Penal Charges Policy
Lord Krishna Financial Services Ltd (NBFC - Base Layer)
“Lord Krishna Financial Services Ltd” (LKFSL / the Company) is an RBI-registered Non-Banking Financial Company categorized as NBFC-Base Layer (“NBFC-BL”) in accordance with the RBI Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023. The Reserve Bank of India vide circular “DoR.MCS.REC.28/01.01.001/2023-24 dated August 18, 2023” titled “Fair Lending Practice - Penal Charges in Loan Accounts” directed Regulated Entities to formulate an explicit policy on penal charges. In compliance therewith, the Board of Directors has adopted this policy.
1. Scope & Applicability
This policy applies universally across all loan accounts, credit facilities, home loans, education loans, personal loans, and short term personal loans disbursed by the Company to all borrower categories.
2. Core Regulatory Principles
In compliance with the circular and Directions issued by the RBI, the key principles governing penal charges at Prest Loans are:
The intent of levying penal charges is essentially to inculcate a sense of credit discipline among borrowers. Such charges shall never be used as a revenue enhancement tool over and above the contracted rate of interest.
Penalty charged for non-compliance of material terms and conditions of the loan contract (such as late payment of installment) is treated strictly as ‘penal charges’ and is not levied in the form of ‘penal interest’.
There shall be no capitalization of penal charges i.e., no further interest shall ever be computed or accrued on such charges. Unpaid penal charges remain separate and do not compound the principal loan balance.
No additional component shall be added to the contracted rate of interest. The quantum of penal charges is reasonable, commensurate with the delay, and non-discriminatory within a particular loan product category.
3. Structure & Computation of Penal Charges
Penal charges are levied only if loan repayments are not made by the respective due date. Penal charges are not envisaged or levied for any other routine administrative interactions.
| Loan Product | Default Trigger | Penal Charge Schedule |
|---|---|---|
| Home Loans | Overdue installment beyond EMI due date | 2% per month on overdue installment amount for the period of default (computed day-to-day, non-capitalized) |
| Education & Skill Development Loans | Overdue installment beyond EMI due date | 2% per month on overdue installment amount for the period of default (non-capitalized) |
| Personal & Short Term Loans | Overdue installment beyond EMI due date | 2% per month on overdue installment amount for the period of default (non-capitalized) |
| Dishonor of Payment Mandate (NACH / Cheque Return) | Bounce / return of electronic repayment mandate or cheque due to insufficient funds | ₹500 + GST per instance of mandate bounce (in addition to bank's own return charges) |
4. Borrower Notification & Disclosure Protocols
The Company adheres to complete transparency regarding penal charges across all customer touchpoints:
- Key Fact Statement (KFS): The quantum and basis for calculation of penal charges is explicitly highlighted in bold in the Key Fact Statement and Sanction Letter provided before loan drawdown.
- Advance Reminders: Automated SMS and WhatsApp reminders are transmitted to borrowers 3 days prior to the EMI due date to prevent accidental default.
- Default Intimation: If an installment remains unpaid on the due date, an immediate electronic intimation is dispatched clearly stating the overdue installment amount, the date from which penal charges begin to accrue, and the specific daily charge rate.
- Separate Billing: Account statements clearly delineate principal repayment, normal contracted interest, and penal charges in separate columns with complete breakdown.
Regulatory Governance
Lord Krishna Financial Services Limited
CIN: U65993DL1992PLC049609 | RBI CoR: B-14.02019
Formulated under RBI Circular DoR.MCS.REC.28/01.01.001/2023-24