1. Objective
This policy outlines the methodology adopted by Ashiana Fincap Private Limited for determining interest rates on its loan products, in compliance with RBI guidelines requiring NBFCs to adopt an interest rate model having regard to relevant factors such as cost of funds, margin, and risk premium.
2. Rate Determination Methodology
Interest rates are determined by the Board-approved framework considering:
- Cost of Funds: Weighted average cost of borrowings from banks, financial institutions, and NCDs.
- Operating Expenses: Overhead and administrative costs allocated to lending operations.
- Credit Risk Premium: Additional margin based on borrower risk profile (credit score, bureau data, industry, tenure).
- Tenor Premium: Adjustment for loan duration and associated duration risk.
- Liquidity Premium: Consideration for asset-liability management requirements.
- Regulatory Costs: Statutory reserve requirements and compliance costs.
3. Annual Percentage Rate (APR) Computation
APR is computed by annualising the total cost of credit to the borrower, inclusive of:
- Interest charges (on reducing balance basis)
- Processing fees
- Documentation charges
- Any other upfront or recurring charges (excluding statutory charges like stamp duty)
APR = [Total Cost of Credit / Principal Amount] × [12 / Tenor in months] × 100
4. Currently Applicable Rate Ranges (as of April 2024)
| Product | Interest Rate (p.a.) | APR (indicative) |
|---|---|---|
| Business Loan | 14% – 22% | 15% – 24% |
| Working Capital Loan | 15% – 22% | 16% – 24% |
| Loan Against Property | 12% – 18% | 13% – 20% |
| Personal Loan | 16% – 24% | 17% – 26% |
| Machinery & Equipment Finance | 13% – 20% | 14% – 22% |
Actual rates applied to individual borrowers may vary based on credit assessment.
5. Penal Charges (effective 01 April 2024)
In compliance with RBI Circular RBI/2023-24/53 dated 18 August 2023, the Company does not levy penal interest. Instead, reasonable penal charges may be levied on the overdue principal for the overdue period. These charges are disclosed in the sanction letter and KFS and are not capitalised.
6. Review
This policy and rate ranges are reviewed quarterly by the Board / ALCO. Last reviewed: April 2024.