1. Introduction
Altura Financial Services Limited (hereinafter referred to as "the Company") is committed to managing risk in a prudent and transparent manner. The Company's Gradation of Risk Policy outlines the process for assessing the risk associated with each loan offered, the factors influencing loan approval, and the applicable interest rates for various loan products. This policy ensures that the Company operates in accordance with industry standards, and that risks are effectively assessed and mitigated in the loan decision-making process.
2. Purpose
The purpose of this policy is to establish a consistent framework for evaluating and assigning risk grades to loan applications, and determining the interest rate applicable to each loan. The Company intends to ensure that borrowers are offered fair and transparent loan terms, while also safeguarding the financial health of the Company.
3. Loan Risk Assessment Criteria
The decision to approve a loan and the interest rate applicable to each loan account shall be assessed on a case-by-case basis using multiple parameters that help in determining the overall risk level. The primary risk factors include, but are not limited to:
- a) Asset Type: The nature and type of the asset being financed (e.g., vehicle, equipment, or property).
- b) Borrower Profile: The financial stability, creditworthiness, and repayment history of the borrower.
- c) Repayment Capacity: The borrower’s ability to repay the loan, assessed based on their income, expenses, and existing financial obligations.
- d) Financial Commitments: The borrower's other existing financial obligations, including loans, credit facilities, and other commitments that could affect their repayment ability.
- e) Past Repayment Track Record: The borrower’s previous repayment history (if any), including their punctuality and reliability in repaying loans.
- f) Security for the Loan: The value of the collateral or security provided against the loan, which may include the underlying asset financed or other guarantees.
- g) Loan-to-Value (LTV) Ratio: The ratio of the loan amount to the value of the underlying asset, which impacts the level of risk assumed by the Company.
- h) Mode of Payment: The agreed method of repayment, including whether payments are monthly, quarterly, or annual, and whether the payment structure aligns with the borrower’s cash flow.
- i) Tenure of the Loan: The duration of the loan, with longer tenures generally presenting higher risk.
- j) Geography (Location) of the Borrower: The location of the borrower may influence the risk profile, taking into account local economic conditions, legal framework, and market stability.
- k) End Use of the Asset: The intended use of the financed asset (e.g., personal, business, or investment) and the potential for the asset to generate returns or enhance the borrower’s financial position.
4. Gradation of Risk Levels
The Company shall classify loans into different risk categories based on the parameters outlined above. The risk categories are designed to ensure a balanced and fair approach to loan approvals and interest rate assignments.
- a) Low Risk (Grade A): Borrowers with a strong financial background, excellent creditworthiness, stable income, a low LTV ratio, and a secure loan repayment structure. Loans in this category are generally offered lower interest rates.
- b) Moderate Risk (Grade B): Borrowers with a satisfactory financial profile but with some minor risks such as moderate LTV ratios or occasional late payments in the past. These borrowers may be offered interest rates slightly higher than those in the Low Risk category.
- c) High Risk (Grade C): Borrowers with weaker credit histories, unstable financial profiles, high LTV ratios, or other significant risks. These loans are associated with higher interest rates to compensate for the increased risk.
- d) Very High Risk (Grade D): Borrowers with significant financial challenges, high default probabilities, or lack of sufficient collateral. These loans carry the highest interest rates and may require stricter terms and conditions.
5. Product-wise Interest Rate Structure
The following table outlines the interest rate structure, which is subject to change based on the risk assessment for each borrower and their loan application:
| PRODUCT |
RATE OF INTEREST |
| Micro Enterprise Loan (MEL) |
---% |
| Two Wheeler Loan |
---% |
| Small & Medium Enterprises Loan (SME) |
---% |
| Commercial Vehicles Loan |
---% |
| Salaried Personal Loan |
---% |
| Loan for onward Lending Purposes |
---% |
The interest rates listed above are indicative and will be determined after evaluating the borrower's risk profile on a case-by-case basis. The final interest rate offered will be annualized, ensuring transparency in the amount charged to the loan account.
6. Review and Amendment of Risk Gradation Policy
The Board of Directors or the designated Risk Committee of Altura Financial Services Limited shall be responsible for the administration, interpretation, and application of this policy. The Committee will review this policy regularly and make amendments as necessary to reflect changes in market conditions, regulatory requirements, or the Company’s strategic goals.
- a) Policy Amendments: The Risk Committee has the authority to make changes to this policy at any stage, with or without prior notice, in accordance with the Company’s requirements.
- b) Policy Disclosure: The Company shall disclose the interest rates and risk gradation structure on its website to ensure that borrowers are fully informed of the terms and conditions applicable to their loan.
7. Periodic Updation
The Board of Directors shall review and update the Gradation of Risk Policy annually or as and when required necessary.