1. BACKGROUND
The Fair Practices Code (“FPC”) has been formulated by Pathetic Finance And Investment Private Limited (“PFIPL” or “Company”) in accordance with the Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 issued by the Reserve Bank of India (“RBI”) (“RBI Master Directions”), as amended from time to time, establishing standards for ethical conduct and transparency in dealings with borrowers. The Fair Practices Code will apply to any loan that the company may sanction and disburse. The FPC also seeks to incorporate various disclosure requirements prescribed by the RBI vide its ‘Guidelines on Digital Lending’ (“Digital Lending Guidelines”), as applicable to the Company’s lending business.
2. OBJECTIVES
This Code has been drawn aiming:
• To adopt good and fair practices by setting minimum standards in dealing with customers.
• To provide the customers effective overview of practices followed by the Company in respect of financial facilities and services offered by the Company to its Customers.
• To promote a fair and cordial relationship between the customers and the Company.
3. APPLICABILITY
This Code shall be binding on all Company employees and any individuals acting on its behalf during the course of business operations. It governs interactions across all service channels, including in-branch counters, telephone, postal correspondence, digital platforms, and any other modes of communication or service delivery. The Code will be visibly displayed at all branch offices and made accessible on the Company’s official website
4. ADVERTISING, MARKETING AND SALES
The Company will ensure that all advertising and promotional content is transparent, accurate, and not misleading in any manner. The principles outlined in this Fair Practices Code will also extend to the Company’s sales associates and representatives, particularly in relation to proper identification when engaging with customers for product promotion. Additionally, any advertisement or promotional material—whether in print, electronic, or digital media—that highlights a product or service along with its interest rate will also disclose any applicable fees or charges to ensure complete transparency.
5. APPLICATIONS FOR LOANS AND THEIR PROCESSING
a. All communications to the borrower shall be in the vernacular language or a language as understood by the borrower. For illiterate borrowers, the Company shall explain important terms and conditions in the presence of a witness.
b. Loan application forms issued by the Company shall include necessary information affecting the interests of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and an informed decision can be taken by the borrower. The loan application form shall indicate the documents required to be submitted with the application form.
c. The Company shall give acknowledgement for receipt of all loan applications. The time frame within which loan applications will be disposed of would also be indicated in the acknowledgement.
d. If the Company cannot provide the loan to the borrower, it shall communicate the same to the borrower.
6. LOAN APPRAISAL AND TERMS AND CONDITIONS AND KEY FACTS STATEMENT FOR LOANS AND ADVANCES
a. The borrower shall be given a loan sanction letter and copy of the loan document together with annexures/enclosures quoted therein in vernacular language or a language as understood by the borrower which shall include the details of the loan such as amount sanctioned, annualized interest rate, method of application thereof and any other terms and conditions.
b. The Company shall also provide a Key Facts Statement (KFS) to all prospective borrowers. This statement will help them to take an informed view before executing the loan contract, as per the format prescribed by the RBI. The KFS shall be written in a language understood by such borrowers. Contents of KFS shall be explained to the borrower, and an acknowledgement shall be obtained that he/she has understood the same.
Further, the KFS shall be provided with a unique proposal number and shall have a validity period of at least three working days for loans having a tenor of seven days or more, and a validity period of one working day for loans having a tenor of less than seven days.
(Validity period refers to the period available to the borrower, after being provided the KFS, to agree to the terms of the loan. The Company shall be bound by the terms of the loan indicated in the KFS, if agreed to by the borrower during the validity period.
c. The penal interest that will be charged for late payment shall be mentioned in bold letters in the loan agreement.
d. An acknowledged copy of the sanction letter shall be kept as part of the document.
e. Penalty, if charged, for non-compliance of the material terms and conditions of the loan contract by the borrower shall be treated as ‘penal charges’ and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest charged on the advances. There shall be no capitalization of penal charges, i.e., no further interest computed on such charges. However, this will not affect the normal procedures for compounding interest in the loan account. A board approved policy on the Penal Charges is annexed herewith as Annexure – I.
f. Whenever reminders for non-compliance with the material terms and conditions of the loan are sent to borrowers, the applicable penal charges shall be communicated. Further, any instance of levy of penal charges and the reason therefor shall also be communicated.
g. The loan agreement for lending against gold shall disclose details regarding the auction procedure. The Company shall follow a transparent auction procedure in case of non-repayment, with adequate prior notice to the borrower. The auction shall be announced to the public by the issue of advertisements in at least two newspapers, one in the vernacular language and another in a national daily newspaper.
7. DISBURSEMENT OF LOANS INCLUDING CHANGES IN TERMS AND CONDITIONS
a. On receipt of all the requisite information and completion of documentation and creation of a charge over the security, the customer shall be given an acknowledgement for receipt of the application indicating the time frame within which the loan application will be disposed of. The customer shall be kept informed of the status of his application.
b. The loan shall be disbursed on executing the necessary documents and completion of the formalities regarding creating a charge over the security offered by the borrower. Any change in the terms and conditions, including interest rates, service charges, prepayment charges, etc., shall be informed to the borrower. Any changes in interest rates and charges effected shall be only prospective.
c. The Company shall release all securities on repayment of all dues or on realization of the outstanding amount of the loan, subject to any legitimate right or lien for any other claim the Company 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 conditions under which the Company is entitled to retain the securities till the relevant claim is settled / paid.
d. The Company shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loans sanctioned for purposes other than business to individual borrowers with or without co-obligant(s).
e. Decision to recall/accelerate payment or performance under the agreement shall be in consonance with the loan agreement.
8. FAIR PRACTICES CODE FOR LENDERS ON CHARGING OF INTEREST
a. Interest shall be charged from the date of actual disbursement of the funds to the customer and not from the date of sanction of the loan or the date of execution of the loan agreement. In the case of loans being disbursed by cheque, interest shall be charged from the date the cheque is handed over to the customer and not from the date of the cheque.
b. The Company shall frame appropriate internal policies and procedures for determining the interest rates and processing and other charges, if any and also ensure that they are not excessive. The Company shall, at the time of disbursal, ensure that the interest rate and other charges, if any, on loans and advances are in strict adherence to above referred internal policies and procedures.
c. The rate of interest will be annualized rates so that the borrower is aware of the exact rates that would be charged on the loan.
d. Interest will be charged on the daily balance outstanding at the monthly rate on the basis of the actual number of days from the date of availing the loan to the date of closure of the loan.
e. The information published on the website shall be updated whenever there is a change in the rates.
f. The rate of interest and the approach for gradation of risk and rationale for charging different rates of interest to different schemes shall be disclosed in the application form and also communicated explicitly in the sanction letter issued to the borrower. The same will also be displayed on the website of the Company.
g. Rebate on interest rates meant to encourage timely periodical payment of interest under each scheme, levying of additional interest for discouraging loans from crossing the sanctioned period, etc., shall be mentioned clearly in the loan agreement.
h. Changes in the Rate of Interest shall be effected prospectively.
9. POLICY ON KYC, APPRAISAL, INSURANCE, STORAGE OF SECURITIES, AUCTION, ETC.
The Company shall put in place a system covering the following aspects:
a. Adequate steps to ensure that the KYC guidelines stipulated by the RBI are complied with and to ensure that adequate due diligence is carried out on the customer before extending any loan.
b. Proper appraisal procedure for assessing the value and purity of the jewellery accepted as collateral security.
c. The Company shall ensure the presence of the borrower(s) while assaying the collateral at the time of sanctioning the loan.
10. ADDITIONAL NORMS FOR GOLD LOAN BUSINESS
PFIPL shall adopt the following guidelines in addition to other applicable guidelines mentioned in this FPC
PFIPL shall put in place Board approved policy for lending against gold that should inter alia, cover the following:
a. Adequate steps to ensure compliance with the KYC Directions stipulated by RBI;Proper assaying procedure for the jewellery received;
b. Internal systems to satisfy ownership of the gold jewellery.
c. The Company shall ensure that the gold collateral is handled only at its branches and only by its employees. All branches shall have a proper storage facility of either Strong Rooms or Safes conforming to BIS Standards of a reputed make to store the jewellery in safe custody. The sets of keys to the strong room/safe shall be held separately by two officials, and the operations thereof shall be done jointly. The staff shall be imparted training on a continuous basis to ensure that the guidelines covering security issues are strictly adhered to. The gold items shall be periodically inspected by the internal auditors to ensure quality, quantity and proper storage.
d. The jewellery accepted as collateral security shall be adequately and appropriately insured.
e. The auction procedure in case of non – repayment shall be transparent. Prior notice to the borrower shall be given before the auction, and there shall be no conflict of interest. The auction process shall ensure that an arm’s length relationship in all transactions during the auction is maintained, including with group companies and related entities. The details regarding the procedure for auction shall be disclosed in the loan document for availing the loan. The auction will be only through auctioneers approved by the Board, and the Company shall not participate in the auction. The auction shall be announced to the public by issuing advertisements in at least two newspapers, one in vernacular language and the other in a national daily newspaper.
f. Any fraud in the functioning of the Company shall be enquired into by the appropriate authority, and suitable punitive measures shall be taken by the appropriate disciplinary authority. Any review of the decision of the disciplinary authority shall be carried out by the Managing Director.
Other Instructions
a. The Company will insist on a copy of the PAN Card of the borrower for all transactions above ₹ 5 lakhs
b. Documentation across all branches must be standardized.
c. Company shall not issue misleading advertisements like claiming the availability of loans in a matter of 2-3 minutes.
11. LOAN FACILITIES TO THE PHYSICALLY / VISUALLY CHALLENGED
The Company shall not discriminate in extending products and facilities, including loan facilities, to physically / visually challenged applicants on the grounds of disability. All branches of the Company shall render all possible assistance to such persons for availing of the various business facilities. The Company shall include a suitable module containing the rights of persons with disabilities guaranteed to them by the law and international conventions, in all the training programs conducted for their employees at all levels. Further, the Company shall ensure redressal of grievances of persons with disabilities under the Grievance Redressal Mechanism already set up.
12. RESPONSIBILITY OF THE BOARD OF DIRECTORS:-
a. The Board of Directors of NBFCs shall also lay down the appropriate grievance redressal mechanism within the organization. Such a mechanism shall ensure that all disputes arising out of the decisions of the lending institution’s functionaries are heard and disposed of at least at the next higher level.
b. The Board of Directors shall also provide 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 shall be submitted to the Board annually.
13. LOANS SOURCED THROUGH DIGITAL LENDING PLATFORMS
Where the Company sources or originates loans through digital lending platform(s), then the following additional steps shall be taken by the Company:
a. The names of all digital lending platforms engaged as agents shall be disclosed on the Company’s website.
b. All digital lending platforms shall be directed to disclose upfront to the borrower the name of the Company on whose behalf they are interacting with borrowers.
c. Immediately after sanction but before execution of the loan agreement, the sanction letter shall be issued to the borrower on the Company’s letterhead.
d. A copy of the loan agreement, along with a copy of each of all enclosures quoted in the loan agreement, shall be furnished to all borrowers at the time of sanction/ disbursement of loans.
e. Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the Company.
f. Adequate efforts shall be made towards creating awareness about the Company’s grievance redressal mechanism.
14. CONFIDENTIALITY
Unless authorized by the borrower, the Company will treat all personal information as private and confidential. The Company shall not reveal transaction details of the borrowers to any other persons except under the following circumstances.
a. If the Company is required to provide the information as per regulatory directives to any statutory or regulatory body or bodies.
b. If arising out of a duty to the public to reveal the information.
c. If it is in the interest of the borrowers to provide such information (eg, Fraud prevention).
d. If the borrower has authorized the Company to provide such information to its group/associate/entities or Companies or any such person/entity as specifically agreed upon.
15. CUSTOMER’S GRIEVANCE REDRESSAL MECHANISM
The Company has framed a suitable mechanism for the redressal of customer grievances/ complaints. A policy on the same is displayed at the Notice Board of every branch and is also available on the website of the Company. The Board shall review the compliance with the fair practice code and the functioning of the grievance redressal mechanism at least once a year.
The Company shall designate a Senior Officer of the Company as Grievance Redressal Officer for resolving customer complaints. Name, Phone Number and email id of the Grievance Redressal Officer shall be displayed on the website of the Company as well as on notice boards of all branches.
In case of grievances, the customer may contact the Grievance Redressal Officer in any of the following ways:
Name of Grievance Redressal Officer:
Email:
Address:
16. REDRESSAL OF GRIEVANCES RELATING TO DIGITAL LENDING
In respect of customer complaints relating to Digital Lending, the Company shall ensure that the Lending Service Providers (LSP) engaged by the Company shall have a suitable nodal grievance redressal officer to deal with fintech/ digital-lending related complaints/issues raised by the borrowers. Such a grievance redressal officer shall also deal with complaints against their respective DLAs. Contact details of grievance redressal officers shall be prominently displayed on the websites of the Company, its LSPs and on DLAs and also in the Key Fact Statement (KFS) provided to the borrower. Further, the facility of lodging a complaint shall also be made available on the DLA and on the website as stated above. It is reiterated that the responsibility of grievance redressal shall continue to remain with the Company.
17. CONSUMER EDUCATION
The Company shall place consumer education literature on its websites, explaining with examples, the concepts of date of overdue, SMA and NPA classification and upgradation, with specific reference to day-end process with a view to increasing awareness among the borrowers. The Company shall also display such consumer education literature in its branches by means of posters and/or other appropriate media. Further, the Company shall also ensure that its front-line officers educate borrowers about all these concepts, with respect to loans availed by them, at the time of sanction/disbursal/renewal of loans.
18. GENERAL PROVISIONS
a. The Company shall display the normal business hours at the respective Branches, the list of holidays and notify the changes, if any, by way of a notice displayed in the premises of the branch or through press notification.
b. Personal information of the customer will not be shared with unauthorized persons or agencies, or third parties by the Company. However, the Company will be bound to honour and comply with legal or regulatory requirements, if any, in this matter, obligating it to part with such information even without notice to the customer.
c. In case of receipt of a request from the borrower for transfer of the borrowal account, the consent or otherwise, i.e. objection of the Company, if any, shall be conveyed within 21 days from the date of receipt of the request. Such transfer shall be as per transparent contractual terms in consonance with the law.
d. 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 staff of the Company shall be adequately trained to deal with the customers in an appropriate manner so as to ensure proper behaviour.
e. The Company will call delinquent customers between 09:00 hrs to 18:00 hrs unless special circumstances of the borrower’s business require calling them otherwise outside the hours mentioned.
19. PERIODICAL REVIEW OF THE FAIR PRACTICES CODE AND FUNCTIONING OF THE GRIEVANCE REDRESSAL MECHANISM
A periodical review of the Fair Practices Code and functioning of the grievances redressal mechanism at various levels of management would be undertaken by the Company at yearly intervals, and a consolidated report of such reviews shall be submitted to the Board of Directors.
20. DECLARATIONS & COMMITMENTS
a. The Company undertakes to abide by all applicable laws, regulations and guidelines passed/issued by the Regulators (Reserve Bank of India, SEBI, IRDA, etc) and other competent authorities such as the Government, Local Authority, etc.
b. The Company undertakes not to discriminate against customers on the grounds of religion, caste, gender or language.
c. The Company will provide clear and full information about its products and services to its customers/prospective customers and will not resort to any misleading or potentially misguiding advertisement or publicity.
d. The Company undertakes to desist from introducing any products/services having elements of hidden charges or a lack of transparency.
e. The Company shall display the FPC on its website in English and the vernacular language as well.
With Regards to the RBI Circular RBI/2023-24/53 DoR.MCS.REC.28/01.01.001/2023-24, dated 18th August 2023, on Fair Lending Practice - Penal Charges in Loan Accounts, the Company is proposing the following norms.
i. Penalty, if charged, for non-compliance of material terms and conditions of the loan contract by the borrower shall be treated as ‘penal charges’ and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest charged on the advances.
ii. There shall be no capitalization of penal charges, i.e., no further interest computed on such charges. However, this will not affect the normal procedures for compounding interest in the loan account.
iii. Pathetic Finance and Investment Private Limited (“PFIPL” or “the Company”) shall not introduce any additional component to the rate of interest.
iv. The quantum of penal charges shall be reasonable and commensurate with the non-compliance of material terms and conditions of the loan contract without being discriminatory within a particular loan / product category.
v. The penal charges in case of loans sanctioned to ‘individual borrowers, for purposes other than business’, shall not be higher than the penal charges applicable to non-individual borrowers for similar non-compliance of material terms and conditions.
vi. The quantum and reason for penal charges shall be clearly disclosed by the Company to the customers in the loan agreement and the most important terms & conditions, in addition to being displayed on the Company’s website under Interest Rates and Service Charges.
vii. Whenever reminders for non-compliance with the material terms and conditions of the loan are sent to borrowers, the applicable penal charges shall be communicated. Further, any instance of levy of penal charges and the reason therefor shall also be communicated.
viii. Authority to waive off penal charges rests with the Managing Director who may delegate it further to any official of the Company as deemed appropriate.
