• SVB India Finance Private Limited Policy Regarding Loan Interest Rates

     
  • Applicable Regulations

    Pursuant to Circular number DNBS.PD/CC.No.95/03.05.002/2006-07 dated May 24, 2007 and Notification Number DNBS. 204/CGM(ASR)-2009 dated 2 January 2009, the Reserve Bank of India requires all Non Banking Financial Companies to comply with certain procedures with respect to the setting of interest rates for loans. This document is intended to present our policies with respect to this Circular and Notification on the loans or advances booked in SVB India Finance Private Limited.

    Approach to Determination of Risk associated with Lending

    SVB India Finance Private Limited has adopted a risk-based approach for client classification for the purpose of determining applicable rate of interest, which differs for each client, primarily based on risk factors such as stage of profitability and growth, probability for subsequent capital raising, growth potential, industry, net worth, appropriate debt level, and nature/purpose of proposed loan/advance.

    Transparency

    Our policy is to be transparent with respect to interest rate at all times. We achieve this by:

    • Disclosing the annual interest rate applicable to each loan in the document that creates the loan. The loan is binding on a customer when the customer signs the loan and the customer is not compelled to sign a loan unless the interest rate is acceptable to the customer.
    • Entering into fixed interest / fixed term loans. When a loan is drawn down the interest rate disclosed in the loan document will apply for the entire term of the loan. At this time, we do not vary the interest rate during the tenor of the loan. However, as per customary financial practice, default interest is charged in the event that a customer does not meet its payment obligations in a timely manner. The process described above applies to each discrete loan. The interest rate applicable to any new loan to a current client will be disclosed in that document.
    • At this time we do not provide overdrafts or variable interest loans.

    Establishing an interest rate

    The interest rate applicable to a particular loan is determined by reference to a number of factors, including:

    • Duration of the Loan
       
    • The interest rate charge will depend on the term of the loan. The interest rate applicable to loans with longer terms will typically be slightly higher than the interest rate applicable for loans with shorter term loans. This reflects the greater credit risk associated with longer term loan transactions.
    • Internal and External Costs of Funds
      The rate of interest we charge is also affected by the rate at which we source the funds necessary to provide loan facilities to customers. We refer to this as our internal cost of funds. The rates we charge are also affected by the rates available in the general market.
    • Credit Risk / Deal Complexity
      The credit risk of the client as well as other factors such as the complexity of the transaction, the size of the transaction and other factors that affect the costs associated with a particular transaction are taken into account before arriving at the final interest rate quoted to a customer. We take a comprehensive approach to the gradation of risk and transaction complexity that and tailor the interest rate to each customer and its loan.

    Interest Rate Information

    As each transaction we enter into is individually assessed, we do not publish interest rates. However, as noted above, the interest rate applicable to any loan transaction a customer wishes to enter into with us will be transparently disclosed in the loan documentation we submit to the customer.

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