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Interest Rate Policy

REVISED IN THE MEETING OF BOARD OF DIRECTORS HELD ON 29.09.2020

Introduction

Reserve Bank of India (RBI) had vide its circulars advised that Board of Directors of Non-Banking Finance Companies (NBFC) shall lay out appropriate internal principles and procedures in determining interest rates, processing and other charges. RBI has advised NBFC's to adopt appropriate interest rate model taking into account relevant factors and to disclose the rate of interest, gradations of risk and rationale for charging different rate of interest. Keeping in view the RBI's guidelines as cited above, and the good governance practices being followed by S M L Finance Limited (the ‘Company’), the following internal guidelines, policies, procedures and interest rate model have been adopted by the Board of Directors of the Company, for its lending business. These need to be taken cognizance of while determining interest rates and other charges, and changes thereto.

Methodology

The interest rates for the products of the Company are decided by the management. The average yields and the minimum rate of interest for each loan product are decided from time to time, giving due consideration to the following factors:


Interest rate policy for lending business

Annualized Rate Of Interest Matrix & Interest Rate Waiver Approval authority Matrix

  1. In Case of Vehicle loan ( Annualised Interest Rate)

PRODUCT

NEW 2W Loans

New 3W Loans

New Car & 4W Loans

Used 2W Loans

Used 3W Loans

Used Car & 4W Loans

Annualised Rate of interest

24%

24%

18%

24%

30%

24%

Interest Rate Waiver Approval authority matrix

MD

5%

5%

5%

5%

5%

5%

  1. In Case of Gold loan ( Annualised Interest Rate)

PRODUCT SCHEMES

LTV 75%

Annualised Rate of interest

12-30%

Interest Rate waiver in case of Gold loans up to 3% by MD

  1. In Case of Other loans ( Annualised Interest Rate)

PRODUCT

Property Loan

Personal Loan

Business Loan

Demand Loan

Consumer Durables Loan

MSME - Loan amount Rs. 46,000

Annualised Rate of interest

30%

26%

30%

30%

26%

31.74%

Interest Rate Waiver Approval authority matrix

MD

5%

5%

5%

5%

5%

5%

  1. In Case of Micro finance Loans

The interest rates fixed for micro finance loans shall be determined at the beginning of each quarter in accordance with RBI Guidelines. Accordingly, the quarterly interest rate fixed by the Company shall be lower of the following:

  1. Cost of funds plus margin of 12%(asset size more than Rs. 100 cr -10%); OR
  2. Average base rate of the five largest commercial banks multiplied by 2.75%

Gradation of risk

The rate of interest is arrived based on the weighted average cost of funds, administrative costs, profit margin, multiple risk parameters such as borrower profile, past year earnings, earning stability, employment stability and repayment capacity, type of loan, scheme of loan, rate of competitors etc. The decision to give a loan is also based on the above factors These informations are collected based on borrower’s inputs, credit bureau and field inspection by the company officials. The Interest rates are subject to change as the situation warrants and are subject to management decision based on the merit of individual cases

Processing/ documentation and other charges

All processing/ documentation and other charges recovered shall be expressly stated in the Loan policy, FPC and loan documents. They vary based on the loan product, schemes & exposure limit, and generally represent the cost incurred in rendering services to the customers. The practices followed by other competitors in the market would also be taken into consideration while deciding the charges.



Particulars

Business Loan

Property Loan

Micro Finance Loan

Consumer Durables Loan

Processing Charge

-

-

1 - 3 % of loan amount

1 % of loan amount

Documentation Charge

2 % of the loan amount

2 % of the loan amount

-

-

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