Interest Rate Policy
1. Background:
Angel Fincap Private Limited (the "Company") is a Base Layer Non-Banking Financial Company (NBFC) operating under the regulatory purview of the Reserve Bank of India (RBI). The company is classified as Investment and Credit Company.
The company being an Investment and Credit Company is engaged in Lending and investment activity. However, it is primarily engaged in providing Loan Against Shares to the retail clients (both individuals and corporates) and engages in investment activities in mutual funds, NCDs, etc. to manage its liquidity position.
This policy is prepared in line with the requirements prescribed by Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 and various RBI notifications / directions ["RBI Regulations"] issued in this regard.
2. Objectives:
The objectives of this policy are as follows:
• Ensure transparency and fairness in the determination and communication of interest rates and associated charges, adhering to regulatory guidelines.
• Develop a structured interest rate model that considers the cost of funds, margins, and risk premiums to maintain financial sustainability.
• Implement a risk-based approach for charging different interest rates depending on the borrower's risk profile.
• Prevent excessive interest rates and charges, ensuring they align with ethical financial practices and remain sustainable.
• Regularly review and update interest rates to reflect changes in market conditions and operational costs.
3. Scope:
The scope of this Interest Rate Policy covers the framework for determining, reviewing, and communicating the interest rates for all loan products offered by the company. It applies to all borrowers across various business segments and ensures consistency with the company's financial goals and regulatory requirements. The policy also outlines the methods for calculating interest, managing risk premiums, and disclosing terms to customers. It ensures transparency, fairness, and compliance with the Reserve Bank of India's guidelines on interest rates and charges.
5. Interest Rate Determination and Structure:
The company follows a systematic approach to determine interest rates for its loans. The interest rate charged to a customer is based on several key factors, including the company's cost of funds, risk profile of the borrower, loan characteristics, and market conditions.
• Base Rate Calculation:
The company calculates its base rate by considering the following factors:
a. The weighted average cost of funds, which includes the cost of borrowings from various sources like banks, consortium lines, and debentures, along with owned funds (including reserves) invested in the business.
b. Administrative costs, which account for overheads and other unallocable administrative expenses incurred by the company.
c. Adjustments for asset-liability management (ALM) mismatch, if any, are considered in determining the base rate and long term asset allocation strategy of the company.
d. The client profile and sensitivity, which may influence further adjustments to the base rate based on the borrower's business type and risk factors.
• Interest Rate Determination Model:
Once the base rate is determined, additional premiums are added to arrive at the final lending rate. These premiums are influenced by the following factors:
a. Specific cost of funds for on-lending (if any), which reflects the expenses incurred in borrowing from various sources like banks, consortiums, and debentures.
b. Collateral Value and past valuation trends.
c. The ticket size and nature of the loan, as larger or specific types of loans may carry different interest rates.
d. The prevailing industry interest rate, to ensure the company's rates remain competitive in the market.
e. Risk and tenure premiums, which adjust the rate based on the loan's duration and the associated risk profile of the borrower.
f. The type of securities offered by the borrower, where higher-quality collateral may reduce the interest rate.
g. The borrower's income stability, with more stable and regular income sources potentially leading to a lower interest rate.
h. The loan tenure, where longer-term loans or loans with a long customer relationship may attract a higher interest rate.
i. Market dynamics, reflecting changes in the economic environment and overall market trends.
j. Reasonable % of profit considering company's retention strategy.
• Risk Gradation and Documentation:
The company categorizes risk based on several factors, including borrower profile, loan type, collateral value and broader market conditions. The risk level is documented and reviewed periodically. The risk assessment includes:
a. Assessment of eligibility of underlying securities, including type of instrument, issuer quality, market liquidity, price volatility, and historical performance.
b. Margin and Loan-to-Value (LTV) analysis, internal risk appetite, and volatility of the collateral.
c. Credit reports obtained from credit bureaus and financial institutions to assess the borrower's existing loans and repayment history.
d. Credit history for facilities obtained from the company.
• Interest Rate and Default Penalties Disclosure:
The company ensures complete transparency regarding interest rates and penalties. These are disclosed clearly to the borrower in:
a. The Key Fact Statement (KFS), which includes all terms related to interest rates, penalties, and other loan-related charges.
b. The sanction letter and loan agreement, where interest rates and penalties are prominently displayed in bold and in annualized format to ensure clarity for the borrower.
6. Information to the Customers:
• Interest rates may vary for the same product, depending on the borrower, the time of borrowing, the quantum of borrowing or the product itself. This means the rate can differ for different borrowers, or for the same borrower at different times.
• Interest may be offered at a fixed rate, meaning the rate remains the same for the entire loan duration.
• Interest will be calculated based on the amount the borrower uses, not the total sanctioned limit. However, the company shall charge processing fees for total sanction as stated in Key Fact Statement (KFS).
• The interest rate, reset period (if any), and loan terms will be clearly communicated in the KFS, the sanction letter, and loan agreement. Further, KFS shall also include the annualized rate of interest and how the risk gradation affects the rate.
• If there are changes in interest rates or important terms, they will be communicated to customers in advance and the same shall be applicable prospectively, through the company website, app (if applicable) i.e. Customers will be notified before any changes are implemented.
• If the payment due date or the last day of the cut-off period falls on a public holiday or Sunday, the due date will be moved to the next business day and any grace days as decided by the company from time to time.
• Penal charges, prepayment charges, and other financial charges may be applicable and will be clearly stated in the loan agreement and KFS. These charges are applicable as per the terms agreed upon.
• In case, customers may be required to deduct tax at source on payments, as per applicable regulations. The company shall be duly informed at connect@afpl.com.
• The company will generally not entertain claims for refunds or waivers of charges or penal charges unless there is a specific reason. The company has discretion over such requests.
• The company's interest rate policy will comply with the regulations and directions issued by the Reserve Bank of India. In case of any conflicts, RBI guidelines will take precedence.
7. Exception Handling:
The policy shall always be updated with extant regulatory provisions. However, in case of conflict between the Policy and regulations, the regulatory provisions shall always supersede the policy.
The updated policy shall be adhered at all the times and exceptions if any to the policy shall be approved by the board of directors after recording a reason in writing.
8. Adoption, Effective Date and Review:
This policy has been adopted vide resolution of the Board of Directors of the Company dated ______________. This policy shall be applicable organization wide with effect from _____________. This policy shall be reviewed by the Board of Directors on at least an Annual basis.