Policy on Interest Rates and Charges

Newtap Finance Private Limited

Background
In accordance with RBI regulations with respect to digital lending, “Guidelines on Digital Lending” vide circular no. DOR.CRE.REC.66/21.07.001/2022-23 dated September 02, 2022 read with Master Direction – Reserve Bank of India (Non-Banking Financial Company– Scale Based Regulation) Directions, 2023 dated October 19, 2023 and amended from time to time (“Scale Based Regulations”) were prescribed for regulated entities to provide for a policy to be framed for providing the mechanism for calculation of interest rate for its borrowers and also ensuring transparency in methodology of calculation of interest rates.

Objective
In accordance with the RBI directions, Newtap Finance Private Limited (“Company”) is required to adopt an appropriate interest rate model taking into account relevant factors and to disclose the rate of interest, gradations of risk and rationale for charging different rate of interest.

Keeping in view the RBI's guidelines as cited above, and the good governance practices being followed by the Company, the following internal guidelines, policies, procedures and interest rate model have been adopted by the Company.

The Company’s lending products will be priced in accordance with business objectives to sustain interest income and ensure adherence to business objectives.

With the help of this policy, the company shall determine the benchmark rates to be used for arriving at the final rate to be charged to the borrowers/ customers for various products financed by the company

The Company shall adopt all the best practices prescribed by RBI from time to time and shall make appropriate modifications, if required, in the Interest Rate Policy to comply with the standards so prescribed.

Products

The Company is offering the following products to the consumers

• - Personal loan
• - Short-term Personal Loan
• - Loan against securities/ mutual funds
• - Business Loan products

The above-mentioned products can be offered by the Company or through a Co-lending model with other Regulated Entities (“RE”) registered with the RBI and the pricing for each product may vary depending on the commercial arrangement with each Co-lender.

Depending on the business strategy and objectives, the Company can either add or substitute the current product offering considering the demand of the product and its financial and strategic viability.

Interest rate calculations could vary depending on risk criterias for each of the products.

Interest rate calculation criteria

The company intends to follow a Risk based pricing and accordingly leverage the risk under-writing model to charge relevant interest rate from the customer across different programs. The decision to give a loan and the interest rate applicable to each loan account will be assessed on a case-to-case basis, based on multiple parameters such as the borrower profile, repayment capacity, borrower’s other financial commitments, past repayment track record if any, loan to income ratio and employment stability.

The definition of interest rates will be risk-based and based on consumer segmentation. In order to promote growth, improve customer satisfaction and align with risk interest rates will be kept competitive.

The rate of interest shall be defined in accordance with the following parameters:

• - Average Cost of funds of the Company
• - Operational and Administrative Costs
• - *Risk Premium depending on the following risk factors associated with the borrower like:
• a. bureau score,
• b. repayment history,
• c. past history of 30+ dpd/ 90+ dpd
• d. write-off/ suit filed,
• e. active credit card/loans on bureau,
• f. FOIR
• g. employment type, business segment etc, as applicable.
• - Risk weights as prescribed by RBI for particular product
• - Expected loan performance
• - Profit margin
• - Strategic importance of the particular product in accordance with the risk management policy of the Company.

*The above mentioned factors can change depending on risk appetite for each customer segment and also as per the credit risk associated with the said customers.

Interest rates

This policy provides details of the interest rate being charged by the Company which are mentioned in Annexure-A .

Charges

In accordance with the business model of the Company, certain charges are part of the loans sanctioned by the Company. Please find the details of all the charges of all the products of the Company as per Annexure-B .

Annual Percentage Rate(APR)

The Company shall intimate the borrower, the loan amount; annualized rate of interest along with the tenure and amount of monthly/quarterly installment. The other charges such as processing fees, penal charges on delayed payments and bounce charges, if any, among the rest, shall also be mentioned in the Loan Agreement and also displayed on the website.

Company will ensure that it does not resort to predatory pricing for standard interest rate and charges as well as penal charges. Company will ensure that it transparently communicates its interest rate and other charges to customers and does not change it retrospectively.

Annexure-A: Interest Rates for Loan Products

Note:

• Short-term personal loans are interest-free until EMI conversion, with an optional interest-free period of up to 30 days.

Annexure-B: Charges for Loan Products

Note:

• All charges are exclusive of GST.

Insurance Premium
For an additional fee, Newtap offers an optional accidental insurance cover on loans. The premium is calculated per lakh of the loan amount, based on the borrower’s age and loan tenure.