Interest
rate and Policy
RATE OF
INTEREST AND LATE FEE
For second-hand
(used) vehicles rate of interest varies from 10% to
18% per annum and for new vehicles rate of interest varies from 10% to
14% per
annum.
Policy for fixing the interest
rates on second-hand (Used) or New Vehicles loan shall
consider the prevailing market conditions and various rules and
regulations
prescribed by the Reserve Bank of India or such other competent
authority from
time to time. The Company may fix the interest rate for any loan in
such a way
to ensure an Internal Rate of Return of 6%. Interest charged under second-hand (used) vehicles and new
vehicles shall have
three
components i.e., Basic Rate, Risk Premium and Additional Interest.
i)
Basic Rate
- Basic Rate shall
be arrived at after considering the following aspects:
• Cost of Funds: This includes the
interest and other related charges payable by the Company on the
borrowed funds
such as Fixed Deposit, etc.
• Operating Cost: This includes
the
Employee cost and other administrative overheads of the company.
• Gradation of Risk: The nature of
risk
associated with the loan will always have a bearing on the Basic Rate
to be
arrived at.
• Return on Equity: After meeting
all
the above, a reasonable return on equity is to be ensured in arriving
at the
base rate.
ii)
Risk Premium
- While fixing the risk premium, the company shall take into
consideration, the
LTV rate applicable to the loan, the frequency of servicing of the loan
by the
customer, risk perception of the company based on geographical
location, class
of customers etc.
iii) Additional Interest / Late
fee
Additional Interest (late fee) in order to cover any possible loss due to additional cost of finance on the company due to non-repayment of EMIs, by the borrower. The company may charge an additional interest at a maximum rate of 36% per annum on the defaulted EMI amount for the defaulted days. The collection of additional interest (late fee) as stated herein is not covered by the ceiling of maximum of 18% interest rate indicated in first paragraph under the rate of interest since it relates to the principal amount of hire purchase loan. Additional interest (late fee) will be collected in a transparent manner by mentioning the same as in the Hire Purchase Agreement.
Rev. 1.8.2016