Zerodha Capital Private Limited [“The Company”] may extend loan finance in the form of secured and unsecured, long term and short term to eligible borrowers, based on their pre-validation or approval by the Committee or the Board.
The Demand / Call Loans can be extended under Trade Advances, Loan against Shares or Securities or any other tangible assets etc. This would be reviewed from time to time by Credit Appraisal and Sanctioning authority/Risk Management Committee.
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.
This also depends 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 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).
The aim of this policy is to lay down clear terms on loan tenure (if opted), interest, repayment, renewal etc relating to demand loan facility given to the borrower for purchase of shares and securities.
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. This would be reviewed from time to time by Credit Appraisal and Sanctioning authority/Risk Management Committee.
Zerodha Capital’s main marquee product would be the Loan Against Securities product for it’s clientele for which the Credit Policy approval would be as stated in the following paragraphs. Zerodha Capital Private Ltd (“the Company) is a RBI registered Non-Deposit Taking Non-Systemically Important Non-Banking Financial Company, which primarily offers Loan against Securities facility to its clients. 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 21 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/-.
Credit Policy guidelines are as follows:
For availing the sanction facility, borrower shall execute the Master Loan Agreement and other necessary documents, declarations, Power of Attorneys (if any) as may be required in respect of the sanctioned facility. The Credit and Sanction Authority will carry out the credit appraisal of documents and then facility will be sanctioned as per the set sanction process.
The Company will treat all personal information of the borrowers as private and confidential (even when the borrower is no longer a customer). The Company will not reveal transaction details of the accounts to a third party, including to group entities, except under following circumstances:
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.
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.
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 overwriting 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 periodical basis and revisions, if any, will be carried out after approval of Board of Directors / Committee 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 overriding effect.