Grameen Shakti Microfinance Services PVT. LTD. (GSMS) shall adopt the following fair practices in conformity with RBI guidelines laid down in the Master Circular dated July 1, 2015 in this regard.
(i) General
(a) The FPC in both English and vernacular languagewill be displayed by GSMS in its office and branch premises.
(b) A statement will be made in vernacular language and displayed by GSMS in their premises and in loan cards articulating their commitment to transparency and fair lending practices.
(c) Field staff will be trained to make necessary enquiries with regard to existing debt of the borrowers.
(d) Trainingoffered to the borrowers shall be free of cost. Field staff will be trained to offer such training and also make the borrowers fully aware of the procedure and systems related to loan / other products.
(e) The effective rate of interest charged and the grievance redress system set up by GSMS will be prominently displayed in all its offices and in the literature issued by it (in vernacular language) and on its website.
(f) MFIs must declare all interest and fees payable as an all-inclusive Annual Percentage Rate (APR) and equivalent monthly rate.
(g) A declaration that GSMS will be accountable for preventing inappropriate staff behaviour and timely grievance redressal, will be made in the loan agreement and also in the FPC displayed in its office/branch premises.
(h) The KYC Directions will be complied with. Due diligence shall be carried out to ensure the repayment capacity of the borrowers.
(i) All sanctions and disbursement of loans will be done only at a central location and more than one individual must be involved in this function. In addition, there will be close supervision of the disbursement function.
(j) Adequate steps will be taken to ensure that the procedure for application of loan is not cumbersome and loan disbursements are done as per pre-determined time structure.
(ii) Disclosures in loan agreement / loan card
(a) SCPLwill have a Board approved, standard form of loan agreement. The loan agreement will preferably be in vernacular language.
(b) In the loan agreement, the following will be disclosed:
a. All the terms and conditions of the loan,
b. That the pricing of the loan involves only three components viz. the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof),
c. That there will be no penalty charged on delayed payment,
d. That no security deposit / margin is being collected from the borrower,
e. That the borrower cannot be a member of more than one SHG / JLG,
f. The moratorium period between the grant of the loan and the due date of the repayment of the first installment,
g. An assurance that the privacy of borrower data will be respected.
(c) The loan card will reflect the following details:
i. The effective rate of interest charged,
ii. All other terms and conditions attached to the loan,
iii. Information which adequately identifies the borrower and acknowledgements by GSMS of all repayments including installments received and the final discharge,
iv. The loan card will prominently mention the grievance redress system set up by the GSMS and also the name and contact number of the nodal officer,
v. Non-credit products issued will be with full consent of the borrowers and fee structure will be communicated in the loan card itself,
vi. All entries in the loan card will be in the vernacular language.
(iii) Non-coercive methods of recovery
(a) Recovery will normally be made only at a central designated place. Field staff will 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 two or more successive occasions.
(b) SPL will ensure that Stems for their recruitment, training and supervision. Training to field staff will include programs to inculcate appropriate behaviour towards borrowers without adopting any abusive or coercive debt collection / recovery practices.
(c) Penalties may be imposed in cases of non-compliance by field staff with the Code of conduct. Generally, only employees and not out sourced recovery agents will be used for recovery in sensitive areas.
(iv) Customer Protection Initiatives
(a) GSMS will ensure that greater resources are devoted to professional inputs in the formation of SHG/ JLG and appropriate training and skill development activities for capacity building and empowerment after formation of the groups. GSMS will also be prudent and responsible in their lending activity.
(b) GSMS will conduct proper due diligence as per its internal credit policy to access the need and repayment capacity of client making a loan and only make loans commensurate with client’s ability to repay.
(c) If a client has two loans from two separate MFIs, then irrespective of the source of the loans, SCPL will not be the third lender to that client. And GSMS will validate the same by Credit Bureau Report prior to extension of loan.
(d) GSMS must not under any circumstance breach the total limit as prescribed by RBI. This will be validated by Credit Bureau prior to disbursement of loan.
(e) GSMS after due verification of credit bureau reports will ensure that loans given on the basis of joint liability group of borrowers (JLG Loan) is restricted to Rs. 60,000 per borrower. Where loan to a specific borrower exceeds Rs. 60,000, or the loan takes the total debt of debt of the borrower above Rs 60,000, such a loan should be given as an individual loan without involving the JLG. GSMS will take necessary steps to have appropriate systems and staff with required competencies to deal with individual loans.
(f) GSMS should carry out test checks of efficacy of their processes related to avoidance of over-indebtedness through additional credit bureau reports on select sample of credits after loan disbursement. The result of this verification will be reviewed by board of GSMS.
(g) GSMS will use UIDAI number (Aadhaar number) based KYC to reduce errors in identification of borrowers in credit bureau reports.
(h) GSMS will ensure that all the staff and persons acting on behalf of the GSMS:
- Use courteous language, maintain decorum, and are respectful of cultural sensitivities during all interactions with clients.
- DO NOT indulge in any behavior that in any manner would suggest any kind of threat or violence.
- DO NOT contact clients at odd hours.
- DO NOT visit clients at inappropriate occasions such as bereavement, etc., to collect dues even if two or more successive repayments are not received.
(i) GSMS must provide a valid receipt (in whatever form decided) for each and every payment received from the borrower and record the payment in the loan passbook/ loan card with the client.
(j) GSMS will have detailed board approved process for dealing with clients, at each stage of default.
(k) GSMS must keep personal client information strictly confidential. Client information may be disclosed to third parties subject to following conditions:
- Client has been informed about such disclosure and prior permission has been obtained in writing.
- The party in question has been authorized by the party with intimation to GSMS to obtain client information.
- It is legally required to do so.
- This practice is customary amongst financial institutions and available for a close group on reciprocal basis (such as Credit Bureau) provided that the 1. Clients’ prior consent has been obtained and 2. The receiver of the information is also bound by the conditions to keep the client information confidential.
(v) Governance
GSMS must incorporate a formal governance system that is transparent and professional, and adopts the following best practices of corporate governance:
a) GSMS must observe high standards of governance by inducting persons with good and sound reputation as Board of Directors / Governing body and seek to comply with best standards stipulated in Companies Act and RBI regulations for NBFC MFI.
b) GSMS will endeavor to have independent directors to the extent of 1/3rd of the Governing Board.
c) GSMS must have a Board approved debt restructuring product/program for providing relief to borrowers facing repayment stress.
d) GSMS will appoint an audit committee on Board with an independent director as chairperson.
e) GSMS will ensure transparency in the maintenance of books of accounts and reporting/ presentation and disclosure of financial statements by qualified auditor/s.
f) GSMS must put best effort to follow the Audit and Assurance Standards issued by the Institute of Chartered Accountants of India (ICAI).
g) GSMS must place before the Board of Directors, a compliance report indicating the extent of compliance with this Code of Conduct and the functioning of the grievance redressal mechanism at various level of management, specifically indicating any deviations and reasons therefore, at regular intervals, as may be prescribed by Board.
(vi) Recruitment / HR
a) As a matter of free and fair recruitment practice, there will be no restriction on hiring of staff from other MFIs by legitimate means in the public domain like general recruitment advertisement in local newspapers, web advertisements, walk-in interviews, etc.
b) Whenever GSMS will seek to recruit an employee in another MFI, it will be mandatory to seek a reference check from current employer. The reference check will be sought from current employer only after an offer is made and an offer letter is issued to the prospective employee.
c) GSMS will respond to the reference check requests from another MFI within two weeks.
d) GSMS will honour notice period as contractually agreed between employer and employee subject to a minimum of one month for an outgoing employee.
e) GSMS shall NOT recruit an employee of another MFI, irrespective of the grade/level of the employee, without the relieving letter from the previous MFI employer. An exception can however be made in instances where the previous employer (MFI) fails to respond to the reference check request within 20 days. GSMS must provide such relieving letter to the outgoing employee in case he/she has given proper notice, handed over the charge and settled all the dues towards the MFI, except in proven cases of fraud or gross misconduct by the employee.
f) Whenever GSMS will recruits from another MFI, at a level up to the Branch Manager position, the said employee shall not be assigned to the same block where he/she was serving at the previous employer, for a period of 1 year.
g) GSMS must not collect shortfalls in collection from employees and HR policies must categorically denounce this practice. However, in proven cases of fraud by employees, GSMS may be allowed to recover the money from said employee(s).
Further GSMS shall adhere to core values and code of conductset up by Self-Regulatory Organization for NBFC MFIregulated by RBI. These core values are:
A) Integrity:
To provide low income clients – women and men, and their families, with access to financial services that are clients focused, designed to enhance their well-being, and delivered in a manner that is ethical, dignified, transparent, equitable, and cost effective.
B) Quality of Service:
- To ensure quality services to clients, appropriate to their needs, and delivered efficiently in a convenient and timely manner.
- To maintain high standards of professionalism based on honesty, non-discrimination and custom centricity.
C) Transparency:
- To provide complete and accurate information to clients regarding all products and services offered.
- To create awareness and unable clients and all other stakeholders to understand the information provided with respect to financial services offered and availed.
D) Fair Practices
- To ensure that clients are protected against fraud and misrepresentation, deception, or unethical practices.
- To ensure that all practices related to lending and recovery of loans are fair and maintain respect for client’s dignity and with an understanding of client’s vulnerable situation.
E) Privacy of Client Information
- To safeguard personal information of clients, allowing disclosures and exchange of relevant information with authorized personnel only, and with the knowledge and informed consent of clients.
F) Integrating Social Values into Operations
- To ensure high standards of governance and management focused on not only financial performance but also social impact of business
- To monitor and report social as well as financial data
- To assess the social performance and the social relevance of the institution from time to time.
G) Feedback and Grievance Redressal Mechanism
- To provide clients formal and informal channels for feedback and suggestions.
- To consistently assess the impact of services in order to enhance competencies and serve clients better.
- To provide a formal and easy to access grievances redress mechanism for clients.
