Interest Rate Policy
1. Background and Purpose
The Reserve Bank of India ("RBI") vide its Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 ("RBI Directions") has advised that the Board of Directors of Non-Banking Finance Companies ("NBFCs") should lay out appropriate internal principles and procedures in determining interest rates, processing and other charges. In this regard, RBI further requires NBFCs to adopt an appropriate interest rate model considering relevant factors and to disclose the rate of interest, gradations of risk and rationale for charging different rates of interest.
In order to put in place a transparent and standardized mechanism for determining interest rate and fee/ charges on its loan products, Whizdm Finance Private Limited ("Company") has devised its existing Interest Rate Policy "Policy" in line with RBI Directions.
The Policy has been formulated with the objective of ensuring that interest rates and fee/ charges are determined in a standardized manner to ensure long-term sustainability of business while considering the interests of all stakeholders including customers.
The principles governing such pricing are set out in this Policy, while the detailed computation methodologies, governance mechanisms and approval authorities would be documented in the Company's Internal Pricing Framework, which shall be read in conjunction with this Policy.
The Board of Directors shall approve this Policy and exercise oversight over the Company's pricing framework. The methodologies for determining interest rates and processing fees shall be implemented in accordance with the governance structure prescribed under the Internal Pricing Framework.
In order to put in place a transparent and standardized mechanism for determining interest rate and fee/ charges on its loan products, Whizdm Finance Private Limited ("Company") has devised its existing Interest Rate Policy "Policy" in line with RBI Directions.
The Policy has been formulated with the objective of ensuring that interest rates and fee/ charges are determined in a standardized manner to ensure long-term sustainability of business while considering the interests of all stakeholders including customers.
The principles governing such pricing are set out in this Policy, while the detailed computation methodologies, governance mechanisms and approval authorities would be documented in the Company's Internal Pricing Framework, which shall be read in conjunction with this Policy.
The Board of Directors shall approve this Policy and exercise oversight over the Company's pricing framework. The methodologies for determining interest rates and processing fees shall be implemented in accordance with the governance structure prescribed under the Internal Pricing Framework.
2. Types of Interest Rate
The Company charges a fixed interest rate for its loan products. The determination of the fixed interest rate shall be based on various factors discussed in this Policy.
3. Interest Rate Model
The Company has adopted risk based methodology for determining interest rate after considering relevant factors as mentioned below:
a. Cost of Funds:
b. Operating Expenses: Operating expenses refer to the costs incurred in the day-to-day running of the business. These include employee expenses, IT infrastructure costs, fixed and variable costs and other operational expenditures. This does not include any cost incurred for onboarding a loan including the fees paid to DSA/LSPs/DLAs for sourcing of loan.
c. Cost of Liquidity: The Company needs to keep liquidity buffer to manage liquidity risk and this liquidity buffer comes with negative carry.
d. Expected Return on Assets: This refers to the return expected by the shareholders to ensure the sustainability of the company's business operations. It aims to balance profitability with charging customers interest rates that are fair, reasonable, and transparent.
e. Risk premium: It is the cost of risk which the business carries on account of the creditworthiness of the borrowers. The risk premium charged to the customer which represents the default risk arising from loan sanctioned will be arrived at based on an appropriate credit risk rating after taking into consideration customer relationship, expected losses etc. The Risk Premium for Loan Products is calculated for different customer segments to cover the potential credit loss risk associated with them. It is assessed based on the following factors:
f. Market liquidity and prevailing macro-economic conditions
The rate of interest for the same product and tenor availed during the same period by different customers need not be the standardized one. It could vary for different customers depending upon consideration of all or any combination of above factors.
Interest Rate: The Company will ensure that applicable rate of interest to any borrower shall not exceed the maximum rate fixed by the Company. The annualized interest rate shall not exceed 32% per annum.
The interest rate shall be computed on daily outstanding balances basis and charged on either daily or monthly rest or such other rest.
a. Cost of Funds:
- Cost of Borrowings: The cost of borrowing represents the average cost of raising debt funds through various external sources. This cost is influenced by market conditions and may fluctuate accordingly. Any changes in the cost of funds directly impact pricing of the loans which the Company offer
- Cost of Equity: To operate effectively, the company also invests its own equity in the business. The cost associated with this equity is considered when determining overall pricing and interest rates.
b. Operating Expenses: Operating expenses refer to the costs incurred in the day-to-day running of the business. These include employee expenses, IT infrastructure costs, fixed and variable costs and other operational expenditures. This does not include any cost incurred for onboarding a loan including the fees paid to DSA/LSPs/DLAs for sourcing of loan.
c. Cost of Liquidity: The Company needs to keep liquidity buffer to manage liquidity risk and this liquidity buffer comes with negative carry.
d. Expected Return on Assets: This refers to the return expected by the shareholders to ensure the sustainability of the company's business operations. It aims to balance profitability with charging customers interest rates that are fair, reasonable, and transparent.
e. Risk premium: It is the cost of risk which the business carries on account of the creditworthiness of the borrowers. The risk premium charged to the customer which represents the default risk arising from loan sanctioned will be arrived at based on an appropriate credit risk rating after taking into consideration customer relationship, expected losses etc. The Risk Premium for Loan Products is calculated for different customer segments to cover the potential credit loss risk associated with them. It is assessed based on the following factors:
- Type of Loan- secured or unsecured
- Type of Loan Product- Various loan products offered by the Company have unique features. These features will be considered when determining the interest rates for a particular type of loan product.
- Tenor of facility: The tenor of the facility is a key factor in determining the interest rate for the borrower, as short-term and long-term funds have different associated costs.
- Perceived Industry Risk (if any): The perceived risk associated with the industry.
- Value and Quality of Security/ Collateral, if applicable
- Creditworthiness of the borrower, based on credit information available with credit information companies. The Company may also factor internal risk score together with it or separately.
- Profile of Customer: Customer profile which includes their credit history, educational qualifications, market reputation, business profile, financial profile, business model, group strength etc. are important factors deriving the interest rate for the loans.
- Geographic Location: Including local delinquency rates and local economic conditions associated with the geographic location of a customer.
- Internal risk score
- Historical Performance of Similar types of borrowers
- Sourcing channel
- Repayment from Salary deduction at source
- Any additional costs, such as regulatory provision, additional credit cost, operational cost etc., if any.
f. Market liquidity and prevailing macro-economic conditions
The rate of interest for the same product and tenor availed during the same period by different customers need not be the standardized one. It could vary for different customers depending upon consideration of all or any combination of above factors.
Interest Rate: The Company will ensure that applicable rate of interest to any borrower shall not exceed the maximum rate fixed by the Company. The annualized interest rate shall not exceed 32% per annum.
The interest rate shall be computed on daily outstanding balances basis and charged on either daily or monthly rest or such other rest.
4. Processing and other Charges
Besides interest, the Company charge following:
4.1 Processing fees: Upto 5.75% of loan amount.
4.2 Bounce Charges: ₹500 (levied once during the month per EMI bounce, not charged on subsequent representation during the same month).
4.3 Penal Charges - The Company shall levy 24% per annum for the days of delays on the overdue amount as a penal charge.
4.4 Pre-payment / Foreclosure charges: Loan Foreclosure/Part Pre-payment Charges shall be maximum upto 4% of the principal outstanding amount as on the date of payment.
In addition to these charges, stamp duty, GST, and other cess, if any, will be collected at applicable rates from time to time, as communicated in the documentation provided. Details of all these charges will be mentioned in the loan agreement and the sanction letter.
Penal charges will be reasonable, non-discriminatory within product categories, and communicated to borrowers in case of non-compliance. Specific clauses attracting penal charges will be mentioned in the loan agreement in bold. There will be no capitalization of penal charges, and all regulatory guidelines will be adhered to.
Charges shall be reviewed from time to time based on market practices. The Company's loan documents shall mention all applicable processing fee and relevant charges. These charges shall be part of the Loan Documents, Key Fact Statement and will also be displayed on the Company's website.
Any revision in these charges will have a prospective effect and will be communicated to the borrower. While determining the charges, market practices and industry standards will also be taken into consideration.
4.1 Processing fees: Upto 5.75% of loan amount.
4.2 Bounce Charges: ₹500 (levied once during the month per EMI bounce, not charged on subsequent representation during the same month).
4.3 Penal Charges - The Company shall levy 24% per annum for the days of delays on the overdue amount as a penal charge.
4.4 Pre-payment / Foreclosure charges: Loan Foreclosure/Part Pre-payment Charges shall be maximum upto 4% of the principal outstanding amount as on the date of payment.
In addition to these charges, stamp duty, GST, and other cess, if any, will be collected at applicable rates from time to time, as communicated in the documentation provided. Details of all these charges will be mentioned in the loan agreement and the sanction letter.
Penal charges will be reasonable, non-discriminatory within product categories, and communicated to borrowers in case of non-compliance. Specific clauses attracting penal charges will be mentioned in the loan agreement in bold. There will be no capitalization of penal charges, and all regulatory guidelines will be adhered to.
Charges shall be reviewed from time to time based on market practices. The Company's loan documents shall mention all applicable processing fee and relevant charges. These charges shall be part of the Loan Documents, Key Fact Statement and will also be displayed on the Company's website.
Any revision in these charges will have a prospective effect and will be communicated to the borrower. While determining the charges, market practices and industry standards will also be taken into consideration.
5. Disclosure and Transparency
The Company strictly adhere to Fair Practice Code and other applicable regulations and ensures that its policies and practices align with regulatory expectations and are designed to ensure transparency, fairness and full disclosure to customers: In this regard, the Company ensures proper disclosure of the Rate of Interest, Fees, and Charges will be expressly stated in the Loan agreement or the Sanction Letter and the Key Fact Statement. The Company will provide information on the Rate of Interest, fees, and charges through an acceptable mode of communication.
The Company will communicate the annualized Rate of Interest to all its borrowers so that its borrowers are aware of the exact rates that will be charged to the respective loan facility. The interest will be charged on actual date of disbursement to the Customer and not from the loan sanction or agreement signing to ensure that fairness and meet regulatory requirements.
The interest will be computed on a daily basis and charged on periodicity as specified in the loan agreement at the rate as stated in the agreement.
The Company will communicate the annualized Rate of Interest to all its borrowers so that its borrowers are aware of the exact rates that will be charged to the respective loan facility. The interest will be charged on actual date of disbursement to the Customer and not from the loan sanction or agreement signing to ensure that fairness and meet regulatory requirements.
The interest will be computed on a daily basis and charged on periodicity as specified in the loan agreement at the rate as stated in the agreement.
6. Administration, Amendment and Review of the Policy
The Board of the Company shall be responsible for the administration, interpretation, application, and review of this Policy. The Board shall also be responsible for bringing about necessary changes to this Policy, if so required at any stage, at its own discretion or with concurrence.
This Policy may be altered or revised as per changes in the market scenario and/or statutory guidelines. The Policy shall be reviewed at least once a year or as and when there are any amendments in the applicable guidelines.
This Policy may be altered or revised as per changes in the market scenario and/or statutory guidelines. The Policy shall be reviewed at least once a year or as and when there are any amendments in the applicable guidelines.