Fair Practice Code
MIDLAND MICROFIN LIMITED
|Name of the document||Fair Practice Code||
|Prepared by||Mr. Maninder Kumar – Associate Vice President – Credit and Product||March 25, 2022|
|Reviewed by||Mr. Gagandeep Sharma –Deputy Vice President – Legal and Audit||March 26, 2022|
|Approved by||Board Of Directors||March 31,2022|
|Effective from||–||April 01,2022|
Statement of Confidentiality
This document is confidential in nature and contains information that is proprietary and confidential to Midland Microfin Limited (MMFL) which shall not be disclosed outside MMFL, transmitted, or duplicated, used in whole or in part for any purpose other than its intended purpose. Any use or disclosure in whole or in part of this information without explicit written permission of Midland Microfin Limited is prohibited.
The Reserve Bank of India had issued a Circular, no. RBl/2011-12/470 DNBS.CC.PD.No.266/03.10.01/2011- 12 dated 26th March, 2012 regarding Fair Practices Code (FPC) to be adopted by all NBFCs while doing lending business. Midland Microfin Ltd. (MMFL) is committed to dealing with its customers in a fair and transparent manner. As a Non-Banking Financial Company (NBFC), the Company has put in place a Fair Practice Code that incorporates both the RBI’s guidelines on fair practices for NBFCs, as well as other self- regulatory organizations.
भारतीय रिज़र्व बैंक ने एक परिपत्र जारी किया था, RBl/2011-12/470 DNBS.CC.PD.No.266/03.10.01/2011-12 दिनांक 26 मार्च, 2012 के संबंध में सभी गैर बैंकिंग वित्तीय कंपनियों द्वारा उधार कारोबार करते समय अपनाए जाने वाले उचित व्यवहार सहिंता (एफपीसी) के संबंध में।मिडलैंड मिक्रोफिन लिमिटेड(कंपनी) में हम नियामक द्वारा जारी निर्देश के अनुसार उक्त उचित प्रथाओं का पालन करने के तिए प्रतिबद्ध हैं। फेयर प्रैक्टिस कोड दस्तावेज़ को आरबीआई/ डीएनबीआर/2016-17/45 मास्टर डायरेक्शन DNBR PD. 008/03.10.119/2016-17 दिनांक 01 सितंबर , 2016 के अनुसार अद्यतन किया गया था।
The Fair Practices Code was further updated as per the Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
उचित व्यवहार सहिंता को गैर- बैंकिग वित्तीय कंपनी – व्यवस्तिथ रूप से महत्वपूर्ण जमा न करने वाली कंपनी और जमा स्वीकार करने वाली कंपनी (रिज़र्व बैंक) निदेश, 2016 के अनुसार अद्यतन किया गया था।
According to the latest RBI Circular, Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 Circular, no. RBI/DOR/2021-22/89 DoR.FIN.REC.95/03.10.038/2021- 22 has mentioned additional guidelines on conduct towards Microfinance Borrowers.
नवीनतम आरबीआई परिपत्र, मास्टर निदेश के अनुसार – भारतीय रिज़र्व बैंक (माइक्रोफाइनेंस ऋण के लिए नियामक ढांचा) निर्देश, 2022 परिपत्र, संख्या RBI/DOR/2021-22/89 DoR.FIN.REC.95/03.10.038/2021-22 ने माइक्रोफाइनेंस उधारकर्ताओं के प्रति आचरण पर अतिरिक्त दिशानिर्देशों का उल्लेख किया है।
2. MMFL’s commitment:
2.1. To act honestly, fairly and reasonably in conducting microfinance activities and to deal our customers on the ethical principles of integrity and transparency.
2.2. To not discriminate against clients on the basis of gender, race, caste, religion or language and to treat all the clients consistently and fairly.
2.3. To prominently display the Fair Practice Code in vernacular language on the notice board at the Head Office and all the branches, and put systems in place to ensure compliance. Moreover, MMFL always welcomes new ideas and suggestions from its clients. For this, the suggestion boxes are placed at the Head and Branch Offices.
2.4. To ensure transparency in the maintenance of books of accounts and disclosure of financial statements by qualified auditor/s.
2.5. To place before the Board of Directors within 2 months of the end of every half financial year as on September 30th and March 31st, a Compliance/ Management Report indicating the extent of compliance with the Fair Practice Code and the functioning of Grievance Redressal Mechanism (specifically indicating any deviations and reasons therefore) as at the end of said half financial year.
2.6. The Code will be publicized by us through our website in English and vernacular languages.
2.7. MMFL shall disclose pricing related information to a prospective borrower in a standardized simplified factsheet. Any fees to be charged to the borrower by MMFL and/ or its partner/ agent shall be explicitly disclosed in the factsheet. The borrower shall not be charged any amount which is not explicitly mentioned in the factsheet.
3. Applications for availing loans and their processing:
3.1 At the time of applying for a loan, the applicant is fully appraised of the terms and conditions attached to the sanction of the loan through various meetings, so that she/ he is able to make an informed decision.
3.2 She/ he will be given the contact number of the concerned Centre Officer and Branch Manager from whom she/ he can enquire about developments in the loan process.
3.3 The credit application form of MMFL seeks detailed information about the borrower and his/her family including their financial means. If any additional details/ documents are required, the same shall be intimated to the borrowers. The need for such information and documents shall be explained to the customer and reasonable time shall be provided for submission of the same.
3.4 As many customers do not have documents to support all the information, information is collected through a personal visit, observation and discussion with the customer. Subsequently, MMFL seeks an appointment at a convenient time for the client to complete the credit application form.
3.5 Information so obtained is used by MMFL to take a credit decision and enables both MMFL and the borrower to exercise caution in respect of the amount borrowed.
3.6 MMFL undertakes to give to the borrowers, an acknowledgement of the receipt of all loan applications and to convey its decision to the applicant within 30 working days after the loan application form is completed. (A form is considered complete once all information has been duly received and filled in, and required documents have been submitted and found acceptable).
4. Loan appraisal and terms/conditions:
4.1.MMFL places great emphasis on explaining all terms and conditions orally to its customers at the loan disbursement stage by way of a pre-disbursement session. MMFL shall also provide 3 days mandatory training to its borrowers free of cost and also make the borrowers fully aware of the procedure of availing the loan.
4.2.To reinforce the understanding, the terms and conditions and responsibilities are reiterated at the time of application, sanction and disbursement.
4.3.The terms and conditions explained to the borrower include, but are not limited to the following:
a) Compliance with KYC guidelines of RBI.
b) The manner of repayment of the loan.
c) The fact that each member jointly and severally guarantees the liability of the other for repayment of the loans of the other group members
d) The loan amount and tenure, rate of interest, method of application as well as other charges
e) The frequency of repayment – whether weekly, fortnightly or monthly.
4.4 MMFL undertakes to give due notice for any change in the conditions of the loan specially pertaining to interest rate and periodicity, quantum of installments and tenure of loan/(any changes in the loan process/procedures).
5. Disbursement of loans including changes in terms and conditions.
5.1. MMFL informs customers clearly about all the terms and conditions of the loan, the advantages of timely repayments and the consequences of non-repayment of outstanding loans.
5.2. The Company shall give notice to the borrower in the vernacular language as understood by the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. The Company shall also ensure that changes in interest rates and charges are affected only prospectively. A suitable condition in this regard shall be incorporated in the loan agreement.
6. Recovery of Loans
6.1 MMFL will ensure that its decision to recall/ accelerate payment based on performance is in consonance with the loan agreement.
6.2 In the matter of recovery of outstanding dues of its borrower, MMFL does not resort to undue harassment viz. the use of muscle power for recovery of loans, etc. MMFL also ensures that it does not charge any loan prepayment fee and/ or penalty to its borrowers for delayed payments.
6.3 While enforcing its rights as a lender strictly, MMFL believes in polite language and abjures the use of abusive and harsh words. MMFL is accountable for preventing inappropriate staff behavior.
6.4 MMFL undertakes to release all securities if any on repayment of all dues or on realization of the outstanding amount of loan, subject to any legitimate right or lien for any other claims it may have against the borrower.
6.5 If any 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 MMFL is entitled to retain the securities if any, till the relevant claim is settled/ paid.
6.6 Recovery shall normally be made only at a central designated place. Field staff shall 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 on 2 or more successive occasions.
6.7 The Company shall ensure that a Board approved policy is in place with regard to Code of Conduct by field staff and systems for their recruitment, training and supervision. The Company shall 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 shall include programs to inculcate appropriate behavior towards borrowers without adopting any abusive or coercive debt collection I recovery practices.
6.8 Compensation methods for staff shall have more emphasis on areas of service and borrower satisfaction than merely the number of loans mobilized and the rate of recovery. Penalties shall also be imposed on cases of non-compliance of field staff with the Code of conduct. Generally, only employees and not out sourced recovery agents shall be used for recovery in sensitive areas.
6.9 MMFL has a mechanism for identification of the borrowers facing repayment related difficulties, engagement with such borrowers and providing them necessary guidance about the recourse available. The details of this mechanism shall be provided to the borrower at the time of loan disbursal.
6.10. MMFL will follow below guidelines related to recovery of loans. Recovery will be happened on centrally designated place mutually agreed with borrowers & RE (Recovery can be done at door step if borrower fails to appear at the central designated place on two or more successive occasions).
MMFL will not engage in any harsh methods towards recovery. Without limiting the general application of the foregoing, following practices shall be deemed as harsh:
• Use of threatening or abusive language
• Persistently calling the borrower and/ or calling the borrower before 9:00 AM and after 6:00 PM
• Harassing relatives, friends, or co-workers of the borrower
• Publishing the name of borrowers
• Use or threat of use of violence or other similar means to harm the borrower or borrower’s family/assets/ reputation
• Misleading the borrower about the extent of the debt or the consequences of non-repayment.
7. Client protection principles
7.1 MMFL will take reasonable steps to ensure that credit will be extended only if borrowers have demonstrated an adequate ability to repay and loans will not put borrowers at significant risk of over-indebtedness. Similarly, MMFL will take adequate care that non-credit financial products (such as insurance) extended to low-income customers are appropriate.
7.2 The pricing, terms, and conditions of financial products (including interest charges, insurance premiums and fees) will be transparent and will be adequately disclosed in the application form understandable to clients.
7.3 The privacy of individual customer data will be respected, and such data cannot be used for other purposes without the express permission of the customer.
7.4 MMFL is accountable for preventing inappropriate staff behavior.
8. Regulation of excessive interest charged by NBFCs
8.1 The Board of the Company shall adopt an interest rate model taking into account 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.
8.2 The rate of interest and the approach for gradations of risk and rationale for charging different rate of interest and other charges, shall also be made available on the website of the Company or published in the relevant newspaper. The information so published shall be updated whenever there is a change in the rates of interest.
8.3 The rate of interest shall be annualized rate so that the borrower is aware of the exact rates that would be charged to the account. Any change in interest rate or any other charge shall be informed to the borrower well in advance and these changes shall be effective only prospectively.
9.1 The FPC in vernacular language shall be displayed by the Company in all its offices including corporate office, regional and branch premises. The same shall be put up on Company’s website for the information of various stakeholders.
9.2 A statement shall be made in vernacular language and displayed by the Company in its premises and in loan cards articulating its commitment to transparency and fair lending practices, 9.3 Field staff shall be trained to make necessary enquiries with regard to income, expenses and existing debt of the borrowers.
9.4 Training if any, offered to the borrowers shall be free of cost. Field staff shall be trained to offer such training and also make the borrowers fully aware of the procedure and systems related to loan I other products,
9.5 The effective rate of interest charged and the grievance Redressal system set up by the Company shall be prominently displayed in all its offices and in the literature issued by it (in vernacular language) and on its website,
9.6 A declaration that the Company will be accountable for preventing inappropriate staff behavior and timely grievance Redressal shall be made in the loan agreement and also in the FPC displayed in its office/branch premises.
9.7 The KYC Guidelines of RBI shall be complied with. Due diligence shall be carried out to ensure the repayment capacity of the borrowers,
9.8 Issuance of non-credit products shall be with full consent of the borrowers and fee structure for such products shall be explicitly communicated to the borrower in the loan card itself.
9.9 All sanctions and disbursement of loans shall be done only at a central location and more than one individual shall be involved in this function. In addition, there shall be close supervision of the disbursement function,
9.10 Adequate steps shall be taken to ensure that the procedure for application of loan is not cumbersome and loan disbursements are done as per pre-determined time structure.
9.11 The Company shall have a Board approved, standard form of loan agreement. The loan agreement shall preferably be in vernacular language.
9.12 MMFL refrains from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of sanction of the loan (unless new information, not earlier disclosed by the borrower, has come to the notice of the lender).
9.13 In case of receipt of request for transfer of borrower account, either from the borrower or from a lender which proposes to take over the account, the consent or otherwise i.e. objection of the MMFL, if any, would 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.
10.1. The Company shall have a Board approved, standard form of loan agreement. The loan agreement shall preferably be in vernacular language.
10.2. In the loan agreement the following shall be disclosed.
a. All the terms and conditions of the loan,
b. The pricing of the loan has been separately provided in the policy on pricing.
c. Penalty, if any, for delayed payment shall be applied on the overdue amount and not on the entire loan amount,
d. No security deposit/margin is being collected from the borrower,
e. The moratorium period between the grant of the loan and the due date of the repayment of the first installment.
f. An assurance that the privacy of borrower data will be respected.
10.3. The loan card shall reflect the following details:
a. The effective Rate of Interest (ROI) charged
b. All other terms and conditions attached to the loan
c. Information which adequately identifies the borrower and acknowledgements by the Company
of all repayments including installments received and the final discharge.
d. The loan card shall prominently mention the grievance Redressal system set up by the Company and also the name and contact number of the nodal officer
e. Non-credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself.
f. All entries in the Loan Card shall be in the vernacular language.
11. Grievance Redressal Mechanism
11.1. The Company has adopted Grievance Redressal Mechanism. In case a Company’s staff is involved in any kind of misbehavior, disciplinary action against such staff shall be taken immediately. All the grievance related to staff will be taken through firstname.lastname@example.org and also through the contact number 0181 – 508 5555 and 508 6666.
11.2. All the branches have suggestion and complaint box in their premises where customers can make their grievances. All the customers have access to higher level staff (i.e. Branch Manager/ Cluster Manager) to highlight and discuss their issues/ grievances. The senior staff at field level has been empowered to take certain actions/ decisions to address the issues/ grievance of our customers
immediately. Moreover, Register of Complaints is maintained at Head Office where all the grievances/ complaints are registered.
11.3. In order to ensure that all the disputes arising out of the decisions of the Company’s functionaries are heard and disposed of at least at next higher level, customers may contact the Grievance
Redressal Officer as follows –
Customer may send a letter to:
Mr. Amitesh Kumar,
COO & CFO
Grievance Redressal Officer
Midland Microfin Limited
Fifth Floor, The Axis, BMC Chowk, GT Road,
Jalandhar – 146001
e-mail – email@example.com
11.4. All the grievances will be address by the Company within 30 days of receipt of grievance at the
following levels –
- Complaint to be resolved by field functionaries under the direct intervention of Cluster Head – 3 days.
- To be escalated to COO,CFO and resolved – 7 days from receipt of complaint
- To further escalate of Managing Director – 15 days from receipt of complaint
- To HO Executive Committee – 21 Days from receipt of complaint
- To Board Management Committee – 30 Days from receipt of complaint
11.5. It shall be the endeavor of the company to resolve the complaint on the priority (not later than one month) to the entire satisfaction of the customer. If the complaint/ grievance is not resolved within one month from the date of receiving the complaint/ grievance, the customer may contact the Nodal Officer of the Reserve Bank of India as per following details –
|Designation||Deputy General Manager – Nodal Officer|
|Contact Address||DNBS, RBI, Sector 17, Central Vista, Chandigarh|
|Contact No.||0172 – 2540350|
The Board of Directors shall periodically review the compliance of Fair Practice Code and the functioning of Grievance Redressal Mechanism once in half year.
13. Feedback Mechanism
Midland Microfin has started toll-free Customer Service Helpline (1800 137 0600) for its customers The Company’s Customer Grievance Redressal unit was restructured to redress the grievances at three level mechanism in tune with RBI Guidelines. A Grievance Redressal Committee monitors the implementation of customer service measures periodically and looks into the customer grievances and tries to resolve them efficiently. The Company has made all the efforts to provide maximum customer satisfaction.