, duplicate repayment schedule and legal, repossession and other related 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.
g) The practices followed by other competitors in the market would also be taken into consideration while deciding the charges.
h) Besides normal interest, the company may levy 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.
i) The present rate of interest is between
   a. Two wheeler : 15% p.a. to 29% p.a.
   b. Used Car : 17% p.a. to 22% p.a.
   c. Tractor : 14% p.a. to 20% p.a.
   d. Other Loans : 13% p.a. to 14% p.a.