I make sure that all the requisite documents are available:

1. PAN card of the company and promoters.

2. Other Documents related to the company:
 VAT registration certification
 DIC registration Certificate.
 IEC code Certificate.
 Registration Certificate.
 Partnership Deed.
 MOA and AOD
 Certification of Registration
 Trust Deed.
 PCB Clarence.
 ISO Certificate.
 VAT/CST to validate sales
 Buyer wise sales for past two years.
 Audited Balance Sheet for past thee years (Including all the schedule. 3CB, 3CD, auditors report)
 Next 2 years projection or projection till the tenor of term loan
 Sanction letter of existing Banker
 Assumption of sales
 Orders in hand if any
 Age wise receivable.
 Share Holding Patterns
 12 Months bank statement.
 Term Loan Statement from the date of disbursement.
 CA certificate for investment in P & M.
 Existing Valuation Report and Legal Opinion Report.,Search Report and Due Diligence.
Process Flows:

Once file is logged in, i make sure that the necessary paper are available before starting of appraisal note.

1 To do thorough 1. CIBIL report of the company

Due Diligence 2. CIBIL report of the promoters
3. Central Repository of information of Large Credit. (CRILC). The same is required to know the
SMA Status. (Special Mention Account)
Particulars (Principal and Interest remain overdoes) Compliance Status
SMA-0 00-30 Days
SMA-1 31-60 Days
SMA-2 61-90 Days
Sometimes due to delay in submission of stock statement also accounted for SMA classification.
4. PSL Classification (to be done to fixing up the rate of interest and other concession). Investment
in Plan & Machinery does not exceeds:
Type Micro Small Medium
Manufacturing Upto Rs.25.00 More than More than Rs.5.00 Crs to Rs.10.00
Lacs Rs.25.00 lacs Crs
to Rs.5.00 Crs
Services Upto Rs.10.00 More than More than Rs.2.00 Crs to Rs.5.00
Lacs Rs.10.00 lacs Crs
to Rs.2.00 Crs
5. RBI Defaulter check:
RBI Defaulter List
RBI wilful Defaulter List
RBI Caution List
ECGC Caution List
Caution List Advised and Published by RBI
6. Risk Control Unit (RCU)-An external unit engaged in verifying the geneuiness of the balance
sheet as updated in ITO and the physical copy submitted by the company. They also verify the
last 6 months bank statement and confirm the geneuiness. If required they verify the field
 verification about the company.
7. Market Reference from two buyers and supplied. If required, we take reference check from our
own clients:
Buyers  Dealing with them Since
 Quantity and amount of sales done to them for past two years.
 Credit Period allowed.
 Any information about the company/feedback.
Supplier  Dealing with them Since
 Quantity and amount of supplied to them for past two years.
 Credit Period availed from them.
 Any information about the company/feedback.
8. Last 12 months Bank Statement of CC account.
Details to be  No of credit and summation for past 12 months
seen  Inward and outward cheque returns.
 Credit and debit from which client.
 DPD. How many days the company is taking to regularized its interest.
 Whether the limit is within the sanction limit of not.

9. Term Loan Statement from the date of disbursement.

Details to be  Repayment schedule.
seen  DPD. How many days the company is taking to regularized its interest and
Installment.
 Account is standard or not
 Account is restructured or not.
10. Sanction Letter of existing Bankers.
Details to be  Date of Last renewal.
seen  Date of last Enhancement
 Detail of Security offered to the existing banker to find out the dilution of
security.
 Personal Guarantor detail.
  Sanction Covenants fixed by the existing banker.
 If the company is not submitting the latest sanction letter we are asking the
company for date of last collection of processing fees.
 Also asked for submission of MODs copy.

11. Existing External Ratings.

Details to be  Date of Rating
seen  Rating Status.
 Risk weight.
12. Auditors check and age of the Promoter.
13. MCA check
Details to be  Latest filling of Audited Balance Sheet.
seen  Director Detail and their Signature validity.
 Charge Details
 Share Holding Pattern. To know the beneficial owner.
14. Whether there are any common directors on the Board of the Bank and the Company/its
subsidiary/its holding company:
15. Loans to Directors of other banks and their relatives.
16. Whether any senior officer of the Bank is related to the directors/partners of the Company.
17. Whether a relative of any senior officer of the Bank holds substantial interest in the company, or
is interested as a guarantor.
18. Whether any suit is pending in any court of law against the directors/partners.
19. CMA
20. Internal Rating.
2. Inspection of Unit Inspection:
property and The person undertaking the inspection has to remember that he is representing the bank. The inspection
units includes the followings:
1. Before Inspection:
 Study of Stock Statement.
 Annual Report.
 Projection
  Operating in the account
 TOD limit sanctioned during the year.
 Whether the documents are in force.
 Whether any compliance of sanction is pending.
 Insurance Policy.
 Any amount overdue.
2. At the time of Inspection
 Whether all the licences are renewed.
 Whether all statutory payments have been made on due dates.
 Various securities charged to the bank such as Machinery, furniture & fixtures, Stocks are
maintained or not.
 Banks hypothecation board has been displayed or not.
 Confirm the security arrangement at the premises, Insurance and fire fighting arrangement.
 Verify the stock register, returns and other relevant documents.
After the inspection, prepare the inspection and capture the relevant information in the inspection report.

Collateral Security:
 Take the valuation report and cross verify the following
 Building Plan Approval copy.
 Marketability of the property.
 Locational advantages.
 Basic amenities are available of not.
 Proximity of CIVIC amenities.
3 Profile of the  Inception and formation.
company  Product Details
 Use of the product.
 Buyer and Supplier list.
 Business Model.
 Manufacturing Process.
 Sources of raw material
 Marketing arrangement.
  Comment on Land and building
 Plant & Machinery
 Power Arrangement from TNEB & Genset details
 Statutory details from competent authority.
 Manpower and water details.
 Transportation detail and how many sift the company is operating now.
4 Profile of the  Age.
Promoter.  Academic Qualification.
 Past Experience
 Functional Responsibility.
 Succession Plan.
5 Industry Analysis  Demand and Supply of the product.
 Competitive Scenario.
 Present Trend.
 Standing of the Company is the Industry.
 Recent Developments.
 Market Size
 Government Initiatives.
 Road Ahead.
6. Inter-firm Comments on the following financials:
Comparison  Sales
 PAT Margin
 PBDIT Margin
 PUC
 Net worth
 TOL/TNW
 CR
7 Financial  Sales: Capacity utilising, Segment/Product wise sales, till date performance supported by vat,
Analysis Reason for increased or decreased in sales, Orders in hand if any, future plans.
 Profit and Profitability.
  PBDIT margin
 PUC
 TNW and Movement of TNW
 Gearing Ratio
 Current ratio
 Interest Coverage Ratio
8 Debtors Ageing
Debtors 31.03.2016 Percentage 31.12.2016 Percentage

Up to 30 days 67.54 80.00 400.00 80.53

> 30 days Up to 90 days 15.88 18.81 93.98 18.92
> 90 days Up to 180
days
> 180 days 1.00 1.19 2.70 0.55
Total 84.42 100.00 496.68 100.00
9 Funds Flow
Analysis. Funds flow 2013 2014 2015
Long Term Sources 235.30 1747.55 1938.41
Long Term Use 576.69 918.21 602.10
Contribution to Working Capital -341.39 829.34 1002.00
Short Term Sources 1735.69 337.25 41.00
Short Term Uses 1394.30 1166.59 1043.00
Surplus / Deficit 341.39 -829.34 -1002.00
10 Cash Flow
Analysis 2013 2014 2015
Opening Cash & Cash equivalents 74.00 125.43 251.51
Net Operating cash flow after working capital changes 1135.77 183.19 439.93
Cash flow from investing activities -576.69 -918.21 -988.14
Cash flow from financing activities -507.65 861.10 566.70
Surplus / Deficit 51.43 126.08 18.49
Closing Cash & cash equivalents 125.43 251.51 270.00
11 Assessment of
Fund Based Limit Facility Assessment
CC 1. Projected Turnover Method
2. Maximum Permissible Bank Finance
3. Cash Budget Method.
4. Different Method of Lending.
Projected
Turnover Anticipated Turnover Revenue income estimated (FY 2015-16) : Rs.13.00
Method For Current Yr and Crs
Basis of Arriving at it. Revenue income accepted : Rs. 13.00
Crs.
Limit Assessed Assessment of OD limit:
20% of the accepted turnover - Rs. 2.60 Crs
Limits Proposed Limit Proposed by us - Rs.1.75 Crs
Overall exposure of WC is well within the 20%
accepted turnover. The shortfall in working capital
requirement will be financed from sundry creditors and
own funds.
Maximum (Rs in
Permissible Crs)
Bank Finance Particulars 2014 2015 2016 2017
1 Total Current Assets (TCA) 3.69 4.97 3.57 4.82
2 Current Liabilities (OCL) Other than 0.86 1.71 0.78 0.98
 Bank Borrowings and term loan
instalments due within one year)
3 Working Capital Gap 284 3.26 2.79 3.84
4 Min. Stipulated NWC (25% of the
total current assets the total current
assets excluding export receivable) 0.92 1.24 0.89 1.21
5 Actual/ Projected NWC 1.39 1.76 1.28 1.34
6 Item 3-Item 4 1.91 2.02 1.90 2.64
7 Item 3-Item 5 1.44 1.50 1.51 2.50
8 MPBF (Lower of 6 & 7) 1.44 1.50 1.51 2.50
9 Excess Borrowings Nil Nil Nil Nil
Different reason for excess borrowings are:
 Diversion of funds from short terms funds and long term uses.
 Non infusion of promoter’s margin into the business.
 Lower margin on current assets (minimum stipulated margin is 25%)
Cash Budget Method
Feb-11 Mar-11 Apr-11 Oct-11 Nov-11 Dec-11 Jan-12
Collections from Projects 900.00 1155.00 1140.00 1100.00 1150.00 1200.00 1180.00
Mobilization advance 85.00 -- 200.00 50.00 -- 75.00 40.00
BG Margin Reversal 4.50 -- 4.50 -- -- -- --
Wind Mill receipt -- -- -- 12.00 12.00 -- -
Others -- -- 5.00 -- 12.00 -- --
Total Cash Inflows 989.50 1155.00 1344.50 1150.00 1150.00 1275.00 1220.00

Payments to suppliers 440.50 442.85 450.20 485.55 460.50 500.25 475.00

Labour Payment incl subcontractors 450.00 444.20 450.25 480.00 455.00 485.00 480.00
Repairs and Maintenance 24.00 24.00 24.00 24.00 24.00 24.00 24.00
Centering Materials 200.00 80.00 80.00 80.00 80.00 80.00 80.00
Salaries & wages 55.00 55.00 68.00 68.00 68.00 68.00 68.00
Bonus payment -- -- -- 50.00 --- -- --
Retention payments -- -- -- 100.00 -- -- --
Repayment of Term Loan(Wind mill) 2.87 2.87 2.87 2.87 2.87 2.87 2.87
Repayment of HP loans 15.00 15.00 13.33 13.33 13.33 13.33 13.33
Interest on Working capital 11.00 11.00 16.00 16.00 16.00 16.00 16.00
Interest on Term loan 1.46 1.43 1.40 1.23 1.20 1.17 1.15
BG Marging deposits/Dividend -- -- 10.00 -- -- -- --
Service tax,TDS and Sales tax 45.00 45.00 45.00 45.00 45.00 45.00 45.00
Selling & Administrative expenses 45.00 5.00 5.00 5.00 5.00 5.00 5.00
Income tax -- -- -- -- -- -- --
Total Cash Outflow 1289.83 1126.35 1166.05 1370.98 1170.90 1240.62 1210.35
Net Cash Flow (300) 29 178 (221) (21) 34 10
CC Bank Balance (Addition/Reduction) (963) (1,264) (1,235) (1,328) (1,549) (1,570) (1,536)
CC Closing Bank Balance (1,264) (1,235) (1,057) (1,549) (1,570) (1,536) (1,526)
EPC/RPC
Particulars 2017
Total exports 50.81
Exports Per Month 4.23
Less: Margin @ 10% 0.42
Net Value 3.80
Order Execution Period (Months) 3
EPC requirement 11.40

PSC (Post Shipment Credit)

Particulars 2017
Exports Per Month 4.23
Average Credit Period (Months) 2
PSC Requirement 8.46

Letter of Credit
Import LC (FLC) 2017
1 Raw Material Consumption per annum 97.59
2 % Consumption under LC 50%
3 Amount of consumption under LC per annum 48.79
4 Consumption under LC per month 4.07
5 Lead Time (From the date of opening of LC till 120
shipment)
 6 Transit Period(from the date of shipment till the date 0.00
of receipt of documents by importer
6 Usance Period (Credit period allowed by the supplier 30
to importer after delivery of goods)
Total Period 150
7 LC requirement 24.40
8 Recommended FLC Limit 20.00
Bank
Guarantee Sr. Particulars
No.
A Total Sales 49.95
B Opening Balance as on[ Existing BGs in the name 2.00
of both the JVs ]
C Guarantees Required 3.00
Total orders in LOA stage 43.30
1. Earnest money deposits/Security: 5% 2.16
2. Security Deposits: ___% of tenders worth Rs. --
Lakhs/Crs. expected to be awarded during
3. Advance Payment Guarantees: ___% of new --
orders worth Rs. Lakhs/Crs. expected during
4. Retention / Maintenance Guarantees: ___% of the --
jobs valued at Rs. Lakhs/Crs. expected to be
completed during
5. Guarantees on account of Sales Tax / Excise duty --
payments during ______
Performance Guarantee@5% of [Contract Value] 2.16
6. Total: 6.32
7. Less: Bank Guarantees to be 2.00
cancelled/extinguished during 2013-14
8. Limit Required 4.32
9. Limit Recommend 3.00
Outstanding BGs as on 03.05.2016 3.93
Add: BG required during the period: 3.27@
Less: Estimated maturity/cancellation of BGs during the period
0.93#
Requirement of BGs 6.27
Recommended BG limit 6.00
Financial: Yes Performance: Yes
Margin [Existing/proposed]: [15% Existing and 15% proposed]
@ Additional BG Requirements
For Ashok Layland – For 6 Machine 0.34
Mobilization advance as 10% of the order value i.e Rs.3.45
crores
For M & M- 8 SPMs- Mobilization Advances i.e. 20% of the 1.74
order value of Rs.7.88 crores+ 10% of Rs.1.61 crore
Tappet Hole SPM
For Godrej 20% of the order value of Rs.0.96 crores 0.19
The company is continuously negotiating with the different 1.00
companies and
Rs.1.00 crores BG is estimated for the current FY 2012-13
to meet fresh orders.
Total 3.27
Term Loan Cost of the Project and Means of finance:
Cost Amount Means Amount
Land 6.22 Share capital 365.00
Building & Civil works 214.20
Plant and Machinery 483.50
Misc. Fixed Assets 5.00
Deposits 10.00 Term loan 500.00
Provision for contingencies 35.13
Pre operating & preliminary 31.29
expenses
Margin for Working Capital 79.66
Total 865.00 Total 865.00

Debt Equity Ratio 1.37:1 Promoters 42.20%

Contribution

Project Activity Start Completion Present Status

Implementation Acquisition of land Acquired - -
Schedule Factory Buildings June’11 Dec’11 Kirby Building Systems India
Ltd has been hired for
construction of factory shed.
The civil work of the company
has already been started. The
company has already paid an
advance of Rs.8.86 lacs
towards shed construction and
civil work.
P&M Advances are already paid to
Placement of order May’11 August’11 the supplier of machineries.
Delivery at site Sept’11 Jan’12
Power August’11 Sept’2011 The company has applied for
 arrangement approval of power arrangement
from APTRANSCO.
Erection Sept 2011 Feb’2012 -
Procurement of raw Feb’2012 Mar’2012 -
material
Trial runs Mar’2012 Mar’ 2012 -
Commercial 1 st April -
Production 2012

Statutory Type of Clearance / approvals Status

Approvals DIC Registration Obtained
No objection certificate from Grampanchyat Obtained
Vat Registration Obtained
Pollution Control Board Obtained [CFE]
Conversion of agricultural land for industrial use Obtained
Approval for construction of building Obtained
Factory Building Construction Obtained
Central Excise Registration To be obtained
Approval for power connection To be obtained
Factories Department To be obtained
Income Tax Dept for PAN To be obtained
DSCR:
YEAR 2013 2014 2015 2016 2017 2018 TOTAL
As on 31.03.
Net Sales 1781.92 1930.42 2078.91 2227.40 2227.40 2227.40 -
Retained Profit 108.88 131.76 152.33 175.15 178.62 182.33 929.07
Depreciation 36.12 36.12 36.12 36.12 36.12 36.12 216.72
Cash Accruals 145.00 167.88 188.45 211.27 214.74 218.45 1145.79
Int. On TL 76.62 65.17 51.08 36.99 22.90 8.81 261.57
Total 221.62 233.05 239.53 248.26 237.64 227.26 1407.36
Int. on TL 76.62 65.17 51.08 36.99 22.90 8.81 261.57
TL – Installment 45.45 90.91 90.91 90.91 90.91 90.91 500.00
Total 122.07 156.08 141.99 127.90 113.81 99.72 761.57
Gross DSCR 1.82 1.49 1.69 1.94 2.09 2.28 1.85

Break Even Point

Particulars 2013 2014 2015 2016 2017
Sales 1781.92 1930.42 2078.91 2227.40 2227.40
TVC 1411.88 1526.63 1641.84 1755.13 1758.75
Contribution 370.04 403.79 437.07 472.27 468.65
TFC 261.16 272.03 284.74 297.11 290.03
BEP % 70.58 67.37 65.15 62.91 61.89
BEP Sales 1257.61 1300.51 1354.36 1401.28 1378.45
Cash BEP % 60.82 58.42 56.88 55.26 54.18
Cash BEP Sales 1083.68 1127.83 1182.55 1230.93 1206.78
Cash BEP=FC-DEPN/ConP
Sensitivity analysis
Assumption / particulars PAT Avg. GDSCR Min. DSCR
(2013-14)
Actual level 108.88 1.85 1.49
5% decrease in sale Price realization 37.54 1.25 1.02
 5% increase in raw material cost 63.41 1.48 1.20

Security Margin
Particulars as on 31.03. 2013 2014 2015 2016 2017 2018
W.D.V. of Fixed Assets 739.22 703.10 666.98 630.86 594.74 558.62
Aggregate TL outstanding 454.55 363.64 272.73 181.82 90.91 0.00
Security Margin Available 284.67 339.46 394.25 449.04 503.83 558.62
% of Margin 38.51 48.28 59.11 71.18 84.71 100.00

Buyers Credit:

LER:
12 Inventory and
Holding Level 2014 2015 2016 2017
Calculation Closing stock of Raw Materials 4136.58 3517.00 4278.57 4081.00
RM holding level (in months) 8.32 6.00 6.20 5.02
Closing stock of finished goods 268.29 430.00 304.65 512.00
FG holding level (in months) 0.42 0.62 0.35 0.56
Domestic receivables 84.42 226.00 496.69 295.00
Debtors collection period (in months) 0.10 0.26 0.48 0.26
Trade creditors 1728.96 879.00 1676.85 816.00
Creditors payment period (in months) 3.48 1.50 2.43 1.00
12 Current Assets
How Finances 2015 2016 2017
Bank Borrowings / TCA % 48.21 47.07 45.89
Sundry Creditors / TCA % 33.72 28.09 13.87
OCL / TCA % 7.60 5.63 4.59
NWC / TCA % 10.46 19.21 35.65
Total 100.00 100.00 100.00

13 Security Detail
and collateral Primary:
coverage Cash Credit:
Hypothecation of Current assets including stocks of raw materials, work in progress, finished goods,
stores, spares, consumables and receivables on pari passu basis under consortium with 20% margin.
Corporate Term Loan: Extension of charge on the currents assets and fixed assets on pari passu basis
with SBI and KBL
EPC:
 Extension of charge on all the current assets of the company
 Other primary/ collateral security/ guarantors as applicable to CC/ WCDL facility
FBP/ FBD:
 Export bills with title to the goods duly endorsed in favour of the Bank
 Extension of charge on all current assets
  Other primary/ collateral security/ guarantors as applicable to CC facility

LC (Inland/ Import) / Buyers Credit:

 Goods procured under LC
 Other primary/ collateral security/ guarantors as applicable to cash credit facility
LER: Nil.

Collateral: Second charge on entire fixed assets of the company both present and future under
consortium, excluding those assets specifically charged to other Banks (WDV as on 31.03.2013
Rs.111.59 Crores)

Personal Guarantee
 Selvarajan
 Manoj
14 Particulars IP IP+CM IP+CM+FA
Coverage Existing Proposed Existing Proposed Existing Proposed
IP 0.00 0.00 0.00 0.00 0.00 0.00
CM (% on 0.00 0.00 0.00 0.00 0.00 0.00
NFB limits)
Moveable 0.00 0.00 0.00 0.00 111.59 111.59
FA (net
block)
Total 0.00 0.00 0.00 0.00 111.59 111.59
Proposed 8.00 8.00 8.00 8.00 8.00 8.00
Exposure
Security 0.00 0.00 0.00 0.00 0.00 0.00
cover (as %
of
exposure)
15 Credit Rating
Rating Particulars 2015 2016
Score Rating Score Rating
Overall Rating 56.20 SME 6 71.03 SME 3
Financial Rating 35.87 SME 7 71.13 SME 3
Business Rating 80.00 SME 2 70.00 SME 3
Management Rating 73.00 SME 3 75.56 SME 2
Industry Rating 66.26 SME 4 75.00 SME 2
Conduct Rating 73.24 SME 2 66.26 SME 4
16 Fixing Pricing
Facility Applicable Existing Proposed
CC BR+3.25% i.e. Base Rate + 3%, Base Rate + 3%,
presently 13.50%p.a. presently 13.25% p.a. presently 13.25% p.a.
EPC Up to 180 days: BR + Up to 180 days: BR + Up to 180 days: BR +
1%, i.e.11.25%p.a. 1.50%, i.e.11.75%p.a. 1.50%, i.e.11.75%p.a.
FBILL Upto 180 days BR + Up to 180 days: BR + Upto 180 days BR +
1%, i.e.11.25%p.a. 1.50%, i.e.11.75%p.a. 1.50%, i.e.11.75%p.a.
Corporate Term BR + 3.75% i.e. BR + 5.25% i.e. presently BR + 4% i.e. presently
Loan presently 14% p.a. 15.50% p.a. 14.25% p.a.
LC / BC As per the bank As per the bank standard As per the bank standard
standard charges charges charges
LER As per the bank As per the bank standard As per the bank standard
standard charges charges charges
Processing Fees 0.50% on the renewal 0.375% on the renewal 0.375% on the renewed
limits limits limits.
17 RAROC
18 Conduct of  Debit and Credit Summation
accounts  Cheque Return
 Interest Servicing and Instalment paid on time.
 TOD availed.
 Total Interest and other Income earned from the client during last year and current financial year.
19 Prudential Norms

Existing Exposure Proposed Exposure Total Exposure

RBI Norms Fund Non fund Fund Non fund Fund + Non
Based Based Based Based Fund Based
Company
4746.74 5.50 4.00 5.50 4.00 9.50
Group
12657.98 - - - - -
20 Takeover Norms
Guidelines Compliance status
Due diligence while selecting the borrower - We have carried out the due diligence and four
Takeover proposals from companies whose past references have been obtained and the same is
sanction/enhancement is less than 6 months old, discussed in our appraisal note.
should be carefully assessed and two reference
checks from vendors and two from customers
should be compulsorily made by the RM and
proof of the same gathered at the initial stage
itself should be documented.
The account to be taken over should be a The account is a standard asset as is evident from
standard asset, not reported as SMA 1 or 2 in the the Bank statements perused. The overall rating
past 12 months and the borrower should not be of the account based on AFS 2014-15 is AB-PP,
reported as non-cooperative with any other Bank which is acceptable as per the product norm. The
at the time of take over and should conform to our name of the Concern is not appearing in SMA list
internal rating of SME 1 to 3 (including SO) or also.
equivalent and „acceptable‟ for Templated
products. In case of SMA-0 accounts, reason for
the classification and justification for considering
need to be incorporated.
Further verification needs to be done on whether Not Appearing
the borrower or any other company promoted by
its promoters/directors or any company on whose
board its promoter/directors are a director appear
in the non-cooperative borrower list of CRILC.
If reported as SMA 1 or 2 in the past 12 months Not Appearing
or non cooperative in CRILC*, admin approval
shall be obtained from President (SME) for all the
cases.
Credit Information Report (CIR) shall be obtained CIR has been initiated vide latter dated
in the prescribed format as per extant guidelines 12.11.2015. We are yet to obtain reply from IOB.
of Reserve Bank of India and as per SME Dept. We note to obtain the same before disbursement
Circular No. SME/16/2012-13 dated August 29, of the limit.
2012, Circular No. SME/16/2014-15 dated July
10, 2014 and subsequent instructions.
New to Bank (NTB) exposures rated SME 4 and The rating of account is AB-PP as per ABS 2014-
below (for non templated) and „unacceptable‟ 15.
rating for templated shall not be taken over.
However, if NTB exposures are to be considered
for SME-4 & below rated accounts, there shall be
strong justifiable reasons for the same. Such
accounts may be considered as per guidelines
mentioned in point No.7 of Annexure-1
(Delegation of Powers) of the CCP for applicable
rating. The credit requirements of the borrowers
should be independently assessed by the Bank.
None of the accounts of the borrower with the The OCC limit of the firm is regular with the
other bank should be irregular. existing banker.
In case there is a primary/collateral security As per the legal opinion report of Mr.R Lakshmi
available in form of land and building by way of Narayanan dated: 23.12.2015 the property owned
equitable mortgage by deposit of title deeds, a by Mrs. Kiran Arora (Wife of Proprietor) and Mr.
legal opinion on the title of the property from a Yashdevaraj has got a valid, clear and marketable
legal counsel should be available with the bank title over the property.
from whom the loan is being taken over. In case
the other Bank does not share the legal opinion,
SME Centre Head may relax the condition on a
case to case basis,
Disbursement can be made for principal plus the The same will be obtained from IOB and the
accrued interest from the date of last interest disbursement will be made accordingly. MCMC to
application date with the other bank till the date of ensure compliance.
take over. A letter from the Bank from whom the
account is proposed to be taken over, confirming
the total dues of the borrower (including accrued
interest) as on date of takeover, should be
obtained. However, deviation to this can be
approved by the respective sanctioning authority.
It should be ensured that the formalities such as Will be completed.
documentation, transfer of securities from the
transferor bank should be expeditiously
completed.
Remittance of the funds to the other Bank should The disbursement will be made by way of pay
generally be by a pay order only accompanied by order/RTGS favoring the other bank with the
a letter informing that the proceeds of the pay covering letter clearly setting out the facilities to
order are towards the dues of the borrower for be repaid and closed by the other bank should
takeover of the facilities from them. In case of be hand delivered against acknowledgement.
remittance of fund through RTGS, RMs should
coordinate with CBB/MCMC/Branch/CCOH and
ensure physical delivery of immediate
communication to the Bank taking over the limit.
In both the cases the Bank‟s Official must
personally deliver the letter of takeover to the
other Bank. The branch should retrieve the
documents from other bank and complete the
creation of security within 15 working days from
the date of issue of pay order. In case of delay of
more than 15 working days in retrieving the
security documents, the concerned Bank‟s
Official should personally visit the Bank Branch to
ascertain the actual reason for the delay in
release of security and submit a detailed
report to Centre Head. In cases where the
security creation is not possible within 30 days,
guidelines on seeking approval as mentioned in
the CCP should be strictly adhered to.
It is to be ensured that the important We are advising SM/RM to ensure the same.
communications addressed to other Bank(s)
should be directly delivered, preferably through
hand delivery by our Bank Official only. Under no
circumstances, should the
promoter/representatives of borrowing company
be used to deliver any communication.
RMs should closely monitor transactions in all Noted for close monitoring the transactions.
NTB accounts as well as takeover account to
have a close watch on the cash flow movement
and end use of fund especially till the creation of
security / initial 6 months.
The provisional revenue / sales figures provided Sales validated with VAT Returns and Financials
by the applicant borrower should be cross validated with ROC.
checked with independent returns like Excise
returns / custom documents / sales tax / VAT
returns, In addition, verification of past ABS
data/financials filed with ROC should be
undertaken and found satisfactory.
For exposures < Rs.7.50-Crores under SEG Complied.
segment for Templated & Non-templated
exposures wherein enhancement of greater than
50% of the existing limit is proposed, proposal
shall be submitted to respective sanctioning
 committee as per delegation of powers for
exposure up to Rs. 2.00 Lacs. For exposure
greater than Rs. 2.00 Lacs, the proposal shall be
sanctioned by the respective sanctioning
committee, after obtaining admin approval from
Geography Head.
21 Compliance with
previous sanction
22 Recommendation  The company is banking with us since 2003 and the overall operations are satisfactory,
 The limits sanctioned to the company are under multiple banking arrangements with Karnataka
Bank, Federal Bank, IDBI, Yes Bank and SCB being the other partner banks.
 The total exposure (limits sanctioned) with both fund based and non fund based is shared among
above banks.
 The relationship has yielded good float for the branch. No fund based facility is being availed by
the company.
23 Terms and Discussed below:
Conditions
TERMS AND CONDITIONS
Facility Inland LC Bills Discounting Bills
Limit Rs.550 lacs
Purpose To meet the working capital requirements
Tenor Demand/Usance not exceeding 90 days
Interest / Discount BR + 2.75% i.e. 12.75 p.a
Commission 50% of the Bank’s schedule of charges.
Security Documentary Bills:
Documents of title to goods duly endorsed in favour of the Bank.
Clean Bills: Nil
Other security as detailed below
Other covenants  If bills drawn on any party are returned unpaid, further bills drawn on the same party will not
be accepted for discounting/purchase.
 In case bills are returned unpaid, penal interest @ 2% p.a. to be recovered.
  Bills drawn ‘Without Recourse’ to the drawer should not be accepted for discounting.
 Discounting of bills drawn under LC without waiting for confirmation from issuing bank.
CBO circular instructions pertaining to the LC bills discounting shall be followed
scrupulously.

Facility Export Packing Credit (EPC)/Pre Shipment Credit/PCFC

Amount Rs.550 lacs (Sublimit of LC Bill Discounting limits)
Security Detailed below
Margin Drawings will be permitted only against confirmed export orders/ letters of credit lodged with
the Bank. Actual drawings will be permitted upto 90% of the FOB value of the confirmed export
orders/letter of credit.
Rate of interest For RPC/RPC
Upto 180 days- BR + 2.50% i.e.12.50% p.a.
overdue bills BR + 6% i.e.16% p.a
For PCFC
PCFC –Upto 180 days 125bps above FTP offer curve of the respective tenor.
Overdue bills LIBOR + 400 bps
Payable at monthly interval.
Repayment EPC will be allowed upto 180 days or expiry of contract/ export letters of credit for shipment
whichever is earlier.
Other covenants (i) Where EPC is availed against export order to be backed by LCs, the original LCs is to be
lodged with the Bank within a reasonable period say one month. LCs should be of first
class international banks acceptable to Axis Bank.
(ii) EPC is to be covered under WTPCG of ECGC taken out by the Bank the cost of which is to
be borne by the borrower.
(iii) Outstanding in EPC account should be liquidated only out of export proceeds.
(iv) Terms of EPC will be subject to RBI guidelines issued from time to time. In case the EPC is
not liquidated in a manner approved by RBI, the facilities will be converted into a Cash
Credit limit and the applicable interest rate will be charged.
(v) If the actual exports do not takes place, the interest at the normal domestic lending rate will
be charged from the date of first disbursement.
 (vi) In case of overdue EPC, interest of BR + 6% will be charged from the date of overdue. In
case of PCFC interest rate of LIBOR + 400 bps from the date of overdue will be charged.
(vii) In case of EPC is outstanding quarterly stock inspection to be conducted.

Facility Foreign Bills Purchased/Discounted (FBP/FBD)/EBRD

Amount Rs.550 lacs (Sublimit of LC Bill Discounting limits)
Security Primary
i) Export bills with title to the goods duly endorsed in favour of the Bank.
ii) Extension of charge on all current assets.
Other security/guarantors as applicable to EPC.
Tenor Maximum 180 days from the date of shipment.
Interest a)For Fbill: Demand & Usance Bills (for total period comprising usance period of export bills,
transit period as specified by FEDBAI and grace period wherever applicable).
Upto 180 days BR + 2.50% i.e. 12.50% p.a.
Overdue bills BR + 6% p.a. will be charged from the date of overdue.
b)For EBRD
On demand bills for transit period (as specified by FEDAI) upto 180 days 100 bps above FTP
offer curve of the respective tenor. Nil administrative charges.
Overdue EBRD-LIBOR + 400 bps will be charged from the date of overdue.
Commission & Handling charges 50% of the standard CBO charges as applicable
Repayment On due dates
In case of non-payment, the bills will be crystallized as per RBI regulations.
Interest on crystallized bills @ BR +8% i.e. 18% p.a. will be recovered.
Other covenants i) Post shipment facility will be covered by WTPSG of ECGC and the premium is to be paid
by the borrower/Bank. Wherever felt necessary by the Bank, the borrower will arrange to
cover (buyer’s) country risk also.
ii) LCs covering export bills should be irrevocable and of first class international Banks
acceptable to UTI Bank
iii) Bills having usance period beyond 180 days will not be eligible for Bank finance.
iv) If necessary, purchase/ discounting of export bills by the Bank would be restricted to the
extent of credit limit sanctioned by ECGC on the overseas buyers individually
 v) If necessary, discounting/ purchase of export bills will be subjected to availability of
satisfactory opinion reports from Banks/ agencies overseas. Cost of such reports is to be
borne by the borrower.
vi) In addition to the normal insurance cover stipulated for stocks hypothecated to the Bank,
the borrower will obtain cover for all transit risks in respect of export consignments from the
time the goods leave the borrower’s godowns till the marine insurance comes into effect.
vii) Bank may fix drawee wise sub-limits for bill purchase/discount. In case Bank does not fix up
sub-limits for purchasing/ discounting of bills drawn on various drawees, the borrower will
ensure that there is no undue accumulation of bills drawn on any one party.
viii) Bills drawn on such parties who have dishonoured documents in the past will not be
purchased/ discounted except when the Bank is convinced that there were genuine
reasons for return of bills.
ix) Forward exchange contract will have to be booked by the borrower as and when
considered necessary by the Bank.

Facility Letter of Credit (Inland /Import)

Limit Rs.400 lakhs
Purpose To purchase raw material (either domestic/import)
Usance Period Inland LC - Maximum usance up to 90days
Import LC – Maximum usance up to 180 days
Security Charge on the entire current assets of the company including receivables.
Cash Margin 10% to be collected upfront and kept in TDR with Bank’s lien noted thereon
Commission / Charges 50% of bank’s schedule of charges + applicable service tax.
Other covenants i) LCs will be opened for purchase of raw material/services other than capital goods.
ii) LCs in favour of associate concerns will not be opened unless prior approval of the Bank is
obtained.
iii) All terms and conditions relating to the LCs would be subject to RBI regulations/ UCPDC
(1993 Revision) ICC Publication No. 700 and would be subject to directives from RBI from
time to time.
iv) Opinion/status report on the overseas/domestic supplier shall be obtained, if found
 necessary by the Bank, at the cost of the borrower.
v) Confirmation charges, if any, and other out-of-pocket expenses have to be borne by the
borrower.
vi) Goods covered under the LC shall be insured against all risks. Insurance cost to be borne
by the borrower.
vii) The borrower will submit Exchange Control copy of Import License/approval of appropriate
authority whenever warranted in respect of goods to be imported.
viii) In the event of devolvement of bills or non-payment of any other charges/commission, on
the due dates, the same would carry interest at 18% p.a. for the period of delay/default.
Import bills will be crystallized as per RBI guidelines.

Facility Bank Guarantee (Inland/Foreign)

Amount Rs.110 lacs (sub limit to ILC/FLC )
Purpose Performance/financial in lieu of advance/security deposits favour of sales tax, excise, custom
authorities, other Govt/Semi Govt. Departments, earnest money for tenders or any other in
connection with the trade/activities of borrower
Security Counter guarantee of the borrower
All other security as stipulated below.
Commission 50% of bank’s schedule of charges + applicable service.
Cash Margin 10% to be collected upfront and kept in TDR with Bank’s lien noted thereon. 100% cash
margin in case of disputed liabilities
Period Maximum up to one year including claim period.
Other covenants i) Guarantees to be executed in a format acceptable to the Bank and with quantum and
duration of the liability clearly specified in unequivocal terms. The guarantee should contain
our usual limitation clause.
ii) Opinion/status report on the overseas/domestic party shall be obtained, if found necessary
by the Bank, at the cost of the borrower.
iii) Commitments under the guarantee will be honoured by the borrower from its own resources.
iv) If the guarantees are to be issued come under EPCG scheme, bank will obtain counter
guarantee of ECGC at borrower’s expense.
Facility Loan Equivalent Risk (LER) on Forward Contracts
LER Rs. 120.00 lacs (Sub limit of ILC/FLC )
Margin Nil
Security As detailed below
Purpose For booking forward contract under plain vanilla
Tenor of the contracts As per contract or Maximum one year
Other covenants a) A letter of request will be submitted by the borrower for booking forward contract along with
the authority to debit its account with the cancellation charges, if any.
b) Forward cover contracts shall be duly stamped, as per State Stamp Acts and signed by
authorised signatories of the borrower.
c) RBI / FEDAI rules and regulations shall be observed meticulously by the borrower.
d) The borrower to furnish a certificate to the effect that the exposure covered by the contract
has not been covered with any other Bank.
e) Depending on the volatility of forex markets, the Bank in its absolute discretion, may insist
for requisite cash margins for booking of forward contracts despite sanction of LER limit.
f) Borrower to take delivery/ pick-up under the contracts during the delivery period.
g) Borrower to bear charges, if any, accruing on account of early delivery / extension /
cancellation of the contracts.
h) In the event of extension / cancellation, borrower will inform the Bank before the expiry
date of Contract.
i) Borrower to bear the exchange risk, if any, and undertake to compensate the Bank, any
loss incurred by them whatsoever.
j) In case the exposure reaches 90% of the LER limit, the Bank would reserve the right to
stop accepting fresh bookings and insist on additional margin to revive the facility.
k) The borrower will be required to submit an undertaking that these forward contracts limits
will be within the overall permissible limit from the banking system as per RBI Regulations.
l) In case the exposure reaches the LER limit due to adverse market movements, the Bank,
at its discretion, would cut positions appropriately to an extent of 25% of the LER limit.
m) CIRCULAR NO.TREASURY/IB/2008-09/015 December 26, 2008 and Circular no.
Treasury/IB/2008-09/009 dated 1st November 2008: CO circular/Axis Bank/81/2009-10 dt:-
08.04.09 & CO circular/treasury/IB/8/2009-10 dated 29.01.2010 & on monitoring of LER
limit through LER system shall be strictly adhered to.
 n) LER limit sanctioned to the company should not be breached at any cost and in case of
value of the contract exceeding the limit, prior written permission from SME Centre,
Coimbatore to be obtained. Any breach of LER limit at any point of time should be covered
by 100% cash margin. All the terms and conditions as applicable to LER limit sanctioned to
the firm/ company should be strictly followed
o) Any loss suffered from such transactions will be under the sole risk and responsibility of the
borrower and they should make good of these losses by themselves. An undertaking to the
effect that the customer has understood the implications / inherent risk associated with such
transactions should be obtained from the borrower

Facility Cash Credit

Limit Rs.2.60 Crores (Under Consortium Arrangement) Sub-limit of EPC/ FBP/ FBD facility allowed
within the overall WC limits.
Purpose To meet the working capital requirements
Security Primary:
Hypothecation charge on the entire current assets of the company, present and future on pari
passu basis under consortium arrangements.
Collateral:
As mentioned below in the security template
Margin 20.00% (Book debts with a cover period of 90 days)
Rate of Interest Base Rate + 3%, presently 13.25% p.a. payable at monthly intervals
Repayment/ Period On Demand

Facility Buyers Credit (Sub limit to (ILC/FLC)

Amount Rs.400 lacs
Purpose For liquidation of FLC opened by us
Tenor 180 days (with roll over as per the CBO guidelines)
Security As detailed below
Cash Margin 10% to be collected upfront and kept in TDR with Bank’s lien noted thereon.
Commission 50% of bank’s schedule of charges + actual interest rate & charges of the lending bank along
 with service charges if any.
Other covenants  All the extant of RBI guidelines to be complied with.
 Cir.No.620/2009-10/14-08-09-Centralisation of buyer’s credit operations shall be complied
with.
 Preferably the borrower should edge the contract by utilizing the LER limit sanctioned by us.

Facility Term loan – Fresh

Limit Rs. 2500.00 Lacs
Purpose Term Loan – Construction of building, Increase in Spindlage Capacity and purchase of other
Machineries
Security Primary:
Hypothecation of entire new machinery purchased out of the term loan of Rs.2500.00 lacs
(Total cost of machinery – Rs. 3750.09 lacs)
Collateral:
Details are mentioned below
Margin (own contribution) 33.33% for the proposed term loan.
Rate of interest BR + 2.75% i.e. 11.50 p.a payable at monthly interval.
Processing fee Rs.1.00 lacs + Service tax
Tenor 120 months including of moratorium period of 24 months, instalments commencing from Jul’13.
Repayment The term loan of Rs 2500.00 lacs to be repaid in 96 monthly installments (excluding moratorium
period of 24 months) as follows:
 1st monthly Installment of Rs. 2604167.00 in 31.07.2013.
 Monthly installments of Rs. 2604167.00 from 31.07.2013 upto 30.06.2021 (96 months).
Interest to be paid on monthly basis as and when debited.
Prepayment In case borrower desires to prepay the loan, the prepayment of loan will be at a penalty of 2%
of the limit/DP.
Other covenants The borrower shall provide a certificate from a practicing Chartered Accountant, to the
satisfaction of the Bank, certifying end use of term loan availed from the Bank and capital
infused contribution/margins brought in by the borrower as per projections submitted.
 The Bank reserves the right to utilize the services of a Chartered Engineer at the
expenses of the company for valuation of the project at any stage.
  Any cost overrun in the project should be borne by the firm.
 The payment will be made directly to supplier by way of outward remittance / DD.

Security:-
Primary
In case of LC/BG/EPC/FBD/LER limits
 Pari passu first charge on the Current assets of the company along with Karnataka Bank, IDBI Bank Ltd, Federal Bank Ltd, Standard
Chartered Bank & Yes Bank.
In case of Usance Bills Discounting backed by LC:
 Documents of title to goods duly endorsed in favour of the Bank, Confirmed LCs established by Schedule Commercial Banks shall
back all such documentary bills, LCs opened by Co-operative Banks are not acceptable to our bank.
Collateral
In case of LC/BG/EPC/FBD/LER limits
Paripassu second charge on entire fixed assets of the company along with Karnataka Bank, IDBI Bank Ltd, Federal Bank Ltd and
Standard Chartered Bank (WDV as on 30.09.2010 Rs.50.28 cr)

Personal Guarantee of Mr.Vinod Narsimhan-

Other Terms & Conditions applicable to the Working Capital Facilities

Validity of sanction The sanction shall be valid for acceptance upto 3 months from the date of sanction during which
time, the terms of the facility would have to be accepted by the Borrower.
Tenor One year from the date of sanction or as applicable.
Processing fee Non 0.25% of the limits renewed plus applicable service charges to be collected in upfront.
refundable (whether limits are 1.By cheque favouring “Axis Bank-Processing Fee a/c or
availed or not)- 2.By specific debit advice to the Bank for debiting the Trust’s account maintained with the Bank
and crediting Axis Bank Processing Fee A/c.
Documents Relevant documents for the various facility/ies to be obtained
Insurance All the assets charged to the Bank are to be insured for full value covering all risks with usual
Bank clause. A copy of the insurance policie(s) to be furnished to the Bank.
Security creation Security creation already completed.
Financial Follow-up Repots To be submitted if the borrower avails fund based facility.
(FFR)
Stock statement  The stock and book debt statement as on the last day of the month is to be submitted by 15th
of next month.
 The value of unpaid stocks (e.g. under LCs/purchased on credit) or slow moving stocks will not
be considered for computation of drawing power.
(Along with outstanding position with other banks should be submitted)
Inspection Inspection of stock/securities/books of the borrower would be carried out at quarterly intervals.
The cost of inspection is to be borne by the borrower.
Basis of Valuation At Cost Price or Market Price, whichever is lower.
Raw Materials At Cost Price or Market Price, whichever is lower.
Stores & Spares At Cost of production.
Stocks in Process At Cost of Sales or Controlled Price or Market Price, whichever is lower.
Finished Goods At invoice Value.
Book-Debts
Penal Interest  Delay/non submission of stock statements will attract penal interest @1% p.a. from the date of
default on the outstanding amount.
 Any overdrawing in the account will attract penal interest @2% p.a. on the overdue amount. In
case of running accounts like Cash Credit, if the overdrawing is on more than three occasions
in a calendar month then the penal rate of 2% per annum will be charged on the entire
outstanding in the account.
Other covenants a) Interchangeability allowed from fund based to non-fund based limits and vice versa.
b) The borrower should undertake not to divert working capital funds for long- term purposes.
c) The borrower will maintain its net working capital position equal to or above the levels
furnished in its projections for working capital finance. In the event of difference of opinion
arising as to what constitute current assets and current liabilities, the Bank’s decision will be
final and binding on the borrower.
d) While permitting drawal in funds based limits the borrower should submit an undertaking that
the drawings is within the MPBR. The list of balance outstanding with other banks along with
stock statement to be submitted to the bank to ensure MPBF as well as DP.
e) Latest net worth statement of Sri.Vinod Narsiman to be submitted by the borrower.
f) The borrower to submit a certificate from Chartered Accountant with respect to compliance of
 all statutory obligations where found necessary.
g) Borrower to undertake that director of the company is not Director or specified near relative of
a Director in Axis Bank Ltd.
h) The TOL/TNW should not exceed 3.

General Terms & Conditions specific to working capital facility :

1. The Borrower will keep the Bank advised of any circumstances adversely affecting their financial position including any action taken
by any creditor, Government authority against them.
2. The borrower will place their entire banking business with the Bank or at least proportionately if under consortium or multiple
banking arrangement.
3. The borrower will furnish information/documents including quarterly/annual financial accounts as may be required by the Bank for
review/renewal of credit facility now sanctioned.
4. Book-debts arising on account of bills drawn on sister/associate concerns will not be financed.
5. The Bank may insist that the stock statement is to be certified by a Chartered Accountant as and when it deems fit.
6. The borrower shall pay the charges to the Bank as per the Banks standard schedule of charges for various services rendered by
the Bank.

General Terms & Conditions applicable to working capital and term loan
1. The loan shall be utilised for the purpose for which it is sanctioned and it should not be utilised for –
 Subscription to or purchase of shares/debentures
 Extending loans to subsidiary companies/associates or for making inter-corporate deposits.
 Any speculative purposes.
2. The borrower shall maintain adequate books and records which should correctly reflect their financial position and operations
and it should submit to the Bank at regular intervals such statements as may be prescribed by the Bank in terms of the RBI /
Bank’s instructions issued from time to time.
3. The borrower shall forward to the Bank, provisional balance sheet and Profit & Loss Account within 45 days of year-end and
audited accounts within 3 months of year end. Quarterly financial results shall be submitted within 30 days from the end of each
quarter or with the filing with stock exchange for listed borrower.
4. The borrower will keep the Bank informed of the happening of any event which is likely to have an impact on their profit or
business and more particularly, if the monthly production or sale and profit are likely to be substantially lower than already
indicated to the Bank. The borrower will inform accordingly with reasons and the remedial steps proposed to be taken.
5. The borrower should not pay any consideration by way of commission, brokerage, fees or in any other form to guarantors
directly or indirectly.
6. The interest per annum means interest for 365 days irrespective of leap year.
7. The Borrower and Guarantor(s) shall be deemed to have given their express consent to the Bank to disclose the information
and data furnished by them to the Bank and also those regarding the credit facility/ies enjoyed by the borrower, conduct of
accounts and guarantee obligations undertaken by guarantor to the Credit Information Bureau (India) Ltd. (“CIBIL”), or RBI or
any other agencies specified by RBI who are authorised to seek and publish information.
8. The Bank will have the right to examine at all times the borrower’s books of accounts and to have the borrower’s
factory(s)/branches inspected from time to time by officer(s) of the Bank and/or qualified auditors including stock audit and/or
technical experts and/or management consultants of the Bank’s choice. The cost of such inspections will be borne by the
borrower.
9. During the currency of the Bank’s credit facility(s), the borrower will not without the Bank’s prior permission in writing:
(i) conclude any fresh borrowing arrangement either secured or unsecured with any other Bank or Financial Institutions,
borrower or otherwise, not create any further charge over their fixed assets without our prior approval in writing;
(ii) undertake any expansion or fresh project or acquire fixed assets, while normal capital expenditure, e.g. replacement of
parts, can be incurred.
(iii) invest by way of share capital in or lend or advance to or place deposits with any other concern (normal trade credit or
security deposit in the routine course of business or advances to employees can, however, be extended);
(iv) formulate any scheme of amalgamation with any other borrower or reconstruction, acquire any borrower;
(v) undertake guarantee obligations on behalf of any other borrower or any third party;
(vi) declare dividend for any year except out of profits relating to that year after making all the due and necessary provisions
provided that no default had occurred in any repayment obligation and Bank’s permission is obtained;
(vii) make any repayment of the loans and deposits and discharge other liabilities except those shown in the funds flow
statement submitted from time to time;
(viii) make any change in their management set-up.

10. The Borrower shall furnish to the Bank with the position vis-à-vis the outstanding statutory obligations such as income tax,
payment of provident fund, additional emoluments (compulsory deposit), gratuity, electricity dues etc. as and when demanded
by the Bank with reasons, if any, for increase from the earlier month and the proposed plan of payments thereof.
11. The bank shall have a discretion to cancel/withdraw the facilities in case these are not accepted or drawn by the borrower within
the stipulated time period.
12. By accepting the sanction letter, the borrower confirms that none of the directors of the company are the directors or near
relative of the director of any banking company or any scheduled co-operative bank. The definition of near relative includes the
following “Spouse, Father, Mother (including step-mother), Son (including step son), Son’s wife, Daughter (including step
daughter), Daughter’s Husband, Brother (including step brother), Brother’s wife, Sister (including step sister), Sister’s Husband,
Brother (including step brother) of thethe spouse and Sister (including step sister) of the spouse.
13. The Bank reserve the right to revise the spread over PLR/G Sec/LIBOR/(any other Bench mark rate fixed by the Bank)on the
loan,
a) If the Reserve Bank of India revises the standard provision on assets and/or
b) If the Reserve Bank of India enhances the risk weights for assets and/or
c) Any external rating agency downgrades the loan.
Such revision in spread will however be restricted only to the actual cost impact to the Bank.

14.The Bank reserves an unconditional right to cancel the undrawn / unused / unavailed portion of the facility sanctioned at anytime
during the currency of the loan / facility, without any notice to the borrower, for any reason whatsoever.

15.The Bank shall have the right to reset the concessionary charges / fees if conduct is not satisfactory / noncompliance of other
terms and conditions / internal credit rating is downgraded / estimated ROC is not earned

Post sanctions formalities:

 Helping documentation team for smooth completetion of documents.

 Ensure that borrower has submitted from 8/13 to registar of company along with copy of document executed within 30 days
from the date of execution of documentation.
 Ensure to obtain from the borrower for disbursement of limits after collecting margin money.
 Ensure the end use of funds.
 Ensure search report and due diligence report,
 To ensure compliance with the terms and conditions of sanction.
 Conduct Periodic Inspection,
 Analysis and obtaintention of Stocks Statements, FFR-I & FFR-II and SODs.
FFR-I:

1. A. Name of the borrower : Involute Automation Pvt ltd.

B. Asset Classification : Standard

C. Limits Sanctioned :
(Rs. in lakhs)
Fund Based Non Fund Based
Facility Limit Facility Limit
Cash Credit (Hyp) 150.00 Bank Guarantee 25.00
Term Loan 49.97*

T o t a l (FB) 199.97 T o t a l (NFB) 25.00

2. A. Performance: Are the actual production and sale figures in line with estimates. Please give reasons for any significant
variations.
The company has achieved sales of Rs.216.18 lakhs upto the end of Sep 2010 against the estimated sales of Rs.500.00 lakhs,
which is 43.24% of the estimated annual sales. The performance of the company is satisfactory during the second quarter end as
compared to the previous quarter.

B. Status of WC funds: Are the variations in Current Assets and Current Liabilities in consonance with the expected changes
during the current year? Please give reasons for major/significant deviations, if any:
Particulars As on As on Estimates for
31/03/2010 30/09/2010 2010-11
Current Assets 331.95 388.20 419.32
Current Liabilities 264.71 301.18 322.20
Current Ratio 1.25 1.29 1.30
The total current assets of the company as on 30.09.2010 was Rs.388.20 lakhs as compared to the previous year current assets of
Rs.331.95 lakhs. The current asset of the company was increased mainly on account of increase in receivables from Rs.144.56
lakhs as on 31.03.20101 to Rs.202.05 lakhs as on 30.09.2010. The receivable of the company was increased mainly due to
increase in sales turnover of the firm during the second quarter. The company is in course of achieving the estimates.
The current liability of the company as on 30.09.2010 was Rs.301.18 lakhs as against the previous year current liability of
Rs.264.71 lakhs. The current liability was increased mainly due to increase in sundry creditor of the company from Rs.69.10 lakhs
to Rs.107.33 lakhs. The bank borrowing was increased from Rs.153.50 lakhs to Rs.168.02 lakhs due excess drawing was
permitted by the competent authority to the company. However the current ratio of the company as on 30.09.2010 was at 1.29,
which is inline with the current year estimated current ratio of 1.30%.

C. Financing of Current Assets: Is there a significant change in the pattern of financing current assets and, if so, is it
acceptable?
There is no significance change in the pattern of financing currents. Current assets are financed by more with bank borrowing as
compared to March 2010 levels.

D. Inventory/Receivables/Sundry Creditors:
Please verify whether inventory levels as compared with last year actuals and current year estimates are in accordance with actual
performance for the period. Any significant deviations may be commented upon.

The level of inventory was decreased from 195 days as on 31.03.2010 to 97 days as on 30.09.2010. The inventory level was
declined as most of the inventories are converted to sales during the end of this quarter. The receivable holding level of the
company as on 31.03.2010 was at 251 days. For the second quarter the company’s debtors holding level. The level of inventory
and receivable are in line with the estimates. The level of sundry creditor has come down from 294 days to 88 days (June 10) on
account of purchase made on cash basis.

3. Are the variations between projections and actual performance taken up with the borrower? What is the remedial action
proposed, to overcome adverse features, if any? There in no significance deviation recorded between the projection and the
actuals, hence no remedial action proposed
SODs:
State Bank of Hyderabad
SME Branch, Fax Nos: 23770408
Balanagar Phone Nos: 23774861, 23774229, 23775054
Hyderabad – 500 037.
F/Cheminnova Pharma/ Date: 15.03.2010

The Deputy General Manager

State Bank of Hyderabad
Credit Department
Gunfoundry, Hyderabad.

Re: Scrutiny of SOD for the month of Nov 2010.

Date of Report: 31.11.2010 Sole Banker / Consortium: Sole Banker

Date of Receipt: 15.12.2011 If Consortium, Lead Bank: NA

1. A. Name of the Borrower : M/s.Cheminnova Pharmaceuticals.

B. Asset Classification : Standard

C. Limits Sanctioned : (Rs. in crores)
Fund Based Non Fund Based
Facility Limit Facility Limit
CC (Hyp) 12.00 LC 1.25
MTL-I 4.00 BG 0.50
MTL-II 2.00
MTL-III 4.70
T o t a l (FB) 22.70 T o t a l (NFB) 1.75
 2. Estimated Sales & Production for the Current Accounting Year: (Rs. in crores)
Item Amount Monthly Average
Gross Sales 64.81 5.40
Net Sales -- --
Production 65.00 5.41

3. Actual Sales & Production upto the end of the Month: (Rs. in crores)
Item Amount Percentage of Performance
During the Upto the Against On
Month Month Monthly Avg. Annualized
Basis
Gross Sales 4.29 34.48 79.80 53.20
Net Sales 4.25 34.08 -- --
Production 4.48 35.26 81.37 54.25

4. Remarks (Comments on the Sales & Net Profit etc.):

The firm has achieved sales of Rs. 34.48 crores upto the month of Nov 2010 against the estimated sales of Rs.64.81 crores. Which
is 53.20% of the current year annual estimates. The As its past trends indicate that their maximum sales is achieved at the second
half of the year. Based on past performance, company’s estimated sale is considered achievable which may please be noted.
FFR-II:
FORMAT FOR SCRUTINY OF FFR – II
For the Half Year Ended _______________

Date of Receipt: _____________ Name of the Branch: ______________

Date of Report: ______________ Consortium Leader / Sole Banker_________

(To be submitted within eight weeks from the close of the half year)

1. A. Name of the Borrower: _________________________________________

B .Asset Classification : _______________________

C. Limits Sanctioned: (Rs. In lacs)

i) Cash Credit (HYP) : _________________

ii) Bill Limit (Sub Limit) : _________________
iii) Cash Credit (packing credit) : _________________
iv) Bank Guarantee : _________________
v) Any other limit (specify) : _________________

2 PART A:

Are the operating results of the half-year in tune with estimated for the current year? Item-wise figures to be compared with last
year’s performance and current year Estimates and reasons for significant variations, if any, to be mentioned.
 PART B:

To examine and comment upon the increase in long term sources and uses. Are they as per the annual plan of the company?
To carefully scrutinize for evidence of diversion from Short Term Sources for Long Term Uses and for unplanned investments in
Fixed Assets, ICDs, associate / subsidiary concerns. Adverse changes in working capital gap to be examined vis-à-vis the
company’s liability to meet the shortfall if any.

2. Are the variations between projections and actual performance taken up with the borrower? What is the remedial action
proposed, to overcome adverse features, if any?

 Maintaining ongoing contact with the borrower and other co lender.

 Follow up and ratification of irregularity pointed out in various inspection and audit by RBI Auditor, Concurrent Auditor and
Statutory auditor.
 Timely review and renewal of account.

Different type of facilities sanctioned by the bank.

Cash Credit and Overdraft:

Both "overdraft" and "cash credit" can refer to a type of secured line of credit with a lender. Both overdraft and cash credit are really
forms of borrowing. The institution allows you to withdraw funds that you do not have a demand claim to, usually in small amounts.
The primary differences between these two forms of borrowing is how they are secured and whether the money is lent out of
a separate account. Cash credits are more commonly offered for businesses than individuals. They require that a security be
offered up as collateral on the account in exchange for cash. This security can be a tangible asset, such as stock in hand, raw
materials or some other commodity. The credit limit extended on the cash credit account is normally a percentage of the value of
the security offered. Sometimes a financial institution offers a cash reserve account but calls it a cash credit instead. Cash
reserves (sometimes called cash reserve credits) are unsecured lines of credit that act like overdraft protection. They typically offer
higher overdraft limits and have smaller real interest costs on borrowed funds than overdrafts, since penalty fees are not assessed
for using the cash reserve account. There are several different types of overdrafts, but the two most common are standard
overdrafts on individual demand deposit accounts and secured overdraft accounts that loan cash against various financial
instruments. A standard overdraft is the act of withdrawing more funds from an account than your balance would normally permit. If
you have $30 in a checking account, but you withdraw $35 to pay for an item, a bank that permits overdrafts spots you the $5 and
typically charges you a fee for the service. You are generally charged a separate fee for every purchase in excess of your demand
deposit balance. Overdraft accounts, however, act more like a traditional loan. Money is lent by a financial institution as with a cash
credit account, but a wider range of collateral can be used to secure the credit. For example, you might be allowed to use mutual
fund shares, LIC policies or even debentures. There are even clean overdraft accounts, in which no specific collateral is offered;
instead, clean overdrafts are granted against the worth of the individual. This is usually only possible when the borrower has a lot of
funds parked at the financial institution and enjoys a long-standing relationship with the bank.

Rupee Packing Credit:

Pre-shipment credit:
Pre-shipment / Packing Credit' means any loan or advance granted or any other credit provided by a bank to an exporter for
financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards
rendering of services on the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer or
a confirmed and irrevocable order for the export of goods / services from India or any other evidence of an order for export from
India having been placed on the exporter or some other person, unless lodgement of export orders or letter of credit with the bank
has been waived.

Period of advance:
The period for which a packing credit advance may be given by a bank will depend upon the circumstances of the individual case,
such as the time required for procuring, manufacturing or processing (where necessary) and shipping the relative goods / rendering
of services. It is primarily for the banks to decide the period for which a packing credit advance may be given, having regard to the
various relevant factors so that the period is sufficient to enable the exporter to ship the goods / render the services.
If pre-shipment advances are not adjusted by submission of export documents within 360 days from the date of advance, the
advances will cease to qualify for prescribed rate of interest for export credit to the exporter ab initio

Disbursement of Packing Credit

 Ordinarily, each packing credit sanctioned should be maintained as separate account for the purpose of monitoring the
period of sanction and end-use of funds
 Banks may release the packing credit in one lump sum or in stages as per the requirement for executing the orders / LC.
 Banks may also maintain different accounts at various stages of processing, manufacturing etc. depending on the types of
goods / services to be exported e.g. hypothecation, pledge, etc., accounts and may ensure that the outstanding balance in
 accounts are adjusted by transfer from one account to the other and finally by proceeds of relative export documents on
purchase, discount, etc.
 Banks should continue to keep a close watch on the end-use of the funds and ensure that credit at lower rates of interest is
used for genuine requirements of exports. Banks should also monitor the progress made by the exporters in timely fulfillment
of export orders

Liquidation of Packing Credit:

The packing credit / pre-shipment credit granted to an exporter may be liquidated out of proceeds of bills drawn for the exported
commodities on its purchase, discount etc., thereby converting pre-shipment credit into post-shipment credit. Further, subject to
mutual agreement between the exporter and the banker it can also be repaid / prepaid out of balances in Exchange Earners
Foreign Currency A/c (EEFC A/c) as also from rupee resources of the exporter to the extent exports have actually taken place.

Running Account' Facility

As stated earlier, pre-shipment credit to exporters is normally provided on lodgment of LCs or firm export orders. It is observed that
the availability of raw materials is seasonal in some cases. In some other cases, the time taken for manufacture and shipment of
goods is more than the delivery schedule as per export contracts. In many cases, the exporters have to procure raw material,
manufacture the export product and keep the same ready for shipment, in anticipation of receipt of letters of credit / firm export
orders from the overseas buyers. Having regard to difficulties being faced by the exporters in availing of adequate pre-shipment
credit in such cases, banks have been authorised to extend Pre-shipment Credit ‘Running Account’ facility in respect of any
commodity, without insisting on prior lodgement of letters of credit / firm export orders, depending on the bank’s judgement
regarding the need to extend such a facility and subject to the following conditions:
 Banks may extend the ‘Running Account’ facility only to those exporters whose track record has been good as also to Export
Oriented Units (EOUs)/ Units in Free Trade Zones / Export Processing Zones (EPZs) and Special Economic Zones (SEZs)
 In all cases where Pre-shipment Credit ‘Running Account’ facility has been extended, letters of credit / firm orders should be
produced within a reasonable period of time to be decided by the banks.
 Banks should mark off individual export bills, as and when they are received for negotiation / collection, against the earliest
outstanding pre shipment credit on 'First In First Out' (FIFO) basis. Needless to add that, while marking off the pre-shipment
credit in the manner indicated above, banks should ensure that export credit available in respect of individual preshipment
credit does not go beyond the period of sanction or 360 days from the date of advance, whichever is earlier.
 Packing credit can also be marked-off with proceeds of export documents against which no packing credit has been drawn
by the exporter.
Export Credit against proceeds of cheques, drafts, etc. representing advance payment for exports:
 Where exporters receive direct remittances from abroad by means of cheques, drafts etc. in payment for exports, banks may
grant export credit to exporters of good track record till the realisation of proceeds of the cheque, draft etc. received from
abroad, after satisfying themselves that it is against an export order, is as per trade practices in respect of the goods in
question and is an approved method of realisation of export proceeds as per extant rules.
 If, pending compliance with the above conditions, an exporter has been granted accommodation at normal commercial
interest rate, banks may give effect to prescribed rate for export credit rate retrospectively once the aforesaid conditions
have been complied with and refund the difference to the exporter

Rupee Export Packing Credit to manufacturer suppliers for exports routed through STC/MMTC/Other Export Houses,
Agencies etc.
Banks may grant export packing credit to manufacturer suppliers who do not have export orders/letters of credit in their own name
and goods are exported through the State Trading Corporation/Minerals and Metal Trading Corporation or other export houses,
agencies etc

Rupee Export Packing Credit to Sub-Suppliers:

Packing credit can be shared between an Export Order Holder (EOH) and sub supplier of raw materials, components etc. of the
exported goods as in the case of EOH and manufacturer suppliers, subject to the following:
 Running Account facility is not contemplated under the scheme. The scheme will cover the LC or export order received in
favour of Export Houses/Trading Houses/Star Trading Houses etc. or manufacturer exporters only. The scheme should be
made available to the exporters with good track record.
 Bankers to an EOH will open an inland LC specifying the goods to be supplied by the sub-supplier to the EOH against the
export order or LC received by him as a part of the export transaction. On the basis of such a LC, the sub-supplier's banker
will grant EPC as working capital to enable the sub-supplier to manufacture the components required for the goods to be
exported. On supplying the goods, the LC opening bank will pay to the sub-supplier's banker against the inland documents
received on the basis of inland LC. Such payments will thereafter become the EPC of the EOH.
 It is upto the EOH to open any number of LCs for the various components required with the approval of his banker/leader of
consortium of banks within the overall value limit of the order or LC received by him. Taking into account the operational
convenience, it is for the LC opening bank to fix the minimum amount for opening such LCs. The total period of packing
credit availed by the sub-supplier (s), individually or severally and the EOH should be within normal cycle of production
required for the exported goods. Normally, the total period will be computed from the date of first drawal of packing credit by
any one of the sub-suppliers to the date of submission of export documents by EOH.
  The EOH will be responsible for exporting the goods as per export order or overseas LC and any delay in the process will
subject him to the penal provisions issued from time to time. Once the sub-supplier makes available the goods as per inland
LC terms to the EOH, his obligation of performance under the scheme will be treated as complied with and the penal
provisions will not be applicable to him for delay by EOH, if any.
 The scheme is an additional window besides the existing system of sharing of packing credit between EOH and
manufacturer in respect of exported goods as detailed in paragraph 1.2.1 above. The scheme will cover only the first stage
of production cycle. For example, a manufacturer exporter will be allowed to open domestic LC in favour of his immediate
suppliers of components etc. that are required for manufacture of exportable goods. The scheme will not be extended to
cover suppliers of raw materials/components etc. to such immediate suppliers. In case the EOH is merely a trading house,
the facility will be available commencing from the manufacturer to whom the order has been passed on by the Trading
House.
 EOUs/EPZ/SEZ units supplying goods to another EOU/EPZ/SEZ unit for export purposes are also eligible for rupee pre-
shipment export credit under this scheme. However, the supplier EOU/EPZ/SEZ unit will not be eligible for any post-
shipment facility as the scheme does not cover sale of goods on credit terms.
 The scheme does not envisage any change in the total quantum of advance or period. Accordingly, the credit extended
under the system will be treated as export credit from the date of advance to the sub-supplier to the date of liquidation by
EOH under the inland export LC system and upto the date of liquidation of packing credit by shipment of goods by EOH.. It
has to be ensured that no double financing of the same leg of the transaction is involved.
 Banks may approach the ECGC for availing suitable cover in respect of such advances. (i) The scheme does not envisage
extending credit by a sub-supplier to the EOH/manufacturer and thus, the payment to sub-suppliers has to be made against
submission of documents by LC opening bank treating the payment as EPC of the EOH.
Rupee Pre-shipment Credit to Construction Contractors
 The packing credit advances to the construction contractors to meet their initial working capital requirements for execution of
contracts abroad may be made on the basis of a firm contract secured from abroad, in a separate account, on an
undertaking obtained from them that the finance is required by them for incurring preliminary expenses in connection with
the execution of the contract e.g., for transporting the necessary technical staff and purchase of consumable articles for the
purpose of executing the contract abroad, etc.
 The advances should be adjusted within 365 days from the date of advance by negotiation of bills relating to the contract or
by remittances received from abroad in respect of the contract executed abroad. To the extent the outstanding in the
account are not adjusted in the stipulated manner, banks may charge normal rate of interest applicable for working capital
finance.
  The exporters undertaking project export contracts including export of services may comply with the guidelines/instructions
issued by Reserve Bank of Ind.
POST-SHIPMENT RUPEE EXPORT CREDIT:
'Post-shipment Credit' means any loan or advance granted or any other credit provided by a bank to an exporter of goods / services
from India from the date of extending credit after shipment of goods / rendering of services to the date of realisation of export
proceeds. , and includes any loan or advance granted to an exporter, in consideration of, or on

Period of Realisation of Export Proceeds:

The period of realization of export proceeds is determined by FED, banks are advised to adhere to the direction issued under
Foreign Exchange Management Act, 1999, as amended from time to time.

Types of Post-shipment Credits Post-shipment advance can mainly take the form of:
(i) Export bills purchased/discounted/negotiated.
(ii) Advances against bills for collection.
(iii) Advances against duty drawback receivable from Government.

Liquidation of Post-shipment Credit:

Post-shipment credit is to be liquidated by the proceeds of export bills received from abroad in respect of goods exported /
services rendered. Further, subject to mutual agreement between the exporter and the banker it can also be repaid / prepaid out of
balances in Exchange Earners Foreign Currency Account (EEFC A/C) as also from proceeds of any other unfinanced (collection)
bills. Such adjusted export bills should however continue to be followed up for realization of the export proceeds and will continue to
be reported in the XOS statement. In order to reduce the cost to exporters (i.e. interest cost on overdue export bills), exporters with
overdue export bills may also extinguish their overdue post shipment rupee export credit from their rupee resources. However, the
corresponding GR form will remain outstanding and the amount will be shown outstanding in XOS statement. The exporter’s liability
for realisation would continue till the export bill is realised.

Rupee Post-shipment Export Credit

Period
 In the case of demand bills, the period of advance shall be the Normal Transit Period (NTP) as specified by FEDAI.
 In case of usance bills, credit can be granted for a maximum duration of 365 days from date of shipment inclusive of Normal
Transit Period (NTP) and grace period, if any. However, banks should closely monitor the need for extending postshipment
 credit upto the permissible period of 365 days and they should persuade the exporters to realise the export proceeds within
a shorter period.
 'Normal transit period' means the average period normally involved from the date of negotiation / purchase / discount till the
receipt of bill proceeds in the Nostro account of the bank concerned, as prescribed by FEDAI from time to time. It is not to be
confused with the time taken for the arrival of goods at overseas destination.
An overdue bill
a. in the case of a demand bill, is a bill which is not paid before the expiry of the normal transit period, plus grace period and
b. in the case of a usance bill, is a bill which is not paid on the due date.

Advances against Undrawn Balances on Export Bills In respect of export of certain commodities where exporters are required
to draw the bills on the overseas buyer upto 90 to 98 percent of the FOB value of the contract, the residuary amount being
'undrawn balance' is payable by the overseas buyer after satisfying himself about the quality/ quantity of goods. Payment of
undrawn balance is contingent in nature. Banks may consider granting advances against undrawn balances based on their
commercial judgement and the track record of the buyer.

Advances against Retention Money:

 i In the case of turnkey projects/construction contracts, progressive payments are made by the overseas employer in
respect of services segment of the contract, retaining a small percentage of the progressive payments as retention
money which is payable after expiry of the stipulated period from the date of the completion of the contract, subject to
obtention of certificate(s) from the specified authority.
 ii Retention money may also be sometimes stipulated against the supplies portion in the case of turn-key projects. It may
like-wise arise in the case of sub-contracts. The payment of retention money is contingent in nature as it is a deferred
liability.
 iii The following guidelines should be followed in regard to grant of advances against retention money:

 No advances may be granted against retention money relating to services portion of the contract.
 Exporters may be advised to arrange, as far as possible, provision of suitable guarantees, instead of retention money.
 Banks may consider, on a selective basis, granting of advances against retention money relating to the supplies portion
of the contract taking into account, among others, the size of the retention money accumulated, its impact on the liquid
funds position of the exporter and the past performance regarding the timely receipt of retention money.
  The payment of retention money may be secured by LC or Bank Guarantee where possible. e. Where the retention
money is payable within a period of one year from the date of shipment, according to the terms of the contract, banks
should charge prescribed rate of interest upto a maximum period of 90 days. The rate of interest prescribed for the
category 'ECNOS' at post-shipment stage may be charged for the period beyond 90 days. f. Where the retention money
is payable after a period of one year from the date of shipment, according to the terms of the contract and the
corresponding advance is extended for a period exceeding one year, it will be treated as post-shipment credit given on
deferred payment terms exceeding one year, and the bank is free to decide the rate of interest.

Export of Goods for Exhibition and Sale

Banks may provide finance to exporters against goods sent for exhibition and sale abroad in the normal course in the first instance,
and after the sale is completed, allow the benefit of the prescribed rate of interest on such advances, both at the preshipment stage
and at the post-shipment stage, upto the stipulated periods, by way of a rebate. Such advances should be given in separate
accounts.

Post-shipment Advances against Duty Drawback Entitlements:

 Banks may grant post-shipment advances to exporters against their duty drawback entitlements and covered by ECGC
guarantee as provisionally certified by Customs Authorities pending final sanction and payment.
 The advance against duty drawback receivables can also be made available to exporters against export promotion copy of
the shipping bill containing the EGM Number issued by the Customs Department. Where necessary, the financing bank may
have its lien noted with the designated bank and arrangements may be made with the designated bank to transfer funds to
the financing bank as and when duty drawback is credited by the Customs.

DEEMED EXPORTS - RUPEE EXPORT CREDIT

Banks are permitted to extend rupee pre-shipment and post-shipment rupee export credit to parties against orders for supplies in
respect of projects aided/financed by bilateral or multilateral agencies/funds (including World Bank, IBRD, IDA), as notified from
time to time by Department of Economic Affairs, Ministry of Finance under the Chapter "Deemed Exports" in Foreign Trade Policy,
which are eligible for grant of normal export benefits by Government of India. 3.2 Packing Credit provided should be adjusted from
free foreign exchange representing payment for the suppliers of goods to these agencies. It can also be repaid/prepaid out of
balances in Exchange Earners Foreign Currency account (EEFC A/c), as also from the rupee resources of the exporter to the
extent supplies have actually been made.
Banks may also extend rupee (i) pre-shipment credit, and (ii) post-supply credit (for a maximum period of 30 days or upto the actual
date of payment by the receiver of goods, whichever is earlier), For supply of goods specified as 'Deemed Exports' under the same
Chapter of Foreign Trade Policy from time to time. 3.4 The post-supply advances would be treated as overdue after the period of
30 days. In cases where such overdue credits are liquidated within a period of 180 days from the notional due date (i.e. before 210
days from the date of advance), the banks are required to charge, for such extended period, interest prescribed for the category
'ECNOS' at post-shipment stage. If the bills are not paid within the aforesaid period of 210 days, banks should charge from the date
of advance, the rate prescribed for 'ECNOS'-postshipment.

4.2 Interest Rate on Rupee Export Credit 4.2.1

Interest Rate Structure The Base Rate System is applicable with effect from July 1, 2010. Accordingly, interest rates applicable for
all tenors of rupee export credit advances sanctioned on or after July 01, 2010 are at or above Base Rate.

Interest on Pre-shipment Credit i. The Base Rate System is applicable from July 1, 2010 and accordingly interest rates applicable
for all tenors of rupee export credit advances sanctioned on or after July 01, 2010 are at or above Base Rate. ii. If pre-shipment
advances are not liquidated from proceeds of bills on purchase, discount, etc. on submission of export documents within 360 days
from the date of advance, or as indicated at para 1.1.4 (i) the advances will not be treated as export credit ab initio. iii. If exports do
not materialise at all, banks should charge on relative packing credit domestic lending rate plus penal rate of interest, if any, to be
decided by the banks on the basis of a transparent policy approved by their Board.

Interest on Post-shipment Credit:

Early payment of export bills i. In the case of advances against demand bills, if the bills are realised before the expiry of the normal
transit period (NTP), interest at the prescribed rate shall be charged from the date of advance till the date of realisation of such bills.
The date of realisation of demand bills for this purpose would be the date on which the proceeds get credited to the banks' Nostro
accounts. ii. In the case of advance/credit against usance export bills, interest at prescribed rate may be charged only upto the
notional/actual due date or the date on which export proceeds get credited to the bank’s Nostro account abroad, whichever is
earlier, irrespective of the date of credit to the borrower's/exporter's account in India. In cases where the correct due date can be
established before/immediately after availment of credit due to acceptance by overseas buyer or otherwise, prescribed interest can
be applied only upto the actual due date, irrespective of whatever may be the notional due date arrived at, provided the actual due
date falls before the notional due date. iii. Where interest for the entire NTP in the case of demand bills or upto notional/actual due
date in the case of usance bills as stated at (b) above, has been collected at the time of negotiation/purchase/discount of bills, the
excess interest collected for the period from the date of realisation to the last date of NTP/notional due date/actual due date should
be refunded to the borrowers
EXPORT CREDIT IN FOREIGN CURRENCY:
With a view to making credit available to exporters at internationally competitive rates, authorised dealers have been permitted to
extend pre-shipment Credit in Foreign Currency (PCFC) to exporters for domestic and imported inputs of exported goods at
LIBOR/EURO LIBOR/EURIBOR related rates of interest as detailed below:

Scheme:
The scheme is an additional window for providing pre-shipment credit to Indian exporters at internationally competitive rates of
interest. It will be applicable to only cash exports. The instructions with regard to Rupee Export Credit apply to export credit in
Foreign Currency also mutatis mutandis, unless otherwise specified.

ii. The exporter will have the following options to avail of export finance: a. to avail of pre-shipment credit in rupees and then the
post-shipment credit either in rupees or discounting/ rediscounting of export bills under EBR Scheme mentioned in paragraph 6.1.
b. to avail of pre-shipment credit in foreign currency and discount/ rediscounting of the export bills in foreign currency under EBR
Scheme. c. to avail of pre-shipment credit in rupees and then convert drawals into PCFC at the discretion of the bank.

iii. Choice of currency a. The facility may be extended in one of the convertible currencies viz. US Dollars, Pound Sterling,
Japanese Yen, Euro, etc. b. To enable the exporters to have operational flexibility, it will be in order for banks to extend PCFC in
one convertible currency in respect of an export order invoiced in another convertible currency. For example, an exporter can avail
of PCFC in US Dollar against an export order invoiced in Euro. The risk and cost of cross currency transaction will be that of the
exporter. c. Banks are permitted to extend PCFC for exports to ACU countries. d. The applicable benefit to the exporters will accrue
only after the realisation of the export bills or when the resultant export bills are rediscounted on ‘without recourse’ basis.

Source of funds for banks i. The foreign currency balances available with the bank in Exchange Earners Foreign Currency
(EEFC) Accounts, Resident Foreign Currency Accounts RFC(D) and Foreign Currency (Non-Resident) Accounts (Banks) Scheme
could be utilised for financing the pre-shipment credit in foreign currency.

ii. Banks are also permitted to utilise the foreign currency balances available under Escrow Accounts and Exporters Foreign
Currency Accounts for the purpose, subject to ensuring that the requirements of funds by the account holders for permissible
transactions are met and the limit prescribed for maintaining maximum balance in the account under broad based facility is not
exceeded.
iii. Foreign currency borrowings a. In addition, banks may arrange for borrowings from abroad. Banks may negotiate lines of credit
with overseas banks for the purpose of grant of PCFC to exporters without the prior approval of the RBI. b. Banks may avail of lines
of credit from other banks in India if they are not in a position to raise loans from abroad on their own, provided the bank does not
have a branch abroad. The spread between the borrowing and lending bank is left to the discretion of the banks concerned. c.
Banks should draw on the line of credit arranged only to the extent of loans granted by them to the exporters under the PCFC.
However, where the overseas bank making available the line of credit stipulates a minimum amount for drawals which should not
be very large, the small unutilised portion may be managed by the bank within its foreign exchange position and Aggregate Gap
Limit (AGL). Similarly, any prepayment by the exporter may also be taken within the foreign exchange position and AGL limits.
iv. In case the exporters have arranged for the suppliers’ credit for procuring imported inputs, the PCFC facility may be extended
by the banks only for the purpose of financing domestic inputs for exports.
v. Banks are also permitted to use foreign currency funds borrowed in terms of para 4.2(i) of Notification No. FEMA.3/2000 RB
dated May 3, 2000 as also foreign currency funds generated through buy-sell swaps in the domestic forex market for granting pre-
shipment credit in Foreign Currency (PCFC) subject to adherence to Aggregate Gap Limit (AGL) prescribed by RBI (FED).

Spread i. Banks are free to determine the interest rates on export credit in foreign currency with effect from May 5, 2012. ii. LIBOR /
EURO LIBOR / EURIBOR rates are normally available for standard period of 1, 2, 3, 6 and 12 months. Banks may quote rates on
the basis of standard period if PCFC is required for periods less than 6 months. However, while quoting rates for non-standard
period, banks should ensure that the rate quoted is below the next upper standard period rate. iii. Banks may collect interest on
PCFC at monthly intervals against sale of foreign currency or out of balances in EEFC accounts or out of discounted value of the
export bills if PCFC is liquidated.

Period of credit
 The PCFC will be available for a maximum period of 360 days. Any extension of the credit will be subject to the same terms
and conditions as applicable for extension of rupee packing credit.
 Further extension will be subject to the terms and conditions fixed by the bank concerned and if no export takes place within
360 days, the PCFC will be adjusted at T.T. selling rate for the currency concerned. In such cases, banks can arrange to
remit foreign exchange to repay the loan or line of credit raised abroad and interest without prior permission of RBI.
 For extension of PCFC within 180 days, banks are free to determine the interest rates on export credit in foreign currency
with effect from May 5, 2012.
Disbursement of PCFC
 In case full amount of PCFC or part thereof is utilised to finance domestic input, banks may apply appropriate spot rate for
the transaction.
  As regards the minimum lots of transactions, it is left to the operational convenience of banks to stipulate the minimum lots
taking into account the availability of their own resources. However, while fixing the minimum lot, banks may take into
account the needs of their small customers also.
 Banks should take steps to streamline their procedures so that no separate sanction is needed for PCFC once the packing
credit limit has been authorised and the disbursement is not delayed at the branches.

Liquidation of PCFC Account

i. General PCFC can be liquidated out of proceeds of export documents on their submission for discounting/rediscounting under
the EBR Scheme detailed in para 6.1 or by grant of foreign currency loans (DP Bills). Subject to mutual agreement between the
exporter and the banker, it can also be repaid / prepaid out of balances in EEFC A/c as also from rupee resources of the exporter to
the extent exports have actually taken place.

ii. Packing credit in excess of F.O.B. value In certain cases, (viz. agro based products like HPS groundnut, defatted & deoiled
cakes, tobacco, pepper, cardamom, cashew nuts, etc.) where packing credit required is in excess of FOB value, PCFC would be
available only for exportable portion of the produce.

iii. Substitution of order/commodity Repayment/liquidation of PCFC could be with export documents relating to any other order
covering the same or any other commodity exported by the exporter or amount of balance in the EEFC Account. While allowing
substitution of contract in this way, banks should ensure that it is commercially necessary and unavoidable. Banks should also
satisfy about the valid reasons as to why PCFC extended for shipment of a particular commodity cannot be liquidated in the normal
method. As far as possible, the substitution of contract should be allowed if the exporter maintains account with the same bank or it
has the approval of the members of the consortium, if any.

Diamond Dollar Account (DDA) Scheme Under the Foreign Trade Policy 2009-2014, firms/companies dealing in purchase/sale of
rough or cut and polished diamonds, diamond studded jewellery, with good track record of at least two years in import or export of
diamonds with an annual average turnover of Rs. 3 crore or above during the preceding three licensing years (from April to March)
are permitted to carry out their business through designated Diamond Dollar Accounts (DDAs). Under the DDA Scheme, it would
be in order for banks to liquidate PCFC granted to a DDA holder by dollar proceeds from sale of rough, cut and polished diamonds
by him to another DDA holder. (For details regarding the Diamond Dollar Accounts, bank may refer to AP (DIR series) circu
6. Post-shipment Export Credit in Foreign Currency
6.1 Rediscounting of Export Bills Abroad Scheme (EBR)
Banks may utilise the foreign exchange resources available with them in Exchange Earners Foreign Currency Accounts (EEFC),
Resident Foreign Currency Accounts (RFC), Foreign Currency (Non-Resident) Accounts (Banks) Scheme, to discount usance bills
and retain them in their portfolio without resorting to rediscounting. Banks are also allowed to rediscount export bills abroad at rates
linked to international interest rates at post-shipment stage.

Scheme
i. It will be comparatively easier to have a facility against bills portfolio (covering all eligible bills) than to have rediscounting facility
abroad on bill by bill basis. There will, however, be no bar if rediscounting facility on bill to bill basis is arranged by a bank in case of
any particular exporter, especially for large value transactions.
ii. Banks may arrange a "Bankers Acceptance Facility" (BAF) for rediscounting the export bills without any margin and duly
covered by collateralised documents.
iii. Each bank can have its own BAF limit(s) fixed with an overseas bank or a rediscounting agency or an arrangement with any
other agency such as factoring agency (in case of factoring arrangement, it should be on ‘without recourse’ basis only).
iv. The exporters, on their own, can arrange for themselves a line of credit with an overseas bank or any other agency (including a
factoring agency) for discounting their export bills direct subject to the following conditions: (a) Direct discounting of export bills by
exporters with overseas bank and/or any other agency will be done only through the branch of an authorized dealer designated by
him for this purpose. (b) Discounting of export bills will be routed through designated bank/ authorized dealer from whom the
packing credit facility has been availed of. In case, these are routed through any other bank, the latter will first arrange to adjust the
amount outstanding under packing credit with the concerned bank out of the proceeds of the rediscounted bills. v. The limits
granted to banks by overseas banks/discounting agencies under BAF will not be reckoned for the purpose of borrowing limits fixed
by RBI (FED) for them.

Eligibility criteria i. The Scheme will cover mainly export bills with usance period upto 180 days from the date of shipment
(inclusive of normal transit period and grace period, if any). There is, however, no bar to include demand bills, if overseas institution
has no objection to it. ii. In case borrower is eligible to draw usance bills for periods exceeding 180 days as per the extant
instructions of FED, Post-shipment Credit under the EBR may be provided beyond 180 days. iii. The facility under the Scheme of
Rediscounting may be offered in any convertible currency. iv. Banks are permitted to extend the EBR facility for exports to ACU
countries. v. For operational convenience, the BAF Scheme may be centralised at a branch designated by the bank. There will,
however, be no bar for other branches of the bank to op
Source of On-shore funds ( )i In the case of demand bills [subject to what has been stated in paragraph 6.1.3 (i) above], these may
have to be routed through the existing post-shipment credit facility or by way of foreign exchange loans to the exporters out of the
foreign currency balances available with banks in the Schemes ibid. ( ) ii To facilitate the growth of local market for rediscounting
export bills, establishment and development of an active inter-bank market is desirable. It is possible that banks hold bills in their
own portfolio without rediscounting. However, in case of need, the banks should also have access to the local market, which will
enable the country to save foreign exchange to the extent of the cost of rediscounting. Further, as different banks may be having
BAF for varying amounts, it will be possible for a bank which has balance available in its limit to offer rediscounting facility to
another bank which may have exhausted its limit or could not arrange for such a facility. (iii) Banks may avail of lines of credit from
other banks in India if they are not in a position to raise loans from abroad on their own or they do not have branches abroad (iv)
Banks are also permitted to use foreign currency funds borrowed in terms of para 4.2(i) of notification No. FEMA 3/2000 RB dated
May 3, 2000 as also foreign currency funds generated through buy - sell swaps in the domestic forex market for granting facility of
rediscounting of Export Bills Abroad (EBR) subject to adherence to Aggregate Gap Limit (AGL) approved by RBI (FED).

Facility of Rediscounting 'with recourse' and 'without recourse' It is recognized that it will be difficult to get ‘without recourse’
facility from abroad under BAF or any other facility. Therefore, the bills may be rediscounted ‘with recourse’. However, if an AD is in
a position to arrange ‘without recourse’ facility on competitive terms, it is permitted to avail itself of such a facility.

Accounting aspects i. The rupee equivalent of the discounted value of the export bills will be payable to the exporter and the same
should be utilised to liquidate the outstanding export packing credit. ii. As the discounting of bills/extension of foreign exchange
loans (DP bills) will be in actual foreign exchange, banks may apply appropriate spot rate for the transactions. iii. The rupee
equivalents of discounted amounts/foreign exchange loan may be held in the bank’s books distinct from the existing post-shipment
credit accounts. iv. In case of overdue bills, banks may charge interest from the due date to the date of crystallization as per the
interest rate policy of the bank.. v. Interest rate as per RBI interest rate directive for post-shipment credit in rupees will be applicable
from the date of crystallisation. vi. In the event of export bill not being paid, it will be in order for the bank to remit the amount
equivalent to the value of the bill earlier discounted, to the overseas bank/agency which had discounted the bill, without the prior
approval of the RBI.

Restoration of limits and availability of export benefits such as EEFC Account As stated in paragraph 6.1.5 above, ‘without
recourse’ facility may not generally be available. Thus, the restoration of exporter’s limits and the availability of export benefits, such
as credit to EEFC accounts, in case of ‘with recourse’ facility, will be effected only on realisation of export proceeds and not on the
date of discounting/ rediscounting of the bills, However, if the bills are rediscounted ‘without recourse’, the restoration of exporter’s
limits and availability of export benefits may be given effect immediately on rediscounting.
INTEREST ON EXPORT CREDIT IN FOREIGN CURRENCY:
In respect of export credit to exporters at internationally competitive rates under the schemes of 'Pre-shipment Credit in Foreign
Currency' (PCFC) and 'Rediscounting of Export Bills Abroad' (EBR), banks are free to determine the interest rates on export credit
in foreign currency with effect from May 5, 2012.

Gold Card Scheme for exporters The Government (Ministry of Commerce and Industry), in consultation with RBI had indicated in
the Foreign Trade Policy 2003-04 that a Gold Card Scheme would be worked out by RBI for creditworthy exporters with good track
record for easy availability of export credit on best terms. Accordingly, in consultation with select banks and exporters, a Gold Card
Scheme was drawn up. The Scheme envisages certain additional benefits based on the record of performance of the exporters.
The Gold Card holder would enjoy simpler and more efficient credit delivery mechanism in recognition of his good track record. The
salient features of the Scheme are:
 All creditworthy exporters, including those in small and medium sectors, with good track record would be eligible for issue of
Gold Card by individual banks as per the criteria to be laid down by the latter.
 Gold Card under the Scheme may be issued to all eligible exporters including those in the small and medium sectors who
satisfy the laid down conditions.
 The scheme will not be applicable for exporters blacklisted by ECGC or having overdue bills in excess of 10% of the
previous year’s turnover.
 Gold Card holder exporters, depending on their track record and credit worthiness, will be granted better terms of credit
including rates of interest than those extended to other exporters by the banks. v. Applications for credit will be processed at
norms simpler and under a process faster than for other exporters.
 Banks would clearly specify the benefits they would be offering to Gold Card holders.
 The charges schedule and fee-structure in respect of services provided by banks to exporters under the Scheme will be
relatively lower than those provided to other exporters.
 The sanction and renewal of the limits under the Scheme will be based on a simplified procedure to be decided by the
banks. Taking into account the anticipated export turnover and track record of the exporter the banks may determine need-
based finance with a liberal approach.
 In-principle' limits will be sanctioned for a period of 3 years with a provision for automatic renewal subject to fulfillment of the
terms and conditions of sanction.
 A stand-by limit of not less than 20 per cent of the assessed limit may be additionally made available to facilitate urgent
credit needs for executing sudden orders. In the case of exporters of seasonal commodities, the peak and off-peak levels
may be appropriately specified.
  In case of unanticipated export orders, norms for inventory may be relaxed, taking into account the size and nature of the
export order.
 Requests from card holders would be processed quickly by banks within 25 days / 15 days and 7 days for fresh applications
/ renewal of limits and ad hoc limits, respectively.
 Gold Card holders would be given preference in the matter of granting of packing credit in foreign currency.
 Banks would consider waiver of collaterals and exemption from ECGC guarantee schemes on the basis of card holder's
creditworthiness and track record.
 The facility of further value addition to their cards through supplementary services like ATM, Internet banking, International
debit / credit cards may be decided by the issuing banks.
 The applicable rate of interest to be charged under the Gold Card Scheme will not be more than the general rate for export
credit in the respective bank. In keeping with the spirit of the Scheme, banks will endeavour to provide the best rates
possible to Gold Card holders on the basis of their rating and past performance.
 Gold Card holders, on the basis of their track record of timely realization of export bills, will be considered for issuance of
foreign currency credit cards for meeting urgent payment obligations, etc.
 Banks may ensure that the PCFC requirements of the Gold Card holders are met by giving them priority over non-export
borrowers with regard to granting loans out of their FCNR (B) funds, etc.
 Banks will consider granting term loans in foreign currency in deserving cases out of their FCNR (B), RFC, etc. funds.
(Banks may not grant such loans from their overseas borrowings under the 25 per cent window of overseas borrowings.)

Delay in crediting the proceeds of export bills drawn in foreign currency Delays are observed in passing on the credit of export
bills drawn in foreign currency to the exporters after the foreign currency amounts are credited to the ‘Nostro’ accounts of the
banks. Although there are instructions that the prescribed post-shipment interest rate will cease from the date of credit to the
'Nostro' account, the credit limits enjoyed by the exporters remain frozen till the actual date of credit of rupee equivalent to the
account of the customer. There is, therefore, need to promptly restore the limit of the exporters on realisation of bills and pass on
the rupee credit to the customer.

8.1.5 Payment of compensation to exporters for delayed credit of export:

i. In respect of the delay in affording credit in respect of credit advices complete in all respects, the compensation stipulated by
FEDAI should be paid to the exporter client, without waiting for a demand from the exporter. ii. Banks should devise a system to
monitor timely credit of the export proceeds to the exporter's account and payment of compensation as per FEDAI rules. iii. The
internal audit and inspection teams of the banks should specifically comment on these aspects in the reports.
Letter of Credit:

Letter of credit is a written undertaking from a bank to pay a beneficiary against the delivery of a specified set of documents. In the
event that the buyer is unable to make payment on the purchase, the seller may make a demand for payment on the bank. The
bank will examine the beneficiary's demand and if it complies with the terms of the letter of credit, will honor the demand. [1] Most
letters of credit are governed by rules promulgated by the International Chamber of Commerce known as Uniform Customs and
Practice for Documentary Credits. The current version, UCP600, became effective July 1, 2007.

UCP 600 defines a number of terms related to letters of credit. These include:
 The Advising Bank is the bank that will inform the Beneficiary or their Nominated Bank of the credit, send the original credit to
the Beneficiary or their Nominated Bank, and provide the Beneficiary or their Nominated Bank with any amendments to the
letter of credit.
 The Applicant is the person or company who has requested the letter of credit to be issued; this will normally be the buyer.
 The Beneficiary is the person or company who will be paid under the letter of credit; this will normally be the seller.
 A Complying Presentation is a set of documents that meet with the requirements of the letter of credit and all of the rules
relating to letters of credit.
 Confirmation is an undertaking from a bank other than the issuing bank to pay the Beneficiary for a Complying Presentation,
allowing the Beneficiary to further reduce payment risk, although Confirmation is usually at an extra cost.
 The Issuing Bank is the bank that issues the credit, usually following a request from an Applicant.
 The Nominated Bank is a bank mentioned within the letter of credit at which the credit is available.

Process:
After a sales contract has been negotiated and letter of credit has been agreed upon as the method of payment, the Applicant will
contact a bank to ask for a letter of credit to be issued, and once the issuing bank has ascertained that the Applicant will be able to
pay for the goods it will issue the letter of credit. Once the Beneficiary receives the letter of credit it will check the terms to ensure
that it matches with the contract, and will either arrange for shipment of the goods or ask for an amendment to the letter of credit so
that it meets with the terms of the contract. The letter of credit is limited by time, in terms of the validity of the credit, the latest date
of shipment, and in terms of how long after shipment the documents may be presented to the Nominated Bank.
Once the goods have been shipped, the Beneficiary will present the set of requested documents to the Nominated Bank. This bank
will check the documents, and if they comply with the terms of the Letter of Credit the Issuing Bank is bound to honour the terms of
the letter of credit by paying the Beneficiary.
If the documents do not comply with the terms of the letter of credit they are considered Discrepant. At this point the Nominated
Bank will inform the Beneficiary of the discrepancy and offer a number of options depending on the circumstances. If the
discrepancies are minor it may be possible to present corrected documents to the bank to make the presentation compliant.
Documents presented after the time limits mentioned in the credit are also considered discrepant.
If corrected documents cannot be supplied in time the documents may be forwarded to the issuing bank "in trust"; effectively in the
hope that the Applicant will accept the documents. Documents forwarded in trust remove the payment security of a letter of credit
so this route must only be used as a last resort.
Some banks will offer to "Telex for Approval" or similar. This is where the Nominated Bank holds the documents, but sends a
message to the Issuing Bank to accept the discrepancies. This is more secure than sending documents in trust.

Documents that may be Requested for Presentation

To receive payment, an exporter or shipper must present the documents required by the LC. Typically the letter of credit will
request an original bill of lading as the use of a title document such as this is critical to the functioning of the Letter of Credit.
However, the list and form of documents is open to negotiation and might contain requirements to present documents issued by a
neutral third party evidencing the quality of the goods shipped, or their place of origin or place. Typical types of documents in such
contracts might include:[citation needed]
 Financial documents — bill of exchange, co-accepted draft
 Commercial documents — invoice, packing list
 Shipping documents — bill of lading (ocean or multi-modal or charter party), airway bill, lorry/truck receipt, railway receipt, CMC
other than mate receipt, forwarder cargo receipt
 Official documents — license, embassy legalization, origin certificate, inspection certificate, phytosanitary certificate
 Insurance documents — insurance policy or certificate, but not a cover note.
But the range of documents that may be requested by the applicant is vast, and varies considerably by country and commodi

Import/export — The same credit can be termed an import or export LC[5] depending on whose perspective is considered. For the
importer it is termed an Import LC and for the exporter of goods, an Export LC.
Revocable The buyer and the bank that established the LC are able to manipulate the LC or make corrections without
informing or getting permissions from the seller. According to UCP 600, all LCs are irrevocable, hence this
type of LC is obsolete.
Irrevocable Any changes (amendment) or cancellation of the LC (except it is expired) is done by the applicant through
the issuing bank. It must be authenticated and approved by the beneficiary.
Confirmed An LC is said to be confirmed when a second bank adds its confirmation (or guarantee) to honor a complying
presentation at the request or authorization of the issuing bank.
Unconfirmed This type does not acquire the other bank's confirmation.
Restricted Only one advising bank can purchase a bill of exchange from the seller in the case of a restricted LC.
Unrestricted The confirmation bank is not specified, which means that the exporter can show the bill of exchange to any
bank and receive a payment on an unrestricted LC.
Transferrable The exporter has the right to make the credit available to one or more subsequent beneficiaries. Credits are
made transferable when the original beneficiary is a middleman and does not supply the merchandise, but
procures goods from suppliers and arranges them to be sent to the buyer and does not want the buyer and
supplier know each other. A letter of credit can be transferred to the second beneficiary at the request of the
first beneficiary only if it expressly states that the letter of credit is "transferable". A bank is not obligated to
transfer a credit.
Untransferable A credit that the seller cannot assign all or part of to another party. In international commerce, all credits are
untransferable.
Deferred / Usance A credit that is not paid/assigned immediately after presentation, but after an indicated period that is
accepted by both buyer and seller. Typically, seller allows buyer to pay the required money after taking the
related goods and selling them.
At Sight A credit that the announcer bank immediately pays after inspecting the carriage documents from the seller.
Red Clause Under this LC the issuing bank authorize the advising bank to advance a part of LC amount to the seller to
meet pre shipment expenses.
Green clause Under this LC the applicant also provides for storage facility along with pre shipment expenses.
Back to Back Many trading house accepts orders to supply or export commodities from different importers. The trading
house in their turn procure the commodities from different manufacturer. The trading house may have LC
established in their favour that are not act as middleman between the actual supplier and importers, may
request their bank to issue LC in the favour of actual suppliers of the goods on the strength of the existing LC
already established in the favour of the former. Theses LC are called back to back LC.
Standby Letter of Operates like a Commercial Letter of Credit, except that typically it is retained as a "standby" instead of being
Credit the intended payment mechanism. UCP600 article 1 provides that the UCP applies to
Standbys; ISP98 applies specifically to Standby letters of Credit; and the United Nations Convention on
Independent Guarantees and Standby letters of Credit applies to a small number of countries that have
ratified the Convention.

NPA Management:
NON PERFORMING ASSETS: The assets which ceases to generate income for the bank.

Assets classification: A non performing assets is loan or an advance where:

1. Interest and instalment of principal remain overdue for a period of more than 90 days in respect of term loan.
2. The account remains out of order for more than 90 days in respect of overdraft/cash credit account. Out of order means if
outstanding remain continuously in excess of sanctioned limit/drawing power or whew outstanding is less than sanctioned
limit/DP but there is no credit continuously for 90 days as on the date of balance sheet or credit is not enough to cover the
interest debited during the same period, these account is treated as out of Order.
3. The bill remains overdue for a period of more than 90 days in case of bills purchase or discount.
4. The instalment of principle or interest therein remain overdue for two crop seasons for short term crops.
5. The instalment of principle or interest therein remain overdue for one crop seasons for long term crops.
6. Where full-fledged renewal has not been carried within 180 days.
7. If stock statements are not received for more than 90 days for updating the DP.
8. Assets under consortium arrangement: Assets classification of accounts under consortium should based on the record of
recovery of the individual members banks.

Categories of NPAs

1. Sub-Standard:
 The assets which remain NPA for a period less than or equal to 12 months.
2. Doubtful:
 The assets which remain Sub Standard category for period of 12 months.
3. Loss Assets:
  A loss asset is one where los has been identified by the bank or internal or external of RBI auditor but the amount has
not been written off wholly.

Provisioning:

Standard Assets Provisioning Revised

% accelerated
provisioning
(%)#
1. Direct Agricultural and SME Sector 0.25%
2. For residential Housing Loan beyond 1.00%
Rs.20.00 Lacs.
3. Advance to Specific Sector i.e. Personal 2.00%
Loans (Including credit card receivable),
Capital market exposure, commercial real
estate loans
1. Other Advances 0.40%
Sub-Standard
4. Secured Loan 15.00% 25
5. Unsecured Loan 25.00% 40
Doubtful Assets
1. D1 (Up to 1 year) 25% 40
2. D2 (1-3 Years) 40% 100
3. D3 (Above 3 Years) 100% 100
All unsecured potion 100% 100
Loss Assets 100% of 100
outstanding.
# In cases where banks fail to report SMA status of the accounts to CRILC or resort to methods with the intent to conceal the actual
status of the accounts or evergreen the account, banks will be subjected to accelerated provisioning for these accounts and/or
other supervisory actions as deemed appropriate by RBI. The current provisioning requirement and the revised accelerated
provisioning in respect of such non performing accounts are as under:
The performance of the bank is rated by regulator as well as rating agencies based on model of CAMELS
C Capital Adequacy
A Assets Quality
M Management
E Earnings
L Liquidity
S System & Control
The first step should be a through and objective credit assessment before disbursal of a loan. Account slips into the NPA category of
the interest is not serviced regularly. In case of bad loans that occur in large advances, the following steps recommended:
NPA Management:
Sl. Nature of Description
No activity
1 Recovery  Bank personnel jointly approach the defaulting borrower for repayment of dues at a place and time
Camps convenient to both the party.
 These are suitable for small loans.
 Bank instead of conducting the recovery camps at their branches, the usually conduct such recovery
camps in centres like Panchayat board office, court buildings, Government Department building. The
borrower will find convenient to attend the recovery camps
 Certain circumstance, the branch manager in charge along with other officer goes to each house
and recover the instalments.
2 Preference of  Claim Indemnity from
Claims  DICGC (Deposit Insurance and credit Guarantee Corporation.
 Export Credit Guarantee Corporation (ECGC)
 Credit Guarantee Fund Trust for small and Micro Enterprises (CGTSME)
 Invoke personal guarantee and recover the dues and reduce NPAs.
3 Compromises  It is adopted by the bank when the client is facing genuine difficulties, where normal recovery is not
possible.
4 One Time  When all the effort to recover the dues are exhausted or the bank is convinced that further pursuit
Settlement of the case will not result any worthwhile result the outstanding amount is written off by utilizing the
Scheme. provision made for that account in the books.
5 Exit from the  Insisting the borrower to shift his account to another which has a different credit appetite.
 account
6 Rescheduling  Bank loans that are usually altered to have longer maturities in order to assist the borrower in makin
g the necessary repayments.
 A loan made to a borrower where the lender has extended the repaymentperiod. Rescheduled loans
are mostcommon when the borrower informs the lender that he/she will be unable to repay the loan
in time, or when theborrower cannot afford payments. Because a default would hurt both the borrow
er and the lender, the lender oftenworks with the borrower through options, such as rescheduling the
repayment.
 Restructuring process would involve modification of terms of the advance/securities, which would
generally include among others, alteration of repayment period/repayable amount/rate of interest
(due to reasons other than competitive reasons) etc.
 when a borrower fails to repay the loan instalments accordingly the terms and conditions they
agreed upon, they can request for a reschedule of their loan or the lender can approach the
borrower for repayment. Rescheduling includes revision of interest rates and loan tenure. Suppose
an organization is a default or can't repay the loan instalments, if the lender believes that the
borrower has the repayment ability at that time lender can revive interest rate , extension of loan
tenure and low emi.
7 Corporate Debt  There are occasions when corporate find themselves in financial difficulties because of factors
Restructuring beyond their control and also due to certain internal reasons.
 For the revival of such corporate as well as for the safety of the money lent by the banks and
financial institutions, timely support through restructuring of genuine cases is called for. However,
delay in agreement amongst different lending institutions often comes in the way of such
endeavours.
 The Corporate Debt Restructuring (CDR) Mechanism is a voluntary non-statutory system based on
Debtor-Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA) and the principle of approvals
by super-majority of 75% creditors (by value) which makes it binding on the remaining 25% to fall in
line with the majority decision.
 The CDR Mechanism covers only multiple banking accounts, syndication/consortium accounts,
where all banks and institutions together have an outstanding aggregate exposure of Rs.100 million
and above.
 It covers all categories of assets in the books of member-creditors classified in terms of RBI's
prudential asset classification standards.
 Even cases filed in Debt Recovery Tribunals/Bureau of Industrial and Financial Reconstruction/and
other suit-filed cases are eligible for restructuring under CDR. The cases of restructuring of standard
and sub-standard class of assets are covered in Category-I, while cases of doubtful assets are
covered under Category-II.
 Structure of CDR System: The edifice of the CDR Mechanism in India stands on the strength of a
three-tier structure:
 CDR Standing Forum
 CDR Empowered Group
 CDR Cell

The CDR Standing Forum, the top tier of the CDR Mechanism in India, is a representative general body
of all Financial Institutions and Banks participating in CDR system. The Forum comprises Chief
Executives of All-India Financial institutions and Scheduled Banks and excludes Regional Rural Banks,
co-operative banks, and Non-Banking Finance Companies.

It is a self-empowered body which lays down policies and guidelines to be followed by the CDR
Empowered Group and CDR Cell for debt restructuring and ensures their smooth functioning and
adherence to the prescribed time schedules for debt restructuring.

It provides an official platform for both creditors and borrowers (by consultation) to amicably and
collectively evolve policies and guidelines for working out debt restructuring plans in the interest of all
concerned.

The Standing Forum monitors the progress of the CDR Mechanism. It can also review individual
decisions of the CDR Empowered Group and CDR Cell. The Forum can also formulate guidelines for
dispensing special treatment to cases which are complicated and are likely to be delayed beyond the
time frame prescribed for processing. The Forum meets at least once every six months.

The individual cases of corporate debt restructuring are decided by the CDR Empowered Group (EG),
which is the second tier of the structure of CDR Mechanism in India. The EG in respect of individual
cases comprises Executive Director (ED) level representatives of Industrial Development Bank of India
Ltd., ICICI Bank Ltd., State Bank of India as standing members, in addition to ED level representatives of
financial institutions (FIs) and banks which have an exposure to the concerned company. The Boards of
all institutions/banks authorize their Chief Executive Officers and/or Executive Directors to decide on the
restructuring package in respect of cases referred to the CDR system, with the requisite requirements to
meet the control needs.
While the Standing Members of EG facilitate the conduct of the Group’s meetings, voting is in proportion
to the exposure and number of the concerned lenders only. In order to make the Empowered Group
effective and broad-based and operate efficiently and smoothly, the participating institutions and banks
approve a panel of senior officers to represent them in the CDR EG and ensure that they depute officials
only from among the panel to attend the meetings of EG. The representative have general authorization
by the Boards of the participating FIs/banks to take decisions on behalf of their organizations regarding
restructuring of debts of individual corporates.

The EG considers the preliminary Flash Report of all cases of requests of restructuring, submitted to it by
the CDR Cell. After the EG decides that restructuring of a company’s debts is prima facie feasible and
the concerned enterprise is potentially viable in terms of the policies and guidelines evolved by Standing
Forum, the detailed restructuring package is worked out by the referring institution in conjunction with the
CDR Cell. However, if the referring institution/bank faces difficulties in working out the detailed
restructuring package, the participating institutions/banks decide upon the alternate financial
institution/bank which would work out the detailed restructuring package at the first meeting of the EG
when the Flash Report comes up for discussion.

The EG is 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 EG. The EG decides on the acceptable viability benchmark
levels on the following illustrative parameters, which are applied on a case-to-case basis, depending on
the merits of each case:

· Debt Service Coverage Ratio

· Break-even Point(Operating & Cash)
· Return on Capital Employed
· Internal Rate of Return
· Cost of Capital
· Loan Life Ratio
· Extent of Sacrifice

The EG meets on two occasions to discuss (Flash and Final Report) in respect of each borrower
account. This provides an opportunity to the participating members to seek proper authorization from
their CEO/ED, in case of need, in respect of those cases where the critical parameters of restructuring
are beyond the authority delegated to him/her.

Having regard to the varied features of the borrower-corporates and their promoters/sonsors, they are
classified into four categories for the purpose of stipulation of conditions. Borrower Class – A comprises
companies affected by external factors pertaining to economy and industry. Class –B borrowers are such
corporates/promoters who, besides being affected by the external factors, also have weak resources,
inadequate vision and do not have support of professional management. Class-C borrowers are
overambitious who have diversified into related/unrelated fields with/without lenders’ permission and
those classified in Class-D are financially undisciplined borrowers. The categorization of borrowers is
decided by the EG after ensuring that all conditions being stipulated have been discussed with the
borrower concerned by the referring institution.
The decisions of the EG are final. If restructuring of debt is found to be viable and feasible and approved
by the EG, the company is put on the restructuring mode. If restructuring is not found viable, then the
creditors are free to take necessary steps for immediate recovery of dues and/or liquidation or winding up
of the company, collectively or individually.

The CDR Cell, the third tier of the CDR Mechanism in India, is mandated to assist the CDR Standing
Forum and the CDR Empowered Group (EG) in all their functions.
All references for corporate debt restructuring by lenders/borrowers are made to the CDR Cell. It is the
responsibility of the lead institution/major stakeholder to the corporate to work out a preliminary
restructuring plan in consultation with other stakeholders and submit to CDR Cell. The CDR Cell makes
initial scrutiny of the proposals received from the lenders/borrowers, in terms of the general policies and
guidelines approved by the CDR Standing Forum, by calling for details of the proposed restructuring plan
and other information and place for consideration of the CDR EG within 30 days to decide whether
restructuring is prima facie feasible. If found feasible, the referring institution/bank takes up the work of
 preparing the detailed restructuring plan with the help of other lenders, in conjunction with CDR Cell and,
if necessary, experts engaged from outside. If not found prima facie feasible, the lenders may start action
for recovery of their dues.

The EG can approve or suggest modifications to the restructuring plan, but ensure that a final decision is
taken within a total period of 90 days. The period can be extended up to a maximum period of 180 days
from the date of reference to the CDR Cell, if there are genuine reasons.
8 Restructuring This is not very different from 'rescheduling' but a complete new process which includes all the aspects
of 'rescheduling' , lowering repayment amount(emi)and enhancement in loan amount. We can say
restructuring is a completely a new loan as it requires all the documents to be modified. Will be
considered for only those businesses, which have growth and can repay the loan. The borrower has to
provide sufficient documents in supporting his/ her financial ability to repay loan then only considered
restructuring.
9 SARFAESI Act  The full form of SARFAESI Act as we know is Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002.
 Banks utilize this act as an effective tool for bad loans (NPA) recovery. It is possible where non-
performing assets are backed by securities charged to the Bank by way of hypothecation or
mortgage or assignment.
 Upon loan default, banks can seize the securities (except agricultural land) without intervention of
the court. SARFAESI is effective only for secured loans where bank can enforce the underlying
security eg hypothecation, pledge and mortgages.
 In such cases, court intervention is not necessary, unless the security is invalid or fraudulent.
 However, if the asset in question is an unsecured asset, the bank would have to move the court to
file civil case against the defaulters.
How it works?
 The SARFAESI Act, 2002 gives powers of “seize and desist” to banks. Banks can give a notice in
writing to the defaulting borrower requiring it to discharge its liabilities within 60 days.
 If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the
following measures:
 Take possession of the security for the loan.
 Sale or lease or assign the right over the security.
  Manage the same or appoint any person to manage the same.
 The SARFAESI Act also provides for the establishment of Asset Reconstruction Companies (ARCs)
regulated by RBI to acquire assets from banks and financial institutions.
 The Act provides for sale of financial assets by banks and financial institutions to asset
reconstruction companies (ARCs).
 RBI has issued guidelines to banks on the process to be followed for sales of financial assets to
ARCs.
Methods of Recovery:
 According to this act, the registration and regulation of securitization companies or reconstruction
companies is done by RBI. These companies are authorized to raise funds by issuing security
receipts to qualified institutional buyers (QIBs), empowering banks and Fls to take possession of
securities given for financial assistance and sell or lease the same to take over management in the
event of default.
 This act makes provisions for two main methods of recovery of the NPAs as follows: Securitisation:
 Securitisation is the process of issuing marketable securities backed by a pool of existing assets
such as auto or home loans. After an asset is converted into a marketable security, it is sold.
 A securitization company or reconstruction company may raise funds from only the QIB (Qualified
Institutional Buyers) by forming schemes for acquiring financial assets.
 Asset Reconstruction: Enacting SARFAESI Act has given birth to the Asset Reconstruction
Companies in India. It can be done by either proper management of the business of the borrower, or
by taking over it or by selling a part or whole of the business or by rescheduling of payment of debts
payable by the borrower enforcement of security interest in accordance with the provisions of this
Act.
 Further, the act provides Exemption from the registration of security receipt. This means that when
the securitization company or reconstruction company issues receipts, the holder of the receipts is
entitled to undivided interests in the financial assets and there is not need of registration unless and
otherwise it is compulsory under the Registration Act 1908.
 However, the registration of the security receipt is required in the following cases:
 There is a transfer of receipt.
 The security receipt is creating, declaring, assigning, limiting, extinguishing any right title or
interest in a immovable property.
10 Bank Adalat
11 Lok Adalat  All NPAs category with outstanding balance upto Rs.20.00 Lacs are eligible to be referred to Lok
Adalat.
 Lok adalat has been set up by government under the legal services authority act 1987 with a view to
settle dispute by way of adjudication and compromise without going to a court of law.
 Lok adalats are headed by serving or retired judicial officers.
12 CIVIL Court
13 Debt Recovery
Tribunal
14 Rehabilitation Rehabilitation would involve process to ensure that the Sick MSME Units become Viable. A unit would
be considered as Sick, if Any of the borrowal account of the enterprise remains NPA for three months or
more.

There is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its net worth
during the previous accounting year.
Scope:
 All non-corporate Micro, Small and Medium Enterprises (MSMEs), irrespective of the level of dues to
bank.
 All corporate MSMEs, which are enjoying banking facilities from a single bank, irrespective of the
level of dues to the bank
 All corporate MSMEs, which have funded and non-funded outstanding up to Rs.10 crore under
multiple/ consortium banking arrangement.
 All corporate MSMEs which have funded and non-funded outstanding above Rs. 10 crores under
multiple/ consortium banking arrangement would be restructured as per CDR Mechanism.In respect
of BIFR cases, approval from BIFR will be obtained before implementing the
restructuring/rehabilitation package.

Time Period: The Restructuring package will be implemented within 90 days from the date of receipt of
request for restructuring from the borrower, while the rehabilitation package will be fully implemented
within six months from the date of unit being declared as viable/potentially viable. During the six month
period of identifying and implementing rehabilitation package, the Bank would permit "Holding Operation"
which will allow the sick unit to draw funds from the cash credit account atleast to the extent of deposit of
 sale proceeds.
15 Rephasement Change in repayment schedule in term loan is known as rephasement.
EWS:

Types of EWS Particulars

Financial Warning  Substantial increase in long term bank borrowings.
Signals  Poor performance in terms of sales, profit and other financial parameters.
 Erosion of net worth.
 Operating loss.
 Rising in bad debts losses.
 High percentage of debtors more than 180 days
 High level of unsecured loan and high cost borrowings
 Diversion of funds to subsidiary concern and creation of fixed assets.
 Stretched working capital Cycle
 Excess Borrowings in MPBF
 Exceptional written off.
 Diversion of funds.
 External rating outlook is negative.
Operating Warning  Low Level of operation in plants
Signals  Non Payment of wages and power bills.
 Loss of critical customers.
 Substantial change in buyer and supplier.
 High level of absolute stocks.
 Low capacity utilization.
 Above average inventory level or huge WIP.
Management Warning  Lack of cooperation from key personnel CFO.
Signals  Change in management ownership and key personnel.
 Family dispute.
 Fudging of accounts.
Banking related  Decline in operation in the account.
warning signals
  Opening of current account with other bank.
 Frequent inward cheque returns.
 Frequent request of loans.
 Frequent request of TODs.
 Frequent delay in submission of stocks statement, SODs, FFRs and other financial data.
 In complete documentation in terms of creation and registration of charges.
 Non compliance of terms and conditions.
 Frequent change in bank.
 Sharpe movement in stocks of share
 Persistent irregularity in the account.
 Default in repayment obligation
 Devolvement in LC and Invocation in Bank guarantee.
 Frequent change in auditors and accounting policy.
 Breach of financial covenants.
 Adverse feature in CIBIL report and RBI defaulter list.
External Factor  Economic Recessions
 Emergency of new competitor and technology.
 Change in government policy.
Remedies  Monitoring of monthly stock statements provided by the company and verify with quarterly
financial statements.
 Market reference checks with peer company, share holder, other banker, auditor, supplier and
buyer.
 Immediate reduction of limits.
 Ask for higher security along with exclusive charge on cash flow from stable projects.
 Selling of assets to other bank/exit the account.

Post Sanction formalities:

 Co-ordinate with the documentation team for disbursement of limits.

 Ensure that borrower has submitted for 8 and 13 to register to registar of company along with
Ratio Analysis:
Liquidity Ratio Details Formulas Ideal Implication
1. Current Ratio Current Asset
Current Liability
2. Quick Ratio Current Assets-Inventory
Current Liability
3. Cash Ratio Cash+Marketable Security
Current Liability
4. Interval Measure Cash-Inventory
Average Daily Cash Expenses
Leverage Ratio 5. Gearing Ratio TOL
TNW
6. Debt/Equity Ratio Long Term Debt
Equity
7. Gross DSCR PAT + Depreciation + Interest
Interest + Instalment
8. Net GSCR PAT + Depreciation
Instalment
9. Interest Coverage PBDIT
---------
Interest

Profitability 10. GP Ratio GP

Net Sales *100
11. NP Ratio NP
Net Sales*100
12. Operating Operating Profit
Profit Ratio Net Sales*100
13. Cash Profit Cash Profit
Ration Net Sales*100
 14. ROI PAT
Net worth*100
15. ROE PAT-Preference Dividend
Equity Share Capital
16. ROCE PBDIT
Total Assets*100
17. EPC PAT-Preference Dividend
No of Equity Share
18. DPS Dividend Paid to Share Holder
No of Shares
19. DYR Dividend Per Share
Market Value Per Share
20. DPR Dividend Per Share
------
EPS
Activity Ratio 21. Inventory Inventory
Turnover Ratio ----------
COGS*365
22. Debtors Debtors
Turnover ----------------------
Credit Sales*365
23. Creditors Creditors
Turnover Ratio --------------------------
Credit Purchase*365
24. RM Holding Stock of RM
Level ----------
RM Consumption*365
25. SIP Holding SIP
Level -----
COP*365
 26. FG Holding FG
Level ----
COGS*365
27. Receivable Receivable
Holding Level -----
Annual Gross Sales
28. Creditors Creditors
Holding Level ----
Annual Purchases*365
Other IMP 29. Assets Sales
Ratio Turnover ----
Total Assets
30. FACR Net Block
----
Term Loan o/s