Fair Practices Code

Guidelines on Fair Practices Code for NBFCs

A. (i) Applications for loans and their processing

1. All communications to users shall, by default, be in English Language. In the event where a user requests communication to be provided in vernacular language or a language as understood by the user, Fundfina will act to fulfil such request on best effort basis.
2. Fundfina provides necessary information, that could be crucial to the interest of its user, on its platform. It is our constant endeavour to promote transparency so that our Users can make a meaningful comparison with the terms and conditions offered by other NBFCs and user can make an informed decision. The lending/borrowing forms indicate the documents required to be submitted to participate on platform.
3. Fundfina provides acknowledgement for receipt of all loan applications and lending commitments vide email communication. The time frame within which loan applications will be disposed of is also indicated in the acknowledgement.

(ii) Loan appraisal and terms/conditions

Fundfina conveys in writing to the borrower in English, or in the vernacular language as understood by the borrower on request, by means of sanction email, in the user account on platform and/or other electronic media, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest thereof and records the acceptance of these terms and conditions by the borrower on its record. As complaints received against NBFCs generally pertain to charging of high interest / penal interest, Fundfina mentions the penal interest charged for late repayment in a separate clause in bold in the loan agreement.

It is understood that in a few cases, borrowers at the time of sanction of loans are not fully aware of the terms and conditions of the loans including rate of interest, either because the NBFC does not provide details of the same or the borrower has no time to look into detailed agreement. Hence Fundfina sends a copy of Draft agreement to its users along with acknowledgment emails describe earlier in (i)(c) to allow its user ample time and opportunity to assess and understand the loan agreement.

We understand that Not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between Fundfina and the users with regard to the terms and conditions on which the loan is granted.

Fundfina, therefore, furnishes a copy of the loan agreement in English and on request of users in the vernacular language as understood by the user along with a copy each of all enclosures quoted in the loan agreement to all the users at the time of disbursement of loans.

(iii) Disbursement of loans including changes in terms and conditions

• Fundfina gives notice to the users in English and on request in the vernacular language as understood by the user of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. Fundfina also ensures that changes in interest rates and charges are effected only prospectively.
• Decision to recall / accelerate payment or performance under the agreement is done in consonance with the loan agreement.
• Fundfina releases all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim Fundfina may have against borrower in accordance with the Loan agreement.

(iv) General

1. Fundfina refrains from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement (unless new information, not earlier disclosed by the borrower, has come to the notice of the lender and or platform).
2. In case of receipt of request from the borrower for transfer of borrowal account, the consent or otherwise i.e. objection of the NBFC, if any, shall be conveyed within 21 days from the date of receipt of request. Such transfer shall be as per transparent contractual terms in consonance with law.
3. In the matter of recovery of loans, Fundfina does not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans etc. As complaints from customers also include rude behaviour from the staff of the companies. Fundfina ensures that the staff are adequately trained to deal with the customers in an appropriate manner.

(v) The Board of Directors of Fundfina also lay down the appropriate grievance redressal mechanism within the organization to resolve disputes arising in this regard. Such a mechanism ensures that all disputes arising out of the decisions of platform’s functionaries and participants are heard and disposed of at least at the next higher level. The Board of Directors also provides for periodical review of the compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels of management. A consolidated report of such reviews is submitted to The Board at regular intervals.

(vi) Complaints about excessive interest charged by NBFCs

The Reserve Bank has been receiving several complaints regarding levying of excessive interest and charges on certain loans and advances by NBFCs. Though interest rates are not regulated by the Bank, rates of interest beyond a certain level may be seen to be excessive and can neither be sustainable nor be conforming to normal financial practice.

Board of Fundfina has, therefore, laid out appropriate internal principles and procedures in determining interest rates and processing and other charges. The interest charged is capped at 30%.

In this regard the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans have been kept in view.

(vii) Regulation of excessive interest charged by NBFCs

1. The Board of Fundfina has adopted an interest rate model taking into account relevant factors such as, credit worthiness, interest coverage, sources of income, quality of income, margin and risk premium, etc and determine the rate of interest to be charged for loans and advances.
2. The rates of interest and the approach for gradation of risks is made available on the web-site. The information published in the website or otherwise published should be updated whenever there is a change in the rates of interest.
3. The rate of interest displayed are annualised rates so that the borrower is aware of the exact rates that would be charged to the account.