Interest Rate Policy

CREDIT PRICING

POLICY MANUAL

(Updated in accordance with RBI (NBFC – Credit Facilities) Directions, 2025 &

RBI (NBFC-MFI) Directions, 2025 effective November 28, 2025)

Document Revision History

Table of Contents

Spirit of the Pricing Framework

The microfinance borrower is a vulnerable borrower. She is exposed to multidimensional risks — economic, social, and climatic — and hence the Pricing Framework for such a borrower must take into account the context of her livelihood, her income, and the risks surrounding her. The spirit of this framework is enshrined to sensitise the ALCO and the Pricing Committee to the segment of the population we serve and to design our pricing guidance accordingly.

DJT Microfinance's Board believes that our Pricing Framework should be forward-looking and designed such that in case of favourable macro-economic tailwinds, the customer should see a beneficial flow in the form of reduced cost; and during macro headwinds, the customer should be shielded from the risk of increased costs. The Pricing Framework, while considering past trends, must also take into account forward conditions to achieve a balanced pricing output.

Under the 2025 RBI Directions, there is no prescribed regulatory interest rate cap for NBFC-MFIs. The Board has accordingly adopted a self-imposed discipline framework — a Board-approved ceiling on the all-inclusive interest rate, reviewed quarterly by the ALCO, ensuring efficiency gains are passed on to borrowers while maintaining the Company's financial viability.

1. Context

DJT Microfinance Private Limited (also referred to as 'Company' in this document) is registered as a Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI) with the Reserve Bank of India (RBI).

Prior to April 2022, as per the RBI, the interest rates charged by an NBFC-MFI to its borrowers were the lower of the following:

• Cost of funds plus a margin cap of 10% for MFIs with a portfolio of Rs.100 crore or above, and 12% for others.
• The average base rate of the five largest commercial banks by assets multiplied by 2.75 for the next quarter. This average was advised by the Reserve Bank on the last working day of the previous quarter and determined interest rates for the ensuing quarter.

Among various entities serving microfinance customers in India, only NBFC-MFIs were under the above imposed restrictions. Universal or Scheduled Commercial Banks, Small Finance Banks (SFBs), NBFCs and other entities like not-for-profit ventures were historically not under any similar pricing restrictions.

On 14th March 2022, RBI released the Master Direction — Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022, effective from 1st April 2022, which deregulated interest rate pricing for NBFC-MFIs. This direction has since been repealed and superseded.

In view of the same, DJT Microfinance presents this revised and comprehensive Interest Rate Policy for approval by the Board before implementation.

2. Applicable Regulatory Framework

This policy is framed in compliance with the following active and repealed RBI directions and circulars:

Note: The above guidelines create a level playing field with the same set of rules for all player categories, allowing NBFC-MFIs to compete on equal footing with banks and SFBs.

3. Background

Currently, the microfinance industry is served by different types of RBI-regulated lending institutions including Scheduled Commercial Banks/Universal Banks, Small Finance Banks, Non-Banking Financial Companies, Non-Banking Financial Companies – Micro Finance Institutions, and other entities such as not-for-profit ventures.

4. Pricing Framework for Qualifying Assets

The pricing framework has two main components: (a) interest rate and (b) other charges and fees for customers. The Company aims to have a customisable pricing framework factoring historical data across products and customer segments.

The Company has put in place this Board-approved Interest Rate Policy for Microfinance Loans, covering a comprehensive, auditable interest rate model for arriving at the all-inclusive rate of interest. The model delineates various components of the interest rate — cost of funds, operating expense, credit risk premium and margin — in terms of the range of spread of each component for a given category of borrowers, and specifies all other charges applicable to microfinance loans.

4.1 Three Pillars of the Pricing Framework

• Pillar 1 — Auditable Data-Verified Pricing Model: A documented pricing model based on past portfolio trends, updated every quarter, that computes a minimum reference rate for each product category.
• Pillar 2 — Board-Approved Pricing Range Guidance: The output of the pricing model is validated against a Board-approved pricing range. The Board sets a rate band (XX% to XX% p.a.) with a self-imposed ceiling approved by the Board; the self-imposed ceiling replaces the erstwhile RBI-mandated margin cap.
• Pillar 3 — Peer Review Framework: The Company benchmarks its rates against at least 10 comparable NBFC-MFIs, Universal Banks and Small Finance Banks every quarter. The Board's guidance is that DJT Microfinance shall remain within the middle band of this pricing peer group.

4.2 Documented Interest Rate Computation Model

In compliance with RBI Credit Facilities Directions 2025, Para 60(i) and 60(ii), the following table delineates each component of the interest rate with its quantified range, updated quarterly by the ALCO/Pricing Committee:

Formula: Interest Rack Rate = Reference Rate + Credit Risk Premium + Liquidity Risk Premium

Board-Approved Ceiling on Interest Rate: The Board shall set a ceiling on the all-inclusive interest rate for Qualifying Microfinance Assets each year, in lieu of the erstwhile regulatory margin cap. This ceiling shall be disclosed in the ALCO minutes and in this policy.

5. Broad Structural Components of Risk-Based Pricing

5.1 Interest Rack Rate

Given the microfinance customer segment — and that microfinance loan products are unsecured, of relatively small amounts and short tenures — the Company will offer fixed interest rack rates to customers. The interest rack rate will be based on various factors including but not limited to: cost of funds pertaining to borrowings, operational expenditure on manpower and occupancy, business risks including credit costs and liquidity risk premium, and the desired Return on Assets (ROA) to be a sustainable and viable business.

5.1a Reference Lending Rate

5.1b Risk Premium

Post defining the base lending rate, the Company will define a variable risk premium based on its product and customer segments, historical data for its own products and industry products, customer segment risks, and prevailing market rates of competition. The cost to maintain liquidity as per RBI regulations and lender requirements will also be derived and included.

6. Other Fees and Interest

The Company shall define the fees and charges associated with each loan product in percentage or absolute terms. All fees shall be explicitly disclosed in the Key Fact Statement (KFS) prior to loan disbursement, in compliance with RBI Credit Facilities Directions 2025, Para 62 and the April 2024 KFS Circular. No charge shall be levied on a borrower that is not mentioned in the KFS.

7. Pricing Framework for Non-Qualifying Assets

To cater to the diverse spectrum of borrowers, DJT Microfinance is also engaged in funding non-MFI borrowers who do not qualify as MFI customers under RBI regulations. Under the RBI (NBFC-MFI) Directions 2025 (Para 49), an NBFC which does not qualify as an NBFC-MFI shall extend microfinance loans which in aggregate do not exceed 25 per cent of its total assets (previously 10%).

The pricing for non-qualifying asset borrowers shall be decided by the Asset Liability Committee (ALCO) or the Credit Committee in the case of term loans to borrowers other than individuals.

The interest rack rate shall be based on cost of funds pertaining to borrowings, operational expenditure on manpower and occupancy, business risks including credit costs and liquidity risk premium, and the desired Return on Assets (ROA).

The Company must submit a remediation plan to the RBI if it does not meet the 60% qualifying assets threshold for four consecutive quarters (RBI NBFC-MFI Directions 2025, Para 12).

8. Rate Display, Disclosure and KFS Requirements

8.1 Minimum, Maximum and Average Rate Display (RBI Credit Facilities Directions 2025, Para 62)

In compliance with applicable RBI Directions, the Company shall prominently display the minimum, maximum and average interest rates charged on microfinance loans:

• At all DJT Microfinance branch offices — on notice boards in the local language;
• In all literature issued by the Company, including information booklets and pamphlets provided to borrowers;
• On the Company's official website (www.djtmpl.com) under the 'Loan Products' or 'Investor Relations' section; and
• In all supervisory returns filed with the RBI.

The Compliance Officer shall be responsible for ensuring all displays are current and updated within 7 working days of any rate change approved by the ALCO.

8.2 Key Fact Statement (KFS) and APR Disclosure

In compliance with RBI Credit Facilities Directions 2025, Para 62 and the RBI Circular on KFS dated April 15, 2024 (RBI/2023-24/86), the Company shall provide a standardised Key Fact Statement (KFS) to every prospective borrower before loan disbursement.

9. Approved Pricing — Rate Matrix

In order to be fair and competitive in the microfinance industry while being sustainable and viable, the Company shall follow the risk-based pricing matrix below. Effective interest rack rates and discounts offered therein shall be finalised by the ALCO (Pricing Committee). There may be changes in the interest rates offered to customers to align with regulations, market developments and the external environment from time to time.

9.1 Risk-Based Pricing Matrix for Qualifying Microfinance Assets (Board-Approved — Rates subject to ALCO quarterly review)- illustrative

Note: Rates are per annum on reducing balance basis. Under the 2025 RBI Directions, there is no regulatory formula cap on interest rates. All rates in the above matrix are Board-approved and subject to quarterly review by the ALCO. The Board's self-imposed discipline framework (not a regulatory mandate) provides for a ceiling on the all-inclusive rate for qualifying microfinance assets.

10. ALCO / Pricing Committee — Governance Structure

The effective interest rack rate and all discounts offered therein shall be finalised by the Company's Asset Liability Management Committee (ALCO), which shall also serve as the Pricing Committee. The ALCO shall meet at minimum once every quarter to review, validate and set the interest rate framework.

10.1 ALCO Composition

10.2 ALCO Responsibilities

• Review and update the interest rate computation model (Section 4.2 table) every quarter with actual data;
• Benchmark DJT Microfinance's rates against a peer group of at least 10 comparable MFIs, universal banks and SFBs;
• Ensure compliance with the Board-approved ceiling on interest rates (self-imposed; replaces erstwhile RBI-mandated 12% margin cap);
• Apprise the Executive Committee and Board of Directors of prevailing interest rates, competitive positioning, and any proposed changes;
• Update the rate display at branches and website within 7 working days of any approved rate change; and
• Ensure the KFS template is current and reflects approved rates before disbursements are made.

11. Rate Change Communication to Borrowers

In compliance with RBI Responsible Business Conduct Directions 2025, any change in interest rate or any other charge shall be communicated to the borrower well in advance and shall take effect only prospectively. The Company shall follow the procedure below:

12. Peer Benchmarking Framework

In compliance with the spirit of RBI Credit Facilities Directions 2025 and the Responsible Business Conduct Directions 2025, the ALCO shall conduct a formal peer benchmarking exercise every quarter. The exercise shall include:

• Comparison of DJT Microfinance's minimum, maximum and average rates with at least 10 comparable NBFC-MFIs operating in similar geographies;
• Comparison with the prevailing rates of Universal Banks and SFBs offering JLG/microfinance products;
• Reference to rate ranges published by SROs (MFIN, Sa-Dhan) for member MFIs; and
• A written assessment to the Board confirming DJT Microfinance's position within the peer group.

The Board's direction is that DJT Microfinance shall aim to position itself within the middle band of its pricing peer group, neither among the highest-priced nor aggressively under-pricing in a manner that threatens business viability.

13. Supervisory Returns and RBI Reporting

The minimum, maximum and average interest rates charged on microfinance loans shall be included in all supervisory returns filed with the Reserve Bank of India. The Compliance Officer shall ensure this data is accurate, current and consistent with the rates displayed at branches and on the website.

The Company shall cooperate fully with any supervisory scrutiny by the Reserve Bank of India pertaining to pricing, fee disclosure, or the reasonableness of interest rates under the Credit Facilities Directions 2025.

14. Policy Review and Modification

This policy shall be reviewed and modified to give effect to changes in extant guidelines, directives, or instructions advised by the Reserve Bank of India or the Government of India from time to time. Any modification shall require ratification and approval by the Board of Directors.

The ALCO shall review pricing quantum quarterly. A comprehensive policy review shall be conducted at least annually by the Board.

Annexure I — Specimen of Lending Rate and Disclosure Table

The table below discloses the interest rates applicable across DJT Microfinance loan products. This table shall be prominently displayed at all branches and on the Company website. Rates are Board-approved and reviewed quarterly by the ALCO — there is no regulatory formula cap under the 2025 RBI Directions.

Note: All rates stated above are per annum on a reducing balance basis. The Annual Percentage Rate (APR) for each loan, incorporating all charges, is disclosed to each borrower in the Key Fact Statement prior to disbursement.

Annexure II — Key Fact Statement (KFS) Template

In compliance with RBI Credit Facilities Directions 2025 (Para 62) and RBI/2023-24/86 dated April 15, 2024, the following KFS shall be provided to every prospective microfinance borrower before loan disbursement. The KFS shall be in the local language wherever feasible.

Key Facts Statement

Part 1 (Interest rate and fees/charges)

Annexure III — RBI Regulatory References and Extracts

The following table consolidates the key RBI regulatory requirements and extracts relevant to this Interest Rate Policy. It serves as a ready reference for audit, compliance and governance purposes.

Key Definitions

Regulatory Change Summary: 2015 / 2022 vs. 2025 Directions

Interest Rate Computation — Step-by-Step with Illustrations

DJT Microfinance uses a cost-plus pricing model. The final interest rate charged to borrowers is built up from four components: Cost of Funds, Operating Expense Ratio, Risk Premium (Credit Cost), and Net Margin.

Step 1 — Calculate Cost of Funds (CoF)

CoF = Σ (Monthly Average Balance of each borrowing × Interest Rate) ÷ Total Monthly Average Borrowings

Illustration — Cost of Funds Calculation:

Overall CoF = ₹26.68 Cr ÷ ₹270.00 Cr = 9.88% ≈ 9.90% (rounded up for prudence)

Step 2 — Calculate Operating Expense Ratio (OER)

Step 3 — Calculate Risk Premium (Credit Cost)

Annualised Credit Cost (Risk Premium) = ₹5.00 Cr ÷ ₹192.00 Cr = 2.60%. Add forward-looking buffer of 0.40%–1.00%. Assume Risk Premium = 3.00% in this illustration.

Step 4 — Compute Minimum Required Interest Rate

Summary Calculation:

The Board sets the actual lending rate at 31% per annum on a reducing balance basis (rounding down slightly from the theoretical floor as a competitive adjustment, subject to review). This is the rate that will be disclosed to borrowers.

Step 5 — Converting Reducing Balance Rate to EMI — Worked Loan Illustrative

Weekly EMI = ₹605 (approx) | Total paid = 104 × ₹605 = ₹62,920 | Total interest = ₹12,920 | Effective APR = 24.50% reducing balance | Equivalent Flat Rate = 12.92% flat p.a.

Amortisation Schedule — First 8 Weeks (Illustrative):

Glossary of Key Terms and Definitions

The following glossary defines key terms, abbreviations and concepts used throughout DJT Microfinance's Interest Rate Policy and related regulatory documentation. All definitions are aligned with applicable RBI Directions effective November 28, 2025, including the RBI (Non-Banking Financial Companies – Credit Facilities) Directions, 2025 and the RBI (Non-Banking Financial Companies – Microfinance Institution) Directions, 2025. Terms are arranged in alphabetical order.

Note: This glossary is an integral part of DJT Microfinance's Interest Rate Policy. In the event of any inconsistency between terms defined herein and the applicable RBI Directions, the definitions in the RBI Directions shall prevail. The ALCO shall ensure this glossary is reviewed and updated contemporaneously with any policy revision or regulatory change.

Submission

This revised Interest Rate Policy for Microfinance Loans has been updated in accordance with the RBI (Non-Banking Financial Companies – Credit Facilities) Directions, 2025 and RBI (Non-Banking Financial Companies – Microfinance Institution) Directions, 2025 effective November 28, 2025, and is presented to the Board of Directors of DJT Microfinance Private Limited for discussion, approval and noting. Upon Board approval, this policy shall supersede all earlier versions.