INTEREST RATE POLICY
Pursuant to Notification No. DNBS. 204 / CGM (ASR)-2009 dated January 2, 2009; and Master Direction NBFC-NSI-ND taking Company (Reserve Bank) Directions, 2016 issued by the RBI to NBFCs for the regulation of interest rate and the prevention of the charging of excessive interest rates, Monedo Financial Services Private Limited (Monedo India) has formulated this Interest Rate Policy (“Policy”) outlining its interest rate model and the Company’s approach to risk gradation in its lending business.
Objectives of the Policy
This Policy outlines Interest rate Model and approach to the gradation of risks. The primary objectives of the Policy are as follows:
i. To prevent the charging of excessive interest rates;
ii. To enable Customers know the exact interest rates that will be charged on the loan amount per annum;
iii. To enable Customers know the conditions upon which the interest rates are arrived at.
Application of the Policy
This policy is applicable to all customers and persons seeking to obtain loans (the “Customer”) from Monedo India. A copy of this policy is displayed on Monedo India website. Monedo India may amend this policy from time to time subject to prevailing conditions and will display such updates on its website.
Interest Rate Model
Monedo India’s business model is geared at providing credit only to customers meeting the benchmarks set by Monedo India. The interest rate chargeable to each loan account is assessed on a case by case basis, upon an evaluation of factors which are considered below:
i. Tenor of the Loan & Payment Terms – Monedo India takes the term of the loan and terms of payment of interest into consideration in evaluating interest rates;
ii. Internal and External Costs of Funds – the cost of sourcing the funds for providing loans to customers (external cost of fund) and the expected return on equity (internal cost of funds) are also considered;
iii. Internal cost loading –Factors such as the costs of doing business, the complexity of the transaction, capital risk involved, size of the transaction, location of the customer etc. are also given a consideration;
iv. Credit Risk – the risk of credit loss cost is also taken into consideration in assessing the interest rate chargeable on loan accounts. Monedo India’s internal assessment of the credit strength of a customer is also taken into consideration in determining the amount of credit risk cost applicable to the said customer.
v. Structuring Premium – In the event that there is a significant structuring element regrading the collateral or other aspects of transaction structure, Monedo India may apply a premium to the loan.
vi. Market Dynamics – the prevailing interest rates offered by other NBFCs for similar products / services as offered by Monedo India shall be taken into consideration in assessing chargeable interest rates. The forecasts and analysis of ‘what if’ scenarios’ are also relevant factors for determining interest rates to be charged.
vii. Other relevant factors such as matching tenor cost, market liquidity, relevant RBI Policies, stability of customers’ earnings and employment history, subvention and subsidies available, deviations permitted, further business opportunities, external ratings, industry trends, switchover options etc. may also be considered by Mondeo India in determining the interest rate to be charged upon customers.
Approach for Gradation of Risk (AGR)
The factors which are considered in assessing a customer’s risk premium are assessed as follows:
i. the profile and market reputation of the customer;
ii. inherent nature of the product, type / nature of facility, loan to value of asset financed;
iii. history and duration of relationship with the customer, past repayment track record and historical performance of similar clients;
iv. group strength, overall customer yield, future potential, repayment capacity based on cash flows and other financial commitments of the customer;
v. nature and value of primary and secondary collateral / security;
vi. type of asset being financed, end use of the loan represented by the underlying asset;
vii. interest, default risk in related customer segment;
viii. the relevant RBI guidelines and other applicable laws;
ix. any other factors that may be relevant for the gradation of risks on a case by case basis.
Non-Applicability of the Approach for Gradation (AGR)
Monedo India reserves the right to determine which of the approaches to the gradation of risks (AGR) it adopts for all its customers. Monedo India undertakes to abide by the stipulations in this policy in reaching decisions on applicable interest rates.
Rate of Interest
i. Monedo India shall calculate its interest rate according to the 30/360 day count convention
ii. The rate of interest for the same product and tenor availed during same period to different customers may differ depending on the result of an application of the conditions listed in this policy.
Processing Fees / Commitment Fee / Other Charges
Nothing in this policy shall be deemed to deprive Monedo India of its right to make necessary charges on a customer as may arise from the said customer’s loan account. Such charges include but are not limited to processing fees, bounced back cheques Debit fee, loan termination fees, field collection charges etc. And such other charges arising from a customer’s loan account as Monedo India may levy against a customer.
For the avoidance of doubt, service tax, levies, cess and other taxes arising from the loan account shall be payable by the customer at applicable rates.
Penal Interest Rate / Charges
Besides the annualized interest, Monedo India may levy additional interest for ad hoc facilities, penal interest /default interest for any delay or default in making payments of any dues as agreed between the customer and Monedo India in the loan agreement. The details of Penal Interest charges for late repayment will be mentioned in bold in the loan agreement and the sanction letter.
Review and Revision
Any revision in the Company’s interest rate applicable to business would be reviewed by the Board of Directors/Management Committee and recommended to the MD & CEO for approval.