BAJAJ FINANCE LIMITED
FAIR PRACTICE CODE
April 2024
Ver.7.0
COMPLIANCE DEPARTMENT
INDEX
Sr. No. |
Particulars |
Page No. |
1. |
Introduction |
3 |
2. |
Key Commitments |
3 |
3. |
Information |
3 |
4. |
Applications for Loan and their processing |
3 |
5. |
Loan appraisal and terms/conditions |
4 |
6 |
Penal Charges in Loan Accounts |
4 |
7. |
Disbursement of loans including changes in terms and conditions |
4 |
8. |
Responsible Lending Conduct – Release of movable/immovable property documents on repayment/ settlement of personal loans |
5 |
9. |
Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans |
5 |
10. |
General |
6 |
11. |
Grievance Redressal |
7 |
12. |
Ombudsman Scheme for Non-Banking Financial Companies, 2018 - Appointment of the Nodal Officer/Principal Nodal Officer |
7 |
13. |
Hosting on Website |
8 |
14. |
Regulation of excessive interest charged |
8 |
15. |
Repossession of vehicles financed |
8 |
16 |
Lending against collateral of gold jewellery |
8 |
17 |
Loan facilities to the physically/visually challenged by the Company |
9 |
18 |
Fair Practice Code for Microfinance Loans |
9 |
19 |
Review of Fair Practice Code |
10 |
1. Introduction
Bajaj Finance Limited, a Non-Banking Finance Deposit Taking Company registered with Reserve Bank of India (“RBI”) is presently in the business of providing different types of loans which includes Consumer Durable Loans, Personal Loans, Two-Wheeler loans, Loan against Property, Loan against Shares etc., to its various customers. Such credit facilities are extended to different types of customers, which include Individuals, Partnership Firms, Companies and other Legal entities.
Bajaj Finance Limited (“the Company”) has put in place the Fair Practice Code (FPC) as per the RBI directives and it has been duly approved by the Board of Directors. The Fair Practice Code sets out the principles for fair practices/ standards while dealing with its customers.
The Company has adopted this Fair Practices Code (“the Code”) and have implemented it. The Code applies to all categories of products and services offered by the Company (currently offered and which may be introduced in future).
2. Key Commitments
The Company's key commitments to customers:
i. Act fairly and reasonably in all their dealings with customers by:
- Meeting the commitments and standards specified in the Code, for the products and services which the Company offers and, in the procedures and practices its staff follows;
- Making sure that Company's products and services meet relevant laws and regulations;
- Company's dealings with customers will rest on ethical principles of integrity and transparency
ii. Help customers understand how company's product work by:
- Explaining their financial implications
iii. Deal quickly and sympathetically with things that go wrong by:
- Correcting mistakes;
- Handling customer's complaints;
- Telling customers' how to take their complaint forward if they are still not satisfied
iv. Publicize the Code, put it on Company's website and have copies available for customer on request.
3. Information
a) Helping customer choose products and services, which meet their needs and give them clear information explaining the key features of the services and products they are interested in.
b) Inform customers about the documents and information the Company needs from them to establish customer’s true identity and address and, other documents to comply with legal and regulatory requirements.
4. Applications for loans and their processing
a) All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
b) The Loan application forms of the Company will 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 indicates the documents required to be submitted with the application form.
c) The Company will have a system of giving acknowledgement for receipt of loan applications. The time frame within which loan applications will be disposed of will be indicated in the acknowledgement.
5. Loan appraisal and terms/conditions
The Company will convey in writing to the borrower in the vernacular language by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record. The Company will mention the penal charge which will be charged for late repayment and / or any other default on the part of the customer, in bold in the loan agreement.
The Company will furnish a copy of the loan agreement preferably in the vernacular language as understood by the borrower along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
The exact due dates for repayment of a loan, frequency of repayment, breakup between principal and interest, examples of SMA/NPA classification dates, etc. shall be communicated to the borrower at the time of loan sanction and also at the time of subsequent changes, if any, to the sanction terms/ loan agreement till full repayment of the loan. In cases of loan facilities with moratorium on payment of principal and / or interest, the exact date of commencement of repayment shall also be communicated to the borrower.
6. Penal Charges in Loan Accounts
a) Penalty, if charged, for non-compliance of material terms and conditions of loan contract by the borrower shall be treated as ‘penal charges’ and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest charged on the advances. There shall be no capitalization of penal charges i.e., no further interest computed on such charges. However, this will not affect the normal procedures for compounding of interest in the loan account.
b) The Company shall not introduce any additional component to the rate of interest and ensure compliance to RBI Guidelines on Fair Practice Code in both letter and spirit.
c) The quantum of penal charges shall be reasonable and commensurate with the non-compliance of material terms and conditions of loan contract without being discriminatory within a particular loan / product category.
d) The penal charges in case of loans sanctioned to ‘individual borrowers, for purposes other than business’, shall not be higher than the penal charges applicable to non-individual borrowers for similar non-compliance of material terms and conditions.
e) The quantum and reason for penal charges shall be clearly disclosed by the Company to the customers in the loan agreement and most important terms & conditions / Key Fact Statement (KFS) as applicable, in addition to being displayed on the Company’s website under Interest rates and Service Charges.
f) Whenever reminders for non-compliance of material terms and conditions of loan are sent to borrowers, the applicable penal charges shall be communicated. Further, any instance of levy of penal charges and the reason therefor shall also be communicated.
A separate Policy on Fair Lending Practice- Penal Charges on Loan accounts has been put in place and duly approved by the Board of Directors in its meeting held on October 17, 2023.
7. Disbursement of loans including changes in terms and conditions
a) The Company will give notice to the borrower in the vernacular language of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. The Company will also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard will be incorporated in the loan agreement.
b) Decision to recall / accelerate payment or performance under the agreement will be in accordance with the loan agreement.
c) The Company will release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim the Company may have against borrower. If such right of set off is to be exercised, the borrower will be given notice about the same with full particulars about the remaining claims and the conditions under which the Company is entitled to retain the securities till the relevant claim is settled/paid.
8. Responsible Lending Conduct – Release of movable/immovable property documents on repayment/ settlement of personal loans
A Standard Operating Procedure (SOP)- Property Documents Handover & Charge Release Process in line with RBI guidelines has been put in place for where release of original movable/immovable property documents for all cases due after December 01, 2023.
a) Release of movable/immovable property documents
i. The Company shall release all the original movable / immovable property documents and remove charges registered with any registry within a period of 30 days after full repayment/settlement of the loan account.
ii. The borrower shall be given the option of collecting the original movable/ immovable property documents either from the banking outlet/branch where the loan account was serviced or any other office of the Company where the documents are available, as per her/his preference.
iii. The timeline and place of return of original movable/immovable property documents shall be mentioned in the loan sanction letters issued on or after the effective date.
iv. In order to address the contingent event of demise of the sole borrower or joint borrowers, the Company have a procedure for return of original movable/immovable property documents to the legal heirs. The procedure is displayed on the website of the Company.
b) Compensation for delay in release of movable/immovable property documents
i. In case of delay in releasing of original movable/immovable property documents or failing to file charge satisfaction form with relevant registry beyond 30 days after full repayment/ settlement of loan, the Company shall communicate to the borrower reasons for such delay. In case where the delay is attributable to the Company, it shall compensate the borrower at the rate of ₹5,000 for each day of delay.
ii. In case of loss/damage to original movable/immovable property documents, either in part or in full, the Company shall assist the borrower in obtaining duplicate/certified copies of the movable/immovable property documents and shall bear the associated costs, in addition to paying compensation as indicated at clause (i) above. However, in such cases, an additional time of 30 days will be available to the Company to complete this procedure and the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days).
iii. The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law.
9. Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans
a) At the time of sanction of EMI based floating rate personal loans, the company is required to take into account the repayment capacity of borrowers to ensure that adequate headroom/ margin is available for elongation of tenor and/ or increase in EMI, in the scenario of possible increase in the interest rates during the tenor of the loan NBFCs are advised to put in place an appropriate policy framework meeting the following requirements for implementation and compliance:
i. At the time of sanction, the Company shall clearly communicate to the borrowers about the possible impact of change in interest rate on the loan leading to changes in EMI and/or tenor or both. Subsequently, any increase in the EMI/ tenor or both on account of the above shall be communicated to the borrower immediately through appropriate channels.
ii. At the time of reset of interest rates, the company shall provide the option to the borrowers to switch over to a fixed rate as per its Board approved policy. The policy, inter alia, specifies the number of times a borrower will be allowed to switch during the tenor of the loan.
iii. The borrowers shall also be given the choice to opt for-
(a) enhancement in EMI or elongation of tenor or for a combination of both options; and,
(b) to prepay, either in part or in full, at any point during the tenor of the loan. Levy of foreclosure charges/ pre-payment penalty shall be subject to extant instructions.
iv. All applicable charges for switching of loans from floating to fixed rate and any other service charges/ administrative costs incidental to the exercise of the above options shall be transparently disclosed in the sanction letter and also at the time of revision of such charges/ costs by the Company from time to time.
v. The Company shall ensure that the elongation of tenor in case of floating rate loan does not result in negative amortisation.
vi. The Company shall share / make accessible to the borrowers, through appropriate channels, a statement at the end of each quarter which shall at the minimum, enumerate the principal and interest recovered till date, EMI amount, number of EMIs left and annualized rate of interest / Annual Percentage Rate (APR) for the entire tenor of the loan. The Company shall ensure that the statements are simple and easily understood by the borrower.
Apart from the equated monthly instalment loans, these instructions would also apply, mutatis mutandis, to all equated instalment based loans of different periodicities.
A separate Policy on Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans has been put in place and duly approved by the Board of Directors in its meeting held on October 17, 2023.
10. General
a) The Company will refrain from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement (unless new information, not earlier disclosed by the borrower, has come to the notice of the Company).
b) In case of receipt of request from the borrower for transfer of borrowal account, the consent or otherwise i.e., objection of the Company, if any, will be conveyed within 21 days from the date of receipt of request.
c) In the matter of recovery of loans, the Company will not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc. To avoid rude behavior from the staff of the Company, the Company shall ensure that the staff are adequately trained to deal with the customers in an appropriate manner.
d) The Company shall not charge foreclosure charges/ pre-payment penalties on floating rate term loans sanctioned for purposes other than business to individual borrowers, with or without co-obligant(s).
(Reference: RBI Circular on Levy of Foreclosure Charges/ Pre-Payment Penalty on Floating Rate Loans by NBFCs DNBR(PD) CC.No.101/03.10.001/2019-20 dated August 2, 2019)
11. Grievance Redressal
a) A periodical review of the compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels of management. A consolidated report of such reviews will be submitted to the Board at regular intervals.
b) The following information shall be displayed prominently, for the benefit of the customers, at all branches/ places of the Company, where business is transacted:
i. the name and contact details (Telephone / Mobile nos. as also email address) of the Grievance Redressal Officer who can be approached for resolution of complaints against the Company.
ii. If customer's complaint/concern is not redressed within a period of 30 days, customer can lodge a complaint on RBI CMS portal - https://cms.rbi.org.in
Or send complaint form to the below mentioned address:
Centralised Receipt and Processing Centre,
Reserve Bank of India, 4th Floor,
Sector 17, Chandigarh – 160017
Tollfree Number- 14448
12. Ombudsman Scheme for Non-Banking Financial Companies
(a) Reserve Bank – Integrated Ombudsman Scheme, 2021
Under the Ombudsman Scheme, the Company has appointed Principal Nodal Officer (PNO) who shall be responsible for representing the Company and furnishing information to the Ombudsman in respect of complaints filed against the Company. The Nodal Officers (NO) appointed by the Company will assist the PNO.
For the benefit of the customers, at the branches/ places where business is transacted, the name and contact details (Telephone/ Mobile number and email) of the PNO along with the details of the complaint lodging portal of the Ombudsman (https://cms.rbi.org.in) will be displayed.
The salient features of the Scheme shall be displayed prominently in English, Hindi and Regional languages at all the offices and branches in such a manner that a person visiting the office or branch has adequate information on the Scheme.
The salient features ails of the Ombudsman Scheme along with the copy of the Scheme and contact details of the Principal Nodal Officer shall be prominently displayed and updated on the website.
(Reference: Reserve Bank - Integrated Ombudsman Scheme, 2021 dated November 12, 2021)
(b) Appointment of Internal Ombudsman
In accordance with the RBI guidelines on ‘Appointment of Internal Ombudsman by Non-Banking Financial Companies’ dated November 15, 2021, the Company has appointed Internal Ombudsman and shall adhere to the corresponding guidelines.
(Reference: Appointment of Internal Ombudsman by Non-Banking Financial Companies dated November 15, 2021)
13. Hosting on Website
Fair Practices Code, in vernacular languages shall be put up on the website of the Company for the information of various stakeholders.
14. Regulation of excessive interest charged
a) The Board of Directors has adopted an interest rate model for determining the rate of interest to be charged on loans and advances, processing and other charges taking into account relevant factors such as, cost of funds, margin and risk premium, etc. The rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers shall be disclosed to the borrower or customer in the application form and communicated explicitly in the sanction letter.
b) The rates of interest and the approach for gradation of risks shall also be made available on the web-site of the company. The information published on the website shall be updated whenever there is a change in the rates of interest.
c) The rate of interest shall be annualised rate.
15. Repossession of vehicles financed
The Company shall include re-possession clause in the loan agreement with the borrower which will be legally enforceable. To ensure transparency, the terms and conditions of the loan agreement shall also contain provisions regarding: (a) notice period before taking possession; (b) circumstances under which the notice period can be waived; (c) the procedure for taking possession of the security; (d) a provision regarding final chance to be given to the borrower for repayment of loan before the sale / auction of the property; (e) the procedure for giving repossession to the borrower, and (f) the procedure for sale / auction of the property. A copy of such terms and conditions shall be made available to the borrowers.
16. Lending against collateral of gold jewellery
In addition to the general guidelines as above, the Company shall, while lending to individuals against gold jewellery, follow the policy, duly approved by the Board of Directors, containing, inter-alia, the following:
i. Adequate steps to ensure that the KYC guidelines stipulated by RBI are complied with and to ensure that adequate due diligence is carried out on the customer before extending any loan.
ii. Proper assessing procedure for the jewellery received.
iii. Internal systems to satisfy ownership of the gold jewellery.
iv. Adequate systems for storing the jewellery in safe custody, reviewing the systems on an on-going basis, training the concerned staff and periodic inspection by internal auditors to ensure that the procedures are strictly adhered to. Loans against the collateral of gold shall not be extended by branches that do not have appropriate facility for storage of the jewellery.
v. The jewellery accepted as collateral shall be appropriately insured.
vi. The policy with regard to auction of jewellery in case of non-repayment shall be transparent and adequate. Prior notice to the borrower shall be given before the auction date. It shall also lay down the auction procedure that will be followed. There shall be no conflict of interest and the auction process will ensure that there is arm’s length relationship in all transactions during the auction including with group companies and related entities.
vii. The auction shall be announced to the public by issue of advertisements in at least 2 newspapers, one in vernacular language and another in national daily newspaper.
viii. The Company shall not participate in the auctions held.
ix. Gold pledged will be auctioned only through auctioneers approved by the Board.
x. The policy shall also cover systems and procedures to be put in place for dealing with fraud including separation of duties of mobilization, execution and approval.
xi. The loan agreement for lending against gold shall also disclose details regarding auction procedure.
17. Loan facilities to the physically/visually challenged by the Company
The Company shall not discriminate in extending products and facilities including loan facilities to physically/visually challenged applicants on grounds of disability. All branches of the Company shall render all possible assistance to such persons for availing of the various business facilities.
18. Fair Practice Code for Microfinance Loans
Reserve Bank of India (RBI) has issued Master Direction - Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 under reference DoR.FIN.REC.95/03.10.038/2021-22 dated March 14, 2022. These Directions are effective from April 01, 2022 and applicable to all commercial Banks, NBFCs including Microfinance Institutions and Housing Finance Companies.
In addition to the FPC as mentioned in the above sections, the Company shall adopt the following fair practices which are specific to Microfinance Loans:
(i) General
a. The FPC in vernacular language shall be displayed in office and branch premises of the Company, apart from the Company’s website.
b. Field staff shall be trained to make necessary enquiries with regard to income and existing debt of the borrowers.
c. Training, if any, offered to the borrowers shall be free of cost.
d. The minimum, maximum and average interest rates charged on microfinance loans shall be prominently displayed in all its offices, in the literature issued by it (in vernacular language) and also on its website.
e. A declaration shall be made in the loan agreement and also in the FPC displayed in office, branch premises and website of the Company that it will be accountable for inappropriate behaviour by its employees or employees of the outsourced agency and shall provide timely grievance redressal.
f. No security deposit / margin is being collected from the borrower,
g. The Company shall have a standard form of Microfinance loan agreement. The loan agreement shall preferably be in vernacular language.
h. All the terms and conditions of the loan shall be disclosed in the loan agreement.
i. The loan card shall reflect the following details:
- Simplified factsheet on pricing,
- All other terms and conditions attached to the loan,
- Information which adequately identifies the borrower,
- Acknowledgements by the Company of all repayments including instalments received and the final discharge,
- The loan card shall prominently mention the grievance redressal system set up by the Company 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 shall be in the vernacular language or the language as understood by the borrower.
(ii) Non-coercive methods of recovery:
a. Recovery shall 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 two or more successive occasions.
b. The Company shall ensure that a Board approved policy is in place with regarding conduct of employees and system for their recruitment, training and monitoring. The Code shall lay down minimum qualifications necessary for the staff and shall provide necessary training tools to deal with the customers. Training to employees shall include programs to inculcate appropriate behaviour towards borrowers. Conduct of employees towards customers shall also be incorporated appropriately in their compensation matrix.
19. Review of Fair Practice Code
The Managing Director shall be authorized to review and approve any modifications to the Fair Practice Code from time to time.
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