Swadha Finlease Private Limited (“Swadha Finlease”) is a Non-Banking Financial Company which will provide loans. The main objective of the company is to become a credible, relevant and leading financier in its chosen segments of business. Swadha Finlease commit to operate according to the highest ethical and compliance standards and constantly seek to follow best practices in the industry. Under no circumstances will contravention of laws and relevant regulations be tolerated.
The product parameters defined under this policy are applicable on all products.
M/S. Swadha Finlease Private Limited is a Non-Deposit taking Non-Banking Financial Company which has commenced its operations from Oct, 2019 onwards. Swadha Finlease is trying to work on a model that focuses on building and nurturing long-term relationships with their clients. At present, the operations have been started in Raipur.
Company has received the Certificate of Registration from Reserve Bank of India on 19th June , 2019 vide certificate no. B-03.00201 providing access to financial services sector focused on Loan and Advance nature of activities of company.
Our business model will be completely based on the principal of “Faster Processing of Loans”. Finance is always been blood of organization/business from the day one. It is not possible to run business without finance. Success or failure of any business depends on the availability of funds at the right time. We understand this and hence would make sure that the timely disbursal or funds are done to our clients by adopting a quick processing of Loan. We achieve this by having efficient manpower and use of technology tools.
Usually banks impose a very tough eligibility requirement like good credit score, no bad history of repayments and a significant credit standing. We would also adopt stringent eligibility checkpoints but with flexibility on studying the requirements and usage of funds. We sincerely believe that a business has ups and downs and hence we would focus more on the right usage of funds. The secured loans offered by us would also have better Collateral to Loan ratio than our competition.
An Applicant, Co-Applicant and Guarantor must be Indian resident. Foreign nationals are not eligible for loan disbursement.
Following shall be eligible for the loan disbursement:
There is a requirement of minimum 2 borrowers, applicant as well as co-applicant. However, deviations can be approved by credit head. To arrive at loan eligibility, maximum 5 applicants can be considered for the income consideration. There is no limit on the maximum no of applicants.
| Borrower | Age |
|---|---|
| Applicant | 25 |
| Co-Applicant | 21 |
| Guarantor | 21 |
| Borrower | Age |
|---|---|
| Salaried | Retirement age OR 65 years at loan maturity - for all applicants/ co-applicants whose salary income is considered for loan eligibility. If pension income to be considered age up to 65 years can be taken. |
| Self Employed |
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Minimum Income is defined as the income of applicant clubbed with co-applicant.
Following are the minimum income norms:
For loan eligibility calculation, a maximum of 5 incomes (1 applicant + 4 co-applicants) can be combined.
Loans will have co-applicants or Guarantors to cover the death risk. In case of involving Individuals, immediate family members (excluding married sisters, staying in one residence) can be taken as co-applicants. Married daughters/sisters, Son in law & brother in law may also be taken if engaged in the same business. In case of private limited company or Partnership firm at least 51% partners and directors need to be a part of the loan structure for income consideration of the firm or NOC is to be collected from the partners/directors not in the loan structure.
Guarantors should meet all the credit parameters. The guarantors should be a family member, friend, business associate of the applicant and should have an independent source of income with loan servicing ability equivalent to that of the applicant. Income papers and bank account statements to verify the same should be provided.
On the basis of industry feedback certain professions/ profiles are considered as restricted. Lending to these profiles is done extremely cautiously and is based on past credit history. A detailed list of restricted profiles is available in the Credit Process Manual. Restricted professions include:
Lending to these profiles can be done as per the deviation matrix only.
Swadha Finlease’s objective is to involve in bona-fide business activities and provide financing solutions. As such, prior to detailed work on the credit proposal, client suitability must be clearly established. Through multiple criteria, client suitability has to be checked– which may evolve over time but must cover issues of reputation and regulatory risk, and the any concerns over money-laundering activities.
List of defaulters/watch-lists issued by relevant regulatory bodies and exchanges viz. RBI, Government of India (especially Department of Corporate Affairs), SEBI, Competition Commission of India, Registrar of Companies, NSE/BSE/Other exchanges, NCLT and other debt recovery institutions.
Review of Press and Social Media for adverse publicity and news about the potential borrower.
To the extent available for public use.
Any issues or findings of concern or a NIL findings comment are mandatorily part of the credit proposal.
Rs. 50,000/- to Rs. Rs. 15,00,000/-
Rs. 10,000/- to Rs. Rs. 10,00,000/-
| Loan Against Property | |
|---|---|
| Maximum Quantum of Loan | Rs. 15,00,000/- |
| Maximum Repayment Tenure | 60 Months |
| Business Loan | |
|---|---|
| Maximum Quantum of Loan | Rs. 15,00,000/- |
| Maximum Repayment Tenure | 48 Months |
| Interest Rate | Processing Fees | Foreclosure Charges |
|---|---|---|
| On the basis of interest Rate Policy of Swadha Finlease | 3.5% of the loan amount + GST (as applicable) | 5% of outstanding + GST (as applicable) |
For loan disbursement, there shall be loan disbursement committee for effective coordination, monitoring, as well as enforce the utilization of the loan to achieve best results subject to the approval of business head.
The loan Disbursement process mainly consists of four simple steps:
Loan recovery is a very critical process and for this, different method can be used. In case loan is not recovered after trying hard then legal action can be taken by the company. For loan recovery following steps can be taken:
Swadha Finlease shall be offering loans up to a maximum tenor of 5 years. The loan tenors will be restricted by the age of the property. The residual age of the property to be at least 10 years at the maturity of loan. Also the total age of the property is considered to be 70 years while in case of leasehold properties the maximum tenor to be such that the loan maturity is 10 years prior to expiry of the lease period.
Following can be type of collateral:
In the loan structure, co-owners must be borrowers in the loan structure.
Note: In case of leasehold properties, loan can be provided only if they are long term government or development authority lease. Proper permission must be obtained to mortgage these properties from the concerned authority. Also there should be proper process for the sale and purchase of such properties.
Following types of properties can be taken as a collateral security:
Minimum collateral value must be Rs. 10,00,000/- or equal to 100% of loan amount.
Repayment of loan shall be through Equated Monthly Installments (EMI) of principal and interest with a maximum tenure of 5 years or interest only. The repayment shall be either through Post Dated Cheques (PDCs) or ECS/NACH only. Two undated Principal Value cheque needs to be collected as security along with ECS Mandate/NACH.
For Example: If the Total Market Value (MV) of the property is Rs 2,500,000 and the loan amount is Rs 1,000,000 then the LTV is 1,000,000/2,500,000=40% decided
It is defined as loan amount divided by the total property value. The LTV norms are different for different product categories and the same are enumerated below.
Loans disbursed under this program can be used for any of the following:
Note: It is to be noted that the Loan offered by Swadha Finlease Pvt Ltd. cannot be used for any speculative or illegal purposes or any purpose prohibited by law and/or applicable regulations, as amended from time to time.
| Individuals | Company | Partnership Firm |
|---|---|---|
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Proof of Age: Standard Documents:
Non-Standard Documents:
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One certified copy of all the below mentioned documents:
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One certified copy of all the below mentioned documents:
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ID Proof: Standard Acceptable ID Proofs:
Non-Standard ID Proof:
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NA |
NA |
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Address Proof: Standard Address Proof:
Non-Standard Address Proof:
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NA |
NA |
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Income Documents Salaried
Self Employed Individuals
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ITR’s for last two years along with financial statements |
ITR’s for last two years along with financial statements |
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Bank Statements: Applicant/ Co applicant
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Bank Statements Main applicant:
Account from where PDC/ECS instruction is given to be verified mandatorily and the same to be attached in the file for at least 03 months |
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Bank Signature Verification:
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Bank Signature Verification:
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End Use Letter: To be taken from application form. It is a mandatory field in the application form |
End Use Letter: To be taken from application form. |
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The mandatory documents required for the loan are enlisted as follows.
Note*
| Process Checks | Individual | Company/Partnership |
|---|---|---|
| Defaulter Checks |
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| CPV/TVR Office | TVR to be done only by Credit team or the CPA staff trained by them. Residence CPV mandatory to be done by CPV For individuals, CPV to be done at both residence and office. |
Same as for individuals and in addition CPV to be done for all co- applicants, partners and directors included in the loan structure |
| Loan Verification | Loans that reflect in Credit Bureau(CIBIL) , Experian etc. For other loans the same needs to be verified by taking a loan repayment track | Loans that reflect in Bureau (CIBIL), Experian,etc For other loans the same needs to be verified by taking a loan repayment track |
| ITR Checks | Last 02 years filed ITR | Last 02 years filed ITR |
| Bank Statement Verification | Saving Account for the last 6 Months | Current Accounts for the last 6/12 months |
| Property Documents & other related documents |
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Swadha Finlease shall implement risk-based pricing which shall vary with each product. The Interest rates will be pegged to the company’s cost of funds (COF). Floating rate options will be reset at quarterly frequency in each calendar year.
This will be the weighted average cost of funds for Swadha Finlease on a monthly basis.
The prepayment fee will be as follows:
| Particulars | Criteria |
|---|---|
| Prepayment |
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| Partial Prepayment | 3% prepayment fee for partial prepayment No partial prepayment allowed in loans less than 6 Months Partial prepayments allowed only 2 times in a year. There should be a minimum gap of 4 months between two partial prepayments. |
Note*the charges mentioned above are only indicative in nature and liable to change from time to time.
| Parameter | Policy |
|---|---|
| End Use |
|
| Loan Amount | Minimum: INR 50,000/- Maximum: INR 15,00,000/- |
| Income Norms | Salaried
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| Pricing | As per the Pricing Matrix |
| DBR |
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| Collateral Type |
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| Minimum Collateral Value | Rs. 10,00,000/- or minimum 100% of loan value |
| Maximum Tenor | 5 Years |
| Property Type | Normal LTV Norms |
|---|---|
| Self Occupied Residential (SOR) | 60% |
| Rented Residential | 55% |
| Vacant Residential | 50% |
| Multiple Use Residential | 55% |
| Mixed Use | 50% |
| Commercial Use | 50% |
The collateral reports cannot be more than 90 days old at time of approval and need to be signed and stamped in original by the vendor at the time of approval.
An empaneled lawyer will verify the entire chain of property documents and/or carries out a search at the Sub Registrar’s or development authority’s office for any lien or legal case pending for that property.
The following tasks are entrusted to title search lawyer/firm to cover risks related to mortgage right establishment, defects on ownership and other rights, defects in lease and transference status search, document forgery, false impersonation, delay or registration failure.
On the basis of this a report will be prepared which mentions the list of documents that should be collected to create an Equitable/Registered Mortgage. Lawyer also gives an option whether the property can be mortgaged or not by the applicant. Based on this report credit officer decides whether the collateral offered is acceptable or not. The collateral is mortgaged to us way of an equitable mortgage and only properties that have a clear title are acceptable as collateral.
For all cases property appraisal is mandatory. The value of the collateral is determined by an independent property appraisal carried out by a panel of accredited valuers. Each customer files to be accompanied with a Valuation report which will capture the key items with regard to valuation.
| Minimum property value | Rs. 10,00,000/- |
| # of Valuations |
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| Additional / Alternate Collateral |
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| Sampling post disbursals | Sampling to be done for 10% of the loans booked |
Swadha Finlease proposes to offer the following two options to the customer if he/she chooses to get it done through the company.
For all income assessment methods two years financials are required. The income is assessed as per the latest ITR but if there is more than 50% increase in income over last year then the same needs to be averaged out. Income is considered Post Tax for both Salaried and Self employed applicants.
Maximum of 4 co-applicant’s income can be added to the income of the main applicant. Income of co-owners of the property can be added in all cases. Income of the following people can be considered without deviation
Business Income Post Tax: Profit after tax as reflected in the latest year ITR and P&L statement. If the tax has not been subtracted in the profit figures then tax needs to be subtracted as reflected in the ITR. In case of a PVT Ltd Company/Partnership firm salary and interest paid to partners can be added if all the partners/directors are present in the loan structure.
Depreciation: 75% of the deprecation as claimed in the P&L can be considered for income purpose. If the depreciation amount is unusually high then asset verification is done at time of TVR.
| Borrower Segment | Criteria |
|---|---|
| Proprietorships | Income = Profit after tax (PAT) +3/4th depreciation+ All payments made to relatives as reflected in tax audit report and other regular income as reflected in ITR and bank statements to the satisfaction of credit manager. |
| Partnerships | Income = PAT +3/4th depreciation + Interest paid on Partner’s Capital+ Salary paid to partners |
| Corporate | Income = PAT +3/4th depreciation + Director’s remuneration |
Gross margin method of computing income basically involves taking gross margin or 15% of total sales from audited financials, whichever is lower as the total income. No other income can be added back to this income from business. Gross margin is defined as total turnover or total sales revenue minus the sales cost. Essentially it will be the Total Sales cost directly related to the sale of the goods. These costs can include manufacturing expenses, raw materials, labor, selling, marketing expenses. Revenue cannot include income from speculation or interest income from speculation or interest income. However, exceptions can be approved by Underwriting Head/COO.
Agricultural income can be accessed via Mandi sale receipt, total land holding (same to be verified via Kisan rin Pustika ). Average over three years in considered for income calculation. If the income is unusually high then proof of agricultural receipts as issued by the local governing body can be requested for. Exceptions can be approved by underwriting Head /NCM.
Rental income can be considered if it reflects in ITR/Bank statements/Rental Agreements.
Other Income: Interest income, dividend income, income from investment and income from part-time business-like tuitions etc can be added if reflected consistently in the ITR for at least two years. Proof of investments can be requested and verified as applicable.
Customer should be known to Swadha Finlease or having an existing relationship
It is defined as the EMI of the current loan + all other monthly loan and credit obligations of the customer divided by his monthly assessed income (inclusive of income of all applicants and co-applicants).
As above if applicant has monthly income of Rs. 15000, his EMI on our loan is Rs 5000 and applicant is also running a loan of EMI 3000 then his DBR is (5000+3000)/15000=53.33%
Credit Appraisal means an investigation done by the financial institution before granting loan or advances to the fund seeker.
The credit process begins with a thorough analysis of the borrower’s creditworthiness, or capacity and willingness to repay the loan. Following shall be considered:
This process begins with the collection, analysis and evaluation of information required to determine the creditworthiness of the borrower seeking credit. After the credit analysis is completed and borrower has been determined to be an acceptable risk, the credit officer proposes a loan structure for approval that preserves the strengths and protects against identified weaknesses of the borrower. The process ends with determination of a risk rating for the credit and loan approval (or rejection). The financial institution’s credit policy, lending standards and procedures create the parameters for this process, thereby establishing the appetite for risk.
Analysis of risks associated with any borrower should focus on the four foundations of creditworthiness, shown below:
It involves the industry dynamics and the company’s position within the industry. Weakness in the industry itself can significantly impact loan repayment ability and the company’s position within the industry is an important issue.
It focuses on the borrower’s ability to generate sufficient cash, the first source of loan repayment, or to draw on existing resources, e.g., capital or assets, to repay borrowings. The credit analyst examines the income statement, the balance sheet and the cash flow statement to evaluate this foundation of creditworthiness, focusing on profitability, efficiency, liquidity, and leverage, in particular.
It entails the competence, integrity and alliances of the key individuals running the company. Management weakness or dishonesty can have an impact on both repayment capacity and security realization. Depth of management is always a concern, especially in smaller, family run organizations.
It determines the level of the financial institutions' control over collateral and the likely liquidation value, factoring in time, i.e., net present value. Weakness in security realization threatens the second source of loan repayment.
If an existing borrower wants to take an additional loan, they can be funded as per financial eligibility and property value. This can either be booked as a separate loan or by closing the previous loan and booking fresh loan with total exposure.
Points to be followed:
If an existing customer comes to us loan against another property a gap of 6 months (6 EMIs paid) is mandatory in disbursal of the next loan. LTV, DBR and tenor norms will be applicable on the total exposure. Also the customer will have to meet all the enhancements / Top-Up norms as per policy.
Example: If a customer has an existing EMI of Rs 10,000 and for the new loan his EMI will be Rs. 5000/ Then the total EMI 10000+5000=15,000/20000(assumed monthly income)= 75% . This breaches the DBR of 70% hence the new loan cannot have an EMI of Rs. 5000
| Mode | Conditions |
|---|---|
| Repayment cycle | EMI’s will be due from the customer on the 7th, 14th , 21st & 28th of every month. |
| EMI / Pre-EMI | The customer is required to pay the EMI from the next month onwards. For example loans sanctioned between 28th day to 6th day of month 1, would have EMI payable on next month 7th day. Similarly loans sanctioned between 7th day to 13th day would have 14th day of next month, loans sanctioned between 14th to 20th day would have 21st of next month and lastly loans sanctioned between 21st day to 27th day would have 28th day of next month. Pre-EMI would be applicable in case of mortgage loans (home Loan & LAP), where customer have taken part disbursement. In case of Pre-EMI , interest to paid on a per day calculation basis for the period until EMI repayment starts. |
| Electronic Clearing System (ECS) |
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| Post Dated Checks (PDC’s) |
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Ensuring that the Swadha Finlease team remains fully engaged with the client and in a position to remain updated about credit developments with the client is critical to maintain a high quality credit portfolio.
For completing the KYC process, clients must furnish all authenticated documents necessary. This includes all charter and incorporation documents, proof of address and business, financial statements and also the KYC documents for important stakeholders and authorized signatories.
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