Interest rate policy

Introduction

Reserve Bank of India Vide its Notification No. DNBS. 204 / CGM (ASR)-2009 dated January 2, 2009 has directed that the Board of each NBFC shall approve an Interest rate model for the Company, taking in to account relevant factors such as cost of funds, margin and risk premium, etc. and determine the rate of interest to be charged for loans and advances. Further, the directives states that the rate of interest and the approach for gradation of risk and the rationale for charging different rates of interest for different category of borrowers should be communicated to the borrowers / customers in the sanction letters to them.

Purpose and scope

The Interest rate model is also required to be made available on the website of the Company so as to enable the customers to understand the logic and methodology of the lending rates charged to them. In compliance with the said RBI directives, the Interest rate model for the Company is given below:

Principles for determining interest rate for loans:

Zerodha considers the average yields and the rate of interest under each product from time to time, giving due consideration to the following factors:

  • The cost of funds on the borrowings, as well as costs incidental to those borrowings, taking into consideration the average tenure, market liquidity;
  • Operating cost of business;
  • Inherent credit and default risk in our business;
  • Nature of lending, for example unsecured/secured, and the associated tenure;
  • Nature and value of securities and collateral offered by customers;
  • Subventions and subsidies available, if any Risk profile of customer - professional qualification, stability in earnings and employment, financial positions, past repayment track record with us or other lenders, external ratings of customers, credit reports, customer relationship, future business potential etc.; and
  • Industry trends - offerings by competition, other NBFCs, and similar products available in the market.

Rate of Interest and Charges

  • The interest could be charged on a monthly or a quarterly basis for the various products/loan types made available as per the loan agreement agreed upon. The company shall adopt a discrete interest rate policy which means that the rate of interest for same product and tenure availed during the same period by separate customers would not be standardized but could vary within a range, depending, amongst other things, the factors mentioned above.
  • The interest rates offered could be on fixed basis or floating / variable basis. Changes in interest rates would be decided at any periodicity, depending upon market volatility and competitor review.
  • Annualized rate of interest would be clearly intimated to the customer.
  • Besides normal interest, the company may levy additional interest for adhoc facilities, penal interest for any delay or default in making payments of any dues. The Company shall mention the penal interest in bold in the loan agreement. The interest reset period for floating / variable rate lending would be decided by the company from time to time, applying the same decision criteria as considered for fixing of interest rates Interest would be charged, and recovered on a monthly, quarterly basis or such other periodicity as may be approved by the designated authority.
  • Specific terms in this regard would be addressed through the relevant product policy. Interest rates would be intimated to the customers at the time of sanction / availing of the loan and the EMI apportionments towards interest and principal dues would be made available to the customer.
  • Interest shall be deemed payable immediately on due date as communicated and a grace period for payment of interest may or may not be allowed. Interest changes would be prospective in effect and intimation of change of interest or other charges would be communicated to customers in a manner deemed fit, as per terms of the loan documents.
  • Besides interest, other financial charges like processing fees, cheque bouncing charges, prepayment/ foreclosure charges, part disbursement charges, cheque swaps, cash handling charges, RTGS/ other remittance charges, commitment fees, charges on various other services like issuing NO DUE certificates, NOC, letters ceding charge on assets/ security, security swap & exchange charges etc. would be levied by the company wherever considered necessary.
  • Besides the base charges, the GST and other cess would be collected at applicable rates from time to time.
  • Any revision in these charges would be with prospective effect. A suitable condition in this regard would be incorporated in the loan agreement. These charges would be decided upon collectively by the management of the Company. The practices followed by competitors would also be taken into consideration while deciding on interest rates / charges.
  • Claims for refund or waiver of such charges/ penal interest / additional interest would normally not be entertained by the company and it is the sole and absolute discretion of the company to deal with such requests.