SRI VIJAYARAM HIRE PURCHASE AND LEASING FINANCE LIMITED

ஸ்ரீ விஜயராம் ஹையர் பர்ச்சேஸ் & லீசிங் பைனான்ஸ் லிமிடெட்

CREDIT POLICY

(Reviewed on 08.06.2012, 09.03.2013, 11.03.2016, 10.03.2017, 19.06.2019, 12.1.2022, 25.06.2022)

SRI VIJAYARAM HIRE PURCHASE AND LEASING FINANCE LIMITED

CREDIT POLICY

Purpose:

The Credit/Investment policy sets out requirements with regard to credit dispersal and deployment of the funds of the Company, considering the profitability, stability and growth.

Policy:

1. The Company shall not lend to any single borrower exceeding fifteen percent of its owned fund and to any single group of borrowers exceeding twenty five percent of its owned fund.

2. The Company shall not lend and/or invest exceeding twenty five percent of its own fund to a single party and forty percent of its owned fund to a single group of parties.

3. In case of any exceptional circumstances, the Company happens to exceed the above mentioned ceiling by 5% of its owned fund, it should be approved by the board.

4. The success of any lending institutions depends on its efficiency in credit appraisal, by which selection of right customer for lending is the key factor. If the selection is done correctly, then almost 90% of the lending job is complete and further collection will be only a 10% job. On the other hand, if the selection is wrong, then the collection will become a 90% job and very tough.

5. There should be 100% clarity in the lending norms and uniform understanding of the same amongst all the employees involved in the lending process. The entire appraisal team should fully and clearly understand the reasons for each and every policy and procedure followed by the Company so that the implementation will be 100% effective.

6. Maximum Loan to Value:

VEHICLE TYPE	CUSTOMER	MAXIMUM LOAN AMOUNT	AGE OF VEHICLE
TWO-WHEELER	New Vehicle
	New Customer	70%
	Existing/ Old Customer	75%
	Pre-Owned Vehicle
	New Customer	Nil	Upto 2 years
	Existing/ Old Customer	50%
THREE- WHEELER	New Vehicle
	New Customer	70%
	Existing/ Old Customer
	Pre-Owned Vehicle
	New Customer	50%	Upto 5 Years
	Existing/ Old Customer
FOUR-WHEELER	New Vehicle
	New Customer	70-80%
	Existing/ Old Customer
	Pre-Owned Vehicle
	New Customer	50%	Upto 7-10 Years. Heavy vehicles depending on Vehicle condition.
	Existing/ Old Customer	60%

7. The points that should be given priority in the credit appraisal are:

(a) Compliance with KYC Norms.

(b) Ability and credit worthiness of the borrower.

(c) Willingness to repay and integrity.

(d) Field inspection report.

(e) Liquidity and cash flow of the borrower.

(f) Actual end use of the loan.

(g) Past track record of the borrower.

(h) Resale value of the security with adequate margins

(i) Verification of track record to the data base of High mark credit information system / other sources.

8. For selecting a borrower the Company will assess the risk profile of the borrower and classifies them as high, medium & low risk.

S.No	Risk assessing category	%
1	Credit worthiness	15%
2	Assuredness of cash flow and its surplus	20%
3	Asset backing	10%
4	Past track record, if any	5%
5	Years of Experience in their line of activity	5%
6	Geographic Location	5%
7	Field of Activity	5%
8	Margin cushion	20%
9	Market Report etc.,	10%
10	Credit Information Report	5%
		100%

S.No	%	Category
1	More than 75%	Low Risk
2	60% to 75%	Medium Risk
3	50% to 59%	High Risk
4	Less than 50%	Rejected

Further the Company shall obtain sufficient identification to verify the identity .of the Customer.

9. Loans and advances are granted bearing in mind “ABC analysis method of asset creation and maintenance of loan assets”.Therefore as far as possible the efforts are on creating “A” Category of loan assets portfolio.

10. Second hand vehicles are considered for loans and advances but with adequate safety margin.

11. Harvesters & Excavators are considered for financing occasionally taking into account the income generating aspects, security and safety issues.

12. Consumer durables/white goods are considered for financing, but the percentage of loans for this category when compared to vehicles, is far less (under 10% of the portfolio), as the Company is aware of the high risk under this category.

13. Procedure for Sanction / Disbursement:

Application for any credit facility should be made in the prescribed form by the applicant, furnishing all the particulars called for, along with necessary enclosures required therein and substantiating the claim of the applicant.

At this stage the applicant and the guarantors should be clearly explained about the terms and conditions of lending, rate of interest, monthly repayment of obligations on time, rate of interest charges for delayed payments, consequences of delayed payments, advantages of prompt repayments, duties of the borrower till settlement of the loan, situations warranting recalling of loan, duties of the guarantor, situations warranting repossession of the vehicle, procedure to be followed during and after repossession of the assets etc.

The application should be complete in all respects, including KYC norms, with full particulars about the borrowers and guarantors, as well as the asset to be financed, copies of the documents to be attached therein.

On satisfaction of scrutiny of the applications, a field inspection to the place of residence and business of the borrower as well as guarantor should be carried out to verify the credit worthiness and integrity of the parties and also ensure that the details furnished in the loan applications are correct. Field enquiry about the parties shall be made with our existing good performing customers who are located in the nearby localities and who are in the same line of business or services.

On being satisfied with the field inspection, inspection of the asset to be financed should be carried out. In case, it is a used vehicle, it should be physically verified and valued by a competent person, with adequate experience and he should give a valuation report in this regard.

Then all these facts should be presented to the officer in-charge of the loan section, who should carefully go through these documents and discuss with those involved in this process so far. If he is fully satisfied, he shall recommend the loan for the final approval of the Director.The Director to whom it is presented for approval should once again go through all these documents and details to be fully satisfied, he shall then approve the loan for disbursal.Whether approved or not, this should be communicated to the applicant in writing, also setting out the terms and conditions of sanctioned.

The Company should also have a proof that the sanction communication and other terms and conditions of the sanction were duly obtained and acknowledged by the borrower and guarantors.

14. Stern steps of recovery procedure is in action as per manual and is therefore constantly monitored to review the ongoing credit policy periodically.

15. Documentation: All the documents prescribed for the purpose of sanction and disbursements of loans such as loan application forms with enclosures, field inspection report, valuation report for second hand vehicles, recommendation by the loans in-charge, loans Agreement, Demand promissory Note, forms required for RTO purposes, letter of Indemnity, power of attorney necessary cases, acknowledgement from the borrower and guarantor for receipt of sanctioned letter setting of the terms and conditions etc., shall be executed duly completed in all respects and properly filed/stored by the Company.

16. Assets satisfying the norms of “Supporting economic activity”, prescribed by the Reserve Bank of India:

RBI has stated that NBFC’s will be given the status of ‘Asset Finance Company”, only if it satisfies the norms on income as well as assets satisfying the condition of assets supporting economic activity. Hence, the Company should finance assets, satisfying these norms in such a way that the status of Asset Finance Company by RBI is not disturbed.

17. Income Recognition principles:

a) The income recognition shall be based on recognised accounting principles.

b) Income including interest/ discount/ hire charges/ lease rentals or any other charges on NPA shall be recognised only when it is actually realised. Any such income recognised before the asset became non-performing and remaining unrealised shall be reversed.

18. The Company after taking into account the degree of well-defined credit weaknesses and extent of dependence on collateral security for realisation, classify assets into the following categories:

Ø Standard Assets: Standard asset shall mean the asset in respect of which, no default in repayment of principal or payment of interest is perceived and which does not disclose any problem or carry more than normal risk attached to the business

Ø Sub-Standard Asset: An asset which has been classified as non-performing asset for a period not exceeding 12 months. An asset where the terms of the agreement regarding interest and/ or principal have been renegotiated or rescheduled or restructured after commencement of operations, until the expiry of one year of satisfactory performance under the renegotiated or rescheduled or restructured terms.

Ø Doubtful Asset: A term loan, a lease asset, hire purchase asset or any other asset which remains a sub-standard asset for a period exceeding 12 months.

Ø Loss Asset: An asset which has been identified as loss asset by the applicable Company or its internal or external auditor or by the Bank during the inspection of the applicable Company, to the extent it is not written off. It also includes an asset which is adversely affected by a potential threat of non-recoverability due to either erosion in the value of security or non-availability of security or due to any fraudulent act or omission on the part of the borrower.

Non-Performing Assets:

1. An asset, in respect of which, interest has remained overdue for a period of three months or more

2. A term loan inclusive of unpaid interest, when the instalment is overdue for a period of three months or more or on which interest amount remained overdue for a period of three months or more;

3. Demand or call loan, which remained overdue for a period of three months or more from the date of demand or call or on which interest amount remained overdue for a period of three months or more;

4. A bill which remains overdue for a period of three months or more;

5. The interest in respect of a debt or the income on receivables under the head ‘other current assets’ in the nature of short term loans/ advances, which facility remained overdue for a period of three months or more;

6. Any dues on account of sale of assets or services rendered or reimbursement of expenses incurred, which remained overdue for a period of three months or more;

7. The lease rental and hire purchase instalment, which has become overdue for a period of three months or more;

8. In respect of loans, advances and other credit facilities (including bills purchased and discounted), the balance outstanding under the credit facilities (including accrued interest) made available to the same borrower/ beneficiary when any of the above credit facilities becomes non-performing asset.

Provisioning Requirements:

The provisioning requirement in respect of loans, advances and other credit facilities including bills purchased and discounted shall be as under:

(a) Loss Assets: The entire asset shall be written off. If the assets are permitted to remain in the books for any reason, 100% of the outstanding shall be provided for;

(b) Doubtful Assets:

(a) 100% provision to the extent to which the advance is not covered by the realisable value of the security to which the applicable Company has a valid recourse shall be made. The realisable value is to be estimated on a realistic basis;

(b) In addition to item (a) above, depending upon the period for which the asset has remained doubtful, provision to the extent of 20% to 50% of the secured portion (i.e. Estimated realisable value of the outstanding) shall be made on the following basis:-

Period for which the asset has per cent of provision been considered as doubtful

Up to one year 20%

One to three years 30%

More than three years 50%

(c) Sub-standard Assets general provision of 10% of total outstanding shall be made.

(d) The Company shall make provisions for standard assets at 0.40% of the outstanding, which shall not be reckoned for arriving at net NPAs. The provision towards standard assets need not be netted from gross advances but shall be shown separately as ‘Contingent Provisions against Standard Assets’ in the balance sheet.

19. Repossession of Assets:

(i) The Company built-in re-possession clause in the contract/loan agreement with the borrower which must be legally enforceable. To ensure transparency, the terms and conditions of the contract/loan agreement shall also contain provisions regarding:

a) Notice period before taking possession;

b) Circumstances under which the notice period can be waived;

c) The procedure for taking possession of the security;

d) Provision regarding final chance to be given to the borrower for repayment of loan before the sale/ auction of the property;

e) The procedure for giving repossession to the borrower; and

f) The procedure for sale/ auction of the property.

(ii) A copy of such terms and conditions must be made available to the borrower. The Company shall invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction/ disbursement of loans, which forms a key component of such contracts/loan agreements.