Interest Rate Policy
This policy of Nigania Finance Private Limited ("the Company", "we", "us") sets out how we determine the rate of interest and other charges on our loans, and our approach to gradation of risk. It is framed under the Reserve Bank of India's directions on the Fair Practices Code and on transparency in interest rates and charges, and the RBI (Digital Lending) Directions.
The rate of interest, the Annual Percentage Rate (APR) and every charge on a particular loan are stated in that loan's Key Fact Statement (KFS), which the borrower sees before accepting. The KFS governs the loan.
1. Principles
- Interest and charges are fair, reasonable and disclosed in full before the borrower commits.
- Pricing reflects our cost of funds, our operating costs and the credit risk of the borrower. It is not usurious and not discriminatory.
- The rate on a loan is fixed at sanction and does not change during its tenure.
- Any change to our rates or charges applies only to loans sanctioned after the change.
2. How the rate of interest is determined
Cost of funds
The weighted average cost of the Company's own funds and any borrowings.
Operating costs
The cost of originating and servicing small-value loans: identity and KYC verification, credit bureau enquiries, bank-statement analysis, payment and auto-debit processing, technology, customer service and collection.
Credit risk (gradation of risk)
Within the approved range, the rate offered to a borrower takes into account:
- credit history and bureau record, including any past delinquency;
- the level and regularity of salary income, and its stability;
- existing obligations and the share of income left to repay this loan;
- the loan amount, tenure and number of instalments; and
- the outcome of identity, bank-account and fraud checks.
The same criteria are applied to every applicant. A borrower assessed as higher risk may be offered a higher rate within the range, or a lower amount, or may be declined.
Margin
A reasonable margin to provide for expected credit losses and a return on capital.
3. The range of rates and how interest is charged
| Item | Position |
|---|---|
| Type of rate | Fixed for the life of the loan |
| Loan amount | ₹1,000 to ₹50,000 |
| Repayment | One instalment at the end of 30 days, or three monthly instalments (EMIs) |
| Interest — single instalment | Charged on the loan amount for the tenure, and paid with the principal on the due date |
| Interest — EMIs | Charged on the reducing balance, so each EMI carries interest only on the principal still outstanding |
| Representative Annual Percentage Rate | 18% to 36% per annum |
The APR is the all-in annual cost of the loan — interest plus the processing fee and GST — measured against the amount actually disbursed, as the RBI prescribes. Because a fixed fee is spread over a short tenure, the APR of a loan is higher than its rate of interest. The exact APR of every loan is in its KFS.
4. Other charges
| Charge | Amount | When |
|---|---|---|
| Processing fee | 1.4% of the loan amount, plus GST | Once, deducted from the amount disbursed |
| Penal charge | 2% per month on the overdue amount | Only on an amount that is overdue, for the period it is overdue |
| Failed auto-debit or cheque return | ₹590 (₹500 plus GST) | Each time a presented debit or instrument is dishonoured |
| Prepayment or foreclosure | Nil | — |
- The penal charge is a charge, not penal interest. It is not added to the rate of interest, not capitalised, and no interest is charged on it.
- No charge other than those stated in the KFS is levied without the borrower's explicit consent.
- A fee due to any Lending Service Provider is paid by the Company and is never passed on to the borrower.
5. Prepayment and the cooling-off period
A borrower may repay all or part of a loan at any time without charge, and pays interest only for the period the money was outstanding. Within the cooling-off (look-up) period stated in the KFS, the borrower may exit the loan by repaying the principal and the interest for the days held, with no penalty.
6. Communication
The rate of interest, the APR and every charge are stated in the KFS and the sanction terms before the borrower accepts, and in the loan agreement. The ranges in this policy, and any change to them, are published on this website.
7. Review
The Board of Directors approves this policy and the range of rates, and reviews them at least once a year, or sooner if the cost of funds or market conditions change materially.