SARALA’S CORE VALUES OF MICROFINANCE

INTEGRITY

Sarala aim’s to provide low income clients- women and men and their families, with access to quality financial services that are client focused, designed to enhance their wellbeing, and delivered in a manner that is ethical, dignified, transparent, equitable and cost effective.

TRANSPARENCY

The organisation aims to create awareness and enable clients and all other stakeholders to understand the information provided with respect to financial services offered and availed.

FAIR 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.

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.

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.

FEEDBACK & GRIEVANCE REDRESSAL MECHANISM

To provide a formal and easy to access grievance redress mechanism for clients and also provide

PART I

SARALA AGREES TO:

Promote and strengthen the Microfinance movement in the country by bringing low income clients to the mainstream financial sector.

CODE OF CONDUCT

 

  1. Integrity and Ethical Behaviour

 

We shall design appropriate Board approved policies and operating guidelines to treat clients and

employees with fairness and dignity and trained to put this Code into practice. The incentive structure for the staff should aim at promoting good business and service practices towards customers. We shall educate our clients on the Code of Conduct and its implementation.

 

  1. Governance

 

We must incorporate a formal governance system that is transparent and professional, and adopts the following best practices of corporate governance:

 

  1. We must observe high standards of governance by inducting persons with good and sound reputation as members of Board of Directors/Governing body and seek to comply with the best standards stipulated in Companies Act, RBI regulations and the Stock Exchange regulations for listed companies(even though we are not listed in a stock exchange).

 

  1. We shall endeavour to have independent directors to the extent of 1/3rd of the Governing Board.

 

  1. We must have a Board approved debt restructuring product/program for providing relief to borrowers facing repayment stress.

 

  1. We will appoint an audit committee of the Board with an independent director as chairperson

 

  1. We must ensure transparency in the maintenance of books of accounts and reporting/ presentation and disclosure of financial statements by qualified auditor/s.

 

  1. We must put in best efforts to follow the Audit and Assurance Standards issued by the Institute of Chartered Accountants of India (ICAI).

 

  1. We 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.

 

III. Transparency

 

  1. We shall disclose all terms and conditions to the client, in a form and manner that is understandable, 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 the following documents.
  2. Individual sanction letter
  3. Loan card
  4. Loan schedule
  5. Passbook

 

Further, disclosure should be made through Group/Centre meetings for securing clients’ informed consent. (Details can be printed on a paper and all borrowers can sign on the same as acknowledgement of their acceptance).

 

  1. We must communicate all the terms and conditions for all products/services offered to clients in the official regional language or a language understood by them.

 

  1. At the minimum, we must disclose the following terms:
  2. Rate of interest on a reducing balance method
  3. Processing fee
  4. Any other charges or fees howsoever described
  5. Total charges recovered for insurance coverage and risks covered

 

  1. We must communicate in writing, charges levied for all financial services rendered. Fee on non-credit products/services will be collected only after prior declaration to the client.
  2. We shall declare all interest and fees payable as an all-inclusive Annual Percentage Rate (APR) and equivalent monthly rate.

 

  1. We must follow RBI’s guidelines with respect to interest charges and security deposit.
  1. 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.

 

  1. We shall place in public domain the assessment reports on code of conduct compliance.

 

  1. We note to put our annual reports and annual financial statements on our website immediately after approval of our Board/AGM

 

  1. Client Protection

 

Fair Practices

 

  1. We shall ensure that the provision of micro finance services to eligible clients is as per RBI guidelines.

 

  1. We must obtain copies of relevant documents from clients, as per standard KYC norms. Additional documents sought must be reasonable and necessary for completing the transaction.

 

  1. The decision on loans must be taken within a reasonable of time. We shall indicate the time limit within which customers can expect a decision on their application and if sanctioned, the time taken for disbursement of loan.

 

  1. Products should not be bundled. (Bundling in this context means making purchase of a product or service conditional for provision of another product or service). The only exceptions to bundling may be made with respect to credit life, life insurance & livestock insurance products, which are typically offered bundled with loans.

 

Avoiding Over-indebtedness

 

  1. We must conduct proper due diligence as per their internal credit policy to assess the need and repayment capacity of client before making a loan and must only make loans commensurate with the client’s ability to repay.

 

  1. If a client has loans from 2 separate MFIs, then irrespective of the source of the loans, we shall not be the third lender to that client. This should be validated by the Credit Bureau Report prior to extension of the loan.

 

  1. We must not, under any circumstance, breach the total debt limit for any client, as prescribed by RBI. This should be validated by the Credit Bureau Report prior to disbursement of the loan.

 

  1. We after due verification of credit bureau reports will ensure that loans given on the basis of joint liability of group of borrowers (JLG loan) is restricted to Rs 60,0001 per borrower. Where the loan to a specific borrower exceeds Rs 60,000, or the loan takes the total debt of the borrower above Rs 60,000, such a loan should be given as an individual loan without involving the JLG. We will take necessary steps to have appropriate systems and staff with required competencies to deal with individual loans.

 

1 The cap of Rs 60000 will be reviewed by SRO from time to time based on factors such as inflation rates and real value of loans.

 

  1. To reduce the errors in identification of borrowers in credit bureau reports, Sarala will move towards adoption of UIDAI number (Aadhaar number) based KYC within a two year period (from the day this COC comes into effect). As an initial measure, MFIs will ensure that while providing second and subsequent cycle loans the borrowers are identified with their Aadhaar number as part of KYC. The Aadhaar numbers will then be used by the Credit Bureaus for producing CIR.

 

Appropriate interaction and collection Practices

 

We must have clearly defined guidelines for employee interactions with clients.

 

We must ensure that all staff and persons acting on behalf of Sarala.

 

  1. Use courteous language, maintain decorum, and are respectful of cultural sensitivities during all interaction with clients.
  2. DO NOT indulge in any behaviour that in any manner would suggest any kind of threat or violence.
  3. DO NOT contact clients at odd hours, as per the RBI guidelines for loan recovery agents.
  4. DO NOT visit clients at inappropriate occasions such as bereavement, etc., to collect dues even if two or more successive repayments are not received

 

  1. We must provide a valid receipt for each and every payment received from the borrower and record the payment in the loan passbook/loan card with the client.

 

  1. We must have a detailed Board approved process for dealing with clients, at each stage of default.

 

  1. We must not collect shortfalls in collections from employees. However in proven cases of frauds by employees, we shall recover the money from employees.

 

 

  1. Privacy of client information

 

We must keep personal client information strictly confidential. Client information may be disclosed

to a third party subject to the following conditions:

 

  1. Client has been informed about such disclosure and prior permission has been obtained in writing.
  2. The party in question has been authorized by the client with intimation to the MFI to obtain client information from the MFI.
  3. It is legally required to do so.
  4. This practice is customary amongst financial institutions and available for a close group on reciprocal basis (such as a credit bureau) provided that the i) clients’ prior consent has been obtained and ii) the receiver of such information is also bound by these conditions to keep the client information confidential.

 

V Recruitment

 

The code covers all our staff.

 

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 advertisements in local newspapers, web advertisements, walk-in interviews, etc.

 

Whenever we seek to recruit an employee in another MFI, it will be mandatory to seek a reference check from the 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.

 

We note to respond to the reference check request from another MFI within two weeks.

 

We must honour notice period as contractually agreed between employer and employee subject to a minimum of one month for an outgoing employee.

 

We 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.

 

We 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.

 

Whenever we recruit 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.

 

  1. Client Education

 

  1. We must have a dedicated process to raise clients’ awareness of the options, choices and responsibilities vis-à-vis financial products and services available.

 

  1. New clients must be informed about the organization’s policies and procedures to help them understand their rights as borrowers.

 

  1. We must ensure regular checks on client awareness and understanding of the key terms and conditions of the products/ services offered / availed. Customer feedback should be gathered, as part of internal audit systems or through some other regular monitoring such as a system of calls to random sample of customers. The feedback from such monitoring should be reported to the board periodically.

 

VII. Data Sharing

 

  1. We must share complete client data with all RBI approved Credit Bureaus, as per the frequency of data submission prescribed by the SRO.

 

  1. We should provide the data and information called for by all supervisory and regulatory bodies including the SRO

 

VIII. Feedback/ Grievance Redressal Mechanism

 

  1. We must establish dedicated feedback and grievance redressal mechanisms to correct any error and handle/receive complaints speedily and efficiently. The minimum standards required of the GRM are i) an easy procedure for recording a complaint over phone – with details of phone numbers printed on loan cards, ii) a staff assisted procedure at the branch for recording complaints/ grievances, iii) acknowledgement for receipt of the complaint iv) a time limit for resolution of the complaint, v) a clear appeal procedure in case where customer is not satisfied with the solutions offered by the MFI, vi) nodal staff in the branch to guide customers to lodge grievance with RBI or SRO, vii) assurance to customers that they will be treated fairly despite the complaint/grievance being

lodged.

 

  1. We must inform clients about the existence and purpose of these mechanisms and how to access them.

 

  1. We must designate at least one grievance redressal official to handle complaints and/or note any suggestions from the clients and make his/ her contact numbers easily accessible to clients.

 

  1. We must display contact number and address of SRO (as applicable) nodal official and details of the grievance redressal system of the SRO.

 

  1. We will have an appropriate mechanism for ensuring compliance with the Code of Conduct.

 

  1. Where complainants are not satisfied with the outcome of the investigation conducted by us into their complaint, they shall be notified of their right to refer the matter to the grievance redressal mechanism established by the SRO, as applicable.

 

We shall prepare a monthly report on grievances received, resolved and pending for a senior management review and periodic reports to the board.

 

 

SARALA’S TOWARDS CUSTOMER RIGHTS:

 

As Sarala’s customer you should have the right to:

 

  1. Ascertain the terms and conditions of the loan from the field officer or the branch staff – either orally or in writing

 

  1. Ascertain the balance outstanding, amount of loan and interest repaid and other information relating to an existing loan or a loan that has been closed not earlier than 12 months back – either orally or in writing

 

  1. Receive a loan sanction letter or loan card indicating all the terms of the loan

 

  1. Get a passbook in any suitable form indicating the periodic loan installments repaid and the balance outstanding

 

  1. Get a receipt for any payments including loan installments made to the staff of MFI

 

  1. Access the officials indicated in the loan card or other material of the MFI for making complaints, registering grievances – this can be done in writing or over phone

 

  1. Receive assistance from a designated staff of the MFI in the branch for lodging a complaint or grievance

 

  1. Receive an acknowledgement of a complaint or grievance lodged by you with a time limit indicated for resolution

 

  1. Receive a reply to your complaint/grievance within the prescribed time limit – which will be informed to you by the MFI when you lodge the complaint

 

  1. Appeal to a higher level in case you are not satisfied with the response or the solution provided on your complaint

 

  1. Appeal to the nodal officer of RBI in any case, regardless of our grievance procedure.

 

SUMMARY OF Sarala’s revised Code of Conduct

Do’s
 

1. Shall endeavour to provide micro finance services to all eligible clients, as per RBI guidelines.

 

2. Shall educate clients, staff, and any persons acting on their behalf on the Code of Conduct and its implementation.

 

3. Shall disclose all terms and conditions to the client for all products/services offered, prior to disbursement, in accordance with the Reserve Bank of India’s (RBI) fair practices code through the following documents.

a. Individual sanction letter

b. Loan card

c. Loan schedule

d. Passbook

In addition, disclosure should be made through Group/Centre meetings for securing clients’ informed consent. (Details can be printed on a paper and all borrowers can sign on the same as acknowledgement of their acceptance).

 

4. Shall communicate all the terms and conditions for all products/services in the official regional language or a language understood by clients.

 

5. Shall disclose the following terms:

a. Rate of interest on a reducing balance method

b. Processing fee

c. Any other charges or fees howsoever described. Total charges recovered for insurance coverage and risks covered

 

6. Shall communicate in writing, charges levied for all financial services rendered.

 

7. Shall not collect fee on non-credit products/ services without prior declaration to the client.

 

8. Shall declare all interest and fees payable as an all-inclusive APR and equivalent monthly rate.

 

9. Shall follow RBI’s guidelines with respect to interest charges and security deposit.

 

10. Shall obtain copies of relevant documents from clients, as per standard KYC norms. Additional documents sought must be reasonable and necessary for completing the transaction.

 

11. Shall disclose reasons for rejection of loans to applicants.

 

12. Shall indicate the time limit within which applicants/customers can expect a decision on their application and if sanctioned, the time taken for disbursement of loan.

 

13. Shall not bundle products, except for credit life, life insurance & live-stock insurance products. The terms of insurance should be transparently conveyed to the customer and must comply with RBI & IRDA norms. Consent of the client must be taken in all cases.

PART III

14. Shall conduct proper due diligence to assess the need and repayment capacity of client before making a loan and must only make loans commensurate with the client’s ability to repay.

 

15. Shall not be the 3rd lender to a client if the client has loans from 2 other lenders (irrespective of the source of loan).

 

16. Shall not breach the total debt limit for any client, as prescribed by the RBI or Central/ State Government or SRO

 

17. Shall ensure that all employees follow company guidelines for interaction with clients.

 

18. Shall ensure that all staff and persons acting for the MFI or on behalf of the MFI: Use courteous language, maintain decorum, and are respectful of cultural sensitivities during all interaction with clients.

 

19. Shall provide a valid receipt (in whatever form decided by the MFI) for each and every payment received from the borrower and record the payment in the loan passbook/loan card with the client.

 

20. Shall follow approved company procedure to deal with client default sensitively.

 

21. Shall follow the debt restructuring mechanism adopted by the MFI for borrowers under liquidity stress.

 

22. Shall keep personal client information strictly confidential.

 

23. Shall disclose client information to a third party only under the following conditions:

a) Client has been informed about such disclosure and permission has been obtained in writing.

b) The party in question has been authorized by the client to obtain client information from the MFI.

c) It is legally required to do so.

d) This practice is customary amongst financial institutions and available for a close group on reciprocal basis (such as a credit bureau) provided that the

i) clients’ prior consent has been obtained

and

ii) The receiver of such information is also bound by these conditions to keep the client information confidential.

 

24. Shall follow board approved process to raise clients’ awareness of the options, choices, and responsibilities vis-à-vis financial products and services available.

 

25. Shall inform all new clients about the organization’s policies and procedures.

 

26. Shall inform clients about the existence and purpose of feedback mechanisms and how to access them.

 

27. Shall get an assessment of compliance with the code of conduct carried out by an agency approved by the SRO, once in every 12 to 18 months and place the assessment report in public domain.

 

28. Shall seek a reference check from previous employer for any new hire.

 

29. Shall provide within 20 days the reply to the reference check correspondence for another MFI.

 

30. Shall honour notice period as contractually agreed between employer and employee subject to a minimum of one month for an outgoing employee.

 

31. Shall not recruit an employee of another MFI without the relieving letter from the previous MFI employer except where the previous employer (MFI) fails to respond to the reference check request within 20 days.

 

32. Shall not assign a new employee recruited from another MFI, to the same area he/she was serving at the previous employer, for a period of 1 year. This restriction applies to positions up to the Branch Manager level.

 

33. Shall have a dedicated process to raise the client’s awareness of options, choices, rights and responsibilities as a borrower and shall conduct regular checks on client awareness and understanding of the key terms and conditions of the products/ services offered / availed.

 

34. Shall agree to share complete client data with all RBI approved Credit Bureaus, as per the frequency of data submission prescribed by the SRO.

 

35. Shall establish dedicated feedback and grievance redressal mechanisms to correct any error and handle/receive complaints speedily and efficiently.

 

36. Shall designate an official to handle complaints and/ or note any suggestions from the clients and make his/ her contact numbers easily accessible to clients.

 

37. Shall undertake remedial measures in respect of deficiencies found in COC observance during assessments carried out.

 

38. Shall get an assessment of compliance with the code of conduct carried out by an agency approved by the SRO, once in every 12 to 18 months and place the assessment report in public domain.

 

Don’ts
 

DO NOT visit clients at inappropriate occasions such as bereavement, etc., to collect dues even if two or more successive repayments are not received.

 

Any miscommunication/assurance/promise/commitment to customers during field investigation.

 

If a client has loans from 2 separate MFIs, then irrespective of the source of the loans, we shall not be the third lender to that client. This should be validated by the Credit Bureau Report prior to extension of the loan.

 

Use of abusive word, physical assault and or any unconstitutional act towards employee/customer and or stakeholders.

 

We must keep personal client information strictly confidential. Client information may be disclosed to a third party subject to the following conditions:

 

 

Any miscommunication/assurance/promise/commitment to customers during field investigation.

 

Use of abusive word, physical assault and or any unconstitutional act towards employee/customer and or stakeholders.

 

Using powers to take undue advantage from employee/customers/stakeholders for benefiting them.

 

Using professional and official equipments for unethical purpose.

 

Misconduct against the organization policy on code of conduct.