The Reserve Bank of India (RBI) has issued broad guidelines on fair practices for Non-Banking Financial Companies (NBFCs) thereby setting standards for fair business and corporate practices while dealing with their borrowers. IIFL Finance Limited (the 'Company') has adopted all the best practices prescribed by RBI from time to time and has framed the Fair Practices Code (the 'Code').
The Code has been developed with the following objectives:
- To promote good and fair practices by setting minimum standards in dealing with borrowers;
- To increase transparency so that the borrower can have a better understanding of what they can reasonably expect of the services;
- To promote a fair and cordial relationship between borrower and the Company.
This Code shall apply to all employees of the Company and other persons authorized to represent it in the course of its business, whether the products and services are provided across the counter, over the phone, by post, through interactive electronic device, on the internet or by any other method. This code will also be displayed on the notice board in all the branches and also on the website of the Company.
The Company shall adhere to this Code to act fairly and reasonably in all dealings, on the ethical principle of integrity and transparency, to meet the standard practices prevalent in the industry.
The Company shall provide clear information, without any ambiguity, to the borrowers in understanding:
- the products and services together with its terms and conditions including interest and service charges;
- the benefits available to borrower.
The Company shall deal quickly and sympathetically in attending to the borrower's complaints considering the objectives of this Code.
The Company shall treat all personal information of borrowers as private and confidential and shall not divulge any information to third person unless required by any law or Government authorities including Regulators or Credit agency or where the sharing of information is permitted by the borrower.
The Company shall not discriminate its borrowers on race, caste, gender, marital status, religion or disability. However, the restrictions, if any, as mentioned in the loan products shall continue to apply.
The Company shall refrain from interference in the affairs of the borrowers 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).
The Company shall provide information on interest rates, common fees and charges through:
- Putting up notices in branches
- Through telephones or help lines
- Through designated staff/help desk
- Providing service guide/tariff schedule
- Publishing on the website of the Company
The Company shall ensure that all advertising and promotional material is clear and not misleading. The Fair Practice Code shall also apply to sales associates / representatives of the company to the extent of their identification when they approach the borrower for selling products personally. In case of any advertisement in any media and promotional literature that draws attention to a service / product and its interest rate, the Company shall also provide the details of other fees or charges, if any.
The Company would give information about borrowers to credit reference agencies on:
- Opening of an account
- The borrower fallen behind with his/her payments and the performance of loan account which includes how much loan has been sanctioned and the subsequent performance
- Legal proceedings have been initiated against the borrower to recover the dues
- Debts settled through legal recourses against the borrower
The Company may give credit reference agencies other information about the borrower's account if law requires it or the borrower has given them his/her permission to do so.
The Company shall explain the requirements of KYC guidelines to its borrowers and inform them about the documents required for establishing the identity of the borrower before loan sanctioning, account opening and operation. The Company shall also put the KYC requirements and filling up the same on Company website www.iifl.com for the benefit of the borrowers.
The Company shall obtain only such information to meet with company's KYC, Anti-Money Laundering or any other statutory requirements. In case any additional information is asked for, it will be sought separately and shall specify the objective of obtaining such additional information.
Applications for loans and its processing:
- All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
- Loan application forms issued by 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 shall indicate the documents required to be submitted with the application form.
- The Company shall give acknowledgement for receipt of all loan applications. The time frame within which loan applications will be disposed would also be indicated in the acknowledgement. The Borrower may contact the borrower service team to obtain an update on the status of the application.
- If the Company cannot provide the loan to the borrower, it shall communicate the same to the borrower through its appointed representatives or directly to the borrower verbally. In case the borrower requires the same in writing the reason(s) for rejection may be provided in writing.
Loan appraisal and terms and conditions:
- The Company shall convey in writing to the borrower in the vernacular language as understood by the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions. The said letter shall include annualised rate of interest and method of application thereof. The Company shall keep the acceptance of these terms and conditions by the borrower on its record.
- The Company shall mention the penalties charged for late repayment in bold in the loan agreement.
- Penalty, if charged, for non-compliance of material terms and conditions of 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 cXXXapitalization of penal charges i.e., no further interest computed on such charges. However, this will not affect the normal procedures for compounding of interest in the loan account.
- The Company shall not introduce any additional component to the rate of interest and ensure compliance in both letter and spirit. The quantum of penal charges shall be reasonable and commensurate with the non-compliance of material terms and conditions of loan contract without being discriminatory within a particular loan / product category.
- 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.
- A copy of the loan agreement along with a copy of each of all enclosures quoted in the loan agreement would be furnished to all the borrowers at the time of sanction / disbursement of loans.
- The Company shall have a built-in re-possession clause in the contract/loan agreement with the borrower which must be legally enforceable (in case of vehicle financing).
- The terms and conditions of the contract/loan agreement in case of vehicle financing shall also contain following provisions:
- Notice period before taking possession
- Circumstances under which the notice period can be waived
- Procedure for taking possession of the security
- Provision regarding final chance to be given to the borrower for repayment of loan before the sale / auction of the property
- Procedure for giving repossession to the borrower
- Procedure for sale / auction of the property
- The loan agreement for lending against gold shall disclose details regarding auction procedure. The Company shall follow transparent auction procedure in case of nonrepayment with adequate prior notice to the borrower. The auction shall be announced to the public by issue of advertisements in at least two newspapers, one in vernacular language and another in national daily newspaper.
Disbursement of loans including changes in terms and conditions:
- The Company would give notice to the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. The Company shall also ensure that the changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement.
- Decision to recall / accelerate payment or performance under the agreement would be in consonance with the loan agreement.
- All the securities offered by the borrower shall be released 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 that 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.
In case of receipt of request from the borrower for transfer of 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 request. Such transfer shall be as per transparent contractual terms in consonance with law.
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).
Whenever loans are given, the Company would explain to the borrower the repayment process by way of amount, tenure and periodicity of repayment. However, if the borrower does not adhere to repayment schedule, a defined process in accordance with the laws of the land shall be followed for recovery of dues. The process will involve reminding the borrower by sending him/her notice or by making personal visits and / or repossession of security, if any. The Company staff or any person authorized to represent the company in collection of dues or/and security repossession shall identify himself / herself and display the authority letter issued by the Company, and upon request display his/her identity card issued by the Company or under authority of the Company. The Company shall provide the borrowers with all the information regarding overdue. The Company shall not resort to undue harassment viz; persistently bothering the borrowers at odd hours, use muscle power for recovery of loans etc. and also ensure that the staff are adequately trained to deal with the borrowers in an appropriate manner.
During visits to borrower's place by the person authorized by the Company for dues collection or/and security possession/repossession the following guidelines shall be followed:
- Borrower would be contacted ordinarily at the place of his / her choice absence of any specified place at the place of his / her residence and if at his / her residence, at the place of business / occupation.
- Identity and authority to represent the Company shall be made known at the first instance.
- Borrower’s privacy should be respected.
- Interaction with the borrower shall be in a civil manner.
- The Company shall strictly ensure that the Company representative or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends or sending inappropriate messages either on mobile or through social media or making threatening and/ or anonymous calls or persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc.
- Time and number of calls and contents of conversation would be documented.
- All assistance should be given to resolve disputes or differences in a mutually acceptable and orderly manner.
- During visits to borrower’s place for dues collection, decency and decorum shall be maintained.
The Company shall inform the borrower in the event of closure/shifting of its branch offices.
Borrowers should be able to access the Company through any of the following means:
- Walk-ins to branches (as mentioned in Company brochure/website/any other leaflet)
- Telephone, fax, email id and website (as mentioned in Company brochure/website/any other leaflet)
A review of compliance of the Fair Practices Code and the functioning of the grievance redressal mechanism would be done by the management at regular intervals and a consolidated report of such reviews shall be submitted to the Board of Directors on a half-yearly basis. An updated copy of the Code shall be displayed on the Company’s website. A consolidated report on the compliance of the Fair Practices Code shall be presented to the Board of Directors periodically for its review.
The Company shall strive for borrower satisfaction within the framework of law, adopted policies and procedures. Such a mechanism ensures that all disputes arising out of the decisions of lending institutions’ functionaries are heard and disposed of at least at the next higher level. The Company’s Grievance Redressal Procedure has been displayed on the Company website www.iifl.com and may be referred to for details pertaining to grievance redressal process and escalation matrix.
In line with RBI Circular DNBR. PD.CC. No. 090/03.10.001/2017-18 dated November 09, 2017, Company’s existing Grievance Redressal Mechanism shall also deal with the complaints relating to services provided by the Outsourced agency
In accordance with the Ombudsman Scheme for Integrated Ombudsman Scheme, 2021 (‘Scheme’), every NBFC is required to appoint a Nodal Officer / Principal Nodal Officer. In line with the requirements, the Company has designated Mr. Amlan Singh as the Principal Nodal Officer (‘PNO’) for receiving and addressing complaints from borrowers in a fair and expeditious manner. The contact details of the Principal Nodal Officer and the Ombudsman are available on the Company website www.iifl.com along with the Scheme. The PNO shall be responsible, inter alia, for representing the Company before the Ombudsman and the Appellate Authority under the Scheme.
To ensure that the borrowers are not charged excessive interest rates and charges on loans and advances by the Company, the Board of the Company has adopted a Policy on Interest Rate Model and Policies & Procedures on Determining Interest Rates. The same has been displayed up on the Company’s website www.iifl.com.
While lending to individuals against gold jewellery, the Company shall adopt the following in addition to the general directions as above:
- 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 borrower before extending any loan
- Proper assaying procedure for the jewellery received
- Internal systems to satisfy ownership of the gold jewellery
- Adequate systems for storing the jewellery in safe custody, reviewing 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. Normally, such loans shall not be extended by branches that do not have appropriate facility for storage of the jewellery
- The jewellery accepted as collateral shall be appropriately insured
- Transparent auction procedure in case of non-repayment with adequate prior notice to the borrower
There shall be no conflict of interest and the auction process must ensure that there is arm’s length relationship in all transactions during the auction including with group companies and related entities:
- The auction shall be announced to the public by issue of advertisements in at least two newspapers, one in vernacular and another in national daily newspaper
- As a policy, the Company themselves shall not participate in the auctions held
- Gold pledged shall be auctioned only through auctioneers approved by the Board
- 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 loan agreement shall also disclose details regarding auction procedur
- The Company will insist on a copy of the PAN Card of the borrower for all transaction above Rs.5 lakhs
- Documentation across all branches shall be standardized
- The Company shall not issue misleading advertisements like claiming the availability of loans in a matter of 2-3 minutes
The Company shall not discriminate in extending products and facilities including loan facilities to physically / visually challenged applicants on 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.
As regards microfinance loans, the Company shall conduct its operations in adherence to the requirements set out below in compliance with Master Direction - Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022.
- At the time of origination of each microfinance loan, the loan applicant shall be provided with the choice of weekly, fortnightly, or monthly repayment periodicity.
- The Company shall have a well-documented interest rate model/ approach for arriving at the all-inclusive interest rate. The Company shall prominently display the minimum, maximum and average interest rates charged on microfinance loans in all its offices, in the literature (information booklets/ pamphlets) issued by it and details on its website.
- Any change in interest rate or any other charge shall be informed to the borrower well in advance and these changes shall be effective only prospectively.
- The Company shall disclose pricing related information to a prospective borrower in a standardized simplified factsheet as per prescribed format.
- Any fees to be charged to the microfinance borrower by the Company and/ or its partner/ agent shall be explicitly disclosed in the factsheet. The borrower shall not be charged any amount which is not explicitly mentioned in the factsheet.
- The Company shall not charge any pre-payment penalty on microfinance loans. Penalty, if any, for delayed payment shall be applied on the overdue amount and not on the entire loan amount.
- There shall be a standard form of loan agreement for microfinance loans in a language understood by the borrower.
- The Company shall provide a loan card to the borrower which shall incorporate the following requirements. All entries in the loan card shall be in a language understood by the borrower:
- Information which adequately identifies the borrower;
- Simplified factsheet on pricing;
- All other terms and conditions attached to the loan;
- Acknowledgements by the Company of all repayments including instalments received and the final discharge; and
- Details of the grievance redressal system, including the name and contact number of the nodal officer of the Company.
- Issuance of non-credit products shall be with full consent of the borrowers and fee structure for such products shall be explicitly communicated to the borrower in the loan card itself.
- Trainings, if any, offered by the Company to its borrowers shall be free of cost. All 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 Company’s field staffs shall be trained to make necessary enquiries to existing debt of the borrowers.
- The Company shall be accountable for preventing inappropriate staff behaviour and timely redressal of the grievances of the borrower. The above declaration shall also be made in the loan agreement given to the borrower and also in the Code displayed in its office/branch premises and on Company’s website.
- Recovery shall be made at a designated/ central designated place decided mutually by the borrower and the Company. However, field staff shall be allowed to make recovery at the place of residence or work of the borrower if the borrower fails to appear at the designated/ central designated place on two or more successive occasions. Company or its agent shall not engage in any harsh methods towards recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
- Use of threatening or abusive language
- Persistently calling the borrower and/or calling the borrower before 9:00 a.m. and after 6:00 p.m.
- Harassing relatives, friends, or co-workers of the borrower
- Publishing the name of borrowers
- Use or threat of use of violence or other similar means to harm the borrower or borrower’s family/ assets/ reputation
- Misleading the borrower about the extent of the debt or the consequences of non-repayment
- Any engagement of recovery agency, which shall, inter alia, cover individuals involved in the recovery process shall be in accordance with the due diligence process stipulated in the policy approved by the board of directors of the Company. The Company shall ensure that the recovery agents engaged by it carry out verification of the antecedents of their employees engaged in recovery, which shall include police verification. Re-verification of antecedents such employees shall be performed on an annual basis.
- To ensure due notice and appropriate authorisation, the Company shall provide the details of recovery agency to the borrower while initiating the process of recovery. Company shall direct the recovery agency to ensure that its employees engaged in recovery also carry a copy of the notice and the authorisation letter from the Company (which, among other details, also include the contact details of the recovery agency and the Company) along with the identity card issued to him by the Company or the agency. Where the recovery agency is changed by the Company during the recovery process, the Company shall notify the borrower of the change and apply the foregoing requirements on the new agency.
- The up-to-date details of the recovery agencies engaged by the Company shall be published on the Company’s website.
Where the Company sources or originates loans through digital lending platform(s) then the following additional steps shall be taken by the Company:
- The names of all digital lending platforms engaged as agents shall be disclosed on the Company’s website.
- 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 him.
- Immediately after sanction but before execution of the loan agreement, the sanction letter shall be issued to the borrower on the Company’s letterhead.
- A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans.
- Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the Company.
- Adequate efforts shall be made towards creating awareness about the Company’s grievance redressal mechanism.
The Company reserves the right to amend / alter / modify the codes as mentioned herein above and provide updates from time to time, not affecting / sacrificing the underlining spirit of the code. Such alternation / amendments may be displayed at the notice boards of the branches / Corporate Office / website of the Company for the benefit and information of the borrower.
This Code may be amended, modified or supplemented from time to time. The Code shall be reviewed every year by the Board of Directors of Company or whenever there is a significant change in law governing the subject matter of the Code.