Zerodha Capital Private Limited [“The Company”] may extend loan finance to Individuals, HNIs, HUFs, Partnership Firms including LLPs and Corporates, both secured and unsecured, long term and short term to eligible borrowers, based on their pre-validation or approval by the Board.
There has been keen competition amongst many players in lending and borrowing markets and products are evolved as per the customer requirements and benchmarked to offering by the competition.
Lending Process is also dependent upon the risk profile of the customer. The option for annulling and repayment of the loan is only with the customer and the company as a lender may not have any such option to call for early repayment except where default exists/Risk Presume and recalling option is exercised.
Demand/Call loans offer better flexibility to both customer and lender in handling the credit requirements. Keeping the benefits in view and in order to exploit the business opportunities the demand loans may open up and in order to offer better flexibility to both customer and the company in handling the credit requirements and giving option to the company to call back the loan on demand, the company intends extending demand / call loans as detailed out in the policy. The Demand / Call Loans can be extended under Trade Advances, Loan against Shares or Securities or any other tangible assets, etc. as determined by the Credit Appraisal and Sanctioning authority along with the directions of the Board of Directors. However, the company shall offer Demand/Call Loans to be disbursed on the Loan Against Securities Product.
The policy is prepared in compliance with RBI regulations namely Para 11 of the Non-Banking Financial Company - Non-Systemically Important Non-Deposit Taking Company (Reserve Bank) Directions, 2016 (“NBFC-ND-NSI Directions”).
an asset which has been identified as loss asset by the company or its internal or external auditor or by the RBI during the inspection of the Company, to the extent it is not written off by the Company and
an asset which is adversely affected by a potential threat of non-recoverability due to either erosion
in the value of security or non-availability of security or due to any fraudulent act or omission on the
part of the borrower.
Aim and Objectives of the Policy The objective of this policy is to lay down a broad framework for the Demand / Call Loans provided by the Company with respect to following specific parameters:
A Detailed summary of the terms of the facility shall be provided in the Key Fact Statement ("KFS") enclosed with the Sanction Letter and Agreement containing but not limited to the:
Demand/call loans would be considered by the company both under secured loans as well as unsecured Loan segments.
The demand/ call loans can be considered under business loans, trade advances, inventory funding, loan against shares & securities etc. as determined by Credit Appraisal and Sanctioning authority under the guidance of the Board of Directors.
Zerodha Capital’s main marquee product would be the Loan Against Shares product (hereafter stated as Loan/Facility) for it’s clientele for which the Credit Policy approval would be as stated in the following paragraphs and may also consider Lending against Mutual Funds, based on the assessment of the Credit Team.
Client has to place collateral of 50 % depending upon the scrip (Group -1 Securities) and rest is funded by us i.e. the company. Group 1 securities shall be as referred in Paragraph 22 of NBFC-ND-NSI Directions and as amended from time to time. To put it simply, for example if the client is having scrip (Group -1 Securities) of Rs.1,00,000/-, then he can be funded Rs. 50,000/-.
Approving authority matrix for sanctioning the loan is mentioned in the ‘Annexure 1’ of the policy.
For availing the sanction facility, the borrower shall execute the Master Loan Agreement and other necessary documents, declarations, Power of Attorneys, Key fact statement, etc. (if any) as may be required in respect of the sanctioned facility. The Credit and Sanction team will carry out the credit appraisal of documents and then the facility will be sanctioned subject to the approval Matrix as stated in Annex 1.
Given the nature of these loans, the Company shall ensure that (i) Stringent KYC measures are being followed, (ii) Robust credit risk analysis is being done on the borrower before sanction, and (iii) the Sanction and disbursal of Demand / Call loans are within the overall Liquidity Risk Management criteria of the Company.
The Board of Directors may appoint a person / department designated to ensure compliance with laid down policies & procedures on Sanction, KYC & PML, Authorization structure etc. Until such appointment, the responsibility of the same would rest with the Chief Financial Officer of the Company. Notwithstanding anything in this Policy, any form of Sanction to the Companies in the Group shall require approval of the Board of Directors of the Company.
The rationale for charging different rate of interest (i.e. premium/discount over the reference rate) shall depend on the risk gradation of the client, tenure of the loan and type of the loan. The approach for gradation of risk is based on factors such as borrower profile, available security, client’s reputation/positioning in the market, past track record, financial standing, etc. Applicable rate of the interest will be on annualized basis and payable as per the agreed terms and as highlighted in the agreement.
TDS is deductible on interest under Section 194A of the Income Tax Act 1961.
Alternatively, Digitally signed TDS certificates can be emailed to “[email protected]”.
Maximum amount for each of the demand/ call loan and the aggregate amount of the demand / call loan would be determined by the Credit Appraisal and Sanctioning authority.
In case the interest is not serviced on due date or the loan is not paid off after being called up / demanded, then the loan would be treated as Non-Performing Asset (NPA) if such overdue status continue for more than 6 months from such date and would be provided for according to the policy of the company. The borrower wise NPA classification would also be applicable although no call or demand is made for any particular loan.
All the Demand / Call loans having stipulated period beyond 6 months shall be subjected to review of performance at the end of 5 months. The review shall include parameters as may be laid down by the Company, but must include:
At least 7 days prior to the end of the stipulated period, the Demand / Call loans shall be reviewed to decide on whether it should be fully / partially Rolled-Over or Demanded / Called on end of expiry period.
Roll-Over shall be offered only if
On renewal, the Demand / Call loan shall be considered as a new demand / call loan, although it may continue under the same customer / loan account number. The Roll-Over shall require re-execution of fresh Loan Agreement and other documents, and mere addendum / amendment to the Loan Agreement shall not be undertaken.
Income Recognition, Asset Classification and Provisioning Demand / Call loans that are classified as NPA shall be accounted for on Receipt / Realization basis. Asset Classification & Provisioning shall be as per the requirements prescribed by Reserve Bank of India. However, the Company may adopt a more stringent Asset Classification & Provisioning mechanism based on expected risks. Further, the Company shall ensure that its Liquidity Risk Management system captures Non-Performing Assets as illiquid.
The Company / Management may set out overall Exposure Limits as well as sub-limits for Demand / Call Loan portfolio, based on parameters which may include:
Margin shall comprise of cash and/or collaterals, as per the Approval List / Group – 1 Securities after applying the haircut percentage as per the scrip category as per the Risk Policy of the company or as per the special margin approved for the client. This Approved List of Group 1 Securities shall be available on the website of the Company at all times, and is subject to change at the discretion of the Company from time to time. This list may be modified by the Company with prior notice which may be immediate and extremely short in nature due to the nature of the volatility of the markets.
This policy will be not be overriding any of the terms and conditions given in the agreement including schedule of terms. In case of any inconsistency, the terms given in the agreement will prevail.
This policy will be reviewed on a periodical basis and revisions, if any, will be carried out after approval of the Board of Directors authorized by it as the case may be.
This policy should always be read in conjunction with RBI guidelines, directives, and instructions. The company will apply best industry practices so long as such practice does not conflict with or violate RBI guidelines. In case of conflicts, the RBI guidelines will have the overriding effect.
Any exception to this Policy on Demand & Call Loans shall be noted in writing and be approved by the Board of directors.