Term Loan Policy

Introduction

Zerodha Capital Private Limited (the “Company”) is a Company limited by shares incorporated under the Companies Act 1956. The Company is registered U/s 45-IA of the Reserve Bank of India Act, 1934 as an Investment and Credit Company and categorized under Base Layer.

The Company is engaged in carrying the lending activity including Loan against securities and Loan against Mutual funds.

This policy (“Policy or “Term Loan Policy”) is prepared in line with the requirements prescribed by Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 and various RBI notifications / directions issued in this regard.

Objective

• To enable establishment of standardized Lending procedures and broad framework for term loans ( including Tenure, Sanction, Review Date, Repayment, Renewal, Interest Rates, Income Recognition, Asset Classification & Provisioning, Exposure Limits, Collateral and Security, etc.)
• To establish procedures and parameters for determining the eligibility of borrower
• To improve operational efficiency and turnaround times
• To develop Authorization Matrix
• To develop capabilities to deal with exceptions
• To ensure adherence with Regulatory regulations

Scope

Term loans are loans given for a fixed period, with a clear Repayment Schedule. This means the Borrower agrees to repay the loan in bullet repayment over a determined period. These loans are useful when the customer needs money for a longer time, such as for expanding business, funding education or meeting other planned expenses.

These term loans will be offered specifically as part of the Loans Against Securities product. The credit team will review and approve the loan based on internal policies and directions from the Board.

The policy shall be applicable to all the term loans granted for Loan Against Securities. The Term Loan Policy is prepared in compliance with all applicable RBI regulations.

Definitions

The definitions provided hereunder are for reference only. Definitions provided by Reserve Bank of India, as amended from time to time, shall supersede the definitions provided hereunder:

1. “Borrower” shall mean any person (including individuals, proprietorships, partnerships, companies, trusts, or other legal entities) who has applied for and/or been sanctioned a loan facility by the Company, and includes co-Borrowers, where applicable.
2. “Companies in the Group” includes an arrangement involving two or more entities related to each other through any of the following relationships: Subsidiary – parent (defined in terms of AS 21), Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23), Promoter-promotee (as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997) for listed companies, a related party (defined in terms of AS 18), Common brand name, and investment in equity shares of 20% and above.
3. “Key fact Statement” be a document provided to the borrower in line with credit policy, containing most important terms and conditions of the term loan product, including details such as Facility Amount, Tenure, Interest Rate, Annual Percentage Rate (APR), Penal Charges and Other Fees, Details of the Grievance Redressal Officer and dispute resolution mechanism, including the place of arbitration, etc.
4. “Non-Performing Asset (NPA)”shall mean:
   • an asset, in respect of which, interest has remained overdue for a period of 90 days or more;
   • a demand or call loan, which remained overdue for a period of three months or more from the date of demand or call or on which interest amount remained overdue for a period of three months or more;
   • a bill which remains overdue for a period of 90 days or more;
   • the interest in respect of a debt or the income on receivables under the head 'Other Current Assets / Other Financial Assets' in the nature of short-term loans / advances, which facility remained overdue for a period of 90 days or more;
   • any dues on account of sale of assets or services rendered or reimbursement of expenses incurred, which remained overdue for a period of 90 days or more;
   • In respect of loans, advances, and other credit facilities (including bills purchased and discounted), the balance outstanding under the credit facilities (including accrued interest) made available to the same Borrower / beneficiary when any of the above credit facilities becomes a non-performing asset.
5. “Loan Agreement” shall mean the definitive master loan agreement entered into between the Company and the Borrower that sets out the terms and conditions governing the sanction, disbursement, repayment, security, interest, fees, charges, and other covenants related to the credit facility extended by the Company, including all annexures, schedules, amendments, supplements, modifications, side letters, and any other document executed in connection therewith.
6. “Cooling-off / Look-up period” shall mean the explicit option to exit a the loan by paying the principal and the proportionate APR without any penalty within the prescribed number of days as stated in the agreement and as per the credit policy.
7. “Corporate Action” shall mean any event that brings material change to its securities, including but not limited to dividend declarations (cash or stock), bonus issues, rights issues, mergers, acquisitions, stock splits, consolidations, buybacks, or any other action that affects the rights or obligations of the security holders.
8. “Repayment Schedule” shall mean the agreed timeline for repayment of the loan, including frequency and amount of installments. It may be monthly, quarterly, or as otherwise approved by the Company.
9. “Review Date” refers to the date during the Tenure when the Company will assess the performance of the loan/credit facility, including repayment status and Borrower conduct. This review does not change the Repayment Schedule but helps the Company monitor the credit risk and take necessary internal actions if needed.
10. "Term Loan" shall mean a loan granted for a fixed duration with a Repayment Schedule. The Borrower is required to repay the principal and interest as per the terms agreed in the Loan Agreement.

In addition to the terms defined above, certain terms may also be defined in specific clauses elsewhere in this Policy or any other policy of the company. All such terms shall have the meanings assigned to them in the relevant context.

Term Loan Key Features Policy

1. Tenure
   • The Term Loan shall be sanctioned for a period of 3 years or more, subject to Board approval, based on the Borrower’s requirement and internal credit assessment (“Tenure”).
   • Any sanction of term loans exceeding this Tenure shall require specific approval by the board / committee authorized by it.
   • Additional drawdown or top-ups, subject to the sanction limit shall not be treated as fresh loan and shall be subject to a credit review assessment by the Company.
   • Such additional Top-ups shall not result in an extension of the original maturity. The Tenure, as originally sanctioned in the first Term Loan, shall remain unchanged irrespective of any interim drawdowns.
   • Upon the expiry of the Tenure, the Borrower shall be liable to repay the outstanding dues in full, in accordance with the terms of the agreement.
   • The Borrowers shall not be allowed to increase the sanction limit more than two (02) times or such higher amount as maybe decided by the Company from time to time. Furthermore, the Borrower shall not be allowed to avail additional top-up facility during the last 3 months of the loan tenure and shall not be allowed to breach the sanction limit during the last 6 months of the loan tenure.
   • Grace Period- A grace period of seven (07) days shall be provided after the end of the Tenure. During this period, the Borrower may repay the outstanding amount without the repayment being treated as a default, unless otherwise specified in the KFS.


2. Criteria for Loan / Facility and loan agreement
   • Term loans may be extended by the Company under both secured and unsecured loan categories, depending on the credit assessment.
   • Term 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.
   • The Loan Agreement shall clearly set out the repayment terms, Tenure, interest rates, and consequences of default. It shall also outline the mode of communication (email, SMS, app-based login) for all Borrower notices, including payment reminders, default intimations, and any changes to terms, and these shall be reflected in both the agreement and the KFS.
   • Upon full repayment of the loan, the Company shall release the securities or other assets held as collateral, in accordance with its Fair Practices Code and internal policies.


3. Credit Policy & Approvals
   • Zerodha Capital’s main marquee product would be the Loan Against Shares product (hereafter stated as Loan/Facility) for its Borrower 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.
   • The Borrower will receive a loan amounting to 45% of the value of the collateral or pledge. For example, if the Borrower pledges securities from Group-1 or direct equity-oriented mutual funds in demat form (with a minimum AUM of 50 Cr) worth Rs. 1,00,000, they will be eligible for a loan of Rs. 45,000. The concerned mutual funds should be from the growth category having no lock in period.
   • The approving authority matrix for sanctioning the loan is mentioned in the ‘Annexure 1’ of the Policy.
   • Credit Policy guidelines are as follows
   1. The Company shall conduct a due diligence on the creditworthiness of the Borrower which will be an important parameter for taking decision on the application. The assessment would be in line with the Company’s credit policies, norms and procedures in respect thereof. Any additional top-ups shall be subject to the credit appraisal of the Borrower
   2. The Borrower would be informed in the English or vernacular language or a language as understood by the Borrower (provided a declaration has been obtained from the Borrower at the time of application) by means of the KFS or otherwise the amount of loan sanctioned by physical/digital means of communication. The said letter shall contain the terms and conditions including the annualized rates of interest and method of application thereof and shall obtain an acceptance / digital signature from the Borrower on the said KFS.
   3. The Company shall make available a copy of the Loan Agreement on the Company’s digital dashboard under the personalized login of the Borrower, along with a copy of all enclosures quoted in the Loan Agreement to the Borrower at the time of requisition by Borrower or brief terms should be made part of KFS . The Loan Agreements shall also be sent to the Borrowers through email.
   4. The Company shall ensure that the Loan Agreements and enclosures furnished to all Borrowers contain the terms and conditions and the rate of interest in the form of a term sheet, which shall be annexed to the Loan Agreement. The Borrower will also be provided with a KFS at each time of grant of loan facility/renewal/changes therewith containing essential features of the facility at that point in time (if any).
   5. Limit is set after reviewing the Borrower's financial background, Borrower’s holdings in his Depository Participant account, a credit score and a credit report from one of the 4 Credit Bureaus / Credit Information Companies in India, and such other financial documentation proof provided by the Borrower. Information from his KYC Application will also be used which is received during onboarding of the Borrower. The KYC / AML Policy shall always be in line with this Term Loan Policy, and both will be subject to change from time to time.
   6. Credit appraisal memo shall be prepared for every new Borrower and same shall be taken into consideration at the time of finalizing limit.
   7. For a prospective Borrower, the Company shall do a diligence with respect to Credit Information Companies or any such other watch out Investors lists provided by RBI, any Government Authority or any other institution of which the Company may be a member of, the Company will at it’s sole discretion decide whether to provide a loan or not.
   8. Risk Categorization shall be done based on financial documents provided, depository participant account holdings and any such other assets owned by Borrowers. The Risk Categorization as per KYC / AML Policy shall also be done based on the Credit Limit received by the Borrower.
   9. The company shall ensure that other key checks as per KYC/AML Policy are adhered when extending Term Loan product.
   10. On a monthly basis, interest payment shall be traced of each Borrower. In case of non-payment, the client shall be duly informed and accordingly action shall be taken.
   11. Enhancement of Sanction Limit shall be done only after reviewing the Borrower's past history, which includes interest repayment on a timely basis and shall be extended only on explicit consent from the Borrower. The company shall also reinitiate its due diligence to its satisfaction of the customer’s financial position.
   12. For renewal of the facility/additional drawdown, the Borrower shall be provided with a fresh KFS containing the details of the interest rate (whether same as previous or a higher/lower rate), Tenure, Amount, Annual Percentage Rate, Penal Charges, Other Charges, etc. provided the validity of the Agreement as entered initially has not expired.
   13. Disbursement shall be made only to the bank account submitted at the time of opening the Demat and trading account. If the Borrower requests a change in the bank account, such change shall be permitted only after the new bank account has been verified to be KYC-compliant.
   14. The company shall ensure that the loans extended / tailored for any customer shall comply with RBI directions on Digital Lending from time to time.

Sanction Process

For availing the sanctioned facility, the Borrower shall execute the Loan Agreement along with other necessary documents, declarations, powers of attorney, the KFS, and any other documents as may be required in relation to the sanctioned facility. The Credit and Sanction Team shall carry out the credit appraisal of the documents, and the facility shall be sanctioned subject to the approval matrix set out in Annexure 1.

1. Given the nature of these loans, the Company shall ensure that: stringent KYC measures are followed;
2. a robust credit risk assessment is conducted on the Borrower prior to sanction; and
3. the sanction and disbursal of Demand/Call loans are aligned with the Company’s overall Liquidity Risk Management framework.

The Board of Directors may appoint a dedicated person or committee responsible for ensuring compliance with the Company’s policies and procedures on sanctions, KYC & PMLA, and the internal authorization structure. Until such appointment is made, the responsibility shall rest with the Head of Business Operations of the Company.

Notwithstanding anything to the contrary in this Policy, any sanction of facilities to the Companies in the Group shall require prior approval of the Board of Directors of the Company.

Interest Rates

1. Interest rates shall be determined based on prevailing market conditions, the Company’s internal cost of funds, and the overall availability of deployable capital. The applicable rate of interest will be expressed on an annualized basis and shall be payable as per the agreed terms specified in the Loan Agreement and KFS.
2. Fixed Interest will be applied which is subject to assessment by the Company in accordance to the prevailing market conditions and shall be serviced by the Borrower through monthly payments. The monthly payment due shall include the interest component, and any amount paid over and above the due interest shall be adjusted toward the principal.
3. Interest posting shall be carried out on the last day of each month and shall become due and payable by the 7th day of the following month, unless otherwise specified in the agreement.
4. The Company may adopt a differential interest rate structure based on the Borrower's risk profile, Tenure, type of facility, security cover, credit history, and overall financial standing. Any changes to the applicable rate shall be communicated to the Borrower in advance and shall become effective prospectively, from the date so notified.
5. The Company may adopt a differential interest rate structure based on the Loan amount. In the event the Borrower avails any additional top-up facility within the same sanction, the interest rate applicable shall continue to be the rate fixed at the time of sanction of the initial loan, unless revised by the Company in accordance with the market condition and its prevailing policies. Refer Annexure 1 for differential interest rate.

Corporate Action

In the event of any corporate action concerning the pledged securities, the Borrower shall be entitled to receive all benefits arising therefrom during the period of pledge. However, upon confiscation of the pledged securities, the Lender shall be solely entitled to receive all cash dividends accruing on such pledged securities from the date of confiscation.

Tax deducted at source (TDS)

In case, TDS of the company is deductible on interest under Section 194A or other relevant section of the Income Tax Act 1961, the company shall:

• List All customers who are liable to deduct the TDS must pay TDS as per applicable rate for the interest being paid.
• Once returns are filed, customer must provide TDS certificates in Form16A generated from the income tax website via email to [email protected].
• TDS credit is given to Borrower on the basis of credit received in 26AS.

Alternatively, digitally signed TDS certificates can be emailed to [email protected].

Renewal of Loans

Term loans shall be sanctioned for the Tenure as specified in the Loan Agreement. No automatic renewal of term loans shall be permitted. Upon the expiry of the Tenure, the Borrower shall be required to repay the outstanding dues in full. On closure of the loan account, aresh loan is sanctioned based on a new credit appraisal and execution of fresh loan documentation.

A new loan shall be issued subject to:

• A fresh credit assessment;
• Issuance of a fresh KFS to the Borrower;
• Execution of new agreements and documentation;
• Approval under the applicable Exceptions Handling provisions, if the revised tenure exceeds the standard sanctioned period.

Loan to Value (securities) and Eligible Securities

The borrowers shall maintain a LTV ratio of 50% of pledged securities. Any shortfall in the maintenance of the 50 percent LTV occurring on account of movement in the share prices shall be made good within 7 working days. In case such, LTV is not reinstated the company shall initiate the recovery proceedings.

Eligible Securities for maintenance of LTV shall be 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 Borrower. The Approved List of Group 1 Securities will be available on the Company's website at all times and may be updated at the Company's discretion. The list can be modified by the Company, and any changes will be posted on the website. Typically, the list will be reviewed and updated on a quarterly basis.

Loan Repayment

• The Repayment Schedule for each term loan shall be as specified in the KFS and/or Loan Agreement and shall align with the Tenure of the loan.
• Borrowers may prepay the loan, in part or in full, at any time before the expiry of the Tenure. No pre-payment charges shall be applicable unless otherwise specified in the agreement or KFS.
• In case of any delay in repayment beyond the scheduled due date, penal charges, as approved by the Board and detailed in the KFS, shall be levied in addition to the applicable interest rate.
• The Company shall ensure that such penal charges are applied in accordance with the RBI regulations and guidelines.
• If repayment is not made upon the expiry of the term loan (including any top-ups ), the Company shall initiate recovery proceedings, including the invocation of any collateral/pledge, as per the terms of the agreement and applicable law. A grace period may be provided at the Company's discretion, not exceeding 07 days, beyond which enforcement action may be taken.
• The Credit Appraisal and Sanctioning Authority shall determine the maximum permissible limits for each term loan and the aggregate exposure per Borrower.

Classification as Non-Performing Assets (NPA)

In case the interest is not serviced on due date or the loan is not paid off upon the expiry of the Tenure, then the loan would be treated as Non-Performing Asset (NPA) if such overdue status continue for more than 90 days from for the financial 2024-25 and would be provided for according to the policy of the Company. The Company shall classify NPAs on a Borrower-wise basis, such that if any one facility of a Borrower is classified as NPA, all other facilities granted to the same Borrower shall also be treated as NPA, irrespective of whether repayment is due under such other facilities.

SMA Classification

NBFC on recognising incipient stress in loan accounts, immediately on default, may classify borrowers as special mention accounts (SMA) as per the following categories:

Exposure Limits

The Company / Management may set out overall Exposure Limits as well as sub-limits for Term Loan portfolio, based on parameters which may include:

• Collateral Type / Unsecured
• Credit Risk
• Geography
• Borrower Demographics
• End-Use

Loan Agreement will override Policy

This Policy will 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.

Excess refund to be credited to Borrower’s bank account

In the scenario, the loan-to-value (hereinafter the "LTV") ratio exceeds the prescribed threshold limit, and if the Borrower cannot make good the shortfall by pledging additional securities or repaying part of the principal outstanding within the prescribed time limit as mentioned in the loan agreement; the Company reserves the right to invoke the pledge and liquidate the securities.

The company shall endeavor to refund the surplus arising from the sale of the pledged securities of the Lender within five working days of receipt of the fund as also prescribed in the agreement.

However, in certain scenarios like change in bank account details, demise of Borrower, etc. wherein the company is unable to refund the surplus due to operational constraints, then the same shall be retained in designated non-interest-bearing bank account and the company shall not be liable for any interest obligations on such surplus. Such surplus shall be refunded to Borrower or any other person as considered appropriate based on presentation of necessary documents and review of the same by the company.

The transferred amount in the designated bank Account can be retrieved by the Lender or their Nominee or any other person as considered appropriate by the company as the case may be following the procedure prescribed by the Company. The Company shall provide the necessary instructions and documentation required for the retrieval process.

Exception Handling

Any exceptions to this Policy shall only be with the prior approval of the Board of Directors of the Company.

Adoption, Effective Date and Review

This Policy has been adopted vide resolution of the Board of Directors of the Company dated 11th August 2025.This Policy shall be reviewed by the Board of Directors on an Annual basis.

1. Collateral Type / Unsecured
2. Credit Risk
3. Geography
4. Borrower Demographics
5. End-Use

Annexure I

Annexure II

Interest Rate Slabs Applicable For Term Loan Facility

Note: If you avail a top-up loan and your total loan amount moves into a higher slab, the interest rate will not change. It will remain the same as decided in your initial loan agreement throughout the loan tenure.