BELSTAR MICROFINANCE LIMITED

FAIR PRACTICES CODE

Policy Certification
Title Fair Practices Code
Version 2.1
Owned by Compliance Department
Prepared by Mr. Banabihari Panda, CCO
Reviewed by Mr. B Balakumaran, ED
 Contents

1 Introduction 2
2 Applications for Loans and their Processing 2
3 Loan Appraisal and Terms / Conditions 2
4 Disbursement of loans including changes in terms and conditions 3
5 General 3
6 Responsibility of Board of Directors 4
7 Grievance Redressal 4
8 Language and mode of communicating Fair Practice Code 5
9 Regulation of excessive interest charged 5
10 NBFC-MFIs 5
11 Review 8
12 Annexure-1 8

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 Executive Summary Date: 21.04.2022

Sub: Amendment in existing Fair Practices Code (FPC) of Belstar

Cause: RBI’s Notification vide RBI/DOR/2021-22/89 dt14.03.2022

The amended provisions / portions now incorporated are highlighted in green colour and
the to-be excluded are shown in red colour in the amended policy.

Ref to Existing Amended Provision Reason

policy
Page No Point No
4 5 (third Examples of undue Probably due
bullet harassment is (i) Use of to RBI’s
point) threatening or abusive concern for
language, (ii) persistently Client
calling the borrowers before Protection
9 am and after 6 pm, (iii) through the
Harassing relatives, friends, or Code of
co-workers of the borrower, Conduct to be
followed by all
(iv) Publishing the name of
Regulated
borrowers, (v) Use or threat of
Entities.
use of violence or other
similar means to harm the
borrower or borrower’s
family/ assets/ reputation, (vi)
Misleading the borrower
about the extent of the debt
or the consequences of non-
repayment.
8 10 (II) C The simplified factsheet on In Annex-II of its
(first pricing. Notification
bullet dt14.03.2022,
point) RBI has
suggested a
format of the
prescribed fact
sheet on
pricing.

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1. Introduction-Belstar Microfinance Limited (hereinafter referred as “Company”/
”BML”) provides scalable microfinance services to micro entrepreneurs to enable
their financial inclusion. The Company is a NBFC- MFI registered with Reserve Bank of
India (RBI). This Fair Practices Code (FPC) of BML is as per the Guidelines issued by
the RBI. The FPC of the Company has been reviewed as per the Master Direction
DNBR. PD. 008/03.10.119/2016-17 date September 01,2016 and further amended
from time to time and The Reserve Bank-Integrated Ombudsman Scheme,
dt12.11.2021.

2. Applications for loans and their processing

• All communications to the borrower will be in the vernacular language or a

language as understood by the borrower;
• The Loan application forms will include necessary information which affects the
interest of the borrower, so that a meaningful comparison with the terms and
conditions offered by other NBFC’s can be made and informed decision can be
taken by the borrower. The loan application form indicates the documents
required to be submitted with the application form;
• BML gives acknowledgement for receipt of all loan applications. The time frame
within which loan applications will be disposed of is also indicated in the
acknowledgement.

3. Loan appraisal and terms/conditions

BML shall convey in writing to the borrower in the vernacular language as

understood by the borrower by means of sanction letter or otherwise, the amount of
loan sanctioned along with the terms and conditions including annualized rate of
interest and method of application thereof and keep the acceptance of these
terms and conditions by the borrower on its record.

BML will furnish a copy of the loan agreement in the vernacular language along
with a copy each of all enclosures quoted in the loan agreement to all the
borrowers at the time of disbursement of loan.

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4. Disbursement of loans including changes in terms and conditions

• In terms of RBI directions vide RBI/2021-2022/125 [Link].68/21.04.048/2021-

22 dt 12.11.2021 on Prudential Norms on IRACP, BML will specify the exact due
dates for repayment of a loan, frequency of repayment, breakup between
principal and interest, examples of SMA/NPA classification dates, etc. in the
loan agreement
• BML will give notice to the borrower in the vernacular language as understood
by the borrower of any change in the terms and conditions including
disbursement/repayment schedule, interest rates, service charges, prepayment
charges etc. BML will ensure that changes in interest rates and charges are
affected only prospectively. A suitable condition in this regard should be
incorporated in the loan agreement;
• Decision to recall / accelerate payment or performance under the agreement
will be in consonance with the loan agreement;
• BML will release all securities on repayment of all dues or on realisation of the
outstanding amount of loan subject to any legitimate right or lien for any other
claim BML may have against borrower. If such right of set off is to be exercised,
the borrower shall be given notice about the same with full particulars about
the remaining claims and the conditions under which BML is entitled to retain
the securities till the relevant claim is settled / paid.

5. General

• BML will refrain from interference in the affairs of the borrower except for the
purposes provided in the terms and conditions of the loan agreement (unless
new information, not earlier disclosed by the borrower, has come to the notice
of BML);
• In case of receipt of request from the borrower for transfer of borrowal account,
the consent or otherwise i.e. objection of BML, if any, will be conveyed within 21
days from the date of receipt of request. Such transfer shall be as per
transparent contractual terms in consonance with law;
• In the matter of recovery of loans, BML will not resort to undue harassment viz.
viz. (i) Use of threatening or abusive language, (ii) persistently calling the
borrowers before 9 am and after 6 pm, (iii) Harassing relatives, friends, or co-
workers of the borrower, (iv) Publishing the name of borrowers, (v) Use or threat
of use of violence or other similar means to harm the borrower or borrower’s
family/ assets/ reputation, (vi) Misleading the borrower about the extent of the
debt or the consequences of non-repayment. BML will ensure that the staff are
adequately trained to deal with the customers in an appropriate manner;
• As a measure of customer protection and also in order to bring in uniformity with
regard to prepayment of various loans by borrowers of banks and NBFCs, BML

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 shall not charge foreclosure charges/ pre-payment penalties on any floating
rate term loan sanctioned for purposes other than business to individual
borrowers, with or without co-obligant(s).

6. Responsibility of Board of Directors

The Board of Directors of BML have laid down the appropriate Grievance Redressal
Mechanism within the organization to resolve disputes arising in this regard. The
Grievance Redressal Mechanism has been set up to ensure that all disputes arising
out of the decisions of the Company’s functionaries are heard and disposed of at
least at the next higher level. The Board of Directors will also provide for periodical
review of the compliance of the Fair Practices Code and the functioning of the
Grievances Redressal Mechanism at various levels of management. A consolidated
report of such reviews will be submitted to the Board at regular intervals, as may be
prescribed by it.

7. Grievance Redressal
At the operational level, BML will display the following information prominently, for
the benefit of the customers, at our branches/places where business is transacted:
• The name and contact details (Telephone / Mobile nos. as also email
address) of the Principal Nodal Officer who can be approached by the
public for resolution of complaints against the Company;
• If the complaint / dispute is not redressed by BML within a period of one
month, the customer may complain in any language to RBI through any one
of the following methods under the RBI-Integrated Ombudsman Scheme:

(i) Online: Through RBI’s CMS portal ([Link]

(ii) Email at: crpc@[Link]
(iii) Physical complaint (letter/post) in the RBI prescribed format to:
Centralised Receipt and Processing Centre (CRPC), 4th Floor, Reserve
Bank of India, Sector 17, Central Vista, Chandigarh – 160017.

7.1 RBI’s Integrated Ombudsman Scheme, 2021

Since BML is covered under The Reserve Bank-Integrated Ombudsman

Schemen,2021, (briefly stated in Annexure-1) it shall appoint Principal Nodal Officer
at HO / Nodal Officers at field level to assist the Principal Nodal Officer to implement
this scheme. On receipt of a complaint from RBI, CRPC, BML will file its written version
in reply to the averments in the complaint enclosing therewith copies of the
documents relied upon, within 15 days before the Ombudsman for resolution. For
the benefit of its customers, BML shall display prominently in English, Hindi and the
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 regional language in all its offices/ branches, the name and contact details
(Telephone/mobile number and E-mail ID) of the Principal Nodal Officer along with
the details of the complaint lodging portal of the Ombudsman
([Link] BML shall also ensure that a copy of the Scheme is available
in all its branches to be provided to the customer for reference upon request. The
salient features of the Scheme along with the copy of the Scheme and the contact
details of the Principal Nodal Officer shall be displayed and updated on the website
of BML.

8. Language and mode of communicating Fair Practice Code

Fair Practices Code will be in the vernacular language as understood by the

borrower. BML shall display the Board approved Fair Practices Code in all places
having customer interface. This Board approved FPC may enhance the scope of
the relevant RBI directions but in no way sacrifice the spirit underlying these
directions. The same shall be put up on website of BML, for the information of various
stakeholders

9. Regulation of excessive interest charged

• Keeping in mind the periodic directives of RBI regarding charging of interest

on loan products, the Board of BML shall adopt an interest rate model
considering relevant factors such as cost of funds, margin and risk premium
and determine the rate of interest to be charged for loans and advances.
The rate of interest and the approach for gradations of risk and rationale for
charging different rate of interest to different categories of borrowers shall be
disclosed to the borrower or customer in the application form and
communicated explicitly in the sanction letter.
• The rates of interest and the approach for gradation of risks shall also be
made available on the web-site of the company (www. [Link]) and shall
be updated whenever there is a change in the rates of interest.
• The rate of interest must be annualized rate so that the borrower is aware of
the exact rates that would be charged to the account.
• The Board of BML shall lay out appropriate internal principles and procedures
in determining interest rates and processing and other charges. In this regard
the RBI directions in the Fair Practices Code about transparency in respect of
terms and conditions of the loans will be kept in view.

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10. NBFC-MFIs:

In addition to the general principles on FPC as provided in RBI’s periodic Directions,

BML shall adopt the following fair practices that are specific to them:

I. General:

a) The FPC in vernacular language will be displayed by BML in its office and
branch premises;
b) BML is committed to transparency and fair practices lending to its borrowers.
BML will make a statement to this effect in the vernacular language and
display the same in all its branch premises and also print it in all borrower loan
cards;
c) BML’s field staffs are trained to make necessary enquiries about existing debt
of the borrowers;
d) All training offered by BML to its borrowers will be free of cost. All field staff
are trained to offer such training and also make the borrowers fully aware of
the procedures and systems related to loan / other products;
e) BML displays the effective interest rate it charges in all its offices and in the
literature issued by it in vernacular language. The Grievance Redressal
System of BML and The Reserve Bank- Integrated Ombudsman Scheme, 2021
will also be prominently displayed in all its offices;
f) BML will be accountable for preventing inappropriate staff behaviour and
timely Grievance Redressal of the borrower. The above declaration is also
made in the loan agreement given to the borrower;
g) BML ensures that the KYC guidelines of RBI and complied with. Due diligence
of each and every borrower will be carried out to ensure the repayment
capacity of borrowers;
h) All sanctioning and disbursement of loans will be done only at a central
location and more than one individual will be involved in this function. In
addition, there will be close supervision of the disbursement function;
i) BML will ensure that the procedure for application of loan is not cumbersome
and loan disbursements are done as per pre-determined time structure.

II. Disclosures in loan agreement / loan card

a) BML has a board approved standard form of loan agreement. The loan
agreement will be in the vernacular language;
b) In the loan agreement the following are disclosed:

 All the terms and conditions of the loan.

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  The exact due dates for repayment of a loan, frequency of repayment,
breakup between principal and interest, examples of SMA/NPA
classification dates, etc. will be specified in the loan agreement.
Borrowers will be given notices in the vernacular language of any change
in the terms and conditions including disbursement / repayment
schedule, interest rates, service charges, prepayment charges etc.
 That the pricing of the loan involves only three components viz; the
interest charge, the processing charge and the insurance premium
(which includes the administrative charges in respect thereof)
 That there will be no penalty charged on delayed payment.
 That no Security Deposit / Margin is being collected from the borrower
 That the borrower cannot be a member of more than one SHG / JLG
 The moratorium between the grant of the loan and the due date of the
repayment of the first instalment
 An assurance that the privacy of borrower data will be respected.

c) The loan card reflects the following details as specified in the Non-Banking
Financial Company - Micro Finance Institutions (Reserve Bank) Directions,
2011 and amendments thereto.

 The simplified factsheet on pricing.

 all other terms and conditions attached to the loan;
 information which adequately identifies the borrower and
acknowledgements by BML of all repayments including instalments
received and the final discharge;
 The loan card will prominently mention the Grievance Redressal System
set up by BML and also the name, contact number and email id of the
Principal Nodal Officer;
 Non-credit products issued will be with full consent of the borrowers and
fee structure will be communicated in the loan card itself;
 All entries in the Loan Card will be in the vernacular language;
 The loan card will display whether the loan is under Qualifying Asset or
not.

III. Non-Coercive Methods of Recovery

 Recovery will normally be made only at a central designated place. But BML
as a policy of recovering at Branch level directly from the customers. Field
staff will be allowed to make recovery at the place of residence or work of
the borrower only if borrower fails to appear at central designated place/
BML’s branch on 2 or more successive occasions.
 BML has a Board approved policy in place about Code of Conduct by field
staff and systems for their recruitment, training and supervision. The Code will
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 lay down minimum qualifications necessary for the field staff and shall have
necessary training tools identified for them to deal with the customers.
Training to field staff will include programs to inculcate appropriate behaviour
towards borrowers without adopting any abusive or coercive debt collection
/ recovery practices, The Reserve Bank- Integrated Ombudsman Scheme,
2021 and BML’s customer grievance redressal mechanism . Compensation
methods for staff will have more emphasis on areas of service and borrower
satisfaction than merely the number of loans mobilized and the rate of
recovery. Penalties will also be imposed on cases of noncompliance of field
staff with the Code of conduct. BML will use only employees for recovery in
sensitive areas.

IV. Internal control system

The responsibility of compliance to the FPC is assigned to the Internal Audit

Head of the Company. BML has an internal audit department which does
periodic audit of all aspects of the operations to check on the compliance of
the FPC.

11. Review- This policy will be reviewed by the Board annually.

*****
Annexure-1
The Reserve Bank- Integrated Ombudsman Scheme, 2021

The Reserve Bank of India (RBI) has launched/notified on November 12, 2021
“The Reserve Bank – Integrated Ombudsman Scheme, 2021” for resolving
customer grievances in an expeditious and cost-effective manner, in relation
to services provided by entities regulated by Reserve Bank of India. The
Scheme is available on the RBI website [Link] All Regulated
Entities (REs) including Banks or Non-Banking Financial Companies (NBFCs) or
a System Participants are advised to ensure that a suitable mechanism exists
for receiving and addressing complaints from their customers with specific
emphasis on resolving such complaints expeditiously and in a fair manner.
Any customer aggrieved by an act or omission of a Regulated Entity resulting
in deficiency in service may file a complaint under the Scheme personally or
through an authorised representative other than an Advocate, unless the
Advocate is the aggrieved person, provided that the complaint was
rejected wholly or partly by the Regulated Entity, and the complainant is not
satisfied with the reply; or the complainant had not received any reply within
30 days after the RE received the complaint. The complaint can be made to
the Ombudsman within one year after the complainant has received the
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 reply from the RE to the complainant or, where no reply is received, within
one year and 30 days from the date of the complaint. The complaint may be
made on line through the portal [Link] or in the prescribed
format through email at: crpc@[Link] or by post to RBI, Centralised
Receipt and Processing Centre, 4th Floor, Reserve Bank of India, Sector 17,
Central Vista, Chandigarh – 160017.

(1) The Regulated Entity to which the Scheme is applicable shall facilitate the
smooth conduct of the Scheme by ensuring meticulous adherence to the
requirements under the Scheme, failing which, the Reserve Bank may take
such action as it may deem fit.

(2) The Regulated Entity shall appoint a Principal Nodal Officer at their head
office who shall not be a rank less than a General Manager or an officer of
equivalent rank and shall be responsible for representing the Regulated
Entity and furnishing information on behalf of the Regulated Entity in respect
of complaints filed against the Regulated Entity. The Regulated Entity may
appoint such other Nodal Officers to assist the Principal Nodal Officer as it
may deem fit for operational efficiency.

(3) The Regulated Entity shall display prominently for the benefit of their
customers at their branches/places where the business is transacted, the
name and contact details (Telephone/mobile number and E-mail ID) of the
Principal Nodal Officer along with the details of the complaint lodging portal
of the Ombudsman ([Link]

(4) The Regulated Entity to which the Scheme is applicable shall ensure that the
salient features of the Scheme are displayed prominently in English, Hindi and
the regional language in all its offices, branches and places where the
business is transacted in such a manner that a person visiting the office or
branch has adequate information on the Scheme.

(5) The Regulated Entity shall ensure that a copy of the Scheme is available in all
its branches to be provided to the customer for reference upon request.

(6) The salient features of the Scheme along with the copy of the Scheme and
the contact details of the Principal Nodal Officer shall be displayed and
updated on the website of the Regulated Entity.

*****

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