Approved by

Regn No. N-02.00290

Rupeek Loan Policy

Rupeek Capital Private Limited

  1. Introduction

    The Loan Policy shall act as a guideline for the top management and other employees of the Company in conducting the business within acceptable risk tolerances.

  2. Objective

    The main objectives of the Lending Policy are to:

    1. Ensure a healthy balance between loan levels, profits and quality of assets.

    2. Comply with the regulatory requirements / directives such as Capital Adequacy, LTV, Interest rates, etc.

    3. Lay down controls for assumption and monitoring of large exposures.

    4. Develop and inculcate “internal values” in the business of lending.

    5. Facilitate sustained growth with maintaining acceptable asset quality.

    6. Lay down proper system & procedures, appraisal standards at various levels in the organization with sturdy internal controls.

    7. Adequately protect the collaterals pledged from any possible loss.

    8. Detail risk management practices and internal audit procedures into the Lending Policy.

    9. Enable the Company to successfully and consistently cope with competition.

    10. Improve the capabilities and credit skills of the employees and officers connected with loan portfolio at various levels.

    11. Meet with the expectations on corporate social responsibility and actively participate in “financial inclusion” programme.

  3. Gold Loan

    1. Nature, Type and Tenor of Loans

      1. The Company will normally accept only Household Used Jewellery as security since they are presumed to carry the invaluable “emotional attachment‟ of the owner. New gold ornaments may also be selectively accepted, subject to laid down controls, provided there are no other adverse implications.

      2. Loan schemes shall be devised in conformity with the Loan Policy of the Company and also the regulatory directives of RBI as applicable. Loan schemes and terms & conditions thereof shall keep in view the NPA / Income recognition classification norms laid down by the RBI.

      3. Suitable norms, encompassing inherent / typical risk factors (e.g. restricted items, prohibited items, large number of similar items, large weight items, “difficult-to-assess” ornaments etc.) should be devised, approved internally and periodically reviewed. Loans against coins, biscuits, bars etc. may not be granted in compliance with RBI directives. Suitable controls, both system (IT) & non-system based, should be put in place and compliance monitored.

      4. Gold Loans will be disbursed by way of single / one time debit to each account and which will then be monitored for interest servicing and final closure along with other accounts, if any, of the same borrower. Borrower wise exposure must be available at any point of time.

      5. The tenure of the loans shall be decided by market practices and regulatory directives, as applicable. The initial maturity of the gold loan shall be maximum for 6 months which may be extended by one more year upon satisfactory servicing on interest due during the initial one year period.

      6. Loans against pledge of gold ornaments should be sanctioned immediately against acceptance of the gold ornaments as security and completion of KYC process to the satisfaction of the relevant function. Accordingly, all loans shall be sanctioned within a reasonable time the same day keeping in view the due diligence requirements, number / nature of items, quantum of loan etc. and also customer satisfaction benchmarks. Sanctioned loan amount shall be disbursed before leaving the borrower’s doorstep with the jewels.

      7. The Company shall devise schemes with appropriate interest rate and other charges on loans keeping in mind the regulatory directives as may be applicable from time to time.

      8. Terms and conditions of loans should be in compliance with the Fair Practices Code of the Company.

    2. Restriction, Prohibition on Lending to Certain Categories of Customers / Persons

      1. Loans to categories of customers perceived having higher than normal risk shall be restricted as far as feasible keeping in balance business compulsions and the consequential risks emanating therefrom. For example, loans to goldsmiths, jewellers etc. shall be judiciously controlled and adequate credit risk assessments undertaken especially when exposure reaches high levels.

      2. Loans to directors, their relatives and related entities shall not be sanctioned.

      3. Loans to staff members of the company and the group shall be restricted to Rs. 50,000 per employee. Such loans shall be on the same terms and conditions applicable to the public. However, changes, if any, in the limit or terms and conditions may be approved by the MD on the proposal submitted by the Senior Management of relevant functions.

      4. Loans to borrowers having a history of pledging spurious / low quality ornaments or stolen gold ornaments or those who have earlier deliberately put the company to material loss of any kind should not be entertained. Suitable limits defining “material” loss should be defined internally and got approved by the MD on the recommendations of the relevant functions. Procedures for immediate “freezing / blocking” such Customer IDs must be implemented. The Company shall maintain an updated list of such “blacklisted”, “caution” customers.

      5. Loans to persons of doubtful integrity (to the extent known), customers engaging in illegal/ unlawful business (to the extent known) etc. shall not be entertained even if the quality of the security offered is beyond doubt.

    3. Loan Application Forms, Loan Sanction Letter

      1. Loans shall be disbursed only against fully completed loan application form which can be digitally filled or details of the loan application can be furnished over call through a designated customer support number. Loan application forms and documentation requirements should comply with the Fair Practice Code and KYC Policy of the Company.

      2. The various loan schemes (loan per gram, interest rate structure, penal interest, compounding if any, other charges etc.) should be explained to the prospective borrower and an appropriate scheme offered based on the borrower’s needs / preferences.

      3. Immediately upon sanction the loan sanction letter (pawn ticket) in duplicate should be given to the borrower for acceptance. The pawn ticket, which serves as a receipt for the gold ornaments delivered by the borrower alongwith the terms and conditions of the loan, will also operate as a loan sanction letter. The acknowledged copy of the pawn ticket should be carefully retained along with the loan application form for future verification and reference.

    4. Know Your Customer (KYC) , Due Diligence

      1. In compliance with RBI directives all customers availing loan facility from the Company shall be required to submit suitable and acceptable evidences of Identity and Address commonly understood as KYC documents. Documents in support of KYC compliance need be normally submitted at the time of the first loan when the “Customer ID” is created in the system. Loans should be sanctioned only after full compliance with the KYC policy as laid down by the Company.

      2. The Company shall strive to introduce a system of capturing the customer's photograph during the loan process through adequate cameras.

      3. Adequate due diligence shall be ensured, to the extent feasible and desirable, before the loan is sanctioned. There should be no prima facie circumstances to indicate that the prospective borrower’s title to the gold ornaments could be defective. The loan application form must also contain an undertaking of the borrower certifying his/her undisputed ownership of the gold ornaments.

      4. A valid pledge and charge over the security shall be created only after ensuring the ownership of the gold, in line with the relevant regulatory norms. Towards this requirement, suitable clauses may be added in the loan documents and the same shall be mandatorily got signed by the Customer before disbursement of loans. The title of the gold ornaments will be satisfied with before the gold is accepted as security. However, in the case of gold ornaments it may not be easy to confirm “ownership” in a foolproof manner, as compared to say lending against property, vehicles etc. To tide over this issue and also to be in line with the relevant provisions as regards methods of establishment of ownership of gold, measures in the nature of obtaining undertaking of ownership in the loan application form, collection of other relevant documents regarding the ownership namely bills, receipts etc, if available and /or authorization to effect pledge on behalf of the rightful owner, ensuring proper KYC procedure, meaningful interaction with loan applicants and other prima facie checks will be made before the gold is accepted as security. However, in the process of interaction about personal details it will be ensured that no offence or embarrassment is caused to the loan applicant.

    5. Appraisal of Security (Gold), Delegation of Financial Powers

      1. Gold ornaments shall be accepted as security for loans only after proper appraisal by the staff before the loans are sanctioned. Gold ornaments of purity below 18 carat shall not be accepted.

      2. Appraisal techniques to be used by the operating staff such as nitric acid test, color, sound / smell test etc. observance of which should be ensured and monitored. Colored gold ornaments shall not be accepted. Adequate tools & training for performing the appraisal of gold must be provided to all relevant operating staff.

    6. Loan To Value (LTV) or Loan Per Gram

      1. The LTV should be in compliance with RBI directives in force from time to time. Flexibility in the fixation of differential LTV for specific customer categories, areas / locations, periods etc. may be provided within the overall lending policy. The relevant department shall prepare a reasoned recommendation and put up to the MD for approval.

      2. The total eligible amount of the loan shall be calculated by the system (IT) based on the weight of the gold ornaments net of stone weight and subject to deductions for lower purity, wastages as applicable. Deductions applicable on account of purity, wastage, local variations etc. should be get periodically approved by the MD on the recommendations of the relevant departments.

      3. Considering the risk gradation arising from differential rates, as a general rule, LTV and interest rate on the loan should be positively correlated i.e. a lower LTV loan shall get the benefit a lower rate of interest. However, exceptional deviations could be made to accommodate various contingencies such as competition, local issues, special / temporary offers etc. Such deviations shall be approved by the MD based on the recommendations of put up by relevant departments.

    7. High / Large Value Loans, Maximum Exposure Per Borrower

      1. Undue reliance on high value loans to accelerate growth should be discouraged considering the inherent concentration risks. Emphasis must be placed on acquisition of small / medium value loans considering the benefits arising from broad basing the customers.

      2. High value loans to single customer (or closely connected group of individuals) should be controlled and monitored as such customers may fall under “high risk‟ category. Such sanction of loans to a single borrower (including closely connected group of individuals) should be defined and reviewed periodically.

        Such limits shall be got approved by the MD on the recommendations of the relevant department. Maximum lending limit may be linked to risk perception in different regions / states. Any exposure beyond the limit should be subject to sanction by the MD and the Company’s Board.

      3. A structured credit check / profiling format should be used for recommending limits higher than the maximum permissible at the borrower level. Further, in all cases where the exposure to a borrower touches Rs 5 lakh address of the borrower must be re-verified and PAN must be obtained (in case not obtained earlier). Due care in large value accounts would also be necessitated by the RBI provisions relating to Anti Money Laundering / Finance for Terrorist Activities. Credit check / profiling / address verification should be done in a discreet manner without offending the borrower.

      4. It shall be ensured that the exposure taken on a single borrower does not exceed Rs. 75,00,000 (Rupees Seventy Lakhs Only). A single borrower shall include a family unit, a closely associated group such as employer-employee etc.

    8. Takeover of Loans

      Takeover of loans from other companies, banks etc. should not be freely permitted considering the risks involved. However, the Company may frame suitable instructions with proper internal controls for take over of loans and review them from time to time.

    9. Custody of Gold, Storage Arrangements, Security

      1. Gold ornaments shall be stored in vaults of reputed 3rd party vault management companies with adequate security measures. A background verification of 3rd party vault management companies is conducted while empanelling them. Two senior officials / employees, normally designated as Area Manager - Vault Operations & Internal Audit would be deputed at each vault location for handing over the Gold ornaments in secure and sealed manner to the 3rd party vault operators. As an internal control mechanism regular audit of these vaults would be carried by the Audit & Auction Team.

      2. A proper and systematic procedure should be laid down for handing over charge from one official to another arising from transfer, leave, resignation etc. so that accountability can be clearly fixed where required. No Area Manager - Vault Operations & Internal Audit should be normally relieved of charge unless the gold packets are subject to minimum verification by the reliever.

      3. Overnight storage of pledged Gold ornaments and cash shall be in burglar proof safes with secure locking facility complying with high safety standards. Adequate arrangements for secure transit of Gold ornaments and cash from customer’s location to vault should be ensured at all times and kept within the permissible limits as defined internal policy.

      4. All gold ornaments and cash whether in the safe room or in transit must be adequately insured against various risks such as burglary, fidelity, transit etc. with a reputed insurance company. Keeping in view the Company’s liability to compensate the borrower for any unforeseen loss the gold ornaments must be insured at “replacement value” through adequate inclusion of “making charges” along with the market value of the gold in the cover policy. These making charges would be would be assessed by company’s experts to arrive at a reasonable value.

    10. Funding of Assets

      Capital adequacy norms as stipulated by RBI shall be complied with by the Company. Owned funds should supplement a suitable mix of bank borrowing / credit lines, NCDs & Bonds. Resources for funding the gold loans should be well diversified and adequate to meet with growth plans. Tenure of funding should, as far as possible, match with the gold loan maturity profile (historical repayment data/trends may be extrapolated).

    11. Recovery of Loans, Sending of Notices, Auction of Security

      Going by the inherent nature of the security it may be reasonably expected that most borrowers will service the interest and repay the loan of their own accord. However, as a matter of good practice and measure of caution, monitoring repayments should be accorded close attention since there would be many borrowers who repay only after receiving reminders for interest dues, loan repayment etc. On the other hand there could be a few borrowers who pose challenges for smooth recovery.

  4. Sharing of Credit Information / Classification of Customers

    1. The company shall become a member of all CICs and submit borrower data (including historical data) to them as per extant RBI guidelines

    2. The company shall comply with the instructions contained in the RBI’s circular DBOD.No.CID.BC.127/20.16.056/2013-14 dated June 27, 2014 amended from time to time and comply with the directives issued under CICRA

    3. Appropriate systems shall be put in place to identify and classify customers into appropriate categories (Special Mention Accounts) as stipulated by RBI and reporting thereof within the defined time limits. The Company shall ensure that the credit information alongwith the SMA status of all the customers having fund based and non fund based exposure of Rs. 5 crores (Rupees Five Crores) and above or such limit as stipulated by RBI from time to time gets reported within the defined timelines.

    4. “Non cooperative borrowers” as defined by RBI shall be identified and reported to CRILC within such time as has been specified by RBI. Before reporting the same, the customer shall be provided adequate time as stipulated by RBI from time to time to clarify their stand before getting reported as non cooperative borrowers. Higher/accelerated provisioning requirements in respect of new loans/exposures to such borrowers as also new loans/exposures to any other company promoted by such promoters/ directors or to a company on whose board any of the promoter / directors of this non-cooperative borrower is a director, shall be complied with.

    5. The Company shall appoint a nodal officer having assigned the responsibility of ensuring prompt submission of customer data to Credit Information Companies.