GIST OF VARIOUS POLICIES FROM EXAMINATION POINT OF …

GIST OF VARIOUS POLICIES FROM EXAMINATION POINT OF VIEW

For detailed information and further clarification please refer the POLICY guidelines

CORPORATE LOAN POLICY:

1. A person is not deemed to have any interest in an undertaking for the purpose of determining

the authority of the delegatee, if he is only a shareholder having not more than 2% of the

paid-up capital of the undertaking in his name. (Page-6)

2. Lending Powers delegated by the Board to Various authorities (Individuals)

Total lending powers (Funded & Non Funded) –

FGM (ZO) – 5 cr.; DGM – 5 cr.; AGM 5 cr.; RM/CM – 3 cr.; SM-Scale III – 1 cr.; BM-Scale

II – 0.50 cr.; BM Scale-I – 0.10 cr. (Page-9)

3. The powers to sanction proposals for Corporate, Non-Corporate and Individuals are different,

so the sanctioning authority while sanctioning proposals should refer the respective

sanctioning powers for all the three categories.

Corporate - Private Limited & Public Limited Companies, PSUs, LLC, LLP, SPVs

& One Person Company

Non-Corporate – Registered Partnership, Registered Trusts viz. Educational /

Medical / Other Institutions & Association of Persons (AOP)

Individual – Individual Borrower/Sole Proprietorship concerns/HUF/ Unregistered

Trusts

4. Following Committees have been constituted as per directive of department of Financial

Services, Ministry of Finance (GOI) –

CACB – Credit Approval Committee of the Board

HLCC – Head Office Level Central Credit Approval Committee

ZLCC – Zonal Office Level Credit Approval Committee

RLCC – Regional Office Level Credit Approval Committee

5. While considering fresh / new credit proposals the following Financials shall be kept in view

– (Page 21)

Ratio Benchmark

Current Ratio 1.33

Current Ratio (Trading) 1.20

Current Ratio (Seasonal Industry) 1.00

Current Ratio (NBFC-MFI) 1.11

TOL / TNW 5:1

TOL / ATNW 4:1

TOL / TNW (Trading) 6:1

TOL / TNW (NBFC/MFI) 8:1

TOL./ TNW (Infrastructure Projects) 7:1

Debt-Equity TL (other than Infra) 3:1

Debt-Equity TL (Infra, SEZ & SPVs created for Infra ) 5:1

Bank Borrowing/TNW 4:1

DSCR (Avg.) 1.5

Interest Coverage Ratio 2.1

Asset Coverage Ratio (ACR) 1.5:1

Fixed Assets Coverage Ratio (FACR)

1.5:1

TOL/ TNW + Quasi Equity

(Quasi Equity= Unsecured Loans equal to 100% of TNW)

4:1

6. DSCR is not applicable in case of Term Loans to NBFC, MFI, Housing finance Companies,

LRD, CRE, and CRE (RH). Loans to these categories will be sanctioned based on Cash

Flows. However other ratios will continue to apply. (Page 26)

7. Bank can issue Solvency Certificate on behalf of their customers who intend to undertake

Government Contracts, etc. The certificate can be issued in respect of a party who has been

maintaining atleast a satisfactorily operated current account with our bank for a minimum

period of 6 months. Amount of the solvency certificate may be equivalent to two and half

time the actual worth of the party concerned. (Page 34)

8. One of the tenets of Prudential Risk Management is to diversify the exposure both in respect

of borrowers and industry business sectors. In line with RBI directive the exposure norm for

single and group borrowers is as under. (Page 41)

Category of Borrower Ceiling as % to Bank’s Capital Funds

Other than Infrastructure For Infrastructure

Projects

Single Party 15% 20%

Group 40% 50%

9. Housing Sector: New Sub-Sector CRE (Residential Housing) within CRE: A separate sub-

sector called Commercial Real Estate – Residential Housing (CRE-RH) is carved out from

the CRE Sector. CRE-RH would consist of loans to builders/developers for residential

housing projects (except for captive consumption) under CRE segment. Such projects should

ordinarily not include non-residential commercial real estate. However, integrated housing

projects comprising of some commercial space (e.g. shopping complex, school, etc.) can also

be classified under CRE-RH, provided that the commercial area in the residential housing

project does not exceed 10% of the total Floor Space Index (FSI) of the project. In case the

FSI of the commercial area in the predominantly residential housing complex exceeds the

ceiling of 10%, the project loans should be classified as CRE and not CRE-RH. (Page 50)

10. Watch List Areas: (Page 54)

1. N.B.F.C/ MFI

2. Commercial Real Estate (CRE & CRE-RH).

3. Gems, Jewellery & Diamond.

4. Capital Market.

5. Iron & Steel (Manufacturing)

11. The Risk grades allocated to various ratings are as under: (Page 66)

CREDIT RATING RISK RATIONALE

CBI - 1 Highest safety

CBI – 2 Very High Safety

CBI – 3 High safety

CBI – 4 Adequate Safety

CBI – 5 Moderate Safety

CBI – 6 Sub-Moderate Safety

CBI – 7 Inadequate Safety

CBI – 8 High Risk Prone

CBI – 9 Vulnerable to Default

CBI – 10 Default /Grade

12. The Risk hurdle rate is as under: (Page 66)

a. In case of new accounts (including proposals admitted by NBG), the overall rating should

be minimum CBI-6.

b. In respect of Take Over (including proposals admitted by NBG), it should be minimum

CBI-5).

c. Advance against SV of LIP (Life Insurance Policies) issued by LIC of India/SBI Life

/ICICI Prudential, Trustee Securities like NSCs, KVPs, Govt. Pro-Notes etc. need not be

credit rated. Similarly advances against Bank’s time deposit (domestic as well as Non-

resident deposits) including third party deposits for personal needs (other than business

requirements) need not be credit rated.

d. All SME accounts to be credit rated as per the policy/guidelines issued by MSME

department.

e. The credit rating as per the system is to be done by the Branch on yearly basis based on

the parameters given in Rating System. The Rating as arrived at by the Branch is to be

confirmed by a Competent Authority as mentioned below on yearly basis:

Sanctioning Authority Confirming Authority

Branch Managers up to Scale III &CM Regional Manager (in Scale V)

Asst. Gen. Manager, Dy. General Manager Regional Manager (Scale VI)/ Zonal

Manager/ZM in Scale VII

13. Methods for Assessment of Working Capital Requirements (Page 68)

Turnover Method: This method should be used for assessing fund based working capital

requirements enjoyed from the banking system upto Rs.5.00 crore.

Traditional Method: Fund based working capital requirements under this method shall be

assessed under Method II for borrowers enjoying fund based working capital limits of above

Rs.5.00 crore but less than Rs.50.00 crore. As per RBI guidelines, Non-Funded limits are also

to be a part of MPBF.

Cash Budget Method: This method would be applicable to borrowers who are

Falling under Cyclical Industries like Tea, Sugar etc.

Borrowers availing Fund Based Working Capital limits of ₹50 crore and above from

the banking system.

14. Term loans can be classified as under:

a) Short term loan – where repayment period does not exceed 3 years

b) Medium term loan – where repayment period is over 3 year and up to 5 years and

c) Long term loan - where repayment period exceeds 5 years.

15. Techno Economic Viability study: (Page No.69) i. Independent TEV study should be carried out in respect all the Term Loan

Proposals.

ii. For proposals up to ₹5.00 crore TEV report from an outside agency may not be

insisted upon.

iii. In case of proposals over ₹5.00 crore TEV report from Bank’s empanelled TEV

Consultant shall be insisted and the same should be studied independently before

making any commitment.

16. The IRR Approach: (Page 69)

i. The IRR approach is being introduced for assessment of Term Loans of ₹10.00

crore and above with repayment period of 5 years or more. This assessment will

be in addition to satisfying norms under DSCR.

ii. Accordingly the following norms are prescribed for IRR approach

a) For other than infrastructure projects, the internal rate of return (Post Tax)

should be 3% and above from estimated cost of funds

b) For Infrastructure projects Internal Rate of return (Post Tax) should be

2% and above from estimated cost of Funds.

c) For calculation of cost of funds, the cost of equity should be assumed as

rate for 7 year Bonds issued by Govt. of India and actual ROI for

Unsecured Loan and Term Loan.

17. Loan Syndication: Loan Syndication is an arrangement between 2 or more lending

institutions to provide credit facility. We may consider such financing arrangements. We

would allow such syndication wherever the finance limit is Rs.5 crore or more.

Delegatees in the rank of Deputy General Manager and above thro’ Credit Approval

Committees only shall allow ‘Loan Syndication’ facility. (Page 76)

18. Multiple Banking: It is an arrangement in which borrower avails working capital

facilities from more than one Bank without a formal consortium arrangement. Bank may

normally agree for multiple banking only in case where the facilities enjoyed by the

borrower are Rs.25 Cr. or more. A borrower may be permitted to bank elsewhere

provided the borrowers agree to furnish from time to time details of the various facilities

availed from other bank/s and also the total working capital limits availed by the

borrowers are within a 10% tolerance level of the working capital limits assessed by us.

(Page 77)

19. Policy on Joint Lending Arrangement- Formation of the Joint Lending

Arrangement (JLA) The scheme shall be applicable to all lending arrangements, with a

single borrower with aggregate credit limits (both fund based and non-fund based) of

Rs.150 crore and above involving more than one Public Sector Bank. (Page 78)

20. Borrowers enjoying working capital limits of ₹5.00 crore and above from the banking

system where we are the leaders in Consortium, Sole Banker or under Multiple Banking

should have to submit QIS Statements. In the case of other accounts where we are

members in consortium we may follow the practice / system adopted by the Lead Bank.

Credit Monitoring Policy should be referred for the guidelines for submission of MSOD

and QIS statement by the borrowers. (Page 79)

21. Recommended Margins: (Page 81)

Approved Securities Minimum

Margin (%)

a. FDR upto 4 years held in the name of the borrowers

b. FDR above 4 years held in the name of the borrowers

5

10

Fixed deposits in the name of the third party 25

Gilt edged securities viz., bonds / stocks issued by Central/ State

Government/Statutory/quasi- Government Corporation or Body

repayment of which is guaranteed by the Central/ State Government

(including Post office)

25

National Saving Certificates with accrued value 20

Surrender value of Life Insurance Policies issued by LIC of India,

SBI Life Insurance & ICICI Prudential Life Insurance

10

Kisan Vikas Patra (KVP) with accrued value 25

Shares and debentures (on Bank’s approved list - In Dematerialized

form

50

Stocks of tradable commodities / goods having realizable value (RM,

SIP, FG) @

25

Book Debts. #

- For Book debts Up to 90days

- For Book debts beyond 90 days and up to 180 days

25

35

Plant and Machinery (New) 25

Plant and Machinery (Secondhand) 40**

Bills of Exchange with Documents / acceptances Nil

Gold Ornaments 40

Vehicles 25

Furniture / Fixtures 25

Consumer durables 25

Live Stocks 25

Land and Buildings / Free Hold Plots 40

Land & building forming part of project 25

Commodities falling under Selective Credit Control. As directed by

RBI from time

to time

Stocks of Sugar 25

#Advance against Book Debts beyond 90 days and up to 360 days may be sanctioned by a

Credit Approval Committee as detailed in the Para no. 4 on Deviation. Receivables must be

from Govt. Departments, PSUs and reputed Corporates having minimum existence of 3 years

with satisfactory track record. With regard to margin beyond 180 days, the view will be taken

by the appropriate authority, keeping in view CDR, JLA approval or otherwise, on the merit

of the case.

** 40% Margin of residual value of second hand machinery.

@ For exporters, lower margin up to 10% may be allowed for packing credit backed by L/C

or firm orders placed on companies having satisfactory track record, subject to approval by a

Credit Approval Committee headed by an authority not below the rank of FGM.

22. Vetting of Documents: Legal vetting of security documents for accounts with limit of

Rs.1.00 crore and above up to Rs.5.00 crore should be done by panel advocates if bank’s

law officers are not in a position to do the same. In other cases of higher limits above

Rs.5.00 crore, the legal vetting of security documents should necessarily be got done

through bank’s law officers only including documents pertaining to consortium, in which

our bank is leader of consortium arrangement. In case of Consortium where we are

members, Lead Bank will take care of documentation formalities. However, Lead Bank’s

Certificate to the effect that they are holding the valid and enforceable documents and

title deeds, if any, on behalf of the Consortium should be held on record. (Page 83)

23. Frequency of review- The frequency of review by loan review cell would be 3 months

for high-risk accounts and 6 months for average risk accounts and 1 year for low risk

accounts. However at present the frequency of loan review is half yearly in case of

accounts having limits of Rs.10 Crore & above and in case of high risk accounts. In the

respect of other accounts the exercise will be carried out once in a year. (Page 83)

24. For the purpose of frequency of Credit Review, the classification of various Risk Grades

will be as under: (Page 83)

RISK GRADES INDICATION

CBI-1, CBI-2 , CBI-3, CBI-4 LOW RISK

CBI-5 & 6, CBI-7 AVERAGE RISK

CBI-8 , CBI-9, CBI-10 HIGH RISK

25. Review of Limits - All the working capital limits should be reviewed after appropriate

period, which is normally one year. The Bank shall adopt discriminatory time schedule

for review of accounts based on the credit rating assigned, as under: (Page 84)

Credit Risk Rating Periodicity of review / renewal

CBI-1 to CBI-7 12 Months (Annual)

CBI-8 and below 6 Months (Biannual)

26. Revalidation of Sanction Limits - Sanctions in respect of working capital and term loan

facilities shall be valid for 6 months from the date of sanction or three months from the

date of documentation (provided documentation takes place within the validity period of

6 months from the date of sanction), whichever is later. Facilities not availed within the

above period should be treated as lapsed and borrower be advised accordingly. Unless a

lapsed sanction is revalidated by the competent authority within a maximum period of 12

months from the date of sanction, no facility should be released. (Page 85)

27. Loan system for Delivery of Bank Credit - As directed by RBI, all borrowal accounts

enjoying working capital (Fund based) limits of ₹10 crores and above will be brought

under Loan System for delivery of bank credit, i.e. Working Capital Limits will be

disbursed by way of Working Capital Demand Loan to the extent of 80% of sanctioned

limit and remaining 20% by way of cash credit (running account) except in following

cases which are exempted from the provision of the Loan System for Delivery of Bank

Credit:-

a Sugar b Tea

c Tobacco d Fertilizer

e Vegetable Oil Industry f Petroleum (Oil Industry)

g Full-fledged Money Changers h Export Credit

i Parties mainly engaged in activities of

Laying Transmission Lines, supply of

equipment for the same, erection of sub

stations and other Engineering, Design,

erection/ Fabrication including projects

undertaken on Turnkey Basis

j Beverages Industry manufacturing soft

drinks, aerated water (Soda/ flavored or

sweetened etc.)

However, the Credit Approval Committee headed by the sanctioning authority in the rank of

DGM and above has the discretion to increase the cash credit component beyond 20%, on the

merits of the case and after giving proper justification. (Page 86)

28. Credit Administration: (Page 87)

i. As per RBI instructions all loan applications up to ₹25,000/- should be disposed

within two weeks of receipt of application complete in all respect.

ii. Similarly, application in respect of loans above ₹25, 000/- and up to ₹5 lakhs

should be disposed off within a period of 4 weeks of receipt of application

complete in all respects.

iii. All applications in respect of loans above ₹5 lakhs should be disposed off as per

the time frame given hereunder:

a. Branch Office Level: Credit proposals received at branch shall be

disposed of/ recommended to the higher authority by the Branch Manager

within 15 days maximum from the date of receipt of proposals complete

in all respects.

b. Regional Office Level: Credit proposals received at ROs shall be

disposed of by Regional Manager or RLCC/ recommended to next higher

authority by the Regional Manager within 15 days maximum from the

receipt of proposal at Regional Office.

c. Zonal Office Level: Credit proposals received at Zonal Office shall be

disposed of by Zonal Manager or ZLCC/ recommended to next higher

authority by the Zonal Manager within 15 days from the receipt of

proposal at Zonal Office.

d. Central Office Level: Proposals received at CO and falling within the

powers of MC/CACB/HLCC-2/HLCC-1

Committee Time Norms

CACB / HLCC-2 /

HLCC-1

30 days from the receipt of recommendation of

Zonal manager(depending upon the schedule of

meetings)

MC 45 days from receipt of recommendation from

Zonal Manager (depending upon the schedule of

M.C. meetings)

MONITORING POLICY:

1. Primary Functions of Credit Monitoring Committees: (Page 14)

i. To ensure that assets charged by way of mortgage are valued every 3 years by

Bank’s approved Valuer.

ii. In case of fresh sanctions, if value of individual property offered as security is

Rs.10 crore and above, valuation report from 2 approved valuers would be

necessary.

iii. In case of borrowers enjoying working capital limits of Rs. 1 crore to less than 5

crore, in addition to stock inspection reports, a Certificate from CA would be

obtained certifying value of paid stock and receivables charged to the Bank and

that borrower has valued current assets as per accounting standards.

iv. Ensuring that Stock Audit is carried out in case of borrower accounts enjoying

Fund Based/Non Fund Based working capital limits including WCDL, Term

Loan against Receivables/Lease Rental Discounting, Term Loan granted for

shoring up of NWC and/or any other exposure taken for working capital purpose

with limits of Rs. 5 crore and above (Limits of Rs one crore and above in case of

Book Debts facility) and to ensure rectification of irregularities pointed out in the

report.

2. In case of all sanctions under retail lending scheme above Rs. One crore irrespective

of the sanctioning authority, process note to be sent to next higher authority. (Page 26)

3. Eligibility Criteria for restructuring of advances: Banks may restructure the accounts

classified under 'standard', 'substandard' and 'doubtful' categories. Banks cannot

reschedule / restructure / renegotiate borrowal accounts with retrospective effect. While a

restructuring proposal is under consideration, the usual asset classification norms would

continue to apply. The process of re- classification of an asset should not stop merely

because restructuring proposal is under consideration. The asset classification status as on

the date of approval of the restructured package by the competent authority would be

relevant to decide the asset classification status of the account after restructuring /

rescheduling / renegotiation. (Page 29)

4. Provisioning norms - Provision on restructured advances – (Page 31)

i. Restructured accounts classified as standard advances will attract a higher

provision (as prescribed from time to time) in the first two years from the date of

restructuring. In cases of moratorium on payment of interest/principal after

restructuring, such advances will attract the prescribed higher provision for the

period covering moratorium and two years thereafter.

ii. Restructured accounts classified as non-performing advances, when upgraded

to standard category will attract a higher provision (as prescribed from time to

time) in the first year from the date of up gradation.

iii. The above-mentioned higher provision on restructured standard advances (2.75

per cent as prescribed vide circular dated November 26, 2012) would increase to

5 per cent in respect of new restructured standard accounts (flow) with effect

from June 1, 2013 and increase in a phased manner for the stock of restructured

standard accounts as on May 31, 2013 as under:

3.50 per cent - with effect from March 31, 2014 (spread over the four

quarters of 2013-14)

4.25 per cent - with effect from March 31, 2015 (spread over the four


5.00 per cent - - with effect from March 31, 2016 (spread over the four


5. Risk-Weights - Restructured housing loans should be risk weighted with an additional

risk weight of 25 percentage points.

6. The repayment period of the restructured advance including the moratorium, if any,

does not exceed 15 years in the case of infrastructure advances and 10 years in the case of

other advances. The aforesaid ceiling of 10 years would not be applicable for restructured

home loans; in these cases the Board of Directors of the banks should prescribe the

maximum period for restructured advance keeping in view the safety and soundness of

the advances. (Page 36)

7. Loan life ratio (LLR) - Present value of total available cash flow (ACF) during the loan

life (Page 39)

LLR = Period (including interest and principal)

--------------------------------------------------

Maximum amount of Loan

8. Corporate Debt Restructuring (CDR) Mechanism - CDR system in the country will

have a three tier structure: (Page 40)

i. CDR Standing Forum and its Core Group

ii. CDR Empowered Group

iii. CDR Cell

9. CDR Standing Forum will be a self-empowered body, which will lay down policies and

guidelines, and monitor the progress of corporate debt restructuring. (Page 41)

10. A CDR Core Group will be carved out of the CDR Standing Forum to assist the

Standing Forum in convening the meetings and taking decisions relating to policy, on

behalf of the Standing Forum. The Core Group will consist of Chief Executives of

Industrial Development Bank of India Ltd., State Bank of India, ICICI Bank Ltd, Bank of

Baroda, Bank of India, Punjab National Bank, Indian Banks' Association and Deputy

Chairman of Indian Banks' Association representing foreign banks in India.

11. The CDR Core Group would lay down the policies and guidelines to be followed by the

CDR Empowered Group and CDR Cell for debt restructuring.

12. CDR Empowered Group: The individual cases of corporate debt restructuring shall be

decided by the CDR Empowered Group, consisting of ED level representatives of

Industrial Development Bank of India Ltd., ICICI Bank Ltd. and State Bank of India as

standing members, in addition to ED level representatives of financial institutions and

banks who have an exposure to the concerned company. The CDR Empowered Group

would be mandated to look into each case of debt restructuring, examine the viability and

rehabilitation potential of the Company and approve the restructuring package within a

specified time frame of 90 days, or at best within 180 days of reference to the

Empowered Group. The decisions of the CDR Empowered Group shall be final. If

restructuring of debt is found to be viable and feasible and approved by the Empowered

Group, the company would be put on the restructuring mode. If restructuring is not found

viable, the creditors would then be free to take necessary steps for immediate recovery of

dues and / or liquidation or winding up of the company, collectively or individually.

(Page 42-43)

13. CDR Cell: The CDR Standing Forum and the CDR Empowered Group will be assisted

by a CDR Cell in all their functions. The CDR Cell will make the initial scrutiny of the

proposals received from borrowers / creditors, by calling for proposed rehabilitation plan

and other information and put up the matter before the CDR Empowered Group, within

one month to decide whether rehabilitation is prima facie feasible. If found feasible, the

CDR Cell will proceed to prepare detailed Rehabilitation Plan with the help of creditors

and, if necessary, experts to be engaged from outside. If not found prima facie feasible,

the creditors may start action for recovery of their dues. The cost in operating the CDR

mechanism including CDR Cell will be met from contribution of the financial institutions

and banks in the Core Group at the rate of Rs.50 lakh each and contribution from other

institutions and banks at the rate of Rs.5 lakh each. (Page 43)

14. Eligibility criteria: The scheme will not apply to accounts involving only one financial

institution or one bank. The CDR mechanism will cover only multiple banking accounts /

syndication / consortium accounts of corporate borrowers engaged in any type of activity

with outstanding fund-based and non-fund based exposure of Rs.10 crore and above by

banks and institutions. (Page 43)

15. The Category 1 CDR system will be applicable only to accounts classified as 'standard'

and 'sub-standard'. There may be a situation where a small portion of debt by a bank

might be classified as doubtful. In that situation, if the account has been classified as

'standard'/ 'substandard' in the books of at least 90% of creditors (by value), the same

would be treated as standard / substandard, only for the purpose of judging the account as

eligible for CDR, in the books of the remaining 10% of creditors. (Page 44)

16. Legal Basis: CDR is a non-statutory mechanism which is a voluntary system based on

Debtor- Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA). The Debtor-

Creditor Agreement (DCA) and the Inter-Creditor Agreement (ICA) shall provide the

legal basis to the CDR mechanism.

17. One of the most important elements of Debtor-Creditor Agreement would be 'stand still'

agreement binding for 90 days, or 180 days by both sides. Under this clause, both the

debtor and creditor(s) shall agree to a legally binding 'stand-still' whereby both the parties

commit themselves not to take recourse to any other legal action during the 'stand-still'

period, this would be necessary for enabling the CDR System to undertake the necessary

debt restructuring exercise without any outside intervention, judicial or otherwise. (Page

45)

18. Exit Option: A creditor (outside the minimum 75 per cent and 60 per cent) who for any

internal reason does not wish to commit additional finance will have an option. At the

same time, in order to avoid the "free rider" problem, it is necessary to provide some

disincentive to the creditor who wishes to exercise this option. Such creditors can either

(a) arrange for its share of additional finance to be provided by a new or existing creditor,

or (b) agree to the deferment of the first year's interest due to it after the CDR package

becomes effective. The first year's deferred interest as mentioned above, without

compounding, will be payable along with the last instalment of the principal due to the

creditor.(Page 46)

19. In addition, the exit option will also be available to all lenders within the minimum 75

percent and 60 percent provided the purchaser agrees to abide by restructuring package

approved by the Empowered Group. The exiting lenders may be allowed to continue with

their existing level of exposure to the borrower provided they tie up with either the

existing lenders or fresh lenders taking up their share of additional finance. (Page 46)

20. Category 2 CDR System - A second category of CDR is introduced for cases where the

accounts have been classified as 'doubtful' in the books of creditors, and if a minimum of

75% of creditors (by value) and 60% creditors (by number) satisfy themselves of the

viability of the account and consent for such restructuring, subject to the following

conditions :

(i) It will not be binding on the creditors to take up additional financing worked

out under the debt restructuring package and the decision to lend or not to

lend will depend on each creditor bank / FI separately. In other words, under

the proposed second category of the CDR mechanism, the existing loans will

only be restructured and it would be up to the promoter to firm up additional

financing arrangement with new or existing creditors individually.

(ii) All other norms under the CDR mechanism such as the standstill clause, asset

classification status during the pendency of restructuring under CDR, etc.,

will continue to be applicable to this category also. (page 46)

21. SME Debt Restructuring Mechanism - This mechanism will be applicable to all the

borrowers which have funded and non-funded outstanding up to Rs.10 crore under

multiple /consortium banking arrangement. (Page 47)

22. Stock Audit: All the borrowal accounts enjoying Fund Based/Non Fund Based working

capital limits including WCDL, Term Loan against Receivables/Lease Rental

Discounting, Term Loan granted for shoring up of NWC and/or any other exposure taken

for working capital purpose with limits of Rs. 5 crore and above (Limits of Rs one crore

and above in case of Book Debts facility) be subjected to stock audit by the external

agencies. (Page 51)

23. New Method of DP Calculation: (Page 59) :As per loan policy guidelines of the Bank,

amended up to 29-08-2011, for working capital limit up to Rs.15 crore, a combined limit

against inventory & receivables has been permitted. However there shall be a common

margin of 25% up to Rs. 5 crore and for balance of Rs. 10 crore, there shall be usual

margin for receivables and inventory as the case may be. The Policy further states that

delegatees having powers to sanction advance against Book Debts can consider such

proposals, (Scale –III & above). There is another stipulation that Book Debts should not

be more than 50% of the total limit. But for calculation of DP, unpaid stock (sundry

creditors) should be deducted from the stock.

24. Loan Review Mechanism (Page 62): STANDARD Borrowal accounts and accounts

under NPA category (where recovery proceedings are not initiated) having limits of

Rs.500 Lacs and above, shall be covered under LRM (with the periodicity of twice a

year).

25. Periodicity (Loan Review Mechanism): (Page 62) i. WHERE LRM TO BE CONDUCTED ONCE IN A YEAR - LRM exercise

shall be conducted after 3 months but within 6 months from the date of Release of

Limits of Fresh Sanction/Review.

ii. WHERE LRM TO BE CONDUCTED TWICE IN A YEAR a. First LRM exercise shall be conducted within 3 months from the date of

Release of Limits of Fresh Sanction/Review or date of Pre Release Audit

whichever is later. In case of restructured NPA accounts within three months

from date of restructuring.

b. Second LRM exercise shall be conducted within 6 months from the date of

FIRST LRM exercise.

iii. WHERE LRM TO BE CONDUCTED THRICE IN A YEAR a. First LRM exercise shall be conducted within 2 months from the date of

Release of Limits of Fresh Sanction/Review or date of Pre Release Audit

whichever is later.

b. SECOND LRM exercise shall be conducted within 4 months from the date of

FIRST LRM exercise.

c. THIRD LRM exercise shall be conducted within 4 months from the date of

SECOND LRM exercise.

RETAIL LENDING POLICY

1. Merged Retail Lending Schemes-

1. Cent Vyapari – Merged with Cent Trade

2. Cent Udaan – Merged with Cent Vidyarthi

2. Closed Retail Lending Schemes

1. Cent Buy

2. Cent Competitive Exam

3. Cent Computer

4. Cent Jewel

5. Cent Multipurpose

6. Cent Safar

7. Cent School

8. Cent Vivah

3. Turn Around Time:

Sr.

No.

Loan Product Turn Around Time

1 Housing Loan all variants and other Mortgage

Backed Loans such as Cent Mortgage, Cent Trade,

Cent Rental etc.

Maximum 6 Working Days

from the date of receipt of

complete application

2 Education Loan where Mortgage of property

is involved.

Education Loan where Mortgage of property

is not involved.

Maximum 6

Working Days from

the date of receipt of

complete application.

Maximum 3

Working Days from

the date of receipt of


3 Vehicle Loan and loans where hypothecation,

pledge, lien or assignment of securities is involved.

Maximum 2 Working Days

from the date of receipt of


4 Unsecured loans such as Personal Loans Maximum 24 Hours from

the time of receipt of


5 In Principle sanction for any Retail Loan Maximum 24 Hours from

the time of receipt of relevant

information.

4. For MSE accounts under Cent Sahyog Scheme, manual scoring model viz, MSE-I (for

existing borrower)& MSE-II (for new borrower) should be used.

5. The minimum hurdle rate for considering a Retail Lending proposal has been fixed at 50% of

the total allotted score for all Retail Lending Schemes and the grading will be done as per

scores furnished here under:

50 Marks and above up to 60 marks B

61 marks and above up to 70 marks B+

71 marks and above up to 80 A

81 marks and above up to 85 A+

86 marks and above A++

6. VETTING OF DOCUMENTS: Legal vetting of security documents for accounts with limit

of Rs. 1.00 crore & above and up to Rs. 5.00 crore should be done by panel advocates or the

law officer of the Bank. In other cases of higher limits above Rs.5.00 crore, the legal vetting

of security documents should necessarily be got done through bank’s law officers only.

7. Delinquency Ratio Formula:

Delinquency Ratio = [(Fresh Slippages during the current FY)/Standard Assets outstanding

as on the last day of previous FY] x 100

RECOVERY POLICY

1. AUTHORITIES TO FINALISE THE DRAFT PLAINT:

OUTSTANDING UPTO AUTHORITY

Rs. 50 LACS REGIONAL MANGER / BM-VLB*

Above Rs.50 Lacs and Upto Rs.150 Lacs ZM / BM-ELB / BM-DGM

All Other Accounts Legal Department at Central Office

*In case there is no Law Officer provided at the branch / regional office, the plaint

should be referred to the Zonal Office so that the plaint is scrutinized and vetted by

the Law Officer at their end.

2. Plaint must be approved by the concerned authority within 15 days and suit should be

filed atleast 6 months before the expiry of the documents.

3. After a permission has been given by the competent authority for filing a suit and if

afterwards for any reason/s, it is thought fit not to file a suit or it is felt advisable to defer

filing of suit, the matter should be referred to the authority who has given permission for

filing a suit for approval of non-filing or deferment of a suit.

4. In cases where continuation of the suit is not considered worthwhile, then decision to

withdraw the suit should be taken by the Zonal Manager upto the suit amount of Rs.5

Lacs. In other cases the matter should be referred to Central Office for decision of

Chairman and Managing Director.

5. Compromise Proposals – To confirm the willingness of the borrower for OTS, it is

stipulated that 10% of the OTS offer must be deposited as down payment in a ‘No Lien

Account’ by all non-corporate borrowers such as sole proprietor, partnership firm, HUFs,

individuals etc. Power to waive this stipulation of 10% down payment shall rest with next

higher authority which should be used in very genuine cases.

6. In case of Wilful Defaulters, the sanction of the Compromise proposal should be obtained

from the Credit Approval Committee of the Board at Central office.

7. On an assumption, the Opportunity Cost of the compromise proposals shall be calculated

@11% monthly compounded for a period of 5 years in the case of suit filed accounts and

7 years in the case of non-suit filed accounts.

8. It is not necessary to work out the opportunity cost in respect of compromise proposal

where the Running Ledger Balance is not exceeding Rs.1 crore.

9. If the difference between Market Value and Realizable value of property is more than

40%, another valuation report is to be obtained from a valuer other than the one who had

valued the property earlier.

10. Within a period of 3 years, if the variation in value of property is more than 50%, then the

valuation is got to be redone by another valuer in the approved panel of the bank.

11. In case of properties of Rs.10 crore and above valuation must be got done by two

approved valuers and two separate reports obtained.

12. The factors governing the Module approach are –

i. Realisable value of securities charged to the Bank

ii. Aggregate means of borrowers / guarantors

iii. Marketability of securities

iv. Age of NPA

v. Legal Position of the Bank

13. Notional dues will be Running Ledger balance as on NPA date plus interest @10%

(simple) from the date of NPA upto the following month of submission of proposal to the

Sanctioning Authority.

14. Contractual dues should be calculated at Contracted rate / documented rate of interest or

14% whichever is less so as to negotiate with the borrower for arriving at better offer.

15. The Net Present Value (NPV) will be calculated at discounted rate @11% on the

compromise amount as well as security value.

16. Notional amount due in the case of compromise proposals shall be calculated by applying

interest @10% simple.

17. In deserving cases, where the borrowers request to pay the settlement amounts in

instalments, a maximum time period of 12 months from the date of sanction, be allowed.

Payment of settlement amount in instalments will attract interest @10% p.a. (simple) on

reducing balance.

18. Wherever instalment payments are sought, there should be minimum of 25% down

payment (including amount of down payment) of the settlement amount.

19. In case of delay in payment of any instalment interest @12% simple should be recovered.

In case of default for 3 consecutive monthly or two quarterly instalments, the

compromise will lapse.

20. Lok Adalat – Eligibility – All NPA accounts, both suit filed and non-suit filed accounts,

which are in doubtful and loss category with outstanding balance upto Rs.20 Lacs.

21. Whenever a party requests for ‘No Due Certificate’ after payment of the compromised

amount, it should be stated in the ‘No Due Certificate’ that the party has adjusted the

account through Compromise.

22. After 30 days of warning notice (one time), we may publish photographs and properties

details in 10 to 12 accounts at a time.

23. Action under Order 21 Rule 41 – If the Bank is unable to execute the decree due to non-

availability of details of assets owned by the Judgment Debtor, the bank shall apply to

the Court for an order under Order 21 Rule 41 of Civil Procedure Code requiring the

Judgment Debtor to disclose the particulars of his assets.

24. On slippage of borrowal accounts to Non-Performing Assets with aggregate sanctioned

limit of Rs.1.00 Lac (including Govt. sponsored cases), the staff accountability shall not

be examined generally.

25. Freshly slipped NPA accounts with Sanctioned Limits over Rs.1 Lac to Rs.3 Crore – As

soon as these accounts slips into NPA category, the Branch Manager shall submit

information on such accounts in the Synopsis I Format to the concerned Regional

Manager within 45 days of such slippage who will take a view on the need for

verification of facts in such accounts within 15 days from the receipt of the format.

26. Freshly Slipped NPA accounts with Sanctioned Limits over Rs.3 crore upto Rs.5 crore –

In these accounts one calendar quarter shall be provided as cooling period for the purpose

of up-gradation of the account. In case the account is not upgraded within the cooling

period, Branch Manager shall submit information of the account in the Synopsis II format

after carefully filling in all the columns therein to the concerned Regional Manager

within 15 days of completion of the cooling period. Regional Manager will forward the

same to Zonal Manager with his comments within 7 days.

27. Freshly slipped NPA Accounts with Sanctioned Limit over Rs.5 crore – Here one

calendar quarter shall be provided as cooling period for the purpose of up-gradation of

the account. In case the account is not upgraded with the subsequent quarter, Branch

Manager shall submit information of the account in the Synopsis II format after carefully

filling in all the columns therein to the concerned Regional Manager within 15 days of

completion of the cooling period. Regional Manager will forward the same to General

Manager (Recovery), Central Office within 15 days of receipt thereof

28. Accounts which have turned NPA within 18 months of sanction / takeover / first

disbursement / whichever is Later (Quick Mortality Accounts) – In all these quick

mortality accounts with sanctioned limits of Rs.1 Lac and above, staff accountability

shall be examined on the same lines of freshly slipped NPA accounts. The quantum of

sanctioned limit in such account shall decide the procedure to be followed by the

concerned competent authorities to consider ordering, investigation and thereafter,

examining staff accountability. However, in respect of such accounts with sanctioned

limits of Rs.25 Lacs and above, investigation shall be carried out invariably within a

period of 3 months of account slipped into NPA.

29. Method of arriving at Reserve price for Sale of NPA – The Reserve price will be fixed by

reducing resolution cost from net realizable value of security and then arriving at Net

present Value at discounted rate at 18-20%. Thus the net realizable value of security is

the basis on which the Reserve price is fixed.

POLICY ON VALUATION OF SECURITIES

1. Periodicity of Valuation –

a. Valuation of Land & Building, Plant and Machinery & Agricultural Farms &

other immoveable properties charged to the bank either as primary or collateral

security should be done at least once in three years by the branch.

b. If the account show persistent irregularities fresh valuation to be taken even at

shorter intervals

2. In case of single property valued at Rs.10 crore or above, minimum two independent

Valuation Reports shall be obtained and lower of the two shall be considered as the

valuation for all purposes.

3. The criteria for empanelment of valuers –

a) The registration of the firm/company of the valuer shall be atleast 5 years old or

valuer should have atleast 5 years of experience in conducting valuation.

b) The valuer should have completed atleast 10 assignments successfully.