LOAN POLICY AND PROCEDURE COMPANY NAME
Aug 07, 2015
LOAN POLICY
AND PROCEDURE
C O M PA N Y N A M E
TABLE OF CONTENTS
PREAMBLE Pg 03
0 1 SCOPE AND OBJECTIVES OF LOAN POLICY Pg 05
02 POLICY DIRECTIVES OF THE RESERVE BANK OF INDIA Pg 08
03 POLICY DIRECTIVES ON SECTOR‐WISE EXPOSURE Pg 15
04 LOAN PROCESSING POLICY Pg 18
05 POLICY DIRECTIVES ON CREDIT DISPENSATION Pg 23
06 POLICY DIRECTIVES ON LOAN PRICING Pg 29
07POLICY DIRECTIVES ON CREDIT ASSESSMENT & RISK
MONITORINGPg 33
08 POLICY ON LOAN PRODUCTS‐ EXISTING AND NEW Pg 39
A ANNEXURES Pg 42
B APPENDIX Pg 55
SCOPE AND OBJECTIVES
OF LOAN POLICY
3
SCOPE AND OBJECTIVES OF
LOAN POLICY
ABCDE Investments & Trading Company Private
Ltd (ABCDE, “the Company”), is a Lending
Finance Company of DOLAT GROUP OF
COMPANIES (DOLAT), which is the flagship
company of Dolat Capital Limited. ABCDE is
registered with the Reserve Bank of India as a
non – deposit accepting, systemically important,
Non–Banking Financial Company (NBFC‐ND‐SI).
Currently CITCPL’s main business is asset based
lending to clients primarily referred to it by
various group entities , consultants. ABCDE is
uniquely positioned to capitalize on the
opportunity thrown by the capital market
financing, real estate backed lending and fixed
income structured products spaces on account
of the strong promoter linkages to growth
companies and prime short‐term credit rating.
Hence, the Company will offer multiple
products to its clients depending upon their
requirements.
With the gradual expansion of ABCDE
Investments lending book, a formally
accepted exposure norm would help all
employees have a clear understanding of
management risk appetite, circumscribed by
regulatory norms. The norms formulated in this
document will be modified from time to time,
subject to board approval to take cognizance
of changed economic conditions, changed
management risk appetite or changed strategic
focus. The Risk Group will also, from time to
time, highlight to the credit committee the
changes in the credit environment and the
changing credit risk profile of different sectoral
exposures. This policy holds or all lending
transactions. more specifically wholesale-lending
. While the company is predominantly in the
secured financing business, any other structure,
such as ICDs, mezzanine finance, structured
finance etc can be explored with the approval of
the Credit Committee after a detailed credit and
risk note is placed before it. The company shall
however not grant on demand loans.
The document supersedes any current lending
policy document
1.0
4
Scope and Objectives of Loan
Policy This Loan Policy Document broadly deals with the following:
• Product Offering of the company
• Risk containment measures to mitigate the credit and Credit for the gamut of products
offered by the Company
• Loan sanctioning authority and delegation
• Sectoral exposure limits
1.1 SCOPE OF THE LOAN POLICY
Scope and Objectives of Loan
Policy The objectives of the Loan Policy are the following:
• To have a loan portfolio which generates adequate risk adjusted returns.
• Ensure all deal managers have a clear understanding of the composition of the
incremental portfolio,
• Define clearly the size and nature of deals that must be brought to the credit
committee for approval before disbursement,
• To ensure operational efficiency and effectiveness
• To comply with the norms set by the Regulators and stakeholders from time to time,
• Enable Standardization of Procedures
1.2 OBJECTIVES OF LOAN POLICY
5
Scope and Objectives of Loan
Policy 2.1.1 SINGLE BORROWER LIMIT
ABCDE shall limit its exposure on a single
borrower and borrowers belonging to a group
to the following limits
• Single Borrower :- 15% of the NBFC’s
own funds
• Group Borrower :- 25% of the NBFC’s
own funds
For FY15 the limits in absolute amounts are
• Single Borrower Rs.__________
• Group Borrower Rs.__________
Single borrower is defined as an individual
borrower that may be an individual, a
proprietorship, a private or public company,
listed company, etc.
Borrowers belonging to a group can be
defined as business entities having one or
more common partner/director. In the case
of public limited companies, the group
definition is based on the concept of
commonality of management and effective
control (that means if a professional is a
director in two public companies and does
not have substantial
shareholding/management control, such
companies would not be classified as group
companies. A limited company which is a
subsidiary of another limited company or a
closely held company with substantial interest
(i.e. more than 50% of the equity share
capital of the company is held by the other
company) would be said to belong to the
same promoter group.
The single borrower limit shall be reviewed
every year after the audited financial results
of the year have been prepared.
2.1 PRUDENTIAL EXPOSURE NORMS
6
Scope and Objectives of Loan
Policy 2.1 PRUDENTIAL EXPOSURE NORMS
2.1.2 CAPITAL MARKET EXPOSURE
The following exposures shall qualify as capital
market exposure:
• Direct investment in equity shares,
convertible bonds and debentures
and units of equity oriented mutual
funds
• Advances against shares/convertible
bonds and debentures or other
securities including loans to retail
borrowers for margin, IPO financing
as well as ESOP financing
• Bridge loans to borrowers against
expected equity inflows
• Exposures to venture capital funds
2.1.3 PROHIBITED EXPOSURES
Lending for the following purposes and to the
following categories of borrowers is prohibited:
• Sanction of fresh loans to declared
NPA Accounts
• Lending to borrowers for illegal /illicit
activity
• Restricted Industry as declared from
time to time
7
3.1 CREDIT RISK APPETITE MATRIX
The following table lists the current appetite of the management for the following industries:
Activity / Industry Classification
Maximum Exposure (Rs. in lakhs)
Activity / Industry Classification
Maximum Exposure (Rs. in lakhs)
Agriculture 250 Trading 150
Small Scale Industries 500 Retail Trade 150
ITES & Software 250 E-commerce 200
Education Sector 250 Infrastructure 500
Hospitality Sector 300 Transport & Logistics 500
Redevelopment Projects
1,000Auto Ancillary/ Cements/Steel
250
Construction Services 500 Consumer Durables 150
Advances to Capital Market
1,500 Others 1,000
(Amit to advise on changes)
Any change in sector cap (once put in place),
must be approved by the Credit Committee. All
credit proposals must clearly specify to
which industry grouping the borrower
belongs. Supporting data such as turnover from
sector, order book, regulatory classification etc
must be provided.
Risk Management must ensure that all sector
limits are in conformance with RBI norms for non
deposit taking NBFCs that might be prevalent at
that time.
8
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