Newtap Finance Private Limited (previously known as Parfait Finance & Investments Private Limited)

Background

Reserve Bank of India revised guidelines on “Co-lending by Banks and NBFCs to Priority Sector lending” vide its circular RBI/2020-21/63 FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 05, 2020. As per the revised guidelines, lending institutions are permitted to co-lend with Banks & Registered NBFCs (including HFCs) based on a prior agreement. It was further clarified by RBI through FAQs (Q11) published for Digital Lending Guidelines on February 14th, 2023 that co-lending arrangement may be adopted for lending to Non-priority sectors as well.

The Banks and NBFCs shall formulate Board approved policies for entering into the CLM and place the approved policies on their websites

Objective

Newtap Finance proposes to engage with “Co-Lenders” - Banks & Registered NBFCs, to explore co-lending opportunities across its existing and new products / segments.This policy on Co-lending Model (CLM) is formulated in tune with guidelines laid down by Reserve Bank of India.

Products for Co-lending

Newtap Finance is a registered non-deposit taking non-banking financial institution and currently offers unsecured Personal Loans through its sourcing partners.

This Policy shall apply to all existing and future products of Newtap Finance

Engagement Model with Co-lender

Newtap Finance may implement co-lending arrangements on the basis of any of the following models as mutually decided with co-lender & as captured in Master Agreement, in accordance with regulations

• Concurrent Disbursement ( Co-lending Model 1 or CLM1)
• Assignment of Loans (Co-lending Model 2 or CLM2)

The models for co-lending may be modified on the basis of regulations, industry trends and evolving trends in the market, subject to the Board Approval

Criteria for Selection of Partner

• Bank and NBFC should be registered entity with RBI
• Number of years of Operation : Min 2 years
• Credit Rating of the NBFC should be BBB and above.The rating should be obtained from an RBI approved Credit Rating Agency & the rating should not be more than one year old as on the date of agreement
• The NBFC/HFC should have a minimum Asset Under Management of Rs.100.00 crs
• The NBFC should have presence in more than one state

Execution of Master Agreement

Newtap Finance will execute a master agreement with the co-lending partner

• The Master agreement shall inter-alia include, terms and conditions of the arrangement, the specific product lines and areas of operation, along with provisions related to segregation of responsibilities as well as customer interface and protection issues, as detailed in the Annex (Reference https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11991&Mode=0#Annex)
• The Master Agreement shall clearly specify the manner of appropriation between the Co-Lenders. Escrow accounts may be opened with the Co-Lender if required as per regulations or if mutually agreed.
• The Master Agreement will contain necessary representations, warranties and covenants, as mutually agreed with the Co-Lender.

Commercials

• Risk Sharing - Share of loan exposure to be taken by Newtap Finance and each Co-Lender shall be as mutually agreed (eg - 80:20 or 90:10).
• Interest, Fees and Charges from borrower - The ultimate borrower may be charged an interest rate, fees and applicable charges, in the manner agreed between Newtap Finance and each Co-Lender.
• Any other commercial terms – Shall be mutually agreed with each Co-Lender.

Charge Creation on security

In case of secured assets, the Company and the relevant Co-Lender shall establish a framework for creation of security and charge, as mutually agreed.

Customer Support

• Newtap Finance shall be the single point of interface for the customers. Newtap Finance shall enter into a loan agreement with each borrower, which shall contain the features of the arrangement and the roles and responsibilities of Newtap Finance and the relevant Co-Lender, in the manner agreed with each Co-Lender. The details of the arrangement shall be disclosed to the customers upfront and their explicit consent shall be taken.
• Newtap Finance and each Co-Lender shall be individually responsible to comply with the extant regulatory guidelines relating to lending, digital lending, customer service, KYC, outsourcing, fair practices code or any other relevant guidelines applicable to the co-lending arrangement.
• Newtap Finance shall ensure that it is able to generate a single unified statement for each customer, through appropriate information sharing arrangements with each Co-Lender.
• Newtap Finance shall be primarily responsible for providing the required customer service and grievance redressal to the borrower. Suitable arrangements will be put in place by Newtap Finance and each Co-Lender to resolve any complaint registered by a borrower within 30 days

Monitoring & Recovery

Newtap Finance and each Co-Lender shall establish a framework for monitoring and recovery of the loans, regulatory reporting, fraud identification and reporting, as mutually agreed

Audit & Verification of the Loans

The loans co-lent or assigned under this Policy may be included in the scope of internal/ statutory audit within each Co-Lender to ensure adherence with their respective internal guidelines and extant regulatory requirements.

Asset Classification and Provisioning

The co-lenders shall adhere to the asset classification and provisioning requirement, as per the respective regulatory guidelines applicable to each of them.

Regulatory Reporting

Both lenders shall take care of their respective reporting requirements including reporting to RBI, CKYCR, Credit Information Companies or any other requirement, under the applicable regulations for its share of the loan account.

Business Continuity Plan

Both the banks and the NBFCs shall implement a business continuity plan to ensure uninterrupted service to their borrowers till repayment of the loans under the co-lending agreement, in the event of termination of co-lending arrangement between the co-lenders.

Review of the Co-lending Policy

The policy shall be reviewed annually or when there is change in co-lending regulatory guidelines or newtap’s co-lending product construct for scope and content so that it remains aligned to the changes in the regulatory requirements, business conditions and Newtap Finance’‘s own business strategy and risk appetite.