Interest Rate Policy

Company Background

Saarathi Finance and Credit Private Limited (“Saarathi Finance”/ “the Company”) is engaged in providing secured and unsecured retail loans to small business owners and self-employed individuals for their business and other needs.

The Company will also rely on borrowed funds from Banks and other Financial Institutions for lending to its potential customers. The company will derive its income from the spread between the rate charged to its customers and the rate charged by its lenders.

Preamble

The guidelines issued by the RBI vide its Notification No. DNBS. 204 / CGM (ASR)-2009 dated 2nd January 2009 and RBI/DoR/2023-24/106 DoR.FIN.REC.No.45/03.10.119/2023-24 dated October 19, 2023 (updated and modified from time to time) and vide its Guidelines on Fair Practices Code for NBFCs, as amended from time to time (RBI Regulations) directs all NBFCs to make available the rates of interest and the approach for gradation of risk on website of the companies.

In compliance with the requirements of the RBI Regulations mentioned above and the Fair Practices Code adopted by the Company, the Company has adopted this Interest Rate Policy that aims to cover:

• Components of the Interest Rate Model
• Approach for gradation of risks
• Disclosure of rate of interest and changes thereof

Interest Rate Model

The benchmark rate/ reference rate of the Company is termed as Saarathi Benchmark Lending Rate or “SBLR” and has been arrived based on the below factors:

• Cost of Funds: The company desires to have a diversified borrowing profile with a mix of lenders including Banks and Financial Institutions and through various products viz. Term Loans and Working Capital, Debentures, Commercial Papers, securitization, Direct Assignment, Co-lending etc. Pricing for all of these lenders and borrowing products would vary depending on many factors. Accordingly, Weighted average cost of funds over average loan book shall be considered for calculation of SBLR.
• Expected Credit Cost: Expected Credit cost would include provisions and write-offs over average loan book
• Expected Operating Cost: Operating Cost over average loan book. Operating Cost may include employee related expenses, branch related fixed and variable costs, operations costs, sales and marketing expenses, technology expenses, collections and recovery expenses, depreciation etc.
• Expected Return on Assets (RoA): Minimum return expected by the Company for a sustainable growth

The abovementioned Benchmark Lending Rate would act as a guidance and the yield for each of the products would vary depending upon product segment, risk level of the segment, market conditions etc.

Approach for gradation of Risk

The rate of interest for same product and same tenor availed during same period by Customers may be different from customer to customer. The risks shall be perceived depending on customer profile, bureau score, size and nature of customer’s business, geography, historical behaviour of similar customers, credit and default risk in the related business segments, nature and value of collaterals, ticket-size of the loan, tenure of the loan, market conditions etc.

The rate of interest applicable to each customer is subject to change as the situation warrants and is subject to the management’s perceived risk on a case-to-case basis. Changes in interest rates would be decided at any periodicity, depending upon change in benchmark rate, market volatility and review of market conditions including other market players.

Interest Rate and Fees/ Charges

While the company’s borrowings are expected to have a mix of fixed and floating rate of interest, the company has chosen to offer fixed rate of interest to the company’s borrowers. The company may however lend at floating rate of interest to customers/ borrowers on case- to- case basis, subject to approval by the ALCO.

Range of rate of interest for company’s products are provided below:

Interest rate range mentioned above are indicative and on annualized basis. Final rate of interest to be charged to the borrower shall depend on risk category of the loan, collateral type etc.

In addition to the interest rate, the Company also charges certain Fees/ Charges as mentioned in schedule of Charges of the Company.

Revision of the Benchmark Rates and Lending Rates

The benchmark rate (including its methodology of calculation) and lending rates are subject to review from time to time depending on cost of borrowings of the company and market volatility. Any revision in the Benchmark Rate or pricing range shall be decided by the ALCO.

Communication Framework

• Annualized rate of interest rates shall be intimated to the customers at the time of sanction/ availing of the loan and the equated installments apportionment towards interest and principal dues shall be made available to the customer.
• Interest changes would be prospective in effect and intimation of change of interest, if any, or other charges would be communicated to customers.
• Intimation of change of interest or other charges would be communicated to customers in a manner deemed fit, as per terms of the loan documents. Any revision in interest or other charges would be with prospective effect.
• Appropriate disclosure regarding this Interest Rate Policy and Schedule of Charges shall be made on the Company website. All other regulatory changes in this regard will stand updated in the policy from time to time.

Review of the Policy

The Board of the Company may review the policy to ensure that it remains consistent with the prevailing market conditions, overall objectives of the Company and it complies with the regulatory/ statutory requirements from time to time. Such review shall be done at least once in a year.