VIRUTCHAM MICRO FINANCE LIMITED
(CIN: U65929 TN2008PLC068502, RBI CoR: N-07-00779)
FAIR PRACTICE CODE
1. Introduction
Virutcham was incorporated under Companies Act and obtained NBFC MFI license from RBI. The Reserve Bank of India through its circulars on various dates issued guidelines on Fair Practices Code (FPC) for all NBFCs to be adopted by them while doing lending business. The guidelines inter alia, covered general principles on adequate disclosures on the terms and conditions of a loan and also adopting a non-coercive recovery method.
2. Guidelines on Fair Practices Code of NBFCs
(i) Applications for loans and their processing
(a) All Communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
(b) Virutcham Loan application forms shall include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and informed decision can be taken by the borrower. The loan application form shall indicate the documents required to be submitted with the application form. Virutcham shall give acknowledgement for receipt of all loan applications, with the time frame within which loan application will be disposed of.
(ii) Loan appraisal and terms/conditions
• Our policy is to be reasonable, transparent and fair with the customers. All communications with the borrower is in the vernacular language. The terms and conditions of the loans offered by us are clearly communicated to the customers in written form and also taught during the two days of compulsory free training given to each centres. Virutcham educates the customers about these terms and conditions so that the customer can make a well informed decision about a loan. The application will go through an internal procedure and also a Credit Bureau check before loans are processed or approved. The applications which do not satisfy this procedure will be automatically rejected. In the event that the loan is rejected, Virutcham would communicate the decision to the customer.
• To prevent over-indebtedness and over-borrowing, Virutcham has registered with Credit Bureaus and in addition to the internal records and appraisal mechanism, the data of each client with respect to current debt levels and repayment history will be used to assess the eligibility for loan.
(iii) Disbursement of loans including changes in terms and conditions
(a) Virutcham shall give notice to the borrower in the vernacular language or a language as understood by the borrower of any change in the terms and conditions including repayment schedule, interest rates, service charges, prepayment charges etc. Virutcham shall also ensure that changes in interest rates and charges are affected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement.
(b) Decision to recall / accelerate payment or performance under the agreement should be in consonance with the loan agreement.
(c) Virutcham shall not obtain any collateral security for its microfinance loan products. No charges levied on prepayment.
(d) Virutcham release all securities received on loans other than microfinance loans (Falling under other than Qualifying Assets) on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim Virutcham may have against borrower. If 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 Virutcham are entitled to retain the securities till the relevant claim is settled / paid.
(iv) General
Virutcham continuously updates its Fair Practices Code to reinforce the commitment to fair practices in lending, transparency to customers and ethical standards in business practices and relationship with customers. The Fair Practices Code is displayed in all our branch offices, the Head Office as well as the Company website www.virutcham.org. The effective rate of interest charged and the grievance redressal system set up by the Virutcham is also prominently displayed in all its offices and in the literature issued by it (in vernacular language) and on its website.
(a) Virutcham refrains from interference in the affairs of the borrower except for the purposes 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).
(b) In case of receipt of request from the borrower for transfer of borrower account, the consent or otherwise i.e. objection of Virutcham, if any, is conveyed within 21 days from the data of receipt of request. Such transfer shall as per transparent contractual terms in consonance with law.
(v) Grievance Redressal Officer
Virutcham has a detailed mechanism for grievance redressal. This will ensure that disputes and grievances are heard and resolved within reasonable period of time. The Virutcham has a designated grievance redressal officer at the Head-Office who can be reached at the contact details provided on each borrower’s loan passbook.
(vi) Language and mode of communicating Fair Practice Code
Fair Practices Code which is preferably in the vernacular language or a language as understood by the borrower based on the guidelines outlined hereinabove shall be put in place with the approval of the Board. The same is put up on the company’s web-site, for the information of various stakeholders.
(vii) Regulation of excessive interest
(a) Virutcham 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.
(b) The rates of interest and the approach for gradation of risks shall also be made available on our web-site updated whenever there is a change in the rates of interest.
(c) The rate of interest should be annualised rate so that the borrower is aware of the exact rate that would be charged to the account.
(d) Rate of interest for Microfinance Loan products shall be fixed as per the Board approved policy of Virutcham Microfinance Limited and comply with RBI guidelines in this regard.
(viii) Disclosures in loan agreement:
Virutcham conveys the amount of loan sanctioned by means of a sanction letter, along with the loan agreement indicating:
1. Terms and conditions of the loan.
2. The pricing of the loan (which includes only three components, i.e. the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof).
3. That no Security Deposit/margin is collected from the borrower.
4. That there will be no penalty charged on delayed repayment.
Virutcham gives notice to the borrower in the vernacular language of any change in the terms and conditions including repayment schedule, interest rates, service charges, etc. Virutcham also ensures that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard is incorporated in the loan agreement. Loan sanctioning is done centrally at Head Office and disbursement of loans is done at the Branch offices. The disbursement function is closely supervised by the Credit Officer and the Branch Manager.
(ix) Loan Card Details
Each borrower is provided with a loan passbook (in vernacular language) at the time of disbursement, reflecting the following details.
• The effective rate of interest charged.
• All other terms and conditions attached to the loan.
• Information which adequately identifies the borrower
• Acknowledgements by Virutcham of all repayments including instalments received and the final discharge.
• The grievance redressal system set up by the MFI and also the name and contact number of the nodal officer
• Non-credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself.
• At the time of disbursement, each customer is assured that the privacy of borrower data will be respected. Written consent will be obtained for use of information in promotions, marketing material and other public information.
• Loans are provided without any collateral for qualifying assets. For non-qualifying assets as and when we take securities, we will release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim NBFCs may have against borrower. If 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 NBFCs are entitled to retain the securities till the relevant claim is settled /paid.
(x) Non – Coercive Methods of Recovery
In the matter of recovery of loans, recovery is normally made at a designated meeting venue. 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. Virutcham does not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of
muscle power for recovery of loans etc.
(xi) Internal Control system
Virutcham shall make necessary organizational arrangements to assign responsibility for compliance
to designated individuals within the company and establish systems of internal control including
audit and periodic inspection to ensure the same.
VIRUTCHAM MICROFINANCE LIMITED
CUSTOMER GRIEVANCE REDRESSAL POLICY
Virutcham Microfinance Limited aims at empowerment of women and improving the standard of living of families it serves. Since the company works among and for the low income households, the company gives highest priority for the redressal of grievances of the customers. The company has developed the operational processes and systems aiming at minimizing the complaints and grievances and ensuring prompt redress.
Objective of the Policy:
The objective of the policy is to redress the complaints / grievances of customers quickly and within a time frame. The mechanism paves way for identifying and reviewing the shortcomings in the services and rectifies them at the earliest possible. This policy covers issues related to Insurance Service provider, being an intermediary between the customer and the Insurance Company.
Key Commitments:
Management of Virutcham Microfinance is keen on upholding the following commitments.
- To carry out all its services to the target customer keeping in mind the vision and mission of the company.
- To comply with fully the directives of RBI and all relevant laws and regulations as applicable, in providing microfinance services.
- The products and services are appropriate for the target customers and the services are provided to them at the time they require it.
- The dealings with the customers are just and fair.
- Ensure that JLGs are formed with potential customers who know each other and support each other, financially / non financially, in time of need.
- Ensure transparency and customer rightly understand the products/services and the terms and conditions by educating the customers at various level and providing all literature like loan card in vernacular language.
- Explaining the implications of excess borrowings and guiding them on choosing right product that pave way for economic empowerment and improved standard of living.
- The company will ensure that the customers have pleasant and trouble free experience with it. However, in case of any instances of disagreement with the services provided by the company to its customers, the same will be handled with utmost care.
- In case the customer is not satisfied with the way their complaint is handled, the company will guide the customer on further procedures of escalation.
Grievance Redressal Mechanism
The company has a structured grievance redressal system in practice where all grievances will be attended as per a defined schedule. This facility has been provided to the customers to register complaints for speedy redressal.
Complaint Registration:
Customers can register their complaints / grievances through any of the below mentioned channels.
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The Details of the Grievance Redressal Officer are as below:
Internal Mechanism to handle Customer Complaints: Resolution of Grievances
Recovery related grievance redressal system: Concerns and grievances related to loan recovery needs to be given special attention keeping in mind the section of people served by and microfinance being non collateral loan. The voices of women clients, who come from low income households and are not much educated, needs to be given due attention. Hence there is dedicated recovery related grievances. Overview of delinquency and preventive strategies Collection is a strategic process that is key to generating good habits and a payment culture among clients. Credit risk such as over indebtedness, bad credit history etc., Operational risks such as process gaps, frauds, weak infrastructure, inadequate staff training etc., and risks due to external factors like natural calamities, macro economic situation, policies of government etc become the cause of delinquency. Delinquency can be controlled by adopting appropriate preventive strategies. One of the best ways to avoid delinquency problems is to address the problem before it arises by ensuring that the early lending process is conducted properly. Preventive action is less costly and more effective. Following are the different ways by which this can be done:
Short term Recovery issues such as delayed wages, temporary shortage of cash liquidity etc shall be resolved by temporary advance given by other member to meet the repayment obligation. Long Term Recovery Issues such as
Dedicated system to handle recovery related grievances:
Role of Grievance Redressal Desk and Time Frame A dedicated staff shall handle the grievance redressal desk at Head Office. The following are the responsibilities of Officer at Grievance Redressal Desk.
ESCALATION: Level 1 Escalation: If customers are not satisfied with the resolution provided by the “Grievance Redressal Desk”, they may further escalate to the Nodal Officer/Ombudsman, mentioned below. Mr. R. Kanagavel, Virutcham Microfinance Limited, No.1, Mullai Tower, Mullai Nagar, Thanakkankulam, Madurai – 625006. Tamilnadu. Email: arm@virutcham.org Mobile phone / Whatsapp : 9443148410. Level 2 Escalation: If customers are not satisfied with the resolution provided by the Nodal Officer, they may escalate the same by writing to the Appellate Authority of Grievance Redressal at below mentioned address. Appellate Authority for Grivance Redress Virutcham Microfinance Limited, No.1, Mullai Tower, Mullai Nagar, Thanakkankulam, Madurai – 625006. Tamilnadu.
Responsibilities of the Appellate Authority for Grievance Redressal
Level 3 Escalation: If the complaint / dispute is not redressed within a period of 4 weeks, the customers may appeal to Ombudsman at Chennai Regional Office of Reserve Bank of India. Dr (Smt) Tuli Roy Review Mechanism: Periodical MIS on complaint is generated and circulated amongst the senior officials of the company for their review and further instructions, if any. A consolidated report of such reviews/MIS shall be submitted to the Board at regular intervals, as may be prescribed by it. Display of Grievance Redressal System The details of Grievance Redressal system shall be displayed prominently, for the benefit of the customers, at all branches / places of the company where business is transacted.
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