INTEREST RATE & CHARGES POLICY
INTEREST RATE POLICY
(Version: 1.9)
INTEREST RATE & CHARGES POLICY
Policy Name
Policy Approval authority Risk Management Committee
Board of Directors
Policy Owner Chief Product Officer
Policy Implementation Authority Chief Product Officer
Version Version 1.9
Issue Date
Date of last review 31 July 2024
Relevant Act/Rules/Regulations
Master Direction – Reserve Bank of India (Non-Banking Financial Company– Scale Based Regulation)
Directions, 2023
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INTEREST RATE & CHARGES POLICY
VERSION CONTROL
Version Author Approval Date Effective Date Version Description
Control
Number
Ver 1.0 Chief Financial Officer 07 December 2011 07 December 2011 -
Ver 1.1 Chief Financial Officer 26 September 1 October 2012 -
2012
Ver 1.2 Chief Financial Officer 15 May 2015 1 January 2016 -
Ver 1.3 Chief Financial Officer 25 January 2017 1 February 2017 Change in Bench Mark rate
Ver 1.4 Chief Financial Officer 23 June 2017 23 June 2017 Change in authorization to
approve charges other
than interest
Ver 1.5 Chief Financial Officer 28 September 28 September 2017 addition of range of
2017 interest rate for covering
unsecured loans & loans
under assets finance
Ver 1.6 Chief Financial Officer 20 May 2019 20 May 2019 Amendment in the
interest rate range of loans
under Vehicle Finance
Ver 1.7 Chief Product Officer 24 January 2024 24 January 2024 Amendment in the Pricing
of loans & revision of fees
& charges
Ver 1.8 Chief Product Officer 29 March 2024 29 March 2024 Splitting of existing policy
into -
i. Retail
ii Corporate & SME loans
Ver1.9 Chief Product Officer 31 July 2024 31 July 2024 Addition of New Product
M/LAP & LAP
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INTEREST RATE & CHARGES POLICY
Preface
Reserve Bank of India had vide its Master Direction – Reserve Bank of India (Non-Banking Financial
Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 (updated as on March 21,
2024) (“SBR Regulations”), requires non-banking financial companies (“NBFCs”) to adopt an interest rate
model taking into account various relevant factors to determine the rate of interest to be charged for
loans and advances. It further requires that the rate of interest and the approach for gradations of risk
and rationale for charging different rate 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.
IndoStar Capital Finance Limited (“ICF”/ “the Company”) presently offers corporate loans, vehicle loans
and loans to small and medium enterprises, retail loans and M-Lap. In this connection, customers are
charged amounts at various instances during the course of the loan cycle.
In compliance with the requirements of the SBR Regulations and the Fair Practices Code adopted by the
Company, the Company has adopted this interest rate policy (“Policy”), broadly outlining the Interest Rate
Model and the Company’s approach towards risk gradation in respect to its lending business.
I. Interest Rate Model
The business model of ICF focuses on providing credit only to customers meeting the credit standards of
ICF for varying tenors. The interest rate applicable to each loan account, within the applicable range is
assessed on case specific basis, based on evaluation of various factors detailed below:
1. Tenor of the Loan and Payment Terms - Term of the loan; frequency of payment of interest (viz.
monthly, quarterly, yearly); terms for repayment of principal; moratorium period, bullet payment,
back ended payment schedule, zero coupon structured loans, etc.
2. Internal and External Costs of Funds - The rate at which the funds necessary to provide loan
facilities to customers are sourced, normally referred to as our external cost of funds. Internal
cost of funds being the expected return on equity; is also a relevant factor.
3. Internal cost loading – The costs of doing business. Factors such as the complexity of the
transaction, capital risk weightage, the size of the transaction, location of the borrower and other
factors that affect the costs associated with a particular transaction would be taken into account
before arriving at the final interest rate quoted to a customer.
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INTEREST RATE & CHARGES POLICY
4. Credit Risk - As a matter of prudence, credit loss (risk) cost would be factored into all transactions.
The amount of credit risk cost applicable to a particular transaction depends on the internal
assessment of the credit strength of the customer.
5. Structuring Premium- A premium may be applied to a loan in case the loan has any significant
structuring elements with respect to collateral, or other aspects of transaction structure.
6. Margin: A markup to reflect other costs/ overheads to be charged to the loan and our designed
margin.
7. ALCO View and Market Dynamics- Views of the Asset Liability Management Committee (“ALCO”)
of the Board of Directors of the Company on product pricing with respect to prevailing interest
rates offered by peer NBFCs for similar products/ services shall be taken into consideration. The
forecasts and analysis of ‘what if’ scenarios conducted by the ALCO are also relevant factors for
determining interest rates to be charged.
8. Other Factors- Matching tenor cost, market liquidity, RBI policies on credit flow, offerings by
competition, stability in earnings and employment, subvention and subsidies available, deviations
permitted, further business opportunities, external ratings, industry trends, switchover options
will also be relevant factors in determining interest rate to be charged.
II. Approach for Gradation of Risk
The risk premium attached with a customer shall be assessed inter-alia based on the following factors:
1) profile and market reputation of the borrower;
2) inherent nature of the product, type/ nature of facility, refinance avenues, whether loan is eligible
for bank financing, loan to value of asset financed;
3) tenure of relationship with the borrower group, past repayment track record and historical
performance of our similar clients;
4) group strength, overall customer yield, future potential, repayment capacity based on cash flows
and other financial commitments of the borrower, mode of payment;
5) nature and value of primary and secondary collateral / security;
6) type of asset being financed, end use of the loan represented by the underlying asset;
7) interest, default risk in related business segment;
8) regulatory stipulations, if applicable, and any other factors that may be relevant in a particular case,
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INTEREST RATE & CHARGES POLICY
9) location of the borrower;
10) external credit score/ rating of the borrower e.g. CIBIL score;
11) performance of the borrower with respect to other/ past loans availed by the borrower from other
financial institutions.
III. Rate of Interest:
1. The Company’s pricing is decided taking into account the customer profile, customer vintage (i.e.
past relationship of the concerned customer with the Company), residential stability, financial
strength, loan history & performance, credit scores, location, asset nature and quality and various
other factors.
2. The lending interest rate will be arrived at based on the weighted average cost of funds including
all charges, risk premium, other costs such as administrative expenses, profit margin, stability,
market information associated with lending activities as given below.
3. The range of interest rate charged by the Company for loans and advances is on fixed rate basis
as given below:
Pricing Range
1. Retail Loans New Used
Commercial Vehicle 10% to 24% 10% to 36%
Construction Equipment 10% to 24% 10% to 36%
Farm Equipment (including Tractors) 10% to 24% 10% to 36%
Cars 10% to 24% 10% to 36%
M-LAP/LAP 10% to 36%
Other Loans (viz. any other loans granted 10% to 36%
by the Company)
4. Managing committee/Risk Management Committee (RMC) can decide on pricing for any new
products introduced for funding/ lending in the Company.
IV. Fees & Charges Matrix
1. The details of fees and charges that can be levied are as follows:
Description of Charges Amount (exclusive of GST)
Processing fees Higher of Rs.7500 or 2%
Documentation charges Rs. 2000
Stamping charges Actuals
Statement of Account (“SOA”) charges Rs. 500
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Swapping charges (from ECS/ PDC/ NACH) Rs. 1000
Roll over PDC charges Rs. 500
Non PDC charges (Cash payment mode) Rs. 500
4% of the principal outstanding
Pre-Closure charges
(“POS”)
Cheque/ Electronic Clearance Service (“ECS”) bounce charges Rs.500 per returned ECS/Cheque
Payment collection charges (FVC) Rs. 200 per Transaction
Duplicate NOC charges Rs. 500 per expired/lost NOC
Repossession charges At Actuals
Late payment - penal charges [36% per annum]
Legal charges At Actuals
Security Creation Charges Actuals
Foreclosure Statement NIL
1000 per Retrieval, Free of cost post
Retrieval of property papers
case loan closure
List of documents charges Rs.500
Interest Certificate Rs.200, per document **
Borrower to initiate and complete
Notification of Intimation of Mortgage to SRO (if applicable)
on its own cost and expenses
Borrower to initiate and complete
ROC Notification for Charge (Where property owner is a company)
on its own cost and expenses
CERSAI Charges Rs.100/- per property
Postage, telegram, telephone and notice charges At Actuals
Enforcement charges At Actuals
Cheque collection charges for outstation cheques At Actuals
Charges relating to repairs to the Property At Actuals
Fees and expenses regarding any action or proceeding At Actuals
Minimum Rs. 3000/- or the number
Loan cancellation charges (if any)
of days** interest whichever is high
Security preservation charges At actuals
Mortgage Origination Fees/Login fees Up-to Rs 2500 per property
Towing Charges /Charges for Parking & Sales of Vehicle Actuals
Details of Contingent Charges (in INR or %, as applicable) Actuals
**Number of days: from the date of disbursement till the date of receipt of full cancellation amount.
**For online downloads Charges would be NIL
**All the above charges are exclusive of GST
2. Penal Charges in Loan Accounts (With effect from April 1, 2024 or any date communicated by
RBI)
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a. Penalty charged for non-compliance of material terms and conditions of the loan contract by
the borrower shall be charged as ‘penal charges’ and shall not be levied in the form of ‘penal
interest’, that is added to the rate of interest charged on the advances. The penal charges
charged to the borrowers shall not be capitalized i.e. no further interest computed on such
penal charges.
b. There shall be no introduction of any additional component to the rate of interest and ensure
compliance to SBR Regulations in this regard in both letter and spirit.
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c. The quantum of penal charges shall be reasonable and commensurate with the non-
compliance of material terms and conditions of loan contract without being discriminatory
within a particular loan/product category.
d. The penal charges in case of loans sanctioned to ‘individual borrowers, for purposes other
than business’, shall not be higher than the penal charges to non-individual borrowers for
similar non-compliance of material terms and conditions.
e. The quantum and reason for penal charges shall be clearly disclosed to customers in the loan
agreement and most important terms and conditions/ key fact statement (KFS) and shall
additionally be displayed on websites of the Company under interest rates and service
charges.
f. Whenever reminders for non-compliance of material terms and conditions of loan are sent
to its customers/ borrowers, the Company shall communicate penal charges and the reason
therefor to such customers/ borrowers.
V. Waivers & Delegation:
Any Waivers & Delegation to be approved as per DOA (Delegation of Authority).
VI. Content on the website:
Appropriate disclosure regarding this Interest Rate Policy shall be made on the Company website.
VII. Review of the policy:
The policy shall be reviewed on an Annual basis.
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