With a view to setting out Fair Lending Practices in a transparent manner, it is proposed to adopt the following as Lenders’ Fair Practices Code.
The Fair Practices code applies to the following areas :
- Applications for loans and their processing
- Loan appraisal and terms/conditions
- Disbursement of loans including changes in terms and conditions
- Other general provisions
- Regulations of excessive interest charged
Applications for loans and their processing:
- All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
- Loan application forms would include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and informed decision can be taken by the borrower.
- Loan application forms would indicate the documents required to be submitted with the application form.
- An acknowledgement for receipt of all loan applications would be given to the prospective clients and the said acknowledgement would indicate the time frame within which loan applications will be disposed of which would not be later than 15 working days after receipt of all requisite documents/information.
Loan appraisal and terms/conditions:
- The borrower would be conveyed in writing, by means of a sanction/offer letter or otherwise in the vernacular language as understood by the borrower, amount of loan sanctioned alongwith all the terms and conditions thereof including annualised rate of interest thereon and method of application thereof, and the borrower would, in turn, accept in writing the aforesaid terms and conditions, and the said acceptance would be kept on record by IFCI.
- The Loan Agreement would contain, in bold, details of penal interest charged for loan repayment.
- All the borrowers would be provided with a copy of loan agreement alongwith all enclosures referred in the loan agreement, in vernacular language as understood by the borrowers at the time of sanction/disbursement of loan.
Disbursement of loans including changes in terms and conditions:
- The borrower would be given an advance notice in vernacular language as understood by the borrower as to any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges, etc.
- The said changes in interest rates and charges would be with prospective effect and a clause in this regard would be incorporated in the loan agreement.
- Decision to recall / accelerate payment or performance under the agreement would be in consonance with the loan agreement.
- IFCI would release all securities on repayment of all dues or on realization of the outstanding amount of loan subject to any legitimate right or lien for any other claim IFCI may be having against the said borrower. In case such right of set off is to be exercised, IFCI shall give notice to the borrower about the same with full particulars about the remaining claims and the conditions under which IFCI is entitled to retain the securities till the relevant claim is settled / paid.
Other general provisions:
- IFCI would refrain from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement and unless new information, not earlier disclosed by the borrower, has come to the notice of IFCI.
- In case of receipt by IFCI of a request from the borrower for transfer of borrowal account, the consent or otherwise i.e. objection of IFCI, if any, would be conveyed to the borrower within 21 days from the date of receipt of such request, and such transfer, if consented to, shall be as per transparent contractual terms in consonance with law.
- In the matter of recovery of loans, IFCI would not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans etc.
- IFCI shall ensure that the staffs are adequately trained to deal with the customers in an appropriate manner.
- In case of complaints received, the matter with full details will be brought before the Grievance Redressal Authority within 7 days from date of receipt, as under:-
(a) Matters approved by
|Grievance Redressal Authority
||Next higher authority
(b) Matters approved by officials under delegated authority
|Upto the level of GM / VP
||CGM at HO
||CEO & MD
|CEO & MD
- The Grievance Redressal Authority would take all necessary steps to redress and resolve the grievance/dispute, preferably within a maximum period of 30 days.
- The compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels of management would be periodically (quarterly) reviewed at various levels of management and a consolidated report of such reviews would be submitted to the Board on half yearly basis.
Regulation of Excessive Interest charged:
- IFCI shall adopt an interest rate model taking into account relevant factors such as, cost of funds, margin and risk premium, etc for determining the rate of interest to be charged for loans and advances. The rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers shall be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter.
- The rates of interest and the approach for gradation of risks shall also be made available on the website of IFCI or published in relevant newspapers and the same shall be updated whenever there is a change in the rates of interest.
- The rate of interest shall be annualised rates so that the borrower is aware of the exact rates that would be charged.
In order to enhance value and relevance to the borrowers this code would be under review from time to time. IFCI would, therefore, greatly value any suggestion for improvement.