CREDIT APPRAISAL TABLE OF CONTENTS Chapters 1. INTRODUCTION Reason for selecting the project Scheme of the project Research Methodology Limitation of the study 2. CREDIT POLICY OF COMMERCIAL BANK Commercial banks and its objectives Recent policy developments regarding bank credit Changing phase of bank credit Trends of bank credit in India Procedure for providing bank credit Credit Appraisal 3. THE PROFILE OF THE ORGANIZATION OF PNB Indian banking sector & its major challenges Punjab National Bank at a glance Mission and Vision Page 1
1. INTRODUCTION y Reason for selecting the project y Scheme of the project y Research Methodology y Limitation of the study
2. CREDIT POLICY OF COMMERCIAL BANK y Commercial banks and its objectives y Recent policy developments regarding bank credit y Changing phase of bank credit y Trends of bank credit in India y Procedure for providing bank credit y Credit Appraisal
3. THE PROFILE OF THE ORGANIZATION OF PNB y Indian banking sector & its major cha
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CREDIT APPRAISAL
TABLE OF CONTENTS
Chapters
1. INTRODUCTION
Reason for selecting the project
Scheme of the project
Research Methodology
Limitation of the study
2. CREDIT POLICY OF COMMERCIAL BANK
Commercial banks and its objectives
Recent policy developments regarding bank credit
Changing phase of bank credit
Trends of bank credit in India
Procedure for providing bank credit
Credit Appraisal
3. THE PROFILE OF THE ORGANIZATION OF PNB
Indian banking sector & its major challenges
Punjab National Bank at a glance
Mission and Vision
Organizational structure of PNB
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4. CREDIT PHILOSOPHY & POLICY WITH REGARDS TO PNB
Credit philosophy
Credit policy
Introduction to loans
Classification of loans
Building up of a proposal
Requirements as per constitution of borrower
Financial Appraisal
5. ANALYSIS AND INTERPRETATION OF DATA
Credit Appraisal techniques
Process of credit appraisal for providing cash credit
Appraisal techniques for retail loans
6. CONCLUSION
Conclusion
BIBLIOGRAPHY
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Introduction
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The last year financial crises have become the main cause for recession which was started in
2006 from US and was spread across the world. The world economy has been majorly
affected from the crisis. The securities in stock exchange have fallen down drastically which
has become the root cause of bankruptcy of many financial institutions and individuals. The
root cause of the economic and financial crisis is credit default of big companies and
individuals which has badly impacted the world economy. So in the present scenario
analysing one’s credit worthiness has become very important for any financial institution
before providing any form of credit facility so that such situation doesn’t arise in near future
again.
Analysis of the credit worthiness of the borrowers is known as Credit Appraisal. In order to
understand the credit appraisal system followed by the banks this project has been conducted.
The project has analysed the credit appraisal procedure with special reference to Punjab
National Bank which includes knowing about the different credit facilities provided by the
banks to its customers, how a loan proposal is being made, what are the formalities that is to
be satisfied and most importantly knowing about the various credit appraisal techniques
which are different for each type of credit facility.
Before going further it is necessary to understand the need and basic framework of the
project. Therefore this chapter provides an introduction to the topic, objective of the project,
reasons for selecting the project and the basic structure and framework how the project
proceeds. In order to understand the importance of the topic selected an introduction to the
overview of the commercial bank , its functions, and present trends and growth in bank credit
are required and it is covered in this chapter.
Reasons for selecting the project
Whenever an individual or a company uses a credit that means they are borrowing money
that they promise to repay with in a pre-decided period. In order to assess the repaying
capability i.e. to evaluate their credit worthiness banks use various techniques that differ with
the different types of credit facilities provided by the bank. In the current scenario where it is
seen that big companies and financial institutions have been bankrupted just because of credit
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default so Credit Appraisal has become an important aspect in the banking sector and is
gaining prime importance.
It is the incident of credit defaults that has given rise to the financial crisis of 2008-09. But in
India the credit default is comparatively less that other countries such as US. One of the
reasons leading to this may be good appraisal techniques used by banks and financial
institutions in India. Eventually the importance of this project is mainly to understand the
credit appraisal techniques used by the banks with special reference to Punjab National Bank.
Scheme of the project
It covers the objective and structure of the project which is discussed as follows:-
Objective of the project
The overall objective of this project is to under stand the current credit appraisal system used
in banks. The Credit Appraisal system has been analysed as per the different credit facilities
provided by the bank. The detailed explanation about the techniques and process has been
discussed in detail in the further chapters.
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Structure or Plan of the project
The project first of all makes a study about the commercial banks- its important functions.
Then it highlights on the concept of Bank Credit & its recent trends. The project then
proceeds towards the lending procedure of banks and here it highlights about credit appraisal
being the first step in building up of a loan proposal. Then it discusses the bank credit policy
with respect to Punjab National bank where the project was undertaken.
The project then proceeds with the review of literature i.e. review of some past work
regarding credit appraisal by various researchers. The project then moves towards research
methodology where it covers the information regarding the type of data collected and the
theoretical concepts used in the project are discussed in detail. Then the project proceeds with
the next chapter consisting of the analysis part which covers the analysis of various
techniques used by the banks for the purpose of credit appraisal. Then the project moves to its
next chapter i.e. findings where some results found out are interpreted and then moving on to
the last and the final chapter i.e. the suggestions and conclusions where some steps are
suggested to be implemented to increase the work efficiency and to reduce to work pressure
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Commercial banks and its objectives
A commercial bank is a type of financial intermediary that provides checking accounts,
savings accounts, and money market accounts and that accepts time deposits. Some use the
term "commercial bank" to refer to a bank or a division of a bank primarily dealing with
deposits and loans from corporations or large businesses. This is what people normally call a
"bank". The term "commercial" was used to distinguish it from an investment bank.
Commercial banks are the oldest, biggest and fastest growing financial intermediaries in
India. They are also the most important depositories of public savings and the most important
disbursers of finance. Commercial banking in India is a unique banking system, the like of
which exists nowhere in the world. The truth of this statement becomes clear as one studies
the philosophy and approaches that have contributed to the evolution of banking policy,
programmes and operations in India.
The banking system in India works under constraints that go with social control and public
ownership. The public ownership of banks has been achieved in three stages: 1995, july 1969
and April, 1980. Not only the public sector banks but also the private sector and foreign
banks are required to meet the targets in respect of sectoral deployment of credit, regional
distribution of branches, and regional credit deposit ratios. The operations of banks have been
determined by lead bank scheme, Differential Rate of interest scheme, Credit authorization
scheme, inventory norms and lending systems prescribed by the authorities, the formulation
of credit plans, and service area approach.
Commercial Banks in India have a special role in India. The privileged role of the banks is
the result of their unique features. The liabilities of Bank are money and therefore they are
important part of the payment mechanism of any country. For a financial system to mobilise
and allocate savings of the country successfully and productively and to facilitate day-to-day
transactions there must be a class of financial institutions that the public views are as safe and
convenient outlets for its savings. The structure and working of the banking system are
integral to a country’s financial stability and economic growth. It has been rightly claimed
that the diversification and development of Indian Economy are in no small measure due to
the active role banks have played financing economic activities of different sectors.
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Major objectives of commercial banks
Bank Credit
The borrowing capacity provided to an individual by the banking system, in the form of
credit or a loan is known as a bank credit. The total bank credit the individual has is the sum
of the borrowing capacity each lender bank provides to the individual.
The operating paradigms of the banking industry in general and credit dispensation in
particular have gone through a major upheaval.
Lending rates have fallen sharply.
Traditional growth and earning such as corporate credit has been either slow or not
profitable as before.
Banks moving into retail finance, interest rate on the once attractive retail loans also
started coming down.
Credit risks has went up and new types risks are surfaced
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Balancing profitability with liquidity managementAs any other business concern, Banks also aim to make profitbut besides that they also need to maintain liquidity beacuse of the nature of their liabilities.
Management of ReservesBanks are expected to hold a part of their deposits in form of ready cash which is known as CASH RESERVES.Central bank decides the reserve ratio known as the CRR.
Creation of CreditBanks are said to create deposits or credit or money or it can be said that every loan given by bank creates a deposit.This has given rise to the important concept of money multiplier.
on recovery and increased efficiency in core operations of the Bank. The performance
highlights of the bank in terms of business and profit are shown below: Rs in Crore
Parameters Mar'08 Mar'09 Mar'10 CAGR (%)
Operating Profit 4006 5744 7326 22.29
Net Profit 2049 3091 3905 23.98
Deposit 166457 209760 249330 14.42
Advance 119502 154703 186601 16.01
Total Business 285959 364463 435931 15.09
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PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The bank has made rapid strides in this direction. All branches of the Bank are under Core Banking Solution (CBS) since Dec’08, thus covering 100% of its business and providing ‘Anytime Anywhere’ banking facility to all customers including customers of more than 3000 rural & semi urban branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc. Towards developing a cost effective alternative channels of delivery, the bank with more than 3500 ATMs has the largest ATM network amongst Nationalized Banks.
With the help of advanced technology, the Bank has been a frontrunner in the
industry so far as the initiatives for Financial Inclusion is concerned. With its policy of
inclusive growth in the Indo-Genetics belt, the Bank’s mission is “Banking for Unbanked”.
The Bank has launched a drive for biometric smart card based technology enabled Financial
Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to
reach out to the last mile customer. The Bank has started several innovative initiatives for
marginal groups like rickshaw pullers, vegetable vendors, dairy farmers, construction
workers, etc. Under Branchless Banking model, the Bank is implementing 40 projects in 16
States. The Bank launched an ambitious ‘Project Namaskar’ under which 1 lakh touch points
will be established in unbanked villages by 2013 to extend the Bank’s outreach. Under this,
30 Kiosks have been opened covering 119 Villages reaching 1.32 Lakh beneficiaries.
Backed by strong domestic performance, the bank is planning to realize its global aspirations.
Bank continues its selective foray in international markets with presence in 9 countries, with
branches at Kabul and Dubai, Hong Kong & representative offices at Almaty, Dubai,
Shanghai and Oslo, a wholly owned subsidiary in UK, a joint venture with Everest Bank Ltd.
Nepal and a JV banking subsidiary “DRUK PNB Bank Ltd.” in Bhutan. Bank is pursuing up
gradation of its representative offices in China & Norway and is in the process of setting up a
representative office in Sydney, Australia and taking controlling stake in JSC Dana Bank in
Kazakhstan.
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Mission and Vision
VISION
"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and
services under one roof"
MISSION
"Banking for the unbanked"
“TO provide excellent professional services and improve its position as a leader in financial and related services; build and maintain a team of motivated and committed
workforce with high work ethos; use latest technology aimed at the customer satisfaction and act as effective catalyst for socio- economic development”
Products and Services
Corporate banking Personal banking Industrial finance Agriculture finance Financing of trade International banking Home loan Auto loan ATM/Debit card Deposit interest rate Credit interest rate Other services: lockers facility, internet banking, EFT & Clearing services etc
Award & Achievements
Best IT Team of the year Award
SKOTCH Challenger Award for Change Management for the year 2005-06
Best IT User in Banking & Financial Services Industry - 2004
by NASSCOM in partnership with Economic Times
Golden Peacock Award for Excellence in Corporate Governance - 2005 by Institute of Directors
FICCI's Rural Development Award for Excellence in Rural Development – 2005
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Skotch Challenger Award for Exemplary use of Technology
for becoming a pioneer in Public Banks - 2005
Golden Peacock National Training - 2004 & 2005
by Institute of Directors
National Award for Excellence in SSI Lending
Ranked 2nd for 4 consecutive years - 2002, 2003, 2004 & 2005
Banking Technology Awards 2004 Runner up in 'Best IT Team of the Year Award 2005'
Jointly Adjudged by IBA, Finacle & TFCI
Money Outlook Award - 2004Runner up in 'Best Bank (public Sector) of the year Award' -2005
Niryat Bandhu Gold Trophy
for excellence in export perforamnce for 3 consecutive years 2001, 2002 & 2003by Federation of Indian Exporters Organization (FIEO)
21st Amongst Top 500 Companiesby the leading Financial Daily The Economic Times, June 2005
9th amongst India's Top 50 Most Trusted Service Brands
A.C Nielson Survey, The Economic Times Dec 2004
3rd Rank amongst Banking Sector in India 323rd Rank in the World
The Bankers' Almanac, January 2006
368 amongst Top 1000 Global Banks The Banker, London July 2005
Skoch Challenger Award for Exemplary Use of Technology
Winner for becoming a pioneer in public banks by Skoch consultancy services pvt ltd, Gurgaon 2005
FICCI's Rural Development Award Award for excellence in rural development 2005
Amity Global Corporate Excellence Award
Amity Business School, Noida has conferred the Award to PNB, after an in-depth research to analyse the strengths and core competencies of the Global 500 companies and banks which have already made an indelible most admired impression on the Indian economy. 2008& 2007 & 2005
Banking Technology AwardsIBA, Finacle & TFCI jointly adjudged PNB as runner up in "Best IT Team of the year Award" 2005
PC Quest Users’ Choice AwardBest IT Implementation 2007& 2005
Symantec Visionary Award Information Security Impact 2005
Money Outlook AwardMoney Outlok adjudged PNB as runner up in "Best Bank (Public Sector) of the year Award" 2005
Banking Technology AwardsIBA, Finacle & TFCI runner up Award for Outstanding Achiever of the Year (Individual). 2005
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Golden Peacock Innovative Product/Service Award
2010 (for BCP implementation)
Golden Peacock Award for Excellence in Corporate Governance
Winner in the ‘Large Joint Entry’.2009 &2007 & 2005
Skoch Challenger Award for Change Management
For upliftment of Weaker sections of society 2006
IDRBT Banking Technology Awards
Best IT Team of the Year Award 2006
National Award For Excellence in lending to Tiny sector
First Prize by By Ministry of Small Scale Industries.2006
Skoch Challenger Award for capacity building for FTC initiative
Skoch Consultancy Services Pvt Ltd 2007
Computer Associates Excellence Award
Excellence in EMS Roll Out. 2007
CIO 100 AwardFor Best IT Implementation by IDG Media Pvt. Ltd.2007, 2008 & 2009
National Award for Excellence in Lending to Micro Enterprises
For Lending to Micro enterprises 2007
Award for the use of Technology for Financial Inclusion.
Institute for Development and Research in Banking Technology (IDRBT), Hyderabad. 2008
Dun & Bradstreet Award for “Priority Sector Lending including Financial Inclusion”.
Dun & Bradstreet 2009
National Award for Excellence in Lending for Institutional Finance in Propagating KVI Programmes in NORTH ZONE
Khadi & Village Industry Commission, Ministry of Micro, Small & Medium Enterprises, Govt. of India(Interest Subsidy Eligibility Certificate Scheme)2009
National Award for Excellence in Lending for Institutional Finance in Propagating KVI Programmes in CENTRAL ZONE
Khadi & Village IndustryCommission, Ministry of Micro, Small & Medium Enterprises, Govt. of India
(Interest Subsidy Eligibility Certificate Scheme)
2009
National Award for Excellence in Lending for Institutional Finance in Propagating KVI Programmes in NATIONAL LEVEL
Khadi & Village IndustryCommission, Ministry of Micro, Small & Medium Enterprises, Govt. of India
National Award for Excellence in Lending for Institutional Finance for Propagating KVI Programmes in NORTH ZONE
Khadi & Village IndustryCommission, Ministry of Micro, Small & Medium Enterprises, Govt. of India
(Prime Minister Employment Generation Programme) 2009
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National Award for Excellence in Lending for Institutional Finance for Propagating KVI Programmes in CENTRAL ZONE
Khadi & Village IndustryCommission, Ministry of Micro, Small & Medium Enterprises, Govt. of India
(Prime Minister Employment Generation Programme) 2009
India Pride Award by dainik Bhaskar and Daily News analysis
Excellence in PSU 2009
Indira Gandhi Rajbhasha Shield Promoting Hindi 2009
Emerson Uptime Champion Awards 2009
“Best InfoSphere Warehouse Solution” Award by IBM
2009 (for implementation of Enterprise Wide Data Warehouse)
Organizational structure of Punjab National Bank
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Head Office7, Bhikhaji Cama Place, New Delhi-110066
Circle OfficeBranches
CREDIT APPRAISAL
Hierarchy
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Chairman
Executive Director
General Manager (GM)
Deputy GM
Assistant GM
Chief Manager
Senior Manager
Manager
Officers
Subordinate clerks
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Board of Directors
Sh.K.R. Kamath:- He has been appointed as a chairman and managing director of Punjab National Bank by Govt. Of India.
Sh. M.V.Tanksale:- Executive Director
Sh. Nagesh Pydah:- Executive Director
Smt. Ravneet Kaur:- Govt. of India Nominee Director Shri L.M.Fonseca:- Reserve Bank of India Nominee Director Shri Mushtaq A Antulay:- Part-time non-official Director Shri Gautam P. Khandelwal:- Part-time non-official Director Shri Vinod Kumar Mishra:- Part-time non-official Director Shri Tribhuwan Nath Chaturvedi :- Share Holder Director Shri G R Sundaravadivel:- Share Holder Director Shri Devinder Kumar Singla: Share Holder Director Sh. M P Singh:- Workmen Employees Director Sh. Pradeep Kumar:- Officer Director
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Review of Literature
Literature review provides available research with respect to the selected topic of the project
or the research findings by an author which has been done with respect to the research topic.
This chapter provides the overall view of the available literature with respect to the topic of
the project. The review of the related research works are described as under:-
1. A research work on the topic “ On the appraisal on consumer credit banking products
with the asset quality frame: A multiple criteria application.” done by Panagiotis Xidonas,
Alexandros Flamos, Sortirios Koussouris, Dimitrious Askouins & Ioannis Psarras from
National Technical University of Athens in 2007 says that Asset quality refers to the
likelihood that the bank's earning assets will continue to perform and requires both a
qualitative and quantitative assessment. Decision problems like the "internal appraisal of
banking products", are problems with strong multiple-criteria character and it seems that the
methodological framework of Multiple Criteria Decision Making could provide a reliable
solution. In this paper, the Asset Quality banking indicators are the, so called, "criteria", the
value of these indicators are the, so called, "scores" in each criterion and the
P.R.O.METH.E.E. [Preference Ranking Organization Method of Enrichment Evaluations,
Brans & Vincke (1985)] Multiple Criteria method is applied, towards modelling banking
products appraisal problems. A Multiple Criteria process, strictly mathematically defined,
integrates the behaviour of each indicator-criterion and utilizes each score in order to rank the
so called "alternatives", i.e. categories of banking products.
2. The research Paper on “Evaluation of decision support systems for credit management
decisions” by S. Kanungo, S.Sharma, P.K. Jain from Department of studies, IIT Delhi have
conducted a study to evaluate the efficiency of decision support system (DSS) for credit
management. This study formed a larger initiative to access the effectiveness of the I.T based
credit management process at SBI. Such a study was necessitated since credit appraisal has
become an integral sub-function of the Indian banks in view of growing incidence of non-
performing assets. The DSS they have assessed was a credit appraisal system developed by
Quuattro pro at SBI. This system helps in analysis of balance sheets, Calculation of financial
ratios, cash flow analysis, future projections, sensitivity analysis and risk evaluation as per
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SBI norms. They have also used a strong Quassi experimental design called Solomon’s four
group design for the assessment. In the experiment the managers of SBI who attended the
training programme were the subjects the experiment consisted of the measurements that
were taken as pre and post tests. An experimental intervention was applied between the pre-
tests and the pro-tests. The intervention or stimulus consisted of DSS training and use. There
were four groups in the experiment. The stimulus remained constant as the they took care to
ensure that the course content as well as the instructors remained the same during the course
of the experiment. Two were experimental groups and two were control groups. All four
groups underwent training in credit management between the pre and the post tests. Results
from research shows that while the DSS is effective, improvement needs to be done in the
methodology to assess such improvements. Moreover such assessment frameworks while
being adequate from a DSS-centric viewpoint do not respond to the assessment of DSS in an
organizational setting . In the concluding section they have discussed how this evaluative
framework can be strengthened to initiate an activity that will allow the long term and
possibly the only meaningful evaluation framework for such a system.
3. The research paper on the topic “Towards an appraisal of the FMHA farm credit
program: A case study of the efficiency of borrower by S. Mehdian, Wm. McD. Herr, Phil
Eberle, and Richard Grabowski” have studied that the a production frontier methodology is
used to measure the overall efficiency of a sample of farmers home administration(FMHA)
compared to non participants. The study did not find evidence that the efficiency FMHA
farms improved between a time period Results indicated that overall efficiency of FMHA
borrowers is associated with selected financial characteristics of the farms. A review of the
literature shows that agricultural finance specialists have not been successful in evaluating
whether FMHA pro- grams improve the efficiency and income of probability of success.
Liberal loan policies
Eligible borrowers. Inadequate evaluation of the FMHA program occurs partly because of
because the difficulty of adequately deter-mining the impacts of changes in the econ-
borrowers in a more normal period of the loan. This study addressed these difficulties by
utilizing a nonparametric production frontier technique to measure overall efficiency and a
matched pair statistical procedure to measure how efficiency of farms receiving FMHA credit
changed relative to a Non-FMHA farmers.
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4. The book named “Financial Analysis for Bank Lending in Liberalised Economy” by
Sampat.P.Singh and Dr.S.Singh have discussed the subject financial analysis for bank
lending has assumed considerable importance, particularly since early 1990's when, like most
of the countries, India opted for the policy of liberalisation and globalisation after 1991.
The present volume is meant to be a standard reference as well as text book on the varied
facets of financial analysis with reference to credit management by Banks and Financial
Institutions. The book consists of three parts. Part I discusses the concepts and tools of
Financial Analysis; Part II explains various concepts of working capital in its historical
context; while Part III demonstrates the application of these tools in the changing context of
liberalised economy by focusing on new concepts like 'Credit Worthiness', Risk-Analysis,
Concept VIDYALAKSHYAPURTI Scheme is the main scheme and its variant PNB Sarvotam Shiksha scheme stands merged with the main scheme with effect from 20.12.2008
Courses eligible
Studies in IndiaSchool level including. +2, Graduation, Post graduation, Professional courses, Computer courses and Evening courses, other courses leading to diploma /degree approved by UGC, Govt, AICTE, AIBMS, ICMR etc. and Advance diploma in Banking Tech. It includes professional & commercial & pilot training courses in India and abroad. For study in India. Institutes approved by DGCA are included.
Studies AbroadGraduation, PG and Courses offered by CIMA London , CPA in USA
Eligibility Indian National Secured Admission
Secured pass marks in qualifying exam. Branches need not go into technicalities of admission process (selection through management quota etc.) and may consider loan based on admission advice. ( RBD Cir. No. 60/08 dt. 20.12.2008)
More than one loan in a family
In case of more than one loan in a family, the family as a unit is to be taken into account for considering the loan and security taken in relation to total quantum of loan subject to margin and repaying capacity of the parents.
Top up Loans Top up loans may be sanctioned to students for pursuing further studies within overall eligibility limits with appropriate reschedulement of existing loans and required permission by the CH
Age of student There is no restriction with regard to age of student for being eligible for the loan.
Income Criteria
No Income criteria are prescribed for the parents. However amount of loan be decided by judging Income of the parents.
Amount of loan Rs. 10.00 lac in India and 20.00 lac for abroad. CH can exercise higher powers.
Priority Sector Rs. 10.00 lac in India and Rs. 20.00 lac for abroad.
Capital Requirement
Risk Weight as per BASEL-I 100%Risk Weight as per BASEL-II 75%
Margin NIL Up to Rs. 4.00 lac 5% Above Rs. 4.00 lac in India 15% Above Rs. 4.00 lac abroad(Scholarship/assistance may be included in the margin)
Security NIL Up to Rs. 4.00 lac3rd party guarantee for loans above 4.00 lac upto Rs. 7.5 lac(Exemption from taking guarantee for loan up to 7.50 lakh for students of IIT, IIM, XLRI etc.EM of IP or other Coll. Security for loans above 7.50 lac (should be interpreted as loan amount of Rs. 7.51 lac and above in terms
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Hypothecation of assets if created out of loan amount.Co-obligation of students’ parents as well as assignment of future income of student in loan above Rs. 7.5 lac. For married persons, co-obligator can be spouse or parents or parents-in-law. Grand parents can also become co-obligants.
Security for staff members
Lien on Terminal dues Extension of EM of IP Fresh Mortgage if there is no HL Co-obligation of employee
Penal Interest Up to 25000/- ----NIL , Above 25000/- @ 2% on OVERDUE AMOUNT
Upfront fee NIL 0.50% (Maximum 5000/-) for studies abroad which is eligible for
refund on availment of loan.Documentation Charges
Upto 4.00 lac - Rs. 270/- plus service tax Above 4.00 lac Rs. 450/- plus service tax
Repayment 5 to 7 years with moratorium period equal to Course period + 1 year or 6 months after getting job whichever is earlier. BM is empowered to permit extension in moratorium period up to 2 years as against present provision of max. 1 year in deserving cases under reporting to circle head.
Calculation of interest
Simple interest is to be charged during moratorium period and kept in a separate account. The accrued interest during repayment holiday will be added to Principal for fixing of EMI.
Interest concession
1% interest concession is allowed if it is serviced during holiday period. The concession will be given at start of repayment and EMI will be fixed accordingly.Rebate of 0.5% is allowed to students of IITs, IIMs etc.
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Constitutes of loan
Tuition fees, Hostel charges, Exam fees, Library/Lab charges, Books, Equipment, Instruments, Uniform, Building fund, Refundable deposit, Travel expenses & Computers. (Advances for Computers are allowed in Computer/Management courses only.)
Fees re-imbursement
Within 6 months. Circle Head can allow beyond a period of 6 months also on merits.(RBD Cir. No. 12/10 Dt. 16/02/2010)
Documents Documents will be executed both by student and the parent/guardian.
1. Letter of admission and proof of last qualifying exam. 2. Loan application3. Agreement on PNB 1116 if student is minor.4. Agreement on PNB 1117 if student is major.5. Letter of guarantee if loan is above Rs. 4.00 lac.6. EM of IP if loan amount is above Rs. 7.5 lac
Post sanction Follow up
Follow up with the college/university for getting progress report at regular intervals.
Life Insurance by Kotak Mahindra
In terms of guidelines contained in RBD-A cir no. 16/08 dt. 26.3.08, Insurance policy can be obtained to meet the exigencies in case of death of student borrower between age group of 18-33 years. The coverage is between 20000-15 lac. Single premium will be paid. It will vary according to age and total insurance Tenor. The scheme is valid for one year.
Relaxations for students of IIT,IIM, MDI, XLRI, ISB
It has been decided to permit the following relaxations to the students securing admission in IITs/IIMs/MDI Gurgaon/XLRI Jamshedpur and ISB Hyderabad:
Exemption from making parent/guardian as co-borrower. Exemption from taking guarantee for loans up to 7.50 l
Other provisions
CR of the borrower is not required. Brief CR of the guarantor to be prepared.
“No due Certificate” is not to be insisted upon. Application will be rejected by next higher authority.
2nd time loan can be considered by the CH within limits. Capability Certificated may be issued for studies abroad. Education loan to the institutions previously under Sarvotam Shiksha
Scheme can be sanctioned by the branch (other than place of residence of parents) convenient to the borrower depending upon genuineness, accessibility and aspect of recovery.
On-line applications are being accepted for grant of education loan. Loan applications are to be disposed of within 15 days under branch/hub sanction and 21 days under CH and above.
CH has full powers to relax eligibility, margin and security norms. Parents, grandparents, spouse, parents-in-law can be co-obligants. Passport and Visa is required for study abroad.
Disposal of loan applications
It has been decided to curtail the period of disposal of education loan applications to maximum 1 week except cases of CH and above level where the outer limit of disposal will be 2 weeks from the date of receipt of complete application.
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II. VEHICLE LOANS
Today, vehicles can be financed using a number of options such as loans, lease, or hire
purchase agreement. Obtaining a vehicle loan is one of the more straightforward ways of
financing a two or four wheeler. In this manner, the vehicle purchased is actually possessed
by the bank or lending institution. This means the car or motorbike is hypothecated.
Therefore, though the consumer owns the vehicle, the bank or the lending institution is
actually using it as a security against the loan that the consumer has obtained.
Vehicle loan provided by Punjab National Bank are under two categories know as PNB
SARTHI and CAR Loan & details about its processing, eligibility, margin etc are discussed
below:-
PNB SARATHI
Eligibility Individuals with Income proof Students above 18 years with parents as co-borrowers Business concerns Individuals without income proof but residing at the given address
for the last at least 3 years. Individuals with good repayment track without default.
Purpose & Extent
Purchase of Scooter/Motor Cycle/MopedMaximum Rupees. 100000/-.
Margin 5% where salary is disbursed through branch or check-off facility is available.
25% for students where parents are co-borrowers. 30% for business or where there is no income proof. 10% for others.
Income criteria 10000/- pm. Is the minimum criteria. Income of parents be considered in case of students. Income of spouse can be added.
Switch over to new scheme
On flat fee of 2%
Guarantee Generally it is not required. In cases where there is no Income proof, Guarantee of some family member or 3 rd. party
In cases where income of spouse is to be added, Guarantee of spouse can be taken.
Insurance Comprehensive Insurance with bank clause and policy to remain with the bank.
Security Inspection
PNB 551 is required for the Ist time. In case account is regular, PNB 551 is not required thereafter.
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In case the account is irregular, Qtrly. Inspection is must.Upfront fee Rs 200/- + Service Tax For students – Nil
Documentation Charges
Rs. 270/- plus service tax
Other Requirements
Driving License is required. Statement of account for the last 3 years is required. Income Tax Proof Salary certificate Income of spouse can be considered if he/she is made guarantor.
CAR LOANConveyance Loan (Public) for Car
Eligibility Individual & Business concerns, Professionals & Agriculturists with 6M transaction records.
Purpose & Extent
Car, Van & Jeep, Multi Utility Vehicles/Sports Utility Vecles
New or Old (not older than 3 years – CH powers)
Individuals 25 times of net monthly salary or Rs. 25 lac whichever is lower for one or more vehicles.
CH may relax the criteria within powers keeping in view the repayment capacity.
Income of spouse can be considered provided he/she stands as additional guarantor
Business Corporate and non-corporate
No Ceiling. One or more vehicle can be purchased. Earning and repaying capacity will be considered.
Agriculturists --do--Margin General 20% - Cost of Insurance and one-
time road tax can be considered as margin.
Govt./PSU employees 15% (Repayment in 84 EMIs)If net income is more than 6 lac Margin can be reduced to 15% by
Sanctioning Authority.Old Vehicles 30%CH may reduce up to 10% in deserving cases.
Repayment Maximum 7 years without any Moratorium period Old Vehicles – 5 years Agriculturists – 14 H/years as per crop pattern CH and above empowered to relax repayment by 12M Maximum age for EMI 65 years relaxable up to 70 years. Carry home pay should not be more than 50% of gross salary Advance cheques equal to no. of installments be obtained.
Rate of Interest The rate is on fixed option with reset clause of 1 year. Rate of interest is linked with tenure of loan. Presently 0.5% extra interest is charged
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if repayment period is 3 years and above.Upfront fee 1% of loan subject to maximum 6000/- exclusive of service tax.
Documentation charges
Rs. 270/- (Tie up arrangement Rs.1270/- ) up to Rs. 2.00 lac + ST Rs. 450/- (Tie up arrangement Rs.1700/- ) Above Rs. 2.00 lac + ST
Security Hypothecation of the vehicle RC in joint name of borrower and bank Bill of the vehicle will also be in the joint name.
Guarantee Spouse if employed or Suitable 3rd party guarantee or Collateral Security in shape of IP/liquid security equal to 100% of loan amount.CH and above can waive the guarantee/collateral security.
Insurance Comprehensive Insurance with bank clause and policy to remain with the bank.
Security Inspection
PNB 551 is required for the 1st. time. In case account is regular, PNB 551 is not required thereafter.
In case the account is irregular, Qtrly. Inspection is must.Other Provisions
15% depreciation on St. line method is to be applied in case of Old Car
Driving License is not at all required. Statement of account for the last 6 M. is required. Car loan finance to business concerns for personal use of
executives shall be outside the purview of corporate banking and may be sanctioned by officials under vested powers even in case where existing facilities have been sanctioned by higher authorities in terms of RBD cir. No. 51 dt. 15/09/09.
III. 5.8.3 HOUSING LOANS
IV. Housing loans have emerged as an attractive avenue for credit deployment for
banks in the recent past. Industry level statistics reveal that NPAs in this segment is
relatively low. Housing loans are fully secured as they are backed by mortgages of
residential properties. Small housing loans up to Rs 10 lakhs can be classified as
priority sector credit and hence help in achieving/ maintaining the mandated
priority sector lending targets. Risk weightage for housing loans is only 50 % ,
enabling expansion of the credit portfolio with lesser capital requirement. The
prevailing lower interest rates, which have resulted in greater affordability and the
tax concessions offered by the government have made this one of the fastest
growing financial products. Further since the housing loan portfolio typically
comprises a large pool of small and medium sized loans, risk is distributed over a
large number of accounts, which is ideal from Risk Management point of view.
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Hence growth of quality assets under Housing Finance is one of the major areas of
focus for the bank.
PNB-(Punjab National Bank) Home Loan offers the most consumer friendly
home loans and housing finance schemes at attractive rates. PNB Housing Loans, with an
aim to make purchase and construction of homes a comfortable task, provides fixed as well
as floating home loans at different rate of interest for different tenures. PNB Housing
Finance covers 80% of the cost of your home or renovation / repairing of your home loan up
to Rs. 10 Lacs for buying land and up to Rs. 2 Lacs for furnishing can be availed from PNB
Home Loan.
The details of housing loan product of Punjab National Bank regarding its purpose, eligibility criteria, assessment, processing, documentation, cut back, margin,
pre-sanction follow ups, etc. are as foll1. 2. HOUSING FINANCE (PUBLIC)Eligibility Individual & Joint Owners
Purpose & Extent
Purchase of Plot Rs.20 lac. However, RM & above may consider Loan upto 50 lac.
Construction of House Need basedSemi -built House/flat from Pvt Builders
Repair & Renovation Rs. 20 lacCost of furnishing Max. 10% of the loan upto
maximum of Rs. 2.00 lacPari pasu Charge CH powers up to 20 lac to Govt.
EmployeesFreehold & Lease hold
The loan can be granted both for freehold and for leasehold property.
In case of Leasehold, loan can be granted on the basis of P/A from original allottee where DDA/PUDA/HUDA permit conversion of leasehold into freehold property.
Otherwise advance is not permitted against plots purchased on Power of Attorney basis.
Capital Requirement
Loan limit up to 30 lac Risk Weight is 50%Loan limit above 30 lac Risk Weight is 75%LTV Ratio more than 75% Risk Weight is 100%
Rate of Interest Rate of Interest as per LA Circulars issued from time to time. 0.50 % extra will be charged on H/L for 3rd House. The interest can be fixed or floating Option can be changed from fixed to floating and vice versa with
flat charges of 2% fee on Balance outstanding Fixed Interest rate be reviewed/reset after a block of 5 years in
respect of loans disbursed on or after 1.8.2006.
Concessional Rate of Interest for Defense Employees
Bank has decided to extend concessions to Defense personnel who are raising Housing Loans under bank’s regular Housing Loan scheme for public as under:
25 bps relaxation in interest rates 50 bps relaxation in processing fee
These relaxations are to be made applicable in all new cases where defense personnel avail housing loan either in single name or along with spouse.
(RBD Cir. No. 11/2010 dt. 16.2.2010)
Repayment Maximum 25 years including Moratorium period of 18 months Installment can be fixed up to maximum age of 65 years. Hub
Incharge of Scale-IV and above besides Circle Head can relax the age up to 70 years,
Repayment of loan for repair/renovation/addition/alteration restricted to 10 years including moratorium period of 6M.
All deductions should not exceed 50% of Gross monthly income. However where gross monthly salary is above 50000/-, the deduction can be up to 60% and if gross monthly salary is above 100000/-, the deduction can be up to 70% with the permission of CH. The income of earning spouse and children can be taken into account.
The Income of spouse and earning children can be taken into account provided they are made co-borrowers.
Father/mother can also be made co-borrowers in cases where property is in the single name of his/her son and also clubbing of their income is permitted for determining eligibility criteria.
Minimum 24 advance cheques should be obtained. As and when, 6 cheques remain, fresh lot be obtained. Out of 24, 23 cheques should be of installments and 1 cheque should be of the amount equal to the balance amount.
Graduated EMI
PNB offers benefit of graduated EMI. This means that the customer has the option of choosing EMI that can increase or decrease during repayment period rather than being given a fixed EMI over repayment tenor.
Upfront fee 0.90 % of loan amount + service tax & education cess (10.30%) on loans above 300 crore.Processing fees @ 0.50% of loan amount (max. 20000) +service tax for loans up to 300 crore.
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Documentation charges
Rs.1350 + service tax
Security Equitable/Registered Mortgage of Immovable Property Tripartite agreement be executed amongst Housing Board/Dev
Authority/Coop Society/Builder, the borrower and the bank where mortgage cannot be created immediately. In such cases, 3rd party guarantee is also to be obtained.
EM of other IP or pledge of NSC etc. up to 125% of loan amount if property is being purchased from 1st P/A holder and where there is delay in execution of Tripartite agreement or where the mortgage of property is not possible being an ancestral property (without title deeds) or Lal Dora Land.
Verification of security is required once in 2 years. In case of NPAs accounts, security is to be verified on Half yearly basis.
Guarantee In general, no guarantee is to be asked for. But while preparing RBL score sheet, if score is less than 50%, then 3rd party guarantee can be obtained to raise score of the applicant.
Insurance In case of building at Re-construction cost.
Other features Loan can be sanctioned by the branch/hub near to the present place of work/posting/residence of the borrower. However, if the property is situated at other place, services of branch/hub located at that center may be availed for verification of Security and NEC/Valuation etc.
Loan can be granted even if property is in the name of wife/parents provided that the owner is made co-borrower.
Loan can be granted for 2nd house in the same city. Loan can be granted for purchase of house for rental purpose. For take over, permission of higher authority is not required
Important conditions
Loan cannot be granted
For construction in Un-authorized colonies If property is to be used for commercial purpose Without approved Map
( In Compliance of Delhi High Court Orders)
Pre-payment charges of 2% be recovered on account being taken over by another bank. In case, the loan is pre-paid out of own sources or the loan is taken over by another bank with in 30 days from date of circular by which either the interest is
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raised or any important term or condition is changed, there will be no pre-payment charges.
Flat pre-payment charges of 2% be recovered from borrowers who pre-pay without construction on the plot before 5 years.
Powers of concessions in rate of interest/other charges stand withdrawn vide RBD cir no. 52/07 dt. 13.11.07.
In case, the construction of house is not completed within 3 years or in case the plot is sold, penal interest @2% over and above the applicable rate be charged.
Expression of Interest
It is a letter issued by the bank/branch wherein the lender expresses intention to make advance to the intended borrower on the basis of eligibility criteria subject to the fulfillment of terms and conditions.
Grih Raksha Kavach
It is Mortgage Reducing Term Assurance Policy issued in Tie up arrangement with TATA-AIG. There is one-time premium of 2.5% (approx) and that amount can also be financed. The coverage of the scheme is 1-20 years. The sum assured is between Rs.10000 to Rs. 1.00 crore. In case of death of the borrower, receipt from insurance company can be utilized towards adjustment of loan amount as per amortization table. Prior permission of TATA-AIG is required if amount is over Rs. 80.00 lac.
Iffco Tokyo general insurance co.
The coverage for accidental death and permanent total disability (due to accident) along with mandatory insurance “Fire Policy – including earthquake” is offered in tie up arrangement with Iffco Tokyo General Insurance Co. Ltd. To all existing as well as new borrowers.
Earnest Money Deposit Scheme
To meet the requirement of earnest money to apply for plot/flat/house from State Housing Boards and Urban Development authorities.
These authorities undertake to refund or issue allotment letter to the bank subject to eligibility of the bank for proposed loan and future requirement of Housing Loan.
Extent of loan is 90% of EMD or max. Rs 2.00 lac in the shape of Demand Loan
ROI is BPLR – 1.75% Repayment through Refund order/Housing Loan/Bullet Payment. Guarantee clause deleted
OD Facility to existing H/L borrowers
OD facility can be allowed to existing Housing Loan borrowers there is no IR irregularity. Other features of the scheme are as under:
Minimum 50000/- and Maximum Rs. 5.00 lac. Additional limit and present o/s should not exceed 75% of
current market price of the house so as to maintain margin of 25%.
Upfront fees is NIL and documentation charges are Rs. 500/-. Take home salary should not be less than 40% of gross salary. Loaning powers are SB-Nil, MB- Rs.4.00 lac, LB, ELB &
VLB Rs. 5.00 lac. ROI is equal to BPLR
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After HL is repaid, OD can be continued/ renewed provided the sanctioning authority is satisfied about repaying capacity of the borrower and Value of security.
OD facility for personal use should not be sanctioned to the borrowers, who have availed loan for plot , construction on which is yet to be completed in terms of RBD cir. no. 43 dt.21/08/09
On review, it has been decided to do away with the condition of minimum 2 year of repayment track record of the borrower for considering OD facility up to 5 lac. However this is subject to compliance of all other terms and conditions such as KYC norms, CIBIL database, takeover guidelines, security norms, maintenance of margin etc.
This facility is outside the purview of “Hub and Spoke“ model in the accounts of existing HL borrowers.(RBD Cir. No. 64 dt. 19.12.2009)
PNB Flexible Housing Loan Scheme
This is an attractive variant of Housing Loan Scheme offered by the PNB for its customers. Under this scheme, OD facility is made available to the HL borrower. He can deposit his savings and withdraw the same as per his requirement. The features of the scheme are as under:
Eligibility Age of the applicant must be less than 50. Existing HL borrowers can also apply provided their
loan account is regular and no IR irregularity persists.Purpose All purposes as per original scheme except Purchase of
Land / Plot.
Extent Term Loan 80%
Overdraft 20%
After lapse of 3 years, enhancement in OD will be allowed equal to reduction in Term Loan and thereafter on yearly basis.
After lapse of 5 years, 20% increase in original limit is allowed in the shape of TL/OD for personal needs.
Market Value of Property should be sufficient to cover the margin of 25%
After attaining age of 55 years, OD facility will be reduced on monthly basis so that whole limit and T/L are adjusted by the end of 65 years.
Maximum OD limit should not exceed 50% of Total limit.
HL can be sanctioned by the branch/hub situated near the workplace/posting/residence.
Security verification can be done by nearby branch.
Rate of Interest as given above in the table in
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Housing Loan scheme (general)For Overdraft portion, R/I is equal to BPLR
IV. 5.8.4 Personal Loan For Pensioner & Public
Two types of personal loans are being offered by PNB. Personal loan for pensioner is special
category of retail lending scheme being offered by Punjab National Bank to pensioner. The
main intension of this loan is to meet each and every personal needs including medical
expense of senior citizen. Details regarding the same are mentioned below.
Eligibility Pensioners drawing pension from the branch, Family Pensioners, DPDO Pensioners, Ex-employees
Purpose & Extent
Personal needs
Up to 75 years of age: 1.50 lac (Minimum Rs. 25000/-)
Above 75 years of age: 0.70 lac (Minimum Rs. 25000/-)
Limit calculation
Equivalent to 18 months net pension or Rs. 150000 (for borrowers up to 75 years’ age) and 12 months net pension or Rs 70000 (for borrowers above 75 years’ age) whichever is lower. For defense retirees, the loan equivalent to 20 M net Pension can be granted. Take home Pension should not be less than 50% of monthly pension
Nature DL or TL or OD on monthly reducing DP
Margin NIL
Guarantee Personal guarantee of spouse eligible for family pension or any other family member or 3rd party guarantee.
Upfront fee NIL
Documentation charges
Rs. 270/- plus service tax
Repayment 60 EMIs . 24 EMIs in case age is more than 75 years which can be extended up to 48 months by the sanctioning authority.
Miscellaneous PPO be kept with the loan documents Affidavit from the pensioner that present disbursing branch will
not be changed without bank’s consent. The loan can be availed more than once only after adjustment of
earlier loan
PERSONAL LOANS FOR PUBLICEligibility Only PNB Account holders are eligible. Minimum 6 months’ salary
should be routed in the account or 6 months satisfactory transaction
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record for non salary saving accounts.
Permanent Defence, CRPF, BSF & ITBP Personnel (Not to be granted to those who are due to retirement within next 24 M.
Confirmed permanent employees of Central/state Govt./PSUs/Reputed Co./Schools/Institutions who fulfill any of the following 2 conditions:
Route of salary through branch Check-off facility Professionally qualified practicing doctors viz. MBBS, BDS
and above having customer relationship with PNB at least for 6 months having annual income of Rs. 4.00 lac and above. Doctors should be tax payers for 3 years and ITRs be kept on record.
Check off Facility
It means that the employer undertakes to deduct monthly installment from the salary and remit the same towards adjustment of the loan till its liquidation and also confirms attachment of terminal dues of the borrower/employee.
Purpose & Extent
Personal needs. Minimum Rs. 50000 & Maximum Rs. 4.00 lac or 20 times net salary whichever is lower depending upon the repaying capacity & Rs. 5.00 lac for those salaried persons who have completed 3 years in the present organization and drawing net monthly salary not less than Rs. 30000/-.
Nature TL or ODSanction and Disbursement
All branches can generate leads for processing at Retail Hubs/CCPCs. However disbursement can be made only by branches having recovery percentage of not less than 90% under Personal Loan segment as at end of previous half year.
Minimum net monthly income
Metro Rs. 15000/- p.m.Urban Rs. 12500/- p.m.SU & Rural areas Rs. 10000/- p.m.Defence personnel and Teachers Rs. 7500/- p.m.
Margin NIL
Repayment TL – 60 EMIs OD- Reducing DP spread over 60 M.Defence Personnel – 36 M.Amount of EMI should not be more than 50% of net monthly income.60 advance cheques (maximum) signed by the borrower along with letter of deposit be obtained. Obtention of advance cheques is applicable where check off facility is not available.
Guarantee Suitable 3rd party guarantee. RM/CM may waiveRBL Sheet PNB Score system will be applicable and the applicant will have to
score at least 50% marks to avail loan. Upfront fee % of loan amount + service tax
NIL for defense personnel.Docm. Charges Rs. 270/- up to Rs. 2.00 lac. Rs. 450/- Above Rs. 2.00 lac + ST
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NIL for defense personnel.Other Requirements
In case of Army personnel, a copy of authority letter be sent to Controller of Defense Account (CDAO) Pune so that salary is remitted till liquidation of loan
Statement of account for at least 6 m. be obtained. Affidavit that no other loan from other bank is availed be
obtained. Copy of IT return for previous 3 years be obtained. Form 16 be
taken if loan is granted to employee. A Registered letter be sent to the employer informing about
details of loan raised by the employee.RBD Cir. No. 27/09 dt. 26.5.2009
It is clarified that the branches eligible for disbursement/maintaining the accounts shall obtain blanket permission from CH for disbursement in the next 25 accounts submitting performance of the branch under the portfolio.
The genuineness of salary certificates be independently got verified from HR Deptt. Of the employer of applicant.Hubs should ensure drawing of CIRs from CIBIL Data base for considering request of Personal Loans.
V. 5.8.5 PNB Baghban scheme for senior citizen
PNB is the first Public Sector Bank to come out with a Reverse Mortgage concept based
product for senior citizen titled "PNB Baghban". The product addresses one of the very
important requirements of the society in the fast changing culture of Indian society. The
main objective of this scheme is to address the financial needs of senior citizens owning self
occupied property (house), for leading a decent life. The salient features of the product are
given hereunder:
Eligibility Senior citizens owning Self-occupied property. If property in single name, there must be will in favors of spouse and it should be registered. In case of joint property, one of the spouses must be of 60 years and above. The other spouse should be at least 58 years old. If there is no spouse, loan will be made in favor of single.
Purpose & Extent
To lead a decent life Maximum qualifying amount can be Rs. 1.00 crore which will
depend upon realizable value of property after maintaining margin of 20%. The monthly payment will be made to the borrower on the basis of reverse mortgage annuity table.
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Margin 20% of realizable value of the property to arrive at the qualifying amount
Income criteria No
Rate of Interest 10.5% with reset clause of 5 years.Disbursement of loan
In the shape of monthly instalments (to be calculated on reverse annuity basis) during loan tenor of 15-20 years for age group of individuals between 60-70 years and 10-15 years for age group of over 70 years or till death of last surviving spouse, whichever is earlier.
For example, if Qualifying amount is Rs. 1.00 lac,
On 10 year tenor of loan, monthly installment will be Rs. 475/-, On 15 year tenor, monthly instalment will be Rs. 230/- and on 20 year tenor, monthly instalment will be Rs. 125/-
The series of monthly instalments would continue after death of first spouse during life time of surviving spouse.
Tenor of loan Age group of 60-70 years 15-20 years
Age group above 70 years 10 –15 years
Insurance Against fire, Earthquake and other calamities at the cost of the borrower
Security EM of IP in favor of the bank. Valuation of property to be got done from approved valuer. Revaluation be also got done once in a span of 5 years.
Upfront fee Amount equal to half month’s loan subject to maximum of Rs. 15000/- + Service Tax @10.30%
Docm. Charges NIL
Repayment The loan becomes due for payment after 6 months from death of both the spouses. In case the loan is not repaid by legal heirs within 6 months from the death, the bank is within its right to sell the property for adjustment of the loan in case the consent of the legal heirs is not received within 6 months from the death of last survivor.
Others Residual life of property should be at least 20 years. Purpose of loan should not be speculation or trading. It should be ensured that the will executed by the borrower is the
last will. Life certificate is to be obtained once in a year in November.
Age of Property
Residual life of property should be at least 20 years. A certificate from architect at the time of first valuation be obtained. Revaluation of property will be done once in 5 years.
Ancestral property as security
Now it has been decided to accept ancestral property provided bank is satisfied that there are no other legal heirs or original title deed is not available. For this, documentary evidence is required. Circle Head will deal such proposals.
TERM LOANS A lump sum Term loan can be sanctioned up to Rs. 15.00 lac. The
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UNDER PNB BAGHBAN SCHEME
cases can be considered on selective basis by HO only for medical purpose to senior citizens for treatment of self, spouse and dependents.
Amendments in PNB Baghban Scheme
Following two amendments have been carried out in IT Act, 1961. 1. Reverse Mortgage does not tantamount to transfer; therefore there is no Capital Gain Tax. Income tax is levied only at the time of alienation of Mortgaged property by mortgagee for recovery of loan. 2. Stream of payment received by Sr. Citizen would not be treated as Income. Therefore, bank has to obtain the following at the time of application of loan:
Cost and year of acquisition of Capital asset. Cost and year of improvement. PAN No. of all legal heirs. Changes, if any made in the Registered Will.
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Conclusion
Credit appraisal is a process of appraising the credit worthiness of loan applicants. The fund
of depositors i.e. general public are mobilised by means of such advances / investments. Thus
it is extremely important for lender bank to assess the risk associated with credit, thereby
ensure the security for fund deposited by depositors. Therefore my analyses regarding credit
appraisal procedure of Punjab National Bank are as follows:-
In case of retail lending bank strictly follow it’s circular and fulfils all requirement of
necessary documents required for different types of loan so that bank do not suffer
any types of loss.
Bank is very much particular about CIBIL report of borrowers in case of each type of
lending.
Bank lending process in case of retail loan is very much fast after compiling with all
the criteria of bank.
In case of project financing bank follow lengthy norms to check the feasibility of the
project such as:-
I. Firstly personal appraisal of promoter is done by the bank to ensure that
promoters are experienced in the line of business and capable to
implement and run the project efficiently.
II. Secondly detail study about the technical aspect is done to find the
technical soundness of project such as proper scrutiny of financial report
is done, valuation of property by government approved valuer is done and
view regarding each and every area of project is done under technical
analysis.
III. A detail study relating financial viability of project is done by detail study
of cash flow, fund flow statements and by calculating import ratio which
is very much necessary for project appraisal such as DSCR, DER etc. the
main purpose of financial appraisal is insure that project will ensure
sufficient surplus to repay the instalment and interest.
IV. Risk analysis is done by bank to determine the risk associated with the
project. This is mainly done by sensitivity analysis and by PNB credit
rating or scoring. With sensitive analysis feasibility of project is
determined under worsened condition. Credit rating or PNB scoring is
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done of various parameters such as personal, management, financial etc ,
thereby determine credit worthiness of customer.
V. It is on basis of credit risk level, a collateral security to be given by
borrower is determined.
This shows that Punjab National Bank has sound credit appraisal system.
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BIBLIOGRAPHY
i. PUNJAB NATIONAL BANK ANNUAL REPORT
ii. PNB JOURNALS
iii. BOOKS
MANAGEMENT OF INDIAN FINANCIAL INSTITUTION, SRIVASTAVA R.M