NABARD FINANCIAL SERVICES LIMITEDnabfins.org/wp-content/uploads/2017/07/Fair-Practice-Code.pdf · NABARD FINANCIAL SERVICES LIMITED ... Primary data is collected from the borrower

NABARD FINANCIAL SERVICES LIMITED [Subsidiary of National Bank for Agriculture and Rural Development]

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FAIR PRACTICES CODE

Intent and Content

NABARD Financial Services Ltd. (NABFINS) is registered as Non-deposit taking, Systemically Important NBFC - MFI with RBI and commits itself for implementing and adopting fair practices in all its activities and transactions with the stakeholders. This Code drafted by NABARD Financial Services Limited (NABFINS) as per the Guidelines issued by the Reserve Bank of India on Fair Practices Code for Non-Banking Finance Companies vide its Circular No. (RBI/2015-16/16 DNBR (PD) CC. No. 054/ 03.10.119/ 2015-16) dated 1st July 2015. This Code sets minimum Fair Practice standards for NABFINS to follow when it is dealing with the customers. It provides information to customers and explains how NABFINS is expected to deal with the customers on day-to-day basis. This Code is effective from the date of approval and adoption by the Board for implementation by NABFINS.

I. Objectives of the Code

The Code has been developed with an object to:

Promote good, fair and transparent business practices by setting minimum

standards in dealing with the customer which NABFINS shall follow;

Increase transparency so that the customer can have a better understanding of

what type of service level can be expected from the NABFINS;

NABFINS will interact with the customers in such manner so as to promote

cordial relationship;

NABFINS shall endeavor to achieve, through fair means, higher operating

standards: and

Foster customer confidence in NABFINS in the activities undertaken.

II. Application of the Code

The Code applies to all products, offered by NABFINS as envisaged in its

Memorandum of Association.

III. Key Commitment

a) To help borrower/customer to understand how NABFINS's financial products and

services work by:

i. Ensuring that the customer is given clear information about NABFINS's

products and services, the terms and conditions and interest rates/ service

charges, which apply to them in the loan application form;

ii. Keeping customer informed about changes in the interest rates, charges,

terms and conditions;

b) To act fairly and reasonably in all dealings with the customer by,

i. Meeting the commitments and standards in this Code for products and

services offered by NABFINS.

ii. Making sure that products and services meet relevant principles of integrity

and transparency.

iii. Informing customer about the time limit by which loan application will be


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processed and informing them of the status at regular intervals.

iv. Handling customer complaints promptly.

v. Informing customers about the process to take their complaints forward to

higher authorities.

c) To treat personal information of customers as private and confidential.

IV. Fair Practices Code for Lending Activities:

1. Application for Loan

a. Primary data is collected from the borrower along with Know Your Customer

(KYC) norms as per the Company guidelines in the prescribed format.

b. Loan application forms will be designed and implemented depending upon the

loan products offered and these forms will provide clear information in vernacular

language or in the language understood by the borrowers regarding loan

products and services, the terms and conditions, the interest rates l service

charges, benefits available to customers and their implications.

c. The loan application form has to be disposed of for a credit decision within 2

weeks to 8 weeks from the date when the loan application is received, complete

in all respects depending upon the quantum of loan.

d. All communications by the Company to the borrower shall be in the vernacular

language or a language as understood by the borrower.

e. NABFINS shall acknowledge the receipt of loan applications and indicate the

time frame in which the same shall be disposed of. However in the case of

SHG/JLG/CIG etc. the grading of the groups shall be conducted simultaneously

with collection of applications and the decision of eligibility or otherwise will be

announced at the end of the grading.

2. Loan appraisal and terms/conditions

a) The rate of interest on loan products will be reasonable in relation to market

conditions. The sanction letter will convey the amount to be financed and the rate of

interest and the method of application thereof, mode and time at which the interest will

be debited and other terms and conditions applicable to loan. One copy would be

handed over to the customer and one copy will be retained in customer's file and after

due acceptance of the terms and conditions by the borrower.

b) A separate repayment schedule indicating the actual principal, interest rate,

processing fees, period shall be given to the loanee.

c) NABFINS shall not charge any penal interest on late payment.

3. Disbursement of loans including changes in terms and conditions

a. A copy of the loan agreement along with a copy each of all enclosures quoted

in the loan agreement will be furnished to the borrower at the time of sanction /

disbursement of loan.


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b. Any change in terms of conditions like change in interest rate, tenure, all charges

/ fees would be communicated to the borrower in writing in vernacular language

by Registered post acknowledgement due. The Company will ensure that

changes are effected only prospectively.

c. Any decision to recall or to accelerate payment would be communicated to the

borrower in writing as per the terms of the loan agreement.

d. NABFINS will release all securities if any, on repayment of all dues or on

realization of the outstanding amount of loan subject to any legitimate right or

lien for any other claim NABFINS may have against the borrower. If such right

of set off is to be exercised, the borrower shall be given notice about the same

with full particulars about the remaining claims and the condition under which

NABFINS is entitled to retain the securities till the relevant claim is settled / paid.

V. General

a) NABFINS would not discriminate on grounds of sex, caste and religion in the

matter of lending. However, this does not preclude the Company from

participating in credit linked schemes for the weaker sections of the society and

in respect of schemes formulated by NABARD / other Government Agencies,

implemented through NABFINS.

b) The Company will not interfere 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 Company.

c) NABFINS will take recourse actions only through legally permissible remedies

as per the terms and conditions of loan agreement entered into with the

borrower.

d) If there is any specific request from the borrower for transfer of borrower

account, the consent or otherwise i.e. objection of the Company, if any will 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.

e) In the matter of recovery of loans, the Company will not resort to undue

harassment i.e. persistently bothering the borrowers at odd hours, use of muscle

power for recovery of loans etc.

f) The Company will not charge foreclosure charges/pre-payment penalties on all

floating rate term loans sanctioned to individual borrowers.

g) The company will ensure that its staff is adequately trained to deal with the

customers in an appropriate manner without resorting to rude behavior.

NABFINS will be liable and accountable for the inappropriate staff behavior and

will ensure timely redressal.

h) NABFINS shall refrain from interference in the affairs of the borrower except for

the purpose provided in terms and conditions of the loan agreement (unless new

information not earlier disclosed by the borrower has come to the notice of

NABFINS).

i) NABFINS shall treat customer information as private and confidential. The

information shall be parted by the NABFINS only in the following circumstances:


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1. Information required to be given under law or as demanded or required by statutory

authorities.

2. Information is given with customer's specific written permission.

VI. Responsibilities of Board of Directors

The Board of Directors of the Company shall ensure that an appropriate grievance

redressal mechanism is in place and all disputes arising out of the decisions of lending

by the concerned staff are heard and disposed of at least at the next higher level. A

periodical review of the compliance of the Fair Practices Code and the functioning of

the grievances redressal mechanism at various levels of management shall be ensured

and a consolidated report of such review shall be submitted to the Board at regular

interval.

VII. Grievance Redressal Mechanism

a) The Company has adopted Grievance Redressal Mechanism. In case a Companys staff is involved in any kind of misbehavior, disciplinary action against such staff shall be taken immediately under the defined rule by the Company.

b) Vigil mechanism / whistle blower policy is in place as an extension of the Fair Practice Code and Staff Rules of the Company.

c) In order to ensure that all disputes arising out of the decisions of the companys functionaries are heard and disposed of at least at the next higher level, clients may contact the nodal officer for customer complaints and grievance redressal as follows:

Designation Grievance Redressal Officer ( Mr. Bibhu Prasad Mishra, AGM )

Contact Details Land Line Number: 080-26563443, 26574222 Fax: 080-26563442, Toll Free Number: 18001024205

E-mail ID [email protected]

d) Suggestions and complaints are accepted through the toll free phone number

(18001024205) shared with all the borrowers, through District offices and

through the suggestion/complaint box. A register is maintained and status of all

such complaints are reviewed on monthly basis by the competent authority.

e) If the complaint/dispute is not redressed within a period of one month, the client

may appeal to the Officer-in-Charge of the Regional Office of DNBS of RBI:

Designation The General Manager

Contact Address Department of Non-Banking Supervision (DNBS),

Reserve Bank of India, 10/3/8, Nrupathunga Road, Post

Bag No.5467, Bangalore-560001

VIII. Measures/Regulations against charging of Excessive Interest

a) Board of Directors of the Company shall lay out appropriate internal principles and procedures in determining interest rates and processing fee and other charges.


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b) The Company will obey the guidelines with regard to transparency of terms & conditions of the loan as mentioned in the Fair Practices Code of the Company.

c) The Company shall adopt interest rate model with the Board Approval by taking into account the relevant factors such as Cost of Funds, Margins, and Risk Premiums etc.

d) Charging different rates of interest for different products shall be disclosed in the loan application form, repayment schedule and loan sanction letter to the Borrowers.

e) The rate of interest shall be made available on the web-site of NABFINS and shall be updated whenever there is a change in the rate of interest.

IX. Fair Practices Code for Microfinance Activities

In addition to the general principles as above, the Company follows fair practices that are specific to its microfinance lending business and regulatory framework.

1. General

a) The Fair Practices Code in vernacular language shall be displayed by the Company in its office, web-site and District Office premises.

b) A statement shall be made in vernacular language and displayed by the Company in its premises and in loan documents articulating our commitment to transparency and fair lending practices.

c) The Companys Field staff shall be trained to make necessary enquiries with regard to existing debt of the borrowers.

d) Training if any, offered to the borrowers 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.

e) The effective rate of interest charged and the grievance redressal system set up by the Company shall be prominently displayed in all its offices and on its website.

f) The Company shall comply with the KYC Guidelines of RBI and due diligence shall be carried out to ensure the repayment capacity of the borrowers.

g) All sanctioning and disbursement of loans shall be done only at the central locations/ Borrower meeting points and more than one individual shall be involved in this function. There shall be close supervision of the disbursement function.

h) The Company shall ensure that the procedure for application of loan is not cumbersome and loan disbursements are done as per the pre-determined time structure.

2. Disclosures in loan agreement / loan card

The company shall have a Board approved, standard form of loan agreement. The

loan agreement shall preferably be in vernacular language disclosing the following

details:

Loan Agreement

a. That pricing of the loan and the various components viz; interest charge,

processing fee and service tax on processing fee.

b. That there will be no penalty charged on delayed payment


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c. That no Security Deposit / Margin is being collected from the borrower.

d. That the borrower cannot be a member of more than one SHG / JLG

e. The moratorium between the grant of the loan and the due date of the

repayment of the first instalment will be as guided by the NBFC-MFls

(Reserve Bank) Directions, 2011,

f. An assurance that the privacy of borrower data will be respected

Loan Card

a. The effective rate of interest charged.

b. All other terms and conditions attached to the loan.

c. Information which adequately identifies the borrower.

d. Acknowledgements by the company of all repayments including instalments

received and the final discharge.

e. The loan documents copy provided to borrowers shall prominently mention

the grievance redressal system set up by the company and also the name

and contact number of the nodal officer.

f. Non-credit products issued shall be with full consent of the borrowers and

fee structure shall be communicated in the loan documents itself.

g. All entries in the Loan Documents shall be in the vernacular language.

Collection of Dues

a) In the matter of recovery of loans, NABFINS shall not resort to undue

harassment viz., persistently bothering the borrowers at odd hours, use of

muscle power for recovery of loans, etc.

b) All sanctioning and disbursement of loans shall be done only at a central

location which is convenient to SHG/JLG etc. in the presence of members of

the SHG/JLG.NABFINS's collection policy shall be built on courtesy, fair

treatment and persuasion. Efforts will be made in building customer

confidence and long-term relationship.

c) The staff deputed to make recovery calls shall identify themselves and shall

provide details with regard to outstanding claims to the customer.

3. Internal Control System

The Company shall make necessary organizational arrangements to assign responsibility for compliance to designated individuals within the Company and establish systems of internal control including audit and periodic inspection to ensure the same.

X. To be entitled to the aforesaid provisions of the Fair Practices Code,

the borrower agrees that :

a) She/he will abide by the assessment of credit application carried out by the

NABFINS and shall not expect the use of margin and security stipulations as a

substitute for due diligence on credit worthiness of the borrower.


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b) The limits sanctioned and other terms and conditions are purely at the discretion

and subject to modification as may be prescribed by the NABFINS

c) The interest rate stipulated for the limit will be as per the guidelines to be framed

by NABFINS. Appropriate interest will be charged taking into account the

changes that may be effected by the NABFINS from time to time

d) The sanction does not vest with anyone the right to claim any damages against

any reason whatsoever

e) Allowing drawings beyond the sanctioned limits, honoring of Cheque issued for

the purpose other than specifically agreed to in the credit sanction at the

discretion of the NABFINS.

f) NABFINS does not have the obligation to meet further requirements of the

borrower on account of growth in business etc. without proper review of credit

limits

g) NABFINS does not have the obligation to finance the account in the case of

sickness.

h) In the event of account becoming-NPA, full details of the account can be

disclosed to public and shall undertake to sign the disclosure clause.

--0O0--

TIONING YOUR NAME AND PERSONAL DETAIL

FAIR PRACTICE CODE

All our transaction with customers will be

transparent, fair and ethical.

We shall not discriminate customer on

grounds of sex, caste or religious.

We shall communicate with the customers in

vernacular language or language known to

them.

We shall provide clear information about

our products and services, the terms and

condition, Interest rates/Services charges,

and method of application thereof etc. (in

sanction letter/repayment schedule). Any

changes/revision, shall be informed from

time to time.

We shall ensure that our products and

services meet relevant principal of integrity

and transparency.

During loan origination, acknowledgement

shall be issued for receipt of loan application

with process timeline.

For loans to SHG/JLG, we do not insist,

security, margin etc. No penal interest shall

be charged for delayed repayment. No

foreclosure charges/Pre-payment penalty

charges.

We shall handover copies of loan sanction

letter/ repayment schedule and loan

agreement/document to borrowers.

We shall take re-course action only through legally

permissible remedies. We or our representative/s

shall not resort to undue harassment, i.e.

persistently bothering of borrowers at odd hours,

use of muscle power etc. for recovery of loan.

Proper receipt shall be issued to customers on the

spot of collection, acknowledging payment

received.

We shall refrain from interference in the affair of

the borrower except for the purpose provided in

the terms and condition of the loan agreement. We

shall treat the personal Information of customers

as private and confidential.

We have put in place an effective redressal

mechanism for any compliant/grievances of

customers as displayed on the notice board.

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Our Mission: To be a trusted client centric financial

institution advancing hassle-free services to the low

income household and unorganized sector.


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FAIR PRACTICE CODE

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