Takeover of accounts from other Banks

Corporates seeking better facilities/higher credit from Banks often approach different lenders for sanction of credit facilities. Central Vigilance Commissioner observed that sometimes existing accounts with one bank already showing signs of sickness are taken over by another bank and such accounts predictably turn NPA within a short time. To arrest unethical/unjustified practice of takeover of accounts, Department of Financial Services, Govt. of India has issued the following guidelines to all Banks.

  • For taking over of any accounts, Banks must put in place, a Board approved Policy with regard to take over of accounts from another Bank and the same should be incorporated in the credit policy of the Bank.
  • Normally, the accounts having ratings above the level approved by the Board should only be taken over and the concessionary facilities should be extended only in extremely deserving cases with specific reasons recorded in writing.
  • In all cases of takeover of accounts, it is necessary to do proper due diligence including visit to the premises of the customer, if needed, before the account is considered for takeover by the bank.
  • The guidelines of joint lending should be strictly applied in all cases where the borrower seeks to have additional exposure from the bank after taking over the account.
  • No cases should be taken over by a Bank from any Bank where any of its ED or CMD had worked earlier. In case, any such cases need to be taken over, the proposal will need to be put up to the Board with specific reasons justifying the need for taking over the accounts.

The operational guidelines with regard to Take over of accounts are as under:

  • The account should be a Standard Asset with Positive Net Worth & profit record. P & C Report is mandatory preferably before sanction, if not, at least before disbursement.
  • Obtain credit information in prescribed format, which enables the transferee bank to be fully aware of irregularities, if any, existing in the borrower’s account with the transferor bank.
  • Account Statement – The account copies of all the borrowal accounts with the present bankers/financial institution shall be obtained at least for the last 12 months and ensure that the conduct of the a/c is satisfactory and no adverse features are noticed.
  • Existence & Previous profit track record - i) In existence for a minimum of 3 years with Audited B/S ii) Profit making in preceding 2 years & iii) Availing Credit facilities with the previous Banker at least for 3 years.
  • Enhancement on Existing Limits with the present Banker: i) Enhancement not beyond 50% ii) No further Enhancement/ Additional Limits till one year or next ABS, whichever is earlier.
  • TOL/TNW should not exceed 4:1 in case of takeover accounts.
  • Group Accounts – In case of having Sister / Associate concerns, Groups consolidated position has to be examined.

Branches should ensure that Assessment is to be made independently as per our Loan Policy guidelines. Administrative clearance is to be obtained from Zonal Office / Head Office. To take all existing securities and to complete the documentation expeditiously duly complying with our loan policy guidelines on takeover norms, compliance, legal audit, permission for release of limit etc. While other bank is taking over our borrowal account, Branches are advised to inform adverse features if any, in the conduct of the accounts to the transferee bank duly obtaining permission from competent authority for issuing P & C Report.