BELSTAR MICROFINANCE LIMITED

CODE FOR RESPONSIBLE LENDING (CRL)

@Reviewed by The Board of Directors on April 29, 2021

 Contents
1. Introduction: ............................................................................................................................................. 2
2. Objectives: ................................................................................................................................................ 2
3. Applicability: ............................................................................................................................................. 2
4. The Code: .................................................................................................................................................. 3
4.1 Fair Interaction: ....................................................................................................................................... 3
4.2. Suitability (avoiding multiple/over lending) : ........................................................................................ 3
4.3 Education & Transparency: ..................................................................................................................... 4
4.4 Information & Privacy ............................................................................................................................. 5
4.5 Grievance Redressal ................................................................................................................................ 5
5. Governance & Enforcement ..................................................................................................................... 6
6. Review: ...................................................................................................................................................... 6

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1. Introduction:
Belstar Microfinance Limited (hereinafter referred as “the Company”/”BML”) aims to
promote financial inclusion and women empowerment by extending unsecured micro
enterprise loans and credit plus assistance to the clients. The Company is a NBFC- MFI
registered with Reserve Bank of India (RBI). The Company follows various guidelines issued
by Reserve Bank of India (RBI) and has also adopted Code for Responsible Lending (CRL)
developed by MFIN (Microfinance Institutions Network) the SRO (Self-Regulatory
Organization) recognized by RBI. The company strives to:
a. Promote and strengthen the Microfinance movement in the country by bringing low-
income clients to the mainstream financial sector.
b. Build progressive, sustainable, and client-centric systems and practices to provide a
range of financial services (consistent with regulation) to clients.
c. Promote cooperation and coordination among themselves and other agencies in
order to achieve higher operating standards and avoid unethical competition in
order to serve clients better.

2. Objectives:
This document defines the elements of Code for Responsible Lending (CRL) which is sector
specific and entity agnostic. Building on key regulatory customer-protection measures as
described in RBI Master Directions for NBFC-MFIs, RBI Fair Practice Code for Banks and NBFCs,
Industry Code of Conduct and RBI Charter of Customer’s Rights in the context of micro-credit
sector, CRL includes most critical elements which have been adapted by the company to
implement while delivering micro-credit loans.

3. Applicability:
This code is applicable to unsecured micro-credit loans extended by the company and more
specifically in the following activities.
d. Providing credit services to clients, individually or in groups.
e. Recovery of credit provided to clients.
f. Providing insurance and pension services, remittance services, or any other related
products and services.
g. Formation of any type of community collectives including self-help groups, joint
liability groups and their federations.
h. Business development services including marketing of products or services made or
extended by the eligible clients or for any other purpose for the welfare and benefit
of clients.
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4. The Code:
The Code has five elements:
i. Fair Interaction
ii. Suitability
iii. Education & Transparency
iv. Information & Privacy
v. Grievance Redressal

4.1 Fair Interaction:

4.1.1. The company must ensure that customer is not unfairly discriminated against on
grounds such as religion, caste, marital status or sexual orientation etc.
4.1.2. The Company must ensure that all employees and persons acting on its behalf:
4.1.2.1. Use respectful language, maintain decorum and are respectful of social and cultural
sensitives
4.1.2.2. Do not use coercion of any sort to make recovery of loans
4.1.2.3. Do not intimidate or humiliate verbally or physically
4.1.2.4. Do not contact customers at odd hours or at inappropriate times such as
bereavements, illness, social occasions such as marriages and births
4.1.3. The company will ensure that its clients are protected against fraud and
misrepresentation, deception or un-ethical practices with an understanding of clients’
vulnerable situation.
4.1.4. The company will not bundle products. The only exceptions to bundling may be made
with respect to credit life, life insurance & live-stock insurance products, which are typically
offered bundled with loans. The terms of insurance should be transparently conveyed to the
client and must comply with RBI & Insurance Regulatory and Development Authority (IRDA)
norms. Consent of the client must be taken in all cases.
4.1.5. The company will have a detailed Board approved process for dealing with clients, at
each stage of default. The company will not collect shortfalls in collections from employees
and company’s HR policy will categorically denounce this practice. An exception can
however be made in proven cases of frauds by employees.

4.2. Suitability (avoiding multiple/over lending) :

The company will adhere to following while providing its low income clients, women and
their families, with access to financial services that are client focused and designed to
enhance well-being and are delivered efficiently in a manner that is ethical, dignified,
transparent, equitable, convenient, timely and cost effective. The company will ensure the
quality of service to its clients and maintain high standards of professionalism based on
honesty, non-discrimination and customer centricity.
4.2.1 The Company must assess customer’s financial situation (income and expenses), credit
requirement, repayment capacity and indebtedness based on information from the
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 customer, Credit Information Report (CIR) and/or field level intelligence before disbursing a
loan.
4.2.2. The Company must use a valid CIR before sanctioning any loan. It is clarified that valid
CIR must be used for all loans including small value top-up loans, second and subsequent
cycle loans. CIR is considered as ‘valid’ for 15 calendar days from the date of extraction of
the CIR. This implies the company needs to disburse loan to customer within 15 calendar
days from date of extracting her CIR.
4.2.3. The Company must disburse the loan commensurate with the customer’s ability to
repay. Prior to sanctioning of loans, the Company (based on micro-credit loans captured in
the microfinance section of the CIR) must ensure that:
4.2.3.1. It does not become the fourth lender to a customer if a customer has active loans
from three different lenders. The Company is additionally required to ensure that not more
than two NBFC-MFIs (including BML) lend to a customer.
4.2.3.2. It does not breach the total indebtedness of Rs 1,25,000 per customer. It is
reiterated that the Company must verify the total indebtedness of customer factoring all
unsecured micro-credit loans (individual as well as group) captured in the microfinance
section of the CIR prior to sanctioning of the loan. However, loan, if any, availed towards
meeting education and medical expenses shall be excluded while arriving at the total
indebtedness of a customer.
4.2.3.3. It does not sanction/disburse a loan to customer who has non-performing
(delinquency > DPD90 days) accounts with loan amount outstanding > Rs 1,000 with another
lender. If applicant contests on her delinquent account status in CIR or share that her
delinquent account is attributed to withdrawal/closure of operation of another micro-credit
Provider in her area, the company must support her to resolve the issues by contacting with
CICs, relevant Providers or the SROs, as required. Exception to this is available to loans
affected by natural calamities which are qualified under RBI Guidelines for Relief Measures
in areas affected by Natural Calamities for Banks and NBFCs. Refer:
https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11394&Mode=0,
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10531

4.3 Education & Transparency:

4.3.1 The company must provide the key information to the customer and include them in
the loan documents such as loan application, loan sanction letter/loan agreement and loan
card. This must include:
4.3.1.1. Identity and address of the company
4.3.1.2. Identity and address of the customer
4.3.1.3. Product details (loan amount, tenure, repayment frequency, annualized interest
rate on reducing balance method, processing fee, any other charges or fees howsoever
described, total amount payable, total charges recovered towards premium of credit-linked
life insurance cover, coverage amount and risks covered, if applicable and other key terms
and conditions)
4.3.1.4. Details of customer grievance redressal system. The company follows the RBI
Directions with respect to pricing including interest rate and processing fee.

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 4.3.2. The company must communicate all the terms and conditions to customers in the
official regional language or a language understood by them.
4.3.3. The company must provide a receipt for every payment received from the customer.
4.3.4. The company must take measures (such as training, assessment and periodic
interactions with customers) to ensure that customers fully understand the products,
process and terms of the contract.
4.3.5. The company shall disclose all terms and conditions to the clients for all services
offered. Disclosure must be made prior to disbursement in accordance with the Reserve
Bank of India’s (RBI) fair practices code, through (a) Individual sanction letter, (b) Loan card/
Loan Schedule, (c) Through Group/Centre meetings. At the minimum, the company will
disclose (a) rate of interest on a reducing balance method, (b) processing fee, (c) total
charges recovered for insurance coverage and risks covered and (d) any other charges or
fees howsoever described with prior intimation to the clients. Formal records of all
transactions must be maintained in accordance with all regulatory and statutory norms, and
borrowers’ acknowledgment/ acceptance of terms/conditions must form a part of these
records.

4.4 Information & Privacy

4.4.1. The Company must obtain copies of KYC documents from customers as per RBI norms.
4.4.2. The Company must upload accurate and comprehensive customer data with all RBI
approved Credit Information Companies’ (CICs) as per Uniform Credit Data Format on daily
basis.
4.4.3. The Company must promptly address any dispute raised by the customer about her
data with CICs.
4.4.4. The Company must keep personal customer information strictly confidential.
Customer information may be disclosed to a third-party subject to any of the following
conditions:
4.4.4.1. 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).
4.4.4.2. Customer has been informed about such disclosure and prior permission has been
obtained in writing.
4.4.4.3. The party in question has been authorized by the customer with intimation to the
company to obtain customer information.

4.5 Grievance Redressal

4.5.1. The Company will provide a robust customer grievance redressal system to address
customer complaints in an effective and timely manner. A separate policy on Customer
Grievance Redressal Mechanism (CGRM) has been approved by the Board which is being
implemented. The company inform its clients about the existence and purpose of this
mechanism and how to access them. The company has also designated Mr. B Panda, Chief
Risk Officer, as the Nodal Grievance Redressal Officer for the company to handle complaints
and / or note any suggestion from the clients. His contact number is displayed in all Branches
of the company for easy accessibility to clients.

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 4.5.2. The Company must clearly communicate the details of customer grievance redressal
in branches, loan documents and other communication materials.

5. Governance & Enforcement

5.1 The Company has got the CRL signed by its Executive Director backed by a Board
resolution of the company in the format suggested by MFIN.
5.2 The Company, having adopted the CRL, takes the responsibility to align own policies and
process to adhere to the norms of CRL.
5.3 The Company, having adopted the CRL, takes the responsibility to incorporate
professional governance system to ensure that employees and persons acting on their
behalf are oriented and trained to follow the CRL into practice. The company will also
educate its clients on this CRL and its implementation.
5.4 The Company, having adopted the CRL, has voluntarily agreed to CRL’s governance &
enforcement framework to ensure adherence to the CRL.
5.5 The Company, having adopted the CRL, has assigned its Chief Risk Officer (CRO) as the
dedicated CRL Coordinator who will be the focal point to coordinate on CRL.
5.6 The Company, having adopted the CRL, will submit the Quarterly Adherence Report
(QAR) in the following format prescribed by MFIN

Name of the Company – Belstar Microfinance Ltd Quarter

S.No Indicator M1 M2 M3
1 Date of monthly submission to CICs
2 If all daily files were submitted to CICs (Yes/No)
3 Number of active accounts submitted in monthly file to CICs
4 Loan accounts disbursed during the period (as per monthly file to CICs)
4.1 Loans disbursed crossing the norm of 3 Providers per customer
4.2 Loans disbursed crossing 3 loans from own company per customer (There
is no cap on number of loans per Provider per customer under CRL.
However, this data is captured to see the trend of multiple lending by a
Provider.)
4.3 Loans disbursed crossing max indebtedness (Rs 100,000) per customer
4.4 Loans disbursed to customers who have nonperforming (delinquency >
DPD 90 days) accounts with loan amount outstanding > Rs 1,000 with
another Provider

6. Review:
This Code will be placed to the Board for their review annually.

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