Fair Practice Code

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CODE OF CONDUCT

IV GOVERNANCE

WE must incorporate a formal governance system that is transparent and professional, and adopts the following best practices of corporate governance:
1. WE must observe high standards of governance by inducting persons with good and sound reputation as members of Board of Directors/Governing body.
2. WE must endeavor to induct independent persons to constitute at least 1/3rd of the Governing Board, and the Board must be actively involved in all policy formulations and other important decisions.
3. WE must have a Board approved debt restructuring product/program for providing relief to borrowers facing repayment stress.
4. WE will appoint an audit committee of the Board with an independent director as chairperson.
5. WE must ensure transparency in the maintenance of books of accounts and reporting/presentation and disclosure of financial statements by qualified auditor/s.
6. WE must put in best efforts to follow the Audit and Assurance Standards issued by the Institute of Chartered Accountants of India (ICAI).
7. WE must place before the Board of Directors, a compliance report indicating the extent of compliance with this Code of Conduct, specifically indicating any deviations and reasons therefore, at the end of every financial year.

CLIENT PROTECTION GUIDELINES FOR MICROFINANCE INSTITUTIONS (CPG)

The CPG states that all WE, regardless of their form:

1. WE Shall display the Client Protection Code in all branches and offices, in plain view.
2. WE Shall endeavor to provide micro finance services to all eligible clients, as per RBI
1. guidelines.
2. WE Shall educate clients, staff, and any persons acting on their behalf on the Code of Conduct and its implementation.
3. WE Shall disclose all terms and conditions to the client for all products/services offered, prior to disbursement, in any of the following ways:

  • Individual sanction letter
  • Loan card
  • Loan schedule
  • Passbook
  • Through Group/Centre meetings (Details can be printed on a paper and all borrowers can sign on the same as acknowledgement of their acceptance)

4. WE Shall communicate all the terms and conditions for all products/services in the official regional language or a language understood by clients.
6. WE Shall disclose the following terms:

  • Rate of interest on a reducing balance method
  • Processing fee
  • Any other charges or fees howsoever described
  • Total charges recovered for insurance coverage and risks covered

5. WE Shall communicate in writing, charges levied for all financial services rendered.
6. WE Shall not collect fee on non-credit products/services without prior declaration to the client.
7. WE Shall declare all interest and fees payable as an all-inclusive APR and equivalent monthly rate.
8. WE Shall follow RBI guidelines with respect to interest charges and security deposit.
9. WE Shall obtain copies of relevant documents from clients, as per standard KYC norms. Additional documents sought must be reasonable and necessary for completing the transaction.
10. WE Shall not bundle products, except for credit life, life insurance & live-stock insurance products. The terms of insurance should be transparently conveyed to the customer and must comply with RBI & IRDA norms. Consent of the client must be taken in all cases.
11. WE Shall conduct proper due diligence to assess the need and repayment capacity of client before making a loan and must only make loans commensurate with the client ability to repay.
12. WE Shall not be the 3rd lender to a client if the client has loans from 2 other lenders (irrespective of the source of loan).
13. WE Shall not breach the total debt limit for any client, as prescribed by the RBI or Central/State Governments.
14. WE Shall ensure that all employees follow company guidelines for interaction with clients.
15. WE Shall ensure that all staff and persons acting for the MFI or on behalf of the MFI:
a) Use courteous language, maintain decorum, and are respectful of cultural sensitivities during all interaction with clients.
16. DO NOT indulge in any behavior that in any manner that would suggest any kind of threat or violence to clients.
17. DO NOT contact clients at odd hours, as per the RBI guidelines for loan recovery agents.
18. DO NOT visit clients at inappropriate occasions such as bereavement, sickness, etc. to collect dues.
19. WE Shall provide a valid receipt (in whatever form decided by the MFI) for each and every payment received from the borrower.
20. WE Shall follow approved company procedure to deal with client default sensitively.
21. WE Shall follow the debt restructuring mechanism adopted by the MFI for borrower under liquidity stress.
22. WE Shall keep personal client information strictly confidential.
23. WE Shall disclose client information to a third party only under the following conditions:

  • Client has been informed about such disclosure and permission has been obtained in writing.
  • The party in question has been authorized by the client to obtain client information from the MFI.
  • It is legally required to do so.
  • This practice is customary amongst financial institutions and available for a close group on reciprocal basis (such as a credit bureau).

24. WE Shall follow company approved process to raise clients awareness of the options, choices, and responsibilities -vis financial products and services available.
25. WE Shall inform all new clients about the organization policies and procedures.
26. WE Shall inform clients about the existence and purpose of feedback mechanisms and how to access them.