Fair Practices Code & FC Model
ALTERNATIVE INVESTMENTS AND CREDITS LIMITED
FAIR PRACTICES CODE
1) The company shall include in the loan application forms necessary information which affects the interest of the borrower, for a meaningful comparison with the terms and conditions offered by other NBFCs.
2) The loan application form shall always indicate the documents required to be submitted with the application form.
3) The company shall always give acknowledgement for receipt of all loan applications.
4) The company shall indicate in the acknowledgement the time frame within which loan application will be disposed of.
5) The company shall convey the amount of loan sanctioned along with the terms and conditions including funding charges and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record in the sanction letter.
6) The company shall give notice to the borrower of any change in the terms and conditions including disbursement schedule, funding charges, service charges, prepayment charges etc.
7) The company shall ensure that changes in funding charges and any other charges are effected only prospectively.
8) The company‘s decision to recall/ accelerate payment or performance under the agreement shall always be in consonance with the loan agreement.
9) The company shall release all securities on repayment of all dues or on realization of the outstanding amount of loan. However if the company has any legitimate right or lien for any other claim, it shall be set-off against the other claims. If such right of set off is exercised by the company, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which the company is entitled to retain the securities till the relevant claim is settled/paid.
10) The company shall not interfere in the affairs of the borrower except for the purpose 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 the lender)
11) In case of receipt of any request for transfer of borrowal account, the company will convey it’s reply within 21 days from the date of receipt of request.
12) In the matter of recovery of loans, the company shall not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc. If the matter is not resolved by persuasion, legal recourse shall be resorted to.
13) The company shall set-up a grievance redressal committee and the role of the committee would be
a) to hear the disputes arising out of the lending institutions functionaries and resolve the disputes at the next higher level.
b) periodical review of the compliance of the Fair Practices Code.
14) The company’s Grievances redressal committee shall function at various levels of management.
15) A consolidated report of reviews mentioned in point no. 13 and 14 shall be submitted to the Board once every quarter.
Funding Charges Model
Funding Charges Model for Participation Finance Scheme:
(As per notification No.DNBS.204/CGM (ASR)-2009 dated January 2, 2009, the RBI)
A) The Basis:-
1) The Applicant shall share the profits of the business with the AICL in proportion to the equity capital of the Applicant/Borrower and the amount of funds provided by the AICL.
2) The Equity capital of the Applicant/Borrower shall be determined every quarter/month and the profits accruing shall be added to the capital. Similarly, the funds provided by AICL shall be determined after repayments every quarter/month.
3) Profits shall be shared only if the applicant has earned profits. In case there are losses in any year suffered due to reasons beyond the control of the Applicant, the Applicant is not liable to make any payment to AICL towards Funding Charges. However the Applicant shall be liable to pay repayment installments.
4) In case of ‘Losses’ in any year, the non-sharing of profits by the AICL is not kept as outstanding for future recovery.
5) The past losses are adjusted from the current year’s profits to determine the profit to be shared for the current year.
1) The accounts of the business shall be inspected by AICL executives to ensure that proper accounting does take place and everything is in order. The profit is declared by the entrepreneur and the AICL accepts the same unless some marked differences are noted in financial reports submitted by the Applicant/Borrower. In such case the accounts are subject to detailed inspection by AICL representatives and discussions shall be held with the CA of the entrepreneur for clarifications. Any discrepancy noted shall be corrected and such revised figure is accepted.CA certification shall not be mandatory. This model is adopted as integrity of Applicant/ Borrower is ensured before sanctioning of loan through local references.
2) From the above profit, first the managerial remuneration at 15% or more as decided by AICL is allocated to the Applicant/Borrower and the balance profits are to be shared between the applicant and AICL in proportion to the Equity capital of the applicant and the amount of funds provided by the AICL.
3) No managerial remuneration is allowed in the case of a loss in any year and such management remuneration cannot be carried forward for subsequent years.
4) The Applicant/Borrower shall not give any amount during gestation period of the business and such period may be decided by the AICL.
5) The non-sharing of profits will continue as long as the project becomes operational and generates revenue unless the AICL is satisfied that the delay caused is intentional / due to mismanagement of the owner. In such case AICL shall demand reasonable compensation or direct forthwith to repay the funds borrowed.
1) The company permits prepayments with prior permission of the Board without any penalties. However when the prepayment amounts to sudden settlement without adequate notice, the Board shall ask the entrepreneur to pay a mutually agreed compensation based on earning capacity of the business.
2) The AICL has examined the normal profitability of investments of funds in variety of the businesses/services and is of the considered opinion that under the Participation Finance Scheme the Applicant/Borrower are likely to share much less than 24% of the participation finance provided by the AICL. The annualised rate of return on investment to AICL in any case shall not in any case exceed 25% of amount provided by AICL.”
3) The AICL shall make changes in the terms of finance effective only prospectively.
4) A processing fee of .5 % of sanctioned amount subject to maximum of Rs. 5000 is charged on sanctioning of application. No penalties are levied for certain non-compliances.