Interest Rate Policy
Maxemo Capital Services Private Limited(hereinafter referred as “MAXEMO”) is a private limited company, incorporated under companies act 2013 and got in principal approval for Non-Banking Financial Company (‘NBFC’) from the Reserve Bank of India and will operate business under Reserve Bank of India (‘RBI’) regulations/directions and its activities are governed by the various Indian laws and RBI regulations/directions.
This Policy is intended to be representative of MAXEMO guiding philosophy of dealing with customers in a transparent and open manner. Thus, in accordance with The Reserve Bank of India (RBI) vide its Notification No. DNBS. 204 / CGM (ASR)-2009 dated 2 January 2009 and vide its Guidelines on Fair Practices Code for NBFCs, as amended from time to time (RBI Regulations), has directed all NBFCs to make available the rates of interest and the approach for gradation of risk on web-site of the companies.
MAXEMO has documented Interest Rate Policy / Model approved by the Board of Directors which lays down internal principles and procedures in determining interest rates and other charges on the loan products offered by MAXEMO.
MAXEMO is committed to and conducts its business activities lawfully and in a manner that is consistent with its compliance obligations. Activities of MAXEMO are conducted in line with RBI /Company Law and prevailing local regulations/rules/laws/Acts. In the event this Policy is atvariance with regulations/rules/laws/Acts at any stage due to omissions or changes in regulations/rules /laws/Acts, the regulations/rules/laws/Acts would prevail. If any clarifications are needed on these regulations/rules /laws/Acts, the same must be referred to _______________ (Compliance officer) for its final opinion on the issue.
The business model of MAXEMO, includes structured and mid-market lending. Internal Rate of Return (‘IRR’) shall depend upon the type of lending and based on the evaluation of various risks detailed hereunder.
In compliance with the requirements of the RBI Regulations mentioned above and the Fair Practices Code adopted by the Company, the Company has adopted this Interest Rate Policy broadly outlining the Interest Rate Model and the Company’s approach of risk gradation in this regard for its lending business.
2. ESTABLISHING AN INTEREST RATE
The interest rate applicable to each loan account, within the applicable range is assessed on a case specific basis, based on evaluation of various factors detailed below:
a) Tenor of the Loan :- The interest rate charge will depend on the term of the loan.
b) Tenure of Repayment :- The product offering consist mainly of secured and unsecured loans to MSEs & individuals carrying of business activity, with repayment period varying from case to case basis, depending upon cash flow of the prospective borrower. The focus will be to keep it on an average around 24 months, which may go up to maximum period up to 60 months or more in exceptional cases. The product category also consists of unsecured loans to Group Borrowers for periods ranging usually from 12 – 24 months. The clientele of the company can be categorized into high risk category. Therefore, considering the product offering and the absence of tangible securities in most cases, the risk of recovery can be considered to be in the medium to high category and accordingly the risk premium would be reckoned.
c) Internal and External Costs of Funds :- The rate at which the funds necessary to provide loan facilities to customers are sourced, normally referred to as our external cost of funds. Internal cost of funds being the expected return on equity; is also a relevant factor. Further, the rationale is based on reasonable assumptions towards cost of funds, administrative/operational cost and risk premium which will be subject to review when felt necessary. The company would be offering fixed rate of interest.
d) Internal cost loading:- The costs of doing business. Factors such as the complexity of the transaction, capital risk weightage, the size of the transaction, location of the borrower and other factors that affect the costs associated with a particular transaction would be taken into account before arriving at the final interest rate quoted to a customer.
e) Customer Requirement :- The final lending rate would take the above factors into consideration and in addition factors such as profile of the borrower, their repayment track record, tenure of relationship with the borrowers, future potential, nature of primary and secondary security offered etc. Such information would be gathered on the basis of information furnished by the customers, market intelligence gathered by our CDOs / CUs and Credit Information Reports preferably from two agencies besides the competition pricing
f) Credit Risk :- As a matter of prudence, credit loss (risk) cost would be factored into all transactions. The amount of credit risk cost applicable to a particular transaction depends on the internal assessment of the credit strength of the customer.
g) Structuring Premium :- A premium may be applied to a loan in case the loan has any significant structuring elements with respect to collateral, or other aspects of transaction structure.
h) Margin :- The rate of interest is arrived on reasonable assumption towards the average cost of funds, administrative costs, risk premium and a reasonable margin for the Company.
3. PROCEDURAL ASPECTS
MAXEMO shall communicate to the customer
i. The amount of loan sanctioned along with the terms and conditions including annualised rate of interest
ii. Details of the default interest / penal interest rates (expressed in percentage per month /annum as the case may be) and the charges payable by the customers in relation to their loan account and method of application thereof (penal interest charged for late repayment of loan would be mentioned in bold in the loan agreement).
iii. Terms and conditions and other caveats governing the credit given by MAXEMO arrived at after negotiation.
iv. In case of any change in any of the terms and conditions / caveats / any information which is relevant from the point of view of the transaction (including annualised rate of interest), the same shall be conveyed to the customer either as an addendum / additional annexure to the agreement/term sheet. However all the relevant formalities (e.g. further legal documentation, approval of customer, certification of MAXEMO officials etc.) relating to such change shall be documented and a copy of the same shall also be sent to the customer. The same may be communicated through electronic media or any other form of communication.
v. The acknowledgement of the receipt of the said additional document shall also be preserved on the records by MAXEMO officials.
vi. Foreclosure charges / prepayment penalty would be charged in line with the agreement with the client except in cases expressly restricted by prevailing RBI Regulations. Current RBI regulations do not permit such charges on floating rate loans to individuals.
vii. Changes to interest rates and charges, other than as documented in the loan agreement, will be effected prospectively.
4. APPROACH FOR GRADATION OF RISK
The risk premium attached with a customer shall be assessed inter-alia based on the following factors:
i. profile and market reputation of the borrower,
ii. inherent nature of the product, type / nature of facility, refinance avenues, whether loan is eligible for bank financing, loan to value of asset financed,
iii. tenure of relationship with the borrower group, past repayment track record and historical performance of our similar clients,
iv. group strength, overall customer yield, future potential, repayment capacity based on cash flows and other financial commitments of the borrower, mode of payment
v. nature and value of primary and secondary collateral / security,
vi. type of asset being financed, end use of the loan represented by the underlying asset,
vii. interest, default risk in related business segment,
viii. regulatory stipulations, if applicable,
ix. and any other factors that may be relevant in a particular case.
5. DETAILS OF INTEREST ON THE WEBSITE
MAXEMO will display its interest rate policy and broad interest rate structure on its web-site in line with RBI Directions/Regulations.
6. CONTENT ON THE WEBSITE
Appropriate disclosure regarding this Interest Rate Policy shall be made on the Company website.
7. AMENDMENT TO THE POLICY
This Policy shall be reviewed by the Board as and when any changes are required in the Policy.
Feel free to contact us in case of any queries. Helpline Number - 8929723334
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