In compliance with the requirements of the applicable regulations and the Fair Practices Code adopted by the Company, Aastha Micro Credit (“the Company”) has adopted this Interest Rate Policy.
This Policy broadly outlines the Interest Rate Model and the Company’s approach to risk gradation for its lending business.
The business model of Aastha Micro Credit focuses on providing credit only to customers meeting the prescribed credit standards for varying tenors.
The interest rate applicable to each loan account, within the applicable range, is assessed on a case-specific basis based on evaluation of the following factors:
a. Tenor of the Loan & Payment Terms:
Term of the loan; terms of payment of interest (monthly, quarterly, yearly); repayment of principal; moratorium period; bullet payments; back-ended schedules; zero-coupon structured loans, etc.
b. Internal and External Costs of Funds:
The rate at which funds are sourced to provide loans (external cost of funds) and the expected return on equity (internal cost of funds).
c. Internal Cost Loading:
Costs of doing business including transaction complexity, capital risk weightage, size of transaction, borrower location, and other related cost factors.
d. Credit Risk:
Credit loss risk is factored based on internal assessment of the borrower’s credit strength.
e. Structuring Premium:
Premium applied where the loan involves complex structuring, collateral arrangements, or special transaction features.
f. Margin:
Mark-up to reflect overhead costs and the Company’s designed margin.
g. Other Factors:
Matching tenor cost, market liquidity, credit flow policies, competitor offerings, employment stability, subsidies, deviations permitted, future business opportunities, external ratings, industry trends, and switchover options.
The risk premium attached to a borrower is assessed based on the following factors:
a. Interest rates may be offered on a fixed or floating/variable basis.
b. Floating/variable rates shall be benchmarked as follows:
c. The DFTPL-PLR is a benchmark rate approved and periodically reviewed by the Board of Directors. The methodology may be modified with Board approval.
d. Interest rates for the same product and tenor may vary among customers based on risk assessment and policy factors.
e. Loan amount, annualized rate of interest, and tenure shall be communicated in the sanction letter along with breakup of principal and interest.
f. Additional interest or penal/default interest may be charged for delays or defaults. Penal charges shall be clearly mentioned in bold in the loan agreement.
g. Other charges such as processing fees, cheque bouncing charges, foreclosure/prepayment charges, part disbursement charges, cash handling fees, remittance charges, and statutory taxes including GST shall be levied as applicable.
h. Such charges shall be proposed by the respective Credit Teams and approved by the Board of Directors.
i. Interest rates may be revised based on perceived risk and market conditions on a case-to-case basis.
j. Changes in interest rates shall be determined based on benchmark movement, market volatility, and competitor review.
k. Any change in interest or charges shall be communicated to borrowers with prospective effect only.
l. Requests for refund or waiver of charges or penal interest shall be at the sole discretion of the Company.