1) INTRODUCTION:

Reserve Bank of India has issued Master Direction- Know Your Customer (KYC) Direction, 2016 as amended from time to time including comprehensive guidelines on Know Your Customer (KYC) norms and Anti-money Laundering (AML) standards and has advised all NBFCs to ensure that a proper policy framework on KYC and AML measures be formulated and put in place with the approval of the Board.

Accordingly, in compliance with the guidelines issued by RBI from time to time, the following KYC & AML policy of the Company is approved by the Board of Directors of the Company.

Applicability of this policy shall be on all categories of products and services offered by the Company.

2) OBJECTIVE:

The main objectives of this policy are as follows:

• To prevent criminal elements from using Company for money laundering activities;
• To put in place an effective system and procedure for Customer identification and verifying its / his / her identity and residential address;
• To enable Company to know and understand its customers and their financial dealings better which, in turn, would help the Company to manage risks prudently;
• To put in place appropriate controls for detection and reporting of suspicious activities in accordance with applicable laws/laid down procedures;
• To comply with applicable laws and regulatory guidelines.

3) DEFINITIONS:

4) CUSTOMER ACCEPTANCE POLICY:

The Company shall follow the following norms while accepting and dealing with its customers:

1. No account is opened in anonymous or fictitious / benami name.
2. The Company shall carry out full scale customer due diligence (CDD) before opening an account. When the true identity of the applicant is not known or the Company is unable to apply appropriate CDD measures, no transaction or account based relationship will be undertaken with such person / entity.
3. 'Optional'/additional information, is obtained with the explicit consent of the customer after the account is opened.
4. The Company shall apply CDD measures at the Unique Customer Identification Code (UCIC) level. Thus, if an existing KYC compliant customer of a RE desires to open another account with the same RE, there shall be no need for a fresh CDD exercise.
5. CDD Procedure is followed for all the joint account holders, while opening a joint account.
6. Where Permanent Account Number (PAN) is obtained, the same shall be verified from the verification facility of the issuing authority.
7. Parameters of risk perception are clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc. to enable categorization of customers into low, medium and high risk. The illustrative list of such risk categorisation is provided in Exhibit – I.
8. The customer profile contains mandatory information to be sought for KYC purpose relating to customer's identity, address, social/financial status, nature of business activity, information about the clients' business and their location etc. The nature and extent of due diligence will depend on the risk perceived by the Company. However, while preparing customer profile the Company will seek only such information from the customer which is relevant to the risk category and is not intrusive. The customer profile will be a confidential document and details contained therein will not be divulged for cross selling or any other purpose. The Company shall maintain secrecy regarding customer information except where the disclosure is under compulsion of law, there is a duty to the public to disclose, the disclosure is made with express or implied consent of the customer.
9. The Company shall ensure that the identity of the customer does not match with any person or entity whose name appears in the sanction lists circulated/prescribed by RBI from time to time.
10. The intent of the Policy is not to result in denial of financial services to general public, especially to those, who are financially or socially disadvantaged. While carrying out due diligence, the Company will ensure that the procedure adopted does not result in denial of services to any genuine customers.
11. When the true identity of the account holder is not known, the Company shall file Suspicious Transaction Reporting (STR) as provided below in clause 9.

5) CUSTOMER IDENTIFICATION PROCEDURE:

I. The Company shall undertake identification of customers before commencement of an account based relationship. Customer identification means identifying the customer and verifying his / her identity by using reliable and independent source of documents, data or information to ensure that the customer is who he / she claims to be.

II. The Company shall obtain sufficient information necessary to establish the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of the relationship.

III. The Company shall verify the identity of the customer and address using reliable, independent source documents, data or information.

IV. The Company shall identify the beneficial owner and take reasonable measures to verify the identity of the beneficial owner, such that the Company is satisfied that it knows who the beneficial owner is.

V. The Company shall conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of the relationship to ensure that the transactions being conducted are consistent with the Company's knowledge of the customer, their business and risk profile.

6) DOCUMENTS REQUIRED FOR KYC:

The Company shall collect the following documents for KYC purposes:

7) RECORD KEEPING:

The Company shall maintain records of all transactions, customer identification documents, account files and business correspondence for a period of five years from the date of transaction or the date of closure of the account, whichever is later, as required under the PML Rules.

8) SUSPICIOUS TRANSACTION REPORTING:

The Company shall monitor transactions and report suspicious transactions to the Financial Intelligence Unit-India (FIU-IND) as per the provisions of the PML Act and Rules.

9) PERIODIC UPDATION OF KYC:

The Company shall periodically update the KYC records of customers as per the guidelines issued by RBI from time to time. The periodicity of such updation shall be at least once in every two years for high risk customers, once in every eight years for medium risk customers, and once in every ten years for low risk customers.

10) TRAINING:

The Company shall provide appropriate training to its staff members on KYC/AML procedures and ensure that they are aware of their responsibilities in this regard.

11) REVIEW OF POLICY:

This policy shall be reviewed by the Board of Directors at least once in a year or as and when there are changes in the regulatory framework, whichever is earlier.

Purpose

Reserve Bank of India (RBI) vide its Circular DNBS PD/CC No.95/03.05.002/2006-07 dated May24, 2007 advised that Board of Non-Banking Finance Companies (NBFC's) lay out appropriate internal principles and procedures in determining interest rates, processing and other charges. This was reiterated vide RBI's circular DNBS (PD) C.C. No. 133 / 03.10.001 / 2008-09 dated January 2, 2009.

With a view to institute fair and transparent dealings in the lending business, the Company has adopted and put in place the following Interest Rate Policy parallel to the company's Fair Practice Code, in accordance with the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 as amended and updated from time to time.

RBI further advised NBFC's to adopt an 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 the Company, the following internal guidelines, policies, procedures and interest rate model have been adopted by the Company. The Board of Directors of the Company ("the Board") or any Board constituted Committee ("the Committee") as the case may be, while fixing interest rates chargeable from the customers shall be guided by this Interest Rate Policy. In addition to cost factors set out hereunder, the Board or the Committee shall be guided by the market conditions and various rules and regulations, if any, prescribed by the Reserve Bank of India or such other authority from time to time.

Key Commitments and Declarations

Interest charged by the company from its customers shall inter-alia have the following components viz., Reference Rate, Risk Rate, Additional/Default Rate. Additionally, market scenario, competitive intensity, assignability of products, secured-unsecured ratio and overall product portfolio considerations would be key inputs to pricing.

Reference Rate

Reference Rate shall represent the rate chargeable on floating rate loans. The final rate shall be at a spread (positive or negative) to reference rate. Reference Rate shall be arrived at after considering the following aspects:

Thus, the Reference rate shall be determined by considering the cost of borrowing, overhead/sourcing cost, competitive factors, market conditions, guidance on portfolio shape, size and fair return on capital employed.

Risk Rate

Risk rate (estimate of credit losses) shall be determined by taking into account the degree of risk involved in loan considering various factors like general economic conditions, customer category, customer category servicing costs, mode of repayment, Loan to value ratio, Tenor of loan, Product (as in, car, commercial vehicle, SME etc. location of the customer, etc.

Interest rate fixed or floating– charging interest at fixed rate or floating rate would be decided basis product category.

Additional/Default Rate

Loans remaining unpaid on due dates shall be charged penal interest at such rates uniform across all product portfolio as mentioned in bold in the respective customer agreements.

Any service charges, prepayment charges as charged to the borrower shall be disclosed appropriately to the borrower.

The same shall be based on the following rationale:

1. Acquisition costs/underwriting costs incurred in writing the loan
2. Product segment, depth and liquidity of the market and possibility of reinvesting the funds received by way of prepayment into new products, at similar return on assets
3. Use of fixed cost funds/ lines of credit/internal allocation of resources, for funding a particular product segment
4. Exposure limit or ticket size for the loan products
5. Industry Trends of rate shopping by customers, on the basis of a prevailing contract with PFL, and going to a competing financier, with a view to obtain lower rates

Further, all loans which are pre-paid shall bear pre-payment penalty at rates mentioned in the respective customer agreements.

However the company shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned for purposes other than business to individual borrowers, with or without co-obligant(s) as per the Reserve Bank of India's Circular dated August 02, 2019.

The final reference rate is a sum of above to be looked at on a portfolio basis.

Disclosures

As per the extant regulations the following disclosures shall be made to the borrower:

1. There shall be appropriate disclosure of the rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers in the application form and communicated in the sanction letter.
2. The annualised rate of interest shall be disclosed to the customers.
3. Any change in the interest rate or other charges shall be made prospectively and the same shall be adequately disclosed in the loan agreement.
4. The rate of Interest for various class of assets as revised from time to time shall also be displayed on Company's website

Approach for gradation of risk has been:

The decision to give a loan and the interest rate applicable to each loan account shall be assessed on a case to case basis, based on multiple parameters such as the type of asset being financed, borrower profile and repayment capacity, borrower's other financial commitments, past repayment track record if any, the security for the loan as represented by the underlying assets, loan to value ratio, mode of payment, tenure of the loan, geography (location) of the borrower, end use of the asset, etc. The rate of interest is subject to change as the situation warrants and is subject to the discretion of the Company on a case-to-case basis. The rate of interest informed are annualized rates so that the borrower is aware of the exact rates that would be charged to the loan account. The Company shall disclose the interest rates and gradation of risks on its website.

Product Wise Interest Rate:

Administration, Amendment and Review of the Policy

The Board or the Committee shall be responsible for the administration, interpretation, application and review of this Policy. The Committee shall also be empowered to bring about necessary changes to this Policy, if so required at any stage at its own discretion or with the concurrence.