Interest Rate Policy
INTEREST RATE POLICY
FMEC International Financial Services Ltd.
1. PURPOSE AND REGULATORY FRAMEWORK
In accordance with the Master Direction issued by the Reserve Bank of India (RBI), as amended from time to time, the Board of Directors of FMEC International Financial Services Ltd. (“Company”) has adopted this Interest Rate Policy (“Policy”) to lay down the principles and procedures for determining interest rates, processing fees, penal charges and other applicable fees.
This Policy aims to ensure transparency, fairness and consistency in the pricing of the Company's loan products and provides a clear rationale for charging differential rates of interest to different categories of borrowers.
This Policy shall be read in conjunction with the Company's Fair Practices Code and other applicable Board-approved policies.
2. OBJECTIVES
The primary objectives of this Policy are to:
Ensure that interest rates and charges are fair, transparent and non-discriminatory.
Adopt a risk-based pricing approach aligned with the risk associated with the borrower and the loan product.
Ensure the sustainability of the Company while protecting the legitimate interests of borrowers.
Ensure accurate computation and disclosure of interest and other applicable charges.
Comply with applicable RBI guidelines, regulatory requirements and prevailing market best practices.
3. GOVERNANCE AND OVERSIGHT
The Board of Directors shall have overall oversight and responsibility for this Policy.
All pricing decisions shall be taken in accordance with the principles and framework prescribed under this Policy and within the limits approved by the Board.
The Board shall periodically review this Policy and ensure that the Company's interest rate and pricing practices remain compliant with applicable regulatory requirements and are aligned with the Company's business objectives and risk management framework.
4. LOAN PRODUCTS
The Company may offer, inter alia, the following loan products:
Personal Loans
Micro Enterprise Loans (MEL)
Loan Against Property (LAP)
Vehicle Loans
Corporate Lending
Business Loans – Secured / Unsecured
Any other lending products as may be approved by the Board from time to time.
The availability of specific loan products, applicable eligibility criteria, pricing and terms may vary depending upon the Company's policies, regulatory requirements and business considerations.
5. TYPES OF INTEREST RATES
The Company charges a fixed interest rate for its loan products.
The determination of the applicable fixed interest rate shall be based on various factors including the Company's cost of funds, operating expenses, borrower risk profile, product characteristics, market conditions and other relevant factors specified under this Policy.
The applicable interest rate shall be communicated to the borrower through the relevant loan and sanction documentation.
6. INTEREST RATE MODEL
The Company follows a risk-based interest rate model, ensuring that the interest rates charged are commensurate with the risks associated with the borrower, the loan product and prevailing market conditions.
Interest shall be charged only from the actual date of disbursement of the loan.
6.1 Primary Factors
Interest rates shall be determined after considering one or more of the following factors:
Cost of borrowings and cost of equity
Operating and administrative expenses
Cost of maintaining liquidity buffers
Expected return on assets
Credit risk and expected losses
Prevailing market and macroeconomic conditions
These factors may be reviewed periodically by the Company to ensure that pricing remains commercially sustainable and consistent with applicable regulatory requirements.
6.2 Additional / Risk-Based Factors
Interest rates may vary based on one or more of the following factors:
Secured or unsecured nature of the loan.
Loan product features and structure.
Loan amount and repayment profile.
Quality and value of collateral, where applicable.
Borrower's credit history and credit bureau score.
Income stability, business profile and repayment capacity.
Industry, sectoral and geographical risk.
Internal risk score and historical borrower performance.
Sourcing channel and repayment mechanism.
Subvention or promotional schemes, if any.
Accordingly, the interest rate for the same loan product and tenor may vary between borrowers based on their individual risk profiles and the applicable factors mentioned above.
7. GRADATION OF RISK
The Company shall adopt an internal risk assessment framework for evaluating the creditworthiness and risk profile of borrowers.
The assessment may take into consideration various parameters, including:
Credit bureau information.
Repayment history.
Income stability or business stability.
Existing indebtedness.
Nature and structure of the credit facility.
Verification outcomes.
Borrower's repayment capacity.
Quality and value of security/collateral, wherever applicable.
Other relevant credit and risk parameters.
Based on the assessment, an appropriate internal risk grade may be assigned to the borrower.
The assigned risk grade shall be one of the factors influencing the applicable interest rate and overall pricing of the loan.
8. PROCESSING FEES, PENAL CHARGES AND OTHER CHARGES
8.1 Processing Fees
The Company may levy processing fees of up to a maximum of 10% of the loan amount, excluding applicable taxes.
Processing fees may vary depending upon:
Product type.
Loan amount.
Borrower profile.
Loan structure.
Applicable promotional or other schemes.
Other relevant factors.
The applicable processing fee shall be disclosed to the borrower prior to or at the time of loan sanction/disbursement, as applicable.
8.2 Bounce Charges
The Company may levy bounce charges in cases involving dishonour of repayment instruments or failed auto-debits.
Such charges shall be subject to a maximum of ₹21,000 per bounce, as applicable under the Company's approved schedule of charges and applicable regulatory requirements.
8.3 Penal Charges
Penal charges may be levied for non-compliance with material terms and conditions of the loan agreement, subject to applicable regulatory requirements and the following principles:
The maximum penal charge shall not exceed 36% per annum.
Penal charges shall be reasonable and non-discriminatory within a product category.
Penal charges shall not be capitalized.
No further interest shall be levied on penal charges.
Penal charges and the events triggering such charges shall be clearly disclosed in the Loan Agreement and Key Fact Statement (KFS).
Penal charges shall be applied only in accordance with the applicable terms and conditions of the loan agreement and relevant regulatory guidelines.
8.4 Other Charges
The Company may levy other charges, including but not limited to:
Rescheduling charges.
Statement charges.
Other applicable service or administrative charges approved by the Board.
Any revision in applicable charges shall be applied prospectively and shall be communicated to borrowers through appropriate and permissible modes.
9. ANNUALIZED PERCENTAGE RATE (APR)
The Company shall disclose the Annualized Percentage Rate (APR) to borrowers.
The APR represents the all-inclusive annualized cost of borrowing, including applicable interest and processing fees, while excluding contingent charges such as penal charges.
The applicable APR shall be disclosed to the borrower upfront through the:
Sanction Letter, and
Key Fact Statement (KFS).
The disclosure of APR is intended to provide borrowers with greater clarity regarding the overall cost of borrowing.
10. COOLING-OFF PERIOD
Borrowers shall be provided with a cooling-off period of up to T+1 days, during which they may exit the loan by repaying the principal amount and cooling-off charges, subject to a maximum of the proportionate APR, without incurring any additional penalty, in accordance with applicable RBI guidelines.
The applicable cooling-off period and associated terms shall be communicated to the borrower in the relevant loan documentation and Key Fact Statement, wherever applicable.
11. COMMUNICATION AND TRANSPARENCY
The Company is committed to maintaining transparency in its lending and pricing practices.
All applicable interest rates, fees and charges shall be clearly disclosed to borrowers through appropriate documentation, including:
Sanction Letter.
Loan Agreement.
Key Fact Statement (KFS).
Other applicable customer communications.
There shall be no retrospective change in interest rates or charges.
Any applicable changes in interest rates, fees or charges shall be communicated to borrowers through appropriate and permissible modes and shall be implemented prospectively, subject to applicable regulatory requirements and contractual terms.
12. FAIR PRACTICES CODE
All lending, servicing and collection activities undertaken by the Company shall be governed by the Company's Board-approved Fair Practices Code and applicable RBI regulations and directions, as amended from time to time.
The Company shall endeavor to ensure that its lending practices are conducted in a manner that is fair, transparent, responsible and non-discriminatory.
The Interest Rate Policy shall be read together with the Fair Practices Code and other applicable policies of the Company.
13. REVIEW AND AMENDMENT
This Policy shall be reviewed by the Board of Directors at least once every year or earlier, if required, based on:
Changes in applicable regulatory guidelines or RBI directions.
Changes in market conditions.
Changes in the Company's business strategy.
Changes in the Company's risk management framework.
Changes in the Company's lending and pricing practices.
Any other circumstances requiring modification of the Policy.
Any amendment, modification or revision to this Policy shall require the approval of the Board of Directors.
KEY PRINCIPLES OF THE POLICY
The Company's interest rate and pricing framework is guided by the following core principles:
Transparency
Interest rates, fees and charges shall be clearly communicated to borrowers.
Fairness
Pricing shall be fair, reasonable and non-discriminatory within applicable product categories.
Risk-Based Pricing
Interest rates may vary based on the risk profile of the borrower and characteristics of the loan.
Regulatory Compliance
The Company's pricing practices shall comply with applicable RBI directions and regulatory requirements.
Responsible Lending
The Company shall seek to balance business sustainability with the legitimate interests of borrowers.
Clear Disclosure
Applicable interest rates, APR, processing fees, penal charges and other charges shall be disclosed through appropriate loan documentation.