Policies & Practices

Credit Service

Code of Conduct

Preamble

 

This Code of Conduct (CoC) aims at promoting and advancing ‘responsible lending’ practices in the micro-credit.

Ensuring that customer’s interests are prioritized and protected, and micro-credit does not harm the customer’s well-being is at the heart of ‘responsible lending. In the context of micro-credit customers, much of academic work, business practices and regulatory directions, globally and in India, broadly converge to core principles of fair treatment, suitability, transparency, privacy and grievance redressal.

Building on this knowledge, industry’s own experience of CoC over the year and evolving landscape of micro-credit in the country, this CoC continues to focus on ‘responsible lending’ practices towards the customer. Given that customers of micro-credit may not always fully understand the product and its impact, it is imperative that Providers take greater responsibilities to ensure that customers’ interests are protected.

Responsible lending behaviour and practices are greatly influenced by Provider’s policy with respect to employees and corporate governance. Therefore, employee engagement and corporate governance are two key pillars to achieve customer welfare and CoC includes them in its ambit.

Notes

  1. Applicability
  2. This CoC applies to all Providers of micro-credit, where
  • Micro-credit is defined and understood as per RBI definition of ‘qualifying assets’ for the NBFC- MFIs1. It is clarified that all loan accounts under ‘qualifying assets’ criterion, i.e. first cycle and subsequent cycle loans, top-up loans and loans provided for purchase of third-party products, are covered by CoC.
  • Provider is defined as a legal entity, which provides micro-credit as per RBI norms under ‘qualifying assets’ criterion for NBFC-MFIs.

 

  1. For Providers who are members of the Self-regulatory Organization (SRO2), CoC is obligatory to follow and necessary condition for the membership. Other Providers are strongly encouraged to voluntarily adopt the CoC as an industry standard.

 

  1. As micro-credit is the key product offered by Providers to low-income market segments, focus on the CoC is ‘responsible lending practices. However, underlying principles of customer protection (fair treatment, suitability, transparency, privacy and grievance redressal) can very well applied to other financial products offered by the Providers.

 

  1. Providers are required to adhere to many legal and regulatory requirement as required by the RBI, SEBI, IRDA, Central & State Government Acts etc across range of issues. It may be noted that CoC is in addition to these compliances and does not substitute them.
  2. Changes to previous edition and alignment with CRL
  3. CoC is a revision of the previous edition of CoC and therefore most of the elements which are central to customer welfare are kept intact. These are, however, re-drafted and re-structured for better clarity. Some of the clauses which were ‘not in conformity’ with the existing regulations or found to be repetitive or not contributing to responsible lending practices, are taken off. Given the importance of employee engagement and corporate governance, these two parts are more elaborately drafted and have many new additions.
  1. It may be noted that part on Customer Engagement is largely aligned with the Code for Reasonable Lending (CRL) and any additions to CRL are highlighted in blue and italics.

Code of Conduct

  1. Customer Engagement
  2. Fair Interaction
    1. Provider must ensure that customer is not unfairly discriminated against on grounds such as religion, caste and marital status and sexual orientation etc.

 

  1. Provider must ensure that all employees and persons acting on its behalf.
  • Use respectful language, maintain decorum and are respectful of social and cultural sensitives
  • Do not use coercion of any sort to make recovery of loans and take recovery only at a central designated place. Employee take recovery at the place of residence or work of the customer only if customer fails to appear at central designated place on two or more successive occasions
  • Do not intimidate or humiliate verbally or physically
  • Do not contact customers at odd hours or at inappropriate times such as bereavements, illness, social occasions such as marriages and births

 

  1. Suitability (avoid multiple/over-lending)
    1. Provider must assess customer’s financial situation (income and expenses), credit requirement, repayment capacity and indebtedness based on information from the customer, Credit Information Report (CIR) and field level intelligence before disbursing a loan.

 

  1. Provider must use a valid3 CIR before sanctioning any loan. It is clarified that CIR must be used before disbursing all loans including small value top-up loans, second and subsequent cycle loans.

 

  1. Provider must disburse the loan commensurate with the customer’s ability to repay. While disbursing a loan, Provider must ensure that:
  • It does not become the fourth lender to a customer if a customer has active loans from three (3) different Providers. NBFC-MFIs are additionally required to ensure that not more than 2 NBFC-MFIs lend to a customer4. Provider must verify the lender count (i.e. number of Provider) to the customer using a valid CIR prior to sanction of the loan.
  • It does not breach the total indebtedness of Rs 100,000 per customer. Provider must verify the total indebtedness to customer factoring un-secured microfinance loans (individual as well as group) captured in the microfinance section of the Credit Information Report (prior to sanctioning of the loan)5.
  • It does not sanction/disburse a loan to customer who has non-performing (delinquency > dpd 90 days6) accounts with loan amount outstanding > Rs 1,000 with another Provider7.
  1. Education & Transparency
    1. Provider must provide the key information to the customer and include them in the loan documents such as loan application, loan sanction letter/loan agreement and loan card. This must include:
  • Identity and address of Provider
  • Identify and address of the customer
  • Product details (loan amount, tenure, repayment frequency, annualised interest rate on reducing balance method8, processing fee, any other charges or fees howsoever described, total amount payable, total charges recovered towards premium of credit- linked life insurance cover, coverage amount and risks covered, if applicable and other key terms and conditions)
  • Details of customer grievance redressal system

 

  1. Providers must communicate all the terms and conditions to customers in the official regional language or language understood by them.

 

  1. Provider must provide a receipt for every payment received from the customer.

 

  1. Provider must take measures (such as training, assessment and periodic interactions with customers) to ensure that customer fully understands the products, process and terms of the contract including grievance redressal mechanism and potential risks associated with digital financial transactions and their safeguards.

 

  1. Provider must disclose the reason to customer if her loan is rejected. For this purpose, acknowledgment of loan application given to customer should carry Provider’s CGRM number and TAT, so that customer can reach out to Provider. Please refer to Annex for details of disclosure requirements in branches and loan documents.

 

  1. Provider must make customer aware about blind trust with group and centre leader and how any default in the fictitious loan taken by group/centre leader in customer’s name can ruin her credit records and access to credit in future. This should be part of Compulsory Group Training (CGT)/Group Recognition Test (GRT) process. Provider must enforce customer attendance in the group meetings.

 

  1. Information & Privacy
  2. Provider must obtain copies of KYC documents from customers as per RBI norms.

 

  1. Provider must upload accurate and comprehensive customer data with all RBI approved CICs as per Uniform Credit Data Format on a weekly basis.

 

  1. Provider must promptly address any dispute raised by the customer about her data with CICs.

 

  1. Provider must keep personal customer information strictly confidential. Customer information may be disclosed to a third-party subject to any of the following conditions:
  • Such information is required to be provided under the law or it is provided for a mandated business purpose (for example, to credit information companies).
  • Customer has been informed about such disclosure and prior permission has been obtained in writing.
  • The party in question has been authorized by the customer with intimation to the Provider to obtain customer information

 

  1. Provider must take customer’s consent for loan application, checking her CIR and accepting terms and conditions of loan. For every product availed by customer, credit as well as insurance or any other product, separate customer consent should be taken.
  2. Grievance Redressal 9
    1. Providers must provide a robust customer grievance redressal system to address customer complaints in an effective and timely manner. Provider must provide an easy access to CGRM through dedicated a phone-number or a staff assisted procedure at the branch to register customer grievances.

 

  1. Providers must clearly communicate the details of customer grievance redressal in branches, loan documents and other communication materials. Please refer to Annex disclosure requirements.

 

  1. Providers must have least one Grievance Redressal Officer to over-see the CGRM and make his/her contact details (e-mail, phone number) accessible to customers.

 

  1. Provider must assure customer that she will be treated fairly despite the grievance being lodged.
  2. Others10
  3. Provider must charge the customers in line with relevant RBI Directions.

 

  1. Provider, offering any third-party sell (non-micro-credit product) to customer, must clearly disclose all necessary details of such product (pricing, benefits, warranties, exclusions). Provider must ensure that customer is not forced to buy any such product as a pre-condition to access micro-credit or vice versa. There should be a minimum time gap of one month between the disbursement of the primary credit product and the credit for financing the third- party sell or vice versa.

 

  1. Provider, offering credit-linked life insurance to customer, must clearly disclose all necessary details as under:
  • Name of insurer
  • Policy number
  • Individuals covered
  • Premium paid
  • Coverage amount
  • Period/term of coverage
  • Events covered
  • Exceptions: terms related to pre-closure, loan rescheduling and loan default etc.
  • Process to file claims (documents required, TATs etc.)
  • Grievance process for insurance
  • Other key conditions

 

  1. Provider, who have underlying digital (i.e. paper-less) process for sourcing (loan application), customer consent, due-diligence, contracts, disclosures, payment receipts, grievance redressal etc, must ensure that process are aligned with relevant regulatory norms and customer is made fully aware, educated and comfortable with digital modes.

 

  1. Provider, if withdrawing operations from an area, must make alternate arrangement to service the existing loans of the customers.

 

Provider must establish direct contact with the customers, avoiding any influential intermediaries such as group or centre leader. Provider must regularly rotate their group/centre leaders to restrain the disproportional influence of leaders in the group.

 

  1. Employee Engagement
  2. Recruitment
    1. Provider must not discriminate a candidate for recruitment based on gender, religion, caste, marital status and sexual orientation etc.

 

  1. Provider must select candidates based on merit, ethics and integrity.

 

  1. Provider must recruit a candidate from other Provider based on the satisfactory relieving letter or reference check. However, if reference check is not responded in 15 calendar days (from date of sending the requests), Provider may go ahead with the recruitment.

 

  1. Provider must honour the notice period as mutually agreed between employer and employee.

 

  1. Provider are encouraged to participate in Employee Bureau to submit their employees’ data and check candidate’s employment records.

 

  1. Provider, recruiting branch-level employee from other Provider, should position such employee at least 50 km away from location of his/her last posting (i.e. location of branch where employee was last posted).
  2. Orientation (training and appraisal)
    1. Provider must give comprehensive induction training to the employees on policies, processes, regulations, as well as CoC. Emphasis should be given on customer-interface aspect such as fair treatment, credit assessment, privacy of data, service quality, CGRM, dealing with customer facing difficulty in repayment etc.

 

 

  1. Provider must regulatory assess employees’ understanding of above elements and conduct refresher training to address the gaps in understanding.

 

  1. Provider must train their employees on understanding and dealing with gender issues including do and don’ts of interaction with women customers.

 

  1. Provider must necessarily orient their employees on professional conduct and integrity issues including expected behaviour and not indulging in any unlawful and anti-social activities.

 

  1. Provider must engage new employees in the branch-level business operations only after completion of induction training11.

 

  1. Provider must ensure that employees directly responsible for CGRM receive detailed training about the system, processes and soft skills for resolving the complaints.

 

  1. Provider must institute an incentive and appraisal structure in such a way that it does not lead to perverse sales behaviour, factor for the service quality, customer engagement and reward compliance with the CoC and penalize breach of the CoC.

 

  1. Providers must set sales target for the branch-level employees based on a reasonable- objective criterion including understanding of micro-credit requirement in an area.

 

  1. Well-being
    1. Provider must ensure the well-being (for example, adequate remuneration, working hours, working conditions, leaves for personal reasons such as family commitments and emergencies) and security of employee is given due importance.

 

  1. Provider must have well-defined protocol to be followed by employee to handle risks arising from going to difficult area and cash-handling. Provider must indemnify the employees for cases where protocol has been followed but mishap still occurred.

 

  1. Provider must not collect shortfalls in collections from employees unless in proven cases of frauds by employees.

 

  1. Provider must create conducive professional environment for both genders to work and grow.

 

  1. Provider must have a process to address the grievances of the employees and provide counselling.

 

  1. Provider must complete the relieving formalities (including final settlement of pending dues) of the employees as per internal policy in a reasonable timeframe. Request from prospective employer for reference check should be responded within 15 calendar days from receipt of the communication.

 

 

 

  1. Corporate Governance
  2. Policies, Strategic Directions & Oversight
    1. Provider must align relevant polices such as Fair Practices Code (FPC), Product development, Operational, Human Resources, CGRM, Internal Audit, Information & Technology etc to clauses stipulated in the CoC. Specifically,
    2. Provider must have clearly defined guidelines for employee interaction with customers. This must include policy to deal with aberrations from the guidelines.
    3. Provider must have a board approved CGRM policy covering process to register, resolve and escalate the complaints, internal and external escalation mechanism, complaints categories and TAT, review/audit of CGRM and reporting to Board and top management.
    4. Providers must have a section in Credit policy to deal with delinquencies at the customer level including rescheduling of loans for customer who is facing difficulty in repayment of loans on account of loss of business assets, loss of earning members of the family, natural disasters or other emergencies.
    5. Provider must have a Board approved framework to deal with crisis arising from natural disasters, mass defaults, negative media, local-level hostility etc.
    6. Provider must have a policy to safeguard customer’s data (capturing, transmitting, storing) covering the universally accepted principles of data protection as under:

›       collection limitation

›       purpose specification

›       use limitation

›       data minimisation

›       preservation of data quality

›       breach-notification

›      Incorporation of access controls

›       Encryption of data wherever feasible.

›       Incorporation of Data protection impact assessments to actively identify and mitigate threats to personal data and undertaken periodically.

 

  1. Provider must get all key policies at-least annually reviewed and updated by the Board.

 

  1. Provider must align processes with the updated policies.

 

  1. Provider must assess its product offering through multi-dimensional lens including its impact on the well-being of customers (such as increasing income, access to assets, reducing drudgery, improving skills etc).

 

  1. Provider must develop their business plans based on both supply and demand side factors including current supply of micro-credit and need and repayment capacity of customers in an area. Data available from CICs should be used to understand the supply and repayment behaviour of a geography. Geographies which saturated, should be avoided or approached with utmost caution.

 

 

 

  1. Provider must conduct at-least an annual assessment of its performance (adherence and well as lapses) vis a vis CoC and discuss the report at Board and top Management level. The reports must disclose the methodology used for evaluating the performance. Where feasible, Provider should explore to undertake such assessment through an external agency.

 

  1. Provider must record and analyse individual and aggregate level data for CGRM capturing nature of complaints, action taken and turn-around time. Report on grievances received, resolved and pending along with nature of complaints should be shared with the Board for review.

 

  1. Risk Management & Internal Audit
    1. Provider must have a well-laid out risk management framework to identify key credit and operational risks (concentration, excess supply, political, people) and steps to mitigate them.

 

  1. Provider must audit the branches, customer, employees, process and system to check adherence with the elements described in CoC.

 

  1. Provider must undertake the regular audit to capture instances of lending breaching the norms on total indebtedness, lender count and lending to customer having a delinquent account with another Provider. For this purpose, Provider may use data available from CICs to capture adherence with the norms of total indebtedness and Provider count per customer.

 

  1. Provider must develop specific internal controls to identify and avoid intermediaries in the lending process and system. For example, direct connect with customers, pre-disbursement confirmation calls to customers, loan utilization checks, regular rotation of group/centre leaders, and customer verification during internal audit.
  2. Industry Cooperation
    1. Provider must share data and information required by the SROs to understand industry level practices, research etc. For this purpose, Provider must identify a focal person to coordinate with the SROs.

 

  1. Provider must cooperate amongst themselves to deal with industry-level issues.

 

Annexure: Disclosure to customers

 

  1. Office

Provider’s office (Head/Regional/Zonal) should have following 'disclosure to customers'.

 

Sl no

Disclosure requirements

Drawn from

(clause/page no)

1

Fair Practices Code (FPC) of the Provider which is aligned with RBI's FPC in                   RBI FPC, 2.B.i.a (p 9) vernacular language

2

The effective rate of interest charged

RBI FPC, 2.B.i.e (p 9)

3

Declaration that Provider will be accountable for preventing inappropriate                   RBI FPC, 2.B.i.f (p 9)

staff behaviour and timely grievance redressal

4

Commitment to transparency and fair lending practices

RBI FPC, 2.B.i.b (p 9)

5

Grievance Redressal System set-up by the Provider

RBI FPC, 2.B.i.e (p 9)

6

The name and contact details (Telephone / Mobile nos. as also email                 RBI FPC, 2.A.vi.a (p 6) address) of the Grievance Redressal Officer who can be approached by the

public for resolution of complaints against the Provider

7

If the complaint / dispute is not redressed within a period of one month,                  RBI FPC, 2.A.vi.b (p 6) the customer may appeal to the Officer-in-Charge of the Regional Office of

DNBS  of  RBI  (complete  contact  details),  under  whose  jurisdiction  the

registered office of the Provider falls

8

Ombudsman Scheme for NBFCs: Purpose and contact details of the Ombudsman to whom complaints are to be made12

RBI’s Ombudsman Scheme for NBFCs 2018,

Chapter IV, 15, 1 (p 13)

9

CoC in English and vernacular

CoC

10

Customer Grievance Redressal Mechanism (CGRM) of Provider as under:

CoC

I

Channels available to customers with Provider to register complaints

Ii

Escalation process

Iii

Expected Turnaround time at every level of escalation

Iv

SRO’s CGRM number if customer needs support in resolving complaint

11

Details of all loan products offered as under

CoC

I

Amounts

Ii

Annualised interest rate on a reducing balance basis

Iii

Processing fees

Iv

Tenure

V

Repayment frequency

Vi

Purpose

  1. Branch

Provider’s branch should have following 'disclosure to customers'

 

Sl no       Disclosure requirements                                                                                                   Drawn from

(clause/page no)

1

Fair Practices Code (FPC) of the Provider which is aligned with RBI's FPC in

vernacular language

RBI FPC, 2.B.i.a (p 9)

2

The effective rate of interest charged

RBI FPC, 2.B.i.e (p 9)

3

Commitment to transparency and fair lending practices

RBI FPC, 2.B.i.b (p 9)

4

Declaration that Provider will be accountable for preventing inappropriate

staff behaviour and timely grievance redressal

RBI FPC, 2.B.i.b (p 9)

5

Grievance Redressal System set-up by Provider

RBI FPC, 2.B.i.e (p 9)

6

The name and contact details (telephone/mobile nos and email address)

of the Grievance Redressal Officer who can be approached by the public for resolution of complaints against the Provider

RBI FPC, 2.A.vi.a (p 6)

7

If the complaint / dispute is not redressed within a period of one month, the customer may appeal to the Officer-in-Charge of the Regional Office of DNBS of RBI (complete contact details), under whose jurisdiction the

registered office of the Provider falls

RBI FPC, 2.A.vi.b (p 6)

8

Ombudsman Scheme for NBFCs: Purpose and contact details of the Ombudsman to whom complaints are to be made13

RBI’s Ombudsman Scheme for NBFCs 2018,

Chapter IV, 15, 1 (p 13)

9

CoC

CoC

10

Details of all loan products offered as under

CoC

i

Amounts

ii

Annualised interest rate on a reducing balance basis

iii

Processing fees

iv

Tenure

v

Repayment frequency

vi

Purpose

11

Pricing of loan involves only three components viz; interest charge,

processing charge and insurance premium (which includes administrative charges in respect thereof)

CoC

12

Customer Grievance Redressal Mechanism (CGRM) of Provider as under:

CoC

I

Channels available to customers with the Provider to register complaints

ii

Escalation process

iii

Expected Turnaround time at every level of escalation

iv

CGRM number and contact details of Provider's Customer Grievance

Redressal Officer

v

SRO’s CGRM number if customer needs support in resolving complaint

 

  1. Loan Application

Provider’s Loan Application should have following 'disclosure to customers'

 

Sl no       Disclosure requirements                                                                                                   Drawn from

(clause/page no)

1 

Necessary information which affects the interest of the borrower, so that                    RBI FPC, 2.A.i.b(p 3) a meaningful comparison with the terms and conditions offered by other

NBFCs can be made and informed decision can be taken by the borrower

2 

Documents required to be submitted with the application form                                    RBI FPC, 2.A.i.b(p 3)

3 

Acknowledgement for receipt of all loan applications. Preferably, the time                   RBI FPC, 2.A.i.b(p 3) frame within which loan applications will be disposed of should also be

indicated in the acknowledgement

4 

Following details of the product being offered to the customer

CoC

I 

Amounts

Ii

Annualised interest rate on a reducing balance basis

iii

Processing fees

iv

Tenure

v 

Repayment frequency

vi

Purpose

vii

Other terms and conditions of the loan

5

List of KYC documents to be submitted by customers                                                     CoC

6

Consent to check customer's credit data with credit information                                   CoC companies (CICs)

7

Written acknowledgement provided to the customers captures the CGRM                   CoC number of the Provider

 

  1. Loan Agreement

As per RBI FPC, Provider should provide a copy of loan agreement, preferably in vernacular, along with a copy each of all enclosures quoted in loan agreement, to customer in language understood by them, at the time of sanction/disbursement of loan, for each loan disbursed, stating all terms and conditions of the loan. Provider’s Loan Agreement should have following 'disclosure to customer'

 

Sl no       Disclosure requirements                                                                                                   Drawn from

(clause/page no)

1

Amount of loan sanctioned

RBI FPC, 2.A.ii(p 3)

2

Annualised rate of interest on a reducing balance basis

RBI FPC, 2.A.ii(p 3)

3

The NBFCs should give notice to the borrower in the vernacular language or a language as understood by the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. NBFCs should also ensure that changes in interest rates and charges are effected only prospectively. A suitable

condition in this regard should be incorporated in the loan agreement

RBI FPC, 2.A.iii.a (p 4)

4

All the terms and conditions of the loan

RBI FPC, 2.B.i (p 9)

5

Pricing of the loan involves only three components viz; the interest charge, the processing charge and the insurance premium (which includes the

administrative charges in respect thereof)

RBI FPC, 2.B.ii (p 9)

6

There will be no penalty charged on delayed payment

RBI FPC, 2.B.iii (p 9)

7

No Security Deposit / Margin is being collected from the borrower

RBI FPC, 2.B.iv(p 9)

8

Borrower cannot be a member of more than one SHG / JLG

RBI FPC, 2.B.v (p 9)

9

The moratorium period between the grant of the loan and the due date of the repayment of the first instalment (as guided by the NBFC-MFIs (Reserve

Bank) Directions, 2011

RBI FPC, 2.B.vi (p 10)

10

Assurance that the privacy of borrower data will be respected

RBI FPC. 2.B.vii (p 10)

11

Provider is accountable for preventing inappropriate staff behaviour and

timely grievance redressal

RBI FPC, 2.B.i.f (p 9)

12

No customer data will be shared with any third party without taking

customer consent unless required by regulations

CoC

 

  1. Loan Card

As per RBI Master Directions, Provider should provide loan card in vernacular language to the customer for every loan disbursed. Provider’s Loan Card should have following ‘disclosure to customers’

 

Sl no       Disclosure requirements                                                                                                   Drawn from Clause/Page

no

1

Commitment to transparency and fair lending practices as prescribed by

RBI

RBI FPC, 2.B.i.b (p 8)

2

The effective rate of interest charged

RBI FPC, 2.B.ii.c.i (p 10)

3

All the terms and conditions of the loan

RBI FPC, 2.B.ii.c.ii (p 10)

4

Information which adequately identifies the borrower

RBI FPC, 2.B.ii.c.iii (p 10)

5

Acknowledgement of all repayments including instalments received and

the final discharge

RBI FPC, 2.B.ii.c.iii (p 10)

6

If the loan is classified as “Qualifying Asset”

RBI FAQ14

7

Prominently mention the grievance redressal system set up by the Provider

and also the name and contact number of the nodal officer

RBI FPC, 2.B.ii.c.iv (p 10)

8

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

fee structure shall be communicated in the loan card itself

RBI FPC, 2.B.ii.c.v (p 10)

10

Grant of loan is not linked to any other product /services offered by the

Provider or third-party

CoC

11

Pricing of the loan as under

›       Processing fee

›       Annualised interest rate on a reducing balance basis

›       Insurance premium collected towards credit-linked life insurance

CoC

12

No penalty is charged on delayed payment or pre-payment

CoC

13

SRO’s CGRM number if customer needs support in resolving complaint

CoC

14

Coverage amount in credit-linked life insurance and period/tenure of

coverage

CoC

 

References

 

1 https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9827

2 SRO are defined as Industry Associations which are recognized by the RBI as SRO for the NBFC-MFIs as per RBI in accordance with RBI press-release https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=30052

3 CIR is considered as ‘valid’ for 15 calendar days from the date of extraction of the CIR. This implies that Provider needs to disburse a loan to the customer within 15 calendar days from date of extracting her CIR.

4 As per the RBI Directions for the NBFC-MFIs

5 Loan, if any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a customer

6 If customer contests on her delinquent account status in CIR or share that her delinquent account is attributed to withdrawn/closure of operation of micro-credit Provider in her area, Provider must support her to resolve the issues by contacting with CICs, relevant Providers or the SROs, as required.

7 Exception to this is available to loans affected by natural calamities and are qualified under RBI Guidelines for Relief        Measures in areas affected by Natural Calamities for   Banks and NBFCs https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11394&Mode=0, https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10531

8 NBFC-MFIs are required to follow the RBI Directions with respect to pricing including interest rate and processing fee

9 Provider may refer to RBI’s FPC (https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9823) for NBFCs for further details on CGRM.

10 All points covered under ‘others’ are additional points to CRL

11 as detailed in II. b.1

12 This is currently applicable to NBFCs with assets size > Rs 100 Cr or above with customer interface

13 This is currently applicable to NBFCs with assets size > Rs 100 Cr or above with customer interface

14 https://m.rbi.org.in/Scripts/FAQView.aspx?Id=102

 

 

 

 

 

 

 

 

 

 

 

Code of Responsible Lending

I.Introduction

Over the last two decades, the micro-credit sector has successfully mainstreamed itself as a key delivery channel to provide credit to low-income households. Currently a wide range of Providers such as NBFC-MFIs, Banks, SFBs, NBFCs and Non-profit/Section 8 MFIs, under different regulatory framework, provide micro-credit to over 4 crore customers from low-income households.

A microfinance customer as defined by the RBI (for NBFC-MFIs) is a person with an annual household income of Rs 1 lakh in rural India and Rs 1.6 lakhs in urban India. One fundamental challenge for the micro-credit sector today is that microfinance customer is served by differently regulated entities with no uniform regulation. With the multiplicity of sources of credit to the microfinance customers and without a uniform regulation, safeguarding the interests of low-income-customers, who are generally quite vulnerable, is becoming increasingly challenging. Clearly, uniform rules across the Providers, on customer-centric issues such as transparency and multiple/over-lending are important to ensure that power of micro-credit can reach its intended objectives in a responsible and nurturing way.

For this purpose, a meeting of all Providers of micro-credit was called to agree and adopt a uniform- common code for customer-conduct in micro-credit. This code is titled ‘Code for Responsible Lending (CRL) in Micro-credit’.

This document defines the elements of Code for Responsible Lending (CRL) which is sector specific and entity agnostic. Building on key regulatory customer-protection measures as described in RBI Master Directions for NBFC-MFIs, RBI Fair Practice Code for Banks and NBFCs, Industry Code of Conduct and RBI Charter of Customer’s Rights in the context of micro-credit sector, CRL includes most critical elements which are required to be adopted by Providers while delivering micro-credit loan.

This code is applicable to unsecured micro-credit loans1 given under individually or group liability to microfinance segment2 by all Providers3.

 

II.      Code

This code applies to the delivery of micro-credit to customers, individually or in groups either on its own or through an agent by Providers. Code has five elements:

  1. a.       Fair Interaction
  2. b.       Suitability
  3. c.       Education & Transparency
  4. d.       Information & Privacy
  5. e.       Grievance Redressal

 

  1. a.      Fair Interaction 
    1. Provider must ensure that customer is not unfairly discriminated against on grounds such as religion, caste, marital status and sexual orientation.
    2. Provider must ensure that all employees and persons acting on its behalf.
  • Use respectful language, maintain decorum and are respectful of social and cultural sensitives
  • Do not use coercion of any sort to make recovery of loans
  • Do not intimidate or humiliate verbally or physically
    • Do not contact customers at odd hours or at inappropriate times such as bereavements, illness, social occasions such as marriages and births

 

  1. b.     Suitability (avoiding multiple/over lending) 
    1. Provider must assess customer’s financial situation (income and expenses), credit requirement, repayment capacity and indebtedness based on information from the customer, Credit Information Report (CIR) and/or field level intelligence before disbursing a loan.
    2. Provider must use a valid4 CIR before sanctioning any loan. It is clarified that CIR must be used before disbursing all loans including small value top-up loans, second and subsequent cycle loans.
    3. Provider must disburse the loan commensurate with the customer’s ability to repay. While

disbursing a loan, Provider must ensure that:

  • It does not become the fourth lender to a customer if a customer has active loans from three

(3) different Providers (entity agnostic). NBFC-MFIs are additionally required to ensure that not more than 2 NBFC-MFIs lend to a customer5. Provider must verify the lender count (i.e. number of Provider) to the customer using a valid CIR prior to sanction of the loan.

  • It does not breach the total indebtedness of Rs 100,000 per customer. Provider must verify the total indebtedness to customer factoring un-secured microfinance loans (individual as well as group) captured in the microfinance section of the Credit Information Report (prior to sanctioning of the loan)6.
  • It does not sanction/disburse a loan to customer who has non-performing (delinquency > dpd 90 days7) accounts with loan amount outstanding > Rs 1,000 with another Provider8.

 

  1. c.      Education & Transparency 
    1. Provider must provide the key information to the customer and include them in the loan documents such as loan application, loan sanction letter/loan agreement and loan card. This must include:
  • Identity and address of Provider
  • Identify and address of the customer
  • Product details (loan amount, tenure, repayment frequency, annualised interest rate on reducing balance method9, processing fee, any other charges or fees howsoever described, total amount payable, total charges recovered towards premium of credit-linked life insurance cover, coverage amount and risks covered, if applicable and other key terms and conditions)
  • Details of customer grievance redressal system
  1. Providers must communicate all the terms and conditions to customers in the official regional language or a language understood by them.
  2. Providers must provide a receipt for every payment received from the customer.
  3. Providers must take measures (such as training, assessment and periodic interactions with customers) to ensure that customers fully understand the products, process and terms of the contract.

 

  1. d.     Information & Privacy 
    1. Provider must obtain copies of KYC documents from customers as per RBI norms.
    2. Providers must upload accurate and comprehensive customer data with all RBI approved Credit

Information Companies’ (CICs) as per Uniform Credit Data Format on a weekly basis.

  1. Provider must promptly address any dispute raised by the customer about her data with CICs.
  2. Provider must keep personal customer information strictly confidential. Customer information may be disclosed to a third-party subject to any of the following conditions:
  • Such information is required to be provided under the law or it is provided for a mandated business purpose (for example, to credit information companies)
  • Customer has been informed about such disclosure and prior permission has been obtained in writing
  • The party in question has been authorized by the customer with intimation to the Provider to obtain customer information

 

  1. e.      Grievance Redressal 
    1. Providers must provide a robust customer grievance redressal system to address customer complaints in an effective and timely manner.
    2. Providers must clearly communicate the details of customer grievance redressal in branches, loan documents and other communication materials.

 

III.    Governance & Enforcement

  1. CRL to be signed by the Chief Executive/ relevant Senior Management level of the Provider backed by a Board resolution of the company10.
  2. Provider adopting the CRL take the responsibility to align own policies and process to adhere with norms of CRL.
  3. Provider adopting the CRL take the responsibility to incorporate professional governance system to ensure that employees and persons acting on their behalf are oriented and trained to follow CRL into practice.
  4. Provider adopting the CRL voluntarily agree to governance & enforcement framework to ensure adherence of the CRL.
    1. Provider adopting CRL agree to assign a dedicated CRL Coordinator who will be the focal point to coordinate on CRL.
    2. The implementation of the CRL to be guided by the Steering Committee comprising of representatives from different Providers (NBFC-MFIs, SFBs, Banks, NBFCs and industry associations) as under:
  • Banks: 2 seats
  • SFBs: 2 seats
  • NBFC-MFIs: 2 seats
  • NBFCs: 1 seat
  • Industry Associations (IBA, FIDC, MFIN, Sa-Dhan): 1 seat each
  1. MFIN and Sa-Dhan to act as a facilitator for the implementation of CRL and the CRL Steering Committee.
  2. Steering Committee to have a Terms of Reference (ToR).
  3. Compliance would be based on three-pronged approach
  • Quarterly adherence report on/by Provider based independent data from a Credit Information Company (CIC) in a standard template11
  • Peer complaint system whereby Providers can bring forth the instances of non- compliances to the CRL Steering Committee.
  • Monitoring and assessment facilitated by the Steering Committee
  1. Based on changes in the regulations and data on industry and compliances, CRL to be reviewed by the CRL Steering Committee on a periodic basis.

 

 

References

1 For NBFC-MFIs, these loans come under ‘qualifying asset’ criterion

2 As defined by the RBI

3 Provider is defined as a legal entity, which provides micro-credit as per RBI norms under ‘qualifying assets’ criterion for NBFC-MFIs and provide their data to Credit Information Companies (CICs) under CICRA. Therefore, Provider includes entities such NBFC-MFI, SFB, Bank, NBFC, Section 8 Company etc.

4 CIR is considered as ‘valid’ for 15 calendar days from the date of extraction of the CIR. This implies Provider needs to disburse loan to customer within 15 calendar days from date of extracting her CIR

5 As per the RBI Directions for the NBFC-MFIs

6 Loan, if any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a customer

7 If customer contests on her delinquent account status in CIR or share that her delinquent account is attributed to withdrawn/closure of operation of micro-credit Provider in her area, Provider must support her to resolve the issues by contacting with CICs, relevant Providers or the SROs as required

8 Exception to this is available to loans affected by natural calamities and are qualified under RBI Guidelines for Relief       Measures        in       areas        affected        by       Natural        Calamities        for       Banks       and       NBFCs https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11394&Mode=0, https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10531

9 NBFC-MFIs are required to follow the RBI Directions with respect to pricing including interest rate and processing fee

10 Refer to Annexure for suggested formats for Board resolution and sign-up

11 Report from a CIC in a standard format (refer Annex) will capture data for all new loans disbursed by a Provider during the quarter for their adhere with standards of CRL with respect to a) number of Providers (≤ 3) per customer, b) total indebtedness of Rs 100,000 per customer and c) loans to customers who has non-performing (delinquency > dpd 90 days) accounts with loan amount outstanding > Rs 1,000 with another Provider, d) submission of comprehensive and timely data to CICs on a weekly basis

Client Grievance Redressal

Overview:

WeGrow being a financial service provider to the under-financed and the under-privileged sections of society, believes that client-servicing is the most important tool for sustained business growth. Organisation’s Grievance Redressal Policy articulates our objective to minimize instances that give rise to customer complaints and create a review mechanism to ensure consistently superior service behavior. The objective of the Grievance Redressal Mechanism is to provide clients with a convenient, simple, low cost and effective process for settlement of individual grievances. For the purpose of the policy, ‘Grievances’ means individual client grievance and includes all the matters related thereto.

Objective:

The objective of the policy is to ensure that:

  • All customers are treated respectfully, fairly and without bias at all times.
  • All issues raised by customers are dealt with courtesy, efficiency and are resolved in a timely manner.
  • Customers are made aware of their rights so that they can seek alternative remedies if they are not fully satisfied with our response or resolution of their complaint.
  • All employees will work in good faith with and without prejudice to the interest of the customers.

Registration of Complaints

In case of any complaints/grievances/disputes/quires, the customers can make use of the following Grievance Redressal Mechanism at various levels.

Level-I (At the Branch)

  • The customers can speak to respective officials for resolution of their issues
  • Register their grievance through the complaint book available in physical form.
  • They can drop their written complaint/grievance into Complaint Box which is kept in the prominent place of the branch office.
  • The customers can call phone numbers of local Branch Manager and Area Manager which are mentioned in Group Resolution Book for resolution of their issues.

 

 

Level-II (At Head Office)

If the customer is not satisfied with the response received from the branch or if the customer er doesn’t receive a response in 2 working days, they can call over the Help Desk Representatives available on the phone or write an email to the below mentioned e-mail id or post on Website to register their complaints.

Toll-Free Helpline Number: 1800 123 267 267 (Toll Free)

(Which is written on passbook)

Timing:  10 a.m. to 5 p.m. except Holiday, Sundays, 2nd and 4th Saturday of every month

E-mail: customer.support.wegrow@gmail.com

Website: www.wegrowindia.com

Level-III (At Head Office)

If the customer is not satisfied with the response from customer service helpdesk or if the customer does not receive a response within 3 working days, they can call or write to the Chief Grievance Redressal officer. The customer will receive a response within 5 working days from the receipt of the complaint by the Chief Grievance Redressal Officer.

Contact Details of the Chief Grievance Redressal Officer:

Mr. Apurba Lal Mondal

Deputy General Manager- Operation

WeGrow Financial Services Private Limited

AE- 601, Ground Floor

Sector -1, Salt Lake City

Kolkata- 700064

Contact number: +91 9073950228

E-mail: apurbawegrow@gmail.com

Level-IV (SRO)

If the complaint is not resolved by within 15 working days, the customer can call the Toll free number or write to Sa-Dhan which is an Independent body recognized as Self-Regulatory Organisation (SRO) by the Reserve Bank of India to redress customer complaints.

         Toll Free Helpline Number - +91 11 47174400

 

Level-V (RBI)

If the complaint is not redressed within 30 days, the customer may appeal to the officer-in-charge of the Department of Non-Banking Supervision (DNBS) of the Reserve Bank of India, Kolkata at the following address.

Reserve Bank of India

Department of Non-Banking Supervision

5th Floor, 15 Netaji Subhas Road,

Kolkata – 700 001

Tel : 033

E-mail :

 

Categories of Customer’s communications with WeGrow

Query

These may be general inquires, primarily relating to loans, interest rates, repayment terms, eligibility norms etc.

Request

Requests for obtaining any valid services for financing or refinancing support.

Grievance

Express dissatisfaction because of lack of action, inadequate quality of services

Grave/ urgent Grievance

Related to staff misbehavior, cheating/fraud, false commitments, miss-conduct with the customers.

Suggestion/ Feedback

Related to functions/ roles with respect to operations, policies or practices.

 

 

Resolution of Complaints:

 

Timeframe:

  1. The complaints will be analyzed from all possible angles. Complaints shall be resolved in a proper and time bound manner as per following defined turnaround time for categories of grievances:

 

Level

Responsible Officer

No. of working days

Branch

Area Manager/ Branch Manager

2 days

Customer Service Help Desk

Officer at Help Desk

3days

Grievance Cell

Grievance Redressal Officer

5 days

 

  1. There may be some complaints which require deeper analysis from all possible angles which may cause delayed resolution of the complaint. In such cases, WeGrow will try to resolve grievances at the earliest depending on the nature of the case. Such delay in addressing the complaint beyond the prescribed time limit shall be conveyed to the complainant along with reasons for the same.

 

  1. If the resolution of the complaint is delayed beyond 15 days of receipt, or the complainant is not satisfied with the reasons of delay conveyed to her, she may call to the Toll free number or write to Sa-Dhan which is an Independent body recognized as Self-Regulatory Organisation (SRO) by the Reserve Bank of India to redress customer complaints.

 

  1. If the complaint is not redressed within 30 days, the customer may appeal to the officer-in-charge of the Department of Non-Banking Supervision (DNBS) of the Reserve Bank of India, Kolkata at the afore mentioned address.

Interaction with Customers:

  • Customer’s expectations/ requirements/ grievances can be better appreciated through personal interaction with customers and publicity of grievance redressal machinery by placing them on website/ branch offices.
  • Higher authority, Area Manager and Branch Manager are required to make surprise visits to meet customers and seek feedback about our work and field staff behaviour for continuous improvement and to record grievance if any.
  • Internal Audit should check if all complaints are appropriately registered, handled, and resolved, adherence to TAT, degree of satisfaction with the resolution provided as reported by customers.

 

Reporting to Board of Directors

Summary of the customer grievance reports along with actions initiated would be reported to the Board at least twice in a year.

The Report shall contain information like the total no. of complaints received, disposed of and pending, with reason thereof, which will be placed before the Board for information/ guidance.

Mandatory display at the offices

WeGrow shall ensure to display the following information prominently, for the benefit of its customers, at its places of business:

  • Name and contact details (Telephone, mobile nos. email address) of the Grievance Redressal Officer who can be approached by the customer for resolution of complaints against WeGrow.
  • Toll free Number and e-mail address of Head Office.
  • Details of mailing address with phone number and e-mail address of Chief Grievance Officer at Head Office.
  • Toll free Number and e-mail address of Sa-Dhan
  • Details of mailing address of Officer -in-Charge of the Regional Office of Department of Non-Banking Supervision (DNBS) of RBI, Kolkata.

Sensitizing operating staff for improvement in service and handling complaints

It is very important to sensitize our staff to handle customer complaints/ grievance with courtesy, empathy and promptness. WeGrow conduct training programmes regularly for staff on customer services and minimizing grievances. It will be our constant endeavor to keep our staff committed to fair behavior and ethical practices at all point of time.

Interest Rate Policy for the year 2020-21

In accordance with RBI circular, vide DNBS (PD) CC. No. 300/03.10.038/2012-13 dated August 03, 2012 and DNBS.CC.PD.No. 250/03.10.01/2011-12 dated December 02, 2011 and further notifications (if any) issued by Reserve Bank of India in this regard; all NBFCs have to ensure complying with the caps on Net Interest Margin and cap on interest rate difference between products as other ‘pricing guidelines’, to be eligible to classify these loans as priority sector loans.

1. The Interest rates charged by an NBFC MFI to its borrowers will be lower of the following:

a)     The cost of funds plus margin as indicated in point (2) below; or

 

b)     The average base rate of the five largest commercial banks by assets multiplied by 2.75. NBFC MFI will ensure that the average interest rate on loans during a financial year does not exceeds the average borrowing cost during the financial year plus the margin within prescribed cap.

 

  1. The cap on margins may not exceeds 10% for MFI with loan portfolio exceeding Rs. 100 crores and 12% for others.

 

  1. There shall be only three components in the pricing of the loan viz.the interest charge, the processing charges and the insurance premium (which includes the administrative charges in respect thereof).

 

  1. Processing charges shall not be more that 1% of gross loan amount. Processing charges need not to be included in the margin cap or the interest cap.

 

  1. NBFC MFI shall recover only the actual cost of insurance for group, or livestock, life, health for borrower and spouse. Administrative charges where recovered, shall be as per IRDA guidelines.

 

  1. The average of the base rates of the five largest commercial banks shall be advised by the Reserve Bank of India on the last working day of the previous quarter, which shall determine interest rates for the ensuing quarter.

 

WeGrow shall ensure that it shall modify its interest rate accordingly with immediate effect.