‍POLICY FOR DETERMINING INTEREST RATES AND CHARGES‍

EDGRO FINANCE PRIVATE LIMITED

POLICY FOR DETERMINING INTEREST RATES AND CHARGES

1. BACKGROUND, SCOPE, OBJECTIVES AND APPLICABILITY

1. Background

EDGRO Finance Private Limited (“Company”), has been granted registration as a Non-Banking Financial Company (“NBFC”) by the Reserve Bank of India (‘RBI’) under the Section 45-IA of the Reserve Bank of India Act, 1934.

The Company, as a base layer NBFC, is required to comply with the Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023. Under Chapter VII of the RBI Directions, guidelines with respect to Fair Practice Code has been provided. In accordance with clause 45.12 under Chapter VII of the RBI Directions, boards of NBFCs shall lay out appropriate internal principles and procedures in determining interest rates and processing and other charges.

In pursuance to the above regulatory requirements, the Company, being an NBFC, shall adopt this ‘Policy for Determining Interest Rates and Charges’ (“Policy”).

2. Scope and Objective of the Policy

The objective of this Policy is to define a framework to transparently determine rate of interest, fee and charges which are applicable to its borrowers.

3. Applicability

The Policy shall be effective from the date of its approval by the Board, and it shall be applicable to lending activities of the Company.

2. POLICY STANDARDS 

4. Broad Range of Interest Rates Applicable on the Lending Business

Range of interest rates applicable to the Company’s loan products shall be computed considering the cost of funds, credit costs, operational expenses, and other administrative costs.

5. Cost of Funds

The cost of funds will depend on the different types of funding sources availed by the Company to fund its lending business. Various sources will consist of equity, bank loans, debentures, commercial papers and other market instruments. 

6. Range of Interest Rates on Specific Loan Product or a Category of Borrowers

The range of interest rates for a category of borrowers or a loan product shall factor various elements like the Company’s cost of funds, credit risk premium for the product, tenor premium, sourcing cost, operating cost, margin & interest rate trend prevailing in the market for the specific borrower category/ product. Thereafter, gradations of risk will further determine the specific rate applicable to a customer.

7. Gradations of Risk

Based on gradations of risk, the Company may charge different rates of interest to different categories of borrowers. Key factors which may be used in gradation of risk for deciding the rate of interest applicable to a specific borrower are as under: 

1. Risks associated with the borrower’s employment/ business.
2. Type, nature, vintage/ experience, profile of the borrower.
3. Vintage of the Company’s relationship with the borrower, repayment track record of existing borrower, credit history of the borrower available from various sources.
4. Purpose of the loan.
5. Existing and expected/ projected financial position of the borrower, sustainability of cash flow of the borrower.
6. Historical performance of homogenous pool of similar borrowers and credit default risk in the similar loan category and business segment.
7. Nature and value of primary collateral and additional security.
8. Tenure of the loan.

8. Interest Rates

Interest Rates would be fixed in nature. The borrowers are categorised into different risk buckets based on several factors such as customer’s nature of employment, bank statement analysis, income assessment, overall customer credit score and education profile, etc. Institutes are categorized into different risk buckets (A+ to D) based on institute vintage, segment, accreditation, size, past performance, financial health, etc. Based on the assessed risk category of customer and the institute, rate of interest ranging from 13.5% to 42% (effective annualized reducing interest rate) is charged.

9. Penal Charges

As a deterrent against delinquency and to encourage timely repayment and adherence to the repayment terms, the Company may levy a penal interest rate as per the terms and conditions agreed with the borrower. 

10. Other Charges

The Company, wherever considered necessary, may levy various other financial charges like processing fees, cheque bouncing charges, late payment charges, prepayment/ foreclosure charges, part disbursement charges, cheque/ repayment instrument swap charges, security swap charges, charges for issuance of a statement/ document/ copy of document, re-schedulement charges etc. subject to the regulatory restrictions, if any. The Company shall disclose the applicable charges to its customers.

11. Variation in Applicable Charges

Certain charges may vary from customer to customer depending on loan product, borrower category, credit history of customer, type of security offered, expenses incurred in sourcing of business, geographical location and cost incurred in rendering service to the customer etc.

12. Disclosure of Interest Rates, Processing Fee, and other Applicable Charges

The Company through sanction letter, key fact statement and loan agreement shall convey annualized applicable rate of interest, processing fee and other charges to the borrower.

3. AUTHORITY

1. The BOARD shall have authority to define/ review/ revise the Company’s benchmark floating reference rate, if any.
2. The BOARD shall have authority to define/ review/ revise the range of rates of interest applicable on various types of loans extended by the Company. 
3. The Whole Time Director (“WTD”) of the Company or an official (to whom such authority may delegated by any of these officials) shall have authority to approve rate of interest (in case of fixed rate loans) and additional margin/ discount on benchmark floating reference rate (in case of floating rate loans) that may be charged on a specific loan.
4. The WTD of the Company or an official to whom such authority may delegated by any of these officials may approve fees and charges to be levied on a specific loan/ credit exposure.

4. REVIEW OF THE POLICY

This Policy shall be reviewed, with the approval of the Board of Directors, once a year or earlier if required by the applicable rules and regulations. However, if the Policy is required to be amended due to change in any statutory/ regulatory requirement, requisite modifications shall be carried-out and implemented at the earliest with the approval of the Chief Executive Officer or the Chief Financial Officer of the Company. Such amended Policy shall be placed before the Board in its immediate next meeting for ratification.

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