Loan Policy Guidelines
The objective of Loan Policy is to ensure balanced growth of credit across various sectors and to avert credit to undesirable sectors. It is aimed at to improve the credit off-take with quality with minimum risk and maximize profits. Further, it enables the bank to continue to maintain thrust to priority sector advances in consonance with Govt. of India / Reserve Bank of India guidelines. The exposure norms as per the existing policy of the Bank are as under:
|1||Single Borrower||15% Bank’s capital fund*|
|2||Single Borrower–Infrastructure||20% Bank’s capital fund|
|3||Group Borrowers||40% Bank’s capital fund|
|4||Group – Infrastructure||50% Bank’s capital fund|
|5||Single Borrower – Oil Companies||25% Bank’s capital fund|
|6||NBFC Borrower||10% Bank’s capital fund|
|7||NBFC (IFC) Borrower||15% Bank’s capital fund|
|8||NBFC (IFC) – Infra||20% Bank’s capital fund|
|9||NBFC – Asset Finance Company (AFC)||15% Bank’s capital fund|
|10||NBFC (AFC) – Infrastructure||20% Bank’s capital fund|
|*Bank’s Capital Fund = Tier-I & II Capital as per audited balance sheet of the previous year. Single Borrower threshold limit & Substantial Exposures Limit can be exceeded by Management Committee/Board. (Circular no.108 Ref 26/14 dated 21.06.2013)|
Maximum Exposure / Prudential limits:
|No||Category||Maximum prudential limit|
|1||Individual / Proprietary concern||20||30|
|3||Limited Liability Partnerships||5||10|
|5||Trusts / Societies / Associations||20||30|
|6||Private Limited Companies||80||100|
|7||Public Limited Companies (closely held)||100||120|
|8||Film Industry (Per party) Max – 6 parties||4|
|9||Infrastructure Project (Per project)||500|
|10||Construction Contractors||15 times of Net owned funds|
|Note: The maximum limit is to be restricted to the said limits or 6 times of net worth of the concern as per the Latest Audited Balance Sheet, which ever is less. However, in case of Individual / Proprietary / Partnership / HUF / Trusts / Societies / Associates the limit can be sanctioned to Rs.60 crores by CMD/ED.|
Non Funded Limits – Maximum Exposure / Prudential norms:
|1||BGs (including Letter of Comfort / Letter of Undertaking)||3 times of Net Worth of the Bank|
|2||BGs to Banks / FIIs / Others||10% of Bank’s capital funds (Tier-I capital)|
|3||Letter of Credit||2 times of Net Worth of the Bank|
|4||Bills discounted (IDBI/SIDBI)||1% of Net Worth of the Bank|
|5||Foreign Exchange Commitments||Equal to the Net worth of the Bank|
Substantial Exposure Limits
- Single borrower threshold limit will be Rs.750 Crores. 138 Banker’s Digest-2014 email@example.com Mobile 9490213002
- Substantial Exposure Limit – The sum total outstanding of all the borrowal accounts, where the single borrower exposures is in excess of Rs.750 crore, shall not exceed Rs.20000 crore.
The following internal exposure limits are fixed to specific industries/sectors in addition to the above exposure limits.
|Industry / Sector||Exposure Ceilings|
|Fund Based||Non Fund Based|
|of which Renewable energy||2.00%|
|2. Real Estate||20.00%||2.00%|
|of which Housing||15.00%||-|
|4. Educational Inst.||2.00%||2.00%|
|6. Petroleum products||10.00%||1.00%|
|8. Iron & Steel||10.00%||14.00%|
|9. Construction & Contractors||10.00%||50.00%|
|11. Rice Mills||6.00%||2.00%|
|12. Commercial Real Estate||7.00%||2.00%|
|13. Diamond, Gems & Jewellery||5.00%||3.00%|
|*Sub-ceiling of 3% for NBFCs dealing in financing against gold collateral|
Administrative clearance from H.O is required for credit facilities to Trust & HUF borrowal accounts for the first sanction. For subsequent renewals & enhancements it is not required provided there is no change in the composition / activity of HUF / Trust. The extent up to which Interest & Non-interest bearing Unsecured Loans (from promoters, friends and relatives) can be treated as Quasi Capital/Net Worth for exposure norms is 50% and 100% respectively.
Capital Market Exposure: Funded & Non-funded facility to Stock Brokers including its associates/inter connected companies subject to
a) 20% of Net Worth of the Bank as per the last audited balance sheet (on solo/consolidated basis) after netting exposure to Loans and advances to Individuals, Loans & advances to 138ttest138ed for meeting promoter’s contribution & Loans to individuals for investment in IPOs/ESOPs.
b) For Individuals Rs.20.00 crore, For Partnership firms Rs.30 crore and for Private and Public Sector Companies it is Rs.80 crore and Rs.100 crore respectively subject to 6 times of Net worth of the borrower for Individual, Partnership & Private Ltd. Companies. (Cir.47 Ref 26/9 dated 27.05.11)
Exposure ceilings – Exemptions
- Loans & Advances against security of bank’s own term deposits and LCs / BGs covered by 100% cash margin.
- Rehabilitation of Sick / Weak Industrial units: Existing / additional credit facilities (including funding of interest and irregularities) granted to weak / sick industrial units under rehabilitation packages.
- Govt. of India Guaranteed accounts where principal & interest are fully guaranteed.
- Bills purchased/negotiated/discounted under LC (where the payment to the beneficiary is not made under reserve.)
Maximum repayment period allowed for the following Term Loans
|No||Category||Credit Rating||Repayment with in|
|1||Infrastructure||A+++ / A++||A++||15 Years including gestation|
|2||Infrastructure||A+ / A&B||A+,A,B++||12 Years including gestation|
|3||RTO Loans||A+++ / A++||A++||6 Years including holiday|
|4||RTO Loans||A+ / A&B||A++||5 Years including holiday|
|5||Other TLs||A+++ / A++||A++,A+A,B++||7 Years excluding holiday|
|6||Other TLs||C||B+, B||5 Years excluding holiday|
Due Diligence Report – Conducting due diligence is a prerequisite for all new borrowal accounts (Rs.100 lac & above) by the branch. It helps the branch to assess the credit worthiness of the prospective borrower and risks involved in the proposal. The report covers the details of the prospective borrower / Promoters / Partners / Directors, details of associate and group concerns and details of market enquiries about the new borrower and the associate/sister/group concerns. Due diligence is to be done by Zonal Office in case of accounts of Rs.300 lac and above. However, branches to obtain Credit Investigation Report for all advance accounts irrespective of the credit limits sanctioned. However, Agrl, Weaker and Govt. Sponsored accounts upto a limit of Rs.25 lakh are exempted from the purview of Credit Investigation. (Cir.no. 6 Ref 26/03 dated 07.04.2010)
Audited Balance Sheet of the latest financial year shall be the basis for arriving at the various financial parameters at the time of renewal / sanction under CRAS / CRS/CRRM. In the absence of audited balance sheet of the latest financial year, the least of ratings arrived based on the latest provisional balance sheet OR last audited balance sheet shall be awarded. In such cases, the audited balance sheet for the latest financial year is to be obtained within 6 months to finalise credit rating and re-fix interest accordingly. If the audited balance sheet of the latest financial year is not submitted within 6 months from the date of closure of financial year for arriving at credit rating in case of fund – based advances of Rs.100 lakh & above, additional interest of 1% is to be charged for the non-submission period.
Credit Rating is required for Small Loans of above Rs.2 Lakh and below Rs.5 Lakh – Fund and Non-Funded (SSI, RT, BE, PSE, RTO); Credit Rating System (CRS) for Fund Based Limits of Rs.5 Lakh & above but less than Rs.50 Lakh; Credit Risk Assessment System (CRAS) for both Fund Based and Non-Fund based Limits of Rs.50 Lakh & above up to Rs.500 lakh; Credit Rating Model for New units without Audited Balance Sheet for Limits of Rs.5 Lakh & above and up to Rs.500 lakh; Credit Risk Rating Model for credit limits of above Rs 500 lakh (fund & non-fund based) is applicable. Risk Rating Model is to be applied for Stand alone Term Loans of Rs.5 Lakh & above. As per CRS/CRAS/CRRM (as applicable) at the time of half yearly / annual review basing on latest Audited Balance Sheet and pricing shall be reset as per the credit rating so arrived at by the sanctioning authority. CRS/CRAS is applicable for the borrowal accounts with both working capital and term loan limits under the industry / business / trade / agriculture segments including import and export proposals. Rating is required for non-fund based limits also. However, it is not applicable to Professionals. CRS is applicable for Rice Mill accounts with limits of above Rs.10 Lakh irrespective of any upper limit. A+& above rated Rice Mills have a concession of 50% of the processing. Interest Rate as per Credit Rating by the sanctioning authority is applicable for advances of above Rs.10 Lakh. However, interest rates of import/export credit shall be fixed as stipulated by RBI/Bank from time to time but not as per CRS/CRAS/CRRM rating. For agriculture segment – Credit rating is required for firms/corporate borrowers with above Rs.5 lakh limit and Rs.25 lakhs & above for Individuals and non-corporate borrowers. However, DWCRA / SHGs / IRDP / SGSY / SCAP / STAP / FSCS / LAMPS / Cold Storages, Rural Godowns Scheme / storages financed under capital investment subsidy scheme of NABARD are exempted from the above rating.
Stock Statement/Book Debts: All borrowers availing working capital limits are required to submit stock statement as on the last Friday of the month before 10th of succeeding month. Penal Interest of 1% for the period of default on working capital outstanding. The minimum working capital limit to accept Book Debts as security is above Rs.5 lakh. Book Debt statement is to be certified by the borrower every month and it should be certified by a Chartered Accountant every quarter.
MSOD: All accounts with working capital limit of Rs.100 Lakh & above from the Banking system is required to submit MSOD. MSOD is to be submitted on or before 15th of next month. Penal interest of 1% to be charged in case of accounts with fund based working capital limits of Rs.100 lakhs & above for the period of default.
QIS II is a Quarterly Statement showing the performance during the quarter. Time stipulation for the submission of QIS II is within six weeks from the close of the quarter. Cut-off limits for obtention of QIS form II.
- Funded working capital limits of above Rs.6.00crore (A & above rated)
- “C” rated accounts, with fund based working capital limits of Rs.1.00 crore and above
- “B”(CRS/CRAS)& B++(CRRM) rated accounts, with fund based working capital limits of Rs.2.00 crore and above
QIS III is a Half-yearly Operating and Funds-Flow statement. Time stipulation for the submission of QIS III is within two months from the close of the half year. Cutoff limits for obtention of QIS form III.
- Funded working capital limits of Rs.3.00 cr and above (A and above rated) C”(B+ & B under CRRM) rated accounts, where fund based working capital limits of Rs.1.00 crore and above
- “B”(B+ under CRRM) rated accounts, where fund based working capital limits of Rs.2.00 crore and above
Penal interest @ 1% p.a for one full quarter on the working capital outstanding will be levied for non submission of QIS II/III. However, maximum over all penal interest chargeable in an account for any reason should not exceed 2% p.a.
Margins & Securities:
Bank Guarantees – Value of Agricultural Land and/or Rural Buildings should not exceed 30% of total collateral security requirement in case of new accounts and 50% in case of existing accounts that too in states where there is no ban on acceptance of agricultural land as security for non-agricultural purposes.
Loans against NSCs/KVPs – 75% of the purchase value plus accrued interest of NSCs / KVPs is eligible for bank finance. However, the loans should be extended only where the date of maturity is less than 3 years from the date of finance except where the facility of premature cancellation/surrender value is available.
Book Debts: The margin required for financing against book debts is 50% and in case of MSME it is 30%. However, sanctioning authority can reduce margin to 25% on book debts of Government departments. While arriving Drawing Power, only Book Debts 90 days and below are to be taken in to consideration. With regard to MSME advances the stipulation is 180 days & below.
Security Norms – Crop Loans / Agriculture Term Loans: Hypothecation of Crops/Assets financed is only be treated as security for loans up to Rs.50000/- and for loans beyond Rs.50000/- and up to one lakh, branches to obtain co-obligation / thirdparty guarantee. However, in case of loans above one lakh, 100% collateral security in the form mortgage of land / creation of charge is required.
Third party Collateral norms: Borrowers are required to furnish the collateral securities in the form of immovable or movable properties as per the loan policy guidelines of the bank. In the cases where the borrowers are not having sufficient / adequate properties, the properties of third parties who are near relatives, friends etc. are being accepted as collateral security. However, in view of the risks involved in accepting the collaterals from third parties, now the branches are advised to obtain administrative clearance from the next higher sanctioning authority for all loans except loans against Bank Deposits. Third Party means any person other than the borrower, borrower’s spouse, father, mother, son and daughter, partner of the firm or Directors of the Company or Trustees of a Trust. While accepting third party collateral security, a savings account has to be opened in the name of the party depositing title deeds with due KYC compliance. An attested photo should be kept along with RF 255. Branch Managers or authorized officer should visit independently, unaccompanied by the borrowers or their representatives and make their own enquiries about ownership and valuation from the neighbours/office bearers of the resident’s society, if any. The first visit should be along with the borrower and a certificate to this effect is to be kept on record along with the loan document. (Cir.no.231 Ref 26/36 dated 13.10.2011)
Unit Inspections & Audits:
|No||Cash Credit Limits||Periodicity|
|1||Below Rs.50 lakhs||Bi-monthly by branch|
|2||Rs.50 lakhs & above||Once in a month by Officer & once in a quarter by Manager / Stock Audit by Concurrent Auditor|
|3||Rs.100 to Rs.200 lakhs||Once in a month by Officer & once in a quarter by Manager / Stock Audit by Concurrent Auditor. Once in a year by Inspector of Branches.|
|4||Rs.200 to Rs.300 lakhs||Once in a month alternatively by Officer/Branch Manager/Concurrent Auditor; Short Inspection by Concurrent Auditor/IOB once in a year; Stock & Receivable Audit once in a year.|
|5||Above Rs.300 lakhs||Once in a month by ZO officials (Technical Officer/Senior Manager-Credit) or CM/SM heading branches.|
|6||Other than Cash||Credit Once in a quarter by an Officer; Once in half year by the Manager.|
Stock Audit is to be done for all Cash Credit Accounts with limits of Rs.50 Lakh & above by the Concurrent Auditor.
Short Inspection is applicable to Advances of Rs.100 lakhs & above. Short Inspection will be conducted by Concurrent Auditors/Inspectors of Branches. In case of Fresh Advances, Short inspection is to be conducted within 3 months from the date of first disbursement. In case of Existing Advances, the periodicity is once in a year preferably six months after the regular inspection of the branch.
Stock & Receivable Audit – Minimum Cash Credit Limit for conducting audit is Rs.2.00 Crore. Accounts for which conducting “Stock & Receivable Audit” is applicable:
|C – Rated Accounts||Rs.2 Cr. & above(with min. of 50% fund based limits)|
|B – Rated Accounts||Rs.3 Cr. & above(with min. of 50% fund based limits)|
|A – Rated Accounts||Rs.5 Cr. & above(with min. of 50% fund based limits)|
|NPA Accounts With balances of||Rs.5 Crore & above|
|New/Take-over accounts < 3 years Where Working Capital Limits enjoyed are||Rs.2 Crore & above irrespective of Credit Rating.|
|To all accounts W.C. Limits of||Rs.10 crore & above (fund based and non fund) irrespective of rating.Cir.311 ref 26/37 dt 16.11.06|
Audit is to be done by a firm of practicing Chartered / Cost Accountants once in a year and review should be done by Zonal Office. (Cir. No.463 ref 26/83 dated 31.3.2009)
Pre-sanction Unit Inspection report is to be done preferably by Manager himself within in one month of disbursement of loan. However, it is to be done before sanction of Fresh / Renewal / Enhancement of the limits.
Review of Accounts:
|Parameter||Periodicity of Review||Time of review||Reviewing Authority|
|Term Loans up to Rs.5 lakh||Yearly||During III Quarter of the financial year||Branch Manager|
|TL/DPG above Rs.5 lakh and below Rs.100 lakh||Yearly||During III Quarter of the financial year||Sanctioning Authority|
|Large Borrowal A/cs of Rs.100 lakh & above||Half Yearly||Every 6 months|
|Cir.no.062 Ref 26/11 dated 04.06.2011|
Renewal of ‘C’ rated accounts (B under CRRM) under the branch/zonal office powers shall be considered by Zonal Manager & DGM as II level official at ZO. At HO respective sanctioning authorities can renew the “C” Rated A/cs. For Enhancement one level higher to the sanctioning authority upto GM (Credit). ED/CMD is empowered to sanction enhancements under their delegated powers the limits. For D rated limits renewal/review powers are with one level higher to the sanctioning Authority.(Cir.274 ref.26/35 dt.11.11.2008).
Working Capital Term Loans for Traders & small units:
- Maximum limit up to which Working Capital Term Loans can be sanctioned to Traders and Small Units is Rs.10 lakhs.
- Permissible repayment period of Working Capital Term Loan to Traders and Small Units is 60 equal monthly installments.
- Periodicity for obtaining Stock-Statements in case of WCTL to Traders and Small Units is once in a quarter.
- Margin on Primary Security in case of WCTL to Traders and Small Units is 10% for limits up to Rs.5 lakhs and for others it is 25%.
- The units are to be inspected once in a Quarter.
- Collateral Security is to be obtained minimum of 125% of the value of Limit.
Credit Committees: In order to expedite sanction of credit proposals, a committee approach is introduced for all loans over and above the branch sanctions. The delegation of lending powers of Branch Heads will continue to exist as per the extant guidelines. Credit Committees constituted at Zonal level and Head Office level will consider credit proposals and all credit related matters in respect of proposals falling under their respective delegated authority in accordance with the respective banks Loan Policy guidelines. It is expected that this will improve the quality of decision making also. Committees at Head Office level – Credit Approval Committee headed by CMD, Credit Committee headed by ED/CGM, Credit Committee headed by GM. Similarly, Zonal level committees are – Zonal Level Credit Committee-I headed by Zonal Manager, Zonal Level Credit Committee-II headed by second level officials at Zonal Offices. The committees are expected to meet once on a fixed day in a week.
Legal Audit: All new/ renewal borrowal accounts with aggregate credit limits of Rs.25 lakh and above are covered under Legal Audit. From limits of Rs.25 lakhs to Rs.100 lakhs empanelled Advocate who has not given legal opinion or Law Officer at Zonal Office. For limits above Rs.100 lakhs law officer at ZO has to conduct the legal audit. It covers other aspects such as documents relating to Primary & Collateral securities. Legal Audit is to be completed before release of loan amount. After the completion of Legal Audit, permission from Zonal Office is required, in respect of the borrowal accounts with aggregate credit limits of Rs.50 lakh & above (fund based & non fund based inland and foreign business limits) for release of sanctioned limits.
Legal Audit of Title Documents: As per RBI guidelines, the genuineness of title deeds of all accounts with credit exposure of Rs.500 lakhs and above, existing and new accounts, are to be verified for every two years from the date of original sanction. The re-verification should be entrusted to any advocate other than one who has given the original/earlier legal opinion. The charges incurred for the above reverification including amount payable to advocate shall be recovered from the concerned borrower. However, this can be entrusted to concurrent auditors for the branches subjected to concurrent audit. As the documents to be examined during reverification, are original documents held by the branch for the purpose of creating mortgage, they should be examined in the Branch premises only that too in the presence of the Manager/Officer of the branch. In no circumstances, the documents should be allowed to go out of the Branch premises or left unattended during verification (Cir no.298 Ref 26/38 dated 18.10.2013 & 328 Ref 11/07 dt.5.11.13)
Loan Delivery System – Borrowal accounts with fund based working capital credit limits of Rs.10 Crore and above from the banking system. The total disbursement for WCDL and Cash Credit should not exceed 80% and 20% of the sanctioned limits. However funds can be released either as Cash Credit or as Demand Loan basing on the request of the borrower.
Trust Receipt Financing: A Trust Receipt is a bridging loan that provides a buyer with financing to settle goods imported on sight terms. Under a Trust Receipt, the applicant pledges the imported goods in favour of the Bank. This means that the borrower takes possession of the imported goods, but holds them in trust for the Bank. When the goods are sold, he has to use the proceeds of the sale to repay the Bank. As security, the goods title will be vested with the Bank, and the borrower will undertake to hold the documents, the goods and the sale proceeds in trust for the Bank. Trust Receipt usually comes together with Import Letter of Credit or Import Collection Bill Service.
Corporate Loans are sanctioned to meet margin requirement for Working Capital, Margin for Long Term Project Finance, commitment of the Corporate or for any other purpose related to the financial needs of the company. However, corporate loans should not be extended to meet the financial commitments of sister concerns. Maximum repayment period for a Corporate Loan is 60 Months.
Disbursement of Term Loan by way of reimbursement to the borrower: It shall be permitted by the sanctioning authority, provided:
- Such reimbursement is within 12 months from the date of purchase / acquisition of the assets.
- It should be supported by satisfactory proof of investment / source of funds supported by Invoice/receipt/voucher followed by auditor’s certificate.
- Such funds should have been remitted through a bank account.
External Rating – Interest Rates: With a view to encourage borrowers to get themselves externally rated and to bring more transparency in pricing process, it is decided to introduce spreads based on External ratings of corporate exposures for pricing purposes as below: (Cir no.165 Ref 26/21 dated 25.07.2013)
|Spreads applicable to Externally Rated borrower Accounts|
|Rating||Linked to Present Base Rate|
|Base Rate||Spread||Interest||Base Rate||Spread||Interest|
- The above spreads are applicable to only those corporate accounts (existing as well as new term loans and working capital facilities) which have a latest external rating by accredited credit rating agencies such as CRISIL, CARE, ICRA etc. For term loans the existing term premia of 0.25% with repayment period of over 3 years and up to 5 years and 0.50% with repayment period of over 5 years will continue.
- The revised interest spreads as applicable to working capital limits at the time of renewal/review shall also be applicable to term loans where both working capital limits and term loan co-exist unless it is specially mentioned otherwise in sanction letters.
- The revised interest rates are applicable to all categories of corporate exposures other than Rice Mills. The interest spreads communicated vide HO Circular No.315, Ref.No.26/41, dated 31.10.2012 continue to be applicable for rice mill borrowers.
- While external rating is used for pricing, internal rating shall continue to be done for the purpose of calculating probability of defaults.
- Approval for internal credit rating has to be obtained from Credit Rating Cell, IRMD, Head Office, before incorporating the same in the process note in respect of borrowal accounts with limits of Rs.5 cr and above in terms of HO Circular No.98, Ref.No.48/3, Dated 07.06.2012.
Penal interest on overdue limits:
|First 3 months from the due date of the credit facility||Penal interest of 1%|
|Beyond 3 months from the due date of the credit facility till submission of renewal application with full information||Penal interest of 2%|
Adhoc Limits – Branch can allow adhoc limits maximum of 3 times during the validity period of the Working Capital Limit. The maximum period for which adhoc limit can be sanctioned is 3 months. Branch Managers (I, II & III) do not have any powers to allow Adhoc limits for the sanctions made by higher authorities except in case of ‘A’ & above rated Micro, Small Enterprises borrowers. Up to 20% of the Working Capital facility can be allowed as adhoc to the eligible accounts. The Adhoc limit shall be regularized on or before due date either by adjustment or by considering the need based regular limits where the Adhoc limit is also reckoned. The concept of Adhoc Limit is not applicable to Non-funded limits. The details of Adhoc limits allowed within the discretionary powers are to be reported in ADA – IX along with monthly sanctions.
Excess Drawals: The general guidelines for allowing Excess Drawals / Adhoc limits are as under:
- The account should be standard performing one and allowed to the borrowers enjoying regular sanctioned limits.
- Both adhoc and excess drawals should not be allowed simultaneously.
- Branches are allowed to extend excess drawals up to 20% of regular limit or beyond the powers of specified for the branch manager as delegated powers the branch has to obtain prior approval from controlling office.
- Excess drawals should be allowed only to meet the urgent business requirements such as payment of wages or urgent cash purchases, etc.
- The maximum period for which Excess Drawals can be sanctioned is for a period not exceeding 15 days.
- Excess Drawals shall be allowed in a Working Capital account not more than 6 times during the validity period of the working capital limit.
- Branch should obtain a letter from the constituent requesting for the Excess Drawal facility specifying the amount; purpose and the time limit.
- Excess Drawals/Adhoc limits attract 2% additional interest.
- No adhoc limits are allowed in case of SOD against Real Estates. – ADHOC Not permitted. However, Excess Drawls can be allowed.
- Excess drawals are to be reported in ADA – X along with monthly sanctions.
Temporary Overdraft (TOD) is a facility by which a constituent is permitted to draw money from his Current Account in excess of his credit balance. TOD facility can be allowed only six times in a year in an account. TODs can be allowed in SB accounts with satisfactory transactions up to Rs.1000/- per account subject to a total amount of Rs.10,000/-.TODs allowed at the Branch as part of specially launched schemes like AB Super Salary, AB Gram Kranthi etc. TODs should not be allowed in accounts of our staff members. The Current Account holder should have undoubted reputation, integrity and satisfactory transactions in the account for a minimum period of six months. Branch should obtain a letter from the constituent requesting for the TOD facility specifying the amount; purpose and the period for which the facility is required. Discretionary powers of Branch Managers for allowing TODs are JM-I 5000, MM-II Rs.10000, MM-III Rs.25000, SM IV Rs.100000 and SM V Rs.200000. All TODs allowed are to be reported in ADA-XI every month to ZO.
Channel Financing is a new approach or system supporting business by a realignment of existing products, delivery process, procedures and organization structures so as to provide a comprehensive solution to the working capital requirements of an entity. It aims at extending working capital finance to authorized suppliers / dealers, whose small businesses are connected to large companies as suppliers/dealers in the business of the entity. Channel Finance provides credit facility to the suppliers of the Corporate for the supplies made is called as ‘Supplier Finance’. Similarly credit facility is provided to the dealers for the goods delivered by the corporate called as ‘Dealer Finance’.
Supplier Finance: Bank pays amount directly to the main operative account of the supplier as per advise of the corporate by discounting the bills with maximum of 180 days tenor and the same will be recovered from Corporate on respective due dates. If the supplier is enjoying working capital limits with another banker, the amount shall be credited to the account maintained with the said bank. An undertaking letter is to be obtained from the Corporate to pay the amounts on the due dates of bills discounted by our Bank. Alternatively, wherever feasible, Post dated cheques of the main operative account are to be obtained from the Corporate to enable the Bank to realize the dues on the respective due dates of the bills.
Dealer Finance: In case sanction of Bill facility to the Dealer as per referral letter of Corporate and agreed by the dealer(s), a suitable Bill discounting limit is assessed and post dated cheques are obtained from the dealer(s). The particulars of deliveries of the final products to the respective dealers are provided to the Bank with supporting documents such as invoices, bills of exchange and other documents evidencing delivery of goods to the dealers. The payment is made by the Bank to the credit of main operative account of the Corporate and the same will be recovered from the dealers on the respective due dates of the bills. If the Corporate is enjoying working capital limits with another banker, the amount shall be credited to the account maintained with the said bank.
|Type||Supplier Finance / Dealer Finance|
|Eligibility Criteria||Sponsoring Corporate can be a Manufacturing unit, Wholesale dealer of goods, Distributor of Goods or Provider of services, approved by Head Office with A and above rating under CRS/CRAS and B++ under CRRM. In case of external rating it should be minimum A2 rating (CRISIL or equilant). Corporate / Supplier in existence for minimum 3 years with good track record.|
|Assessment / Loan / Margin||Based on the quantum of supply / sales for the last 12 months and the period of credit terms between supplier and the Corporate or 20% of total amount of transactions projected between corporate and Supplier, whichever is less. Minimum loan Rs.25 lakh and maximum Rs.500 lakh with 10% margin.|
|Tenor||Maximum 180 days|
|Security||Primary – DA Bills drawn by the suppliers duly accepted by the corporate. Collateral – 25% of the limit in the form of semi urban / urban property or liquid securities.|
|Interest Rate||Up to 45 days – Base Rate + 0.50%|
|> 45 & up to 90 days – Base Rate + 1.75%|
|> 90&up to 180 days – Base Rate + 2.75%|
|Others||The finance made would not be included for MPBF calculations|
|All other loan policy guidelines are applicable|
|Cir.no.271 Ref 26/45 dated 14.11.2011|
Buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside India for maturity of less than three years. Issue of Letter of Comfort /Letter of Undertaking/ Guarantee is applicable for Buyers’ Credit.
Software Exports – Export of software is undertaken in physical form (software prepared on magnetic tapes and paper media) as well as in non-physical form (direct transmission abroad through dedicated earth stations/satellite links). The exporter is required to submit SOFTEX forms in triplicate to the officials of Department of Electronics (DOE), Government of India within 30 days from the date of invoice for the purpose of valuation. After certifying the copies, they forward the original copy directly to the nearest office of the Exchange Control Department of Reserve Bank the day it is received or the next day and return the duplicate to the exporter. The triplicate will be retained by the Department of Electronics for their record. Within 21 days from the date of certification of the SOFTEX form, the exporter should submit the duplicate copy together with a copy of each of the supporting documents to the authorized dealer for negotiation/collection. After the documents have been negotiated/sent for collection, authorized dealers should report the transaction to Reserve Bank in a fortnightly statement in form ENC under the cover of appropriate R Return. The full value of the software exported as declared on the SOFTEX form or as certified by the officials concerned of Government of India, whichever higher should be realized on due date of payment or within 360 days from the date of invoice whichever is earlier.
Poultry Finance: Bank is extending term loans and cash credit for establishment / expansion of existing poultry units. All the birds need to be insured. Of late, insurance companies are not insuring the poultry/EMU birds especially to cover the protection against the diseases, being the important terms of our sanction. To obviate this and to have risk mitigation, Bank is insisting collateral of 150% in lieu of poultry birds insurance. Where the borrowers are unable to provide collateral as above, branch should create a Risk Mitigation Fund and the borrower need to contribute one rupee per bird per annum and kept in a Recurring Deposit for 3 years under lien to the Bank. On maturity, the proceeds should be kept as term deposit for 5 years and the same has to be used for meeting the emergencies like outbreak of diseases to protect the interest of the borrower as well as Bank. (Cir.no.288 Ref 19/37 dated 08.10.2013)
Contact Point Verification: In order to help the branches in strengthening the due diligence process while entertaining retail credit proposals, bank has appointed outsourcing agencies for contact point verification. These agencies undertake to verify the authenticity of the address and the documents submitted by the prospective borrowers. However, highly placed Government officials / institutions / organizations, longstanding customers with above 5 years satisfactory track record, persons having salary accounts with our bank for the last 2 years, existing borrowers enjoying credit facilities with the bank, practicing professionals like Doctors, Chartered Accountants, Cost Accountants, Company Secretaries; landlords of our Bank Premises etc., are exempted Contact Point Verification Process. Nevertheless, branch managers will have to conduct their usual due diligence while processing loan applications. (Cir no. 424 Ref 53/10 dated 30.03.2010 & Cir no 449 Ref 53/28 dated 31.03.2012)
Instant Credit of Outstation/Local Cheques: The facility of instant credit facility is extended up to Rs.15000/- to all individual account holders maintaining Savings Bank/ Cash Credit, including all insurance linked accounts provided the account is properly introduced and maintained satisfactorily for a period not less than 1 year. In case of outstation cheques, branches are to levy normal collection charges only. With regard to local cheques, service charge at flat rate of Rs.5/- per cheque should be levied. In the event of dishonor of the cheque, interest at normal rate should be levied for the period the bank is out of funds. (cir 431 Ref 34/02 dated 31.12.2003)
|Collateral Security Norms – Agriculture (cir no.31 Ref 19/10 dated 19.04.13)|
|For loans up to and inclusive of Rs.50,000/-||Hypothecation of crops/assets to be financed without insisting for any other security /guarantee|
|For loans above Rs.50,000 and up to and inclusive of Rs.1,00,000/-||In addition to hypothecation of crop/assets, co-obligation / third party guarantee has to be obtained.|
|For limits above Rs.1,00,000 or aggregate commitment per borrower up to Rs.1,50,000/-||No collateral security is required for aggregate limits up to Rs.1,50,000/- in case of existing farmers with prompt repayment track record for the past 3 years. However, third party guarantee besides hypothecation of crops / assets has to be obtained.|
|For limits above Rs.1,50,000 or aggregate commitment per borrower up to Rs.2,00,000||No collateral security is required for aggregate limits up to Rs.2,00,000/- in case of existing farmers with prompt repayment track record for the past 5 years. However, third party guarantee besides hypothecation of crops /assets has to be obtained.|
|In case of New farmers /LEC holders : Existing guidelines will continue i.e., Loans up to Rs.1,00,000 on Hypothecation of crop/assets and Collateral security equivalent to 100% of the loan amount for aggregate limits above Rs.1,00,000. In cases where the aggregate sanctioned limit exceeds the above prescribed ceilings, Collateral Security equivalent to 100% of the loan amount shall be obtained.|
|No collateral security or third party guarantee is insisted for SME loans up to Ten lakhs and for Tiny Sector up to Twenty five lakhs based on the good track record and financial position of the borrowing unit.|
Valuation of Properties – All properties mortgaged to the Bank are to be valued before disbursement of loans. The frequency of valuation of properties by approved engineer for fund & non funded working capital limits including Non Performing and Suit filed accounts is 2 years. However, Branch Manager is allowed to value Agricultural lands up to Rs.5 lacs, Above Rs.5 lacs should be valued by RDO and countersigned by Manager. In case of vacant sites up to Rs.25,000 Branch Manager is empowered to undertake valuation. Properties of 50 crore and above, the valuation is to be done by minimum two independent valuers (chartered engineers) and the lower of the two valuations shall be taken into consideration. If the appreciation or depreciation in the value of the security is more than 25% per annum, the valuer may be advised to substantiate the reasons and branch and ZO should record the reasons. The valuation report should bear additional details such as longitude and latitude of the property, distress value of the property along with market value, address of the property with photo, particulars of electricity bill payments and other taxes paid on property as proof of ownership, nearest landmark, deviations in construction, if any. Revaluation of properties is not required in the case of NPA accounts where 100% provision is made. Wherever the value of the property is more than 10 crore at the time of first valuation, it should be revalued by second valuer. In case the difference of valuation is not more than 15%, the average value is to be considered. Where it is more than 15%, then the third valuer shall be appointed and the sanctioning authority shall take appropriate decision. (Cir no 189 Ref 26/23 dated 01.08.2013; 066 Ref 26/14 dated 08.06.2009 & 317 Ref 26/52 dated 14.12.2011)
Prompt repayment track record means farmer repaying the loan / installment of loan within 3 months from the due date consistently for 3/5 years. Reschedulement /Rephasement of loans due to natural calamity will not be treated as an irregularity in repayment of loan. The installment of the restructured loans should have been paid within 3 months of the due date.