Shriram Finance Limited

Interest Rate Policy

Version: 2024 v.3

Table of Contents

1. Background........................................................................................................................... 2
2. Purpose................................................................................................................................. 2
3. Approach to Gradation of Risk & Interest Rate Model ........................................................ 2
3.1 Interest Rates ................................................................................................................ 2
3.3 Penal Charges (DPI): ...................................................................................................... 5
3.4 Cheque Bouncing Charges/Bank Charges: ................................................................... 5
3.5 Foreclosure Charges ...................................................................................................... 5
3.6 Lock-in period................................................................................................................ 5
4. Intimation/ Communication to Borrowers: ......................................................................... 6
5. Review of the Policy ............................................................................................................. 6
Annexure 1- Lending Rate Range for All Products‐ Fixed Rates………………………………………..8

Annexure 2- Charges/Fees/Expenses ..................................................................................... 9

Annexure 3- Foreclosure Charges ........................................................................................ 12

1. Background

Reserve Bank of India had vide its Master Direction - Non-Banking Financial Company - Systemically
Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions,
2016 (‘Master Directions’) advised NBFCs to adopt an interest rate model taking into account
various relevant factors and determine the rate of interest to be charged for loans and advances.
Accordingly, Shriram Finance Limited (“SFL” or “Company”) has framed the Interest Rate Policy. The
Master Directions further advised that the rate of interest and the approach for gradations of risk
and rationale for charging different rates of interest to different categories of borrowers shall be
disclosed to the borrower/customer in the application form and communicated explicitly in the
sanction letter.

2. Purpose

In line with the Master Directions, this Interest Rate Policy (“Policy”) shall define the parameters for
determining interest rates for different categories of borrowers.

3. Approach to Gradation of Risk & Interest Rate Model

3.1 Interest Rates

The interest rate charged by the Company for loans and advances is on a fixed rate basis. With
reference to the Company’s approach for gradations of risk and rationale, the rates of interest
for the same product and same tenor availed during the same period by different customers
could vary depending upon the combination of various factors such as borrower’s profile
including age, number of dependents, residential stability, type of employment and length of
service, primary and secondary income, vintage and growth in business (if self-employed),
nature and type of collateral security, brand/resale value of the vehicle, past repayment track
record, past association with SFL, credit score, loan to value etc.

The lending interest rate will be arrived at based on the following:

i. Cost of Borrowing:
The first element in calculation of the interest rate is the cost of borrowing of the
Company, which is the interest and other incidental charges payable by the Company for
 servicing the borrowed funds deployed by the Company.

ii. Return on Capital Employed:

The second element is the expected return on capital employed which is to be generated
by the Company for servicing the owners’ capital employed in the business.

iii. Overhead Costs:

The third element is the overhead/sourcing cost incurred for sourcing and processing the
loan application including, but not limited to employee costs, office expenses, insurance
premium, if any, marketing expenses etc.

However, the rate arrived based on the aforementioned elements shall be adjusted based on
the risk profile of the borrower by factoring in a risk premium, which may be an addition or
subtraction from such rate. The manner of computation of risk premium shall be as follows:

Risk premium (estimate of credit losses): shall be determined by taking into account the
minimum margin the Company wants to maintain along with degree of risk involved in loan
considering various factors like general economic conditions, customer category, customer
category servicing costs, repayment capacity, mode of repayment, past repayment history,
loan-to-value ratio, tenure of loan, location of the customer, nature of security, etc. The rate
shall be the lower for customers perceived as having lower credit risk and higher for the high
credit risk category.

The Company shall be charging an annualised interest rate on loans and advances extended to
customers. The annualised interest shall be communicated explicitly in the sanction letter as
well as the loan agreement. Any revision/change in the interest rate/other charges would be
affected prospectively only.

In case of term loans, the interest shall be amortized with the principal and the monthly due
shall be repaid by way of installments. The Company may offer an equated monthly instalment
or a structured repayment. The Company may alternatively offer a scheme by which the
interest needs to be serviced month on month or on quarterly basis and the principal repaid at
the end of the tenure. The repayment of both the principal and interest may also be offered on
“Bullet Payment” at the end of the tenure. The interest for the month shall be computed based
on the actual number of days in a month and compounded monthly.

The interest rates proposed for different loans and advances extended by the Company to its
borrowers, are given in Annexure 1. However, in case of co-lending arrangement wherein the
cost of acquisition is borne by the co-lending partner, the rate of interest charged on the
Company’s loan exposure may be lower and rates specific to co-lending have been prescribed
under Annexure 1. Any deviation up to 3 percent from the above may be approved by a person
not below the rank of Zonal Business Head/ Region Head/ State Head. Any deviation in excess
of 3 percent shall be approved by the JMD. The returns to the company inclusive of processing
fee / document charges shall not however be less than 10%.

Further in case where subvention received from the OEMs or discount received from the
dealers and passed on to the customer (by way of lower Interest rate), the rate of interest
charged to the customer may be lower than the minimum threshold limit specified in the policy.
In those cases, interest rate deviation is to be calculated by adding above subvention/discount
to the interest rate charged to the customer.

Part pre-payment/advance payment: Where a customer remits the dues in advance or where
part pre-payments are made, the Company may grant the benefit of interest arising out of early
payment, by accepting settlement of the loan account at the contracted IRR.

3.2 Other Charges

The Company may charge processing fees to cover the cost of sourcing/acquisition, field
verification, credit appraisal etc. Other fees/charges such as legal fees, valuation fees etc. shall
be charged to customers separately. Similarly, other charges such as mandate registration
charges, cheque bouncing charges, overdue / penal interest, swapping charges, rescheduling
charges, part-disbursement charges, prepayment charges, collection charges,
seizing/repossession charges/expenses, statutory charges, auctioning charges, legal expenses
etc. shall be levied by the Company from time to time. In addition, applicable GST and other
cess on the fees and charges shall be collected at the applicable rates from the customers. All
such charges shall be clearly mentioned on the website and the customer may refer to the
website for details of charges
Any revision in these charges shall be given prospective effect only and the same shall be
communicated to customers. The broad range for charging the above referred fees/ charges/
expenses are indicated in Annexure 2 of this Policy.

Any deviation in processing fee up to 5 percent from the above may be approved by a person
not below the rank of Zonal Business Head/Region Head/ State Head.

3.3 Penal Charges (DPI)

Where there is a delay in remittance of instalments, the Company shall charge penal charges at
the rate 36 percent per annum without capitalising it, on the instalments outstanding. This
would be in addition to the interest charged at the contracted rate of interest on the balance
outstanding which would include the EMI (including the interest), insurance payments if any,
debited to the account, repossession and legal expenses debited at actuals. Further, the levy
of penal charges does not prevent the Company from taking any legal action and repossessing
the asset by issuing a notice to the borrower.

3.4 Cheque Bouncing Charges/Bank Charges

The Company may charge a flat amount up to Rs.1000 per instance of cheque/ Automated
Clearing House (ACH) / Electronic Clearing System (ECS) bounce for various loan products.

3.5 Foreclosure Charges

Where a customer proposes to foreclose a loan account (in the absence of any lock-in-period),
the Company shall levy foreclosure charges as detailed in Annexure 3. The Company may also
charge an additional 2 percent on the principal outstanding if the loan is proposed to be taken
over/closed from borrowed funds. The foreclosure charges may however be varied by a senior
executive not below the rank of a State Head/Zonal Business Head/Region Head. The State Head
or the Zonal Business Head/Region Head may delegate this power for ease of operations.

3.6 Lock-in period

The Company operates in a competitive environment and to cover the cost of acquisition,
restrict foreclosure of the loan account in certain cases as negotiated with the customer at the
time of sanction. The Company may restrict foreclosure of a loan by not more than 12 months
 from the date of first EMI due. The Company at its sole discretion, may sanction the loan with
a lock-in period as proposed above.

While the Company does not in the normal course permit foreclosure of the account during the
lock-in-period, the Company may on approval of the State Head / Zonal Branch Head (ZBH)
/Executive Director/ Joint Managing Director (JMD) /Managing Director (MD), permit the
customer to foreclose the loan account during the lock-in-period and in which case, the
Company may propose to charge up to 4 percent over and above the applicable rate
immediately succeeding the lock-in-period, and on acceptance by the customer, permit waiver
of the lock-in period. Approval to permit foreclosure during lock in period shall be at the sole
discretion of the Company as it is a change to the terms of the loan agreement accepted by the
Customer.

4. Intimation/ Communication to Borrowers

The Company shall intimate the borrower the loan amount, annualized rate of interest and method
of application thereof at the time of sanction of the loan along with the tenure and terms of
repayment. In case of loan facilities with moratorium on payment of principal and/or interest, the
exact date of commencement of repayment shall also be specified in the loan agreements.

Requests for waiver of charges/ penal charges / additional interest/ bank charges / foreclosure
charges are at the sole discretion of the Company. The authorised person, as specified in the
Product-wise Exposure Matrix in the Master Credit Policy, may partly or fully waive these charges,
and the decision of the Company is final in this regard.

Note:
In case of LAS/ LAMF products, the waiver of charges if any shall be approved as per the “Approval
matrix" as provided in the LAS policy.

5. Review of the Policy

The Asset Liability Management Committee (ALCO) shall be meeting periodically and reviewing the
interest rates based on various factors and situations prevailing at the time of such review, including
market volatility and cost of funds. The revised interest rates as reviewed and determined by the
ALCO, shall be implemented by the Company, prospectively.
 Annexure 1

Lending Rate Range for All Products‐ Fixed Rates

[Link] Product Name Core Products Digital Markets

Secured Unsecured Secured Unsecured
1 Commercial Vehicle loan (New) 10 % to 32 % 10 % to 32 %
2 Commercial Vehicle loan (Used) 10 % to 42 % 10 % to 42 %
3 Vehicle – non-commercial 10 % to 32% 10 % to 32%
(New)
4 Vehicle- non-commercial (Used) 10 % to 42% 10 % to 42%
5 Gold loan 10 % to 30 % 10 % to 30 %
6 Loan against Property (LAP) – 10 % to 24 % 10 % to 24 %
Salaried /Professional
7 Loan Against Securities (LAS)/ 11% to 20% 11% to 20%
Loan against Mutual Funds
(LAMF)
8 Working Capital Up to 42%
9 Business Loan/SME 10 % to 30 % 12% to 42% 10 % to 30 % 12% to 36%
10 Personal Loan 11% to 42% 11% to 36%
11 Supply Chain Financing 10% to 22% 11% to 36% 10% to 22% 11% to 36%
12 NBFC Lending 11% to 20% 11% to 20%
13 Education Loan 13% to 20% 13% to 20%
14 ESOP Funding 12% to 24% 12% to 24%

- All the rates mentioned are annualized at monthly rests.

- Additional GST and other cess shall be charged as applicable.
Annexure 2- Charges/Fees/Expenses
Type of Charges/Fee/ Expense- Applicable Limits
Others Products
Auction Charges All Actuals
products
except
Gold Loan
Gold Loan Upto Rs 3500
Bank charges (per instance of All Upto Rs 1000
cheque bounce) products
Cancellation of Loan Charges* All Charges Collected until cancellation will not be
products refunded. Pro-rata interest will be charged upto
cancellation.
Cheque and NACH Swap charges All Upto Rs 500
products
Collection charges** All Rs 500
products
Documentation charges All Upto Rs.3000
products
DP Charges Loan As Applicable
against
Securities
(LAS)/Loan
against
Mutual
Funds
(LAMF)
For Transfer of ownership and Vehicle Actuals + Rs.300 for local transactions. Actuals +
effecting SFL endorsement, etc. Loan Rs.500 for outstation transactions.
- RTO related

For Transfer of ownership and Vehicle Actuals + Rs.300 for local transactions. Actuals +
effecting SFL endorsement, etc. Loan Rs.500 for outstation transactions.
- Insurance related

Legal Charges All Actuals

products
Mandate Rejection Charges All Rs 500 per month from the first month of the due date
products for the mandate rejected until new mandate is
registered.
MODT Registration Charges Business Actuals + Rs.1000 for local transactions
Loan/SME Actuals + Rs.2000 for outstation transactions
NOC related Charges All Upto Rs. 500
products
 Type of Charges/Fee/ Expense- Applicable Limits
Others Products
Parking Charges / Yard Rent Vehicle Actuals
Loan
Postal charges All Actuals
products
Processing Fee ^^ All Upto 5%
products
Repossession and Incidental charges Vehicle Actuals
Loan
Statement & Other Document All Upto Rs. 500
retrieval Charges products
Stamping charges All Actuals
products
Towing charges Vehicle Actuals
Loan
Valuation Charges Vehicle Actuals
Loan and
Loan
against
Property
(LAP)
All NIL
For releasing loan amount after Products
Transfer of ownership and
effecting SFL endorsement.

All
For releasing loan amount Products
before transfer of ownership in
borrower name and / or
effecting SFL endorsement.

** Collection charges: The Company may levy collection charge of an amount not exceeding
Rs.500/ per visit to the customer’s place within the same city/town, for recovery of dues. In
case the customer is residing in a far-off location, the cost incurred for collection would be
charged at actuals, subject to a minimum of Rs.500/-.
*Cancellation of Loan Charges: For Digital products, in case borrower decides not to continue with
the loan, he shall pay the principal and the proportionate APR without any penalty during this
period. However, reasonable one-time processing fee can be retained if the customer exits
the loan during cooling-off period.

^^ For short term working capital loan, processing fees shall be as below:
Nature of Short term WC loan Processing Fees

Tyre Loan As agreed by parties not exceeding 20%

 Annexure 3

Foreclosure Charges

S. No Type of Loan % on the Principal Outstanding

1. Two-Wheelers Upto 4 %

2. Personal Loans Upto 4%

3. Commercial Vehicles Upto 4%

4. Business Loans & LAP Upto 4%

5. Gold Loan NIL

Alternatively, the Company may offer a lock in period as defined in the policy herein and in
which case the foreclosure charges are as below:
● The customer shall not be permitted to foreclose the account within 12 months from
the date of first EMI
● Additional 2% if the loan is taken over by another financier

LAS & LAMF

● 2% on the sanctioned amount if the account is foreclosed within 3 months