Revision & Approval History

Revision	Revision Date	Prepared By	Authorized By	Description
1.0	Sept, 2025	Compliance Team	Board of Directors	Initial publication

1. BACKGROUND

1. Talazen Finance India Pvt. Ltd. ("Tala" or "the Company"), being a Non-Banking Financial Company ("NBFC"), has formulated this Interest Rate and Other Charges Policy ("Policy") to establish a transparent and compliant framework for determining interest rates and associated charges on its loan products. This Policy is framed in accordance with the Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023, which requires NBFCs to adopt a Board-approved interest rate model taking into account relevant factors such as cost of funds, margin, and risk premium.
2. In line with the Reserve Bank of India's ("RBI") directions, the Policy also ensures that the approach for gradation of risk and the rationale for charging different interest rates to different categories of borrowers are documented and will be disclosed to borrowers as required.

2. OBJECTIVE AND SCOPE OF THIS POLICY

2.1 Objective

The primary objectives of this Policy are to:

1. Establish a transparent and consistent methodology for determining interest rates across all loan products
2. Ensure compliance with RBI guidelines and other applicable regulations
3. Define the approach for risk gradation and pricing differentials
4. Provide clear guidelines for charging processing fees and other charges
5. Establish robust governance and oversight mechanisms
6. Ensure fair treatment of customers through transparent communication

2.2 Scope

This Policy applies to:

1. All loan products and credit facilities offered by the Company
2. All categories of borrowers across different customer segments
3. Interest rate determination, processing fees, and other charges
4. Both fixed and floating rate loan products
5. All business units and subsidiaries of the Company

3. GOVERNANCE STRUCTURE

5. The board of directors ("Board") of Tala is the ultimate authority for approving this Policy and any subsequent revisions. The Board shall approve the interest rate model and all significant charges levied on loans, ensuring that they are reasonable and compliant with regulatory guidelines. The Board (or a committee empowered by the Board) will also periodically review the prevailing interest rates and fee structures in light of changes in the Company's cost of funds, risk experience, market conditions, and applicable regulations. Any changes to the Company's base rates, interest rate ranges, or schedule of charges must be presented to the Board (or its delegated committee) for approval. The Board provides oversight to ensure that the interest rate setting process remains fair, data-driven, and aligned with the Company's risk management policies and business strategy.

4. INTEREST RATE DETERMINATION

6. Tala shall determine interest rates for its loan products using a structured Interest Rate Model that considers all relevant cost and risk factors (detailed in Section 5). All interest rates shall be annualized rates (per annum) so that borrowers can clearly understand the cost of borrowing on a yearly basis. Tala will charge interest at a fixed interest rate. The fixed interest rate is determined at the time of loan sanction, taking into account factors such as the borrower's credit score and repayment history, financial profile (including income stability and overall debt burden), loan parameters (such as amount and tenure), customer profile and stability, past relationship with Tala, and prevailing sectoral or economic conditions. Once determined, the fixed interest rate remains constant over the entire tenure of the loan.
7. Tala shall ensure that interest rates on all loans are determined in a non-discriminatory manner, factoring in objective criteria as per this Policy. Interest rates will not be set at usurious levels; the Company is committed to charging rates that are commensurate with the risk profile of the borrower and in line with prevailing market practices for similar products, while also covering the Company's cost and profit considerations.

5. INTEREST RATE COMPONENTS

8. Tala's interest rate model is designed to arrive at a fair and competitive lending rate by taking into account a combination of the following key components:

1. Cost of Funds: The average cost of borrowing funds for the Company is the fundamental component of the lending rate. This includes interest and incidental costs incurred by Tala to raise resources, whether from banks, financial institutions, debentures or other sources. The cost of funds may vary with market conditions and the Company's credit ratings. A higher cost of funds necessitates a higher base lending rate, and vice versa.
2. Return on Capital: Tala factors in a reasonable profit margin or return on capital employed as the second component of its interest rate. This margin is the return expected by the Company's shareholders for the capital deployed in the lending business. It ensures that the lending operations yield an adequate profit after covering costs, in line with industry benchmarks and shareholder expectations.
3. Operating Costs: The overhead and operating expenses associated with the lending process are also built into the interest rate. This includes costs related to loan origination, underwriting, credit appraisal, customer acquisition, servicing and collections, administrative and infrastructure expenses, technology costs, etc. These costs, when expressed per unit of lending, form a portion of the rate to ensure cost recovery for the Company. Efficiency improvements that reduce operating costs can enable more competitive rates.
4. Market Conditions and Regulatory Factors: Tala also considers the prevailing market interest rates for similar loan products and peer NBFC/bank benchmarks as a reasonableness test on its pricing. The Company's lending rates are influenced by competition and what is affordable for customers in the target segment. Additionally, any regulatory prescriptions (present or future) with respect to interest rate ceilings or subventions in certain segments will be taken into account. Tala abides by the Fair Practices Code requirement that rates should not be excessive and should be sustainable for borrowers. Market factors and RBI guidelines form an overlay to ensure the interest rates are aligned to industry norms and customer protection principles.

9. Taking into account various factors as indicated above, the Company shall arrive at a benchmark lending rate for Tala's credit products. A risk spread ("Risk Premium") is then added or adjusted to this benchmark rate to arrive at the final rate applicable to a specific borrower segment or individual. The Risk Premium shall be determined by taking into account the minimum margin the Company wants to maintain along with degree of risk involved in loan considering various factors like general economic conditions, customer category, customer category servicing costs, repayment capacity, mode of repayment, past repayment history, loan-to-value ratio, tenure of loan, location of the customer, nature of security, etc. No loan will be priced below the Company's average cost of funds without specific approval from the Board, to ensure sustainability.

6. RISK GRADATION AND RISK PREMIUM GUIDELINES

10. Tala follows a risk-based pricing approach, meaning the interest rate for individual loans or categories of borrowers may differ based on the credit risk and profile of the borrower. This section outlines how risk gradation is done and the guidelines for assigning spreads over the base rate.
11. Risk Assessment: During the loan underwriting process, Tala evaluates each prospective borrower on various parameters including but not limited to: credit bureau score and credit history, income and debt-to-income ratio, employment stability or continuity of business, age and life-cycle stage, existing financial indebtedness, past repayment behaviour, etc. The Company's credit scoring models and rule engine generate a risk score or grade for each borrower, which reflects the expected likelihood of timely repayment. This internal risk grade corresponds to a recommended Risk Premium to be added on top of the benchmark rate.
12. Tala will document an interest rate for each product it offers, approved by the Board. For the same product and tenure, the interest rate offered to different customers may vary within the approved range, depending on the combination of risk factors as assessed.
13. Gradation Framework: Internally, the Company may maintain defined risk tiers or score bands. Each risk grade will have an associated Risk Premium that can be added to the benchmark rate. Credit underwriters or the automated decision engine will recommend the final rate based on the borrower's risk grade. Any exceptions (like offering a rate outside the typical range for a given grade) will require higher approval as per credit approval delegation.
14. Tala's risk-based pricing framework will be periodically reviewed to ensure it remains predictive – i.e., the higher-risk segments are indeed showing higher default rates and thus warrant the higher pricing. If needed, the spread parameters will be recalibrated based on portfolio performance data, changes in macroeconomic conditions, and competitive positioning.
15. It is explicitly noted that higher interest rates are charged only to compensate for higher risk and additional operational costs, and not arbitrarily. The Company does not charge differential rates that are unrelated to borrower risk or loan characteristics.

7. OTHER CHARGES

16. In addition to interest, Tala may levy certain fees and charges on its loan products to cover specific costs or services. All such charges are levied as per the terms of the loan agreement and in line with this Policy. They are communicated transparently to the customer upfront at the time of loan documentation and form part of the sanction terms. Below is a list of other charges that may be applicable on the Company's unsecured personal loans:

• Processing Fee: A one-time processing fee may be charged to the borrower at the time of loan disbursement or repayment (as indicated in the 'Key Facts Statement' "KFS" for each loan), as compensation for the costs of appraising the loan application, credit bureau checks, verification, and onboarding.
• Prepayment / Foreclosure Charges: If a borrower forecloses the loan (fully repays the entire loan principal before the originally scheduled end date), Tala may levy a foreclosure charge as specified in the KFS. This charge is to compensate for the interest loss due to early termination and any administrative cost of early closure. The Company may choose to waive or reduce the foreclosure fee for certain categories of borrowers or after a certain number of EMIs have been paid, as part of promotional schemes or in line with regulatory directives. Any such waiver policy will be approved internally.
• Late Payment Charges: In the event of delays or defaults in payment of scheduled amounts (EMIs or other amounts due) by the borrower, Tala reserves the right to levy penal charges as a deterrent and to encourage timely payments. This penal charge is applied only on the overdue balance, and it is not compounded (interest on penal charge is not charged). Tala will ensure that the penal charges (if applicable) are communicated clearly and in bold text to the borrower in the loan agreement and the Key Fact Statement. The Company may, at its discretion, waive or reduce penal charges in deserving cases (such as proven financial hardships or errors), in accordance with its internal approval matrix.
• Taxes: All aforementioned fees and charges may be subject to applicable taxes such as Goods and Services Tax (GST). The prevailing GST will be added on these fees as per government regulations, and borne by the customer. Tala will clearly disclose the tax component in all fee calculations.

17. Communication and Disclosure of Charges: A 'Key Facts Statement' will be provided to the borrower as part of the loan kit (loan agreement or sanction pack). All charges are also published on the Company's application. The borrower's explicit consent is taken (through the loan agreement and key fact statement) for all applicable charges at the time of sanction. The Company ensures that charges are not introduced or increased post-disbursement unless agreed to by the borrower or required by law. Any revision in charges (for future loans or new applications) will be done with prospective effect only and with proper approval.

8. REVIEW AND REVISION

18. This Policy shall be reviewed at least annually by the Board. The review will ensure that the Policy remains aligned with current regulatory guidelines, business environment, and the Company's strategic objectives. Interim reviews may be conducted more frequently if there are any major changes in regulations (for example, if RBI issues new directives affecting interest rate practices or fee charges) or significant shifts in the Company's cost of funds or risk experience that necessitate a change in pricing approach.
19. Any revision to this Policy including changes in the interest rate model, risk gradation methodology, or schedule of charges will require approval from the Board. Revised versions shall be documented with a new version number and date, and circulated to all relevant departments. All changes will be implemented on a prospective basis – meaning no change will affect existing loan agreements retrospectively, except if mandated by law or regulation (in which case affected customers will be notified and such changes will be carried out in compliance with the law).
20. All material changes in the Policy or in the standard rates/charges will also be duly communicated to customers as needed (for instance, via the Company's website, or individual communication if it impacts existing customers). The Company remains committed to transparency in this regard.

9. CUSTOMER DISCLOSURES AND COMMUNICATION

21. Tala is committed to clear and transparent communication of its interest rates and service charges to its customers, in compliance with RBI's fair practices and disclosure norms. Key aspects of the disclosure and communication framework include:

• Application Stage Disclosure: The loan application form or the preliminary term sheet provided to the customer will indicate the range of interest rates (minimum to maximum) that the Company charges for the product, and the approach for gradation of risk (i.e., that the final rate will depend on the borrower's credit profile).
• Sanction Communication: Upon approval of the loan, Tala will issue a Key Facts Statement and a loan agreement to the borrower. This sanction letter will explicitly communicate the final sanctioned interest rate, expressed as an annualized percentage rate, and will detail the basis for that rate if needed (for example, it may note that the rate includes a base rate plus a risk premium based on the customer's credit score). It will also list out all charges applicable to the loan. The borrower will be made fully aware of the total cost of the loan at this stage.
• Fair Practice Code Adherence: All communications will adhere to the language and spirit of the RBI-mandated Fair Practices Code. This means there will be no hidden charges in the loan documents; all charges are enumerated clearly. The reasoning for differential interest rates (gradation of risk) is available and not based on any discriminatory reasons. Borrowers will not be charged any fee that was not disclosed to them without their prior consent.

22. Through the above measures, Tala ensures that customers are well-informed at every stage about how interest rates and charges affect their loans. The focus is on transparency, understanding, and avoiding surprises for the borrower. This not only fulfils regulatory requirements but also helps in building trust with customers and reducing disputes. All customer-facing materials will be periodically reviewed by Compliance to ensure adherence to the latest guidelines, such as the Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 and Fair Practice Code provisions relevant to interest and fee disclosure.