Fair practices code

Introduction

Zerodha Capital Private Limited,(“The Company”) issues these fair practices code in conformity with Chapter V of Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023, wherein the Reserve Bank of India (RBI) has revised the guidelines on Fair Practices Code for NBFCs to implement the same, as amended from time to time.

The Company provides finance to eligible Individual borrowers as secured, short term Loans against Shares or Securities or any other tangible assets, etc. At present, the Company shall engage primarily in Lending Against Security of Shares. However, The Company has framed and adopted a code, which sets out the principles for fair practice standards when dealing with customers and providing any services as a part of its business as applicable to all the categories of the product.

This Fair Practices Code applies to all categories of products and services offered by the Company (currently offered or which may be introduced at a future date) to their customers.

By enacting this code, the Company is expecting to give a glimpse at the fairness and reasonableness standards as envisaged in the code, that will be practiced by the Company in its affairs. The Company shall ensure that any product or services offered by the Company is legal and is in consonance with this code. The Company shall adhere to strict ethical standards and shall be transparent and forthcoming to the customers with respect to its products and services. The Company shall ensure that the customers are aware of the financial implication and the norms of the fair practice code while availing the products and services of the Company. A stage wise application of the Fair Practices Code that would be followed by the Company is provided hereafter:

Key Objectives

The Company has set its objective to pursue best corporate practices and foster customer confidence in the Company by bringing about utmost transparency in the business practice. Accordingly, this FPC has been formulated with the objectives:

• To treat all the customers consistently and fairly. The Company's fair lending practices shall apply across all aspects of its operations including marketing, loan origination, processing and servicing and collection activities.
• Promote a fair and cordial relationship between the customers and the Company.
• Building Customer confidence in the Company.
• Promote good, fair and trustworthy practices by setting minimum standards in dealing with customers.
• Increase transparency to enable the customers to have a better understanding of what they can reasonably expect of the services.
• Provide transparency in computation of interest and charges. Also, to clearly lay down the events of default and its consequences in the form of penal charges, liquidated damages, penalties, etc.;
• Put in place a formal and robust framework for customer communication and Grievance Redressal Mechanism for borrower customers.

Key Commitments

The Company's key commitments to its customers / prospective customers (as applicable) are as under:

• The Company is to act fairly and reasonably in all the dealings with customers by:
  • Meeting the commitments and standards in this Fair Practices Code for the financial products and services we offer, and the procedures and practices our staff follow;
  • Ensuring that the Company's products and / or services are in compliance with the relevant laws and regulations;
  • Making the Company's dealings with customers / prospective customers rest on ethical principles of integrity and transparency;
  • Providing professional, courteous and speedy services;
  • Providing accurate and timely disclosure of terms and conditions, costs, rights and liabilities as regards financial transactions.
  • Not engaging in unlawful and / or unethical business practices
• The Company is to help the customers / prospective customers understand how the financial products and / or services work by:
  • Ensuring that our advertising & promotional literature is clear and is not misleading;
  • Giving verbal information that is consistent with the document shared with customer;
  • Explaining financial/legal implications of the transactions to them.
• The Company is to deal quickly and sympathetically with the consumer complaints / queries by:
  • Offering channels to route the consumer queries
  • Correcting mistakes / errors quickly
  • Attending and handling customer complaints quickly
  • Assisting customers on process to taking their complaints forward, if they are not satisfied with our assistance (including The RBI Integrated Ombudsman Scheme, 2021);
  • Reversing any charges that the Company has applied erroneously quickly.

Information

The Company commits to:

• Helping customers choose products and services, which meet their needs and give them clear information explaining the key features of the services and products they are interested in.
• The information provided to the consumer will help the consumer make informed decisions and be able to compare offerings made by other NBFCs. 
• Inform customers about the documentary information the Company needs from them to establish customer's identity and address and, other documents to comply with legal and regulatory requirements/ Company's practices.
• Giving exact idea to the customers that how the selected product or service will be implemented on the Company's end and what all compliances need to be done on the custome's end.
• The Company will inform regarding the charges for any service or product before the Company provides that service or product.

Non-Discrimination

The Company is strictly prohibited to engage in any form of discrimination towards the Company's existing as well as potential customers based on gender, race or religion etc. Any complaints for violation of the same are to be communicated immediately to the Grievance Redressal Officer of the Company, whose communication details have been stated in Clause 14 of this code. However, this does not preclude the Company from instituting or participating in schemes framed for different sections of the society. We shall make our best efforts to make it easy and convenient for our customers like senior citizens, physically challenged persons and illiterate persons in their dealing with us.

Applications for Loans and their Processing

• The Company's official language for all communications within the Company or with third parties is to be English (unless a declaration is obtained from the borrower for communication in any other language);
• A declaration from each customer is to be obtained before / along with the application to the effect certifying that the customer understands English.
• The Company may also use an application kit in language as understood by the borrower if the Customer does not understand English. This, however, shall be provided by the Company only on a case-by-case basis, upon request/demand by the borrower/prospective borrower.
• The Application Form of the Company for each of the products offered may be different depending upon the requirement of each product and shall include all information that is required to be submitted by the Borrower. Information relating to the terms and conditions governing the Loan and all other relevant information affecting the interest of the borrowers shall be provided, which enables them to make a meaningful comparison with similar terms and conditions offered by other NBFCs / Financial Institutions and an informed decision based on such comparison can be taken by the borrower.
• The Loan application forms (whether physical or digital) of the Company will include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and informed decision can be taken by the borrower.
• The Loan Application Form shall also indicate a detailed list of documents required to be submitted by the borrower along with the application form and/ or as may be required to be executed and signed/digitally signed by the customer for obtaining the loan. Such information shall also be made available on the website of the Company to facilitate the prospective clients to know and understand their rights and obligations prior to entering the loan agreement with us. However, the Company may, depending on whether the credit underwriting requirements state that  other documents from the borrower are needed, if any.
• The customers would also be provided with a list of services rendered by the Company free of charge.
• The Company will have a system of giving acknowledgement for receipt of all loan applications through the physical/digital means. The time frame within which loan applications will be disposed of will be indicated in the acknowledgement.
• The Company shall endeavor to verify and assess the loan applications based on an assessment that is in line with the Company's credit policies and procedures.
• The Company shall ensure, arrange and provide the customers regular, appropriate updates by means of interactive meeting, through display on the website or by email/ through SMS/ mailing printed letters.
• The Company may conduct contact point verification through its employees or through an agency appointed by it, by contacting the customer at their residence / business telephone numbers and / or physical visit to residence / business address mentioned on the loan application, depending on the risk categorization of the client.
• If the Company cannot provide the loan to the customer, it shall communicate the same to the customer through its appointed representatives or directly to the customer verbally. In case a customer requires the same in writing the reason(s) for rejection may be provided in writing.

Loan Appraisal and Terms/Conditions

• The Company will convey in writing to the borrower (whether physically or digitally) in the vernacular language or a language as understood by the borrower by means of sanction letter or otherwise, the following particulars:-
  • Asset details
  • Sanctioned loan amount
  • Annualized rate of Interest to be charged and method of application
  • Default charges/Penal Charges
  • Cheque bouncing penalty
  • Tenure of loan
  • Instalment amount and structure, including the repayment cycle
  • Commencement date
  • Prepayment charges (Will not be charged on any floating rate term loan sanctioned for the purposes other than business to individual borrowers) and penalty.

The Company shall record the acceptance of these by the Borrower in the form of this Agreement.

• The Company will mention the penal charges in the key facts statement (KFS) and on the website of the Company.
• The Company will furnish a copy of the loan agreement in English or in the vernacular language or language as understood by the borrower along with a copy of each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
• The Company will obtain an acceptance from the borrower on the said sanction letter or vide this Agreement, with the Borrower's signature under the caption “I/WE ACCEPT ALL THE TERMS AND CONDITIONS WHICH HAVE BEEN READ AND UNDERSTOOD BY ME/US.” The Company will maintain a record of such acceptance.
• The company will provide a Key Fact Statement detailing out the key terms of the arrangement.

Disbursement of Loans including changes in terms and conditions

• The Company shall exercise openness and transparency in the process of disbursement of  loans including the changes in the terms and conditions.
• The Company will ensure timely disbursement of loans sanctioned subject to execution of the necessary documents and completion of necessary formalities by the borrower.
• The Company will give notice in writing to the borrower in English /  vernacular language or a language as understood and confirmed by the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges etc. The Company should also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard will be incorporated in the loan agreement.
• Any change in the terms and conditions shall be communicated to the customers through any of the following channels: -
  • Personal intimation
  • Notice Board at each branch
  • Internet, including email and website
  • SMS
  • Newspaper, whenever required
• Any Decision by the Company to recall / accelerate payment or performance under the agreement will be in consonance with the loan agreement.
• The Company will release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim the Company may have against the borrower. If such right of set off is to be exercised, the borrower will be given notice about the same with full particulars about the remaining claims and the conditions under which the Company is entitled to retain the securities till the relevant claim is settled/paid.

Recall of Loans

• The Company shall exercise openness and transparency in the process of recall of loans including the changes in the terms and conditions.
• The decision of the Company to recall/ accelerate payment or performance shall be in consonance with the terms of the loan agreement.
• The Company shall give reasonable time to the borrowers before recalling the loan or requesting for accelerating the payment or performance subject to the terms and conditions contained in the Loan Agreement and other related documents.
• For Demand/Call Loan facility the recalling of loan shall be incorporated in the agreement and the demand/call shall be made as governed by the Demand/Call Policy.

Closure of Loan account and release of securities and documents

• The Company shall release all securities on repayment of all dues or on realization of the outstanding amount of loan subject to any legitimate right or lien for any other claim against the borrower. If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which the Company is entitled to retain the securities till the relevant claim is settled/ paid. However, in cases where the borrower has availed facility allowing him to borrow/ draw monies within the overall amount sanctioned as and when needed by him, the collateral may be retained by the Company for operational convenience and to protect its interest from potential default by the borrowers till the pendency of the obligation of the borrower. Due No Objection certificate will be issued to the customer on fulfillment of applicable terms within 30 workings days of completion of formalities.

Marketing and Product Synergy

• The Company will ensure that all advertisement and promotional materials provided by the Company is clear, fair, reasonable and not misleading. The advertisement will be addressed to the intended public through appropriate media. The terms and conditions of any products or services being offered would be made clear in the advertisement.
• Information about any other products or promotional offers in respect of products/ services of the Company shall be conveyed to customers only if he/ she has given his/ her consent to receive such information/ service either by mail or by registering for the same on the website or on customer service number or through any other media.
• If the services of any third party are used by the Company for providing any support services, the Company will ensure the client confidential and personal information (if made available to such third parties) is secured in accordance with the RBI Directions on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs and the RBI Master Direction on Outsourcing of Information Technology.
• In the event of receipt of any complaint from the customer that the Company's representative/ courier or direct selling agent (“DSA”) have engaged in any improper conduct or acted in violation of this FPC, appropriate steps will be initiated to investigate and to handle the complaint and indemnify the customer if found appropriate.

General

• The Company will refrain from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement (unless new information, not earlier disclosed by the borrower, has come to the notice of the Company).
• In case of receipt of request from the borrower for transfer of the account, the consent or otherwise i.e. objection of the Company, if any, will be conveyed within 21 days from the date of receipt of request. Such transfer shall be as per transparent contractual terms in consonance with law.
• 3. In the matter of recovery of loans, the Company shall strictly resort only to remedies which are legally and legitimately available to it and shall at no point in time resort to any form of undue harassment, such as persistently bothering borrowers at odd hours, use of muscle power for recovery of loans, etc. To avoid rude behavior from the staff of the Company, the Company shall ensure that the staff are adequately trained to deal with the customers in an appropriate manner.
• The Company shall not charge foreclosure charges/ prepayment penalties on any floating rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligant(s).
• The Company reserves the right to amend /alter /modify the codes as mentioned herein above and provide updates from time to time, not affecting/sacrificing the underlying spirit of the code. Such alternation/amendments may be displayed on the website of the Company from time to time for the benefit and information of the customer.
• The Company shall ensure that its staff or any person authorized to represent the Company is adequately trained to deal with customers, in an appropriate manner. All the members of the staff or any person authorized to represent the Company (“Representatives”) in collection or/ and security repossession with respect to the loans extended by the Company shall strictly follow the fair practices set out below:
  • Not resort to coercive measures such as using muscle power, rude behavior or harassment for the recovery of loans.
  • The Representatives shall contact the customer ordinarily at the place of their choice and in the absence of any specified place at the place of their residence and if unavailable at their residence, at the place of business/ occupation.
  • Customer's request to avoid calls at a time or at a place shall be honored unless special and unavoidable circumstances of the business require otherwise.
  • Time and number of calls and contents of conversation shall be documented.
  • All necessary assistance shall be given to resolve disputes or differences regarding dues in a mutually acceptable and in an orderly manner
  • During visits to customer's place for dues collection, the Representatives shall maintain decency and decorum.
  • Inappropriate occasions such as bereavement in the family or such other calamitous occasions, if comes to the knowledge of the Company, shall be avoided for making calls/ visits to collect dues unless the same is required for meeting legal compliance.

A code of Conduct for the DSA/Recovery Agents shall be formulated and adhered based on the above lines by the Company.

Responsibility of Board of Directors

• The Board of Directors of the Company have laid down an appropriate grievance redressal mechanism within the organization. Such a mechanism ensures that all disputes arising out of the decisions of lending institutions' functionaries are heard and disposed of at least at the next higher level.
•  The Board of Directors has laid down a mechanism for periodical review of the compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels of management. A consolidated report of such reviews shall be submitted to the Board at regular intervals, as may be prescribed by it.

Grievance Redressal

The customer can approach any of our service touch points given below to register a complaint and expect a response within a defined time period from complaint registration.

Grievance Redressal Officer

If the complaint/dispute is not redressed within a period of one month the customer may appeal to the Officer-in-Charge of the Regional Office of Department of Non-Banking Supervision of the Bank:

It shall be the endeavor of the Company to improve the quality of service and redress complaints and grievances, if any, of the customers as part of Customer Relationship. 

Regulation of rate of interest

• The Board of Directors of the Company has adopted an interest rate model taking into account relevant factors such as cost of funds, margin and risk premium and has accordingly determined the rate of interest to be charged for loans and advances. 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 or customer in the application form and communicated explicitly in the sanction letter.
• The rates of interest and the approach for gradation of risks is made available on the web-site of the Company. The information published in the website or otherwise published shall be updated whenever there is a change in the rates of interest.
•  The rate of interest is the annualised rate so that the borrower is aware of the exact rates that would be charged to the account.
•  In order to ensure that customers are not charged excessive interest rate and charges on loans and advances by the Company, the Board of Directors will adopt appropriate internal Policies for Determining Interest Rates, Processing and Other Charges.

Complaints about excessive interest charged by Applicable NBFCs

• The Company has laid out appropriate internal principles and procedures in determining interest rates and processing and other charges. In this regard the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans are kept in view.

Know your client (KYC) Guidelines

• In order to comply with the RBI guidelines issued on the know your customer (KYC) norms to be complied with NBFCs, the Company will be required to collect certain documents and information from the borrowers, including a proof of identity, before extending any financial assistance to the borrower.
• It will be responsibility of the customer to provide the necessary documents, including an up-to-date proof of identity and address, and in the event of change in the recorded address or other particulars, such change, with the necessary proof documents shall be brought to the immediate notice of the Company; and
• The loan application forms and other material provided by the Company to the customer shall contain the details of necessary information and documents required to be furnished and/ or produced for verification by the customer for meeting the requirements of the KYC norms.
• The customers can also file their complaints on the Complaint Management System (“CMS”) recently launched by the RBI. CMS is an online portal which is like a single window for customer complaints relating to banks and NBFCs. The web address of the online portal is: https://cms.rbi.org.in.

Force Majeure

• The various commitments outlined and made by the Company shall be applicable under the normal operating economic and business environment and shall not be applicable under the event of any force majeure circumstances which may include circumstances beyond the control of the Company including but not limited to riots, fires, earthquake, floods, storms, lighting, epidemics, wards, disorders, hostilities, expropriation or confiscation of properties, interference by civil or military authorities or acts of Gods and/or any other cause beyond the reasonable control of the party whose performance is affected.

Exceptions Handling

• Any exception to this Fair Practices Code shall be noted in writing and be approved by the board.

Repossession of loans and other assets financed

• The Company will include a built-in re-possession clause in the loan agreement with the borrower which will be legally enforceable.
•  To ensure transparency, the terms and conditions of the loan agreement, shall also contain provisions regarding: 
  • Notice period before taking possession;
  • Circumstances under which the notice period can be waived;
  • The procedure for taking possession of the security;
  • A provision regarding final chance to be given to the borrower for repayment of loan before the sale / auction of the shares/stocks;
  • The procedure for giving repossession to the borrower;
  • The procedure for sale/auction of the shares/stocks.

A copy of such terms and conditions will be made available to the borrowers.

Privacy and Confidentiality

• 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 Company is required by, law or by the order of a court or any statutory authority or as a part of investigation by a public authority, to provide such information,
  • If the Company has entered into an outsourcing arrangement as per the RBI Directions on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs and/or the RBI Master Direction on Outsourcing of Information Technology and is providing information to the service provider on a 'need to know' basis in accordance with the said guidelines, after taking appropriate consent, where required;
  • If it is in the interest of the borrower to provide such information (e.g. fraud prevention)
  • The Borrower requests the Company to provide information, or
  • The Borrower gives the Company permission to provide such information to the Company's group / associate / entities or companies where the Company has tie-up arrangements for providing other financial service products.
  • Unless the customer specifically authorizes the Company to do so, it shall not use customers' personal information for marketing purposes.
• The Company may give the information about the conduct of the customer's account to the Credit Information Companies after intimating about the same to the customers.
• The Company shall give information to credit reference agencies about the personal debts the customer owes to the Company if:
  • The customer has fallen behind with his / her payments; and
  • The amount owed is not in dispute;
• The Company shall explain to the customer the role of Credit Information Companies and the effect the information they provide can have on the customer's ability to get credit.
• Company may give Credit Information Companies other information about the customer's account if the customer has given his/ her permission to do so.  A copy of the information given to the Credit Information Companies shall be provided by the Company to the customer, if so demanded.

Policy Update and Display

• This FPC has been approved by the Board at its meeting held on 04th September 2024.
• This FPC will be displayed on the Company’s website for information of various stakeholders.

This document is the sole property of Zerodha Capital Private Limited. Any use or duplication of this document without permission is strictly prohibited and illegal.