PAHAL FINANCIAL SERVICES PRIVATE LIMITED

2017-18

Credit Policy

Reg. Office: First Floor -2, City Mall, Nr. Rajpath Club, Opp. Madhur Hotel, S.G Highway, Bodakdev,

Ahmedabad -380059

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CREDIT POLICY FOR THE YEAR 2017-18 FOR JOINT LIABILITY GROUP LOAN 1. Eligibility Criteria

1.1 Members Minimum Eligibility Criteria

PAHAL FINANCIAL SERVICES PRIVATE LIMITED’s Centre Members have to fulfil the following minimum criteria:

In case of JLG, a group of seven to fifteen members a Person can only be a woman but to

avail the Individual Loans, person can be a woman or man. Minimum age should be 18 years and the maximum age should be 60 years. Nature of Activity should be permanent/semi-permanent which should generate regular

income (daily, weekly, monthly) The household annual income of borrower in rural area should be less than Rs. 1,00,000/-

and that in semi urban or urban area it should be less than Rs. 1,60,000/- . Location of Residence within

Urban branch will have a radius of 25 Kms to 30 Kms Rural branch will have a radius of 30-35 kms

One loan per household in one Centre. If two or more borrower of one household are

residing in different houses, each can be a member of different Centre of Pahal.

Borrower have to disclose that she is a member of one Centre only and she has not taken loan from more than one MFI.

Total Indebtedness of the borrower shall not exceed Rs. 1,00,000/- provided that loan, if

any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a borrower.

Not more than 2 loans and no over dues. The Client data will be checked with Credit Bureau

data.

Evaluation will be done by Field Officer of the Company and the Branch Manager will indicate to Head Office for accepting the application to adhere to the company’s rules and regulations and have shown willingness and ability to pay.

1.2 Centre Eligibility Criteria

The Centre can consist of 5 (Five) to 15 (Fifteen Members).

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Every member of the Centre must be residing with her immediate family member (Immediate Family member means her husband and/or children, and/or parents)

The residence of a members of a Centre should not only be in PAHAL’s area of operation, but also within a close proximity of each other (i.e within half kilometre of each other). All the member in the Centre should be within 500 metres radius( in urban areas) and 1 kilo metres (in rural areas).

All members of the Centre, should agree and willing to give guarantee or repayments of other members’ Loan of that centre.

No relatives can be in the same Centre. Here relative means Mother, Sister, Daughter, Sister in Law , Mother in Law. They can be in different Centre if they live separately and have separately household income source.

The members of any Centre should not have more than one existing loan from any other MFI. In other words, the members should not have two existing loans from two MFIs other than Pahal.

All members in the centre must have their own respective ID cards and their own residence proof, own or rented.

2. Branch Area of Operations

PAHAL operates in both urban as well as rural India, As of now Pahal operates in state of Gujarat, Madhya Pradesh, Maharashtra and Rajasthan. The operation of branches of Pahal will have following coverage:

Urban Branches will have a radius of 25 to 30 kms. Rural Branches will have radius of 30 to 35 kms

3. Documents required:

Centre members need to be able to present following documents for availing loan facility: Compulsory documents

a. Aadhar Card

And

b. Voter ID

Other Documents ( atleast one among the following documents should be available ) PAN Card, Passport, Driver’s Licence or Panchayat Certificate with photograph or Corporate Certificate, Land Title or Sales agreement or Lease Agreement or Utility Bill or Panchayat Certificate or Copy of Ration Card. For the purpose of proper monitoring Pahal’s team can ask for any KYC Documents from its customers.

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Three Photographs of the applicant

One Photographs of the guarantor

The client would need to submit copy/ies of KYC Documents to the FCO at the time of filling of Loan Application form. Original documents need to be verified and certified by the BM at the time of GRT. Pahal would follow the KYC policy in true letter and spirit, Credit Bureau Checking:- All documents and particulars of the Borrowers will be sent to the Credit Bureau in their format to view the existing loans of each Borrower. Borrower having more than 2 existing loans from any of the MFIs will be rejected and the Borrower who fulfil the eligibility criteria will be called for filling up the KYC and the data will go for further process.

4. Individual not eligible for PAHAL’s loan Following individual not eligible for loan from PAHAL Individual who have had outstanding overdue or past due loans with other credit institutions

and/or other creditors/suppliers Individual who have loan from 2 or more MFI’s Individual involved in illegal business Individual who refuse to provide cleat and truthful information about their business,

employment and personal details.

5. Loan Product 5.1 Purpose of Loan

Loans can be provided to suitable borrower for their business requirements as per the purposed mentioned in the application form. To avail loans for purposes other than those mentioned, a written approval from the Head Office would be required.

5.2 Loan amount and tenure The philosophy of PAHAL is to start with small, short term loan compatible with the client’s household cash flow and the members’ comfort to give mutual guarantee to other member in the Centre. The loan amount and tenure shall be decided by the Executive Directors mutually. Interest Rate could change periodically based on cost of funds, stipulated margin and

RBI Guideline. Other Terms and Condition:

Interest is applied on the monthly reducing balanced method.

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Upfront Processing and Insurance Premium is collected, separately in cash at the time of disbursement in case disbursement is done in cash. In case disbursement is made via NEFT the balance amount after deducting these amounts from sanctioned amount shall be credited to their account. 5.3 Credit Life Insurance: Life Insurance Policy would be taken both for the borrower and the guarantor covering the loan amount. The policy term would be co-existent with the loan tenor. Premium charge collected from the borrower will be paid to the Insurance Company. 5.4 Frequency of Payment

Another key principle of microfinance is the frequency of repayment. Members usually prefer small amounts of repayments which does not adversely affect their cash flow. Accordingly, Pahal offers equal loan instalments payments as per the desire of their clients.

6 Guarantee Mechanism

Mutual Guarantee: The Centre as a whole guarantees the loan of each and every Centre member. The Centre members accordingly are liable for their own individual loan repayment as well as the repayment of the other members of the Centre, by virtue of this mutual guarantee. The member signs a Demand Promissory notes with regard to their individual Loan and also signs as guarantors for other members’ Loan, through a Joint Liability Agreement Document. Further to ensure smooth collection each member has to provide a guarantor. A Guarantor can be a Husband/Father/Mother/Brother/Father in Law/Mother in Law/ Brother in Law /Son (Above age of 18 years)/Daughter (above age of 18 years) as a Guarantor. The Guarantor must stay in the same city in which the member staying.

7 Level of Loan approval

Loan recommendation for all cycles will be done by Brach Manager (BM) and Field Coordinator (FCO). Where there is no BM then Area Manager will recommend the KYC and forward the same to Head Office (HO). The Audit Monitoring Team will take the final decision on the Loan at HO. Any one of the members of the audit monitoring team will sign the loan application for sanction of loan. If there is any case/s which are in deviation from the policy of the company then such deviation can be approved jointly by two executive directors of the company. The deviation should relates only to the delay in repayment and should have valid reason. The facts pertaining to the case/s would need to be clearly mentioned to the directors by the audit monitoring team clearly indicating the background of the case, areas of deviation and justification for seeking exception approval need to be attached to the file.

8 Disbursement a. Cash

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Loan disbursement will be done at the branch offices of the Pahal in the presence of respective Branch Managers (in case of BM is not there, representative from Head Office/Area Manager shall carry on the process) and FCO. The Whole Centre has to be present for Disbursement. Only under unforeseen circumstances (Medical Emergencies) the partial Centre disbursement should be done. For Partial disbursement deviation, approval should be taken from the Operations Manager. Under no circumstances loan should be disbursed to the Centre members if more than 1 member is absent during disbursement. Deviation is allowed only for absence of 1 member in case of medical reason, death in family or any unavoidable events, In that case the absent borrower and leader of respective Centre both will receive the loan when both are available in subsequent dates after disbursement.

b. NEFT The other mode of disbursement is NEFT. The disbursement via NEFT is done from the Head Office of the Company. In this the FCO obtain the account detail of the borrower (at the time of formation of centre) in which they want to get their amount. The same is then communicated to the Head Office thereafter the Accounts team will disburse the amount via NEFT.

9. Collection Collection will be done at the centre during Centre Meetings. The Centre representative will collect the instalments and hand it over the Field Coordinator (FCO). Loan instalments will be collected from the Centre as a whole. In case, collection day falls on national holidays or on day of festivals collections would be scheduled for an earlier day immediately preceding the collection day. In these cases, collection would be done one or two days in advances. In such cases FCO would communicate to the centre the change in schedule ( of collection day and time) atleast 2 weeks in advance. Field Coordinator will take permission of Branch Manager and Branch Manager will communicate in bank deposit slip the names of group and amount collected earlier.

10. Appropriation of receipts/ collections For each overdue instalment (in the order of oldest to latest instalment), the following would be the order or appropriation of amount/s received from the members.

1. Interest past due, if any 2. Interest Due 3. Principal Past due, if any 4. Principal Due

11. Loan Utilization Check (LUC) LUC is an important step in order to avoid default. Within the next 45-60 days after disbursement, the Field Coordinator physically checks for the utilization of every productive loan. If it is found that the loan has not been utilised for the purpose it was taken, the Field Coordinator must make efforts to convince the member to utilise the loan and council the member about its benefit. If the member still does not utilise the loan branch should immediately report the incident to the Head Office.

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Procedure of Loan Utilisation Check

Loan utilisation check is the responsibility of FCO and BM

LUC is to be done as per format provided

FCO is required to check loan utilisation of the entire client, within the next 45-60 days after disbursement and submit the report

BM will verify 25% of the loan utilisation of the loan disbursed every month In case of deviation in loan utilisation for more than 50% of loan amount, the BM is supposed to send the report to Area Manager/Operation Manager. At the same time BM/FCO will insist the borrower to utilise the loan. 12. Loan pre-payments & Advance repayments Loan pre- payments is defined as pre-closure of Loan by way of payment of all instalments due,

before the scheduled due date/s. This pre-payments/closure of Loan is only allowed for the entire centre and not on an individual basis. (Foreclosure of loan of a single member must be approved from Operation Manager at HO). Therefore, even if one member wants to pre- pay his Loan, the entire centre members as a whole should pre-pay their Loans together, at the same time. Also, pre-payment/pre-closure of Loan is allowed only in group, for all cycles. Pre-payments can be paid by the members/group at the PAHAL’s Branch Office to the Branch Manager with intimation at HO.

No individual advance repayment to be entertained. Also, no part repayments are to be

accepted by the FCO. If the member is going outstation or if valid reason is given in writing by the client to FCO, Operation Manager over the phone can allow making pre-payment for which a receipt will be issued by the FCO to the client who is prepaying some instalments.

13. Loan Renewal Loan renewal/repeat Loan are based solely on the Centre member’s repayment track record.

The fundamental principle of group lending wherein the group dynamics apply and members help each other out to ensure that the repayment as a ‘Centre’ on the due date is made every time to ensure continuity in obtaining a Loan, is the basis on which the members are given repeat Loans. Accordingly in situation wherein one or two members who are found to be irregular by the Centre itself, would be weeded out and new member may join in their place.

All repeat Loans would be based on the principle of on-time repayment and repayment

capacity, along with the presence and absence of the borrower in the centre meeting for repaying due instalment. If she is absent for more than 2 meetings (in case loan tenure ≤ 12 months), 4 meetings (in case loan tenure > 12 months) she will be warned; if absent in 3-4 meetings ( in case loan tenure ≤12 months), 6 meetings (in case loan tenure> 12 months) earlier loan amount will be freezed in repeat cycle and if absent for 5 meetings (in case loan tenures ≤ 12 months) 8 meetings (in case loan tenure ≥ 12 months) , loan will be rejected.

Secondly following criterial would also be applicable in instances of delayed instalment by group:

o If the number of repayments is delayed upto 2 instalments, then no Loan would be

sanctioned to any of the Centre Members (even if they join a new centre subsequently)

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Amendment/Modification The Finance Committee of the company is authorised to modify/amend the provision of this policy at any time on recommendation of Audit and Monitoring department. The noting of such modification/amendment shall be placed in the subsequent Board Meeting for the noting of the Board of Directors of the company. Further it is an always prerogative of the company whether to sanction and grant any loan or not in its absolute discretion, with or without assigning any reason whatsoever.

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CREDIT POLICY FOR THE FINANCIAL YEAR 2017-18 FOR INDIVIDUAL LOAN

1. Eligibility

The members have to fulfil the following minimum qualification criteria for availing Individual Loan:

Minimum age should be 18 years and the maximum age should be 57 years, if the borrower is of the age of 55 years or above then medical test is compulsory and it must be positive, The expense of the same would be borne by the borrower himself/herself.

The borrower need to be an owner of either their residence or work place and the building

need to be built up of brick and cement and atleast 3 years has been passed after its construction.

The business or job needs to have stability of atleast 3 years

The residential or the business property should be in the name of borrower himself/herself

The borrower need to submit a proof that the property is in his/her name Equifax and CIBIL check of Borrower and Co-Borrower will be done and the result will be

shared with the branches. Borrower shall be eligible for Loan only if CIBIL and Equifax is positive

The borrowers who had completed two cycles of JLG Loan product would be given preference

2. Loan Product

Loan of Rs. 30,000/ to Rs. 75,000 - will be considered as Unsecured Loans. The tenure in these cases will be 12 and 18 months, the instalment amount needs to be decided on the basis the borrower paying capacity. Cases wherein the loan amount is more than Rs. 75,000 will be considered as Secured Loans/Quasi Secured Loan.

Loan of Rs. 100000/- and above will be considered as mortgage loan.

Mortgage Loan Policy

For all loans till 300000 (Three Lacs), the valuation of the property will be done by Pahal

For loans above 300000 (Three Lacs) legal, technical and mortgage registration is necessary

All expenses for mortgage registration to be paid by the borrower Below mentioned points to be kept into consideration before deciding on a

mortgage loan

The present market value of the property

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The square foot area of the property

Valuation by the local branch manage

For those borrowers who donot have property documents the loan will be given basis city survey record and Akarni. For renewal loan cases the earlier record of the borrower has to be good and regular.

Cattle Loan Product

The borrower should have 2 or more than 2 cattle and the same will be verified at the time of verification.

The borrower should have more than 1.5 acres of land The borrower should have a certificate of selling milk and also should have receipts of the

past 6 months for the same Co-borrower or guarantor is compulsory, KYC documents, receipts of sold milk and dairy

papers are compulsory Revisit of such cases are also mandatory to be done.

3. Loan Condition

For loans secured on 2 wheeler, the hypothecation needs to be done on the company’s name and the same will stay with the company till the loan is completed

For loans secured on LIC policy, the policy needs to be endorsed on Company’s

name and the same will stay with the company till the loan is completed.

For loans secured against property the original documents will stay with the company and the branch will have to follow the notary process.

Once the notary is done all original documents of the property, sanction letter,

agreement and signed completed PDC’s to be sent to HO.

Documents to be attached in the application form for borrower and co borrower are as mentioned – ID proof, residence proof, income proof and bank statement. All documents to be signed by borrower and co-borrower. The Branch Manager also needs to OSV (Original Seen and verified) the documents. Xeroxes of documents needs to be clear as in the photographs and data in the same needs to be visible properly.

No scribbling on legal agreement will be accepted.

4. Notary Process

Franking by notary needs to be done on the legal agreement For notary the documents as mentioned are required – Franking letter, Xerox copy of

mortgage documents, Original ID proof of Borrower and Co-Borrower and Sanction Letter given by the Company.

For notary purpose a witness is also required who can be a family member of the borrower and their original ID proof and Xerox needs to be provided.

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Borrower’s passport size photograph and light bill consisting of present residence address is required.

BM also needs to sign this documents. All expenses related to notary needs to be borne by the borrower. 5. Loan Documentation and Process

List of documents necessary for individual loan

a) Identity proof: Pan card/Passport copy/Driving Licence/Election card/Aadhar Card

b) Property Ownership Documents: Past 3 months electricity bill, tax bill or sale deed/Index Copy/Allotment Letter.

c) Cash Salary/Salary through cheque: Original salary certificate with corresponding company stamp and signature and for cases wherein the salary is given through cheque the statement for that account for the past 6 months.

d) Business Class: Bills of buying and selling/visiting card/Bill book copy/Machinery/bills/ITR/Ghumastadhara (Shops and establishment certificate) /Contract Letter/Farming proof and Receipt of sold milk.

e) Bank Statement: the below mentioned points needs to be taken into consideration

The borrower must have a bank account

6 months statement and current month statement is required

The statement should not have any Inward Cheque return entries/

No latest EMI should by returned

The bank passbook should have all clear details of the customer required for NEFT.

If required other than given bank statements, other account’s bank statement can also be asked from the borrower.

f) PDC related

PDC to be taken of the account wherein the loan amount is deposited. Every cheque should be in the name of “Pahal Financial Services Private Limited” and should be A/c payee. The customer needs to clearly sign the cheques.

For branches wherein ECS is done the format of the same is already present , the

same needs to be filled with correct and complete details and send it to HO without any scribbling on the form. Incomplete ECS forms shall not be accepted.

Equifax and CIBIL check of Borrower and Co-Borrower needs to be attached on the application form (In case, there is guarantor then the photograph of the guarantor is also required to be attached). All data of the application form needs to be filled by branch. All details needs to be properly filled, contact number of borrower and co-borrower needs to be taken and also of guarantor in cases where a guarantor is taken.

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Cases wherein the borrower does not know how to sign and uses thumb impression, in such cases joint account to be opened between borrower, co borrower and signature of co-borrower to be taken.

Signature Verification Letter to be taken from borrowers through their branch wherein details of their account number, residence address and original bank stamp are present. The borrower needs to sign the letter and the same signature verification needs to be replicated by the borrower on the PDC’s. The signature verification letter is compulsory for disbursement.

All loan form applications for individual loan needs to be accompanied by Kotak Insurance forms wherein there is signature of Borrower and Co- Borrower.

The forms wherein the loan amount is more than 50000/-, the DOGH form (Declaration of Good Health) of Kotak also needs to be filled wherein there is a signature of Borrower and Co-Borrower.

Sanction letter will contain all details of the loan which include loan amount, tenure, ROI, instalment amount and total deductions that will be done before the amount in disbursed to the borrower. The Branch Manager will explain these details to the borrower and co borrower. The original letter will be given to the borrower and Xerox needs to be sent to the individual team at HO.

Agreement – name and total address of the borrower and co-borrower needs to be filled in the agreement. Passport size photograph of borrower and co-borrower needs to be attached on the agreement.

6. Checklist for the Individual Managers

First and Foremost for individual loan the application form needs to be clear filled with all

details of borrower and co-borrower with their necessary and clear documents. The forms needs to be signed by borrower, co-borrower and the branch manager

compulsorily. Documents should depict the relation of borrower and co-borrower clearly If the loan amount exceeds 100000/- then pan card is compulsory If the loan is on two wheeler hypothecation the copy of the RC book is necessary The borrower and co borrower need to sign the sanction letter, declaration on Rs. 100/-

stamp paper and agreement. Kotak form also needs to be signed by both borrower and co-borrower If loan is more than Rs. 50000/- then the DOGH form of Kotak needs to be signed by both

borrower and co-borrower

7. Disbursement

The disbursement is done via NEFT. The NEFT is done in the account details mentioned by the borrower.

8. Collection The collection are made via three mode:

a) Cash b) Cheque c) ECS

Cheque and ECS collection will only be done on 5th or 10th or 15th of the month

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Annexure -1

Medical test details MEDICAL TEST FORMAT

SUM ASSURED AGE BAND

18-40 41-50 51-55 56-60

50001 TO 300000 DOGH DOGH DOGH DOGH

300001 TO 500000 DOGH DOGH DOGH DOGHT+M.T

500001 TO 750000 DOGH DOGH DOGHT+M.T DOGHT+M.T

750001 TO 100000 DOGH DOGHT+M.T DOGHT+M.T DOGHT+M.T