1. OBJECTIVE
The purpose of this policy is to establish transparent and fair guidelines for determining the interest rates and associated charges for the loan products offered by Arthimpact Digital Loan Private Limited (“Company”).
This policy ensures compliance with:
- The Reserve Bank of India (RBI) guidelines.
- Internal operational and financial objectives of the Company.
- Fair Practices Code (FPC) principles for dealing with customers.
By following these principles, the Company aims to maintain transparency, fairness, and accountability in its lending operations.
2. INTEREST RATE DETERMINATION
Interest rates for loans are determined based on a comprehensive evaluation of the following factors:
A. Core Determinants
- Cost of Funds: The base rate of interest depends on the cost of sourcing funds, including borrowing costs and associated operational expenses.
- Margins: Includes operational costs, target return on equity (RoE), and other factors that impact overall profitability.
- Risk Premium:
- Internal Risks: Credit risk (based on borrower evaluation), operational risk, and exposure to specific industries or regions.
- External Risks: Economic policies, market volatility, inflation, and competitive pressures.
B. Borrower-Specific Parameters
The final rate for individual borrowers is based on:
- Loan Tenure: Longer loans may attract higher rates due to extended exposure risk.
- Borrower’s Profile: Includes creditworthiness, financial stability, and nature of employment or business.
- Repayment History: Borrowers with a strong track record may benefit from lower rates based on their repayment behavior with previous loans from Arth or other financial institutions.
- Borrower’s Financial Capacity: An assessment of the borrower's income, cash flows, and financial commitments.
- Product Type: Loans designed for specific purposes will have distinct pricing.
C. Interest Rate Range
Interest rates can go up to 36% p.a., calculated on a reducing balance basis for the full tenure of the loan.
3. OTHER FINANCIAL CHARGES
In addition to interest rates, the Company may levy the following charges:
- Processing Fees: A non-refundable fee charged at the time of loan sanction.
- Penal Charges: Applied to overdue payments or defaults.
- E-NACH Charges: For facilitating automated electronic repayment mandates.
- Insurance Fees: If applicable, for bundled insurance services linked to specific loan products.
- Other Charges: As outlined in the Key Fact Statement and loan sanction letter.
Note: All charges are disclosed to the borrower at the time of loan sanction or occurrence of an applicable event.
4. TRANSPARENCY AND DISCLOSURE
The Company is committed to ensuring transparency in its interest rate determination process.
- The interest rates and associated charges are prominently displayed on the Company's website and shared with borrowers through Key Fact Statements.
- Borrowers are informed about the applicable interest rates, charges, and terms at the time of loan sanction.
5. REVIEW AND COMPLIANCE
The policy is subject to periodic review and approval by the Board of Directors to ensure alignment with changes in regulatory requirements, evolving market conditions, and amendments to the Company’s credit and risk policies.
Arth ensures that the policy remains updated at all times, incorporating any past amendments as required.
7. KEY POLICY HIGHLIGHTS
- Loans are priced considering both internal and external factors to balance risk and profitability.
- Interest rates are determined on a case-by-case basis, reflecting the borrower’s risk profile and product structure.
- Maximum interest rate charged shall not exceed 36% p.a.