Policy - Dhanam Finance

Introduction

Dhanam Investment and Finance Pvt. Ltd. (hereinafter referred to as "the Company") aims to promote financial inclusion and women empowerment by extending unsecured microcredit Loans to clients. The Company is a NBFC-MFI registered with the Reserve Bank of India (RBI) and is compliant with Master Direction- RBI (Regulatory Framework for Microfinance Loans) Directions, 2022 vide RBI/DOR/2021-22/89 dt 14.03.2022 (Harmonized Regulations) and Sa-dhan directives.

Objectives

This document defines the elements of the Code of Conduct (CoC) to promote and advance 'responsible lending' practices by Dhanam Finance. Building on key regulatory customer-protection measures as described in RBI Master Directions for NBFC-MFIs, RBI Fair Practice Code for Regulated Entities, Industry Code of Conduct by MFIN and RBI Charter of Customer's Rights in the context of the micro-credit sector, CoC includes most critical elements which the Board of the company has adapted to implement while delivering micro-credit loans.

Applicability

This code applies to unsecured microcredit loans extended by the company, specifically in the following activities:

Providing credit services to clients, individually or in groups.
Recovery of credit provided to clients.
Providing insurance and pension services, remittance services, or any other related products and services.
Formation of any type of community collectives, including self-help groups, joint liability groups and their federations.
Business development services include marketing of products or services made or extended by the eligible clients or for any other purpose for the welfare and benefit of clients.

The Code Elements

The Code has seven elements:

1. Fair Interaction

2. Suitability

3. Education & Transparency

4. Information & Privacy

5. Grievance Redressal

6. Employee Engagement

7. Others

Fair Interaction

Dhanam Finance will ensure that the borrower is not unfairly discriminated against on grounds such as religion, caste, gender, marital status, sexual orientation, etc.

Dhanam Finance will ensure that all employees and persons acting on its behalf:

Undergo training on how to exhibit appropriate behaviour towards the borrowers.
Use respectful language, maintain decorum, and show respect to social and cultural sensitivities.
Do not use coercion of any sort to make a recovery of loans and take recovery only at a centrally designated place mutually agreed upon by the Joint Liability group and our employees. An employee can take recovery at the place of residence or work of the borrower only if the borrower fails to appear at the central designated place on two or more successive occasions.
Do not intimidate or humiliate verbally or physically.
Do not contact borrowers at odd hours or inappropriate times such as bereavements, illness, or social occasions such as marriages and births.
Do not harass the borrower's relatives, friends, neighbours, or co-workers.

A Fair Practices Code approved by the board, as updated from time to time, has been displayed in vernacular language understood by the borrower in all Dhanam Finance offices and its website.

Dhanam Finance will ensure that the engagement of the recovery agents, if any, and their interaction with the borrowers is as per the guidelines mentioned in RBI's Harmonized Regulations.

Suitability

Dhanam Finance will ensure to disburse the loan commensurate with the borrower's ability to repay. It will ensure a limit of maximum 50 percent on the outflows on account of repayment of monthly loan obligations of a household as a percentage of the monthly household income.
The computation of loan repayment obligations shall consider all outstanding household loans.
Dhanam Finance will ensure that the interest rates and other charges/fees on microfinance loans are not usurious, and there will not be any prepayment penalty charges.
Dhanam Finance will ensure that the household income is computed correctly by considering the income of the borrower, spouse, and unmarried adult children.
Dhanam Finance will use a valid CCIR (Comprehensive Credit Information Report) for the borrower and all the household members of the borrower before sanctioning any loan. Further, such a valid CCIR must be used for all loans including small value top-up loans, and second and subsequent cycle loans.
Dhanam Finance will ensure that the CCIR remains current and valid. Dhanam Finance shall mandatorily submit timely (preferably daily) and accurate information including household income and other parameters to the Credit Information Companies (CICs).
Dhanam Finance will not sanction/disburse a loan to a borrower with non-performing (delinquency > DPD 90 days) accounts with another RE or any other microfinance provider.

Education & Transparency

Dhanam Finance will provide key information to the borrower and include it in the loan documents, such as the loan application, loan agreement, and loan card. This must include:

Identity and address of the RE.
Identity and address of the borrower.
Product details (simplified factsheet on pricing in the format specified in the RBI regulations, including instalments received, the final discharge, and other vital terms and conditions).
Details of customer grievance redressal system.

Dhanam Finance will ensure that the issuance of third-party products is done with the full consent of the borrowers, kept voluntary, and the fee structure for such products is explicitly communicated to the borrower.
Dhanam Finance will communicate with the borrower in vernacular/a language understood by the borrower. The communication could pertain to the terms and conditions of the loan, entries in the loan card, fair practices code, standard form of loan agreement, factsheet on pricing of the microfinance loan, and other such communication pertaining to the loan and non-credit products and their servicing.
Dhanam Finance will take measures (such as training, assessment, and periodic interactions with borrowers) to ensure that borrowers fully understand the contract's products, process, and terms.
Dhanam Finance will provide a receipt/acknowledgement for every payment, including the digital payments, received from the borrower.
Dhanam Finance will emphasise educating customers on the importance of timely repayment for good credit history with the CICs, benefits, risks and necessary safeguards of digital financial transactions and grievance redressal mechanism including internal and external escalation mechanism.
Dhanam Finance will educate customers against blind trust on group and centre leaders and how any default in the fictitious loan (also referred to as ghost lending/pipelining taken by group/centre leader in customer's name) can ruin her credit records and access to credit in the future. This should be a part of the Group Recognition Training (GRT) and Compulsory Group Training (CGT). Dhanam Finance staff shall strive to ensure customer attendance in the group meetings. Any training offered to customers should be free of cost.
Dhanam Finance will disclose the reason to the customer if her loan is rejected.

Information & Privacy

The Company must obtain copies of KYC documents from customers as per RBI norms.
The Company must upload accurate and comprehensive customer data with all RBI approved Credit Information Companies' (CICs) as per the Uniform Credit Data Format on a daily basis.
Dhanam Finance will take the borrower's consent to check her CCIR and her acceptance of the terms and conditions of the loan. Consent will also be obtained from the borrower's household members to check their CCIRs per the extant regulations and laws.
Dhanam Finance will promptly address any dispute raised by the borrower about her data with CICs.
Dhanam Finance will have systems to safeguard borrower and borrower household members' data as per the accepted principles of data protection including collection limitation, purpose specification, use limitation, incorporation of access controls etc.

Dhanam Finance will keep the borrower and borrower's household members' personal information strictly confidential. This information may be disclosed to a third party subject to any of the following conditions:

Such information is required to be provided under the law, or it is provided for a mandated business purpose (for example, to credit information companies).
Borrower/borrower's household members have been informed about such disclosure and prior permission has been obtained in writing.
The party in question has been authorised by the borrower/borrower's household members with intimation to Dhanam Finance.

Grievance Redressal

Dhanam Finance has a board-approved customer grievance redressal policy covering the process to register, resolve and escalate the complaints, internal and external escalation mechanism, complaint categories and TAT, review/audit of the redressal system, and reporting to the board and top management.
Dhanam Finance will provide a robust customer grievance redressal system to address complaints effectively and promptly. It will provide easy access to the redressal system to all its borrowers through a dedicated phone number or a staff-assisted procedure at the branch to register grievances.
Dhanam Finance will clearly communicate the details of the customer grievance redressal system in branches, loan documents, and other communication materials.
Dhanam Finance will have a mechanism as part of its grievance redressal framework for the redressal of recovery-related grievances, the details of which must be provided to the borrower at the time of loan disbursal. The idea is to identify and promptly address recovery-related grievances.
Dhanam Finance has a Principal Nodal Officer to oversee the customer grievance redressal function.
Dhanam Finance will record and analyse individual and aggregate level data for grievance redressal systems, capturing the nature of complaints, action taken, and turn-around time. Reports on grievances received, resolved, and pending along with the nature of complaints should be shared with the board for review.

Employee Engagement

Dhanam Finance will recruit a candidate from another RE based on a satisfactory reference check and will not confirm the employee without a relieving letter from the previous employer.
Dhanam Finance will participate in the Employee Bureau to submit its employee's data and check candidate's employment records.
Dhanam Finance will give comprehensive induction training to the employees on policies, processes, and regulations. Emphasis will be given to CoC related aspects on borrower-interface aspects such as fair treatment, household and income assessment, the privacy of data, service quality, customer grievance redressal system, POSH, relationship management, dealing with borrower facing difficulty in repayment, etc.
Dhanam Finance will regularly assess employee's understanding of the above elements and conduct refresher training to address the gaps in understanding.
Dhanam Finance will train its employees on understanding and dealing with gender issues, including appropriate interaction with women colleagues and customers.
Dhanam Finance will orient its employees on professional conduct and integrity issues, including expected behaviour and not indulging in unlawful and anti-social activities.
Dhanam Finance will engage new employees in branch-level business operations only after completion of their induction training.
Dhanam Finance will ensure that employees directly responsible for the grievance redressal system receive detailed training about the system, processes, and soft skills required for resolving complaints.
Dhanam Finance will set targets for the branch-level employees based on reasonable objective criteria, including an understanding of microfinance requirements and repayment capacity in an area.
Dhanam Finance will have a well-defined protocol to be followed by employees to handle risks arising from going to difficult areas and cash handling.
The staff's Compensation matrix will be designed to align their behaviour with fair interaction practices, as mentioned in this COC.
While recruiting an employee, Dhanam Finance will honour the notice period as mutually agreed between the prospective employee and his/her current employer.
Dhanam Finance will respond to requests from other RE/microfinance providers for reference checks within 15 calendar days/a reasonable time-period from the receipt of such communication.

Others

Dhanam Finance will have a framework to deal with crises arising from natural disasters, mass defaults, negative media, local-level hostility, etc., which is reviewed periodically.
In the event of having underlying digital (i.e., paper-less) processes for sourcing (loan application), borrower consent, due diligence, contracts, disclosures, payment receipts, grievance redressal, etc. Dhanam Finance will ensure that these processes are aligned with the applicable regulatory norms and that the borrower is made fully aware, educated, and comfortable with digital transaction modes.
Any new initiatives encouraging digital transactions should be introduced, keeping in mind the borrower's level of knowledge and comfort. During the initial adoption of digital methods, an enhanced focus on grievance redressal system and customer hand holding shall be instituted.
Dhanam Finance will prominently display information about the interest rates charged on microfinance loans in its offices, literature issued by it and its website.
Dhanam Finance agrees to share updated pricing information with Sa-dhan to the highest granularity possible for publishing as required by RBI.
Suppose Dhanam Finance withdraws its operation from an area. In that case, it will make alternate arrangements to service the existing loans of its borrowers, i.e., by making arrangements with an existing RE/MFI to receive loan repayment from borrowers.
Dhanam Finance will ensure that the wellbeing (e.g., adequate remuneration, working hours, working conditions etc) and security of its employees is given due importance.

Governance & Enforcement

The Company, having adopted the CoC, takes the responsibility:

to align their own policies and processes to adhere to the norms of the CoC.
to incorporate a professional governance system to ensure that employees and persons acting on their behalf are oriented and trained to follow the CoC into practice.
to voluntarily agree to the CoC's governance & enforcement framework to ensure adherence to the CoC.

Compliance with this CoC will be based on a three-pronged approach:

The quarterly adherence report on/by Dhanam Finance is based on independent data from a credit information company (CIC) in the following standard template.
A peer complaint system whereby Dhanam Finance and any other microfinance provider can bring forth instances of non-compliance to Sa-dhan.
Monitoring and assessment facilitated by Sa-dhan.

Our Commitment

Dhanam Finance is committed to upholding the highest standards of ethical conduct and responsible lending practices. This Code of Conduct serves as our foundation for building trust, ensuring transparency, and promoting financial inclusion while protecting the interests of all our stakeholders.

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