Interest Rate Fixation amended and duly approved by the Board of Directors in the Board Meeting held on 14.12.2015 atthe Registered Office of the Company.
Inorder to fix the Interest Rate, In addition to cost factors set out here under,the Board or the Committee approved by the Board shall be guided by the marketconditions and various rules and regulations, if any, prescribed by the ReserveBank of India or such other competent authority from time to time.
Interestcharged under various Gold Loan Schemes shall have the following components:
BasicInterest Rate, Risk Interest Rate, Penal Interest Rate.
BasicInterest Rate represents the rate chargeable under every Gold Loan Schemeirrespective of the risk weight attached to the schemes or the type of scheme.Basic Interest shall be arrived at after considering the following aspects:
Costof Working Capital Funds:
Thiscomponent represents the interest and other incidental charges payable by theCompany for servicing the borrowed funds deployed by the Company. Majorcontributing factor to this component includes interest payable on Secured NonConvertible Debentures, Director's Loan Interest and other incidental chargesthereto.
Thisrepresents the Employee cost to the Company and other operating &miscellaneous overheads.
Returnon Capital Employed:
Afterconsidering the above cost factors, the Board shall take into consideration afair return on capital employed which is to be generated by the management forservicing the owners capital employed in the business. Thus the basic interestrate for the gold loan schemes shall be determined by considering the cost ofworking capital, overhead cost and fair return on capital employed.
RiskInterest shall be determined by taking into account the degree of risk involvedin loans under each loan scheme. While the rate shall be the lowest for theschemes where advance amount and the weight of gold is the lowest, it shall beincreased for schemes offering higher advance amount for the same weight.Further, irrespective of the scheme, the risk interest shall also be determinedafter taking into account the period of the loan as the incidence of risk goesup with the passage of time.
Theloan agreement shall contain the rate of interest due, additional interest fordefault in interest payment, and the rate of interest for payment of overdue interestfor more than loan tenure.
Acopy of loan agreement containing terms and conditions will be handed over tothe customer at the time of granting the loan.