Background
 

The Reserve Bank of India (RBI) has issued comprehensive guidelines on Know Your Customer (KYC) norms and Anti-Money Laundering (AML)/Combating Financing of Terrorism (CFT) measures and has advised all NBFCs to ensure that a proper policy framework on KYC and AML/CFT measures be formulated and out in place with the approval of the Board. The objective of RBI guidelines is to prevent NBFCs being used, intentionally or unintentionally by criminal elements for money laundering activities. The guidelines also mandate making reasonable efforts to determine the identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc. which in turn helps the Company to manage its risk prudently. The Prevention of Money Laundering Act, 2002 (“PMLA”) and the Rules notified thereunder impose several obligation on Banks, Non-Banking Financial Companies, Housing Finance Companies (“HFCs”), Chit Fund Company and other defined intermediaries to inter alia verify identity of clients, maintain records and furnish requisite information to Financial Intelligence Unit- India (“FIU-IND”).

Accordingly, in compliance with the guidelines issued by RBI from time to time, Godrej Finance Limited (“GFL” or “the Company”), as a Non-Banking Finance Company, has laid down a ‘Know Your Customer (“KYC”) and Anti-Money Laundering (“AML”) Policy’ (“KYC and AML Policy”).
 

Policy Objective
 

Key objectives of the KYC and AML Policy are as under:
 

• To establish regulatorily compliant KYC mechanism to on-board customers;

• To ensure compliance throughout the life-cycle of customers as per the laid down norms;

• To prevent the Company’s business channels/ products/ services from being used as a channel for Money Laundering (“ML”) / Terrorist Financing (“TF’);

• To establish a framework for adopting appropriate AML procedures and controls in the operations/ business processes of the Company;

• To ensure compliance with the laws and regulations in force from time to time;

• To protect the Company’s reputation;

• To lay down KYC-AML compliance norms for the employees of the Company.
   

Approval and Review of the KYC and AML Policy
 

• There shall be an annual review of the Policy by the Board of Directors

• Board of Directors can at any time modify or amend, either the whole or any part of Policy
   

Applicability
 

This policy is applicable to all categories of products and services offered by the Company. All the employees of the Company, while dealing with its customers, will have to ensure adherence with the KYC and AML Policy.
 

DEFINITIONS
 

“Aadhaar number” means an identification number issued to an individual under sub-section (3) of Section 3 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016), and includes any alternative virtual identity generated under sub-section (4) of that section.
 

Aadhaar Act means Aadhaar (Targeted Delivery of Financial and Other Subsidies Benefits and Services) Act, 2016.
 

“Authentication”, in the context of Aadhaar authentication, means the process as defined under sub-section (c) of section 2 of the Aadhaar Act.
 

Beneficial Owner (BO)
 

• Where the customer is a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/ have a controlling ownership interest (means ownership of/entitlement to more than 25 per cent of the shares or capital or profits of the company) or who exercise control (right to appoint majority of the directors or to control the management or policy decisions) through other means.

• In case of a partnership firm, the BO is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/ have ownership of/ entitlement to more than 15 per cent of capital or profits of the partnership.

• In case of an unincorporated association or body of individuals, the BO is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/ have ownership of/ entitlement to more than 15 per cent of the property or capital or profits of the entity.

  Explanation: Term ‘body of individuals’ includes societies. Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official.

   

• In case of a trust, the identification of BO shall include identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.
   

Cash Transaction Report (CTR)- CTR will include the following:
 

• all cash transactions of the value of more than Rs.10 lakh or its equivalent in foreign currency;

• all series of cash transactions integrally connected to each other which have been individually valued below Rs.10 lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds Rs.10 lakh or its equivalent in foreign currency.
   

Certified Copy of Officially Valid Document (OVD) shall mean comparing the copy of OVD with the original and recording the same as per the extant law and guidelines / directions.
 

Central KYC Records Registry (CKYCR) means an entity defined under Rule 2(1)(aa) of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, to receive, store, safeguard and retrieve the KYC records in digital form of a customer.
 

Counterfeit Currency Transaction Cash transactions where forged or counterfeit Indian currency notes have been used as genuine. These transactions should also include transactions where forgery of valuable security or documents has taken place.
 

Counterfeit Currency Note Report Quarterly Report on status of receipt of counterfeit note received by any NBFC to RBI;
 

Customer means a person who is engaged in a financial transaction or activity with the Company and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting.
 

Customer Due Diligence (CDD) means identifying and verifying the customer and the beneficial owner.
 

Designated Director means the Managing Director or a whole-time Director designated by the Board of Directors of the Company to ensure overall compliance with the obligations prescribed by the PMLA and the Rules.
 

Digital KYC means the capturing live photo of the customer and officially valid document or the proof of possession of Aadhaar, where offline verification cannot be carried out, along with the latitude and longitude of the location where such live photo is being taken by an authorized officer of the Company as per the provisions contained in the PMLA. The Company will adhere to the applicable requirements in this regard which may be prescribed by the Government/ the Reserve Bank of India (“RBI”) from time to time.
 

Equivalent E-document means an electronic equivalent of a document, issued by the issuing authority of such document with its valid digital signature including documents issued to the digital locker account of the client as per rule 9 of the Information Technology (Preservation and Retention of Information by Intermediaries Providing Digital Locker Facilities) Rules, 2016.
 

Know Your Client (KYC) Identifier means the unique number or code assigned to a customer by the Central KYC Records Registry
 

“FATCA” means Foreign Account Tax Compliance Act of the United States of America (USA) which, inter alia, requires foreign financial institutions to report about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
 

Non-face-to-face customers- Customers who open accounts without visiting the branch/ offices of the Company or meeting its officials but will not include customers whose account has been opened as per Video Customer Identification Procedure.
 

Officially valid document (OVD)- Any document defined as OVD under rule 2(l)(d) of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 and the amendments thereto (“PML Rules”) or any document as may be specifically prescribed by the Reserve Bank of India (“RBI”) as per the applicable regulations. Such OVD will be considered valid for verifying identity and proof of address of individual customer/ beneficial owner/ authorized signatory/ power of attorney holder.
 

Please refer to Annexure 1 for list of OVDs and other documents which are currently considered valid for verifying identity and proof of address of customers.
 

Offline Verification means the process of verifying the identity of the Aadhaar number holder without authentication, through such offline modes as may be specified by the Aadhaar regulations.
 

On-going Due Diligence- Regular monitoring of transactions in accounts to ensure that they are consistent with the customers’ profile and source of funds.
 

Periodic Updation means steps taken to ensure that documents, data or information collected under the CDD process is kept up-to-date and relevant by undertaking reviews of existing records at periodicity prescribed by the RBI or the PMLA and the Rules thereunder.
 

Person shall have the meaning as defined under KYC policy of RBI (and any amendment from time to time by RBI) which at present is as follows:
 

‘Person’ shall include:
 

• an Individual;

• a Hindu Undivided Family;

• a Company;

• a Trust

• a Firm;

• an association of persons or a body of individuals, whether incorporated or not;

• every artificial juridical person, not falling within any one of the above person (a to e);

• any agency, office or branch owned or controlled by any one of the above persons (a to f)
   

Politically Exposed Persons (PEPs) are individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States/Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc.
 

Principal Officer (PO)- A senior official designated by the Board of Directors of the Company for overseeing and managing the KYC & AML policies and processes. The PO will be responsible for ensuring compliance, monitoring transactions, and sharing and reporting information as required under the law/regulations.
 

Suspicious transaction means a “transaction”, including an attempted transaction, whether or not made in cash, which, to a person acting in good faith:
 

• gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime, regardless of the value involved; or

• appears to be made in circumstances of unusual or unjustified complexity; or

• appears to have no economic rationale or bona fide purpose; or

• gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.
   

Explanation: Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who finance or are attempting to finance terrorism.
 

Transaction means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes:
 

• opening of an account;

• deposits, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means;

• the use of a safety deposit box or any other form of safe deposit;

• entering into any fiduciary relationship;

• any payment made or received in whole or in part of any contractual or other legal obligation;

• establishing or creating a legal person or legal arrangement.
   

Video based Customer Identification Process (V-CIP) is an alternate method of customer identification with facial recognition and customer due diligence by an authorized official of the Company by undertaking seamless, secure, live, informed-consent based audio-visual interaction with the customer to obtain identification information required for CDD purpose, and to ascertain the veracity of the information furnished by the customer through independent verification and maintaining audit trail of the process. Such processes complying with prescribed standards and procedures shall be treated on par with face-to-face Customer Identification Procedure.
 

POLICY STANDARDS
 

Compliance of KYC policy
 

• Senior Management for the purpose of KYC Compliance shall mean Designated Director, Principal Officer and executive members of Transaction Screening Committee

• Designated Director on recommendation of Principal Officer shall be responsible for setting up the policies which will be approved by the Board on recommendation of Transaction Screening Committee

• Principal Officer with support of executive members of Transaction screening committee be responsible for overseeing the KYC operations of the Company

• Field Sales, operations and credit team shall be responsible for ensuring that policy is followed

• Internal Audit function will review the KYC operations as mentioned in paragraph 3.4.3 of the Policy

• Quarterly audit notes and compliance shall be submitted to the Audit Committee

• Decision-making functions of determining compliance with KYC norms shall not be outsourced
   

The KYC and AML Policy has the following 4 key elements:
 

• Criteria for Customer Acceptance (CAP).

• Risk Management from Money Laundering Risk perspective.

• Customer Identification Procedures (CIP).

• Procedures for monitoring of transactions, as applicable.
   

Customer Acceptance Policy (CAP) and Customer Due Diligence (CDD)
 

The Company will adhere to the following criteria for acceptance of customers:
 

• The Company will not open any account(s) in anonymous, fictitious or 'benami' name(s) and where proper due diligence cannot be applied.

• No account will be opened where the Company is unable to apply required CDD measures, either due to non-cooperation of the customer or non-reliability of the documents/information furnished by the customer.

• No transaction or account-based relationship will be undertaken without following appropriate CDD procedure.

• The mandatory information to be sought for KYC purpose while opening an account and during the periodic updation will be specified.

• A Unique Customer Identification Code (UCIC) shall be allotted while entering into new relationships with individual customers

• CDD procedure is being applied at the account level & thus, if an existing KYC compliant customer of GFL desires to open another account with GFL, there shall be no need for a fresh CDD exercise

• Optional or additional information will be obtained with consent of the customer.

• CDD Procedure will be followed for all joint account holders also.

• A customer will be permitted to act on behalf of another person/ entity in accordance with the legal requirements.

• Identity of the customer should not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations, etc. For this purpose, the Company will maintain lists of individuals or entities issued by RBI, United Nations Security Council, UAPA other regulatory & enforcement agencies etc. Details of accounts/ customers bearing resemblance with any of the individuals/ entities in such list shall be treated as suspicious and reported.

• PAN number will be verified from the verification facility of the issuing authority.

• Where an equivalent e-document is obtained from the customer, the Company shall verify the digital signature as per the provisions of the Information Technology Act, 2000 (21 of 2000).

• In order to avoid fictitious and fraudulent applications of the customers and to achieve a reasonable degree of satisfaction as to the identity of the customer, the Company will conduct appropriate due diligence. Beneficiary of the relationship/ account shall also be identified.

• The nature and extent of basic due diligence measures to be conducted at the time of establishment of account opening/ relationship, will depend upon the risk category of the customers and involve collection and recording of information by using reliable independent documents, data or any other information. This may include identification and verification of the applicant and wherever relevant, ascertaining of occupational details, legal status, ownership and control structure and any additional information in line with the assessment of the risks posed by the applicant and the applicant’s expected use of the Company’s products and services from an AML perspective.

• The Company may rely on third party verification subject to the conditions prescribed by the RBI or the PMLA and the Rules thereunder in this regard.

• For non-face-to-face customers, appropriate due diligence measures (including certification requirements of documents, if any) will be devised for identification and verification of such customers.

• The information collected from customers for the purpose of opening of account shall be treated as confidential and details thereof shall not be divulged for the purpose of cross selling, or for any other purpose without expressed consent of the customer.

• Appropriate Enhanced Due Diligence (“EDD”) measures shall be adopted for high risk customers from AML perspective, especially those for whom the sources of funds are not clear and customers who are Politically Exposed Persons (“PEPs”).

• In respect of unusual or suspicious transactions/applications or when the customer moves from a low risk to a high-risk profile, appropriate EDD measures shall be adopted.

• Where the Company is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the Company may consider closing the account or terminating the business relationship. However, the decision to close an existing account shall be taken at the Principal Officer’s level, after giving due notice to the customer explaining the reasons for such a decision.
   

The aspects mentioned in the CAP would be reckoned while evolving the KYC/AML procedures for various types of customers and products. However, while developing the KYC/CDD procedures, the Company will ensure that its procedures do not become too restrictive or pose significant difficulties in availing its services by deserving general public, especially the financially and socially disadvantaged sections of society.
 

Risk Management
 

The Company will ensure that it has an effective and appropriate KYC procedures. The overall KYC/ AML program will cover proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibilities will be explicitly allocated within the Company to ensure that the Company’s policies and procedures are implemented effectively.
 

Risk Categorization
 

The Company will categorize its customers into low, medium and high-risk category based on the assessment, profiling and perceived money laundering risk. The parameters such as customer’s identity, social/ financial status, nature of business activity, and information about the clients’ business etc. will be considered for the assessment.
 

Periodic Updation
 

The Company will conduct periodic updation of KYC documents at least once in every 2 years for high risk customers, once in every 8 years for medium risk customers and once in every 10 years for low risk customers in any of the following manner:
 

• PAN verification from the verification facility available with the issuing authority.

• Authentication, of Aadhaar Number already available with the Company with the explicit consent of the customer in applicable cases.

• In case identification information available with Aadhaar does not contain current address an OVD containing current address may be obtained.

• Certified copy of OVD containing identity and address shall be obtained at the time of periodic updation from individuals except those who are categorised as 'low risk'. In case of low risk customers when there is no change in status with respect to their identities and addresses, a self-certification to that effect shall be obtained.

• In case of Legal entities, the Company should review the documents sought at the time of opening of account and obtain fresh certified copies.

• The Company will not insist on the physical presence of the customer for the purpose of furnishing OVD or furnishing consent for Aadhaar authentication unless there are sufficient reasons that physical presence of the account holder/holders is required to establish their bona-fides. Normally, OVD/ Consent forwarded by the customer through mail/ post, etc., shall be acceptable.

• The Company will provide acknowledgment with date of having performed KYC updation.

• The time limits prescribed above would apply from the date of opening of the account/ last verification of KYC.
   

Internal Audit and Assurance
 

To provide reasonable assurance that its KYC and AML procedures are functioning effectively, audit of its KYC and AML processes will also be covered under the scope of Internal Audit of the Company. The audit findings and compliance thereof will be put up before the Audit Committee of the Board till closure of audit findings.
 

Money Laundering (“ML”) and Terrorist Financing (“TF”) Risk Assessment
 

It is understood that the ML and TF risks for the Company are likely to be low due to the following reasons:
 

• The Company does not operate in other countries/ geographies;

• The Company does not source/ originate loans from other countries/ geographies and its customer base consists of Indian nationals only;

• The Company extends loans to identified borrowers for which rigorous KYC checks have been put in place

• The company verifies the end-use of the loan

• The Company does not offer banking, liabilities and insurance products; and

• The Company offers loans/ credit facilities with defined end-use.
   

However, in accordance with the regulatory requirements, the Company will carry out ML and TF Risk Assessment exercise periodically to identify, assess and take effective measures to mitigate money laundering and terrorist financing risk to which the Company may be exposed to. Such internal risk assessment should be commensurate to its size, geographical presence, complexity of activities/ structure, etc.
 

Such assessment process will consider various relevant risk factors and will take cognizance overall sector-specific vulnerabilities, if any, that the regulator/supervisor may share. Accordingly, it will frame its mitigation plan also. It should involve the relevant functions and have the following stages:
 

• Identification- Development of list of potential risks or risk factors drawn from known/ suspected threats or vulnerabilities. For this purpose, various important aspects of the KYC Policy (non-compliance of which may pose threat to the Company) will be identified along with the risks which the Company may be exposed to due to the same.

• Analysis- Implementation of key requirements under the KYC Policy should be analyzed. This stage should analyse the likelihood and the impact of each of the identified risks. It will help in assigning priority/ importance to each of the risks.

• Evaluation- It should involve taking the results found during the analysis process to determine priorities for addressing the risks. These priorities should contribute to development of a strategy for their mitigation. A typical Risk Evaluation matrix would be as under:
   

The Company shall conduct the ML and TF Risk Assessment at least once in a year. The outcome of the ML and TF Risk Assessment will be put up to the Audit Committee or to the Transaction Screening Committee.
 

Customer Identification
 

The Company shall undertake identification of customers in the following cases:
 

• Commencement of an account-based relationship with a customer.

• When there is a doubt about the authenticity or adequacy of the customer identification data it has obtained.

• Selling third party products as agents, selling their own products or any other product for more than rupees fifty thousand.

• Carrying out transactions for a non-account-based customer where the amount involved is equal to or exceeds Rs.50,000/-, whether conducted as a single transaction or several transactions that appear to be connected.

• When it has reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/-.
   

Reliance on customer due diligence done by third party
 

For the purpose of verifying the identity of customers at the time of commencement of an account-based relationship, the Company, may at their option, rely on customer due diligence done by a domestic third party, subject to the following conditions:
 

• Records or the information of the customer due diligence carried out by the third party is obtained within two days from the third party or from the Central KYC Records Registry;

• Copies of identification data and other relevant documentation relating to the customer due diligence requirements shall be made available from the third party upon request without delay;

• The third party is regulated, supervised or monitored for, and has measures in place for, compliance with customer due diligence and record-keeping requirements in line with the requirements and obligations under the PMLA  

• The third party shall not be based in a country or jurisdiction assessed as high risk and

• The ultimate responsibility for customer due diligence and undertaking enhanced due diligence measures, as applicable, will be with the Company.
   

Customer Due Diligence (CDD) Procedures
 

The Company will ensure compliance with the regulatory/ statutory requirements with respect to the Customer Identification Procedure to be carried out at different stages, i.e. while establishing a relationship; carrying out a financial transaction or when the Company has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.
 

Customer identification means identifying the customer and verifying his/ her identity by using reliable, independent source documents, data or information. The Company will obtain sufficient information necessary to establish, the identity of each new customer, whether regular or occasional and the purpose of the intended nature of relationship.
 

CDD Procedure in case of Individuals
 

Documents/ Information to be collected
 

From an individual (who is prospective customer OR a Beneficial Owner/ Authorised Signatory/ Power of Attorney Holder related to any legal entity) the following documents/ information will be obtained:
 

• Recent photograph;

• Certified copy of Permanent Account Number (PAN) OR the equivalent e-document thereof;

• Certified copy of one of the OVDs as defined above to be taken for verification of the identity and the address OR the equivalent e-document thereof; an  

• Other document including in respect of the nature of business and financial status of the client OR the equivalent e-document thereof, as may be required by the Company.
   

Note:

• If PAN is not availed then Form No. 60 as defined in Income-tax Rules, 1962 may be taken;

• Aadhaar Offline Verification- The Company, being a non-bank, may carry out offline verification of a customer if he is desirous of undergoing Aadhaar offline verification for identification purpose. However, where its customer submits his Aadhaar number, the Company will ensure such customer to redact or blackout his Aadhaar number through appropriate means where the authentication of Aadhaar number is not required under section 7 of the Aadhaar Act.

• Authentication using e-KYC authentication facility provided by the UIDAI- As and when the Company is authorized to conduct authorization through e-KYC authentication facility provided by the UIDAI, it may conduct such authorization and use the e-KYC facility in accordance with the conditions prescribed under the PMLA/ the Aadhaar Act/ the KYC & AML Guidelines.

• If the customer provides an equivalent e-document of any OVD, the Company should verify the digital signature as per the provisions of the Information Technology Act, 2000 (21 of 2000) and any rules issues thereunder and take a live photo as specified under Digital KYC Process defined below (at sub-para 3.6.1.3).

  The Company may also carry-out KYC verification under Digital KYC Process defined below (at sub-para 3.6.1.3).

   

   

Video based Customer Identification Process (“V-CIP”)
 

The Company may undertake live V-CIP, to be carried out by an official of the Company, for establishment of an account-based relationship with an individual customer, after obtaining his informed consent. The Company, if implements V-CIP, will adhere to the extant applicable requirements.
 

Digital KYC Process
 

In case Digital KYC Process is adopted by the Company, it will ensure compliance with the following requirements:
 

• It will use an Application to be made available at customer touch points for undertaking KYC of their customers and the KYC process shall be undertaken only through this authenticated Application of the Company.

• The access of such Application should be controlled by the authorized persons of the Company. The Application shall be accessed only through login-id and password or Live OTP or Time OTP controlled mechanism defined by the Company.

• The customer, for the purpose of KYC, shall visit the location of the Authorized Official of the Company (“Authorized Official”) vice-versa. The original OVD should be in possession of the customer.

• It should be ensured that the Live photograph of the customer is taken by the Authorized Official and the same photograph is embedded in the Customer Application Form (CAF). Further, a water-mark in readable form having CAF number, GPS coordinates, Authorized Official’s name, unique employee Code (assigned by REs) and Date (DD:MM:YYYY) and time stamp (HH:MM:SS) should be put on the captured live photograph of the customer.

• The Application should have the feature that only live photograph of the customer is captured and no printed or video-graphed photograph of the customer is captured. The background behind the customer while capturing live photograph should be of white colour and no other person shall come into the frame while capturing the live photograph of the customer.

• The live photograph of the original OVD or proof of possession of Aadhaar (where offline verification cannot be carried out), placed horizontally, shall be captured vertically from above and water-marking in readable form as mentioned above shall be done. No skew or tilt in the mobile device should be there while capturing the live photograph of the original documents.

• The live photograph of the customer and his original documents shall be captured in proper light so that they are clear.

• Thereafter, all the entries in the CAF should be filled as per the documents and information furnished by the customer. In those documents where Quick Response (QR) code is available, such details can be auto-populated by scanning the QR code instead of manual filing the details. For example, in case of physical Aadhaar/e-Aadhaar downloaded from UIDAI where QR code is available, the details like name, gender, date of birth and address can be auto-populated by scanning the QR available on Aadhaar/e-Aadhaar.

• Once the above-mentioned process is completed, a One Time Password (OTP) message containing the text that ‘Please verify the details filled in form before sharing OTP’ shall be sent to customer’s own mobile number. Upon successful validation of the OTP, it will be treated as customer signature on CAF. However, if the customer does not have his/her own mobile number, then mobile number of his/her family/relatives/known persons may be used for this purpose and be clearly mentioned in CAF. In any case, the mobile number of the Authorized Official should not be used for customer signature. The Company will check that the mobile number used in customer signature shall not be the mobile number of the Authorized Official.

• The Authorized Official should provide a declaration about the capturing of the live photograph of customer and the original document. For this purpose, the authorized official shall be verified with One Time Password (OTP) which will be sent to his official mobile number. Upon successful OTP validation, it shall be treated as the Authorized Official’s signature on the declaration. The live photograph of the Authorized Official shall also be captured in this authorized officer’s declaration.

• Subsequent to all these activities, the Application should give information about the completion of the process and submission of activation request to activation officer of the Company, and also generate the transaction-id/reference-id number of the process. The Authorized Official shall intimate the details regarding transaction-id/reference-id number to customer for future reference.

• The Authorized Official should check and verify that: (i) information available in the picture of document is matching with the information entered by the Authorized Official in CAF. (ii) live photograph of the customer matches with the photo available in the document.; and (iii) all of the necessary details in CAF including mandatory field are filled properly.

• On Successful verification, the CAF shall be digitally signed by the Authorized Official who will take a print of CAF, get signatures/thumb-impression of customer at appropriate place, then scan and upload the same in system. Original hard copy may be returned to the customer.
   

Simplified procedure for opening accounts of Individuals
 

In case a person who desires to open an account is not able to produce any of the OVDs, the Company may at its discretion open accounts subject to the following conditions:
 

• The Company shall obtain a self-attested photograph from the customer.

• The authorized officer of the Company should certify under his signature that the person opening the account has affixed his signature or thumb impression in his presence.

• The account shall remain operational initially for a period of 12 months, within which CDD as prescribed above should be carried out.

• Balances in all their accounts taken together shall not exceed Rs.50,000/- at any point of time.

• The total credit in all the accounts taken together shall not exceed Rs.1,00,000/- in a year.

• The customer shall be made aware that no further transactions will be permitted until the full KYC procedure is completed in case Directions (d) and (e) above are breached by him.

• When the balance reaches Rs.40,000/- or the total credit in a year reaches Rs.80,000/-, The customer shall be notified that appropriate documents for conducting the KYC must be submitted otherwise the operations in the account shall be stopped when the total balance in all the accounts taken together exceeds the limits prescribed in direction (d) and (e) above.
   

On-boarding the Borrowers through Central KYC Registry
 

Company shall endeavor to provide option to the applicants to be on-boarded through verifying their antecedents through Central KYC Registry.

CDD Measures for Legal Entities

For due diligence with respect to legal entities, the Company will obtain the documents as listed in the Annexure 1.
 

Identification of Beneficial Owner
 

For opening an account of an entity who is not a natural person, the beneficial owner(s) (as defined above) shall be identified and all reasonable steps to verify his/her identity shall be undertaken. While doing so, the Company will keep the following in view:
 

• Where the customer or the owner of the controlling interest is a company listed on a stock exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.

• In cases of trust/ nominee or fiduciary accounts, where it is determined that the customer is acting on behalf of another person as trustee/ nominee or so, identity of the intermediaries and of the persons on whose behalf he is acting, as also details of the nature of the trust or other arrangements in place will be obtained.
   

Enhanced Due Diligence (EDD) Procedures
 

Accounts of non-face-to-face customers: The Company will ensure the first payment is done through any of the KYC Compliant account through banking channels.
 

Accounts of Politically Exposed Persons (PEPs): If the Company decides to establish a business relationship with PEPs, it will ensure the following:
 

• sufficient information including information about the sources of funds of PEPs is gathered;

• the identity of the person shall have been verified before accepting the PEP as a customer;

• the decision to open an account for a PEP is taken at a senior level in accordance with the Company’s procedures;

• all such accounts will be classified as High Risk and will be subjected to required due diligence and monitoring, as applicable;

• if it gets confirmed to the Company that an existing customer or the beneficial owner of an existing account has subsequently become a PEP, an approval from a senior official of the Company will be obtained to continue the business relationship;

• further, such existing accounts which get classified PEPs subsequently will be subjected to enhanced due diligence, as applicable.

  
  

The above will also be applicable to accounts where a PEP is the beneficial owner.
 

Monitoring of Transactions/ On-Going Due Diligence
 

Ongoing monitoring is an essential element of effective KYC procedures. The Company can effectively control and reduce its risk only if it has an understanding of the normal and reasonable activity of the customer so that it can identify transactions that fall outside the regular pattern. The Company will put in place a process to identify and review complex and unusual transactions/ patterns which have no apparent economic or visible lawful purpose, or transactions that involve large amounts of cash or are inconsistent with the normal and expected activity of the customer.
 

Appointment of the Designated Director and the Principal Officer
 

• Designated Director- The Company will nominate a “Designated Director” to ensure compliance with the obligations prescribed by the PMLA and the Rules thereunder.

• Principal Officer- The Company will designate one of its senior officials as the ‘Principal Officer' who will be responsible for ensuring compliance, monitoring transactions, and sharing and reporting information as required under the law/ regulations.
   

The name, designation and address of Designated Director and Principal Officer shall be communicated to FIU-Ind.
 

Reporting the Financial Intelligence Unit-India (FIU-IND)
 

The Company will report information of transaction referred to in clause (a) of sub-section (1) of section 12 of PMLA read with Rule 3 of the PML Rules relating to cash and suspicious transactions, etc., to the Director, Financial Intelligence Unit-India (FIU-IND). The Principal officer shall furnish information, where the principal officer of the Company has reason to believe that a single transaction or series of transactions integrally connected to each other have been valued below the prescribed value to so to defeat the provisions of this section, in respect of such transactions to the Director within the prescribed time.
 

The formats for reporting the requisite information in respect of cash transactions and suspicious transactions as provided by FIU shall be followed as prescribed from time to time.
 

For determining integrally connected cash transactions, the Company shall take into account all individual cash transactions in an account during a calendar month, where either debit or credit summation, computed separately, exceeds rupees ten lakh during the month.
 

All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine shall be reported by the Principal Officer to FIU-IND immediately. These cash transactions shall also include transactions where forgery of valuable security or documents has taken place and may be reported to FIU-IND in plain text form.
 

The Company will pay special attention to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. It is further clarified that the background including all documents/office records/memorandums pertaining to such transactions and purpose thereof shall, as far as possible, be examined and the findings at branch as well as Principal Officer level shall be properly recorded. These records are required to be preserved for five years as is required under PMLA, 2002. Such records and related documents shall be made available to help auditors in their work relating to scrutiny of transactions and also to NHB/other relevant authorities.
 

It is likely that in some cases transactions are abandoned/aborted by customers on being asked to give some details or to provide documents. The Company shall report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.
 

The Company shall make STRs if they have reasonable ground to believe that the transaction involve proceeds of crime generally irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, 2002.
 

The Company shall not put any restriction on operations in the accounts where an STR has been filed. The Company shall keep the fact of furnishing of STR strictly confidential. It shall ensure that there is no tipping off to the customer at any level.
 

In accordance with the requirements under the PMLA, the Company will furnish the following reports, as and when required, to the Director, Financial Intelligence Unit-India (FIU-IND):
 

• Cash Transaction Report (CTR)- If any such transactions detected, Cash Transaction Report (CTR) for each month by 15th of the succeeding month.

• Counterfeit Currency Report (CCR)- All such cash transactions where forged or counterfeit Indian currency notes have been used as genuine as Counterfeit Currency Report (CCR) for each month by 15th of the succeeding month.

• Suspicious Transactions Reporting (STR)- The Company will monitor transactions to identify potentially suspicious activity. Such triggers will be investigated, and any suspicious activity will be reported to FIU-IND. The Company will file the Suspicious Transaction Report (STR) to FIU-IND within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. However, in accordance with the regulatory requirements, the Company will not put any restriction on operations in the accounts where an STR has been filed.
   

The Company will maintain confidentiality in investigating suspicious activities and while reporting CTR/ CCR/ STR to the FIU-IND/ higher authorities. However, the Company may share the information pertaining to the customers with the statutory/ regulatory bodies and other organizations such as banks, credit bureaus, income tax authorities, local govt. authorities etc.
 

Record Management
 

Record-keeping requirements- The Company shall ensure maintenance of proper record of transactions required under PMLA as mentioned below: 
 

• maintain all necessary records of transactions between the RE and the customer, both domestic and international, for at least five years from the date of transaction;

• preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended;

• make available the identification records and transaction data to the competent authorities upon request;

• introduce a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005);

• all cash transactions of the value of more than Rs.10 lakh or its equivalent in foreign currency;

• all series of cash transactions integrally connected to each other which have been individually valued below Rs.10 lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds Rs.10 lakh or its equivalent in foreign currency;

• all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transactions;

• all suspicious transactions whether or not made in cash; and

• records pertaining to identification of the customer and his/her address; and

• should allow data to be retrieved easily and quickly whenever required or when requested by the competent authorities.
   

The records should contain the following information:
 

• the nature of the transactions;

• the amount of the transaction and the currency in which it was denominated;

• the date on which the transaction was conducted; and

• the parties to the transaction.
   

Maintenance and Preservation of records The Company will:
 

• maintain all necessary records of transactions between it and the customer, both domestic and international, for at least five years from the date of transaction.

• preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended.

• maintain and preserve the following records for the required time-period as prescribed under the PMLA, either in hard or soft format:

  • all necessary records of transactions referred above; which will permit reconstruction of individual transactions so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity;

  • records pertaining to the identification of the customer and his address obtained while opening the account and during the course of business relationship.

• make available the identification records and transaction data to the competent authorities upon request.

• introduce a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005).
   

Selling Third Party Products
 

The Company, if acting as agents while selling third party products as per regulations in force from time to time, will comply with the following aspects:
 

• The identity and address of the walk-in customer shall be verified for the transactions as required under the CIP prescribed above;

• Transaction details of sale of third-party products and related records shall be maintained.

• Monitoring of transactions for any suspicious activity will be done.
   

Quoting of Pan
 

Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax Rule 114B as amended from time to time. Form 60 shall be obtained from persons who do not have PAN.
 

Customer Education
 

Seeking of certain KYC information from customers can sometimes lead to queries from the customer as to the motive and purpose of collecting such information. In this regard, the Company will take appropriate steps to educate customers on the objectives of the KYC measures.
 

Hiring of Employees and Employee Training
 

• Adequate screening mechanism as an integral part of their personnel recruitment/hiring process shall be put in place.

• On-going employee training programme shall be put in place so that the members of staff are adequately trained in the KYC Policy. The focus of the training will be different for frontline staff, compliance staff and staff dealing with new customers.
   

Adherence to the KYC and AML Guidelines by the Company’s Agents
 

• The Company’s agents or persons authorized by it, for the its business, will be required to be compliant with the applicable KYC & AML Guidelines.

• All requisite information shall be made available to the RBI to verify the compliance with the applicable KYC & AML Guidelines.

• The books of accounts of persons authorized by the Company including agents etc., so far as they relate to business of the company, shall be made available for audit and inspection whenever required.
   

Sharing KYC Information with Central KYC Records Registry (CKYCR)

The Company will capture the KYC information/ details as the KYC templates and share the same with the CKYCR in the manner as prescribed in the Prevention of Money Laundering (Maintenance of Records) Rules, 2005.

Reporting Requirement Under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS)

The Company, if applicable, will adhere to the provisions of Income Tax Rules 114F, 114G and 114H. If the Company becomes a Reporting Financial Institution as defined in Income Tax Rule 114F, it will take requisite steps for complying with the reporting requirements in this regard.

Compliance with Section 51A of Unlawful Activities (Prevention) Act, 1967

The company will ensure compliance with Section 51A of UAPA Act, 1987 by screening the prospective and existing account holders for UN Sanction List or any other list as per UAPA Act, 1987. In event, any account holder resembles the name of as per the list it will be reported to FIU-IND and Ministry of Home Affairs. Further, other requirement including freezing of assets shall be followed by company.
 

Secrecy Obligations and Sharing of Information

Company shall maintain confidentiality of information as provided in Section 45NB of RBI Act 1934.
 

Annexure 1
 

List of Documents considered valid for verifying identity and proof of address of prospective customers

S. N.	Type of customer	Documents
	Individual- Resident Indian (as a Customer/ Beneficial Owner/ Authorized Signatory/ Power of Attorney holder for another individual/ entity)	Recent photograph; Certified copy of Permanent Account Number (PAN) OR the equivalent e-document thereof; Certified copy of one of the OVDs to be taken for verification of the identity and the address OR the equivalent e-document thereof; and Other document including in respect of the nature of business and financial status of the client OR the equivalent e-document thereof, as may be required by the Company. OVD shall mean the following:   Proof of possession of Aadhaar number, in such form as issued by the Unique Identification Authority of India (UIDAI) Passport Driving License Voter's Identity Card issued by the Election Commission of India Job Card issued by NREGA duly signed by an officer of the State Government Letter issued by the National Population Register containing details of name and address.   “Provided that in case the OVD furnished by the customer does not contain updated address, the following documents shall be deemed to be OVDs for the limited purpose of proof of address:   utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill); property or Municipal tax receipt; pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address; letter of allotment of accommodation from employer issued by State Government or Central Government Departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies and leave & license agreements with such employers allotting official accommodation. Provided, the customer shall submit OVD with current address within a period of three months of submitting the alternate documents specified above. Explanation: For the purpose of this clause, a document shall be deemed to be an OVD even if there is a change in the name subsequent to its issuance provided it is supported by a marriage certificate issued by the State Government or Gazette notification, indicating such a change of name.
	Individual- Non- Resident Indian (NRI)/ Persons of Indian Origin (PIOs)	Recent photograph; Certified copy of Permanent Account Number (PAN) OR the equivalent e-document thereof; In case of Indian Passport Holder- Certified copy of Valid Indian Passport along with copy of valid Employment/ Residence/ Student/ Dependent visa copy or work/ Residence Permit copy; In case of Foreign Password holder Certified copy of valid Foreign Passport along with OCI (Overseas Citizen if India) card / PIO (Person of Indian Origin) card; Certified copy of one of the OVDs to be taken for verification of the address OR the equivalent e-document thereof, if additionally required; Valid KYC for the Power of Attorney holder as detailed in the previous para; and Other document including in respect of the nature of business and financial status of the client OR the equivalent e-document thereof, as may be required by the Company. Further, the original certified copy of OVD, certified by any one of the following, may be obtained:   Authorized officials of overseas branches of Scheduled Commercial Banks registered in India; Branches of overseas banks with whom the Company may have relationships; Notary Public abroad; Court Magistrate; Judge; Indian Embassy/ Consulate General in the country where the non-resident customer resides.
	Sole Proprietary firms	In addition to OVD, PAN and photograph for the proprietor as an individual, any two of the following documents OR the equivalent e-document thereof, as a proof of business/ activity in the name of the proprietary firm shall also be obtained:   Registration certificate, if registered; Certificate/ License issued by the municipal authorities under Shop and Establishment Act; GST and income tax returns ; CST/VAT/GST certificate, whenever applicable Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities / GST authorities; IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT/Licence/certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute; License/certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute; Complete Income Tax Return (not just the acknowledgement) in the name of the sole proprietor where the firm's income is reflected, duly authenticated/ acknowledged by the Income Tax authorities; Utility bills such as electricity, water, landline telephone bills etc. (not older than 2 months)   Note:   In cases where the Company is satisfied that it is not possible to furnish two such documents as mentioned above, it may accept only one of those documents as proof of business/ activity, subject to contact point verification and collection of such other information and clarification as would be required to establish the existence of such firm. Further, it should be satisfied that the business activity has been verified from the address of the proprietary concern.
	Company	In addition to OVD, PAN and photograph of the director/ manager/ employee (as an individual) holding authority to transact on the applicant company’s behalf; certified copies of the following documents OR the equivalent e-document thereof:   Certificate of incorporation; Memorandum and Articles of Association; Permanent Account Number of the Company; and A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf.
	Partnership Firm	In addition to OVD, PAN and photograph of the partner/ manager/ employee (as an individual) holding authority to transact on the applicant firm’s behalf; certified copies of the following documents OR the equivalent e-document thereof:   Document evidencing authority of the person to act on behalf of the entity; Registration Certificate, if registered; Partnership Deed; and Permanent Account Number of the partnership firm.
	Trust	In addition to OVD, PAN and photograph of the trustee/ beneficiary/ person (as an individual) holding an attorney to transact on the trust’s behalf; certified copies of the following documents OR the equivalent e-document thereof:   Document evidencing authority of the person to act on behalf of the Trust; Registration Certificate, if registered; Trust Deed; and Permanent Account Number or Form No.60 of the trust.
		In addition to OVD, PAN and photograph of the person (as an individual) holding an attorney to transact on the entity’s behalf; certified copies of the following documents OR the equivalent e-document thereof:   Permanent Account Number or Form No. 60 of the unincorporated association or a body of individuals; and Such information as may be required by the Company to collectively establish the legal existence of such an association or body of individuals.
	Other entities not specifically covered above, such as societies, universities and local bodies like village panchayats	In addition to OVD, PAN and photograph of the person (as an individual) holding an attorney to transact on the entity’s behalf; certified copies of the following documents OR the equivalent e-document thereof:   Document evidencing authority of the person to act on behalf of the entity; and Such documents as may be required by the Company to establish the legal existence of such an entity/ juridical person.

Introduction

Pursuant to Section 178 of the Companies Act, 2013 (the “Act”) and the Rules framed thereunder (as amended from time to time), the Board of Directors of every listed public Company and the following classes of companies are required to constitute a Nomination and Remuneration Committee (Committee) of the Board and is required to formulate a policy ensuring the criteria for evaluation of performance and determination of remuneration based on the performance of Directors, KMPs and Senior Management.

• The public companies with a paid up capital of ten crore rupees or more;

• the public companies having turnover of one hundred crore rupees or more;

• the public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

  
  

Further, Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 as updated from time to time also require an NBFC to constitute a Nomination Committee.

Scope & Application

The Policy is applicable for appointment, terms of appointment and continuation of appointment and review of employment terms of:

• Directors viz. Executive, Non-Executive and Independent;

• Key Managerial Personnel

• Senior Management

  
  

Purpose

The key objectives of the Policy are as follows:

• To formulate the criteria for determining qualifications, competencies, positive attributes and independence for appointment of a Director (Executive / Non-Executive) and recommend to the Board of Directors of the Company (the “Board”), policies relating to the remuneration (payable in whatever form) of the Directors, Key Managerial Personnel and senior management;

• To ensure that the Directors meet the "Fit & Proper" criteria at the time of appointment, and on a continuing basis;

• To guide the Company in relation to appointment, removal of Directors & KMPs & evaluation of their performance;

• To formulate criteria for evaluation of the members of the Board and provide necessary report to the Board for further its evaluation by them;

• To ensure that remuneration to Directors, KMPs & Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals;

• To retain, motivate and promote talent and to ensure long term sustainability and create competitive advantage.

• To carry out evaluation of the performance of Directors & KMPs & and to provide for reward(s) directly linked to their effort, performance, dedication and achievement relating to the Company’s operations;

• To assist the Board to regularly review the policies and plans; and

• To perform such other functions as may be necessary or appropriate for the performance of its duties and mandated by the Board from time to time

  
  

Definitions

• “Act” means the Companies Act, 2013 and the Rules framed thereunder, as amended from time to time.

• “Board” means the Board of Directors of the Company as defined under the Act.

• “Committee” means Nomination and Remuneration Committee of the Company as constituted or reconstituted by the Board.

• “Company” means Godrej Finance Limited.

• “Directors” shall mean Directors of the Company.

• “Independent Director” means a director referred to in Section 149 (6) of the Companies Act, 2013.

• “Key Managerial Personnel” or “KMP” means: in relation to a Company as defined sub-section 51 of Section 2 of the Companies Act, 2013, means and includes:

  • the Chief Executive Officer or the Managing Director or the manager;

  • the Company Secretary;

  • the Whole-Time Director;

  • the Chief Financial Officer;

  • such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and

  • such other officer as may be prescribed

• “Member” means a Director of the Company appointed as member of the Committee.

• “Senior Management” shall mean chief executive officer/manager, in case they are not part of the board) and shall specifically include Company Secretary and Chief Financial Officer.

  
  

Unless the context otherwise requires, words and expressions used in this policy and not defined herein but defined in the Companies Act, 2013 (as amended from time to time), shall have the meaning respectively assigned to them therein.

Appointment and removal of Directors, KMPs and Senior Management

Appointment criteria and qualifications:

• The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director, KMP or Senior Management and recommend to the Board his / her appointment, as per the Company’s Policy

• A person should possess adequate qualification, expertise and experience for the position he / she is considered for appointment. The Committee has the discretion to decide whether qualifications, expertise and experience possessed by a person is sufficient / satisfactory for the concerned position.

• The Directors for the Company must meet the fit & proper criteria at the time of appointment and on continuing basis

• The Company shall not recommend or appoint or continue the employment of any person as the Managing Director, Whole-time director or Manager within the meaning of the Act, who has attained the age of 70 (seventy) years. Provided that the appointment of such a person who has attained the age of 70 (seventy) years shall be made with the approval of the Shareholders by passing a special resolution, based on the explanatory statement annexed to the notice for the Meeting of the Shareholders for such motion indicating the justification for appointment or extension of appointment beyond the age of 70 (seventy) years.

• whether, he/ she is eligible to hold office of director under the provisions of the Act and Rules made thereunder and the applicable policies of the Company.

• The Company shall obtain necessary information and declaration from the proposed/existing directors as per the format provided under the Companies Act, 2013 and Guidelines issued by Reserve Bank of India from time to time.

• The Company shall obtain annually as on 31st March a simple declaration from the Directors the information already provided has not undergone change and where there is any change, requisite details are furnished by them forthwith.

• The Company shall ensure in public interest that the nominated/elected directors execute the deeds of covenants in the Format provided under the Guidelines issued by Reserve Bank of India from time to time.

  
  

Term / Tenure of Managing Director/Whole-time Director

The Company shall appoint or re-appoint any person as its Executive Chairman, Managing Director, Executive/ Whole-time Director or Manager for a term not exceeding 5 (five) years at a time. No re- appointment shall be made earlier than 1 (one) year before the expiry of term.

Independent Director:

• An Independent Director shall hold office for a term up to 5 (five) consecutive years on the Board and will be eligible for re-appointment on passing of a special resolution by the Company and disclosure of such appointment in the Board’s Report.

• No Independent Director shall hold office for more than two consecutive terms, but such Independent Director shall be eligible for appointment after expiry of 3 (three) years of ceasing to become an Independent Director. Provided that an Independent Director shall not, during the said period of 3 ( three) years, be appointed in or be associated with the Company in any other capacity, either directly or indirectly.

• At the time of appointment of Independent Director(s) it should be ensured that he/she shall not hold office as a director, including any alternate directorship, in more than twenty companies at the same time. Provided that the maximum number of public companies in which a person can be appointed as a director shall not exceed ten.

  
  

Evaluation

The Committee shall carry out evaluation of performance of Board, its Committees and every Director, KMP and Senior Management on an annual basis or at such regular intervals as may be considered necessary.

The evaluation of independent directors shall be done by the entire board of directors which shall includes

• performance of the directors; and

• fulfillment of the independence criteria as specified in these regulations and their Independence from the management:

  
  

Provided that in the above evaluation, the directors who are subject to evaluation shall not participate.

Removal

Due to reasons for any disqualification mentioned in the Act or under any other applicable law, rules and regulations, thereunder, the Committee may recommend, to the Board with reasons to be recorded in writing, removal of a Director, KMP or Senior Management, subject to the provisions and compliance of the said Act, such other applicable law, rules and regulations and the policy of the Company.

Retirement

The Directors, KMP and Senior Management shall retire as per the applicable provisions of the Act and the prevailing HR policy of the Company. The Board will have the discretion to retain the Director, KMP, Senior Management in the same position/ remuneration or otherwise even after attaining the retirement age, for the benefit of the Company, subject to compliance of all applicable laws.

Policy relating to the Remuneration for the Managerial Personnel, KMP and Senior Management

• The Committee may recommend remuneration / compensation / commission for KMP, Senior Managerial Personnel:

  • should be based on the level and composition of remuneration, reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;

  • considering the relationship of remuneration with performance and meets appropriate performance benchmarks; and

  • should be balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals:

• The remuneration / compensation / commission etc. to the Whole-time Director, KMP and Senior Management will be determined by the Committee and recommended to the Board for approval. The remuneration / compensation / commission etc. shall be subject to the approval of the Shareholders of the Company, wherever required.

• The remuneration and commission to be paid shall be in accordance with the conditions laid down as per the provisions of the Act.

• Increments to the existing remuneration/ compensation structure of managerial personnel may be recommended by the Committee to the Board which should be within the limits approved by the Shareholders or as laid down as per the provisions of the Act.

  
  

Remuneration to Non- Executive / Independent Director

The remuneration / commission shall be in accordance with the statutory provisions of the Act and the Rules made thereunder for the time being in force. The Non- Executive / Independent Director may receive remuneration by way of sitting fees for attending meetings of the Board or Committee thereof. Provided that the amount of such sitting fees shall not exceed the maximum amount as provided in the Act, per meeting of the Board or Committee or such amount as may be prescribed by the regulatory authorities from time to time.

Disclosures

Following disclosure of the Policy shall be made:

On website of company where the Policy shall be displayed as per regulatory directions

Along with Directors Report

Governance Framework

Board of Directors

• To consider and approve Nomination & Remuneration policy

• To consider and recommend the appointment of Directors to the Shareholders

• To consider and approve the appointment of KMPs and Senior Management

• To consider and recommend the remuneration including the increments of KMPs,

• To consider and approve the remuneration including increments of KMPs and Senior Management

• To consider and approve the minutes of the meeting

  
  

Nomination and Remuneration Committee




• To consider and recommend Nomination & Remuneration policy

• To consider and recommend the appointment of Directors, KMP and Senior Management to the Board of Directors

• To consider and recommend the remuneration including the increments of KMPs,

• All other matters incidental to policy
  

The Governance framework mentioned herein shall be read along with terms of reference / Charter of Board / Committees approved by the Board of Directors. In case of any conflict, the Terms of Reference / Charter approved by Board to be preferred




Review, Modification & Changes



• There shall be an annual review of the Policy by the Board of Directors

• Board of Directors can at any time modify or amend, either the whole or any part of Policy

 

Introduction
 

Godrej Finance Limited (“GFL” or “Company”) conducts itself with highest standard of integrity and has always followed both letter and spirit of the law.

 

Related party transactions can present a potential or actual conflict of interest which may be against the best interest of GFL and / or its shareholders. GFL does not promote any transaction which may be at variance with the established principles of Corporate Governance, or which does not meet the highest standard of ethics or integrity.
 

Scope & Application
 

This policy shall regulate transactions between the Company and its Related Parties based on the laws and regulations applicable to the Company.
 

Regulatory Requirement
 

In terms of the provisions of Section 188 of the Companies Act, 2013, the Company is required to follow the procedure as prescribed for the Related Party Transactions for which inter alia it is required to draft a Related Party Transaction Policy (Policy) as per the extant law and adhere to it for operations.
 

Purpose
 

This Policy is intended to ensure due and timely identification, approval, disclosure and reporting of transactions between GFL and any of its Related Parties in compliance with the applicable laws and regulations as may be amended from time to time.

The provisions of this Policy are designed to govern the approval process and disclosure requirements to ensure transparency while conducting Related Party Transactions and to comply with the statutory provisions in this regard.
 

Definitions
 

“Act” means Companies Act, 2013 and rules made thereunder, as amended from time to time.
 

“Arm’s Length Transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest
 

“Associate” means an enterprise in which the Company has a significant influence, but which is not a subsidiary company of the Company having such influence and includes a joint venture company and the term “Associate Company” shall be interpreted accordingly. For the purpose of this definition, “Significant Influence” means control of at least twenty percent of total share capital, or of business decisions under an agreement.
 

“Board” means the Board of Directors of the Company as defined under the Act.
 

“Committee” means Audit Committee of the Company as constituted or reconstituted by the Board of Directors of the Company in accordance with the Section 177 of the Companies Act, 2013 read with the rules framed thereunder (“Act”).
 

“Company” means Godrej Finance Limited.
 

“Company Secretary” means a person who is appointed by the Company to perform the functions of the Company Secretary under provisions of the Companies Act, 2013;
 

“Directors” means Directors appointed by the Board including executive, non-executive and independent directors.
 

“Independent Director” means a director referred to in Section 149(6) of the Companies Act, 2013.
 

“KMP” or “KMPs” means the following key managerial personnel:
 

• Executive Officer and / or Managing Director or Manager of the Company;

• Financial Officer of the Company;

• Company Secretary of the Company;

• Whole Time Director of the Company; and

• Such other officer of the Company as may be decided by the Nomination and Remuneration Committee.
   

“Member” means a Director of the Company appointed as member of the Committee.
 

“Material Related Party Transaction” means a transaction with a Related Party in relation to –
 

• sale, purchase or supply of any goods or materials, directly or through appointment of agent amounting to ten percent or more of the turnover of the company; or

• selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agent, amounting to ten percentage or more of net worth of the company; or

• leasing of property of amounting to 10% or more of the turnover of the company; or

• availing or rendering of any services, directly or through appointment of agent, amounting to ten percent or more of the turnover of the company, or

• appointment to any office or place of profit in the Company, its subsidiary company or associate company at a monthly remuneration exceeding Rs. 2.5 lakhs; or

• underwriting the subscription of any securities or derivatives thereof, of the Company exceeding 1% of the Net Worth.
   

“Ordinary course of business” means the usual transactions, customs and practices undertaken by the Company to conduct its business operations and activities and includes all such activities which the company can undertake as per Memorandum & Articles of Association. The Board and Audit Committee may lay down the principles for determining ordinary course of business in accordance with the statutory requirements and other industry practices and guidelines.
 

“Relative” with reference to a Director or KMP means persons as defined under Section 2(77) of the Companies Act, 2013 and rules prescribed thereunder.
 

“Related Party” have the meaning as defined in Section 2(76) of Companies Act, 2013, Regulation 2(1)(zb) of the Securities and Exchange Board of India (Listing Obligations And Disclosure Requirements) Regulations, 2015.
 

"Related Party Transaction" means the transaction under Section 188 of the Companies Act, 2013 encompasses all contracts or arrangements with a Related Party and have the meaning as defined under Regulation 2(1)(zc) of the Securities and Exchange Board Of India (Listing Obligations And Disclosure Requirements) Regulations, 2015 as means transfer of resources, services or obligations between a listed entity and a related party, regardless of whether price is charged and a transaction with a related party shall be construed to include a single transaction or a group of transactions in a contract, including but not limited to the following –
 

• sale, purchase or supply of any goods or materials;

• selling or otherwise disposing of, or buying, property of any kind;

• leasing of property of any kind;

• availing or rendering of any services;

• appointment of any agent for purchase or sale of goods, materials, services, property;

• appointment to any office or place of profit in the company

• underwriting the subscription of any securities or derivatives thereof, of the company
   

A transaction shall be construed to include a single transaction or a group of transactions in a contract.
 

“Senior Management Personnel / Senior Management” means personnel of the company who are members of its core management team excluding Board of Directors comprising all members of management one level below the executive directors, including the functional and departmental heads.

Any other term not defined herein shall have the same meaning as defined in the Act or any other applicable law or regulation and as amended from time to time.
 

Key Principles for Related Party Transactions
 

Identification of Related Parties
 

All Directors and Key Managerial Personnel (KMPs) shall be responsible for informing the Company of their interest (including interest of their Relatives) in other companies, firms or concerns at the beginning of every financial year and any change in such interest during the year, immediately on occurrence. Further, Directors and KMPs should disclose to the Board whether they, directly, indirectly, or on behalf of third parties, have interest in any transaction or matter directly affecting the Company.

 

In addition, all Directors and KMPs are responsible for giving notice to the Company Secretary of any potential Related Party Transaction involving them or their Relatives.

 

Also, every officer of the Company entrusted with the authority to enter into any transaction shall be responsible for providing notice to the Board or Audit Committee, through the Company Secretary of the Company of any Related Party Transaction involving the Company. The Board / Audit Committee, through the Company Secretary will determine whether the Transaction does, in fact, constitute a Related Party Transaction requiring compliance with this Policy.

 

Such notice of any Related Party Transaction should be given at least 1 week in advance so that the Company Secretary (or such other person who may be entrusted for this purpose by the Audit Committee) has adequate time to obtain and review information about the proposed transaction and place the same before the Audit Committee.

 

The relevant Director/ KMP will also be required to provide any additional information about the transaction that the Board/Audit Committee may reasonably request. The Board/ Audit Committee will determine whether the transaction does, in fact, constitute a Related Party Transaction requiring compliance with the Policy.

 

Ordinary Course of Business
 

The phrase Ordinary Course of Business is not defined under the Act or Rules made thereunder. The Company shall adopt a reasonable approach / methodology to demonstrate ‘Ordinary Course of Business’ which shall, inter alia, include the Nature of the transaction, the frequency / regularity / length of time the company is engaged in such transaction, such transaction / action is consistent with the past practices and was taken in the ordinary course of the normal day-to-day operations of such company, common commercial practice i.e. customarily taken, in the ordinary course of the normal day-to-day operations of other companies that are in the same / similar line of business.
 

Arms-Length Transaction
 

For transactions between two related parties to be considered to be at Arm’s Length Pricing, the transaction should be conducted between the two parties as if the parties were unrelated, so that there is no conflict of interest i.e. Arm’s Length Pricing is the condition or the fact that the two related parties transact as independent (un-related) parties and on an equal footing from one or more of the following aspects viz. nature of goods / services, risk assumed, assets / resources employed, key terms / covenants.

 

In the absence of any guidelines on Arm’s Length Pricing in the Act, the Company shall adopt reasonable approach / methodology to demonstrate Arm’s Length Pricing for the specified Related Party Transactions identified, which shall, inter alia, include, the nature of the transaction, description of functions to be performed, risks to be assumed and assets to be employed, key terms / special terms in the arrangement forming part of a composite transaction;

 

The Company shall adopt an appropriate framework to assess whether transactions with related parties are done at an Arm’s Length and Company adopts generally accepted practices and principles in determining whether the transaction is at “Arm’s Length”.

 

Materiality Threshold for Related Party Transaction
 

The Company follows Materiality Thresholds for Related Party Transactions as defined under Definition section of this Policy, which are not in the ordinary course of business and/or not at arm’s length basis.
 

Guiding Principles for Approval of Related Party Transactions
 

For seeking approval of Audit Committee and the Board of Directors, as the case may be, for Related Party Transaction(s), all relevant material information of the Related Party Transaction(s), including the terms of the transaction, the business purpose of the transaction, the benefits to the Company etc. will be provided to the Board/ Audit Committee. The information provided shall specifically cover the following:
 

• the name of the related party and nature of relationship;

• the nature, duration of the contract and particulars of the contract or arrangement;

• the material terms of the contract or arrangement including the value, if any;

• any advance paid or received for the contract or arrangement, if any;

• the manner of determining the pricing and other commercial terms, both included as part of contract and not considered as part of the contract;

• whether all factors relevant to the contract have been considered, if not, the details of factors not considered with the rationale for not considering those factors;

• any other information relevant or important for the Committee to take a decision on the proposed transaction.
   

In determining whether to approve or reject a Related Party Transaction, the Board/ Audit Committee will consider the following factors, among others, to the extent relevant to the Related Party Transaction:
 

• Whether the transaction is in the ordinary course of business of the Company;

• Whether the terms of the Related Party Transaction are fair to the Company and would apply on the same basis if the transaction did not involve a Related Party;

• Whether there are any compelling business reasons for the Company to enter into the Related Party Transaction and the nature of alternative transactions, if any;

• Whether the Related Party Transaction would impair the independence of Director/KMP;

• Where the ratification of the Related Party Transaction is allowed by law and is sought from the Committee, the reason for not obtaining the prior approval of the Committee and the relevance of business urgency and whether subsequent ratification would be detrimental to the Company; and

• Whether the Related Party Transaction would present an improper conflict of interest for any Director, or KMP of the Company, taking into account the size of the transaction, the overall financial position of the Director, Executive Officer or other Related Party, the direct or indirect nature of the Director’s, Key Managerial Personnel’s or other Related Party’s interest in the transaction and the ongoing nature of any proposed relationship and any other factors the Board/Committee deems relevant.
   

Related Party Transaction not approved under the policy
 

In the event the Company becomes aware of a Related Party Transaction with a Related Party that has not been approved under this Policy prior to its consummation, the matter shall be reviewed by the Committee / Board.

 

The Committee / Board shall consider all the relevant facts and circumstances regarding the Related Party Transaction, and shall evaluate all options available to the Company, including ratification, revision or termination of the Related Party Transaction.

 

The Committee / Board shall also examine the facts and circumstances pertaining to the failure of reporting such Related Party Transaction to the Committee under this Policy and shall take any such action it deems appropriate.

 

In any case, where the Committee / Board determines not to ratify a Related Party Transaction that has been commenced without approval, the Committee / Board, as appropriate, may direct additional actions including, but not limited to, immediate discontinuation or rescission of the transaction.

 

In connection with any review of a Related Party Transaction, the Committee / Board has authority to modify or waive any procedural requirements of this Policy.
 

Approval Process for Related Party Transactions
 

Approval of the Audit Committee
 

Every related party transaction shall be approved by the Audit Committee (“Committee”) as required in terms of the provisions of the Companies Act, 2013 and the Directions. The Audit Committee of the Board will review and, if appropriate, approve Related-Party Transactions. Accordingly, management shall present to the committee the following information with respect to all Related Party Transactions expected to be entered into during that financial year:
 

• the name of the Related Party;

• the Related Party’s interest in the transactions, including the Related Party’s position or relationship with, or ownership of, any entity that has an interest in the transactions;

• the estimated rupee value of the transactions;

• a general description of the transactions, including material terms and conditions;

• in case of loans, the aggregate amount of loans and the rate of interest payable on such loans;

• in case of guarantees issued, the aggregate amount of guarantees, nature of guarantee and commission to be payable on such guarantees;

• an assessment of whether the transactions are on terms that are comparable to the terms available to unrelated third parties or to employees generally; and

• any other material information regarding the transaction(s) or the Related Party’s interest in the transaction(s).
   

After reviewing such information and being satisfied that there is a need for such approval, the members of the Audit Committee (without the participation of the Committee member(s) interested in the transaction, if any) shall approve or disapprove such transactions.
 

Omnibus Approval to transactions
 

The Committee may consider to grant Omnibus approval of such transactions only if it is determined by the Committee that such transactions are:
 

• Repetitive in nature and that such approval is in (or not inconsistent with) the best interests of the Company and its shareholders;

• Compliant with requirement of the Arm’s length transaction;

• In the ordinary course of the business of the Company.
   

Such omnibus approval shall specify:
 

• the name/s of the related party;

• nature of transaction, period of transaction, maximum amount of transaction that can be entered into, and

• the indicative base price / current contracted price and the formula for variation in the price if any.
   

Provided that where the need for Related Party Transaction cannot be foreseen and aforesaid details are not available, Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding Rs.1 crore per transaction.
 

The Audit Committee shall review, on a Quarterly basis, the details of Related Party Transactions entered into by the Company pursuant to each of the omnibus approval given. Such omnibus approvals shall be valid for a period not exceeding one financial year and shall require fresh approvals after the expiry of one financial year.
 

Any member of the Audit Committee who has a potential interest in any Related Party Transaction will not remain present at the Meeting when such Related Party Transaction is considered.
 

No member of the Audit Committee shall participate in the review, consideration or approval of any Related-Party Transaction with respect to which such member or any of his or her relatives is a Related Party.
 

If any material information with respect to such transactions shall change subsequent to the Committee’s review of such transactions, management shall provide the Committee with updated information at a subsequent meeting and will get the changes approved afresh by the Committee.
 

All the directors are required to declare and disclose their concerns or interests in any company or companies or bodies corporate at the first Board meeting in every financial year and subsequently whenever there is any change therein.
 

Omnibus approval shall not be made for the transactions in respect of selling or disposing of the undertaking of the Company.
 

Approval of the Board of Directors
 

All Related Party Transactions that are not in the ordinary course of business or not on arm’s length basis shall be referred to the Board of Directors for their approval.

Any member of the Board who has a potential interest in such Related Party Transaction will recuse himself or herself and abstain from discussion or voting on the approval of such Related Party Transaction.

In addition to the above, the following kinds of transactions with related parties are also placed before the Board for its approval:
 

• Transactions which may be in the ordinary course of business and at arm’s length basis, but which are as per the policy determined by the Board from time to time (i.e. value threshold and/or other parameters) require Board approval in addition to Audit Committee approval;

• Transactions in respect of which the Audit Committee is unable to determine whether or not they are in the ordinary course of business and/or at arm’s length basis and decides to refer the same to the Board for approval;

• Transactions which are in the ordinary course of business and at arm’s length basis, but which as per Audit Committee requires Board approval;

• Transactions meeting the materiality thresholds laid down under Approval of Shareholders part of the Policy, which are intended to be placed before the shareholders for approval.
   

Approval of Shareholders
 

Any such Related Party Transactions shall also be placed for prior approval of shareholders by way of resolution, if it exceeds the thresholds as defined under the definition of Material Related Party Transactions under this Policy.

All entities falling under the definition of Related Parties shall not vote to approve the said resolution being placed before the shareholders, irrespective of whether the entity is a party to the transaction or not.
 

Related Party Transaction not requiring Approval
 

The following Related Party Transactions shall not require any separate approval under the Policy:
 

• Any transaction that involves the providing of compensation to a Director or Key Managerial Personnel in connection with his or her duties to the Company or any of its subsidiaries or associates, including the reimbursement of reasonable business and travel expenses incurred in the ordinary course of business;

• Transactions that have been approved by the Board under specific provisions of the Companies Act, 2013;

• Payment of Dividend;

• Transactions involving corporate restructuring, such as buy-back of shares, capital reduction, merger, demerger, hive-off etc. which are approved by the Board and carried-out in accordance with the specific provisions of the Companies Act, 2013 or the applicable regulations;

• Contribution towards Corporate Social Responsibility (CSR) within the overall limits approved by the Board that require approval of the CSR Committee.

• Where the transactions are entered into by the Company in its ordinary course of business and are on arms’ length basis; or

• Any related party transaction not requiring approval as per extant applicable law / guidelines.
   

Approval Matrix:
 

Audit Committee Approval	Board Approval	Shareholders’ Approval
All related party transactions	Related Party Transactions referred by Audit Committee for approval of the Board.	Approval by shareholders’ resolution for Related Party Transactions not in Ordinary Course of Business and/or not at Arm's length basis and/or crosses prescribed threshold limit as per the Act
	Related Party Transactions not in the ordinary course of business and not on arm’s length relationship

Disclosure
 

All Related Party Transactions will be disclosed in Annual Report, Results and other filings made by the Company, to the extent required as per the applicable provisions of the laws and regulations.

Further, as required in the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, the Company will disclose the Policy on its website as well as in its Annual Report.
 

Review, Modification & Changes
 

• There shall be an annual review of the Policy by the Board of Directors;

• Board of Directors can at any time modify or amend, either the whole or any part of Policy;