1.1 New Opportunity Consultancy Pvt. Ltd. (NOCPL), a company registered under the Companies Act, is an authorized Business Correspondent (BC) to multiple Banks/NBFCs in India. The Company, on behalf of these Banks/NBFCs, provides micro loans under SHG/JLG model, credit linked insurance, savings account, etc. at the doorstep of its customers. The purpose of appointment of BC is to enhance the reach of a Bank/ NBFC to help in their overall Financial Inclusion Plan. BCs are the extended arms of the Bank/NBFC to reach areas where they are not able to provide services directly in normal course of business.
- 1.2 The Microfinance Industry has evolved over the years to play an enhanced role in the financial inclusion efforts. Consequently, the need for a consensus-based industry framework to ensure standardization and compliance in an uniform manner across all microfinance institutions is a natural corollary. One of the outcomes has been the formulation of a common Industry Code of Conduct.
- 1.3 NOCPL is a member of Microfinance Institutions Network (MFIN), which is a representative body as also the Self-Regulatory Organization (SRO) for Non-Banking Finance Companies - Microfinance Institu-tions (NBFC-MFIs) regulated by the Reserve Bank of India. As a member of MFIN, NOCPL and its employees shall strictly follow the Code of Conduct adopted by MFIN towards conducting every stage of microfinance business (including recovery of dues from its customers) on behalf of the Banks and NBFCs.
2.1 Identification of Target Customers & Group Formation
The primary objective of micro finance is to reach economically challenged people, predominantly women, for delivering financial products and services. To ensure that the right customers are targeted, the Company emphasizes on door-to-door sourcing, Customer Point Verification (CPV) and checking credit bureau information to weed out over-leveraged and defaulted customers.
2.2 Multi-Step Customer Verification
In order to ensure the quality of sourcing by eliminating, inter alia, the possibility of coerced borrowing practices prevalent in microfinance industry
- The Company has established separate channels for customer relationship (acquisition & maintenance by a Relationship Officer) and customer evaluation (credit risk mitigation by a Credit Officer).
- Compulsory Group Training (CGT) is done by Relationship Officer for all customers to ensure that they have full understanding of the joint liability, loan product, interest rate, repayment schedule and terms & conditions. A little bit of financial literacy is also imparted.
- Group Recognition Test is done by the Company’s Branch Manager or the Principal Bank’s Product Sales Manager to revalidate the quality of CGT, customer’s credentials and loan purpose.
2.3 Centre Meetings & Collection
Collecting monthly installments on due dates and depositing with the designated account of the Principal Bank/NBFC is one of the most critical activities of the BC. To ensure smooth collection of monthly repayments (EMIs), the Company follows a business model wherein the Relationship Officer (RO) in a branch has 8 to 10 scheduled meetings per day with 15/16 collection days in a month, which makes the collection meetings predictable – both for the RO and the customers.
3.1 During Sourcing & Customer Verification
- Professional Conduct: Employees of the Company shall always remain professional during conversations and visits, use respectful language and maintain decorum. They shall always identify themselves as also the Company at the beginning of every conversation with customers.
- No discrimination: Customers shall not be discriminated on grounds of religion, caste, marital status or sexual orientation.
- Direct contact with the customers: Shall be established to avoid unscrupulous intermediaries or ring leaders.
- Know Your Customer (KYC): Shall obtain valid KYC documents (as per requirement of Principal/ RBI) before processing loan request.
- Credit Assessment and Avoidance of Over-Indebtedness: The Company shall take reasonable steps to ensure that credit will be extended only if the borrowers have demonstrated adequate ability to repay and such loans will not put the borrowers at significant risk of over-indebtedness. Similarly, adequate care shall be taken to ensure that non-credit financial products (such as insurance) extended to low-income customers are appropriate and all necessary details are disclosed.
- Use of Valid Credit Information Report: Shall be checked in association with the Principal, before sanction of loan to confirm existing indebtedness and no default status of the customers.
- Training, Education and interaction: Shall be imparted to ensure that the customer fully understands the product, process and terms of contract. Information shall also be provided on importance of timely repayment for good credit history (with credit bureau agency) as well as benefit, risks and necessary safeguards of digital financial transactions and grievance redressal mechanism.
- Transparent Terms: Pricing, terms & conditions of financial products (including interest charges, insurance premium, all fees, etc.) shall be transparent and adequately disclosed in a manner/ language understandable to the customer. The Sanction letter & Loan Agreement shall contain key information of customers and relevant details of the loan.
- Bundling of Third Party Products: Customers shall not be forced to buy any third-party sale as pre-condition to access micro-credit.
3.2 During Collections (SHG/JLG meetings) – Guidelines to deal with delinquent customers
It is the endeavour of the Company that its customers are treated with respect, dignity, courtesy and fairness in debt collection practices, which shall not be abusive or coercive.
Therefore, it is important that all employees involved in collection-related activities shall follow the adopted Code of Conduct, viz:
- Employees shall use only acceptable business language, even if the other party does not
- No written or verbal threats, abuse or rudeness shall be permitted
- If the customer declines to pay, the consequences of such a decision shall be explained to her:
- Impact on credit history
- Possible inclusion in restricted list of the Company
- Possible legal action and its impact
- When a customer turns abusive or threatening, the employee shall terminate the discussion
- All discussions where the customer becomes abusive or threatening shall be properly documented
- The customer’s debt/ obligation shall normally be discussed only with her
- The customer shall ordinarily be contacted at Centre meeting place. However, should the customer provide a business address also, then attempts to contact her may be made there, only if accompanied by other member/s from the Group
- The customers shall be called only between 8.00 AM to 6.00 PM.
- Threaten legal action when none is expected to be taken
- Threaten repossession of assets when such action is not planned
- Threaten with imprisonment or even mention about imprisonment unless legal action planned or currently underway could result in imprisonment
- Accept bribes or gifts of any kind from the customers
- Collect sums in excess of total dues of the customer
- Enter the customer’s residence against her wishes
- Restrict the customer’s movement or restrain her from entering or leaving the house/room
- Visit the customer’s house in large numbers, and/or if she has suffered a bereavement or a family member is gravely ill, and/or a social engagement is in progress, and/or if the customer is not present and only minors/elderly/infirm are present at the time of the visit
- Remain in the customer’s house, if she were to leave for any reason including to collect money from a bank/ elsewhere
- Discuss the customer’s debt where others can overhear the conversation.
3.3 General Guidelines
- Valid Receipt/Acknowledgement: Shall be issued for each and every payment received from the customers.
- Ethical Staff Behaviour: Company officials shall comply with high ethical standard in their interaction with micro finance customers and the Company shall ensure that adequate safeguards are in place to detect and remove corruption or mistreatment of customers.
- Privacy of Customer Data: Privacy of individual customer data shall be respected and such data shall not be used for other purposes without the express permission of the customers (while recognizing that the Company shall play an important role in helping customers achieve the benefits of establishing credit histories).
- Mechanism for Redressal of Grievances: The Company shall have in place Customer Grievance Redressal system to address customer complaints in an effective and timely manner.
- The Company is committed to observe fair practices in all its business transactions and dealings with customers with utmost transparency and ethical standard. Strict compliance to the aforesaid Code of Conduct and guidelines shall go a long way to ensure such commitment.