Capital Trust Microfinance Private Limited
The company is doing its MFI Business through Capital Trust Microfinance Private Limited earlier known as Parikarma Investments and Financial Services Pvt Ltd. The company is a RBI Registered NBFC – MFI registered in New Delhi . The company is registered with Registrar of Companies under registration No. U65921DL1990PTC287461.
The company is wholly owned subsidiary of Capital Trust Limited, a Non-Banking Finance Company listed on the Bombay Stock Exchange and The National Stock Exchange, Mumbai with a market cap of nearly Rs.800 cr. The company has a legacy of over 30 years in the field of financial services.
Directors of the Company:
Mr. Yogen Khosla
Mrs. Anju Khosla
Mr. Hari Bhaskaran
As per Reserve Bank of India regulations the company is charging the following fro its MFI clients:
- Interest Rate for the quarter starting 1st July 2017 is 25.35%.
- Processing Fee is 1%.
- Actual Cost of Insurance.
Guidelines on Fair Practices Code for NBFCs
In pursuant to DNBR (PD) CC.No.047/03.10.119/2015-16 dated July 1, 2015 Master Circular- ‘Non-Banking Financial Company-Micro Finance Institutions’ (NBFC-MFIs) – Directions, Capital Trust Microfinance Pvt. Ltd here by adopt the Code of Conduct. The company is registered with Sa-Dhan, a RBI recognized Self Regulatory Organization (SRO) and hereby adopt the following;
CORE VALUES OF MICROFINANCE
To provide low income clients – women and men – and their families, with access to financial services that are client focused, designed to enhance their wellbeing, and delivered in a manner that is ethical, dignified, transparent, equitable and cost effective.
Quality of Service:
To ensure quality services to clients, appropriate to their needs, and delivered efficiently in a convenient and timely manner.
To maintain high standards of professionalism based on honesty, non-discrimination and customer centricity.
To provide complete and accurate information to clients regarding all products and services offered.
To create awareness and enable clients and all other stakeholders to understand the information provided with respect to financial services offered and availed.
To ensure that clients are protected against fraud and misrepresentation, deception or unethical practices.
To ensure that all practices related to lending and recovery of loans are fair and maintain respect for client’s dignity and with an understanding of client’s vulnerable situation.
Privacy of Client Information
To safeguard personal information of clients, allowing disclosures and exchange of relevant information with authorized personnel only, and with the knowledge and informed consent of clients.
Integrating social values into Operations
- To ensure high standards of governance and management focused on not only financial performance but also social impact of business.
- To monitor and report social as well as financial data.
- To assess the social performance and social relevance of the institution from time to time.
Feedback & Grievance Redressal Mechanism
- To provide clients formal and informal channels for feedback and suggestions.
- To consistently assess the impact of services in order to enhance competencies and serve clients better.
- To provide a formal and easy to access grievance redressal mechanism for clients.
CODE OF CONDUCT FOR MICROFINANCE INSTITUTIONS
All Microfinance Institutions, regardless of form of organisation, are required to follow all regulatory norms as well as consumer protection practices (specifically, RBI’s Guidelines on Fair Practices issued for NBFCs) laid down by the government and the regulators in both letter and spirit. This Code of Conduct lays down additional requirements to enhance and improve sector practices.
Capital Trust Microfinance Private Limited follows the following code of conduct:
- Promote and strengthen the Microfinance movement in the country by bringing low income clients to the mainstream financial sector.
- Build progressive, sustainable, and clientcentric systems and practices to provide a range of financial services (consistent with regulation) to clients.
- Promote cooperation and coordination among themselves and other agencies in order to achieve higher operating standards and avoid unethical practices – including competitive business practices – in order to serve clients better.
I. Integrity and Ethical Behaviour
- We have designed appropriate Board approved policies and operating guidelines to treat clients and employees with fairness and dignity.
- We have incorporated transparent and professional governance system to ensure that staff and persons acting on their behalf are oriented and trained to put this Code into practice.
- The incentive structure for the staff is aimed at promoting good business and service practices towards customers.
- We educate clients on the Code of Conduct and its implementation.
- CapitalTrust Microfinance discloses all terms and conditions to the client, in a form and manner that is understandable, for all services offered. Disclosure is made prior to disbursement in accordance with the Reserve Bank of India’s (RBI) Fair Practices Code through the following documents:
- Individual sanction letter
- Loan card
- Loan schedule
Disclosure is made through Centre meetings for securing clients’ informed consent.
- The company communicates all the terms and conditions for all products/services offered to clients in the official regional language or a language understood by them.
- The Company discloses the following terms:
- Rate of interest on a reducing balance method
- Processing fee
- Total charges recovered for insurance coverage and risks covered
- Company declares all interest and fees payable as an all-inclusive Annual Percentage Rate (APR) and equivalent monthly rate.
- We follow RBI’s guidelines with respect to interest charges.
- Formal records of all transactions are maintained in accordance with all regulatory and statutory norms, and borrowers’ acknowledgment/acceptance of terms/ conditions are formed a part of these records.
- Where a loan is not sanctioned against an accepted application, the company discloses the reasons for rejection.
- The Company puts its annual reports and annual financial statements on website immediately after approval of Board/AGM
III Client Protection
A Fair Practices
- We ensure that the provision of micro finance services to eligible clients is as per RBI guidelines.
- We offer only financial products and services that have been approved by the concerned regulatory authority to our clients.
- The decision on loans is taken within a reasonable of time. We indicate the time limit within which customers can expect a decision on their application and if sanctioned, the time taken for disbursement of loan.
B Avoiding Over-indebtedness
- The Company conduct proper due diligence as per their internal credit policy to assess the need and repayment capacity of client before making a loan and must only make loans commensurate with the client’s ability to repay.
- If a client has loans from 2 separate MFIs, then irrespective of the source of the loans, we are not the third lender to that client. The same is validated by the Credit Bureau Report prior to extension of the loan.
- The company does not, under any circumstance, breach the total debt limit for any client, as prescribed by RBI. This is validated by the Credit Bureau Report prior to disbursement of the loan.
- The company after due verification of credit bureau reports ensures that loans given on the basis of joint liability of group of borrowers (JLG loan) is restricted to Rs 60,000 per borrower.
- To reduce the errors in identification of borrowers in credit bureau reports, the company shall move towards adoption of UIDAI number (Aadhaar number) based KYC within a two year period (from the day this Code of Conduct comes into effect).
C Appropriate interaction and collection practices
- The company has clearly defined guidelines for employee interactions with clients.
- It ensures that all staff and persons acting on behalf of the company
- Use courteous language, maintain decorum, and are respectful of cultural sensitivities during all interaction with clients.
- DO NOT indulge in any behaviour that in any manner would suggest any kind of threat or violence.
- DO NOT contact clients at odd hours, as per the RBI guidelines for loan recovery agents.
- DO NOT visit clients at inappropriate occasions such as bereavement, etc., to collect dues even if two or more successive repayments are not received
- The company provides a valid receipt for each and every payment received from the borrower and record the payment in the loan passbook/loan card with the client
- The company have a detailed Board approved process for dealing with clients, at each stage of default.
- The company does not collect shortfalls in collections from employees.
D Privacy of client information
We keep personal client information strictly confidential except where it is required legally to be given. The information of the client is shares with the Credit Bureau.
The Company have incorporated a formal governance system that is transparent and professional, and adopted the following best practices of corporate governance:
- The Company observes high standards of governance by inducting persons with good and sound reputation as members of Board of Directors/Governing body and seek to comply with the best standards stipulated in Companies Act, RBI regulations.
- The Company has independent directors to the extent of 1/3rd of the Governing Board.
- The Company has appointed an audit committee of the Board with an independent director as chairperson.
- The Company ensures transparency in the maintenance of books of accounts and reporting/ presentation and disclosure of financial statements by qualified auditor/s.
- The Company has best efforts Audit and Assurance Standards issued by the Institute of Chartered Accountants of India (ICAI).
- The Company places before the Board of Directors, a compliance report indicating the extent of compliance with this Code of Conduct and the functioning of the grievance redressal mechanism at various level of management, specifically indicating any deviations and reasons therefore, at regular intervals, as may be prescribed by Board.
- As a matter of free and fair recruitment practice, there is no restriction on hiring of staff from other MFIs by legitimate means in the public domain like general recruitment advertisements in local newspapers, web advertisements, walk-in interviews, etc.
- Whenever the Company seeks to recruit an employee from another MFI, it generally seeks a reference check from the current employer.
- The Company responds to the reference check request from another MFI.
- The Company honours notice period as mentioned in the terms of Appointment of the employee.
- The Company does not recruit an employee of another MFI, irrespective of the grade/level of the employee, without relieving letter from the previous MFI employer. However, exception can be made in instances where the previous employer (MFI) fails to respond to the reference check request.
VI Client Education
- The Company has a dedicated process to raise clients’ awareness of the options, choices and responsibilities vis-à-vis financial products and services available. The Company provides financial literacy to the clients informing about various financial products and services and their usage.
- New clients are informed about the organization’s policies and procedures to help them understand their rights as borrowers.
- The Company ensures regular checks on client awareness and understanding of the key terms and conditions of the products/ services offered / availed.
VII Data Sharing
- The Company shares complete client data with all RBI approved Credit Bureaus, as per the frequency of data submission prescribed by the SRO2.
- All MFIs should provide the data and information called for by all supervisory and regulatory bodies including the SRO
VIII Feedback/ Grievance Redressal Mechanism
- MFIs must establish dedicated feedback and grievance redressal mechanisms to correct any error and handle/receive complaints speedily and efficiently. The minimum standards required of the GRM are
i) an easy procedure for recording a complaint over phone – with details of phone numbers printed on loan cards,
ii) a staff assisted procedure at the branch for recording complaints/ grievances,
iii) acknowledgement for receipt of the complaint
iv) a time limit for resolution of the complaint,
v) a clear appeal procedure in case where customer is not satisfied with the solutions offered by the MFI,
vi) nodal staff in the branch to guide customers to lodge grievance with RBI or SRO, vii) assurance to customers that they will be treated fairly despite the complaint/grievance being lodged.
2. MFIs must inform clients about the existence and purpose of these mechanisms and how to access them.
3. MFIs must designate at least one grievance redressal official to handle complaints and/ or note any suggestions from the clients and make his/ her contact numbers easily accessible to clients.
4. MFIs must display contact number and address of SRO (as applicable) nodal official and details of the grievance redressal system of the SRO
5. Each MFI will have an appropriate mechanism for ensuring compliance with the Code of Conduct.
6. Where complainants are not satisfied with the outcome of the investigation conducted by the concerned MFI into their complaint, they shall be notified of their right to refer the matter to the grievance redressal mechanism established by the SRO, as applicable.
7. MFIs should prepare a monthly report on grievances received, resolved and pending for a senior management review and periodic reports to the board.
A (i) 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) Loan application forms should 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 may indicate the documents required to be submitted with the application form.
(c) The NBFCs should devise a system of giving acknowledgement for receipt of all loan applications. Preferably, the time frame within which loan applications will be disposed of should also be indicated in the acknowledgement.
(ii) Loan appraisal and terms/conditions
The NBFCs should convey in writing to the borrower in the vernacular language as understood by the borrower 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. As complaints received against NBFCs generally pertain to charging of high interest / penal interest, NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement.
It is understood that in a few cases, borrowers at the time of sanction of loans are not fully aware of the terms and conditions of the loans including rate of interest, either because the NBFC does not provide details of the same or the borrower has no time to look into detailed agreement.
Not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the NBFC and the borrower with regard to the terms and conditions on which the loan is granted.
NBFCs are, therefore, advised to 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.
(iii) Disbursement of loans including changes in terms and conditions
(a) The NBFCs should give notice to the borrower in the vernacular language as understood by the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. NBFCs should also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement.
(b) Decision to recall / accelerate payment or performance under the agreement should be in consonance with the loan agreement.
(c) NBFCs should 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 NBFCs may have against borrower. If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which NBFCs are entitled to retain the securities till the relevant claim is settled/paid.
(a) NBFCs should 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 lender).
(b) In case of receipt of request from the borrower for transfer of borrowal account, the consent or otherwise i.e. objection of the NBFC, if any, should be conveyed within 21 days from the date of receipt of request. Such transfer shall be as per transparent contractual terms in consonance with law.
(c) In the matter of recovery of loans, the NBFCs should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans etc. As complaints from customers also include rude behavior from the staff of the companies. NBFCs shall ensure that the staff are adequately trained to deal with the customers in an appropriate manner.
(v) The Board of Directors of NBFCs should also lay down the appropriate grievance redressal mechanism within the organization to resolve disputes arising in this regard. Such a mechanism should ensure that all disputes arising out of the decisions of lending institutions’ functionaries are heard and disposed of at least at the next higher level. The Board of Directors should also provide for 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 may be submitted to the Board at regular intervals, as may be prescribed by it.
(vi) Fair Practices Code (which should preferably in the vernacular language as understood by the borrower) based on the guidelines outlined hereinabove should be put in place by all NBFCs with the approval of their Boards within one month from the date of issue of this circular. NBFCs will have the freedom of drafting the Fair Practices Code, enhancing the scope of the guidelines but in no way sacrificing the spirit underlying the above guidelines. The same should be put up on their web-site, if any, for the information of various stakeholders.
(vii) Complaints about excessive interest charged by NBFCs (issued vide CC No. 95 dated May 24, 2007)
The Reserve Bank has been receiving several complaints regarding levying of excessive interest and charges on certain loans and advances by NBFCs. Though interest rates are not regulated by the Bank, rates of interest beyond a certain level may be seen to be excessive and can neither be sustainable nor be conforming to normal financial practice.
Boards of NBFCs are, therefore, advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges.
In this regard the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans are to be kept in view.
(viii) Regulation of excessive interest charged by NBFCs (Notification No. DNBS. 204 / CGM (ASR)-2009 dated January 2, 2009)
(a) The Board of each NBFC shall adopt an interest rate model taking into account relevant factors such as, cost of funds, margin and risk premium, etc and determine the rate of interest to be charged for loans and advances. 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 companies or published in the relevant newspapers. The information published in the website or otherwise published should be updated whenever there is a change in the rates of interest.
(c) The rate of interest should be annualised rates so that the borrower is aware of the exact rates that would be charged to the account.
(ix) Clarification regarding repossession of vehicles financed by NBFCs (issued vide CC No. 139 dated April 24, 2009)
NBFCs must have a built in re-possession clause in the contract/loan agreement with the borrower which must be legally enforceable. To ensure transparency, the terms and conditions of the contract/loan agreement should 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 must be made available to the borrowers in terms of circular wherein it was stated that NBFCs may invariably furnish a copy of the loan agreement 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, which may form a key component of such contracts/loan agreements.
In addition to the general principles as above, NBFC-MFIs shall adopt the following fair practices that are specific to their lending business and regulatory framework.
- Disclosures in loan agreement / loan card
- All NBFC-MFIs shall have a Board approved, standard form of loan agreement. The loan agreement shall preferably be in vernacular language.
- In the loan agreement the following shall be disclosed.
- The FPC in vernacular language shall be displayed by an NBFC-MFI in its office and branch premises,
- A statement shall be made in vernacular language and displayed by NBFC-MFIs in their premises and in loan cards articulating their commitment to transparency and fair lending practices,
- Field staff shall be trained to make necessary enquiries with regard to existing debt of the borrowers,
- Training if any, offered to the borrowers shall be free of cost. Field staff shall be trained to offer such training and also make the borrowers fully aware of the procedure and systems related to loan / other products,
- The effective rate of interest charged and the grievance redressal system set up by the NBFC-MFI should be prominently displayed in all its offices and in the literature issued by it (in vernacular language) and on its website,
- A declaration that the MFI will be accountable for preventing inappropriate staff behavior and timely grievance redressal shall be made in the loan agreement and also in the FPC displayed in its office/branch premises,
- The KYC Guidelines of RBI shall be complied with. Due diligence shall be carried out to ensure the repayment capacity of the borrowers,
- As specified in the NBFC-MFIs (Reserve Bank) Directions, 2011, all sanctioning and disbursement of loans should be done only at a central location and more than one individual should be involved in this function. In addition, there should be close supervision of the disbursement function,
- Adequate steps may be taken to ensure that the procedure for application of loan is not cumbersome and loan disbursements are done as per pre-determined time structure.
- All the terms and conditions of the loan,
- that the pricing of the loan involves only three components viz; the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof),
- that there will be no penalty charged on delayed payment,
- that no Security Deposit / Margin is being collected from the borrower,
- that the borrower cannot be a member of more than one SHG / JLG,
- the moratorium between the grant of the loan and the due date of the repayment of the first instalment(as guided by the NBFC-MFIs(Reserve Bank) Directions, 2011),
- an assurance that the privacy of borrower data will be respected.
The loan card should reflect the following details as specified in the Non-Banking Financial Company – Micro Finance Institutions (Reserve Bank) Directions, 2011.
(i) the effective rate of interest charged
(ii) all other terms and conditions attached to the loan
(iii) information which adequately identifies the borrower and
(iv) acknowledgements by the NBFC-MFI of all repayments including instalments received and the final discharge.
(v) The loan card should prominently mention the grievance redressal system set up by the MFI and also the name and contact number of the nodal officer
(vi) Non-credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself.
(vii) All entries in the Loan Card should be in the vernacular language.
iii. Non-Coercive Methods of Recovery
As specified in the NBFC-MFIs (Reserve Bank) Directions, 2011, recovery should 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 2 or more successive occasions.
NBFC-MFIs shall ensure that a Board approved policy is in place with regard to Code of Conduct by field staff and systems for their recruitment, training and supervision. The Code should lay down minimum qualifications necessary for the field staff and shall have necessary training tools identified for them to deal with the customers. Training to field staff shall include programs to inculcate appropriate behavior towards borrowers without adopting any abusive or coercive debt collection / recovery practices. Compensation methods for staff should have more emphasis on areas of service and borrower satisfaction than merely the number of loans mobilized and the rate of recovery. Penalties may also be imposed on cases of non-compliance of field staff with the Code of conduct. Generally only employees and not out sourced recovery agents be used for recovery in sensitive areas.
- Internal control system:
As the primary responsibility for compliance with the Directions rest with the NBFC-MFIs, they shall make necessary organizational arrangements to assign responsibility for compliance to designated individuals within the company and establish systems of internal control including audit and periodic inspection to ensure the same.