FAIR PRACTICE CODE OF MELKER FINANCE AND LEASING PRIVATE LIMITED
(Approved by the Board Meeting dated 27th May 2019.)
The Reserve Bank of India (RBI) has issued guidelines on Fair Practices Code for Non- Banking Financial Companies (NBFCs) thereby setting standards for fair business and corporate practices while dealing with their customers. Melker Finance and Leasing Private Ltd (“the Company”) hereby furnishes the Fair Practices Code (“the FPC”) based on the guidelines issued by the RBI. The Company shall also make appropriate modifications in the FPC from time to time to confirm to the standards that may be prescribed by the RBI from time to time. it is proposed to establish the following as the Fair Practices Code for the Company’s lending activities.
I. KEY OBJECTIVES
The key objectives of putting in place the FPC are as follows.
- The Company’s products, services, procedures and practices will meet the broad requirements and standards in the FPC;
- The Company’s products and services will be in accordance with relevant laws and regulations as applicable for the time being in force;
- The Company’s dealings with its borrowers will rest on ethical principles of honesty, integrity and transparency.
- Providing information about the products and services in simple manner;
- Explaining the financial implications of using the products and services.
- Deal with the errors promptly and effectively;
- Deal with the Grievances redressal in a quick and efficient manner and to the satisfaction of the customers;
- Promptly handle Complaints;
- Have Escalation process, in the event of dissatisfaction of the borrower in handling his complaint(s).
II. APPLICABILITY OF FAIR PRACTICE CODE
The FPC will be applicable to the following broad areas:
- i. Loan applications and processing thereof
- ii. Loan appraisal and terms/conditions
- iii. Disbursement of loans including changes, if any, in terms and conditions
- iv. Post disbursement supervision/monitoring
- v. Policy Guidelines on sale by Auction of Pledged Gold Ornaments
- vi. Other general provisions
i. Loan Applications and Processing Thereof
- Loan Application Forms will be made available to the prospective borrowers on request and all communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
- Loan application forms of the company shall 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. The loan application form may indicate the documents required to be submitted with the application form.
- Loan Application Form may also list out the additional information required from the borrowers and their family members in order to enable the Company to create the database.
- The company shall give an acknowledgment for the receipt of all loan applications.
ii. Loan Appraisal and Terms/Conditions
- The Company shall consider all the loan applications keeping in mind the risk based assessment procedures adopted by it.
- The company, with customer bearing the cost, will furnish a copy of the loan agreement preferably in the language as understood by the borrower along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
- The company would convey in writing to the borrower in the language as understood by the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record. In the sanction letter so issued, Company shall mention the penal interest charged for late repayment in bold in the loan agreement.
- A copy of the loan documents including loan agreement and annexures thereof shall be made available to the borrower.
iii. Disbursement of Loans Including Changes in Terms and Conditions
- Disbursement of amount of loans sanctioned may be made available to the borrowers on demand subject to completion of all formalities including execution of loan documents.
- The Company shall convey in writing to the borrower in a vernacular language as understood by the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc.
- Change in the interest rates and service charges shall be made applicable prospectively. The loan agreement shall contain a specific clause in this regard.
- The company shall release 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 the company may have against borrower.
iv. Post Disbursement Supervision
- The decision, if any, of the Company to recall/accelerate payment or performance of loan shall be in accordance with the terms and conditions of the Loan Agreement.
- The Company shall give reasonable time to the borrowers before recall the loan or asking for accelerating the payment or performance subject to the terms and conditions contained in the Loan Agreement and other related documents.
- The collaterals lying with the Company may be released on receipt of full and final repayment of loans subject to any legitimate right or lien and set off for any other claim that the Company might have against the borrowers. However, in cases where the borrower has availed facility allowing him to borrow/draw monies within the overall amount sanctioned as and when needed by him, the collateral may be retained by the Company for operational convenience and to protect its interest from potential default by the borrowers.
v. Policy Guidelines on Sale by Auction of Pledged Gold Ornaments
The following shall be the General Policy Guidelines for the Sale by Auction of Gold Ornaments pledged with the Company by the Customers:
- Adequate steps to ensure that the KYC guidelines stipulated by RBI are complied with and to ensure that adequate due diligence is carried out on the customer before extending any loan,
- Proper assaying procedure for the jewellery received,
- Declaration shall be obtained from the borrower confirming the ownership of the gold jewellery,
- The company shall have adequate systems for storing the jewellery in safe custody,
- The company will review the systems on an on-going basis, training the concerned staff and periodic inspection by internal auditors to ensure that the procedures are strictly adhered to. As a policy, loans against the collateral of gold should not be extended by branches that do not have appropriate facility for storage of the jewellery,
- The jewellery accepted as collateral should be appropriately insured,
- The Board approved policy with regard to auction of jewellery in case of non-repayment is transparent and adequate. Prior notice to the borrower is to be given before the auction date. The auction process ensures that there is arm’s length relationship in all transactions during the auction including with group companies and related entities,
- The auction should be announced to the public by issue of advertisements in at least 2 newspapers, one in vernacular language and another in national daily newspaper.
- Gold pledged will be auctioned only through auctioneers approved by the Board, as a policy the NBFCs themselves shall not participate in the auctions held.
- The policy shall also cover systems and procedures to be put in place for dealing with fraud including separation of duties of mobilization, execution and approval.
The Company has also put in place Board approved Auction Policy dealing exhaustively with the policies and procedures relating to Auctions of pledged gold ornaments.
vi. Other General Provisions:
- Company shall refrain 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).
- In case of receipt of written request from the borrower for transfer of borrowal account, the consent or otherwise i.e. objection of the company, if any, should be conveyed within 21 days from the date of receipt of request. As a policy company do not entertain transfer of accounts.
- In the matter of recovery of loans, the company shall not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans etc
- The Board of Directors has laid down the appropriate grievance redressal mechanism within the organization to resolve disputes arising on the decisions of the officials of the company. Disputes arising out of the decisions of lending institutions' functionaries are heard and disposed of at least at the next higher level. The Board of Directors will do a 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 should be submitted to the Board at regular intervals, as may be prescribed by it.
- Fair Practices Code (which should preferably in the vernacular language as understood by the borrower) based on the guidelines outlined hereinabove has the approval of their Boards within one month from the date of issue of this circular.
- The FPC in vernacular language shall be displayed by the company in its office and branch premises,
- A statement shall be made in vernacular language and displayed by Company in their premises and in loan cards articulating their commitment to transparency and fair lending practices,
- Field staff will be trained to make necessary enquiries with regard to existing debt of the borrowers,
- Training offered to the borrowers, if need arises, shall be free of cost. Field staff shall be trained to offer such training and also make the borrowers fully aware of the procedure and systems related to loan / other products,
- The effective rate of interest charged and the grievance redressal system set up by the Company will be prominently displayed in all its offices and in the literature issued by it (in vernacular language) and on its website,
- The company’s accountability for preventing inappropriate staff behaviour and timely grievance redressal shall be made in the loan agreement and also in the FPC displayed in its office/branch premises,
- The KYC Guidelines of RBI shall be complied with. Due diligence shall be carried out to ensure the repayment capacity of the borrowers,
- The procedure for application of loan is not cumbersome and loan disbursements are done as per pre-determined time structure.
- The company shall treat all personal information of its borrowers as private and confidential and will not reveal any information to any other entity other than for regulatory/statutory matters.
The various commitments outlined and made by the Company shall be applicable under the normal operating environment. In the event of any Force Majeure circumstances, the Company may not be able to fulfill the objectives under the FPC to the entire satisfaction of the borrowers, the stakeholders and the public in general.
In order to enhance the value and relevance to the borrowers, this code shall be under review from time to time.