Policy on Determination of Interest Rate

1. Interest Rate Determination

Interest rates charged to borrowers are determined after considering a range of factors, including:

1. Loan Tenure
2. Internal and External Cost of Funds
3. Prevailing Treasury Bill Rates and Sovereign Yield Curve
4. Spreads between Sovereign and AAA Corporate Bonds
5. Benchmark Lending Rates of Major Banks
6. Borrower’s Risk Profile
7. Market Credit Risk and Default Premiums (including CDS spreads)
8. Internal Operating Costs
9. Rates Offered by Peer NBFCs
10. Other Case-Specific Factors

This approach ensures that the interest rate is both risk-based and competitive, in line with industry norms and regulatory expectations.

2. Risk Assessment

The Company evaluates the risk profile of each borrower based on:

• Management Risk
• Business Risk
• Financial Risk
• Industry Risk
• Collateral Risk

Further, the following are also considered:

• Industry Type
• Profitability Track Record (last three years)
• Projected Profitability during the loan tenure
• Security Coverage
• Reputation of Borrower/Promoter/Principal Shareholder
• Past Defaults and Their Resolution
• Promoter/Shareholder Background
• Other Relevant Factors

As a result, interest rates for the same product and tenure may differ among customers, depending on these risk and business parameters.

3. Board Oversight

The Board of Directors reviews and approves the interest rates after a thorough assessment of the above factors. The policy is reviewed annually or as required by regulatory changes.

4. Floating Rate Loans (EMI-Based)

For floating rate personal loans, the following provisions apply:

1. At the time of sanction, borrowers are informed of the potential impact of benchmark rate changes on EMIs and/or loan tenure. Any subsequent changes are promptly communicated.
2. Borrowers are given the option to switch to a fixed rate as per the Board-approved policy, with the number of allowed switches specified in the sanction letter.
3. Borrowers may choose to increase EMIs, extend tenure, or both, and may prepay at any time, subject to applicable guidelines on foreclosure/prepayment charges.
4. All charges related to switching from floating to fixed rates, and other administrative fees, are transparently disclosed in the sanction letter and updated as needed.
5. The Company ensures that any extension of loan tenure does not result in negative amortization.
6. Borrowers receive quarterly statements detailing principal and interest paid, remaining EMIs, and the annualized interest rate/APR, presented in a clear and simple format.

5. Additional Charges

In addition to the base interest, the Company may levy:

1. Penal Charges (see Section 8)
2. Processing Fees
3. Foreclosure/Prepayment Charges
4. Commitment Fees, etc.

All such charges are clearly mentioned in the loan agreement and related documents.

6. Customer Communication

The Company ensures that all borrowers are informed of this policy prior to loan disbursement, and that all terms are clearly communicated as required by the Fair Practices Code and RBI guidelines.

7. Review

This policy is reviewed at least annually, or more frequently as required by changes in laws, regulations, or business needs.

8. Quantum and Reason of Penal Charges

The Company may levy the following penal charges:

• Penal Charges (Default): The NBFC may charge **2% per month** on the overdue amount (plus applicable taxes) for defaults in loan instalment repayment.
• For Non-Compliance: The NBFC may charge **2% per month** on the outstanding loan facility amount (plus applicable taxes) for breaches of agreed terms and conditions as detailed in the Sanction Letter.