1. Applications for loans and their processing
. The applicable terms and conditions
. An indicative list of KYC documents to be submitted, together with the duly completed application form.
2. Loan application forms should include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and informed decision can
be taken by the borrower. The loan application form may indicate the documents required to be submitted with the application form.
3. The Company shall adopt an internal time frame for processing all loan applications and will also indicate the approximate time frame within which the loan application will be processed post the submission of completed application form.
2. Loan appraisal and terms/conditions
1. Loan applications shall be subject to the company’s credit appraisal process.
2. Upon approval of the loan, an agreement/sanction letter indicating the amount of loan sanctioned, rate of interest applicable, method of interest calculation along with other terms and conditions shall be conveyed to the loan
applicant in writing. A written acceptance of such terms and conditions will be taken from the borrower
3. A copy of the loan agreement along with the enclosures will be furnished to all the borrowers
3. Disbursement of loans including changes in terms and conditions
1. VCCI shall give notice to the Borrowers, of any changes to the terms and conditions, including disbursement schedule, interest rates, service charges, prepayment charges, etc.
2. Changes in the interest rates and other charges shall be effected prospectively other than under circumstances arising from regulatory instructions. Retrospective changes shall as far as possible be avoided and shall be implemented
only within the framework define in the Loan Agreements.
3. Decision to recall / accelerate payment or performance under the agreement shall be in accordance with the terms and conditions of the Loan Agreement.
4. General Provisions
1. VCCI will refrain from interference in the affairs of its Borrower except for the purposes provided in the terms and conditions of the respective loan agreement (unless new information, not earlier disclosed by the Borrower,
which may come to the notice of VCCI).
2. For recovery of loan, VCCI shall follow procedures as laid down in the internal guidelines and provisions and would remain within the legal framework.
3. VCCI shall ensure that it’s employees are adequately trained to deal with customers in an appropriate manner.
5. Grievance Redressal:
For resolution of complaints against the Company, customers/ public may contact the respective branch office of the Company.
6. VCCI-MFIs
In addition to the general principles as above, as a MFI VCCI is adopting the following fair practices that are specific to their lending business and regulatory framework.
General:
1. The Fair Practice Code in vernacular language shall be displayed by MFI in its office and branch premises.
2. A statement shall be made in vernacular language and displayed by MFI in their premises and in loan cards articulating their commitment to transparency and fair lending practices.
3. Field staff shall be trained to make necessary enquiries with regard to existing debt of the borrowers
4. Training if any, offered to the borrowers shall be free of cost. Field staff shall be trained to offer such training and also make the borrowers fully aware of the procedure and systems related to loan / other products
5. The effective rate of interest charged and the grievance redressal system set up by the MFI should be prominently displayed in all its offices and in the literature issued by it (in vernacular language) and on its website
6. A declaration that the MFI will be accountable for preventing inappropriate staff behaviour and timely grievance redressed shall be made in the loan agreement and also in the FPC displayed in its office/branch premises.
7. The KYC Guidelines of RBI shall be complied with. Due diligence shall be carried out to ensure the repayment capacity of the borrowers.
8. As specified in the NBFC-MFIs (Reserve Bank) Directions, 2011, all sanctioning and disbursement of loans should be done only at a central location and more than one individual should be involved in this function. In addition, there should be close supervision of the disbursement function.
9. Adequate steps may be taken to ensure that the procedure for application of loan is not cumbersome and loan disbursements are done as per pre-determined time structure.
Disclosures in loan agreement / loan card
1. VCCI shall have a Board approved, standard form of loan agreement. The loan agreement shall preferably be in vernacular language.
2. In the loan agreement the following shall be disclosed.
. All the terms and conditions of the loan,
. That the 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),
. That there will be no penalty charged on delayed payment
. That no Security Deposit / Margin is being collected from the borrower,
. That the borrower cannot be a member of more than one SHG / JLG,
. An assurance that the privacy of borrower data will be respected
10. The loan card should reflect the following details as specified in the Non-Banking Financial Company – Micro Finance Institutions (Reserve Bank) Directions, 2011.
. The effective rate of interest charged
. All other terms and conditions attached to the loan
. Information which adequately identifies the borrower.
. Acknowledgements by the NBFC-MFI of all repayments including instalments received and the final discharge.
. The loan card should prominently mention the Grievance Redressed system set up by the MFI and also the name and contact number of the nodal officer.
. Non-credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself.
. All entries in the Loan Card should be in the vernacular language.
2. Non-Coercive Methods of Recovery
As specified in the NBFC-MFIs (Reserve Bank) Directions, 2011, recovery should normally be made only at a central designated place. Field staff shall be allowed to make recovery at the place of residence or work of the borrower
only if borrower fails to appear at central designated place on 2 or more successive occasions.
NBFC-MFIs shall ensure that a Board approved policy is in place with regard to Code of Conduct by field staff and systems for their recruitment, training and supervision. The Code should lay down minimum qualifications necessary for the field staff and shall have necessary training tools identified for them to deal with the customers. Training to field staff shall include programs to inculcate appropriate behavior towards borrowers without adopting any abusive or coercive debt collection / recovery practices. Compensation methods for staff should have more emphasis on areas of service and borrower satisfaction than merely the number of loans mobilized and the rate of recovery. Penalties may also be imposed on cases of non-compliance of field staff with the Code of conduct. Generally only employees and not out sourced recovery agents be used for recovery in sensitive areas.
4. Internal control system:
As the primary responsibility for compliance with the Directions rest with the NBFC-MFIs, VCCI has made necessary organizational arrangements to assign responsibility for compliance to designated individuals within the company
and establish systems of internal control including audit and periodic inspection to ensure the same.
The Client Protection Principles describe the minimum protection clients should expect from VCCI. These Principles are adopted from the CGAP’s Client Protection Principles. These principles are used to protect the clients and as
well as VCCI’s image, therefore, VCCI’s staff of all levels should adhere to the following the Client Protection Principles
1. No Discrimination in Operation:
VCCI and its staff will give loan based on the repayment capacity of the particular client by not depending on any race or any tendency.
2. Avoidance of Over-Indebtedness:
VCCI will take reasonable steps to ensure that credit will be extended only if borrowers have demonstrated an adequate ability to repay and loans will not put borrowers at significant risk of over-indebtedness.
3. Transparent Communication:
The pricing, terms, and conditions of financial products (including interest charges, penalty, all fees, etc.) will be transparent and will be adequately disclosed in a form understandable to clients. VCCI will educate and clearly communicate to the clients about the consequences of the over-indebtedness.
4. Appropriate Collections Practices:
Debt collection practices will not be abusive or coercive. Debt collection process must follow the collection procedures which are legally correct and binding.
5. Ethical Staff Behaviour:
VCCI will comply with high ethical standards in their interaction with clients and ensure that adequate safeguards are in place to detect and correct corruption or mistreatment of clients.
6. Mechanisms for Redress of Grievances:
VCCI has in place timely and responsive mechanisms for complaints and problem resolution for its clients
7. Privacy of Client Data:
The privacy of individual client data will be respected, and such data cannot be used for other purposes without the express permission of the client.