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NRFSI INTEREST RATE MODEL Dated: 17th March 2018
PROPOSED BY K. Arun, Chief Financial Officer
RECOMMENDED BY Shishir Bhushan, Managing Director
APPROVED BY Board of Directors
PURPOSE
This policy document defines the applicable policy to guide prospective customers of the NRFSI
on the internal principles and procedures followed in determining interest rates and fixing of
processing and other charges. The objective is to bring in transparency in the process.
SCOPE
This policy designs the principles and procedures followed by NRFSI in determining interest rates
and other charges and process to be followed for revising the same. It applies to Wholesale
Financing and Retail Financing businesses.
APPLIES TO
This policy applies to ALCO committee, Wholesale Risk/Retail Risk teams. They are required to
acknowledge having read the policy document and sign a letter of spirit of adherence to the
policy in the normal course of business.
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NRFSI INTEREST RATE MODEL Dated: 17th March 2018
CONTENTS
1. OBJECTIVES …………………………………………………………………………………………………………………..………. 3
2. PRINCIPLES FOR DETERMINING INTEREST RATES …………………………………………………………………. 3
3. RATE OF INTEREST ……………………………………………………………………………………………………….……….. 4
4. WAIVERS/REFUNDS ……………………………………………………………………………………………………….…….. 4
5. EXCEPTION APPROVAL & REVIEW ………………………………………………………………………………………… 4
6. RULES FOR CONTROLLING THE APPLICATION OF THE POLICY …………………………………………….. 4
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NRFSI INTEREST RATE MODEL Dated: 17th March 2018
1. OBJECTIVES
This policy designs the principles and procedures NRFSI would follow in determining the interest
rates, processing fee and other charges applicable to its customers for Dealer Wholesale
Financing, Personal Loans to group employees and Retail Financing new and used cars.
This Policy applies throughout NRFSI in the document and must be implemented by NRFSI’s CFO
and Head of Risk Management in coordination with the Managing Director.
This policy is prepared based on the regulations issued by Reserve Bank of India (RBI) vide its
Circular DNBS / PD / CC No. 95/ 03.05.002/ 2006-07 dated May 24, 2007 advised to the Boards of
Non-Banking Financial Companies. Finance Companies (“NBFC”) to lay out appropriate internal
principles and procedures in determining interest rates, processing and other charges. Further,
RBI vide circular DNBS (PD)C.C. No. 133 /03.10.001/ 2008-09 January 2, 2009, advised the NBFCs
to adopt appropriate interest rate models taking into account relevant factors and to disclose the
rate of interest, gradations of risk and rationale for charging different rates of interest to
different category of borrowers.
2. PRINCIPLES FOR DETERMINING INTEREST RATES
The interest rate for the product will be decided by the ALCO committee or any other sub-
committee to the Board considering the following factors:
(i) the cost of funds, matching tenor cost, market liquidity, refinance avenues, RBI policies on
credit flow, offerings by competition, tenure of customer relationship, market reputation,
cost of disbursements, cost of capital required, inherent credit and default risk in the
products and customer per se arising from customer segment;
(ii) Profile of the customers, qualification, subventions, schemes, promotion campaign,
subsidies available, permitted deviations, ancillary business opportunities and the future
potential business anticipated by the Management;
(iii) 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.
NRFSI follows a 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 which are listed above.
While deciding the charges, the practices followed by the competitors in the market would also
be taken into consideration in addition to factors listed above.
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3. RATE OF INTEREST
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NRFSI INTEREST RATE MODEL Dated: 17th March 2018
The interest rates would be offered on fixed, floating - (variable) basis. The floating rates would
be decided on periodic intervals at monthly / bi monthly / quarterly intervals depending upon
various market factors.
The rate of interest would be intimated to the customer.
The interest reset period in case of variable loans would be decided by NRFSI from time to time.
The interest would be charged on monthly or longer rests based on the product to product.
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.
The interest shall be deemed payable immediately on the due date as communicated and no
grace period for payment of interest is allowed unless communicated to the customer explicitly
in the sanction letter.
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 by NRFSI.
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 NRFSI.
4. WAIVERS/REFUNDS
No claims for refund or waiver of such charges/ penal interest / additional interest would
normally be entertained by NRFSI and it is the sole discretion of NRFSI to deal with such requests,
if any.
5. EXCEPTION APPROVAL & REVIEW
The Board of Directors of NRFSI would review the policy based on business requirements. Any
deviations to the policy would be approved by the Managing Director.
6. RULES FOR CONTROLLING THE APPLICATION OF THE POLICY
Application of this Policy is to be controlled by internal control, external audit and shareholders’
audits.
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