Fair Practices Code

1. PREAMBLE

The Fair Practices Code (“FPC”) has been formulated and approved by the Board of Directors of KARN SECURITIES PRIVATE LIMITED (“Company”) in accordance with the Master Direction – (Non-Banking Financial Company) issued by the Reserve Bank of India (“RBI”) (“RBI Master Directions”), as amended from time to time.

In accordance the RBI Master Directions, Non-Banking Financial Companies (“NBFCs”) having customer interface are required to adopt the guidelines on Fair Practice Code (‘FPC’) prescribed in the RBI Master Directions. The Company, being an NBFC having customer interface, has adopted this FPC for the lending business. The FPC also seeks to incorporate various disclosure requirements prescribed by the guidelines / directions issued by Reserve Bank of India on Digital Lending, and as amended from time to time, as applicable to the Company’s lending business.

This Fair Practices Code shall also be implemented in accordance with the Responsible Business Conduct Directions 2026 framework prescribed by the Reserve Bank of India and shall promote fairness, transparency, customer-centricity, responsible lending, ethical conduct and protection of customer interests throughout the lifecycle of the loan.

2. PURPOSE AND ITS APPLICABILITY:

The Company has adopted the FPC for implementation with the objective of ensuring fair and transparent practices while dealing with its customers/ borrowers. This FPC intends to promote good and fair practices by setting minimum standards to be followed while dealing with the customers. Further, the FPC also seeks to increase transparency so that the customers can have better understanding of the products/ services being offered by the Company.

The Company shall ensure that its lending and customer service practices remain free from misleading, coercive, unfair or deceptive practices and shall establish appropriate governance arrangements to promote responsible business conduct.

This FPC shall apply across all aspects of the Company’s lending business operations including digital lending, marketing, loan origination, processing, servicing, collection activities etc. The Company’s commitment to the FPC would be demonstrated in terms of employee accountability, monitoring and auditing programs, training and technology.

The Company’s Board of Directors and the management are responsible for establishing practices designed to ensure that its operations reflect a strong commitment to the FPC and that all employees are aware of the FPC.

3. DEFINITIONS:

• “Authorised Representative” means a person other than an Advocate duly appointed and authorized in writing to represent a complainant in the proceedings before the officials of RBI;
• “Board” means Board of Directors of the Company;
• “Complaint” means any representation made in writing or through other modes alleging deficiency in service on the part of the Company, and/ or seeking relief under the Scheme;
• “Company” means KARN SECURITIES PRIVATE LIMITED
• "Customer Suitability" means assessment undertaken by the Company to determine whether a credit product is appropriate for a customer considering the customer's financial profile, repayment capacity and borrowing requirements.
• "Dark Pattern" means any user interface or design practice that has the effect of misleading, manipulating or impairing the customer's ability to make free and informed decisions.
• "Director” means individual Director or any of the Directors on the Board of the Company;
• “FPC” means Fair Practices Code;
• "Mis-selling" means sale or promotion of any financial product or service through misleading representation, coercion, omission of material information or unfair practices.
• “RBI” means Reserve Bank of India.

4. NORMS APPLICABLE TO ALL LOAN PRODUCTS OF THE COMPANY:

• (i) Applications for Loans and their Processing:
• • (a) All loan products of the Company shall be as per the Loan Policy adopted by the Company.
  • (b) All communications to the borrower shall be in a language understood by the borrower, including vernacular language where applicable. Where the borrower specifically requests communication in another language, the Company shall make reasonable efforts to accommodate such request and ensure that subsequent communications are made in the preferred language, to the extent feasible.
  • (c) As part of the process and to ensure transparency, the Company, at the application stage, shall provide all necessary information including but not restricted to processing fees/charges, if any, non-refundable fees in case of rejection of loan proposal, pre-payment options etc., which affect the interest of the customer so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and informed decision can be taken by the customer.
  • (d) The Company shall provide acknowledgment for receipt of loan applications along with the time frame within which loan applications would be disposed-of.
  • (e) The Company, at loan application stage, shall indicate all the documents required to be submitted along with the application form.
  • (f) On exercise of choice, the customer would be given the relevant information about the loan product of his/her choice.
  • (g) The customer would be informed about the status of his/ her application, periodically or upon request. The Company, while accepting loan application shall explain the entire loan process and journey till the sanction and disbursement of loan. The customer shall also be informed about the timelines within which the entire loan process will be completed in the ordinary course of business.
  • (h) The Company shall provide a Key Fact Statement (KFS) in the format prescribed by RBI, containing APR, all-inclusive cost, penal charges, and recovery-related charges, prior to execution of the loan agreement.
  • (i) The Company shall obtain only such information and documents from the borrower as are reasonably necessary for credit assessment and regulatory compliance and shall not seek excessive or irrelevant information.
• (ii) Loan Appraisal Terms and Conditions:
• • (a) The Company shall scrutinize the information submitted by the customer and, if any additional data is required, it shall seek the same promptly to facilitate expeditious disposal of the loan application.
  • (b) The Company shall convey key terms and conditions of the proposed loan in writing (in English as it is understood by all customers of the Company), by means of Sanction letter or any other form of written communication and the same shall include:
  • • I. the amount of loan sanctioned along with the terms and conditions including annualized rate of interest;
    • II. details of the default interest / Overdue charges (expressed in percentage per month/ annum as the case may be) and the charges payable by the customers in relation to their loan account and method of application thereof;
    • III. Overdue charges for late repayment of loan shall be expressly mentioned in bold in the loan agreement;
    • IV. There shall be no capitalisation of overdue charges charged by the Company to the borrower i.e., no further interest will be computed on such overdue charges.
    • V. The customer shall provide explicit acceptance of the terms and conditions prior to availing of the loan.
  • (c) The quantum and reason for overdue charges shall be clearly disclosed by the Company to the customers in the loan agreement and most important terms & conditions/Key Fact Statement (“KFS”) as, in addition to being displayed on websites of the Company under Interest rates and Service Charges.
  • (d) If the Company cannot provide the loan to the applicant, it shall endeavour to convey the reason(s) for rejection.
  • (e) The Company shall furnish a copy of the loan agreement in English as understood by the borrower along with copy of all relevant enclosures quoted in the loan agreement to all the borrowers at the time of sanction/disbursement of the loan and shall be duly approved by the customer and countersigned by the authorized officials of the Company.
• (iii) Product Suitability Assessment: Before sanctioning any loan, the Company shall assess whether the proposed loan product is suitable for the borrower considering repayment capacity, financial position and borrowing requirements.
• (iv) Terms & Conditions:
• • (a) The Company shall give notice in English as understood by the customer regarding any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc.
  • (b) The penal charges to be charged by the company for late repayment of loan shall be mentioned in bold letters in the loan agreement.
  • (c) Penal charges shall not be capitalised and shall not be levied in the form of penal interest. Such charges shall be reasonable, non-discriminatory, and commensurate with the default.
  • (d) Decision to recall / accelerate payment or performance under the agreement will be in consonance with the loan agreement.
  • (e) The Company shall not compel any borrower to purchase insurance, investment products or any other financial product as a pre-condition for sanction or disbursement of a loan except where specifically permitted under applicable law.
• (v) Responsible Marketing Practices:
• • a The Company shall ensure that all advertisements, promotional material and customer communications are fair, accurate, balanced and not misleading.
  • b The Company shall clearly distinguish between mandatory and optional products.
  • c Promotional material shall not exaggerate benefits or suppress material risks.
  • d All marketing activities undertaken directly or through DSAs, DMAs, LSPs or outsourced entities shall comply with this Code.
• (vi) Other terms:
• • (a) If the customer does not adhere to repayment schedule, a defined process in accordance with the laws of the land will be followed for recovery of dues. The process will involve reminding the customer by sending the notice or by making personal visits. In case of default, the Company may refer the case to the recovery agent and will inform the customer of the recovery proceedings being initiated. The Company shall ensure that its process of recovery does not involve harassment to the customer. The Company shall ensure that all recovery agents engaged by it undergo proper due diligence, background verification, and periodic training on RBI guidelines, customer protection, and ethical recovery practices. Appropriate instructions will be provided by the Company to its staff for handling customer queries and grievances cordially. The Company shall ensure that recovery is conducted in a non-coercive manner. Recovery agents shall not resort to intimidation, harassment, or use of abusive language, and shall adhere to prescribed calling hours (Recovery calls shall be made only between 8:00 AM and 7:00 PM only). The Company shall ensure that borrowers covered under any restructuring or relief measures approved under applicable RBI Directions are dealt with in accordance with such approved relief measures before initiating coercive recovery action.
  • (b) The Company shall not charge foreclosure charges/ pre-payment penalties on any of the loans sanctioned to individual borrowers.
  • (c) All the fees / charges / interest shall be charged as per the interest rate policy adopted by the Company and as per the terms & conditions applicable to the Loan.
  • (d) The Company shall appropriately consider genuine cases of financial difficulty including situations arising from natural calamities or other external events in accordance with the Company's Board approved policies and applicable RBI Directions.
  • (e) The Company shall collect customer information only for lawful purposes directly related to its lending and business operations. Such information shall be collected with the explicit consent of the borrower and shall be used strictly for the purposes disclosed at the time of collection.
  • The Company shall ensure that all customer information is kept confidential and shall not be disclosed to any third party without the prior consent of the borrower, except as permitted under applicable laws and regulations.
  • The Company may disclose customer information without prior consent under the following circumstances:
  • • • Where such disclosure is required by law or regulatory authorities;
    • • Where such disclosure is necessary for compliance with legal or regulatory obligations;
    • • Where such disclosure is made to Credit Information Companies (CICs), banks, financial institutions, or regulatory bodies, including the Reserve Bank of India;
    • • Where such disclosure is required in the interest of the Company for recovery or legal proceedings.
    • The Company shall implement appropriate data protection and security measures to safeguard customer information against unauthorized access, alteration, disclosure, or misuse, in compliance with applicable data protection laws and RBI guidelines. Customer information shall not be used for cross-selling, marketing or offering third-party financial products without obtaining appropriate consent from the borrower.
  • (f) Customer Rights & Responsibilities: The Company shall ensure that borrowers are made aware of their rights and responsibilities, including the obligation to repay loans on time, provide accurate information, and promptly communicate any financial difficulties. Customer has right to:
  • • receive complete product information; decline optional products;
    • receive KFS before execution;
    • receive copy of executed loan agreement;
    • receive fair treatment throughout loan lifecycle.
• (vii) Responsibility of Board of Directors: The Company, with the approval of its Board of Directors, has laid down Grievance Redressal Mechanism (“GRM”) within the organization as per details mentioned in the next paragraph. Such a mechanism ensures that all disputes arising out of the decisions of the Company’s functionaries are heard and disposed-off at least at the next higher level. The Board of Directors shall annually review the compliance of the FPC and the functioning of the GRM. A consolidated report in this regard shall be submitted to the Board every year. The Board shall periodically review the effectiveness of implementation of Responsible Business Conduct principles including customer complaints, customer outcomes, recovery practices and compliance monitoring.
• (viii) Grievance Redressal Mechanism (“GRM”): The Company, with the approval of its Board of Directors, shall appoint the Grievance Redressal Officer as Nodal Officer. Below is the Escalation Matrix approved by the Board of Directors of the Company:

First Level	Customer Care	Phone: +91-8796552820 Email: info@karnsecurities.com	If the issue is not resolved within 7 days of raising the issue, the customer may escalate the complaint with the Grievance Officer.
Second Level	Grievance Officer	Name: Ms. Saman Luqman Bilgrami Phone: +91-8796552825 Email: Grievance@karnsecurities.com	If the issue is not resolved within 7 days of raising the issue, the customer shall raise the further issue with the Nodal Officer.
Third Level	Nodal Officer	Name: Ms. Harshna Sharma Phone: +91-8810265477 Email: nodal@karnsecurities.com	If any customer dissatisfied with the resolution provided by grievance officer, He/She can reach out to Nodal Officer for resolution.

• If the customer is not satisfied with the resolution, they may approach the RBI Integrated Ombudsman Scheme, as applicable. All grievances shall be resolved within a maximum period of 30 days from the date of receipt, unless otherwise specified by RBI
• The details of the Grievance Redressal Officer and escalation mechanism shall be prominently displayed on the Company’s website and at all offices. Details of the RBI Ombudsman Scheme shall also be displayed.
• Complaints relating to mis-selling, customer suitability, digital lending practices, recovery conduct and data privacy shall receive priority attention.
• (ix) Language and Mode of Communicating the FPC: The Company, in accordance with the Guidelines on FPC and RBI Master Directions, shall put in place the FPC in English language. The Company shall also make the FPC available in regional/ vernacular languages for the customers who request for the FPC in vernacular language.

5.REPOSSESSION CLAUSE:

In case of default, the Company may repossess the secured asset in accordance with the terms of the loan agreement and applicable laws. The Company shall ensure that:

(a) Adequate prior notice is given to the borrower;

(b) The borrower is provided an opportunity to regularize the account;

(c) The repossession process is conducted in a fair and transparent manner;

(d) The dignity and rights of the borrower are respected at all times.

Repossession shall not be undertaken where recovery action has been deferred pursuant to an approved restructuring or relief framework under applicable RBI Directions.

6. ADITIONAL NORMS FOR DIGITAL LENDING OR THE LOANS SOURCED OVER A DIGITAL LENDING PLATFORM:

• (i) Norms for Loans Sourced by the Company over Digital Lending Platform/ Apps (“DLAs”)- In case, the Company sources borrowers and/ or to recover dues over digital lending platform (irrespective of whether they lend through their own digital lending platform or through an outsourced lending platform), the Company shall abide by this FPC in letter and spirit and in the manner, it may be applicable to its business. Further, the Company shall follow the following instructions:
• • (a) Names of digital lending platforms engaged as agents shall be disclosed on the website of the Company.
  • (b) Digital lending platforms engaged as agents shall be directed to disclose upfront to the customer, the name of the Company on whose behalf they are interacting with him.
  • (c) Immediately after sanction but before execution of the loan agreement, the sanction letter shall be issued to the borrower on the letter head of the Company.
  • (d) A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans.
  • (e) Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the Company.
  • (f) Adequate efforts shall be made towards creation of awareness about the grievance redressal mechanism.
• (ii) Norms to be followed by the Company with respect to Digital Lending- The Company shall comply with the provisions of guidelines / directions issued by Reserve Bank of India on Digital Lending, and as amended from time to time to the extent applicable. The Company shall ensure that all Lending Service Providers (LSPs) comply with RBI Digital Lending Guidelines, including data privacy, customer consent, and outsourcing norms.
• (iii) Other Terms:
• • (a) Explicit customer consent shall be obtained before sharing customer information with Lending Service Providers or any third party except where disclosure is required by law.
  • (b) The Company and its Lending Service Providers shall ensure that digital interfaces are free from dark patterns, deceptive designs or misleading practices.
  • (c) Borrowers shall not be compelled to purchase ancillary products as a condition for availing the loan unless specifically permitted under applicable law.

7. MONITORING OF RESPONSIBLE BUSINESS CONDUCT:

The Company shall establish appropriate monitoring mechanisms to periodically review customer complaints, customer outcomes, recovery practices, digital lending practices, outsourcing arrangements and compliance with this Code.

8. REVIEW OF THE FPC:

The FPC shall be amended or modified with approval of the Board. The FPC shall be reviewed by the Board on an annual basis. Consequent upon any amendments in RBI Master Directions or any change in the position of the Company, necessary changes in this FPC shall be incorporated and approved by the Board.

Notwithstanding anything contained in this FPC, in case of any contradiction of the provision of this FPC with any existing legislations, rules, regulations, laws or modification thereof or enactment of a new applicable law, the provisions under such law, legislation, rules, regulation or enactment shall prevail over this FPC.

Annexure-I

Customer Rights Charter

Include

• • Right to Fair Treatment
• • Right to Transparent Pricing
• • Right to KFS
• • Right to Privacy
• • Right to Fair Recovery
• • Right to Grievance Redressal
• • Right to Responsible Digital Lending

Annexure-II

Responsible Business Conduct Principles

Include

• • Fairness
• • Transparency
• • Customer Suitability
• • Responsible Marketing
• • No Mis-selling
• • Data Privacy
• • Ethical Recovery
• • Customer Consent
• • Product Governance
• • Monitoring