Global Credit Exposure Management Policy - 2019

Global Credit Exposure
Management Policy
2019-20
Global Credit Exposure Management Policy Page 1 of 110

INDEX
1 INTRODUCTION ..........................................................................................................................................8
2 PURPOSE AND SCOPE OF THE POLICY ........................................................................................................8
3 OBJECTIVES OF THE POLICY ........................................................................................................................9
4 ROLES AND RESPONSIBILITIES ................................................................................................................. 10
4.1 Board ................................................................................................................................................... 10
4.2 Risk Management Committee of the Board: ....................................................................................... 10
4.3 Credit Policy Committee: ..................................................................................................................... 10
4.4 Product & Process Approval Committee: ............................................................................................ 10
4.5 Risk Management Department: .......................................................................................................... 12
4.6 Credit Risk Evaluation Process ............................................................................................................. 12
5 Governance in Credit Administration ...................................................................................................... 13
5.1 Classification of customers for the purpose of credit risk exposures: ................................................. 13
5.2 Credit Expansion Planning: .................................................................................................................. 14
5.3 Credit related Product Programme and Launching Process: ............................................................... 14
5.4 HR Capacity for Credit Risk Management: .......................................................................................... 16
6 CREDIT STRATEGY .................................................................................................................................... 16
6.1 Credit Risk Strategy .............................................................................................................................. 16
6.1.1 Target Sectors and Target Markets: ................................................................................... 17
6.1.2 Credit rating matrix – other than retail ............................................................................... 17
6.1.3 Credit risk matrix – retail ...................................................................................................... 19
6.1.4 RAROC ................................................................................................................................... 19
6.1.5 Requirement of cross-selling and ancillary business: ..................................................... 20
6.2 Assessment Parameters/Guiding Principles ........................................................................................ 20
6.3 Credit Delivery Channels ..................................................................................................................... 20
6.3.1 Branches ................................................................................................................................ 20
6.3.2 Specialized Mortgage Stores (SMS) .................................................................................. 21
6.3.3 Centralized Processing Centre (CPC) ............................................................................... 21
6.3.4 MSME Loan Factories (SMELF) ......................................................................................... 22
6.3.5 International Merchant Banking Cell (IMBC) .................................................................... 22
6.3.6 Global Syndication Centre (GSC) ...................................................................................... 23

6.3.7 Regional Syndication Centers (RSC) ................................................................................ 23
6.4 Facility Structure .................................................................................................................................. 23
6.5 Exposure Norms .................................................................................................................................. 24
6.5.1 Single/ Group exposure limits: ............................................................................................ 24
6.5.2 Substantial Exposure Cap ................................................................................................... 26
6.5.3 Individual, Non-Corporate & Private Limited Co .............................................................. 27
6.5.4 Other Limits: .......................................................................................................................... 28
6.5.5 Capital Market Exposure ..................................................................................................... 28
6.5.6 Enhancing Credit Supply for Large Borrowers through Market Mechanism ............... 29
6.5.7 Exposure to Banks:............................................................................................................... 30
6.5.8 Investment in Bonds / Debentures / Commercial papers: .............................................. 31
6.5.9 Specific Industry / Sectoral Limits ...................................................................................... 32
6.6 Restricted Exposures ........................................................................................................................... 33
6.7 Activities Not Encouraged by the Bank & Licensing Requirements ..................................................... 43
6.7.1 Activities Not Encouraged by the Bank ............................................................................. 43
6.7.2 Activity Clearance ................................................................................................................. 43
6.7.3 Agreement In Principle (AIP)............................................................................................... 45
6.7.4 Industries for which Industrial Licensing Is Compulsory ................................................. 46
6.8 Repayment Period for Term Loans: ..................................................................................................... 46
6.9 Underwriting Criteria ........................................................................................................................... 47
6.9.1 Risk Adjusted Return on Capital ......................................................................................... 47
6.9.2 Internal Credit Rating: .......................................................................................................... 47
6.9.2.1 Domestic Exposure: ......................................................................................................... 48
6.9.2.2 Overseas Exposure: ......................................................................................................... 48
6.9.2.3 Cut-off scores and grades for Retail Scoring models:................................................. 49
6.9.3 External Credit Rating .......................................................................................................... 49
6.9.4 Margin / LTV Ratio ................................................................................................................ 51
6.9.4.1 Priority Sector: ................................................................................................................... 51
6.9.4.2 Retail Lending: .................................................................................................................. 52
6.9.4.3 Capital Market Exposure & Commodities under Selective Credit Control: .............. 52
6.9.4.4 C &IC, EC / MSME Loans ............................................................................................... 53

6.9.4.5 Real Estate Exposures: ................................................................................................... 53
6.9.5 Assessment criteria: ............................................................................................................. 54
6.9.5.1 Working Capital ................................................................................................................. 54
6.9.5.1.1 Loan System for Delivery of Bank Credit ...................................................................... 55
6.9.5.2 Term Loan .......................................................................................................................... 55
6.9.5.2.1 Letter of Credit within Term Loan: .................................................................................. 56
6.9.5.3 Non Fund Based Facilities............................................................................................... 56
6.9.5.4 Exposure to Counterparty Banks ................................................................................... 57
6.9.5.5 Country Exposure Limit:................................................................................................... 57
6.9.6 Indicative Financial Ratios ................................................................................................... 57
6.9.7 Real Estate ............................................................................................................................ 59
6.9.8 Project Loans ......................................................................................................................... 60
6.9.8.1 TEV Study: ......................................................................................................................... 60
6.9.8.2 Partial Credit Enhancement (PCE) to corporate bonds .............................................. 61
6.9.9 PSUs, Central & State Govt. Entities, Municipal Committees / Corporations: ............ 63
6.9.10 Investment in Corporate Bonds / Debentures / Commercial papers (Exposures

undertaken by SITB) ............................................................................................................................ 63
6.9.11 Export Credit .......................................................................................................................... 63
6.9.11.1 FCNR (B) Loans & FCTL: ................................................................................................ 65
6.9.12 Import Credit .......................................................................................................................... 65
6.9.13 Syndicated Loans / Foreign Currency Loans/ External Commercial Borrowings

(ECB): 67
6.9.14 Financing against Book Debts: ........................................................................................... 69
6.9.15 Takeover of Loan Accounts ................................................................................................. 70
6.9.15.1 Takeover of Corporate & MSME (Regulatory & Expanded definition) Accounts:.... 70
6.9.15.2 Takeover of Retail Loan Accounts .................................................................................. 72
6.9.15.3 Takeover of Agriculture Finance: .................................................................................... 74
6.9.15.4 For overseas territories: ................................................................................................... 75
7 CREDIT PROCESS ...................................................................................................................................... 76
7.1 Credit Approval process ....................................................................................................................... 76
7.1.1 Application: ............................................................................................................................ 76
7.1.2 Processing: ............................................................................................................................ 77

7.1.2.1 Due Diligence .................................................................................................................... 78
7.1.2.2 Valuation of Immovable Property Obtained As Security ............................................. 79
7.1.2.2.1 Valuation of Sugar Stocks: .............................................................................................. 80
7.1.2.2.2 Valuation of Gold: .............................................................................................................. 80
7.1.2.2.3 Valuation of financial securities-periodicity ................................................................... 80
7.1.3 Credit Decision: ..................................................................................................................... 80
7.1.3.1 Delegated Authorities: ...................................................................................................... 81
7.1.3.1.1 Domestic Lending: ............................................................................................................ 81
7.1.3.1.2 Overseas Territories: ........................................................................................................ 82
7.1.3.1.3 Validity of Sanction: .......................................................................................................... 82
7.1.4 Stipulating appropriate covenants ...................................................................................... 82
7.1.4.1 Pricing: ................................................................................................................................ 83
7.1.4.2 Penal Interest: ................................................................................................................... 83
7.1.4.3 Pre-payment Premium: .................................................................................................... 84
7.1.4.4 Levy of Commitment Charges: ....................................................................................... 84
7.1.5 Post Sanction Reporting ...................................................................................................... 84
7.1.6 Documentation, Security Creation & Security Perfection: .............................................. 85
7.1.6.1 Verification of Documents: ............................................................................................... 86
7.1.6.2 Document Management: ................................................................................................. 87
7.1.7 Disbursement: ....................................................................................................................... 87
7.2 Credit Administration: ......................................................................................................................... 88
7.2.1 Review Process..................................................................................................................... 88
7.2.1.1 Review: ............................................................................................................................... 88
7.2.1.2 Single Credit Line / Approval for Recognised Groups:................................................ 89
7.2.1.3 Review of Business Relationship: .................................................................................. 90
7.2.1.4 Short Review: .................................................................................................................... 91
7.2.1.5 Mechanism for Review of Pending Proposals at Various Levels: ............................. 91
7.2.2 Review of Internal Rating..................................................................................................... 91
7.2.3 Periodic Valuation of Assets & Asset Verification / Inspection ....................................... 92
7.2.3.1 Periodic Valuation: ............................................................................................................ 92
7.2.3.2 Asset Verification / Inspection: ........................................................................................ 92

7.2.3.2.1 Primary Securities: ............................................................................................................ 92
7.2.3.2.2 Collateral Securities:......................................................................................................... 93
7.2.3.3 Unit visits / Visit to the Borrower’s Office premises by Authorities: ........................... 93
8 MONITORING AND CONTROL .................................................................................................................. 94
8.1 Three Lines of Defence ........................................................................................................................ 94
8.1.1 First Line of Defense - Customer Relationship Department .......................................... 94
8.1.2 Second Line of Monitoring - Risk Management ............................................................... 94
8.1.3 Third Line of Monitoring – Audit Department .................................................................... 95
8.1.3.1 Loan Review Mechanism/ Credit Audit:......................................................................... 95
8.1.3.1.1 Objectives of Credit Audit: ............................................................................................... 95
8.1.3.1.2 Scope and Coverage:....................................................................................................... 95
8.1.3.1.3 Exclusions: ......................................................................................................................... 95
8.1.3.1.4 Action Points for review: .................................................................................................. 96
8.1.3.2 Verification/Audit of hypothecated/pledged Stocks / Book Debts:............................. 96
8.2 Credit Risk Management ..................................................................................................................... 96
8.3 Credit Risk Mitigation .......................................................................................................................... 96
8.4 Insurance ............................................................................................................................................. 97
8.5 Netting ................................................................................................................................................. 97
8.6 Monitoring Credit Limits ...................................................................................................................... 97
8.7 Credit Monitoring Reports ................................................................................................................... 98
8.7.1 Monthly Monitoring Reports (MMRs): ................................................................................ 98
8.7.2 Accounts causing concern: ................................................................................................. 99
8.8 Stressed Assets Resolution .................................................................................................................. 99
8.9 Curing Policy ...................................................................................................................................... 100
8.10 Credit Systems ................................................................................................................................... 101
9 DATA QUALITY MANAGEMENT .............................................................................................................. 102
10 OTHER POLICY MATTERS ................................................................................................................... 102
10.1 Sanction of Credit Facilities to Companies whose Directors feature in Defaulters’ List .................... 102
10.2 Lending to Group/Associate Concerns having any group NPA A/c .................................................... 104
10.3 Substitution of Securities................................................................................................................... 104
10.4 Interchangeability of limits ................................................................................................................ 104

10.5 Allocation of Sub-Limits/Parking Limits/ Transfer of Loan Accounts ................................................. 105
10.6 Down Selling ...................................................................................................................................... 105
10.6.1 Loan assets acquired through down-selling: .................................................................. 105
10.6.2 Down Selling of the Bank’s Loan Assets: ........................................................................ 105
10.7 Policy on Inter Bank Participation Certificate (IBPC) ......................................................................... 106
10.7.1 Discretionary Lending Powers for “Participation and Issuance”: ................................. 106
10.7.2 IBPC Exposure Cap: .......................................................................................................... 106
10.7.3 IBPC Underwriting Criteria: ............................................................................................... 106
10.8 Priority Sector Lending Certificate (PSLC) .......................................................................................... 107
11 EXIT POLICY ........................................................................................................................................ 108
12 REPORTING OF BREACHES ................................................................................................................. 109
13 TRAINING & DEVELOPMENT .............................................................................................................. 110
14 POLICY ADMINISTRATION AND REVIEW ............................................................................................ 110

1 INTRODUCTION
Credit risk or default risk involves the inability or unwillingness of a customer or a counterparty to
meet contractual commitment(s) in relation to lending, trading, hedging, settlement and other
financial transactions. While credit risk in respect of a single customer or counterparty is made up of
transaction risk or default risk intrinsic to that customer/counterparty, the same in relation to a
portfolio comprises both the intrinsic and concentration risks. The credit risk of a bank’s lending
portfolio depends on its strategic goals concerning risk-adjusted return and the regulatory and
economic capital to be deployed for this purpose. However, there are certain external and internal
factors that can cause deterioration of the credit risk assumed by a bank. The external factors are
the state of the economy, wide swings in commodity/equity prices, foreign exchange rates and
interest rates, trade restrictions, economic sanctions, government policies, etc. The internal factors
are deficiencies in loan policies/administration, absence of prudential credit risk concentration limits,
inadequately defined decision rules and authority/limits for approving credit exposures by Loan
Officers/Credit Committees, deficiencies in the appraisal of borrowers’ business and financial
position, excessive dependence on collateral, faulty risk pricing, defective loan documentation,
absence of proper loan review mechanism and post-sanction surveillance, etc.
This Global Credit Exposure Management Policy (hereinafter referred to as ‘the Policy’) aims to
maintain the different types of credit risk exposures of the Bank within the respective risk tolerance
limits /levels specified in this regard and maximize the risk-adjusted rate of return for such exposures.
2 PURPOSE AND SCOPE OF THE POLICY
The coverage of the Policy extends to all kinds of credit exposures assumed by the Bank globally
both at the stand-alone as well as the consolidated levels. The consolidated level refers only to the
Banking Group entities for specific purpose of consolidated exposures in conformity with the Reserve
Bank of India norms. Individual group entities will be governed by the respective Credit Policies
approved by their Boards. The overseas branches are required to operate within the laws and
regulations of the countries concerned and the regulations of Reserve Bank of India or of the host
country, whichever are more stringent. In case of divergence of guidelines/rules/regulations, the
more stringent ones shall be followed. Branches / Territorial Head / Territorial Committee will lend /
invest in the respective local currencies / authorized currencies as per terms and conditions of
approved lending schemes for each territory, within the delegated lending powers communicated to
the overseas branches. The Limits and Caps wherever mentioned in INR terms in the Policy are
applicable only for the operations of the Bank in India. Overseas Branches are required to
incorporate suitable limits in terms of their local / operating currencies in their territory-specific credit
risk management policies.
The Policy covers only the broad aspects of credit risk exposure management. Operational aspects
and specific details as regards its implementation are covered in the Book of Instructions prepared
by the Corporate & Institutional Credit Department in consultation with other credit verticals and the

Treasury Department. Overseas territories will prepare / update their respective credit operations
manuals in consultation with the Corporate & Institutional Credit Department. Credit product-specific
guidelines and criteria for approval shall be as per the credit programme (refer Circulars / Master
Circulars in this regard) prepared by the respective credit verticals / territories. The Policy provides
the broad principles and guidance for managing the credit risk exposures of the Bank in connection
with its lending and other businesses/activities involving credit risk. Operational aspects are detailed
in the Book of Instructions In respect of any specific product / schemes formulated, the product /
scheme specific guidelines, including indicative financial / non- financial benchmarks will prevail.
3 OBJECTIVES OF THE POLICY
The Policy is devised for prudent and safe deployment of the Bank’s financial resources for lending
and related purposes and also for achieving uniformity in the lending framework, approach and
practices throughout the Bank. Credit risk exposure decisions in terms of the Policy are required to
be taken and implemented in conjunction with various regulatory and operational guidelines issued
from time to time. The Policy also aims to improve the standard and effectiveness of credit risk
management in the Bank.
The objectives of the Policy are as follows:
 To provide an enterprise-wide framework and guidance for all concerned in respect of the
principles and processes to be adhered to for credit risk decisions.
 To optimize the Economic Value Addition (EVA) to the shareholders by setting ex ante
benchmarks for risk-adjusted return (RAROC) for different types of credit risk exposures and
compare the same with actual risk-adjusted returns periodically for the purpose of ex post
evaluation of credit risk decisions for making adjustments in the credit risk exposures, if needed.
 To ensure growth in credit risk exposure-related business and income in line with the annual
and the medium-term plans adopted in this regard.
 To build and maintain a well-diversified credit portfolio yielding adequate risk-adjusted return by
way of interest and commensurate non-interest income and entailing low credit cost.
 To provide need-based and timely credit to various borrower segments, and especially to the
target market customers.
 To strengthen the credit delivery system and to inculcate credit risk culture enterprise-wide.
 To strengthen the credit risk management system and procedure in the Bank by way of risk
identification, measurement, monitoring and mitigation.
 To set up prudential exposure norms and to avoid credit risk concentration.
 To establish risk-based pricing framework for all credit products and facilities.
 To comply with various regulatory requirements, more particularly the exposure norms, Priority
Sector norms, Credit Risk Management guidelines etc. of RBI / other authorities.

4 ROLES AND RESPONSIBILITIES
4.1 Board
 The Board of Directors will be responsible for the overall credit risk exposure management in
the Bank by ensuring that all credit risk decisions are taken following the Policy and that the
benchmark risk adjusted returns on credit risk exposures are achieved.
4.2 Risk Management Committee of the Board:
 To approve the Policy and set all the major credit risk appetite and monitoring limits.
 To provide support and advice to the Board in all matters relating to credit risk exposure
management, including the formulation of the Policy and its periodic review.
4.3 Credit Policy Committee:
The Credit Policy Committee will be responsible for:
 Formulating credit policies and procedures on standards for credit proposals, financial
covenants, rating standards and benchmarks.
 Formulation, review and implementation of credit risk appetite and strategy as per direction
given by the board/committee of board.
 Enforcement and compliance of the risk parameters and prudential limits set by the
Board/regulator etc.,
 Review collaterals, guarantee and other credit risk mitigants including issues related to eligibility,
concentration, legal enforceability, valuation, liquidation, inspection, custody etc.
 Laying down risk assessment systems, developing MIS, and monitoring quality of loan portfolio,
identification of problems and correction of deficiencies.
 Portfolio credit risk review i.e. evaluation of portfolio, conducting comprehensive studies on
economy, industry, testing the resilience on the loan portfolio etc.,
 Improving credit delivery system upon full compliance of laid down norms and guidelines.
 Provide guidance on critical data issues, interpretation issues, or any other issues requiring CPC
consideration
 Setting exposure limits for Sectors/ specific industries not exceeding 10% of the global credit
exposure as on 31st March of previous financial year.
 To approve the credit spreads / default risk premium in respect of different rating grades
4.4 Product & Process Approval Committee:
Product & Process Approval Committee (PPAC) is constituted by the Board for approval of all new
products, processes and / or modifications of the existing products including credit-related products
/processes /schemes.

Chief Risk Officer, Credit Monitoring, Operations & Services, Strategic Planning, Corporate Accounts
(CFO), Compliance, Legal and IT Security functions are the Core Members of PPAC.
The meeting of PPAC will be convened by Risk Management Department whenever found
expedient. The quorum of PPAC is 5 members, including its Chairman. Out of quorum of 5 members,
at least 3 must be Core Members. The presence of Heads of Risk Management and Compliance
Department is mandatory. In absence of Head of Compliance function, the meeting must be attended
by the next senior most executive of the department to deliberate on the issues. However, the
participation of executives other than departmental head (his/her deputy) will not be considered for
the quorum. The constitution and quorum of PPAC can be amended by MD & CEO at his discretion,
taking into account the relevant policies of the Bank, RBI guidelines and the business needs in this
regard.
 All the credit verticals before referring any new products, processes and / or modifications of the
existing products including credit-related products /processes /schemes to PPAC for
consideration shall ensure that the proposal is in tune with the Bank’s business objectives and
strategies. Further, if for the purpose of approval of credit proposal in respect of the new product
or scheme by the designated sanctioning authority, any departure from the indicative financial
parameters/norms as mentioned in this Policy is required, the credit vertical concerned will be
required to justify the departure from a credit risk perspective.
 Compliance Department will examine that the proposed product/ process complies with laws,
rules and regulations applicable to the Bank and is in conformity with the Policy. In case the
department is not satisfied on compliance issues it should present its observations along with
suggestions to the PPAC.
 Risk Management Department will independently identify the credit risk associated with the
product and the operational risks associated with the process. Owner department / verticals to
ensure that they are properly addressed/mitigated so as to be in conformity with the risk appetite
statement of the Bank approved by the Board.
 Before approving a new product/process, the PPAC will ensure that adequate controls and
monitoring mechanism in respect of the identified risks will be put in place before its
implementation.
 Subsequent to the approval of a product/process by PPAC, it will be the responsibility of the
credit vertical concerned to own and control the risks thereof.
 PPAC will ensure that all new products/schemes conform to the risk-adjusted return benchmarks
outlined in this Policy.
 PPAC may approve / disapprove the agendas submitted to it.
 PPAC is authorised to approve (i) financial as well as non-financial covenants applicable to a
specific product/ scheme, and (ii) their pricing (iii) Credit Rating Model.

The minutes of PPAC will be submitted to the Credit Policy Committee / ALCO / Enterprise Risk
Management Committee (ERMC) for noting and further direction, if any.
4.5 Risk Management Department:
 To measure, manage and control credit risk on a Bank-wide basis as per the Policy
 To enforce compliance with the credit risk parameters and prudential limits set by the Board
 To prescribe and implement credit risk measurement and monitoring tools, systems and
procedure to be followed for this purpose, develop MIS for credit risk, monitor the overall quality
of the Bank’s credit portfolio, identify problem exposures and formulate corrective measures
 To undertake risk-return evaluation of the various segments of the Bank’s loan portfolio from
time to time for providing insight and feedback for policy formulation and marketing efforts.
4.6 Credit Risk Evaluation Process
Proposals falling within the delegated lending powers of Corporate Office level committees are to be
submitted to the CRO at least 2 days prior to submitting to the respective sanctioning committees.
The CRO shall be reviewing such proposals from risk angle and accordingly communicate his / her
observations to the respective sanctioning committees.
The CRO will be a member in various Corporate Office level Credit Sanction Committees and his /
her role will be that of an advisor. He / She shall not have any voting right.
Similar set up is to be established at Regional Office and Zonal Office level credit committees.
The following types of proposals will be routed through Credit Risk Evaluation Process:
 In case of fresh exposure of Rs 5 crore & above to a single counterparty
 In case of increase / additional exposure to a single counterparty by any amount leading to the
aggregate exposure to that counterparty reaching Rs 5 crore & above
 Decline in rating by two notches in BOB-1 rated accounts & 1 notch in BOB-2 & below rated
accounts, with current exposure of Rs. 5 crore and above (Review / review with decrease).
The following types of exposures are not required to be routed through Credit Risk Evaluation
Process:
 Overdraft / Loan against Bank’s own Deposits

 Facilities secured fully by cash collaterals
 Staff Loan, Schematic Lending, including Corporate / MSME / Rural & Agriculture and Retail
Loans, such as Supply Chain Finance, Value Chain Finance, Construction & Mining Equipment,
Commercial Vehicle Finance etc., where no deviation is proposed vis-à-vis the approved product
guidelines.

5 Governance in Credit Administration
5.1 Classification of customers for the purpose of credit risk exposures:
Corporate & Institutional Credit (C & IC):

 Corporate entities (public and private limited companies), partnership firms, Limited Liability
Partnership firms, sole proprietorships, trusts, government-owned non-corporate entities etc,
having a gross annual turnover (Sales) of over Rs 500/- crore as per the last Audited Balance
Sheet or Previous Financial Year will be classified as Corporate & Institutional Credit Borrowers.
Emerging Corporate (EC):

partnership firms, sole proprietorships, trusts, government-owned non-corporate entities etc.
having a gross annual turnover of over Rs.250/- crores and up to Rs.500/- crores as per the last
Audited Balance Sheet or Previous Financial Year will be classified as Emerging Corporate
Borrowers.
MSME:
 Corporate entities (public and private limited companies), partnership firms, sole proprietorships,
trusts, government-owned non-corporate entities etc. having a gross annual turnover of up to
Rs.250/- crore1 as per the last Audited Balance Sheet or Previous Financial Year / any other
statutory returns (e.g. GST return) will be classified as MSME borrowers.
Partnership firms, sole proprietorships, trusts, clubs, government-owned non-corporate entities
etc. whose original investment in plant, machinery & equipment meets the Regulatory Definition
for MSME borrowers.
 In respect of project finance, including real estate, where the project cost is up to Rs. 50/- crore.
 Financing under various Government schemes launched for the MSME Sector.
Rural & Agricultural Banking Business
 All agriculture and allied activities accounts irrespective of their priority sector status will be
classified under Rural & Agriculture Banking Business Segment. The Rural & Agri Banking
Department will be responsible for this vertical.
1
If the annual turnover of a borrower in the C & IC or EC categories fall below their respective
thresholds, the account will continue to remain with C&IC or EC verticals and will not be
transferred to MSME vertical.

 Food & Agro Processing Units each with aggregate credit facilities from the banking system up
to Rs. 100 crore, irrespective of their annual turnover.
Retail Lending:
 Lending for purposes related to personal consumption / meeting personal financial life cycle
needs, excluding loans and advances not covered under C & CI, EC, MSME, Rural & Agri
segments and for purposes other than business are covered under the Retail Lending Segment.
 It includes retail lending products such as Baroda Home Loan, Baroda Auto Loan, Baroda
Education Loan, and Baroda Mortgage Loan to Individuals/ Non-Individuals and other products
namely Baroda Personal Loan, , Baroda Loan against Securities, Baroda Ashray (Reverse
Mortgage Loan) etc.
The classification of borrowers, as above, will be entity-wise and not group-wise. Different entities
b e l ong ing t o the same group can be classified differently, depending on their gross annual
turnover, as above.
Credit Policy Committee is authorized to redefine / modify the classification, as above, and provide
clarification in this regard.
The accounts once reviewed/ sanctioned will continue to be with the respective verticals till next
review.
5.2 Credit Expansion Planning:
Each credit vertical will prepare an annual credit expansion plan each financial year. For this purpose,
they will take into consideration the macroeconomic outlook, interest rate scenario, competition in
the market, regulatory and economic capital requirements, prudential risk limits, risk appetite of the
Bank, target Risk Adjusted Return on Capital (RAROC), and resource planning, including training &
development etc. The same will be an integral part of the Target Market Approach.
5.3 Credit related Product Programme and Launching Process:
Every credit vertical will be responsible for designing processes and controls, systems architecture
and capacity planning for achieving its annual business plan and targets in compliance with this
Policy. Accordingly, it will design the process flow (preferably in terms of digital footprints) for
originating new business and monitoring of the portfolio to maintain the desired credit quality. The
specific product programme along with the product launching process will be required to be approved
by the Product & Process Approval Committee (PPAC) and be subjected to performance review by
the Credit Policy Committee after 6 months of rollout and every year thereafter..
The Credit Programme will cover the following aspects:
1. The existing credit portfolio (with quality analysis) and the desired portfolio profile
2. SWOT analysis, which should encompass:
 Industry / sector / segment analysis
 In case of asset-based financing, stage under which the underlying asset / industry / sector is in
the product life cycle (Introduction / growth / maturity / decline)
 Who are the major players in the industry and competitors, threats to the product
 What are the internal capabilities / resources / infrastructure availability to service the customers
under the proposed product segment?
 Analysis of regulatory landscape, restrictions if any, permissions / compliance required
3. Key risks (credit / market / operational / liquidity) identification, providing risk mitigants for each
identified risk (both intrinsic as well as extraneous risk)
4. Projections and estimates:
 Target segments/sectors of the market
 Target geographical segments
 Target business levels
 Target market
 Target returns (risk adjusted returns)
 Expected credit losses
 Overall cost- benefit analysis
5. Business Model
 Delivery model including governance structure, outsourcing requirements, if any, origination,
delivery, maintenance and collection mechanism, pilot and full-fledged launch/ stage-wise
implementation etc.
 Underwriting criteria in line with this Policy and the Bank’s risk appetite.
 Process flow and job cards
 Clearly articulated roles and responsibilities of all concerned in respect of the product and the
process involved.
 Infrastructure required, including IT systems and skilled manpower.
The above are indicative and not exhaustive. Credit verticals may include further information, as they
may deem fit, depending upon the product.
Process of Product Approval / monitoring:
Pre-launch:
Each Credit Programme is required to undergo a collaborative review and approval process in order
to identify appropriate technology, accounting and regulatory standards, legal, compliance and
control framework. Prior to launch of the product, Risk and Control Self-Assessment is to be carried
out.

Post launch Monitoring:
The credit verticals should submit the performance review report in respect of all approved products
(in the specified format approved by the Credit Policy Committee) after 6 months of rollout and every
year thereafter to the CPC.
5.4 HR Capacity for Credit Risk Management:
The Bank will adopt appropriate HR policies for developing and retaining high quality HR capacity to
enhance the appraisal, sanction and monitoring standards of its credit business. Towards this,
Officers engaged in appraisal, inspection, documentation and post-disbursement supervision and
monitoring will be required to possess at least any one of the following qualifications / certification to
qualify for the role:
(a) Chartered Financial Analyst
(b) Chartered Accountant / ICWA / CMA
(c) MBA with specialisation in finance
(d) Certification in Small Business Banking and Commercial Credit from Moody’s
Analytics
(e) Any other certification approved by RBI / IBA / Bank from time to time
 The Bank will make arrangements for training, continuing education and professional
development of the staff engaged in the credit function. For this purpose, the staff can be
deputed to attend in-house as well as external training programme/ workshop etc.
 Officers with qualifications, as above, will be given the responsibilities for processing relevant
sector / product specific credit proposals. Similar requirements of qualification/ certification and
sector-specific expertise will be put in place soon for the officers involved in credit monitoring
purposes also.
 Proposals with exposure of Rs. 50 crore and above (or equivalent in other currencies) will be
processed by officers having any of the qualifications mentioned in (a), (b), and (c) above or
having minimum experience of 3 years in credit function, including sector-specific expertise and
certification mentioned in (d) & (e) above.
HR department will be responsible for developing a pool of human resources with qualification and
experience, as above.
6 CREDIT STRATEGY
6.1 Credit Risk Strategy
The Credit Risk Strategy of the Bank for 2019-20 will apply to all incremental credit risk exposures
to be taken during this period. The strategy has five main elements:

6.1.1 Target Sectors and Target Markets:
In addition to laying stress in meeting specific commitments in terms of RBI and Government of India
directives, the focus areas and target markets for the domestic operations of the Bank will be:
 Micro, Small and Medium Enterprises (MSMEs): Likely to grow faster in view of high priority
being accorded to this segment by the Government.
 Retail Finance: To grow further with specific thrust on housing loans.
Looking into the market dynamics and the economic scenario, all the sectors / industries will be
categorized in terms of their future outlook: positive, neutral or negative. The Bank takes into
account Industrial Risk Scores provided by various agencies, demand-supply situation for the
products, government policies etc. for this purpose. The Bank’s target segment/sector approach for
different sectors / industries based on their respective outlooks, will be as under:
 Positive outlook sectors / industries –Will be the primary target sector.

 Neutral outlook sectors – Exposure will be moderate
 Negative outlook sectors – Exposure will be limited to the borrowers with external rating of ‘A’
and above for exposures of above Rs. 50 crore. For food & agro processing units qualifying for
priority sector classification, the sector outlook and rating criteria will not be applicable
ZOCC-(GM-CC) can approve the proposals falling otherwise within the DLP of upto ZOCC where
the industry is having negative outlook but not meeting the rating criteria. COCC ED can approve
proposals falling otherwise within the DLP of ZOCC (GM-CC), COCC (GM- CC) & COCC ED. CACB
& MCB can approve all other proposals.
Risk Management Department will provide sectoral outlook along with advisory on a monthly basis.
The target market approach, as per the template that has been developed for this purpose, will be
prepared at the beginning of every financial year by respective credit verticals and it will be reviewed
once in every quarter. The annual target market approach and quarterly review thereof will be put up
to the Credit Policy Committee and the Risk Management Committee of the Board for approval.
6.1.2 Credit rating matrix – other than retail
The Bank intends to achieve a good level of diversification across the rating grades that will enable
it to tap good business opportunities while reducing both the expected as well as the realized credit
losses. Accordingly, the Bank’s desired mix of corporate loan book (individual exposures of Rs. 5
crore and above) in terms of credit ratings for the current financial year will be as under:

Internal Rating range Target share in External Rating Range Target share
incremental # in incremental
business business
BOB 1, BOB 2 10% AAA / CMR 1 10%
BOB 3 15% AA / CMR 2 15%
BOB 4 20% A / CMR 3 25%
BOB 5 35% BBB & Unrated / CMR 4 30%
& unrated under CMR
BOB 6 and below including 20%* Non- Investment Grade 20% *
un-rated obligors (BB and below) / CMR 5
and below
(*) Managing Director& CEO may permit the exceeding of the target share by 5 percentage points (i.e. up to and including
25%) in respect of internal rating of BOB 6 & below including un-rated obligors. Similarly, the target may be exceed by 5
percentage points (up to and including 25%) for non- investment grade i.e. BB and below in respect of external credit rating
with the permission of MD & CEO.
(#) For Non- Indian Corporates, only Internal Rating criteria will be applicable.
For MSME exposures of Rs. 5 crore and above and up to Rs. 10 crore, CMR- CIBIL MSME Ratings will only be applicable.
For MSME exposure of Rs. 10 crores and above, the following rating criteria will be applicable:
Internal Rating range Target share in External Rating Range Target share
incremental in incremental
business business
BOB 3 & BOB 4 25% AAA to A 5%
BOB 5 50% BBB including un-rated 45%
exposures
BOB 6 & below, including un- 25% BB 45%
rated exposures
B and below 5%
Shortfall in any rating grade can be compensated by higher exposure in upper rating grades but not vice-versa.
Corporate & Institutional Banking Department and MSME Department will submit monthly progress
report with regard to the above (incremental credit exposure - rating grade-wise) to Risk
Management Department (RMD). RMD, in turn, will submit consolidated report including its summary
in dash board format to the Credit Policy Committee on quarterly basis.

6.1.3 Credit risk matrix – retail
For retail exposures, the Bank currently has a well-diversified portfolio across various rating grades.
The Bank has also linked its pricing policy to the CIBIL scores of the borrowers. In the current
financial year, the Bank plans to automate the loan appraisal and approval process for retail loans
by building new models and IT applications in this regard.
The Bank’s strategy in respect of incremental growth in retail loans in 2019-20, will be linked to credit
information bureau scores. An Illustrative target range of retail portfolio based on CIBIL score is as
under:
CIBIL Score range % share in incremental business

800 and above 30%
760- 799 20%
725-759 10%
Below 725 10% #
Borrowers with limited / no credit history (0, -1) 30%
(#)Managing Director & CEO can approve deviation up to 5 percentage points, i.e., incremental retail portfolio
with CIBIL score below 725 could go up to a maximum of 15%.
Shortfall in any rating grade can be compensated by higher exposure in upper rating grades but not vice-versa.
In case of other credit information companies, equivalent range will be taken into account.
Retail Credit Department to submit monthly progress report with regard to the above (incremental
credit exposure growth – CIBIL Score-wise) to Risk Management Department (RMD). RMD, in turn,
will submit consolidated report, including a summary in dash board format to the Credit Policy
Committee on quarterly basis.
6.1.4 RAROC
 RAROC is to be computed for each credit exposure (other than exempted categories as per
section 6.9.1) and the same is required to be compared with the Cost of Equity (COE). Proposals
where RAROC equals / exceeds the COE (presently 17%) shall be considered as indicative
benchmark, subject to the exempted categories. Moreover, during periodic review, the realised
RAROC on credit risk exposures will be compared with the RAROC assumed at the time of
sanction / previous review. Wherever the realised RAROC is consistently less than the COE
over two successive reviews, the Bank may suitably enhance the price of the exposure or
endeavour to exit the same.
 For the financial year 2019-20, RAROC for at least 75% of the C & IC customers with exposure
of Rs. 50 crore and above (excluding exempted categories) must meet the prescribed COE

mentioned above or as revised from time to time. The Risk Management Department will issue
operational guidelines in this regard and also report the status in this regard to the CPC on
quarterly basis.
 ALCO is empowered to review Cost of Equity and approve benchmark for RAROC.
 The details regarding the RAROC framework are narrated in the Section 6.9.1
6.1.5 Requirement of cross-selling and ancillary business:
Preference will be given to proposals with adequate scope for cross- selling and ancillary business
opportunities. Actual business and revenue generated in this regard will be reviewed once in a year
and will be taken into account for the purpose of calculation of the realised RAROC, as above.
The other elements of the credit risk strategy are:
 Aggregate credit exposures beyond 3 years maturity shall not exceed 35% of the total.
 Launching new product line with enhanced monitoring of credit risk.
6.2 Assessment Parameters/Guiding Principles
The major guiding principles to assess credit risk proposals are the following:
 Eligibility of the applicant customer to represent the institution / company seeking financing
 The customer’s current financial position and future projections in this regard
 The customer’s operating / managerial ability
 Past credit record and performance
 Credit risk rating
 KYC / AML compliance including due diligence of borrowers
 Current facilities that have already been extended to the customer
 Risks specific to the sector and the type of business of the customer
 If the customers belongs to a business group, credit facilities, if any, extended to the other
entities of that group and their performance
 Credit risk mitigants / collateral securities
6.3 Credit Delivery Channels
6.3.1 Branches
 To generate adequate quality leads for various loan products from the existing as well as new
customers belonging to the target sectors/markets.

 Under the new Centralized Credit Processes that have been introduced in the Bank for retail as
well as corporate customers, the role of the branches as the primary source for generation of
leads will continue as hitherto, with a supportive role to be provided by the Sales Team of SMS
/ SMELF for the purpose of penetrating specific target markets.
 To assist in the identification & selection of housing projects in their respective catchment areas
and in the approval of the builders thereof, so as to generate leads from such neighbourhood
projects and parking of the Home Loan accounts with the branch.
 To canvass and collect loan applications from the existing / prospective customers, along with
all the required documents.
 Branches which are not linked to SMS / SMELF, will continue to sanction loans under their
respective DLP and refer the remaining proposals to their higher authorities as per the guidelines
laid down for this purpose.
6.3.2 Specialized Mortgage Stores (SMS)
The Bank has set up specialized units known as Specialized Mortgage Stores (SMSs), for
processing retail mortgage loans. The SMSs work on the principle of assembly line, comprising Sales
as well as Processing Units. All the applications of retail mortgage loans obtained through the
marketing team of SMS, Direct Selling Agents (DSAs) and the linked branches are processed at
SMSs. The operational guidelines for SMSs (issued prior to the establishment of Centralized
Processing Centre) are currently in place, wherein details of job roles / responsibilities of SMSs and
branches on the various aspects of functioning and administration have been defined in detail and
conveyed to the operating units.
6.3.3 Centralized Processing Centre (CPC)
Corporate CPC: A Centralized Processing Centre (CPC) at the Baroda Corporate Centre has been
set up, as a part of the Corporate & Institutional Credit Department, with the objective of speedier
and high quality processing of large value credit proposals. Further, relationship teams for large
corporate groups at all CFS & Emerging Corporate Branches have been established for enhanced
focus on the corporate & institutional business of the Bank.
Retail CPC: For bringing about standardization of processes, improvement in the turnaround time
(TAT), enhancement in the quality of loan approvals and also for allowing SMSs to focus on
marketing and selling, the Bank has set up a Centralised Processing Centre (CPC) for retail loans.
The centralized processing structure, as above, involves the following three entities:
1. Centralised Processing Centre (CPC)

2. Specialised Mortgage Store (SMS)
3. Branches.
Detailed guidelines with regard to job roles, responsibilities and operational procedure applicable to
each of the three entities are provided in the ‘Policy Document on Centralization of Retail Credit
Process’. The CPC will undertake the following key activities:
 Credit approvals following the credit risk strategy outlined in the Policy, with permissible
deviations, if needed
 Management of agencies (valuers, lawyers, CPV)
 Coordination with Specialised Mortgage Store (SMS) and the Branches for achieving
appropriate TAT.
6.3.4 MSME Loan Factories (SMELF)

Assembly line model has also been adopted by the Bank for hassle-free and faster dispensing of
credit to the MSME segment by setting up MSME Loan Factories (SMELF). They work involving
simplified processes and utilizing in-house skilled man power to deliver prompt and high quality
services to the MSME customers. The monetary limits mentioned aforesaid are subject to change
from time to time. Each SMELF will be catering to the various needs of the MSME clientele of the
branches that are allocated to it. The functions of SMELFs are as under:
 Sales & marketing of MSME products and services of the Bank

 Coordination, monitoring and liaising with approved panel of advocates, valuers, consultants for
conducting TEV study etc.
 Conducting/arranging pre-sanction visit to the customers and preparation of inspection reports
 Appraisal and sanction/recommendation of MSME proposals
Integrated SME Loan Factory (ISMELF):
To handle end to end customer service starting from sourcing i.e. Lead generation to Loan sanction
to Account opening, documentation, disbursement and all post disbursement monitoring of the
accounts, ISMELF has been established at New Delhi and Mumbai
6.3.5 International Merchant Banking Cell (IMBC)

All fresh ECB loans (Primary / Secondary Market participation) of Indian corporates will be negotiated
& processed at IMBC. IMBC specifically focuses on Indian corporates and their requirement of
foreign currency funds. IMBC has the following major functions:
1) Liaison with Indian corporates to develop the business.

2) Submission of bids for arranging/ underwriting Syndicated Loans.
3) Marketing of services and products of overseas branches to Indian corporates.
4) Work as a Central Processing Cell for ECB proposals in respect of Indian corporates.

5) Liaison with Indian/ Foreign Banks active in the market.
6) Structured products for financing of specific assets such as rigs, ships, aircrafts etc.
7) Tailor made financial solutions for specific requirements.
8) Advisory services on cross- border funding options
The IMBC will report to Head- International Banking- Credit.
6.3.6 Global Syndication Centre (GSC)
With IMBC being functional with a focus on the Indian corporates, the Global Syndication Centre
(GSC), - London focuses on the non-Indian corporates. However, it can also make reference to the
Corporate Centre on Indian corporates particularly for the purpose loan syndication deals in the
secondary market. The following are the major activities of GSC:
1) Risk Participation/ Trade Finance/ cross border lending/ exposures mainly to countries other
than India.
2) Pro-actively look for the opportunities in Syndicated Loans / Investments in the secondary
market for Indian / non-Indian corporates.
3) Non fund-based credit risk exposures/ credit risk participation.
4) Broad base the syndicated loan assets and diversify the accompanying credit risk.
5) Undertake sale/ purchase of Syndicated Loans / Investments in the secondary market.
6) Trade in Bonds/ Debt instruments, as per the relevant investment policies.
7) Periodically monitor the portfolios of Syndicated Loans / Investments of money center
branches of the Bank
8) Act as a distribution center in Europe/ America for Syndicated Loans Arranged by IMBC.
6.3.7 Regional Syndication Centers (RSC)
In view of the growth of the syndicated loan markets at the major financial centers, the Bank has set
up Regional Syndication Centers (RSCs) at Singapore, Dubai and New York. The role of the RSCs
includes, amongst others, finding opportunities in Syndicated Loans/ Investments both in the primary
and secondary markets in their respective regions. Over a period of time, the RSCs will take over
the functions of GSC for their respective regions and GSC will become another RSC for a region
that will be identified for this purpose.
6.4 Facility Structure
All credit facilities should contain meaningful and practical covenants. Facilities are to be structured
based on identifiable sources of repayment / discharge.

Unsecured credit facilities (excluding schematic lending) should be granted only to customers whose
financials are beyond question and who have a risk rating of not lower than BOB 4 for domestic
operations and BOB 5 for overseas operations. Further, Unsecured Loans (excluding Syndicated
Loans) are to be considered in respect of those customers maintaining satisfactorily conducted
transactional accounts with the Bank for at least 6 months. Under exceptional circumstances,
unsecured loans to customers not satisfying this condition regarding transactional account may be
considered and approved by the next higher sanctioning authority up to the level of ZOCC- GM CC.
Corporate Office level credit committees (COCC-GM-CC, COCC- ED, CACB & MCB) may consider
such proposals falling under their respective delegated powers. For overseas operations, respective
territories to stipulate the rating criteria in their respective loan policies.
Personal guarantees of the principal shareholders are highly desirable in respect of facilities to
closely- held private sector companies. In case such personal guarantees cannot be obtained, the
reasons there for should be cogently recorded in the appraisal note.
6.5 Exposure Norms
Reserve Bank of India prescribes from time to time various prudential limits/ caps for the credit
portfolios of banks. The Bank sets its internal limits within the prudential limits set by the Reserve
Bank of India. Various types of prudential limits as well as the Bank’s internal caps are articulated
hereunder:
6.5.1 Single/ Group exposure limits:
Reserve Bank of India issued guidelines vide DBR.No.BP.BC.43/21.01.003/2016-17 dated

December 01, 2016 on Large Exposure Framework (LEF) which are effective from April 01, 2019.
‘Large Exposure’ (LE) is defined as the sum of all exposure values of the Bank to a counterparty or
a group of connected counterparties if it is equal to or above 10% of the Bank’s Eligible Capital Base
(ECB). Eligible Capital Base (ECB) is the effective amount of Tier 1 capital as per Basel III. Large
Exposure Framework has to be complied with at the stand-alone (including overseas branches) as
well as the consolidated levels. Consolidated level refers to exposure of all the banking group entities
which are under regulatory scope of consolidation.

Large Exposure limits as % of the Tier 1 Capital:
Exposure Type Exposure Limit as %
of Tier 1 Capital
Single Counterparty 20% (#)
Group of Connected Counterparties 25%
Single-NBFC 15%
Interbank Exposure 25%
QCCP (Other than clearing exposures) 25%
CCP (all exposures) 25%
Exposure of Non-G-SIB in India to a G-SIB and to a non-Bank-SIFI 20%
(#)
In exceptional cases, MCB is authorized to allow an additional 5 percent exposure of the Bank’s
available eligible capital base.
Exemptions:
The exposures that will be exempted from the LE limits are listed below:
a) Exposures to the Government of India and State Governments which are eligible for zero
percent risk weight under the Basel III – Capital Regulation framework of the Reserve Bank
of India;
b) Exposures to Reserve Bank of India;
c) Exposures where the principal and interest are fully guaranteed by the Government of India;
d) Exposures secured by financial instruments issued by the Government of India, to the extent
that the eligibility criteria for recognition of the credit risk mitigation (CRM) are met.
e) Intra-day interbank exposures; Intra-group exposures;
f) Food credit to borrowers, the limits in respect of which are authorised by the Reserve Bank
of India;
g) The Banks’ exposure to QCCPs arising out of clearing and settlement activities
h) Rural Infrastructure Development Fund (RIDF) deposits placed with NABARD.
Any breach of the above LE limits shall only be under exceptional conditions and shall be reported
to RBI (DBS, CO) immediately and rectified at the earliest but not later than a period of 30 days from
the date of the breach.
Definition of group of connected counterparties:
The Bank will classify the borrowers under a Group on the basis of following criteria:

1) Controlling/Substantial Interest, i.e. holding of shares, conferring voting rights of 20% and
above by the same enterprise or by the same individual himself or jointly with his/her close
relatives and/or more than 50% of the directors/partners (excluding the ones nominated by
Government of India/Reserve Bank of India/Financial Institutions/Banks/Debenture Trustees)
in one enterprise are the same; and/or
2) Two or more enterprises have a contractual arrangement to share the power to govern the
financial and/or operating policies of the said enterprises; ·and/or
3) One company is subsidiary company (as defined under Companies Act) of another company
either by itself or through one or more subsidiaries.
4) If holding company of two or more companies is the same company
5) If there exists a "holding and subsidiary relationship" between the borrowing company and
such group company/ies (in the case of a split in the group, if the split is formalized, the
disintegrated groups will be regarded as 6eparate groups); or
6) lf the borrowers fall under any or more of the following criteria:
a) lf companies/ firms have common Directors/ Partners, excluding professional/independent
nominated Directors;
b) lf majority of the promoter directors are either partners in a firm or directors in private or
public limited companies and have substantial interest (50 % or above) in the equity/ shares
in the firm;
c) If the majority of the directors are employees of another company with or without any
substantial interest held by them;
d) lf there exists significant equity interest with voice in management (as mentioned in Articles
of Association);
e) lf it is otherwise so declared by the borrower in the credit application; and
f) lf the borrowers are close family members (in case of individual & partnership firms)
Large Exposures are required to be reported to the RBI periodically. Risk Management Department
shall be responsible to monitor all the exposures as mentioned above and shall apprise the Credit
Policy Committee in this regard at least on quarterly basis
6.5.2 Substantial Exposure Cap
“Substantial Exposure Limits” i.e., the sum total of exposures assumed in respect of those single
borrowers enjoying credit facilities in excess of a threshold limit say, 10% or 15% of the Bank’s capital
funds. As per the norms prescribed by RBI, the aggregate Substantial Exposure Limit may be fixed
at 600% to 800% of capital funds depending upon degree of concentration risk a particular bank is
exposed to. In the light of this, the Bank has set the following Substantial Exposure Limits (SEL):

 The Aggregate SEL shall be 300% of the Bank’s capital funds as per the latest audited annual
Balance Sheet. For the purpose of aggregating single borrower exposure for SEL, the thresholds
will be 5% of Capital Funds.
 The Bank may exceed the aforesaid 5% (Single Borrower SEL) up to the ceiling of 15%
prescribed by RBI but shall not exceed the overall SEL of 300%.
6.5.3 Individual, Non-Corporate & Private Limited Co
Type of borrower Maximum aggregate exposure (FB+NFB)@

Individual / Proprietor as Borrower Rs. 25 crore
Non-Corporates Rs. 100 crore
(Partnerships®, Trusts, Associations)
Private Limited Company Ceiling as % of Bank’s Tier 1 capital
BOB 1 to BOB 4 10%
BOB 5 to BOB 6 5%
BOB 7 & below, including Un-rated 4%
@ Exposure other than against specified securities (such as cash collaterals, Bank’s own deposits, NSC /
KVP etc.) for which there is no restriction
® The above ceiling will also be applicable to the aggregate of all facilities sanctioned to partnership firms
(excluding LLPs) which have identical partners.
This cap is applicable to the aggregate of all facilities sanctioned to such constituents as under:
a) Sole proprietor of one concern is sole proprietor of another concern.
b) More than 75% partners of one firm are the same in another firm.
c) In other cases all the members of one concern are members of another concern.
As regards HUF, in one of the judgments the Supreme Court has expressed that HUF cannot enter
into a contract due to floating nature of the organization as its composition changes by births, deaths,
marriages & divorces. The Bank will not accept any HUF [Proprietor / partner] as borrower in respect
of funded as well as non-funded credit facilities or guarantor.
Permitted Deviation:
COCC-ED, CACB & MCB are authorized to consider proposals of above mentioned borrowers, upto
their respective DLP. Any other proposals otherwise falling within the DLP of COCC- GM-CC, COCC
ED is authorized to approve. All other cases otherwise falling within the DLP upto ZOCC- GM- CC,
can be considered by COCC- GM-CC. In case of schematic lending, respective sanctioning
authorities may consider exposures under their respective delegated powers.

6.5.4 Other Limits:
Exposure as per type of activity/ nature of exposure Exposure ceiling
Leasing, Hire Purchase & Factoring Services 10%
(as % of total outstanding global advances as on 31st March of
previous year)
Unsecured Advances & Guarantees 30%
st
(as % of total outstanding global advances as on 31 March of
previous year)
Term Loans in terms of residual maturity of more than –3-years 35% (last quarter)
(as % of total outstanding global advances)
Internal Rating wise exposure cap:
Investment Grade & above Minimum up to 80%
Below investment grade Maximum up to 20%
Indian Joint Ventures / Wholly-owned Subsidiaries Abroad and 20% of the Bank’s
Overseas Step-down Subsidiaries of Indian Corporates (#) unimpaired capital funds
(Tier I and Tier II capital)
Aggregate assets outside India Not to exceed 25% of the
Bank’s demand and time
liabilities in India
(#) subject to:
a) Loan will be granted only to those joint ventures where the shareholding by the Indian company is 51% or
more.
b) Proper systems for management of credit and interest rate risks arising out of such cross border lending
are in place.
6.5.5 Capital Market Exposure

a)
S Exposure type Limit as % of TNW (#)
No RBI ceiling Bank’s
internal cap
1 Total Capital Market (TCM) Exposure – Solo basis & 40.00% 40.00%
Consolidated Basis
1.1) Advances for PSU Disinvestment -- 5.00%
(*)
1.2) Advances to Stock Brokers, Market Makers -- 2.00%
1.3) Others (Individual) -- 2.00%
1.4) Adv. for acquisition of Equity in Overseas JV -- 2.00%
1.5) Direct investment in shares, convertible bonds / 20.00% 8.00%
debentures, units of equity-oriented mutual funds and all
exposures to Venture Capital Funds (VCFs) [both registered

S Exposure type Limit as % of TNW (#)
No RBI ceiling Bank’s
internal cap
and unregistered]
1.6) Other exposure to capital markets (exposure to mutual -- 33.00%
fund trustees/ companies for the purpose of funding their
redemption requirements
2 The Bank’s shareholding in any company, whether as pledgee, 30.00% 30.00%
mortgagee or absolute owner. (@)
(*) Subject to maximum ceiling of Rs. 600 Crores
(#) Limit as on 31st March of previous year. TNW of solo entity/ consolidated entity is to be considered for ceilings
on solo/ consolidated basis respectively
(@) Limit as % of own paid up share capital or the paid-up share capital of the company in question.
b) Financing of equities and investments in shares
Exposure Ceiling Rs. In lakhs
Loans against security of shares, convertible bonds, convertible 20.00
debentures and units of equity oriented mutual funds to
individuals provided there is no credit facility obtained from the
rest of the banking system in this regard
Loans/advances to any individual against security of shares, 10.00
convertible bonds, convertible debentures, units of equity oriented
mutual funds and PSU bonds for subscribing to IPOs provided
there is no credit facility obtained from the rest of the banking
system in this regard
Loan to employees of companies for purchasing shares of their Lower of :
own companies, under ESOP/ reserved by way of employee’s a) 90% of the purchase price of
quota under IPO the shares or
b) Rs. 20 lakhs.
6.5.6 Enhancing Credit Supply for Large Borrowers through Market Mechanism
Reserve Bank of India (RBI), issued guidelines on 25th August, 2016 on enhancing credit supply to
large borrowers through market mechanism, which are applicable from 01st April, 2017. Definition of
key terms are as under:
Aggregate Sanctioned Credit Limit (ASCL): The aggregate of the fund -based credit limits
sanctioned or outstanding; whichever is higher, to a borrower by the banking system. ASCL will also
include unlisted privately placed debt with the banking system.

Specified Borrower: A borrower having an ASCL of more than
a) Rs. 25,000 crore at any time during FY 2017-18
b) Rs. 15,000 crore at any time during FY 2018-19
c) Rs. 10,000 crore at any time from 1st April, 2019 onwards.
Reference Date: The date on which a borrower becomes a “Specified borrower”
Normally Permitted Lending Limit (NPLL): 50% of the incremental funds raised by the Specified
Borrower over and above its ASCL as on the reference date, in the financial years succeeding the
FY in which the reference date falls.
Banking system: All banks in India including RRBs and co-operative banks and branches of Indian
banks abroad.
Any fresh / additional exposure to Specified Borrower beyond NPLL will attract additional provision
of 3% & additional Risk Weight of 75%. Restructured accounts where cut-off ASCL is achieved /
likely to be achieved due to additional finance under the restructuring package under JLF and other
RBI frameworks will not be subjected to disincentive mechanism for the incremental exposure.
In view of the foregoing, the Bank will lend in such a way that the additional provisioning and
additional risk weights are not attracted on account of the Bank’s credit exposures. Risk Management
Department shall monitor any exposure on specified borrowers and apprise the Credit Policy
Committee and Risk Management Committee of the Board in this regard on quarterly basis. If, under
exceptional circumstances, exposure is to be assumed on any specified borrowers, the Corporate &
Institutional Credit Department to approach Risk Management Department for suitable pricing to
offset the additional provisioning and risk weight requirements.
The Bank will also provide Partial Credit Enhancement (PCE) to bonds issued by Corporates /
Special Purpose Vehicles (SPVs) for funding projects subject to RBI guidelines.
6.5.7 Exposure to Banks:
The Bank has put in place exposure limits in respect of all counterparty banks under the “Policy on
Exposure Limits on Counterparty Banks”. This part of the Policy deals with the Bank’s exposures
to Indian banks (SBI, PSU Banks, leading private sector banks, other private sector banks and co-
operative banks) and foreign banks.
The exposure limits fixed under the aforesaid policy broadly cover on-balance sheet items (such as
direct loans and advances to banks, buyers’ credit, negotiations under letters of credit and money
market placements etc.); off balance sheet items which are not subject to market risks (such as

guarantees, acceptances, letters of credit, standby letters of credit, adding confirmation to letters of
credit etc.) and off balance sheet items subject to market risks (such as outstanding spot & forward
foreign exchange contracts including cross currency swaps). Settlement related credit facilities,
which cover risks arising through payment system or through settlement of treasury and securities
transactions are also covered.
6.5.8 Investment in Bonds / Debentures / Commercial papers:
Domestic Treasury:
Investment in un-listed non-SLR securities shall not exceed 10% of the total investments in non-
SLR Securities as on March 31st of the previous year. Such investments may exceed the limit of 10%
by an additional 10 percentage points provided it is on account of investment in securitization papers
issued for infrastructure projects and bonds / debentures issued by securitization companies and
reconstruction companies.
Total investment by the Bank in liquid / short term debt schemes of Mutual Funds with weighted
average maturity of portfolio of not more than 1 year will be subject to a prudential cap of 10% of
their net worth as on 31st March of the previous year.
(Rs. In crore)
S No Cap description Cap / Limit
1 Investment in bonds per issuer 1,000
2 Total investment in bonds portfolio 15,000
3 Investment in CP per issuer 2,000
4 Total Investment in CPs 20,000
5 Residual maturity of bonds at the time of purchase 5 years
(maximum)
6 Residual maturity of CP at the time of purchase 1 year
(maximum)
7 Investment in zero-coupon bonds 5% of outstanding Investments
in Corporate Bonds
8 Maximum investment/ subscription in any issuance of Rs. 25 crores or 25% of the
Zero Coupon Bond (ZCB) issue size, whichever is lower
(Primary market), Rs. 25 crore
(secondary market)
9 Aggregate limit for Bank’s Investment outstanding in 15,000
CD portfolio (face value)

Exclusions from above prudential norms:
 Security receipts issued by securitization companies / reconstruction companies registered with
the RBI, investment in asset backed securities and mortgage backed securities rated at or above
the investment grade.
 Investment in unlisted convertible debentures
 Investments in RIDF / SIDBI / RHDF deposits will not be included in the numerator as well as in
the denominator for computing compliance with the limits / caps described above.
Investment cap for overseas territories:
The cap on investment portfolios at overseas territories will be at aggregate of 25% of total resources
or 40% of core funds (customer deposits + interbank / Inter-branch funds with maturity exceeding 6
months + owned funds) of the respective territories, whichever is lower.
(USD in Millions)
Authority Government Issuers Non- Government issuers
with minimum Minimum Rating less
investment grade Rating AA than AA
sovereign rating
CACB 30.00 25.00 15.00
COCC- ED 25.00 20.00 Nil
COCC- (GM-CC) 20.00 15.00 Nil
Territorial Committee (GM Headed) # 15.00 10.00 Nil
Note: The above cap is for investment in securities other than Investments required to meet local regulatory
guidelines for maintaining liquidity including LCR and other than deployment of surplus local currency funds
which cannot be deployed in respective local currencies and are, therefore, converted into major foreign
currencies for investment as authorized by the International Operations.
(#) The territorial committee headed by General Manager can exercise the above delegated power up to a
maximum amount of USD 400 million for Government securities, USD 100 Million for Indian issuers and USD
200 Million for non- Indian issuers in a financial year.
6.5.9 Specific Industry / Sectoral Limits
As a prudent practice for effective Risk Management, the Bank maintains industry and sectorial cap
keeping in view, inter alia, the Bank’s exposure in this regard. The Bank monitors the performance
of different sectors annually and in the light of assessment of risk and return from time to time,
reviews these caps periodically.
The sectoral / industry exposure cap will be approved by the Credit Policy Committee upto a
maximum of 10% of the Bank’s global credit exposure as at the end of 31 st March of the previous

year, for any industry / sector. For exposure in excess of 10% of global credit exposure, Risk
Management Committee of the Board is authorized to set the exposure cap.
Each overseas territory (Branches) can have its own sectorial ceilings for its territorial jurisdictions
as per its loan policy keeping in view activity pattern in the area of operation. However, the sectoral
/ industry exposures will be aggregated at global level for the Bank as a whole. Risk Management
Department will be monitoring the exposures on fortnightly basis. Further, the periodical monitoring
report of Sectoral / Industry caps shall be submitted to the Credit Policy Committee on quarterly
basis and to the Risk Management Committee of the Board on annual basis as of 31 st March every
year.
Permitted Deviation in Industry / Sectoral Caps for Domestic Operations & Overseas
Territories (Branches):
CACB: Permitted to exceed the stipulated cap by 5% both where cap is fixed in terms of percentage
and / or absolute amount.
MCB: Permitted to exceed the stipulated cap by 10% both where cap is fixed in terms of percentage
and / or absolute amount.
Above deviations are subject to adhering to the regulatory caps, wherever applicable.
6.6 Restricted Exposures
From time to time, exposure to certain sectors or types of assets could be restricted for internal or
external reasons, including regulatory prescription. The operating units and business verticals should
be well versed with all restricted exposures before offering any product to the customer.
1. Wilful Defaulters / Fraud Accounts / Promoters, Directors of such companies Loans

settled under compromise / write-off:
No loan to be granted to Wilful Defaulters (Refer to Recovery Policy), Fraud Accounts and
Promoters, Directors of such companies availing credit facilities from our Bank / Other Banks /
Financial Institutions/ NBFCs, whose loans were settled under compromise /write off. However, for
exposures written off under loan waiver schemes of Central / State Government, such restrictions
will not apply.
In respect of borrowers / guarantors, whose loan accounts were closed (i) under compromise
settlement involving write off, or (ii) by the Bank/other banks/NBFCs with a write off, further lending
(fresh, review with increase & takeover proposals) to them can be considered by the sanctioning
authority strictly on the merits of each case, subject to the following conditions:

Loans & Advances (other than Credit Card) Credit Card write offs
write offs:
1. The aggregate amount written off in regard 1. Cases where credit card account status
to all the credit facilities provided to the write-off / settlement involving amount
borrower by the Bank/other banks/NBFCs was upto Rs.25,000/- and Current CIBIL
not higher than Rs. 1.00 lakh. score of the borrower is at least 725 (in
case of Retail Loans), no deviation is
2. Current CIBIL score of the borrower must be required;
at least 725 in case of Retail Loans.
2. Cases where credit card account write-
3. The loan accounts should have been off/settlement involving amount above
adjusted/ closed at least -5- years prior to the Rs.25,000/- took place in the past and/ or
date of current application for fresh credit current CIBIL sore is below 725,
facilities. Deviation powers rest with the authorities
as under:
All other cases may be referred to ZOCC-
GMCC for prior approval. For the proposals Parameter Authority
falling under the power of ZOCC-GMCC & For proposals falling upto ZOCC
above prior approval to be obtained from next the powers of RMCC
higher authority. For proposals falling in the ZOCC-GMCC
powers of ZOCC
For proposal falling under Respective
the power of ZOCC-GMCC next higher
and above authority
1. While considering deviation proposal where write-off / settled amount is not available in CIBIL/
other bureau report, sanctioning authority may consider ‘High Credit’ amount displayed in
CIBIL / other bureau report for the purpose of quantifying the write-off / settled amount.
2. In case the loan account(s) of the borrower was/were previously with the Bank (BOB, eDena
& eVijaya), the borrower should pay upfront (before disbursal of the fresh credit facilities, if
sanctioned) the aggregate amount written off.
3. In case of review of accounts, sanctioning authority may take a view in all such cases without
referring for deviation
4. No loan should be granted to willful defaulter and fraud account.

2. Security of own shares:
The Bank does not grant any loan and advance on the security of its own shares.
3. Loans to Directors of the Bank:

 The Bank shall not, except with the prior approval of the Reserve Bank of India, remit, in whole
or in part, any debt due to it by (a) any of the Bank's Directors, or (b) any firm or company in
which any of the Bank's Directors is interested as director, partner, managing agent or guarantor,
or (c) any individual, if any of the Bank’s directors is its partner or guarantor.
 The Bank will not hold shares whether as pledgee, mortgagee or absolute owner, in any
company in the management of which Managing Director or any manager of the Bank is in any
manner connected or interested.
 Without prior approval of the Board or without the knowledge of the Board, no loans and
advances should be granted to the Directors and close relatives of the Bank’s Board or other
banks' board of directors, including the directors of scheduled co-operative banks, subsidiaries
/ trustees of Mutual Funds / Venture Capital Funds set up by the Bank or other banks.
o Unless sanctioned by the Board of Directors / Management Committee, the Bank shall not
grant loans and advances aggregating Rs.25 lacs & above to:
a. Directors (including the Chairman/Managing Director) of other banks
b. any firm in which any of the directors of other banks is interested as a partner or
guarantor; and
c. any company in which any of the directors of other banks holds substantial interest or
is interested as a director or as a guarantor.
o The Chairman/Managing Director or any other Director of the Bank who is directly or
indirectly connected or interested in any credit proposal shall disclose the nature of his / her
interest to the Board when any such proposal is discussed. He / she should not be present
in the meeting unless his / her presence is required by the other Directors for the purpose
of eliciting information and the Director so required to be present shall not vote on any such
proposal.
o In this regard, declaration as under shall be obtained from every borrower stating that:
 He/ She is not a director or specified near relation of a director of a banking company
(where the borrower is an individual)
 None of the partners is a director or specified near relation of a director of a banking
company (where the borrower is a partnership firm); and
 None of its directors is a director or specified near relation of a director of a banking
company (where the borrower is a joint stock company)
o The declaration should also give details of the relationship of the borrower to the director of
the bank, if any.
o A condition will be stipulated for the grant of any credit facility that if the declaration made
by the borrower concerned with reference to the above is found to be false, then the Bank
will be entitled to revoke and / or recall the credit facility.
4. Loan against NRE and FCNR (B) Deposits:
The Bank grants loans against NRE and FCNR (B) deposits either to the depositors or the third
parties subject to margin requirements stipulated from time to time. The facility of premature
withdrawal of NRE/ FCNR deposits shall not be available where loans against such deposits are to
be availed of.
5. Buy back of own shares:

The Bank will not provide loans to companies for buy-back of its own shares/securities.
6. Grant of loans & advances to officers and the relatives of Senior Officers:
Extension of any credit facility to the specified near relatives of the officers, and to any entity in which
any of the specified near relatives of Senior Officers (Officers in Grade / Scale IV and above) are
connected/interested shall be subject to the following conditions:
 No officer or any shall sanction any credit facility to the specified near relatives of that officer or
officers comprising that committee. Such facilities shall be sanctioned by the next higher
sanctioning authority. Those facilities, along with the following information shall be reported to
the Board within a fortnight of their approval:
 Particulars of credit facilities to any borrower (partnership firm) in which any of the
specified near relatives of any senior officer of the Bank holds substantial interest, or is
interested as a partner or guarantor; or
 Particulars of credit facilities to any borrower (joint stock company) in which any of the
specified near relatives of any senior officer of the Bank holds substantial interest, or is
interested as a director or as a guarantor,
o In this regard, declaration, as under, shall be obtained from every borrower stating that:
 He/ She is not a specified near relation of any senior officer of the Bank (individual),
 None of the partners is a specified near relation of any senior officer of the Bank
(Partnership firm), and
 None of its directors is a specified near relation of any senior officer of the Bank (Joint
stock company)
o Ensure that the declaration gives details of the relationship, if any, of the borrower to any
senior officer of the Bank.
o Stipulate a condition for the grant of any credit facility that if the declaration made by a
borrower with reference to the above is found to be false, then the Bank will be entitled to
revoke and/or recall the credit facility.
o A compliance certificate is required to be attached with each credit proposal specifically
stating that the sanctioning authority and recommending authority are not specified near
relative of the borrower / guarantor in question.
The staff members can avail following Retail Loans under schemes applicable to the general public:
(i) Baroda Home Loan (all variants)

(ii) Baroda Home Improvement Loan
(iii) Baroda Top up loan
(iv) Baroda Auto Loan i.e. Loan for Car / Two wheeler
(v) Baroda Advance Against Securities
(vi) Baroda Advance against Gold Ornaments/ Jewellery/ Gold Coins
(vii) Baroda Education Loan (for Education purpose of son/daughter/Spouse
(viii) Any other Retail Loan, if it is specifically allowed for staff members, as per the guidelines
of the respective schemes.
Staff /Relatives of Officers up to Scale III:
 Retail Loan proposals (under public scheme as above and/or under staff scheme) of staff/
Officers upto Scale-III and relatives of staff members’ upto Scale-III shall be considered by
Branch Heads / SMS Heads / CPC Heads / RMCC (as the case may be) of the respective
Branches/offices as per the general lending powers meant for the public schemes.
Staff (Senior Officers) Scale IV and above availing under schemes applicable to the General
Public:
 Upto Scale VI: ZOCC as per the general lending powers
 (The Zone having jurisdiction of the branch / base branch of the administrative office)
 Scale VII (GM , GM-CC): COCCED
Staff (Senior Officers) Scale IV and above availing under Staff Home Loan Scheme:
- Upto Scale VI: Zonal Head in the rank of GM - Full powers.
(The Zone having jurisdiction of the branch / base branch of the administrative office)
- For Executives in Scale-VII, sanctioning authority will be ED, being next higher level. The
processing will be done by concerned CPC/SMS/ Region as the case may be and then submitted
to Retail Banking Department, BCC to put upto ED for consideration of sanction.
(Note: Advances to Staff/ Officers, against whom disciplinary action is either pending or
contemplated, shall be considered/ sanctioned by the General Manager (HRM), Corporate Office.)
Relatives of Senior Officers Scale IV and above:

 Shall be considered by Branch Heads / SMS Heads / CPC Heads / RMCC (as the case may
be) of the respective Branches/offices as per the general lending powers meant for the public
schemes.
 Any credit decision in respect of officers of Senior Management Grade and their relatives is to
be immediately advised to Retail Banking Department, Baroda Corporate Center for reporting
to MCB

Staff & its family members i.e. spouse, unmarried children & mother, father is eligible for availing
Baroda Kisan Credit Card (BKCC) loan as per the scheme guidelines, subject to having inherited
agriculture land standing in their name/s and following the aforementioned guidelines.
7. Advances against sensitive commodities under Selective Credit Control (SCC):

Reserve Bank of India issues, from time to time, directives stipulating specific restrictions on
advances against specified sensitive commodities. Generally, the following commodities are treated
as sensitive commodities: -
 Food grains i.e. cereals and pulses, Selected major oil seeds indigenously grown, viz.
groundnut, rapeseed / mustard, cotton seed, linseed and castor seed, oils thereof, vanaspati
and all imported oils and vegetable oils, raw cotton and kapas, sugar/ gur / khandsari, cotton
textiles which include cotton yarn, man-made fibers and yarn and fabrics made out of man-made
fibers and partly out of cotton yarn and partly out of man-made fibers.
The Bank is free to fix prudential margins on advances against the above mentioned sensitive
commodities. However, in case of loans and advance against levy sugar, a minimum margin of 10%
will apply.
8. Ozone Depleting Substances:

The Bank will not extend finance for setting up of new units producing/ consuming Ozone Depleting
Substances (ODS). No financial assistance should be extended to small/medium scale units
engaged in the manufacture of the aerosol units using chlorofluorocarbons (CFC) and no refinance
would be extended to any project assisted in this sector.
9. Loans & advances against shares, debentures and bonds:

 No Loan to be granted against partly paid shares.
 No loan to be granted to partnership/ proprietorship concerns against the primary security of
shares and debentures.
 No financing of “Badla” transactions.
10. Advances against Fixed Deposits Receipts issued by other Banks:

The Bank will not grant advances against Fixed Deposit Receipt or Deposits of other banks
11. Advances to Agents/Intermediaries based on Consideration of Deposit Mobilizations:

The Bank will not be party to unethical practices of raising of resources through agents/
intermediaries to meet the credit needs of the existing/ prospective borrowers or from granting loans
to the intermediaries, based on the consideration of deposit mobilization, who may not require the
funds for their genuine business requirements.
12. Loans against Certificate of Deposits (CDs):
The Bank can lend against CDs and buy back its own CDs only in respect of CDs held by Mutual
Funds, subject to the provisions of paragraph 44(2) of the SEBI (Mutual Funds) Regulations, 1996.
Further, such finance, if extended to equity-oriented mutual funds, will form part of the Bank's capital
market exposure.
13. NBFC Activities not Eligible for Bank Credit:

The following activities undertaken by NBFCs, will not be financed by the Bank:
i) Bills discounted/rediscounted by NBFCs, except for rediscounting of bills discounted by
NBFCs arising from sale of Commercial vehicles (including light commercial vehicles), and
two wheeler and three wheeler vehicles, subject to the following conditions:
a. the bills should have been drawn by the manufacturers on dealers,
b. the bills should represent genuine sale transactions as may be ascertained from the
chassis/ engine number and
c. Before rediscounting the bills, bank should satisfy itself about the bona-fides and track
record of NBFCs which have discounted the bills.
ii) Investments of NBFCs both of current and long-term nature, in any company / entity by way
of shares, debentures, etc. However, Stock Broking Companies may be provided need-
based credit against shares and debentures held by them as stock-in-trade.
iii) Unsecured loans / inter-corporate deposits by NBFCs to / in any company.
iv) All types of loans and advances by NBFCs to their subsidiaries, group companies / entities.
v) Finance to NBFCs for on lending to individuals for subscribing to Initial Public Offerings
(IPOs) and for purchase of shares from secondary market.
vi) Bridge loans / interim finance: The Bank will not grant bridge loans of any nature, or
interim finance against capital / debenture issues and / or in the form of loans of a bridging
nature pending raising of long-term funds from the market by way of capital, deposits, etc.
to all categories of Non-Banking Financial Companies and also Residuary Non- Banking
Companies (RNBCs). Branches need to ensure that these are not circumvented in any
manner whatsoever by purport and / or intent by sanction of credit under a different
nomenclature like unsecured negotiable notes, floating rate interest bonds, etc., as also
short-term loans, the repayment of which is proposed / expected to be made out of funds
to be or likely to be mobilized from external / other sources and not out of the surplus
generated by the use of the asset(s).
vii) Advances against collateral security of shares to NBFCs: A NBFC’s own shares and
debentures cannot be accepted as collateral securities for secured loans granted to it for
any purpose.
viii) Restriction on guarantees for placement of funds with NBFCs: The Bank will not
execute guarantees covering inter-company deposits / loans thereby guaranteeing refund
of deposits / loans accepted by NBFCs / firms from other NBFCs / firms. The restriction
would cover all types of deposits / loans irrespective of their source, including deposits /
loans received by NBFCs from trusts and other institutions. Guarantees should not also be
issued for the purpose of indirectly enabling the placement of deposits with NBFCs.
Repayment schedule and moratorium period of Term Loans to NBFC are to be determined on the
basis of the nature of lending activity and cash flows of the NBFC. Moratorium period may be
granted to NBFC- IFCs and NBFC- HFCs, subject to a maximum period of 18 months
14. Bank finance to Equipment Leasing Companies:

The Bank will not enter into lease agreements with equipment leasing companies as well as other
Non-Banking Financial Companies engaged in equipment leasing. The Bank can only support lease
rental receivables arising out of lease of equipment/ machinery owned by the borrowers, lease
rentals receivables arising out of sub-lease of an asset by a non-banking non-financial company
(undertaking nominal leasing activity) or by a NBFC shall be excluded for the purpose of computation
of eligible bank finance for such company.
15. Financing of Housing Projects:

The Bank will not grant finance for construction of buildings meant purely for Government/ Semi-
Government offices, including Municipal and Panchayat offices. However, the Bank can grant loans
for activities, which will be refinanced by institutions like NABARD.
Projects undertaken by public sector entities which are not corporate bodies (i.e. public sector
undertakings which are not registered under the Companies Act or which are not statutory bodies /
corporations) will not be financed by the Bank.
In respect of projects undertaken by corporate bodies, the Bank will satisfy that the project is run on
commercial lines and that the loan amount is not in lieu of or to substitute budgetary resources
envisaged for the project. The loan could, however, supplement budgetary resources if such
supplementing was contemplated in the project design. In case of housing projects which the
government is interested in promoting either for weaker section or otherwise, a part of the project
cost may be met by the Government through subsidies made available and/ or contributions to the
capital of the institution taking up the project. In such cases, the Bank’s loan / credit will be restricted
to the project cost excluding the amount of subsidy/ capital contribution from the Government. The
Bank will independently verify and ensure the commercial viability of the project.
16. Issue of Bank Guarantees in favor of Financial Institutions:

The Bank can issue guarantees favoring other banks / FIs /other lending agencies for the loans
extended by the latter, subject to adhering to the following guidelines:

a. Prudential limits: Such guarantee exposure should be within the regulatory limits for Single /
Group exposure limits and should not exceed 15% of the Bank’s Tier I capital as on 31st March of
previous financial year.
b. Security and Margin: Applicable norms to the type of borrower / loan.
c. Delegation of powers: As per existing DLP
d. Reporting system: Such guarantee exposures to be reported to Corporate & Institutional Credit
Department on monthly basis.
e. Periodical reviews: As per the existing guidelines in this regard.
f. The guarantee shall be extended only in respect of borrower constituents and to enable them to
avail of additional credit facility from other banks / FIs/ lending agencies.
g. The Bank will assume a funded exposure of at least 10% of the exposure guaranteed.
h. The Bank will not extend guarantees or letters of comfort in favour of overseas lenders including
those assignable to overseas lenders, except for the cases permitted under the FEMA
regulations/guidelines.
i. The guarantee issued by the Bank will be an exposure on the borrowing entity on whose behalf
the guarantee has been issued and will attract appropriate risk weight as per the extant guidelines.
The Operating Units to comply with the recommendations of the Ghosh Committee and other internal
requirements relating to issue of guarantees to obviate the possibility of frauds in this line of business.
17. Lending against Bank Guarantee issued by other Banks/ FIIs:

The Bank can extend credit facilities against the guarantees issued by other banks/FIs subject to
strict compliance with regulatory / internal guidelines issued from time to time. The exposures
assumed by the bank against such guarantees of another bank / FI will be deemed as an exposure
on the guaranteeing banks / FIs and will attract appropriate risk weight per extant guidelines.
Issue of Bank Guarantees in favour of Domestic Banks and Financial Institutions against
Counter Guarantee issued by Domestic / Overseas Bank/ Financial Institutions.
 Bank may selectively consider proposals for issuance of guarantees in favour of Banks/FIs
against counter guarantee of other Domestic banks/Overseas bank/FI.
 The guarantee shall be extended only in respect of KYC-complied customers to enable them to
avail additional credit facility from other banks / FIs / lending agencies.
 The guarantee issued by the Bank will be an exposure on the bank/FI issuing the counter
guarantee. Guarantee will be issued in the Customer ID of the counter-guarantee issuing
bank/FI.
18. Advances against Bullion / Primary gold:

 The Bank will not grant any advances against bullion / primary gold / units of Gold Exchange
Traded Funds (ETF) and units of gold mutual funds. An exception in this regard will be made in
respect of specially minted gold coins sold by the Bank. In such cases, it shall be ensured that
the weight of the coin(s) does not exceed 50 grams per customer and the amount of loan to any
customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 grams) shall
be within the Board approved limit. Further, while granting advances against the gold coins, the
end use of the funds is to be ensured invariably which should be for approved, non-speculative
purposes.
 The Bank will not grant advances to the silver bullion dealers.
 However, Sovereign Gold Bonds can be accepted as Collateral Security for Loans and
advances.
19. Advances against Gold Ornaments & Jewelry:

In line with RBI Guidelines, loans (including bullet repayment loans) sanctioned by the Bank against
pledge of gold ornaments and jewelry for non-agricultural purposes should not exceed 75 per cent
of the value of gold ornaments and jewelry. Further, LTV of 75 per cent shall be maintained
throughout the tenure of the loan for all loans extended against pledge of gold ornaments and jewelry
for non-agricultural end uses.
20. Grant of loans for acquisition of Small Savings Instruments / Kisan Vikas Patras
(KVPs):
The Bank will not sanction loans for acquisition of / investing in Small Savings Instruments / Kisan
Vikas Patras. The Bank will sanction loans against small savings instruments (KVPs, NSCs, etc.)
subject to due diligence.
21. Finance for and Loan against Indian Depository receipts (IDR):
The Bank will not grant any loan / advance for subscription to Indian Depository Receipts (IDRs).
Further, the Bank will not grant any loan / advance against security / collateral of IDRs issued in
India.
22. Bridge Loans against receivables from Government:

The Bank will not extend bridge loans against amounts receivable from Central / State Governments
by way of subsidies, refunds, reimbursements, capital contributions, etc. subject, however, to the
following are the exemptions:
 The Bank will finance against subsidy receivable under the normal Retention Price Scheme
(RPS) for period not exceeding 60 days in case of fertilizer industry. Further, this facility is being
allowed as a purely temporary measure and the fertilizer companies should strengthen their
financial position gradually so that they do not depend on the bank for finance against subsidy.
The Bank will not finance against any other subsidy receivables such as, those in respect of
claims raised by units on the basis of expected revision in retention price because of escalation
in costs of inputs and in respect of freight, etc.

 The Bank will grant finance against receivables from Government by exporters (viz. Duty Draw
Back and IPRS) as per the provisions of the guidelines issued from time in this regard.
23. Cross Border Lending:

The overseas territories (except UK, USA, UAE, Hong Kong and other off-shore banking units) can
consider credit facilities only for borrowers located in the country in which the lending branch is
located. Thus, the cross border lending cannot be sanctioned at the territory level (except UK, USA,
UAE, Hong Kong and other off-shore banking units who are permitted to consider cross border
lending). However, all territories can discount cross border trade bills, subject to a condition that no
exposure is taken on high risk & off-credit countries including debt-ridden countries and countries
facing external sector difficulties
6.7 Activities Not Encouraged by the Bank & Licensing Requirements
6.7.1 Activities Not Encouraged by the Bank

The Bank will not encourage the following activities:-
 Financing for exports to countries for which Export Credit Guarantee Corporation Ltd. (ECGC)
does not extend guarantee cover.
 Enhancement of credit exposure to clients engaged in certain Industry / sectors/markets as may
be specified by the Bank on account of unsatisfactory experience. (Presently, jelly-filled cables
manufacturing / trading etc.)
 Setting up of new sugar factories in the co-operative sector and / or sugar factories of capacity
less than 5000 TCD (Tonnes of crushing per day) of sugarcane. Proposals for working capital
facilities for sugar production units can be considered, subject to the guidelines of RBI under
Selective Credit Control.
For overseas territories:
 Credit facilities for setting up units for products which are in the banned list / negative list of
financial institutions / other authorities in the respective countries
 Financing requests of borrowers who are defaulters with other financial institutions, and/or
against whom caution notices are issued by local regulators
For proposals falling up to the powers of COCC ED, COCC ED is authorized to consider proposals
under above list. Respective corporate level committee may consider other proposals.
6.7.2 Activity Clearance
A. Any fresh / increase in exposure irrespective of the quantum of proposed exposure in case of
following activities/ industries, will be subject to Activity Clearance from Corporate Centre
Committee even though proposals fall under the powers of Branch/ Regional/ Zonal level:-
Applicability
I. Leasing, Hire-Purchase, Non-Banking Finance Companies (other than Central/ State

Government-owned NBFCs),
II. Capital Market (other than advances against shares to individuals),
III. Financing of Film-making – (Sanctioning authority rests with CACB / COCC-ED only within
their delegated powers)
IV. Bridge Loan.
V. Financing of Educational Institute (Above Rs.5.00 crore)
VI. Aviation
VII. Infrastructure-Power
VIII. Infrastructure-Roads
IX. Infrastructure-Telecom
X. Securitization / Through Deed of Assignment.
XI. Gems & Jewellery and Diamond Industry (Above Rs. 2 crore)
XII. Commercial Real Estate for Malls
XIII. Advances to co-operative banks
In respect of following activities, the activity clearance may be accorded by ZOCC- GMCC for
proposals falling up to the power of ZOCC-GM irrespective of the substantive rank of Zonal Heads.:
I. Plantation (excluding tea, coffee and rubber plantations, common horticulture crops, Jatropha,
spices, medicinal plants, essential oils/ Aromatic plants),
II. Manufacturing & Trading of Liquor,
III. Vegetable Oil, Vanaspati.
IV. Cinema Halls, Theatres/ Auditoriums/ Amusement Parks, Marriage Halls Kalyanamandapams).
V. Educational Institutions (for proposal up to Rs.5.00 Crs)
VI. IT & ITES
VII. Advances to Hotels/ Resorts
VIII. Real Estate (other than malls) for Commercial Activities but excluding Retail Loans, Priority
Sector Advances
Note:
a. All cases falling under the power of Zonal Head (ZOCC-GMCC) and above for the above
mentioned activities under section B, are to be put up to Activity Clearance Committee, Baroda
Corporate Centre for consideration.
b. With respect to any ad hoc request related to activities in which activity clearance is required from
Corporate Office, Sanctioning Authority may take a view on adhoc request under respective DLP
strictly on the basis of merit.
c. Fresh sanction of any credit facility, whether FB or NFB including Guarantees and
Temporary Overdrafts, are not to be sanctioned to any Co-operative Bank. Also, guarantee or any
other credit facility is not to be sanctioned to any customer of any co- operative Bank merely on the
strength of counter-guarantee of a co-operative Bank. In exceptionally meritorious cases, the
proposal for sanction of fresh/new credit facility to co- operative banks and/or to their customers
merely on the strength of counter-guarantee of a co-operative bank irrespective of the amount may
be sent to the Corporate Office, Corporate & Institutional Credit Dept., BCC, Mumbai
d. In case of Retail Loans, activity clearance is not required to be obtained from the respective
authorities for Home Loan, Auto Loan, Personal Loan etc. even though prospective borrower is
engaged in the activities, requiring Activity Clearance as mentioned above. However, in respect of
Mortgage Loan to non- individuals, activity clearance needs to be obtained where the Borrower is
engaged in those activities, requiring Activity Clearance as mentioned above.
Activity Clearance Committee
Structure of  Head: Respective ED

Activity  Members:
Clearance - Head - Corporate & Institutional Credit
Committee - Head - Large Corporate & Institutional Relationship
- Head – Retail Assets & Other Mortgages
- Head - MSME Relationships & Government Schemes
- Head – Rural Agriculture Banking & CSR
- Chief Risk Officer
Quorum  Head of the Committee
 Minimum 2 other members, out of which one should be the head of related
vertical
Meeting Minimum once a week
frequency
6.7.3 Agreement In Principle (AIP)
Applicability:
AIP is required in respect of fresh proposals with external credit rating below “A” and falling beyond
the ZOCC (GM-CC) powers.
Authority to issue AIP:
 For proposals falling under discretionary lending powers of COCC- GM- CC, AIP will be
accorded by respective Corporate GM CC / Credit Vertical Head not below the rank of General
Manager.
 For proposals falling within the DLP of COCC-ED, AIP will be accorded by respective ED.

 For proposals falling under discretionary lending power of CACB and MCB, AIP will be accorded
by respective ED and MD&CEO.
Note: If AIP / Activity Clearance falls within BCC powers, ZO/RO/ Branch shall submit the AIP /
Activity clearance form over e-mail directly to the respective sector / Functional Head at BCC
in the specific format.
Branch may or may not carry internal rating as it is not a necessary requirement for AIP/Activity
clearance.
6.7.4 Industries for which Industrial Licensing Is Compulsory
 Distillation and brewing of alcoholic drinks.

 Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
 Electronic Aerospace and Defence Equipment – all types.
 Industrial explosives including detonating fuses, safety fuses, gun-powder, nitrocellulose and
matches.
 Hazardous chemicals:
 Hydrocyanic acid and its derivatives,
 Phosgene and its derivatives,
 Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified (example: Methyl
Isocyanate)
 Drugs and pharmaceuticals (according to modified Drug Policy issued in September, 1994 and
subsequently amended in February, 1999)
Any other as per Central Government / State Government notification issued / to be issued from
time to time.
6.8 Repayment Period for Term Loans:
Generally Term Loans are granted for a period of 3 years and above but not exceeding 15 years
taking into account the repayment capacity of the borrowers, cash generation etc. except in case of
scheme specific advance i.e. Housing Loan & Education Loan where repayment period of more than
15 years including moratorium. In addition, Infrastructure finance is also made available for a period
of more than 15 years on case-to-case basis on merits, in conformity with the regulatory guidelines.
In case of restructured term loan accounts the tenor of the loan will be considered on merits of each
case. In case of overseas territories, the advances repayable between 10 years and 15 years shall
not exceed available net owned funds of the respective territories.

6.9 Underwriting Criteria
6.9.1 Risk Adjusted Return on Capital
RAROC provides an objective basis to evaluate all the risk types and risk exposures consistently,
including the authority to take risk decisions. Further, RAROC promotes consistent, fair, and
reasonable risk-adjusted performance measures that are needed to make the trade-off between risk
and reward more efficient.
RAROC will form an important criterion for all credit decisions. For fresh proposals, RAROC will be
calculated on the basis of the estimated income over the next 12 months adjusted for expected loss
based on the data on actual loss incurred in the loan accounts with similar external/internal credit
ratings. In the case of renewal of facilities, with or without overall enhancement in limits, the higher
of the realised RAROC over the last 12 months or the estimated RAROC should be used. The
RAROC approach requires that the RAROC so computed be compared to the Cost of Equity (COE)
of the Bank. Credit risk exposures with RAROC below the COE do not add economic value to the
shareholders’ equity. COE for the Bank is currently 17%, as approved by the ALCO. ALCO is also
authorised to specify / stipulate / modify the aforementioned benchmark COE for any specific
segment / sector / product from time to time.
Exemptions to RAROC Framework:

 Regulatory retail portfolio as per Basel guidelines (Exposure not exceeding Rs. 5 crore and
annual average sales turnover not exceeding Rs. 50 crore)
 Pre-settlement and settlement counterparty limits for taking derivatives exposures.
 Individual loans, irrespective of the ticket size, under schematic retail lending. However, RAROC
requirement will be applicable at scheme level when any scheme is conceived and when the
performance of the scheme is evaluated post facto. Further, any deviation in respect of
processing charges / interest rate in a specific proposal must be justified by way of computation
of RAROC of that specific proposal. This stipulation will also apply to the regulatory retail
portfolio.
 Credit Risk in respect of exposure under regulatory instance e.g., RIDF funds to NABARD etc.
 Staff Loans
 Credit exposure on counterparty banks
 Loans / Overdrafts against the Bank’s own deposits
6.9.2 Internal Credit Rating:
For robust credit risk management, the Bank assesses credit risk in exposures at each obligor and
facility level by rating them under BOBRAM.

The internal BOBRAM rating so assigned at the time of credit approval process forms the basis for
acceptance criteria, pricing, discretionary lending power for sanction, inspection of securities and
rating-based exposure ceiling.
BOBRAM uses different models for different sector/market/business types, which aspect makes the
internal ratings more relevant and sensitive to the risk and performance factors of the obligors.
Different types of rating models used by the Bank currently are listed below:-
6.9.2.1 Domestic Exposure:
 Models for Corporate Entities – The Bank’s corporate portfolio comprising customers with
aggregate credit exposures equal to or greater than Rs 25 lacs is to be rated by following 12
separate BOBRAM models namely- Large Corporate Model, SME (Manufacturing), SME
(Services),Traders, Banks, NBFCs, Broker, Real Estate, Infrastructure- Road, Infrastructure-
Telecom, Infrastructure- Ports, Infrastructure- Power.
 Score Card Model for MSME rating –MSME customers with aggregate credit exposures
between Rs.2 lakhs and upto Rs. 2 crore are to be rated under this model. Exposures of Rs. 2
crore and above under this category are required to be rated as per the BOBRAM Model for
corporate entities.
 Models for Retail Loans – Score Card Models for Housing Loans, Clean Loans, Secured
Loans, Education Loans and Trader Loans (with aggregate credit exposures up to Rs 2 crores.
For aggregate credit exposures of Rs. 2 crores and above, the BOBRAM Traders Model is to be
used)
6.9.2.2 Overseas Exposure:

 Corporate Portfolio i.e., those with aggregate credit exposures greater than or equal to US$ 1
million or equivalent are rated as per BOBRAM
 In case the overseas obligor is a subsidiary/step-down subsidiary specifically floated as a
Holding Company for the purpose of investment in its own step down subsidiaries and is not
carrying out any business activity itself, the sanctioning authority can waive the carrying out of
Internal Rating. However, in all such cases the internal rating of the parent company shall be
taken into account, if it is having any credit facility from the Bank or if it is a guarantor for any
credit facility to the obligor.
Acceptance Criteria:
 Minimum Investment Grade Rating is BOB 6. Accounts rated BOB 7 and below are considered
as Non-Investment Grades
 All Non-Investment Grade proposals under the power of Branch/Region/Zone/Corporate
General Manager can be only considered by COCC-ED. Such proposals within the Corporate
Office Level committees can be considered by the respective Corporate Office Credit
Committees (i.e. COCC-ED,CACB,MCB)
 Non-Investment Grade accounts in case of Review/ Review with decrease in limits can be
considered by next level of sanctioning authority/committee for the proposals falling within the
delegated powers upto COCC (GM-CC). COCC –ED, CACB and MCB can consider such
proposals falling within their respective DLP.
6.9.2.3 Cut-off scores and grades for Retail Scoring models:
The Bank has score-based models to evaluate the risk and decision making based on the cut off
scores in the case of retail loans. The Risk Management Committee of the Board, in consultation
with Credit Policy Committee, may link the pricing to the internal scorecard model, as and when
found suitable. Presently, pricing is linked to the credit score provided by the Credit Information
companies (CIBIL Score).
The Bank has initiated a process for the re-development of all the retail credit risk rating models with
the help of external experts. The new models will incorporate new set of parameters, including credit
bureau information. The revised risk eligibility/cut-off scores will be advised after the finalization of
the models and with the due approval from Risk Management Committee of the Board after
consultation with the Credit Policy Committee on risk-based pricing of the loans.
6.9.3 External Credit Rating

Credit exposures to Public Sector Entities (PSE), Primary Dealers (PDs), Corporates, Asset Finance
Companies (AFC) and NBFC-AFC Category are governed by the external credit rating under
Standardised approach of Basel guidelines. Accordingly, External Credit Rating is required for the
approval of the above types of exposures. Overseas territories are required to obtain external credit
rating of the non- Indian borrower/ its parent company (which has furnished corporate guarantee)
from the approved credit rating agencies in respect of large credit exposures of Rs. 100 Crore (local
currency equivalent) and more. Managing Director & CEO is authorized to waive such requirement
in exceptional circumstances on case to case basis.
For Indian corporate borrowers, the approved credit rating agencies are ICRA Limited, CRISIL
Limited, Credit Analysis and Research Limited, India Ratings and Research Private Limited (India
Ratings), Brickwork Ratings India Pvt. Ltd (Brickwork), SMERA Ratings Ltd (SMERA) and Infomerics
Valuation and Rating Pvt Ltd. (INFOMERICS) or any other rating agencies approved by Regulators,
whereas, for Non- Indian Corporate Borrowers, the rating should be from Moody’s, Standard & Poor's
and Fitch.
The operating units shall not treat any loan account as rated merely on the basis of the reporting of
the borrower’s name as rated in the web site of the rating agencies, unless the Bank's exposure is
specifically mentioned as part of the obligations of the rated entity. If this is not the case, the branch
shall endeavour to obtain the rating rationale and examine whether it suffices the requirements under

the Policy. Otherwise, the branch should endeavour to convince the borrower to get an external
rating so that exposure gets covered in the rating, adhering to the RBI guidelines in this regard.
External credit rating for borrowers with exposure upto Rs. 50 crore may be exempted.
In respect of long- term rating, if the borrower has an issue rating for a particular debt where the
Bank’s claim is not included, the rating for that issue/ debt can be applied to the Bank’s unrated claim
if (i) this claim ranks pari passu with or senior to the specific rated debt in all respects and (ii) the
maturity of the unrated exposure of the Bank is not later than the maturity of the rated debt.
In cases where multiple rating assessments are available, the below-mentioned guidelines are
required to be followed:
a. If there are two ratings accorded by the credit rating agencies chosen by the borrower that map
into different risk weights, the higher risk weight should be applied.
b. If there are three or more ratings accorded by the credit rating agencies chosen by the borrower
that map into different risk weights, the ratings corresponding to the two lowest risk weights should
be referred to and the higher of those two risk weights should be applied.
The following types of exposures are exempted from the external credit rating criteria:
 Domestic Sovereign
 Direct Housing Loan to Individuals
 Commercial Real Estate
 Capital Market Exposure
 NBFC (excluding Asset Finance Company, which is to be treated as a “Corporate”)
 Staff Loans
 Regulatory Retail (where borrower wise aggregate credit exposure does not exceed Rs.5 crore
AND the borrowers average annual turnover does not exceed Rs. 50 crore)
 Exposures of upto Rs. 50 crore
 Non-Performing Assets
 If the major portion of the credit exposure is guaranteed by a sovereign body or a corporate with
either AAA or AA rating from one or more of the rating agencies mentioned above. In respect of
corporate guarantee the rating agency should have considered the contingent liability of the
guarantor “Corporate” against the Bank while awarding the rating of AAA or AA.
 The credit exposure is covered by a credit risk mitigant (CRM) to a reasonable extent and even
if not 100% (examples of CRM are the Bank's fixed deposit, National Savings Certificate, Kisan
Vikas Patra, Indira Vikas Patra, Government securities, gold etc). Equity shares, whether under
the approved list or not, are not to be treated as CRM.
 Guarantee of CGTMSE, ECGC or any other bank is available to cover at least 50 per cent of
the exposure.
Minimum credit ratings for investment exposures to the Indian corporates:
S No Type of Exposure Minimum Investment

Grade Rating
1 Investment in the capital bonds of banks AA+
2 Non-SLR bonds (other than 3 & 4 below) AA
3 Perpetual bonds AA+
4 Perpetual Non-convertible Non-cumulative Preference shares AA+
Minimum investment grade credit ratings for investment exposures to non-Indian corporates:
Investments in the Notes, Equity, Debt or any other type of instruments or derivatives issued by
entities in the overseas territories, the minimum rating shall be “AA” or equivalent. Investment in
instruments of unrated issuers and instruments with issuer ratings less than AA will be considered
on case-to-case basis only at the Corporate Office.
MCB is empowered to authorize / confirm higher level of investment exposure / confirm breach of
limits / investment below the minimum prescribed rating, unlisted / unrated instruments / tenor etc.
in respect of any permissible instrument figuring in the Investment Policy.
6.9.4 Margin / LTV Ratio

In general, it is desirable to have minimum 25% margin. However, the exact margin requirement will
be decided on case-to-case basis by the sanctioning authority. At each stage of disbursement, the
actual contribution of borrower's margin as per terms of sanction should be ensured. For Supply
Chain Finance, Value Chain, Commercial vehicle CME Product et c, the approved product guidelines
will be applicable for margin requirements. The minimum margin requirements for various types of
credit facilities are as under:
6.9.4.1 Priority Sector:
Borrowers are required to provide margin depending on the category of the borrower, quantum of
loan, type of activity and provision under specific schemes. Subsidy available, if any, in the
Government sponsored Schemes is treated as margin money. The details of margin money
requirement as per the present norms are as under:
A. Stipulated Margin on Agriculture Advances except advances to Food & Agro Based units and
Loans for construction of storage facilities viz: warehouse, market yard, godowns, silos, cold
storage etc. under “Regulatory Agriculture”:

Particulars Margin
Loan Limit up to Rs. 1,00,000 Nil
Crop Loans (irrespective of limit) Nil
Loans for purchase of Tractor and Heavy Agril. Machinery 25% (*@)
Other Agriculture Loans 15%
Agri-Clinics & Agri- Business: Up to Rs.5.00 Lacs Nil
Above Rs.5.00 Lacs 15%
NBFC-MFI under Agriculture- margin on book debts created out of the funds 10%
borrowed from the Bank
(*) For Small/Marginal Farmers, Agriculture labourers and other specified categories, no margin by borrowers
is required where subsidy is available under special development programmes/ Govt. sponsored Schemes.
(@) Excluding the 3 new tractor schemes.
For borrowers mentioned above, where back-end subsidy is available, the same will be considered
as margin. In case subsidy is not available, 5% margin by borrower is required (NABARD
requirement may be borne in mind).
Stipulated Margin on advances to Food & Agro Based units and advances for construction of storage
facilities viz: warehouse, market yard, godown, silos, cold storage etc. under “Regulatory
Agriculture”:
Facility Particulars Margin
Land & Building 30%
Term Loan
Plant & Machinery and Equipment (New) 25%
Working Capital Stocks and receivables 25%
Export credit 10%
6.9.4.2 Retail Lending:

Margin for various retail loan products under the relevant schemes are stipulated to ensure that Loan
to Value (LTV) Ratio remains below a safe threshold. However, certain powers have been delegated
to various authorities to consider deviation in LTV Ratio within the limits permitted under the
regulations issued by Reserve Bank of India.
6.9.4.3 Capital Market Exposure & Commodities under Selective Credit Control:
Exposure Min. Margin
On the funds lent for margin trading 50.00%
On all advances / financing of IPOs / issue of guarantees for capital market 50.00%
operations, including guarantees issued by the Bank on behalf of commodity
brokers in favour of the national level commodity exchanges viz. National
Commodity & Derivatives Exchange (NCDEX), Multi- Commodity Exchange of
India Ltd. (MCX) and National Multi-Commodity Exchange of India Ltd. (NMCEIL)
in lieu of margin requirements as per the commodity exchange regulations

Minimum Cash Margin (within the above-mentioned margin of 50%) to be 25.00%
maintained in respect of guarantees issued by the Bank for capital market
operations and on behalf of commodity brokers.
Advance against Levy Sugar 10%
6.9.4.4 C &IC, EC / MSME Loans

Facility Type of security Minimum
Margin
Term Loan
Factory Land & Building 30%
Plant, Machinery, Equipment 25%
Second hand imported machinery 40%
Working Capital
Stocks & Receivables 25%
Pre- Shipment 10%
Export Credit
Post Shipment Nil
 Extra due diligence/ discrete inquiry to be made in case of old machineries and proper valuation
of old machineries to be obtained for ensuring compliance in respect of margin requirement
 The next higher authority is authorized to reduce margin maximum by 5 percentage points in
deserving cases in respect of all the above types of securities.
 If reduction in margin is proposed beyond 5 percentage points but up to a maximum of 10
percentage points, Executive Director or Managing Director & CEO is authorized to consider it
on merit.
6.9.4.5 Real Estate Exposures:

Description Margin %
Overall Margin for Real Estate Projects 35% of
project cost
Out of above overall margin, minimum contribution by way of own funds and quasi 20% of
capital should be. project cost
(For this purpose, quasi capital should not be more than 50% of net worth / net
owned funds)
Authority for deviation in above margin requirements:
 In respect of proposals falling up to the DLP of COCC ED, COCC ED will have the authority
for deviations and for all other proposals, respective sanctioning committee at Corporate Office
level can approve relaxation in overall margin up to 15 percentage points i.e., overall margin
can be reduced to 20% with minimum FACR: 1.25.
 All functionaries will strictly comply with extant RBI’s / Bank’s internal guidelines and ensure
availability of 100% cash margin upfront, before issuance of Bank Guarantees (BG) / Standby

Letter of Credit (LC) while exercising the discretionary lending powers for issuing BG or LC
backed by 100% cash margin.
 For Loan/ Overdraft against the Bank’s own Deposits, minimum margin of 10% on value of the
deposit shall be ensured. However, the sanctioning authorities can reduce margin up to 5
percentage points on case-to-case basis, subject to separate servicing of interest, as and when
charged.
 Under exceptional circumstances, further reduction down to Nil can be allowed by Regional
Heads for exposures up to Rs. 50 crore, Zonal Heads up to Rs. 100 crore and Executive Director
for all other cases, subject to servicing of interest on the Loan/ OD separately as and when
charged.
 For finance to NBFCs against second hand assets financed by them, margin in the range of
40% to 50% shall be prescribed. COCC - ED & above can reduce the margin up to 25% on
selective basis.
6.9.5 Assessment criteria:
6.9.5.1 Working Capital

As per the directives of Reserve Bank of India for computation of need-based working capital
finance based on the turnover method or cash flow method, besides retaining the existing concept
of Maximum Permissible Bank Finance (MPBF), the Bank has formulated guidelines for determining
Permissible Bank Finance (PBF) for C&IC lending. In case the PBF turns out to be negative as per
the Second Method of Lending, the working capital requirements may be assessed based on Cash
Budgeting Method. Accordingly, the applicability of various assessment methods for working
capital are as under:
Borrower Type Method of lending for Fund Based Working Capital

requirement
Up to Rs. 5 crores Above Rs. 5 crores
Micro & Small Enterprises, Higher of First Method (or) Higher of First Method (or)
Turnover Method (Min 25% (@)) Turnover Method (Min 20%)
Medium Enterprise Higher of Turnover method, Min 20% or first Method
All other borrowers requiring Second Method
Working Capital finance up to
Rs. 10.00 crore Cash flow method.
Above Rs 10.00 crore However, if cash flow projections etc. are not available, then
Second Method may be applied after satisfying that Working
Capital Requirements are based on the Operating Cycle
(@) In case digital sales turnover exceeds 25% of the total/ assessed turnover, additional 5% of the digital
sales turnover will be added to the total assessment of working capital. I.e. 30% of turnover for Digital sales
and 25% of non-digital sales added together will be the working capital limit.

Overseas territories should generally follow turnover method to assess the working capital
requirement up to USD 1 million or equivalent in freely convertible currencies or local currency. For
working capital requirements more than this limit, asset based method or cash-flow based method
should be followed. However, working capital assessment methods prescribed in the respective
territory specific loan policies based on the practices prevalent in the respective territory will be made
applicable with discretion to the territory for the type of method to be used.
6.9.5.1.1 Loan System for Delivery of Bank Credit

With a view to enhancing credit discipline among the larger borrowers enjoying working capital facility
from the banking system, RBI has issued guidelines on Loan System for Delivery of Bank Credit.
Accordingly, the following guidelines will be applicable.
Minimum level of Loan Component:

In respect of borrowers having aggregate fund based working capital limit of ₹150 crore and above
from the banking system, a minimum level of ‘loan component’ of 40 percent shall be effective from
April 1, 2019. Accordingly, for such borrowers, the outstanding ‘loan component’ (Working Capital
Loan) must be equal to at least 40 percent of the sanctioned fund based working capital limit,
including ad hoc limits and TODs. The 40 percent loan component will be revised to 60 percent, with
effect from July 1, 2019.
Hence, for such borrowers, drawings up to 40 percent (60% from 01.07.2019) of the total fund based
working capital limits shall only be allowed from the ‘loan component’. Drawings in excess of the
minimum ‘loan component’ threshold may be allowed in the form of cash credit facility. The bifurcation
of the working capital limit into loan and cash credit components shall be effected after excluding the
export credit limits (pre-shipment and post-shipment) and bills limit for inland sales from the working
capital limit. Investment by the Bank in the commercial papers issued by the borrower shall form part
of the loan component, provided the investment is sanctioned as part of the working capital limit.
6.9.5.2 Term Loan

 In respect of Term Loans, the computation of cost estimates shall be carefully scrutinized to
ensure that the total project cost arrived at is accurate, comprehensive, reasonable and realistic.
 The tenure is required to be set from the day of first drawdown.
 Source and quality of equity capital brought in by the promoters /shareholders must be
ascertained. Multiple leveraging, especially, in infrastructure projects, is a matter of concern as
it effectively camouflages the financial ratios such as Debt/Equity ratio, leading to adverse
selection of the borrowers. It should be ensured at the time of credit appraisal that debt of the
parent company is not infused as equity capital of the subsidiary.
 At the time of project financing, promoters often agree ab initio that they will bring in equity funds
proportionately as the Bank finances the debt portion rather than bringing entire / part upfront
contribution. However, this has greater equity-funding risk. With a view to containing this risk, it
is required to ensure that the infusion of equity/fund by promoters should be such that the
stipulated level of DER is maintained at all times. In the light of above, infusion of 50% promoters'
contribution upfront to the project other than internal accrual considered as a source for the
project should be a pre-condition for disbursement of term loan with the balance to be brought
in stages in a pre-defined manner.
6.9.5.2.1 Letter of Credit within Term Loan:

 Whenever LC within term loan for equipment/machinery is sanctioned, it is treated as single limit
for the purpose of determining the credit exposure.
 In case of term loan participation by institutions like PFC, REC, IDFC, LIC, Branches may
consider proposing LC limit pertaining to Term loan sanctioned by these institutions, subject to
risk participation undertaking to be executed by them and disbursing the underlying term loan
portion directly to the Bank on due date of LC. If so, the LC limit will be an exposure on the
institutions concerned.
6.9.5.3 Non Fund Based Facilities

 In consideration of the Ministry of Finance advisory to PSBs, the Bank is required to ensure that
Letter of Credit (LC) & Bank Guarantee (BG) limits in connection with Working Capital
requirements shall not be given outside Working Capital Limits worked out as per MPBF.
 The creditors available on account of DA-LC (Usance portion) or Bank Guarantee for
procurement of current assets, shall be treated as part of Bank Finance while calculating MPBF.
Such BG will include mobilisation advance Bank Guarantees. Further, margin against LCs &
BGs shall not be funded through Fund Based Working Capital Limits by including the requisite
margin amounts in the Current Asset for computing in the MPBF.
 The LC / BG for procurement of current assets sanctioned should be commensurate with the
borrower’s turnover, and should be for genuine trade / manufacturing activity. The usance period
of the LC should ordinarily have relation to the working capital cycle. Level of inventory is to be
commensurate with industry norms / past trends.
 A suitable margin depending on the borrower's means, creditworthiness, other liabilities, etc.
shall be prescribed. Further, wherever warranted, a lien will be maintained on the unutilised
portion of the cash credit account for the value of the bills to be received under the LC / BG.
 Standby Letter of Credit (SBLC) is a variant of BG / LC and it can be issued to public and private
sector corporates for domestic operations, as well towards genuine business needs.
 The Bank will not extend any non-fund based facilities or additional/ad hoc credit facilities to
parties who are not our regular constituents, nor will discount bills drawn under LCs, or
otherwise, for beneficiaries who are not our regular clients. However, this restriction will not be
applicable for providing Partial Credit Enhancement (PCE) facility to bonds issued for funding
projects by Corporate / SPVs even if they are not our regular constituents.
 In the case of LCs for import of goods, utmost care and vigilance should be observed while
making payment to the overseas suppliers on the basis of shipping documents. They should
exercise precaution and care in comparing the clients

6.9.5.4 Exposure to Counterparty Banks
The criteria for setting overall exposure limits in respect of counterparty banks are described in the
“Policy on Exposure on Counterparty Banks”.
6.9.5.5 Country Exposure Limit:
Country risk refers to the possibility that sovereign borrowers of a particular country may be unable
or unwilling, and other borrowers unable, to fulfill their external obligations for reasons beyond the
usual risks which arise in relation to all lending. A very wide variety of factors may prevent borrowers
of a given country from fulfilling their foreign obligations, which makes country risk a difficult concept
to define with precision. The risks range from the consequences of official actions or important socio-
political changes in the borrowing country to largely unpredictable events such as natural disasters
or external shocks arising from global phenomena like world depression or the consequences of an
oil price rise. A major complication is that the same events will affect borrowers in some countries
more than in others and also have varying effects on different borrowers in the same country. Their
impact will, moreover, tend to vary over time. Country risk assessment cannot, therefore, be an exact
science, but an art in which a significant degree of unpredictability must be acknowledged.
The Bank has established adequate systems and controls for identifying, measuring, monitoring and
controlling Country Risk Exposure. Operating Units are advised to obtain earmarking of country
exposure limits from Global Mid Office, Risk Management Department, for domestic operations
before taking exposures on various countries. Similarly, overseas branches / operating units to
earmark country exposures with their respective Territorial Offices. Risk Management Department
will monitor, report Country Risk exposures and advice branches/offices keeping in view Regulatory
/ the Bank’s guidelines. The detailed guidelines with regard to Country Risk are articulated in the
‘Country Risk Management Policy’ of the Bank.
6.9.6 Indicative Financial Ratios

 While appraising credit proposals, including takeover proposals, various items in the audited
profit and loss account and balance sheet of the borrower should be analysed to arrive at
meaningful conclusions. Whenever the recasting of profit & loss account and balance sheet
becomes necessary, the recast figures should be taken into account for analysis.
 All the financial ratios should be compiled for the past two/three years including the latest audited
financial statements to ascertain the trends in financial position of the borrower.
 Wherever audited financial statements are not readily available for the last financial year,
provisional figures (which should not vary by more than 10% from the audited figures) will have
to be obtained and analysed.
 Further, to make the analysis meaningful, the ratios may be compared with the industry average
to the extent possible.

The indicative benchmarks for key financial ratios are as under:
Ratio General Micro & Medium Acceptable

Benchmark Small Enterprise Level
incl. Enterprise
expanded
SME
Current Ratio (minimum) 1.33 1.17 1.20 1.00
Debt- Equity Ratio TTL/ ATNW 3.00 3.00 3.00 4.50
(maximum)
Debt- Equity Ratio TOL/ ATNW 4.50 4.50 4.50 5.00
(maximum)
Fixed Assets Coverage Ratio 1.25 1.25 1.25 1.25
(minimum)
Average Debt Service 1.75 1.75 1.75 1.20
Coverage Ratio (DSCR)
(minimum)
Minimum DSCR in any year 1.25 1.00 1.25 1.00
ATNW- Adjusted Tangible Net Worth, adjusted to Investments in / Loans & Advances to group companies.
Debt-Equity Ratio: Sub-ordinated debt (viz. long-term unsecured loans from friends and relatives
etc.), will be added to ATNW (up to 100% of ATNW for non-corporate borrowers and up to 50% for
corporate borrowers) for the purpose of computing Debt-Equity Ratios, provided the borrower retains
the same at the existing level/projected level during the currency of the Bank loan.
Current Ratio:
 For MSME (Regulatory & expanded definition) accounts, while calculating current ratio, TL
installments falling due in next 12 months should be excluded, provided the projected cash
flows generation is more than the projected installments of Term loans.
 Further, FDR kept as margin for BG/LC maturing within next 12 months should be treated as
current assets.
 For Export oriented MSME Units (having more than 50% turnover from export activities), the
indicative benchmark current ratio is 1.10
In addition to the above, other parameters including Interest Coverage Ratio, Break- even analysis,
Internal Rate of Return, Debtors, Creditors & Inventory Holding periods, Net Present Value of the
Project etc. are to be computed to ascertain the financial strength of the borrower.

The above benchmarks are only indicative. Sanctioning authorities / competent authority from
ZOCC- GM and above (ZOCC- GM, ZOCC- GMCC, COCC- GM CC, COCC-ED, CACB & MCB) will
have the discretion to allow departures from them on a case-to-case basis, depending upon the
industry specific, borrower specific situations and with cogent reasons / justification, recorded in
writing, from the point of view of business opportunity, credit risk and return. Proposals not meeting
the acceptable level mentioned above and otherwise falling within the DLP upto RMCC will be
considered by next sanctioning authority. This will also be applicable in respect of takeover of funded
and non-funded borrowal accounts from other banks/FIs. Further, where any departure from the
indicative benchmark would entail higher credit risk, the same should be reflected in the price.
For products/schemes approved by PPAC, such as Supply Chain Finance, commercial vehicle
finance, construction equipment finance etc. and credit facilities to NBFC, ship-building, real estate
etc. the approved product / scheme-specific guidelines will be applicable in respect of their indicative
benchmark financial ratios. In case of review / review with decrease, respective sanctioning
authorities can consider the proposals within their DLP subject to incorporating cogent reasons /
justifications for the departure from the aforementioned ratios.
Based on the local industrial / economic scenario, overseas territories may stipulate indicative
benchmark financial ratios, as above, in their territory-specific loan policies.
6.9.7 Real Estate

 It should be ensured that the borrowers have obtained prior permission / approval from
government / local governments / other statutory authorities for the project, wherever required,
including compliance of RERA provisions.
 Bank shall not consider granting advances for merely purchase of plot, whether industrial or
residential or otherwise, since it may amount to speculative activity.
 An exclusive ESCROW ACCOUNT should be opened in all cases for proper control over the
finance and also for monitoring the transactions of the borrowers. Compliance of the guidelines
of the Reserve Bank of India for adherence to the National Building Code (NBC) especially while
considering the advance facilities to private builders is to be ensured.
 While considering such proposals, sanctioning authorities should incorporate suitable conditions
to the effect that the NBC 2005 is to be adhered to by the builder.
 Salient features of the NBC 2005 also include provisions to ensure and certification of safety of
buildings against natural disaster, by structural engineers and provision for two stage permit for
high-rise and special buildings, which the Branches should keep in mind while sanctioning /
disbursing such facilities.
 If required, Branches may avail the services of approved architect / valuer / engineer for ensuring
adherence to NBC by the borrowers.
 The Bank’s exposure per project is restricted to a ceiling of Rs. 1000.00 crore irrespective of
size of the project. If the funding requirement from banking system is more than Rs. 1000 crore,

the Bank’s exposure will be restricted to Rs. 1000 crore or 50% of project cost, whichever is
less.
 The Bank’s Exposure per project can exceed the limit of Rs.1000.00 crore in case of
builders/developers who are externally rated AAA by approved rating agency.
 Tenure of Loan shall not normally be more than 5 years in respect of builders / contractors /
developers. However, in select cases, where loan is granted initially for construction and
against future rent receivables under securitization of lease rentals, longer repayment period
can be considered. For indirect exposure as defined under Real Estate Exposure (i.e. exposure
to NHBs, Housing Finance Companies, the total outside borrowing (including unsecured loans/
Debentures / Preference Shares/Notes/Overdraft etc.) should not exceed 16 times of Tangible
Net worth in case of Housing Finance Companies.
Permitted Deviations:
a) Repayment period may be allowed up to 10 years in exceptionally large cases (Rs. 50
crore and above).
b) Sanction in excess of per project cap of Rs.1000 crore, per borrower cap of Rs. 1000
crore and group cap of Rs. 2000 crore (as stated above).
Authority for deviation:

 For deviations mentioned above, COCC ED for proposals falling up to COCC- GMCC, CACB
for proposals falling within DLP of COCC ED and CACB, MCB for all other proposals are
authorized.
6.9.8 Project Loans
While assessing project loans, all types of risks, including tail risks are to be assessed. Further,
projected cash flows are required to be stress-tested under different scenarios for parameters such
as DSCR/IRR/BEP and appropriate financial covenants are to be stipulated to mitigate the risks.
In case of project cost of Rs.50.00 crore and above, IRR and BEP (for manufacturing unit) in addition
to DSCR are necessarily to be worked out /stress tested.
6.9.8.1 TEV Study:

Broad guidelines for TEV Study are as under:
 No TEV study may be insisted upon for project cost up to Rs. 25 crore. In case, the authority, at
least in the category of Regional Head, feels that the project needs Techno- economic Viability
study, the same may be referred to Bank’s technical officer posted in the Zone or empanelled
consultant for carrying out TEV study.
 For projects above Rs. 25 crore and upto Rs. 100 crore, the TEV Study should be carried out
by the Bank’s Technical Officer posted in the Zone concerned or by an empanelled consultant.
 The zones are required to keep adequate number of consultants empanelled for this purpose.

 Once the TEV study is carried out by our Bank’s empanelled consultant, vetting of such reports
should not be insisted upon and sanctioning authority may rely upon consultant’s report.
 For projects above Rs. 100.00 crore, the TEV Study should be carried out by the Bank’s
Technical Officer/s posted in Project Finance Division at BCC.
 TEV study of the project costing up to Rs.100.00 crore carried out by other banks can be
accepted, if- 1) the bank is one of the first 30 scheduled commercial bank by the size of assets,
2) it is taking exposure for at least 10% of term loan component , 3) In the project under
reference, the Bank’s exposure shall be less than or equal to the exposure of the other bank. If
project cost is above Rs. 100.00 crore, it can be accepted, subject to vetting by the Bank’s
Technical Officer/s posted in Project Finance Division at BCC.
 In case, the TEV study of the project with cost of above Rs.100.00 crores has been done by
agencies of repute, such as Tata Consultants, Engineers India Limited, KPMG, Deloitte, E&Y
,PWC, BDO , Grant Thornton etc. it can be accepted by the Bank, subject to vetting of the TEV
study by the Bank’s Technical Officer/s posted in Project Finance Team at BCC. In case of big
ticket projects, when DPR (Detailed Project Report) is prepared by one of the agencies, as
above, namely Tata Consultants, Engineers India Limited, KPMG, Deloitte, E&Y, PWC, BDO,
Grant Thornton etc. and the same is vetted by another professional agency of repute,
confirming technical and financial viability of the project , the same can be accepted by the Bank
for appraisal
6.9.8.2 Partial Credit Enhancement (PCE) to corporate bonds
Bonds issued for funding projects by corporates / SPVs do not always get high ratings from the
Credit Rating Agencies, because of the inherent risk in the initial stages of project implementation.
With a view to enabling long term providers of funds such as insurance and provident/pension funds,
as also other investors, to invest in the bonds issued for funding projects by corporates/ SPVs,
Reserve Bank of India allowed banks to extend PCE to enhance the credit rating of the bonds issued
so as to enable corporates to access the funds from the bond market on better terms. PCE guidelines
are as under:
 PCE to a project can be provided at the time of bond issue as a non-funded subordinated facility
only in the form of an irrevocable contingent line of credit which will be drawn in case of shortfall
in cash flows for servicing the bonds and thereby improve the credit rating of the bond issue.
The PCE facility is irrevocable.
 Necessary due diligence to be exercised and regular proposal / appraisal / credit risk analysis,
internal credit rating etc. should be carried out without relying entirely on the external rating of
the borrower.
 The aggregate PCE provided by all banks for a given bond issue shall be limited to 20 per cent
of the bond issue size
 Pre-enhanced credit rating of the bond should be minimum BBB minus or better. Continuous
monitoring of the external rating of the underlying bond to be undertaken.

 The documentation for the facility must clearly define the circumstances under which the facility
would be drawn upon
 The contingent PCE will be available only for servicing the bond and not for any other purpose
(such as funding acquisition of additional assets by the corporate, meeting part of the project
cost or meeting recurring expenses of the corporate or servicing other lenders/ creditors to the
project etc.)
 A clear agreement documenting all aspects of the arrangement will need to be signed between
the promoter (bond issuer), our bank and all other lenders to the project.
 The operational details in this regard, including timing etc. of the drawls, are to be decided by
the PCE providing banks.
 The project assets created out of the bond issue for which PCE is provided and the cash flows
from the project should be ring-fenced through an ESCROW mechanism administered under a
bond trustee arrangement. The mechanism should be decided, agreed upon and documented
before the issue of bonds.
 PCE cannot be issued in the form of a Guarantee.
 The Bank is not eligible to invest in the bonds for which PCE is provided by us. However, need-
based credit facilities can be sanctioned to the corporate even after providing PCE.
 In case the PCE facility is partly drawn and interest accrues on the same, the unpaid accrued
interest will be excluded from the calculation of the remaining amount available for drawing
 The aggregate capital required to be maintained will be computed, as if the entire bond issue
was held by the Bank, i.e. the difference between (a) the capital required on the entire bond
amount, corresponding to its pre-credit enhanced rating, and (b) the capital required on the bond
amount corresponding to its post-credit enhanced rating.
 The rating of the bond must be monitored regularly and capital requirement adjusted accordingly.
RBI has now allowed banks to provide partial credit enhancement (PCE) to bonds issued by
the systemically important non-deposit taking non-banking financial companies (NBFC-ND-
SIs) registered with the Reserve Bank of India and Housing Finance Companies (HFCs)
registered with National Housing Bank, subject to the following conditions:
 The tenor of the bonds issued by NBFC-ND-SIs/HFCs for which PCEs are provided shall
not be less than three years;
 The proceeds from the bonds backed by PCE from banks shall only be utilized for
refinancing the existing debt of the NBFC-ND-SIs/HFCs.
 The exposure of a bank by way of PCEs to bonds issued by each such NBFCND-SI/HFC
shall be restricted to one percent of capital funds of the bank within the extant single/group
borrower exposure limits; and
 The exposure of banks to NBFC-ND-SIs/HFCs by way of PCEs shall be within the
aggregate PCE exposure limit of 20 percent
 All other conditions stipulated in RBI on Partial Credit Enhancement to Corporate Bonds
shall apply, mutatis mutandis, to PCEs to bonds issued by NBFC-ND-SIs/HFCs
6.9.9 PSUs, Central & State Govt. Entities, Municipal Committees / Corporations:
a) Branches will carry out normal due diligence while taking exposure against PSUs, Central &
State Govt. Entities, Municipal Committees / Corporations.
b) For PSUs and Government Corporations, it is generally seen that the latest financials are not
available since their accounts need the nod of the Parliament or Legislative Assembly and are
usually delayed by more than a year. In such cases, provisional figures may be accepted in
place of audited balance sheet for a period up to two years.
c) However, for Listed PSUs, there should be no delay in availability of their audited balance
sheet as in the case of any listed company. Accordingly, in such cases, normal due diligence,
assessment, etc. will be applicable, on the basis of the latest / last audited financials.
6.9.10 Investment in Corporate Bonds / Debentures / Commercial papers (Exposures

undertaken by SITB)
 Investment proposals will be subjected to the same degree of credit risk appraisal, due diligence
and analysis as any loan proposal.
 The proposals will also be required to be rated under BOBRAM rating model.
 The Bank will not invest in un-rated non-SLR securities, other than exempted categories such
as equity shares, units of equity-oriented mutual fund schemes, venture capital funds,
commercial paper, Certificate of Deposits, Non-Convertible Debentures with original or initial
maturity up to -1- year issued by corporates, securities acquired by way of conversion of debt,
securities issued by Central / State Governments which are not reckoned for SLR purpose.
However, the Bank can invest in un-rated bonds of companies engaged in Infrastructure
activities within the overall ceiling of 10% for un-listed Non- SLR Securities.
 The Bank will invest only in Non- SLR listed Debt Securities of companies which comply with
the SEBI requirements in this regard.
 The Bank will monitor financial position and rating migration of the issuers / issues on continuous
basis.
 The Bank will not invest in non-SLR securities of original maturity of less than 1 year other than
commercial paper, certificate of deposits and NCDs.
 The Bank shall not hold its own bonds
6.9.11 Export Credit
Export finance is broadly classified into two categories- a) Pre-shipment finance and b) Post-
shipment finance.
 Export credit limit in Foreign Currency will be sanctioned only in US dollars. The FC component
of export credit outstanding will be maintained and monitored in FC.
 Pre-shipment credit to exporters is normally provided on lodgement of LCs or firm export orders

 The Bank can grant Pre-shipment Credit by way of ‘Running Account’ facility, 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.
a) Exporters with good track record i.e. loan accounts in the standard category continuously
for at least 3 years with no irregularities / adverse features in the conduct of the account,
not blacklisted by ECGC, not included in RBI / CIBIL defaulters list / caution list, not making
losses for the last 3 years and not having overdue export bills in excess of 10% of the
current year’s sales turnover.
b) Export Oriented Units (EOUs)/ Units in Free Trade Zones / Export Processing Zones
(EPZs) and Special Economic Zones (SEZs)
c) 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 not
exceeding 30 days
 Branches should mark off individual export bills, as and when they are received for negotiation
against the earliest outstanding pre-shipment credit on 'First-In-First-Out' (FIFO) basis. In case
pre-shipment facilities have been availed upon, lodgement of bills for conversion to post-
shipment is a must.
 Packing credit can also be marked-off with proceeds of export documents against which no
packing credit has been drawn by the exporter.
 If it is noticed that the exporter is found to be abusing the facility, the facility should be withdrawn
forthwith
 There is no fixed formula for determining the quantum of finance to be granted to an exporter
against specific orders / LCs. The guiding principle to be applied in all such cases is a concept
of need based finance. The period for which the Bank gives packing credit depends upon the
manufacturing / trade cycle or specific requirements of the individual export, normally not
exceeding 180 days.
 It will be necessary to ensure proper end use of amounts disbursed to the exporters
 Post-shipment finance can be extended up to 100 % of the invoice value of goods. It can be
short term or long term finance depending upon the payment terms offered by Indian exporters
to overseas buyers. The maximum period usually allowed for realization of export proceeds is
180 days from the date of shipment, with certain exceptions.
 It is possible that the exporter might avail of EPC with one bank and submit the documents to
another bank. In view of this possibility, the Bank will extend such facility only after ensuring that
the exporter has not availed of packing credit from another bank against the documents
submitted
 The Bank has obtained the export credit insurance cover (Whole Turnover PC & PS) i.e. ECIB
(WTPC) & ECIB (WTPS) from ECGC of India Ltd renewable on yearly basis (July – June). The
premium payable on Pre-Shipment is recovered from borrower and premium payable on post-
shipment facilities is borne by the Bank. Under Export Gold Card Scheme, the premium payable
is borne by Bank. However, exports of Diamonds/Other Gems and Jewellery is not covered
under Whole turnover Policy and therefore Individual ECIB (INPC and INPS) policy should be
obtained by the Diamond Exporters and premium will be borne by the exporter himself.
 Borrowers are expected to obtain ECGC Buyer wise Policy to safeguard themselves against
default on part of their buyers. However, wherever the limits are covered under ECIB (WTPS)
and/or Individual ECIB (INPS), based on merits, waiver of Buyer–wise ECGC Policy may be
considered by Sanctioning Authority on case to case basis taking into account the experience &
business prudence, financial strength of the borrower, availability of collateral security, etc.
 Rejection of export credit proposals, if necessary, shall not be done by the sanctioning authority
for proposals falling within the powers up to Zonal Head. Such proposals shall be submitted to
the next higher authority for independent consideration taking into account the merits and
demerits of the case. For proposals falling beyond the powers of Zonal heads, Executive
Director will be the deciding authority.
6.9.11.1 FCNR (B) Loans & FCTL:
The Bank grants foreign currency denominated loans in India against foreign currency funds, which
the bank is having on account of FCNR (B) deposits in 4 currencies viz. US dollar, Pound sterling,
Euro and Japanese yen, subject to availability of foreign currency funds. These loans are disbursed
at Specialized Integrated Treasury Branch, Mumbai. The minimum amount considered for FCNR (B)
loan generally is USD 0.5 million or its equivalent. The rate of interest on FCNR (B) loans is linked
to LIBOR and the spread is decided based on the credit rating of the corporate. The Bank sanctions
Foreign Currency Demand Loans (FCDL) for working capital by earmarking the working capital
facilities within the Permissible Bank Finance (MPBF). The Bank permits Foreign Currency Term
Loans (FCTL) for a period not exceeding 3 years. The borrower should have natural hedge to cover
themselves from exchange risks. The borrowers who do not have natural hedge are required to take
forward cover to avoid the exchange risk. Any waiver in this regard is required to be approved by
the sanctioning authority.
6.9.12 Import Credit
Trade Credits (TC) for imports are extended by the overseas supplier, bank and financial institution
for maturity up to three years.
Amount & Maturity:

 Trade credit period for import of non-capital goods can be up to one year from the date of
shipment or the length of the operating cycle, whichever is lower. For shipyards / shipbuilders,
the period of TC for import of non-capital goods can be up to three years.
 Trade credit period for import of capital goods can be up to three years from the date of shipment
with ab initio contract period of 6 (six) months.
 No roll-over / extension can be permitted beyond the permissible period.

 Amount under Automatic route: Up to USD 150 million or equivalent per import transaction for
oil/gas refining & marketing, airline and shipping companies. For others, up to USD 50 million
or equivalent per import transaction.
 Beyond USD 50 million or equivalent per import transaction are considered by the RBI under
the Approval Route
 All-in-cost ceiling per annum is the benchmark interest rate rate plus 250 bps spread.
 The all- in cost include arranger fee, upfront fee, management fee, handling / processing
charges, out of pocket and legal expenses.
 All-in-cost ceiling is subject to change from time to time as per RBI guidelines
Bank guarantees may be issued by the Bank, on behalf of the importer, in favour of overseas lender
of Trade Credit (TC) not exceeding the amount of TC. Period of such guarantee cannot be beyond
the maximum permissible period for TC. TC may also be secured by overseas guarantee issued by
foreign banks / overseas branches of Indian banks. Issuance of such guarantees will be subject to
compliance with the extant RBI guidelines.
The Bank will not extend any non-fund based facilities or additional/ad hoc credit facilities to entities
who are not its regular clients, nor will the Bank discount bills drawn under LCs, or otherwise, for
beneficiaries who are not its regular clients.
Permitted Deviations: Wherever natural hedge is available, the sanctioning authority may waive
the stipulation of hedging. For all other cases the authority for waiver of hedging requirement is as
under:
a. Sight LC: Hedging not required.
b. Usance LC: On the basis of an undertaking from the Importer, Branch Head may permit the
Importer to open the LC with a condition to Hedge the transaction at the time of
Receipt/Acceptance of Import documents.
However, if the importer is not willing to take hedging contract, it may be waived as per either of the
following methods:
A) Providing Cash Margin in lieu of Hedging.
The following authorities can waive hedging by obtaining additional cash margin:
Cash Margin as % of Import LC Transaction Sanctioning Authority
10% and above and upto 15% Branch Head
8% and above but below 10% Regional Head
5% and above but below 8% Zonal Head

In case of customers without natural hedge being considered for foreign currency facilities, it has to
be ensured that the total foreign currency facility is hedged by booking forward contracts. Wherever
hedging through derivative products/forward contract is not possible and/or not found suitable by the
customers, the branches should keep cash margin as specified above in the form of deposit under
lien or any other cash collateral towards mitigation of risk. It may be noted that this margin
requirement is apart from the normal LC margin as per sanction terms. OR
B) Providing additional 0.50% p.a. commission in lieu of Hedging
In case customer is not willing to provide cash margin in lieu of Hedging, additional 0.50% p.a.
commission will be charged upfront in addition to the applicable commission. This additional
commission will be charged for the usance period/ trade credit period as applicable.
In terms of RBI guidelines, the practice of issuance of LoUs/ LoCs for Trade Credits for imports into
India by AD Category–I banks has been discontinued with effect from 13.03.2018. Accordingly,
branches are prohibited from issuing LOU/LOC.
6.9.13 Syndicated Loans / Foreign Currency Loans/ External Commercial Borrowings (ECB):
 Eligible Borrowers: Indian and Non- Indian Corporates/ Banks, sovereign borrowers, supra-
nationals, with standard asset classification and satisfactory track record of performance/ future
prospects
 Credit Rating: Minimum BOB 6 under BOBRAM rating model / BBB- or equivalent by
International Rating Agencies (S&P, Moody’s, Fitch). The sovereign borrowers (the countries
themselves) raising the funds with a minimum rating of BB or equivalent. In exceptional cases for
non- sovereign borrowers, the assets that are below BBB- (including unrated) may also be
considered. However, exposure to externally unrated single obligor under Syndicated Loan
segment shall not be more than USD 50 million. Under exceptional circumstances, MCB may
consider single unrated syndicated loan exposures beyond USD 50 million. The exposure in the
unrated accounts (including unrated Indian Corporate accounts) is subject to an aggregate cap
of 50% of Syndicated Loan portfolio, outstanding as at the end of previous half year. In case the
borrower is an overseas SPV (unrated) promoted by an Indian Company (which is externally or
internally rated) and the loan is raised against a guarantee of Indian Company, then such
exposures may be reckoned as rated for the purpose of the cap on unrated exposures. In
proposals having credit enhancement (Guarantee/ Deferred Payment L/C/Put Option on the
parent/sponsor company etc.), the rating of the guarantor (if rated) will be considered for deciding
the eligibility, and the exposure shall be on guarantor/Put Option Counter party. If the
guarantor/Put Option Counter Party is not rated, then, the performance parameters would be
considered.

 Currency: The loans shall be granted in freely convertible currencies such as Pound sterling
(GBP), US dollars (USD), Euro (EUR), Japanese yen (JPY), and Swiss franc (CHF). However,
the Bank can participate in the syndicated loans in other convertible currencies also, where
hedging for the currency risk is possible. Wherever funds are not available in the required
currency, the same may be arranged by converting other available currencies.
 Tenor:
 Syndicated loans/FCTLs with average maturity up to 5 years will be the preferred tenor.
 Syndicated loans/FCTLs with average maturity exceeding 5 years may also be considered on
merits subject to compliance with ALM Policy guidelines for the concerned territory and availability
of resources
 Rate of Interest: In normal course loans with a floating rate of interest linked with LIBOR will be
considered. The authority for quoting the rates of interest will be the Executive Director/ Managing
Director & CEO for proposals within their / MCB powers and with the respective delegated
authorities within their discretionary powers.
 All- in- Yield: All-in-Yield (AIY) is the total income per annum from the facility that is required to
be taken into account for consideration of proposals. Preference should be given to the cases,
where higher fee is offered leading to the generation of some income up-front, resulting in higher
AIY.
AIY guidelines for Indian Corporates in respect of ECBs: 450 bps over benchmark rate *
(* 6 months LIBOR or applicable bench mark interest rate for the relevant foreign currency)
 Security: In most Syndicated Loans, emphasis is not given on securities as loans are normally
raised by top / large corporates. Most of the Syndicated Loans are backed by stiff financial
covenants and Non-compliance of financial covenants constitutes an event of default and gives
the banker the right to recall the loan or charge penalty.
 Credit enhancements by guarantees of the Holding / Parent companies or by way of deferred
payment, L/C or guarantee issued by another bank, and guarantees of Export Credit
Organizations of OECD countries can also be accepted as security for all types of syndicated
loans/ECBs, provided Regulatory guidelines permit the same.
 In respect of bilateral loans, security by way of first charge on all fixed assets either solely or on
pari passu basis, is generally stipulated.
Brands and other Intangibles as security:
When the financing is being considered with intangibles including brand names, copyrights, patents
and other intellectual property rights, service and operating rights, licenses and franchises, recipes,
formulae, models, designs and prototypes as prime security, following guidelines shall be followed:

1. Financing should be considered only for corporate with a track record of increasing
sales/business, profits and net worth with satisfactory financial ratios for the last three years;
2. Minimum rating of the corporate, our internal rating as per BOBRAM-CRISIL rating model should
be BOB-2 &/or the external rating from the approved rating agency should be not below A- or
equivalent.
3. Normal credit appraisal shall be carried out and it shall be satisfied that the corporate is in a
position to repay the facility out of its cash flow comfortably (minimum Average DSCR of 1.5
times);
4. The intangible asset being considered as security should be distinctly identifiable as separate
asset and registered with the competent authority.
5. However, security value should not be considered for arriving at FACR. The exposure will be
treated as unsecured to the extent of value of intangible assets.
6. Endeavors shall be made to obtain tangible assets as security besides the assignment of the
intangibles in question.
Besides, the intangibles shall be secured as under:
 First exclusive / pari passu charge in favour of the lender in the form of hypothecation of selected
brands / trademarks and on goodwill and reputation attached to the said specified Trademarks
/ brands owned by the borrower and registered in India together with all interest and rights
related thereto.
 Irrevocable Power of Attorney from the borrower empowering the Bank to assign/secure in its
favour the selected brands / trademarks in the event of default in repayment of the facility and
to register and use the specified Trademarks and Trademark Goodwill in its own favour or in
favour of any third party at its discretion.
 Undertaking to submit quarterly statement of the revenue and EBITDA attained from the
specified brands charged for the facility, variations, if any with that estimated as per the valuation
report , the reasons for the variations and the borrower’s plan to achieve the estimated level of
the revenue and EBITDA for the relevant financial year
 Registration of charge on the brand/intangible assets with ROC.
 The cost of the initial as well as all the subsequent valuation of the intangibles during the time
the loan remains outstanding shall be borne by the borrower.
6.9.14 Financing against Book Debts:
Generally, Book Debts outstanding for more than 90 days are not to be considered for the purpose
of Drawing Power. In case drawings are to be allowed for book debts for more than 90 days period,
Zonal Managers are authorised to accept DP in respect of book debts beyond 90 days and up to
180 days irrespective of sanctioning level, subject to reporting to the higher authorities. Beyond 180
days and up to 360 days, Executive Director and above are authorized. However, the quality of book
debts and the justification for allowing DP there against must be mentioned and recorded.
6.9.15 Takeover of Loan Accounts
Takeover of high quality loans and advances from other banks/FIs/ NBFCs, in compliance with RBI
and MoF guidelines for this purpose is one of the ways for the Bank to grow its credit portfolio. The
following set of norms / guidelines shall be followed in this regard:
Definition of Takeover of Borrowal Accounts:

a) In the case of sole banking, where the Bank takes over an account from another bank or Financial
Institution/s and replaces it.
b) In the case of multiple banking, where the Bank takes over the share of another bank and replaces
the said bank.
c) In the case of consortium accounts, where the Bank replaces an existing member of a consortium
by taking over its share.
6.9.15.1 Takeover of Corporate & MSME (Regulatory & Expanded definition) Accounts:
Non-Financial Guidelines:
 The specific reasons for shifting the account from Financial Institution / other bank to the Bank
should be ascertained.
 Accounts of profit-making (i.e. net profit before tax) concerns as per last two audited balance
sheets should only be considered
 Accounts with existing lenders should be under the category of “Standard Assets” and should
not have been classified under SMA-1 / SMA-2 during the last one year as per the latest CRILC
report.
 Before taking over, Bank should obtain necessary credit information from the transferor bank as
per the format prescribed on “Lending under Consortium Arrangement/Multiple Banking
Arrangements” and / or Latest statement of account of the existing banks for preceding 6 - 12
months is to be obtained and verified to assess the quality of operations with the existing
bankers.
 Besides obtaining Credit Report from the existing lenders, Branches to make discrete inquiries
with people in the similar line of activity / buyers / suppliers and their view about the prospective
borrower's credentials, financial soundness, integrity, reputation and capability (amount
proposed to be taken over) must be obtained. A confirmation to this effect must form a part of
comments in the takeover proposals.
 As a general policy, takeover should be at the existing exposure level only. However, the
additional exposure at the time of takeover can be considered on merit of case.
 External Rating in respect of credit proposal with exposure above Rs.50 Crores by an approved
credit rating agencies should not be below BBB & equivalent..
 Concessionary facilities to “Taken over Accounts” should be extended only in extremely
deserving cases with specific reasons recorded in writing. (MoF Directives).

 There should be tangible security available to cover the advances to be taken over and the
underlying assets should be distinctly identifiable.
 Securities to be revalued at the time of takeover of account as per the extant guidelines
 For Term Loan / Project Finance, the project should not be in the implementation phase at the
time of takeover of the loan. In other words, it should have commenced commercial production.
The remaining repayment period shall not be extended beyond the original repayment period
permitted by the erstwhile lender, as it amount to restructuring of account. However, this
provision will not be applicable in respect of refinance of loans as allowed by the RBI.
 Take-over accounts are to be rated as under:-
o As per the BOBRAM credit rating model, minimum “BOB6” obligor rating grade for all
exposures of Rs. 25 lakh and above, other than MSME exposures. For MSME exposures,
this rating model is applicable for accounts having exposure of above Rs. 2 crore.
o As per MSME Credit Rating Model for MSME accounts of exposure Rs.2 lakh and above
up to Rs. 2.00 crore subject to minimum “MSMEBOB6” rating.
 There should not have been any rescheduling / restructuring in the account during last two years.
 No credit facility should be taken over by the Bank from any other bank where any of the Bank's
Executive Director or Managing Director & CEO had worked earlier. In case any such account
is proposed to be taken over, the proposal will required to be put up to the Board of the Bank /
MCB with specific reasons justifying the need for taking over the account. (MoF-Directives)
Permitted Deviations:
Deviations may be permitted in above-mentioned items by the authorities as under:-
 Next higher authority upto COCC – (GM-CC).

 Full power for COCC-ED and above.
 For Financial ratios and deviations, guidelines as per Section 6.9.6 will be applicable.
An upfront fee @ 0.25% is to be charged in respect of all takeover proposals considered with
deviations in the said benchmark ratios.
Authority for Take-over proposals

a) Proposal for takeover under the powers of Chief Manager and above: -For proposals under the
powers of Chief Manager and above, no prior clearance from next higher authority is required for
takeover.
Delegated authorities under the Bank’s discretionary lending powers may consider takeover
cases within their powers.

b) Proposal for takeover under the powers of below Chief Manager: Prior approval of next higher
authority i.e. Regional Manager is required for takeover. After obtaining prior clearance as above,
delegated authorities may consider the proposals as per their discretionary lending powers.
6.9.15.2 Takeover of Retail Loan Accounts
The Bank can take over accounts from other banks / HFCs/ NBFCs/ FIs etc. keeping in view the
foremost objective of canvassing only good quality accounts
 Good Retail Loan accounts from other Banks / HFCs / NBFCs/ FIs etc. can be taken over,
observing our Bank’s Retail Loan guidelines in respect of income criteria, repayment capacity
(FOIR), margin / LTV norms, CIBIL score validations etc.
 After considering income, repayment capacity and age of applicant /co-applicant, fresh repayment
period & EMI may be fixed within our Bank’s guidelines for respective Retail Loan products.
 Additional funds as per requirements may also be considered [i.e, extension/additional
construction under Home Loan and/or Home Improvement Loan and/or Top up Loan etc.], as per
norms, along with takeover.
Detailed Takeover guidelines for Retail Loans are as under:

 In case of takeover of Retail Loan accounts from other Banks no prior clearance is required from
Regional / Zonal Head / BCC
 However, branches need to observe the following safeguards in respect of such takeover of
accounts:
o Accounts should be taken over in consideration / possibility of larger business interests /
valuable connections.
o There should not have been any re-scheduling / restructuring in the account during last two
years.
o Accounts with the existing lenders should be under the category of Standard Assets and
should not have been classified under SMA-1 / SMA-2 during the last one year as per the
latest CRILC report.
o While taking over loans from other banks / HFCs / NBFCs/ FIs etc., branches should ensure
the minimum stipulated margin and LTV Ratio on the value of property wherever applicable
as per the scheme is available.
o The amount of loan may include the outstanding balance, foreclosure fee payable, if any, to
the current lender bank, and stamp duty for creation of equitable mortgage in the Bank’s
favour subject to margin, income and repaying capacity criteria, Loan to Value (LTV) ratio
etc.
o Repayment period and EMI may be fixed, keeping in view our Bank’s guidelines in respect
of income and repaying capacity of the applicant, LTV/margin norms and considering the
age of borrower/co-borrower.

o Fresh valuation of property to be obtained from our approved Valuer and margin and LTV
Ratio as stipulated to be ensured.
o The valuation norms that in case of Property purchased within last 3 years, the amount of
Registered Sale Deed is to be taken as value of the Property is not applicable for takeover
Home Loans.
o In case of takeover of Home Loan accounts, market value of the property is to be considered
while arriving at the eligibility. For all other retail loans, realisable value of the property is to
be considered.
o All the collateral securities charged to the previous lender institution from whom the loan is
being taken over should also be made available as security to the Bank. However, the
condition of securing the loan with the same collateral securities may be waived subject to
fulfilment of respective scheme guidelines.
o The foreclosure Letter of the existing Loan & List of documents in respect of property
mortgaged to the existing financier (bank/ HFC/ NBFCs etc), to be obtained from the
customer at the time of submission of application. However, in the case of takeover of Home
Loans, foreclosure letter and list of property related documents from the existing financier
should be insisted as a pre-disbursement condition instead of being a pre-processing/
sanctioning condition.
o The disbursement of the loan should be made directly to the bank/HFC/NBFC concerned
and their receipt be kept along with the loan documents. Under no circumstances, the loan
disbursement should be made to the borrower.
o Takeover accounts are to be rated as per the applicable scoring model and the taking over
will be subject to the minimum grade as per the scoring model.
o The prospective borrower should handover a Power of Attorney in favour of the Bank along
with a letter addressed to the bank / HFCs from where finance was availed previously
authorizing them to deliver the title deeds and all the collateral securities charged to them,
directly to the Branch upon receipt of the loan amount.
o In case takeover of Retail Loans, advocates can provide TCR/ Legal opinion based on the
photo copies of the Title Deeds, supported by its Certified Copies. Authenticity of original
Title Deeds is required to be ascertained immediately upon the receipt of the original
documents from existing lenders subsequent to the taking over of the account and
disbursement of loan.
o In some of the States, the equitable mortgage, after being created, is also required to be
registered before the Sub-registrar’s office as per the amendments brought in to
Registration Act by them. In such cases after obtaining the original title documents from the
banks / HFCs / NBFCs/ FIs etc. from where the account is being taken over, Branches must
ensure that the borrower/ mortgagor has discharged/ released the charge created over the
properties by the previous banks / HFCs / NBFCs/ FIs etc. by executing/ registering
necessary documents with registering authorities before creation of fresh equitable

mortgage favoring the Bank and that the equitable mortgage created in the Bank’s favor is
also registered.
o All other extant norms, guidelines as applicable to borrowal accounts, as per the specified
scheme, are required to be followed.
o No credit facility should be taken over from other banks where any of the Bank's current
Executive Director or Managing Director & CEO worked earlier. In case any such account
is proposed to be taken over, the proposal will required to be put up to the Board of the
Bank with specific reasons justifying the need for taking over the account.
o Satisfactory report from the existing bank/FI and/or satisfactory conduct of account as per
latest statement of accounts to be verified.
6.9.15.3 Takeover of Agriculture Finance:

For takeover of agriculture advance accounts, the following norms are to be complied with:
Non-Financial norms (for borrowers preparing financial statements/records):

S. No. Norms
a. Profit-making (i.e. net profit before tax) concerns only as per last audited Balance
Sheet.
b. Accounts be rated as per the applicable rating model subject to ‘minimum’ BOB-6.
c. There should not have been any re-schedulement / restructuring in the account during
last two years.
d. In case of all takeover accounts, satisfactory report from the existing bank/FI and/or
satisfactory conduct of account as per latest statement of accounts to be ensured. In
addition, account should not be reported as SMA 1 / SMA 2 during last 12 months
e. Accounts with existing lenders should be under the category of “Standard Assets”.
f. All other existing norms, guidelines as applicable to borrowal accounts are to be
scrupulously followed.
Authority for permitting deviation in the Non-Financial takeover norms:

S.No. Particulars Authority, who can
allow deviation
1 For proposals failing within Branch Manager’s powers RMCC
2 For proposals falling within RMCC ZOCC
3 For proposals falling within RMCC ZOCC- GM-CC
3 For proposals falling within ZOCC- GM CC & COCC-GM- CC COCC-ED
and IFB/CBB/CFS branches & COCC-ED
4 For proposals falling within CACB powers at Corporate Office CACB
6 In all other cases MCB

Note
 An upfront fee @0.25% is to be charged in respect of all takeover proposals sanctioned with
deviations. .
 For agriculture borrowers, who are not required to prepare financial statements, only non-
financial norms mentioned at serial Nos. c, d, e & f will be applicable.
 Financial Ratios, for agriculture borrowers who are required to prepare financial statements, will
be applicable as per section. 6.9.6 above.
Authority for Takeover of Agriculture Advance:

 In case of takeover of agriculture finance to individual farmers with aggregate limit up to Rs. 10.00
lacs, no prior approval is required subject to compliance of the Non-Financial norms as mentioned
below:
i. There should not have been any rescheduling/ restructuring in the account during last two
years.
ii. Satisfactory report from the existing bank/FI and/or satisfactory conduct of account as per
latest statement of accounts to be ensured. In addition, account should not be reported as
SMA 1 / SMA 2 during last 12 months
iii. Accounts with existing lenders should be under the category of “Standard Assets”
iv. All other existing norms, guidelines as applicable to borrowal accounts are to be
scrupulously followed.
 For authorities below the rank of Chief Manager, prior approval of next higher authority is required
for taking over of Agriculture Accounts.
 For takeover proposal falling in the DLP of Chief Manager and above, no prior approval is
required, provided takeover norms are complied with and decision is taken by the Competent
Authority.
 Deviations in respect of indicative financial ratios as per Section 6.9.6
6.9.15.4 For overseas territories:

The following aspects are to be followed for take -over of facilities in overseas territories:
a) Accounts of profit-making (i.e. net profit before tax) concerns only as per last audited balance
sheet.
b) Accounts with existing lenders should be under the category of “Standard Assets”.
c) Satisfactory report from the existing bank/FI and/or satisfactory conduct of account as per latest
statement of accounts.
d) There should not have been any rescheduling /restructuring in the account during last two years.
e) Accounts should not be taken over in case the borrowers/ directors/ promoters / partners are
under local / Indian defaulters list (ex: RBI / ECGC / CIBIL defaulters list / willful defaulter list /
SMA 2 or any such local defaulters list).
All other usual norms, guidelines as applicable to borrowal accounts are to be scrupulously followed.
Permitted Deviations
Deviations may be permitted in above mentioned point No. (a) & (d) by the authorities as under:
- Head Corporate & Institutional Credit for proposals falling under Territory powers.
- ED for proposals falling within COCC GM-CC powers / GM headed Territory Loan Committee
- MD & CEO for proposals falling within COCC ED powers and
- MCB in all other cases.
7 CREDIT PROCESS
7.1 Credit Approval process
The Bank has designed the credit approval process to ensure that no individual, irrespective of
seniority, has the authority to originate and sanction credit. The credit approval process of the Bank
is as under:
7.1.1 Application:
 Standard application forms for different types of loans (Retail, SME, Agriculture etc.) are
available at operating units as well as on the Bank’s website. Loan applications are to be made
available to the applicants on request, free of cost, along with the schedule of fees and charges.
 Application forms along with detailed form No. 135 containing details of assets and liabilities of
each individual applicants / Guarantors are to be obtained.
 Receipt of completed application forms will be duly acknowledged.
 Rejection of Educational Loan applications and SC / ST Borrower’s applications should be done
at the next higher level instead of at the branch level and reasons of rejection should be clearly
indicated.
Application Disposal:
All loan applications will be disposed of generally within a reasonable period from the date of receipt
of duly completed loan applications i.e. with all the requisite information/papers. Generally, the
following timelines are applicable for disposal of completed credit applications:
Type of Credit Facility Time frame for disposal

PRIORITY SECTOR
Up to Rs.25,000/- Within -1- week

Type of Credit Facility Time frame for disposal
Above Rs.25,000/- Branch Level Within -10 working days
RO/ZO level Within -15- working days
BCC Level Within -30- days
RETAIL LOANS As prescribed at product level but not beyond:

Branch level Within -10 working days
RO/ZO level Within -15- working days
BCC Level Within -30- days
MSME LOANS
For credit limits up to Rs.5/- lakh Within 1 week
For credit limits above Rs.5/- lakh and up to Rs.25.00 Within 10 working days
lakh
For credit limits above Rs.25/- lacs Within 15 working days
OTHER LOANS INCLUDING EXPORT CREDIT, OVERSEAS TERRITORIES, (other than
Priority Sector, MSME and Retails Loans)
Branch Within 10 working days
RMCC / ZOCC / Territorial Credit Committee Within 5 working days from the
date of receipt of proposal/
clarification from the branch
At Baroda Corporate Centre- Corporate Office Level i) Within 7 working days from the
Credit Committees headed by date of receipt of proposal/
i) General Manager / Executive Director clarifications
ii) Within 10 working days from
ii) Managing Director & CEO the date of receipt of proposal/
clarifications
iii) Management Committee of the Board iii) Within 15 working days from
the date of receipt of proposal/
clarifications
7.1.2 Processing:
General Principles of Processing:
 Clear demarcation is followed between Business and Credit Proposal Processing/Appraisal

units. Proposal processing Officer and the sanctioning authority will not be same.
 Proposal processing officers should be having sufficient experience and well trained in credit
sanction process before undertaking process of credit proposals.

 Specialised projects are to be processed by personnel having specific knowledge and skills in
respective field.
 The proposals for Syndicated/Club Deal/ Bilateral loans of Indian corporates will generally be
processed by IMBC, and submitted to the competent authority for consideration/approval. In
case of need, the proposals for Indian corporates may also be submitted by GSC, London/
RSCs.
 The proposal for Bilateral Loan can be prepared by the Indian branches/ Credit Operations
Department at BCC. The proposals/offers for participation, arranging or secondary market
purchases in respect of non-Indian corporates will be processed by GSC/ RSCs and submitted
to IMBC for obtaining necessary approval.
Processing involves the following activities:

Due diligence, Security Valuation, Pre-sanction Inspection, Legal Opinion from empanelled
Advocate, Internal Credit Rating, Techno- economic viability study, Financial data analysis,
evaluation of credit proposal, including all types of risks, assessment of required limits, RAROC
computation. Gist of the guidelines with regard to due diligence and security valuation are as under:
7.1.2.1 Due Diligence

It is utmost important to understand to whom the Bank is granting credit. Therefore, prior to entering
into any new credit relationship, it must be ensured that all the relevant information and data in
respect of the borrower are obtained and objectively analysed to engender a reasonable level of
confidence that borrower is an individual or organisation of sound repute and creditworthiness.
Association with individuals involved in fraudulent activities and other crimes must be avoided. This
can be achieved through a number of ways, including asking for references from known parties,
accessing credit registries (wilful defaulters list, Credit information Bureaus, CRILIC database etc.),
and becoming familiar with the credentials of the persons responsible for managing the borrowing
company and checking their reputation and financial condition. No exposure should be taken on the
entities, individuals and countries in the sanction list of OFAC/UN/EU. It is desired that access to
data of the recognised credit information bureaus (CIBIL, EXPERIAN, EQUIFAX and HIGH MARK
etc.) be considered objectively by credit originating and processing units while appraising credit
proposals. For retail loans, with exposure of R.s 5 lakhs and above (Home Loans- Rs. 10 lakhs and
above) and commercial loans with exposure of Rs. 25 lakhs and above, credit report from atleast
two recognized credit information bureaus is mandatory. The above requirement is not applicable in
respect of Loan/ Overdraft Against Bank’s Own Deposits, gold loans, Loans to Government / PSUs
and Staff Loans. Credit Policy Committee will be authorized to review the above ceilings and criteria
as and when required. Further, Central Fraud Registry (CFR) data must be scanned and commented
upon in the credit appraisal note. Enhanced due diligence is required to be carried out in respect of
all customers categorized as ‘High Risk’ as defined in the Bank’s KYC- AML- CFT Policy including
Politically Exposed Persons (PEPs).

The sanctioning authorities at all levels, shall ensure that suitable stipulations are made in their
sanctions in respect of consortium /multiple lending borrowal accounts, inter alia, to the effect that
the facilities granted by the Bank shall be intimated to other lenders of the borrower; to exchange
information with other lenders of the borrower in prescribed format periodically while ensuring at
least once in a quarter; to obtain due diligence certificate from professionals (Company Secretary or
CA or Cost Accountant) as per format prescribed by RBI on half- yearly basis.
The guidelines relating to Know Your Customer (KYC) principle are applicable to all borrower
customers including foreign currency borrower customers / transactions. “Know Your Customer”
(KYC) procedures should be the key principle for identification of an individual/ corporate while
opening an account. The customer identification / verification shall be on the basis of documents
provided by the customer in accordance with the Reserve Bank of India guidelines issued from time
to time.
The guidelines of KYC are not only for establishing the identity of the person but also satisfying about
his credentials. The due diligence expected under KYC procedures involves going into details. The
responsibility in this regard does not end with opening of the accounts and monitoring of transactions
in the initial few months of opening of the account. Monitoring must be an on-going process.
Detailed instructions / guidelines are contained in the Bank’s ‘Policy on Know Your Customer (KYC)
Norms, Anti Money Laundering (AML) Standards, Combating of Financing of Terrorism (CFT) and
Obligation of Bank under PMLA, 2002’ and circulars / guidelines issued from time to time.
7.1.2.2 Valuation of Immovable Property Obtained As Security
 The property being accepted as security should be got valued by any of the Bank’s approved
valuer at the time of considering the facility.
 The valuation report should contain the value of the property as per present Government rate
along with Market Value, Realizable Value and Distress Value. Lower of realizable value / market
value of asset should be considered.
 Normally for Home Loans, Market value is considered as value of security and for other Retail
Loans, unless it is not specifically mentioned in the scheme, realisable Value is considered as
value of security, in case of immovable properties.
 In case of properties acquired within last -3- years, amount of Registered Sale Deed or the
realisable Value whichever is lower should be taken as value of property and the same be taken
for the purpose of calculation of FACR/Security Coverage Ratio / Loan to Value Ratio.
 If the present realisable value is higher than the Registered value (Registered within last 3 years)
and if it requires to consider present realisable/ Market value as value of property, for any reason,
deviation approval from Regional Authority to be obtained for the same.

 However, the above valuation norms for taking amount of Registered Sale Deed as value of the
Property is not applicable for takeover Home Loans. In case of takeover of Home Loans, the
present Market Value of the property to be considered as valuation.
 In respect of any particular property/ies offered as prime/collateral security valued at Rs. 10.00
crores and above (excluding Retail Loans) and in case of Traders Loan & Mortgage Loans of
limit above Rs. 2.00 Crore, Valuation Report from two empanelled valuers approved by the Bank
shall be obtained and the lower value will be considered
 If any increase in existing exposure / additional limit / facility is considered by extending the
charge over the property, fresh valuation normally would be taken, before taking additional
exposure. However, if the date of latest valuation report obtained for the property proposed to
be mortgaged is within last 3 years and the sanctioning authority is satisfied about the fair and
acceptable valuation of the property as per the valuation report, fresh valuation may not be
insisted upon by the Sanctioning authority.
7.1.2.2.1 Valuation of Sugar Stocks:

 The unreleased stocks of the levy sugar charged to Banks as security by the Sugar Mills shall
be valued at levy price fixed by Government.
 The unreleased stocks of free sale sugar including buffer stocks of sugar charged to the Bank
as security by the Sugar Mills shall be valued at the average of the price realised in the preceding
three months (moving average) or the current market price, whichever is lower; the prices for
this purpose shall be exclusive of applicable GST
7.1.2.2.2 Valuation of Gold:
For the purpose of valuation of gold, the Bank uses the historical spot gold price data publicly
disseminated by a commodity exchange regulated by the Forward Markets Commission.
7.1.2.2.3 Valuation of financial securities-periodicity
Frequency Govt. Debt Gold LIC / NSC / Units of MF

of valuation securities Securities KVP
of Financial Security Daily Daily Daily Annually Daily
In case of LIC policy, branches will update the surrender value on annual basis and in case of NSC
and KVP it has to be ensured that there is no lock in period. It may be noted that these guidelines
are applicable for the securities eligible as financial collaterals only.
7.1.3 Credit Decision:

Based on the recommendations of the appraising official, and considering the credit risk evaluation,
the respective sanctioning authorities will take a favourable credit decision or reject the proposal or
stipulate additional covenants to safeguard the Bank’s interest.

The discretionary lending powers (DLP) are vested in different officials in their individual capacities/
committees which are described hereunder:
7.1.3.1 Delegated Authorities:
7.1.3.1.1 Domestic Lending:

Various functionaries in the Bank will exercise Discretionary Lending Powers in terms of the approval
granted by the Board of Directors from time to time. Committee structure is adopted for sanction of
credit proposals at Regional Office/ Zonal Office and Corporate Office Level. However, Branch
Heads can exercise their delegated lending powers as per their respective scale/ grade. In addition,
Heads of SMELF / SMS (not linked to CPC) and Senior Managers & above posted as Credit Officers
in SMELF / SMS will exercise the DLPs in accordance to their respective rank / grade. Head of
Centralized Processing Centre (CPC), under the Centralization set up for Retail Credit processes,
will exercise the DLP attached to his/her substantive rank / grade. To expedite the credit decisions,
Senior Managers & above in CPC will also exercise the discretionary lending powers in accordance
with their substantive rank / grade subject to the condition that the appraising and sanctioning
authority are different. Detailed guidelines with regard to Delegated Lending Powers are issued
separately. Operating units are to be guided by the same.
1. Corporate Office Level Credit Committees:

a. Management Committee of the Board (MCB).
b. Credit Approval Committee of the Board (CACB) – Headed by the MD&CEO
c. Corporate Office Level Credit Committee headed by respective EDs, in-charge of respective
Corporate Credit Function (COCC–ED).
d. COCC- GM-CC for Sanction of Credit Limits under Inventory / Channel Financing Scheme
for dealers, Proposals processed by CFS / Emerging Corporate Branches, proposals
pertaining to overseas territories beyond territorial credit approval committees and any other
specific scheme as approved by the competent authorities.
2. Zonal Office Level Credit Committee headed by Zonal Head i.e. ZOCC (GM-CC) and ZOCC-
GM.
3. Regional Office Level - credit committee:
a) Regional Office Level Credit Committee headed by Regional Manager (RMCC)
The Quorum of CACB & RMCC, the quorum is -3- members and for all other committees, the quorum
is -4- members. For CACB, presence of Managing Director &CEO, any one of the Executive
Directors is mandatory. For COCC- ED, presence of In-charge ED of respective function for which
proposal is considered and Head of respective function is mandatory. For COCC- GM-CC, head of
sponsoring credit vertical is mandatory. For ZOCC- GM-CC, presence of head of sponsoring Zone
is mandatory. For other committees, presence of the Head of respective committee is required.
Separate credit committees can be formed for specific schemes/ products at Corporate Office / Zone
/ Region level subject to approval by the Credit Policy Committee.
7.1.3.1.2 Overseas Territories:
For Credit Proposals at Overseas Territories (Branches), lending powers are delegated to Branch
Heads depending upon their scale/ grade. Above Branch heads, lending powers are delegated to
territorial committees and individual delegated powers of executives are ceased. The delegated
powers of the credit committee depend upon the scale/ rank of the Executives heading the respective
Territorial Credit Committee. The territorial committees will have 25% more powers than the
individual powers of Head / Chairman of the territorial committee comprising of minimum two
executives. Proposals falling beyond the Territorial Credit Committee are to be submitted to
respective Corporate Office Credit Committees as under:
 Corporate Office Level Credit Committee headed by General Manager Chief Coordination -
COCC – (GM-CC)
 Corporate Office Level Credit Committee headed by Executive Director (COCC- ED)
 Credit Approval Committee of the Board (CACB) headed by Managing Director & Chief
Executive Officer
 Management Committee of the Board (MCB)
Detailed guidelines on Delegated Lending Powers are enunciated in the Credit Policies of respective
territories.
7.1.3.1.3 Validity of Sanction:

1. Any sanction, if not availed of, within three months in case of Working Capital (Funded & Non-
Funded) Facility and six months in case of Term Loans, and Consortium Loans from the date of
sanction, would lapse and would require revalidation by the sanctioning authority.
2. In case both the Working Capital Facilities and Term Loan are sanctioned in a single account,
the validity for Term Loan shall be adhered to.
3. In case, if sanction is accepted unconditionally by the borrowers & guarantors, documents have
been executed within the permissible period (i.e. 3 months in case of working capital and 6
months in case of term loan), and 50% processing charges have been recovered, in such cases,
sanction will remain valid for a period of 9 months from the date of sanction.
4. These clauses are valid for enhancement in existing facilities also.
5. Revalidation of sanction will not extend the date of original / latest sanction for calculation of due
date of review / renewal.
6. For overseas territories, if any advance sanctioned is not availed within four months (six months
in case of Project finance / Infrastructure Finance) from the date of sanction, the facility should
not be allowed without referring matter to the sanctioning authority.
7.1.4 Stipulating appropriate covenants
Appropriate financial and non- financial covenants will be stipulated on case to case basis, based
on the facility type, security, industry, sector, borrower’s constitution etc.

7.1.4.1 Pricing:
Pricing of the rupee loans will be linked to the MCLR, other than the exempted categories as under:
 Loan under Government Schemes

 Working Capital Term Loan, Funded Interest Term Loan etc. granted as part of the rectification
/ restructuring package
 Loans under Government refinance schemes or any Government undertakings.
 Advances to Staff, the Bank’s whole-time Directors, LABOD, Loans linked to market benchmark
and fixed rate loans.
Risk based credit spreads for SME and Corporate advances will be computed by Risk Management
Department based on expected credit losses and also taking into account the opportunity cost of
capital charges.
Overseas territories will benchmark their loan pricing looking into the local regulatory guidelines and
in line with their loan policies, covering cost of funds, operating costs, capital cost, statutory pre-
emption cost and reasonable margin.
7.1.4.2 Penal Interest:
The Bank may apply penal interest of minimum 2% p.a. each, for delay in submission of financial
statement, stock statements, creation of security, quarterly information, overdues, breach of
stipulated covenants etc. without any explicit approval / concurrence of appropriate authority. Penal
interest would be exclusive of the existing pricing of the asset and additional to any other charge for
excess ad -hoc limits.
Penal Interest should be charged to deter the borrower from non- compliance of any term and
condition including default of repayment of interest / installment. Penal Interest / Additional interest
will be charged on the overdue amount @ 2% per annum to the term loan / working capital limit
accounts defaulting installment / interest repayment in respect of loans and advances other than
Priority Sector loans up to Rs. 25,000/-, Loans sanctioned under Government Sponsored Schemes
and Retail advances.
 In respect of Priority sector loans up to Rs. 25,000/-, ECNOS no penal interest is applicable.
ECNOS means Export Credit Not Otherwise Specified in the interest rate structure which banks
are free to decide the rate of interest keeping in view the MCLR / Base Rate / BPLR spread
guidelines.
 In respect of Loans sanctioned under Government Sponsored Schemes, and Retail Loans,
penal interest @ 2% per annum will be applicable on OVERDUE portion only and not on the
entire outstanding amount.

The Bank shall charge overall penal and additional interest up to 2% p.a. over the applicable/regular
interest rate.
Waiver/ relaxation of penal interest for non-compliance of terms and conditions other than default of
Interest / instalment payments, Zonal head and other executive not below the rank of GMs are
authorised to waive / relax levy of penal / additional interest on case to case basis strictly on merits.
7.1.4.3 Pre-payment Premium:
Unless there is scheme level exemption and as exempted by respective verticals like MSME & Retail
from time to time, in case of prepayment of loans, prepayment premium will be at 2% p.a. on the
amount being prepaid for the period for which the amount is prepaid. Since the waiver of prepayment
charges increases our interest rate risk, the same should be granted judiciously in deserving
schemes/ cases only.
7.1.4.4 Levy of Commitment Charges:
To monitor borrowers’ utilization of the sanctioned working capital facilities (excluding retail loans
other than Baroda Traders Loan and Baroda Mortgage Loan) and for effective deployment of
lendable resources, commitment charges will be levied in case of non-utilization / under-utilization
below 60% of working capital limits for advances accounts with fund-based working capital limits of
Rs. 1 crore and above. ZOCC / COCC- GM, Territorial Credit Committee is authorized to waive up
to 25% of commitment charges for proposals falling up to their respective delegated powers. COCC-
ED, CACB and MCB may consider waiver up to 100% of commitment charges for proposals falling
up to their delegated lending powers.
7.1.5 Post Sanction Reporting
Bank follows a Post Sanction Reporting System, wherein the credit decisions considered by any
sanctioning authority are reported to the next higher sanctioning authority on a monthly basis. The
features are as under:
 Covers all sanctions and credit decisions viz., Fresh / Increase / Renewal / Rejection / Adhoc
/ Modifications / Waivers / restructuring / rescheduling etc., excluding sanction of staff
advances, LABOD (i.e. post sanction reporting of LABOD and staff loans is not required).
 Broad parameters relating to sanction are only examined by the PSR authority whereas the
sanctioning authority shall take care of all procedural details on credit appraisal, adequacy of
security, documentation etc.,
 Observations of PSR authority are to be attended immediately, which shall also serve as
guide to the sanctioning authority for future.
 Disbursement of credit facility/ies is not to be withheld merely for want of observations of the
competent authority on PSR.

A. Where PSR reporting is required to be submitted on monthly basis to PSR Authority: All credit
proposals excluding LABOD & Staff Loans
B. Where Copies of Credit Proposals are to be submitted, it must be done to PSR authority within
3 days of sanction along with Appraisal Note, latest financials with necessary comments by the
sanctioning authority, latest credit rating sheet, gist of major adverse features and non-
compliance of stipulated terms and conditions and the sanctioning authority’s comments thereon:
Branches in Area Sanction Threshold (FB+NFB) Other than Retail Retail
Metro & Urban Above Rs.25 lakhs Above Rs.5 lakhs
Semi Urban & Rural Above Rs.10 lakhs Above Rs.5 lakhs
The PSR authority is required to note the proposal from PSR angle within a period of –30- days from
the date of receipt of proposal. If the PSR authority has not made any observation within the said
period, it will be presumed that the PSR authority has no observation to make and the proposal is
cleared from PSR angle. The PSR authority for ZOCC- GM CC shall be COCC GM-CC at Corporate
Office.
7.1.6 Documentation, Security Creation & Security Perfection:
1. Documentation serves as primary evidence of the debt owed by the borrower, or obligation
guaranteed by the guarantor, to be relied upon in the event of any subsequent dispute between
the Bank and the borrower and/ or guarantor.
2. Documentation establishes the following:-
 Legally enforceable contractual relationship between the Bank and the constituent such as
Lender/ Borrower.
 The nature and description of the security, if any, offered for the advance, and
 The terms and conditions of sanctioning the advance.
 The Bank’s unfettered rights for crystallisation of securities when necessary.
 Documents also form the basis for enforcing the Bank’s right to affect recovery through legal
recourse.
3. Limitation Clause: These measures aim at preventing documents from getting time-barred
through limitation and at protecting the securities charged to the Bank from being diluted by
any subsequent charge that might be created by the borrower to secure his other debts, if any.
These objectives are sought to be achieved by:
Revival letters / Letter of Acknowledgement of Debt (LAD) being obtained within the stipulated
period of two years from the date of document/ renewal of document, from borrower / guarantor;
4. In respect of consortium advances, the documents are generally executed in consultation with
the other member banks in accordance with the guidelines laid down by RBI /IBA in the matter.
Similarly, where advances are extended jointly with the financial institutions, documents are
specially drafted in consultation with the solicitors / in-house legal experts to ensure perfection

of pari passu charge and / or second charge, as applicable, of the movable / immovable assets
of the borrower to protect the banks' interests.
5. No credit facility should be disbursed unless the documents have been properly executed and
stamped as applicable and security has been perfected.
6. Sanctioning / Competent authority may permit time for perfection of security within a reasonable
period.
7. Specific approval of sanctioning / competent authority must be obtained in case a new credit
facility is proposed to be disbursed without creating/perfecting the security.
8. If sanctioned facilities are sought to be released on the basis of standalone documentation,
pending Consortium documentation, approval for such arrangement should be obtained from
the sanctioning / competent authority.
9. Non adherence to the time given for perfection of security may invite penal provisions, which
should be clearly mentioned while conveying approval for extension in time.
10. Ceding of charge should not be viewed only from the point of dilution of security but also from
the angle of need / justification for the additional borrowing and the possible impact on the
financials/ performance of the borrowing unit, and a decision taken based on normal business
prudence.
11. The principle of sharing the available securities of the borrowers as between the term lending
banks and institutions should be that no bank/institution over-secures its position at the cost of
the other banks/ institutions.
12. The Bank’s Books of Instructions provides the details, which are to be complied with, keeping
in view periodical updates through circulars/instructions. Obtaining prescribed documentation,
creation and registration of charges (wherever applicable) should be accorded utmost
importance and sufficient care should be taken to release funds only after completing the
relevant formalities except cases where specific prior approval of appropriate authority is
obtained.
7.1.6.1 Verification of Documents:
The guidelines for verification of documents by panel advocate/Law officer of the bank are as
under:
1. Advances accounts with aggregate limit of above Rs. 2 crore (Funded plus Non-Funded) would
be verified by the Bank’s Law Officer posted in the respective Zone / Region / CFS Branches
and the documents relating to Advance Accounts with aggregate exposure of Rs. 10 lacs and
above but up to and inclusive of Rs. 2 crore shall be verified by the Bank’s identified Advocate
/ Lawyer other than the one who has given the Title Opinion / Non-Encumbrance Certificate
(NEC) / Report in respect of mortgage(s) in the account. Further, in respect of following Zones,
documents verification in respect of credit limits between Rs.2 crore and Rs.5 crore can be got
done from empanelled advocate/s of the bank, provided original documents at some stage have
been vetted by Zonal Legal Dept./Law officer of the bank.
1) New Delhi Zone 2) Greater Mumbai Zone 3) Chennai Zone 4) Kolkata Zone 5) Ahmedabad
Zone 6) Pune Zone and 7) Jaipur Zone.
2. Notwithstanding what is mentioned above, all documents pertaining to consortium accounts

have to be necessarily got verified from Corporate Legal Dept. / Zonal Legal Dept. / Law Officer
of Bank. It may be noted that the documents shall be verified by the Bank’s identified panel
Advocate/ Lawyer other than the one who has given the Title Opinion/Non-Encumbrance
Certificate (NEC)/ Report in respect of mortgage(s) in the account.
7.1.6.2 Document Management:
Security documents are stored in a fire proof cabinet at respective Branches. As on date, documents
on pan- India basis are stored in a decentralised form and are located at each branch. Bank under
its transformation journey has already initiated digitization of the records including loan security
documents. The digitised documents will be accessible to the authorised employees for day to day
operations. Once this exercise is completed, Bank will explore the possibility of storing the physical
documents centrally at different locations across India. Similar exercise will also be carried out in
overseas territories.
7.1.7 Disbursement:
1. Stipulated terms and conditions of the sanction are to be conveyed to the borrower in writing
and on acceptance; the disbursement should take place after due execution of necessary
documents, its vetting and compliance of various terms and conditions of sanction.
2. Where borrower approaches multiple banks/ financial institutions for funding their project, it
should be ensured that the borrower is in a position to tie-up with definite commitment from all
the participants and achieve “FINANCIAL CLOSURE” within the committed time frame
3. Disbursement in case of working capital facilities shall be governed by availability of drawing
power in the account. Generally, Book Debts for more than 90 days is not to be considered for
the purpose of Drawing Power. In case drawings are to be allowed for book debts for more than
90 days period, Zonal Managers are authorised to accept DP in respect of book debts beyond
-90- days and up to 180 days irrespective of sanctioning level, subject to reporting to the higher
authorities. Beyond -180- days and up to 360 days, Executive Director and above are
authorised.
4. Disbursement in Infrastructure Project / Project Finance Accounts:
a) Branches shall do the disbursement in Infrastructure accounts as per the progress report
of the projects. In sole banking/consortium accounts, while making disbursement, Lenders
Engineers Report and Chartered Accountant Certificate on cost incurred may be examined.
The position of approvals/clearance from different authorities and timeline for completion to
be perused at each disbursement

b) The disbursements should be commensurate with the progress of the project / business
activity, also taking into account the extent of margin brought in by the promoters up to the
given point of time.
5. Disbursement on Reimbursement Basis:
a) Disbursement of loans and advances should not be on reimbursement basis, unless
expressly approved by the sanctioning authority.
b) In genuine cases, disbursements on reimbursement basis to be considered by sanctioning
authority not below the level of General Manager for capital expenditure already incurred
based on certificate of cost incurred and means of funding certified by Statutory Auditors /
Chartered Accountant / Lenders’ Independent Engineer (LIE), subject to following
conditions:
i) CAPEX should have been incurred within -6- months prior to sanction or application till
the date of 1st disbursement;
ii) Bringing of pro rata promoter’s contribution /margin is ensured;
iii) Such disbursement to the extent of only 20% of the loan;
iv) Inspection of assets created for which reimbursement has been sought.
c) Zonal Heads may allow reimbursement up to 20% of the Term Loan amount in the accounts
sanctioned by authorities at BCC, subject to compliance of conditions mentioned above
d) Concerned vertical heads are authorized to allow full reimbursement in respect of sanctions
up to the power of ZOCC subject to the verification and certification by the Statutory Auditors
/ Chartered Accountant / LIE.
e) For retail loans disbursement on reimbursement basis is specified in the individual schemes
f) For all other cases / deviations, necessary powers shall remain vested with the Executive
Director and above.
g) Reasons for accepting reimbursement should be duly recorded in writing.
7.2 Credit Administration:
For maintaining the quality of the loan asset, Domestic Branches, Overseas territories shall follow
the procedure prescribed in the Book of Instructions, respective Credit Operations Manuals and
territory specific credit policy with regard to end use of loan, monitoring, supervision, risk
assessment, periodical inspections, statements to be obtained from the borrowers, documentation,
credit report from other banks, credit turnover in the account, timely recovery of loan instalments and
interest etc.
7.2.1 Review Process
7.2.1.1 Review:
Credit facilities sanctioned to borrowers are subjected to annual review (except Loan/ Overdraft
Against Bank’s Own Deposits (LABOD/ ODBOD), staff loans and the accounts where facilities
sanctioned are for a period less than one year etc.). However in case of borrowal accounts enjoying

credit facilities of Rs.10 crore and above, where the credit rating is BOB-7 or below, review of such
borrowal account should be on half-yearly basis.
The accounts are required to be reviewed on or before the due date. The review takes a
comprehensive view on various issues covering financial health, borrower's performance and
prospects, quality of the management, conduct of the account, compliance, etc. The review will also
evaluate the impact of deficiencies observed during inspection / Concurrent / statutory / Credit Audit
/ RBI inspection and rectification thereof.
Branches have been authorised to review advances accounts with limit up to Rs. 25 lacs for facilities
enjoyed by borrowers in trading activities, Micro & Small Enterprises, borrowers in rural area,
borrowers having only term loan accounts, financed under government sponsored programme,
borrowers enjoying only guarantee facility, etc, pending receipt of audited financial statements,
provided the conduct of the account is satisfactory in terms of:
 Satisfactory conduct and turnover in the account

 Fulfilment of repayment obligations (Interest/ Instalments)
 Adequacy of securities, drawing power, insurance coverage etc.
 Rectification of inspection irregularities (other than non- submission of financial statements)
 Compliance of all terms and conditions of previous sanction.
 Satisfactory trend in production and /or Sales as per projections
 Documentations and mortgages in the account being complete, valid and enforceable
 Prompt payment of bills under LCs, realization of BP/BDs, Guarantee Commission etc.
 Submission of Income Tax / Sales Tax returns filed with Statutory Authority as per time schedule
prescribed, wherever applicable (which will also indicate about the sales and profitability of the
operations).
While the objective of the above system / procedure is to ensure timely review of advances accounts
so that the slippage of the accounts to NPA category on technical grounds may be avoided. However
branches should obtain latest financial statements within a reasonable time after the review is
conducted and satisfy themselves as to the financial parameters emerging out of the Balance Sheet
/ Profit & Loss a/c. In case any adverse features are observed in the financials of the borrower,
Branches should immediately initiate appropriate action as warranted.
7.2.1.2 Single Credit Line / Approval for Recognised Groups:
In respect of major business groups, it is desirable that a single consolidated credit line / approvals
be considered for the entire group on annual basis, taking in to account the credit worthiness of the
group as a whole and also for enhancing high quality credit exposure. Corporate & Institutional Credit
Department shall carry out group risk assessment using criteria set by Risk Management
Department and submit the same to MCB, which will decide upon the approval of prudential credit
limit for the group. The group risk assessment is mandatory for large groups, if more than two group
entities approach the Bank with proposals involving total group exposure of Rs. 250 crore and above.
Enhanced due diligence must be carried out including monitoring of intra- group transactions, group
structure, ultimate beneficiaries, end use of funds etc. However, each individual group entity’s
requirements will be assessed separately within the overall group exposure limit and as per the
guidelines.
7.2.1.3 Review of Business Relationship:
Apart from review of an account in terms of credit and other risks as brought out above, review of
the business relationship should also be done at the time of annual review. The business relationship
should be reviewed considering the overall value the customer adds to the Bank’s business by way
of cross selling opportunities, ancillary business, retail business by way of staff salary accounts and
retail lending opportunities, Directors / family members’ retail business etc. Further, the Bank should
get its share of fund and non-fund business at least proportionate to the Bank's share of consortium
/ multiple banking / syndication. Branches should, therefore, endeavor to maximize the
utilization/earning opportunities in an account. Following aspects should also be taken into account
in respect of utilization of limits.
1. The utilization level with the Bank should be compared with other banks in the consortium /
multiple banking.
2. Rate of interest, processing charges and commission for letter of credit and bank guarantee
charged by other banks should be compared with the Bank’s terms and may be revised with the
approval of the appropriate authority in order to improve utilization.
3. In companies’ annual reports, useful information regarding outstanding letter of credit, bank
guarantee, bills discounted, term loans availed, financial charges incurred, etc. can be seen.
4. During discussions with promoters/officials of the company, business from group companies,
suppliers etc. should be explored.
5. Wherever term loan has been granted, working capital business should be pursued as and when
the project is nearing completion.
6. Before submitting the credit proposal to the sanctioning authority, branch should discuss the
terms being proposed with the borrower so that there is mutual acceptability or borrower is aware
of the terms. This will eliminate unwarranted modification of terms subsequent to sanction and
loss of business/lower utilisation of limits.
7. Wherever the Bank's share in term loan is higher, branches should try for escrow/TRA float in
respect of infrastructure projects.
8. Financing branch should try for salary accounts and retail loans.

7.2.1.4 Short Review:
The review process should be initiated prior to the due date of regular review and should be
completed before the due date. However, under exceptional circumstances where it is not possible
to carry out a comprehensive Regular Review of any account for want of certain essential particulars/
information, short review can be undertaken for a period of 3 months. As per regulatory prescription,
regular and ad hoc credit limits need to be reviewed/ regularised not later than three months from
the due date/date of ad hoc sanction. In case of constraints such as non-availability of financial
statements (for accounts other than mentioned under section 7.2.1.1) and other data from the
borrowers, there should be evidences to show that renewal/ review of credit limits is already on and
would be completed soon. In any case, delay beyond six months from the due date of regular review
is not considered desirable. Hence, regular review must be completed within 180 days from the due
date/ date of ad hoc sanction.
7.2.1.5 Mechanism for Review of Pending Proposals at Various Levels:
The movement and pendency of all the credit proposals falling under sanctioning authorities at
various levels would be reviewed by higher authorities at specific time intervals as under:
SN Proposals falling Status review by Periodicity of Status Review

within the DLP of
1. Branches Respective Regional Manager Twice a month – 1st & 3rd Saturday
2. RMCC Respective Zonal Manager Twice a month – 2nd & 4th Friday
3. ZOCC Corporate General Manager Once in a month – 1st Saturday
4. COCC-ED / Head of respective credit Once in a month – 3rd Saturday
CACB / MCB vertical
7.2.2 Review of Internal Rating
 The rating exercise for corporate borrowers under BOBRAM will be conducted annually based
on the audited financials of the previous year and/or estimates for the current year for all credit
facilities, including term loans. In exceptional cases where audited financials are delayed, rating
may be completed on the provisional financials. In such cases, on availability of audited
financials, if the adverse variation in turnover/ net profit/ net worth/ current ratio, is more than
10%, then fresh rating shall be done based on audited financials.
 The rating review exercise will be independent of the annual renewal / review exercise. The
Credit Officer concerned should ensure review of the rating of the borrower at least on annual
basis, irrespective of the timing of the annual review / renewal of the credit facility.
 Assuming that the financial year end of a borrower is 31st March, the date of effect of the interest
rate arrived at based on credit rating will be 1st October. Where the financial year end is other
than March, the periodicity of rating exercise and the date of effect of the revised interest rate
will get shifted suitably, keeping the time gap constant.

 In the case of corporate borrowers with exposure of Rs. 5.00 crore and above where there are
significant increase in the credit risk, as indicated by falling under SMA 1 & 2 category, negative
market reports against the borrowers/promoters, adverse Industry conditions etc., re-rating is
required to be done immediately. In case of mid- term review of credit rating, the last credit rating
grades are to be considered for all purposes i.e. for decision making and / or charging interest
rate till the review is over. In case of any deterioration in the mid- term credit rating, concessions,
if any, extended to the customer on the basis of the last rating will have to be reviewed by the
competent authority.
7.2.3 Periodic Valuation of Assets & Asset Verification / Inspection
7.2.3.1 Periodic Valuation:
1. In case of General advances valuation of property is to be carried out once in 3 years by the
Bank’s empanelled valuer, irrespective of classification of account.
2. The Branches will carry out periodical inspections as per extant guidelines. If any adverse
developments are noticed during the inspection of the Property, re-valuation of the same should
be carried out by the valuer other than the previous valuer.
3. Advances granted under Baroda Traders Loan, Baroda Loan to Doctors & Baroda Mortgage
Loan, valuation of the property charged to the Bank need to be got done once in 3 years.
4. In case of Home Loans and other Home Loan variants, if the account is regular and classified
as standard asset, the condition of valuation of the properties once in three years will not be
applicable.
Periodic Valuation at overseas territories:
In case of advances secured by way of mortgage of landed property/fixed assets(as primary or

collateral security), overseas branches shall stipulate for independent valuation report from Bank’s
approved valuers and Solicitor/Advocate’s report on title to the property and encumbrances. The
subsequent valuation are to be carried out atleaset once in every 5 years from the Bank’s empanelled
valuers (other than the previous valuer)
7.2.3.2 Asset Verification / Inspection:
Periodicity of the inspection of securities to be carried out is as under: -
7.2.3.2.1Primary Securities:
Security Frequency of Inspection

For working capital Latest Credit Rating for BOB1, BOB2 & BOB3 Once in every two months.
as per BOBRAM Latest Credit Rating of BOB4 and BOB5 Monthly
rating Latest Credit Rating BOB6 & Below Monthly

Fixed Assets Half-yearly i.e. as of January
(Charged against Demand/Term Loan/DPG) and July
Under consortium arrangement As per periodicity fixed by the
(Exchange of inspection reports / information – with other banks to consortium.
be ensured.)
For overseas operations, individual territories may chalk out the respective periodicity of asset
verification.
7.2.3.2.2 Collateral Securities:
The inspection of collateral securities to be carried out preferably on annual basis for all types of
facilities i.e. Funded as well as Non-Funded.
1. In case of Consortium Accounts, where inspection is carried out by banks on rotation basis, the
inspection carried out by other member banks shall be treated as compliance of inspection
norms. The inspection report should be obtained from other banks, perused and kept on record.
2. Branches to submit call report / unit visit report in prescribed format to the sanctioning / reviewing
authority along with the proposal.
7.2.3.3 Unit visits / Visit to the Borrower’s Office premises by Authorities:
In addition to the aforesaid periodicity of inspection, the Branch Manager/ Regional Manager/ Zonal
Manager shall undertake visits to the borrower’s unit /Office Premises as under:-
S No Sanctioning authority Periodicity of field visits

a) For advance accounts falling up to By the Branch Manager preferably twice a year.
the powers of Branch Manager.
b) For advance accounts falling up to By An executive or an officer at respective RO,
the powers of ROCC. preferably once in a year.
c) For advance accounts falling By an executive or an officer at respective ZO
beyond the powers of ROCC. preferably once in a year.
d) For advance accounts where Periodicity of field visit will be accelerated on case-
obligor (borrower) credit rating has to-case basis as warranted, to be decided by
slipped by two notches Regional / Zonal Authorities for taking timely
corrective actions.
The periodicity suggested is the minimum stipulation and based on the need, the concerned
authorities’ up to Zonal level may visit more frequently, especially in case of accounts causing
concern.

8 MONITORING AND CONTROL
8.1 Three Lines of Defence
The Bank has adopted three lines of defense for effective monitoring of its credit portfolio
performance. The first line of defense consists of the [Customer relationship department] that is
responsible for ensuring adherence to the Bank policies on lending and credit. The second line of
defense is the oversight provided by control functions such as Risk and Compliance [Risk
Management department and Risk Management Committee] who set and monitor adherence to
policies and define work practices. The third line of defense is the independent internal audit and the
directors who undertake reviews of the overall risk management and compliance function.
8.1.1 First Line of Defense - Customer Relationship Department
 Developing a sound framework of process, system and people resources to attain the objective
of the Policy.
 Maintaining customer relationships on a day-to-day basis, ascertaining/meeting new
requirements as well as competently servicing their ongoing requirements;
 Obtaining and collating all information necessary to form a sound credit decision and to develop
a framework to monitor credit quality on a timely and continuing basis;
 Compiling a thorough and well-documented credit file on each loan or facilities package;
 Monitoring closely the credit exposures, evaluating developments and trends, preparing periodic
assessment reports and reporting them to Risk Management department;
 Identifying accounts with negative potential for inclusion in Special Mention category; and
 Developing appropriate strategies promptly to improve/safeguard the bank’s position toward the
debtor, in order to avoid or minimise possible loss.
 Daily monitoring of credit limits;
8.1.2 Second Line of Monitoring - Risk Management
Risk Management function provides services to the Bank independent from its business areas. Its
credit risk monitoring activities include but not limited to:
 Examining process, systems of first line of defence

 Review of portfolio risk
 monitoring of external credit ratings and credit default swap spreads in case of a listed corporate;
 Internal rating model governance
 Improvement of deficiency of process, system, pointed out by third line of defence or otherwise,
is noticed by the department
 Reporting and escalating genuine limit violations and excesses;
 Ensuring appropriate independent credit analysis is undertaken and independently verifying the
internal rating calculated by the Credit department for the counterparty, using an appropriate
rating model.
8.1.3 Third Line of Monitoring – Audit Department
Internal Audit acts as the third line of defense. It carries out independent review of credit function
and provides assurance to the stake holders against credit risks. For high value Credit Proposals,
Bank has adopted Credit Audit mechanism. The details are as under:
8.1.3.1 Loan Review Mechanism/ Credit Audit:
Credit Audit examines compliance with extant sanction and post-sanction processes/ procedures
laid down by the bank from time to time. The execution of Credit Audit will be through a) Loan Review
Mechanism (LRM), b) Loan Documentation Audit c) Credit Concurrent Audit d) Onsite Credit Audit.
8.1.3.1.1Objectives of Credit Audit:
 Improvement in the quality of credit portfolio

 Review sanction process and compliance status of large loans
 Feedback on regulatory compliance
 Independent review of Credit Risk Assessment
 Pick-up early warning signals and suggest remedial measures
 Recommend corrective action to improve credit quality, credit administration and credit skills of
staff, etc.
8.1.3.1.2Scope and Coverage:
Credit Audit is to be carried out within a period of 6 months from the date of sanction / review in
respect of following:
 All fresh Sanctions/ Existing accounts including Retail Loans and Restructured Accounts with
aggregate exposure of Rs.10/- crore and above (Fund based + Non fund based)
 5% of borrowal accounts randomly selected from the rest of the portfolio as under
o Fresh Accounts sanctioned with exposure of Rs. Rs.1/- crore above but below Rs.10/-
crore (Fund based + Non fund based).
o Accounts reviewed with increase with aggregate exposure of Rs.1/- crore above but below
Rs.10/- crore (Fund based + Non fund based).
 Fresh sanction and reviewed with increase account of Sister Concerns / Group/ Associates
concerns of above accounts, with threshold limit of Rs. 1/- crore & above (Fund based + Non
fund based).
8.1.3.1.3Exclusions:
 All the self- liquidating advances granted against the security of Bank’s own deposits, 100%
cash margin, Govt. Securities like NSC/KVP/IVP etc. either granted to the main eligible account
and or its associates.
 All short term clean loan, all Short reviews and all Non Performing Advances

8.1.3.1.4Action Points for review:
 Verify compliance of bank's laid down policies and regulatory compliance with regard to sanction
stipulation
 Examine adequacy of documentation
 Conduct the credit risk assessment
 Examine the conduct of account and follow up looked at by line functionaries
 Oversee action taken by line functionaries in respect of serious irregularities
 Detect early warning signals and suggest remedial measures thereof
8.1.3.2 Verification/Audit of hypothecated/pledged Stocks / Book Debts:
 The existing practice of conducting stock inspections and Book Debt verification by branch
officials and random inspection by concurrent auditors are to continue.
 Stock / Book Debts Audit is to be carried out mandatorily in all accounts having fund-based and
non- fund based working capital facilities of Rs. 1.00 crore and above with our Bank.
 The frequency will be bi-annual in respect of working capital exposures of Rs. 5.00 crore and
above and annual for working capital exposure of Rs. 1.00 crore and above up to Rs. 5.00 crore
 Stock / Book Debts Audit will not be applicable where no working capital facilities are sanctioned
/ or working capital limits are below Rs. 1.00 crore
 The borrowal accounts where concurrent audit has been assigned, may not be subjected to
stock / Book debts Audit
 Stock Audit carried out through other Banks (in case of Consortium / Multiple Banking) shall also
be acceptable.
 Stock Auditors while commencing/ conducting the audit, must adhere to the element of surprise.
 For Supply Chain Finance , the approved product guidelines in this regard will be applicable.
 No Stock & Book Debt verification for borrowers in overseas territories.
 Baroda Traders Loan is exempted from the requirement of Stock / Book Debts Audit
8.2 Credit Risk Management
It is the responsibility of the management of the Bank to actively identify, communicate and manage
credit risks arising from managing business activities and to implement the Credit Risk Management
Policy. Monitoring adherence to the Policy is the responsibility of senior management at executive
level.
8.3 Credit Risk Mitigation
The Bank recognizes eligible collateral for the purpose of reducing exposures for regulatory and
commercial purposes.
For advances to Micro and Small Enterprises as per regulatory guidelines, no collateral security is
to be insisted upon for loans up to Rs. 10 lakh.
All forms of credit risk mitigation will be evaluated by the Risk management department, which will
also set haircuts and/or other parameters to protect the bank’s risk position.
8.4 Insurance
Tangible assets held by the Bank as collateral apart from primary securities must be adequately
insured at all times and The Bank is to be named as beneficiary under the policy. A copy of the policy
must be retained on file and the policy must be renewed as appropriate whilst the Bank is relying on
the collateral. It is the responsibility of the branch to raise a diary note for the renewal.
Insurance of assets financed by the bank in the following cases will be waived:
No. Category Type of Risk Type of Assets

(a) All categories of priority sector advances up to and Fire & other Equipment and
inclusive of Rs.10,000/- risks current assets
Advances to Micro and Small Enterprises up to and
(b)
inclusive of Rs.25,000/- by way of:
 (i) Composite loans to artisans, village and cottage Fire Equipment and
industries current assets
(ii) All term loans Fire Equipment
(iii) Working capital against non-hazardous good Fire Current Assets
However, where insurance of vehicle or machinery or other equipment/assets is compulsory under

the provisions of any law or where such a requirement is stipulated in the refinance scheme of any
refinancing agency or as part of a Government-sponsored programmes, insurance will not be waived
even if the relative credit facility does not exceed Rs.10,000/- or Rs.25,000/-, as the case may be.
8.5 Netting
Before initiating any Derivative transaction, domestic as well as overseas territories must enter into
ISDA agreement with the counterparties, which will enable netting of the exposures. It helps Bank in
reducing the credit exposure as well as capital charge.
8.6 Monitoring Credit Limits
The Bank has established limits to monitor its credit exposures for internal purposes. These limits
have been set at borrower and portfolio level. The limits are proposed by the Risk Management
department in consultation with the Business Heads, reviewed by the Credit Policy Committee and
Risk Management committee of the Board and finally approved by the Board. For monitoring various
Credit Risk Limits (Single/ Group Exposure Limits) on a global basis, Bank has developed “Single

View Report” system wherein all credit exposures (Funded, Non Funded, Investment and Derivative
Exposures) of Domestic, Overseas, Treasury Operations are covered. At present the access to the
‘Single View Exposure system’ is available with Risk Management Department at Corporate Office
and the Exposure Management is carried out using the same. Going forward, the access for Single
View system will be made available to operating units including Credit Verticals at Corporate Office,
specialized Integrated Treasury Branch and Overseas Territories to enable them to manage the
single/ group, sector and industry exposures. With effect from 01.04.2019, Bank is required to
monitor Large Exposures on a consolidated basis. Till now, the Single View Report system captures
global exposures of the Bank, excluding exposures of Subsidiaries and other Group concerns. IT
Department will enable Risk Management to enhance the Single View system capability to capture
exposures of Subsidiaries and other group entities of the Bank.
8.7 Credit Monitoring Reports
The Credit monitoring department is responsible for generating post-loan monitoring report on
individual Borrowers and at portfolio level. It will also be forwarded to the respective Branches /
Regions / Zones to keep them informed of the customer’s performance in adhering to all the
covenants of the credit sanction.
Branches should engage /empanel Agencies for Specialized Monitoring (ASM) Services for Large
Value Accounts i.e. borrowers having exposure of Rs.250 crore and above from Banks /FI under
sole banking or engage /appoint ASM in consultation with members under consortium wherein our
bank is lead bank. Large value accounts under Consortium/Multiple Banking wherein our bank is not
a lead bank or major lenders, branch should take up with consortium leader or major lenders for
appointment of empanelled Agencies for Specialized Monitoring Services. Scope of work to be
assigned to the ASM as per guidelines issued by our bank /IBA from time to time.
8.7.1 Monthly Monitoring Reports (MMRs):
For the purpose of monitoring of large borrowal accounts, to prevent asset quality slippage, to take
timely corrective steps and to improve the quality of credit portfolio, bank has the system of monthly
monitoring through on-line web-based system “CREMON”. Under the system, advance accounts
with exposure (FB+NFB) of Rs.1 crore & above are to be monitored at Regional/Zonal/Baroda
Corporate Centre levels based on monthly monitoring reports as on 15th of every month by end of
the month as under:
Exposure Monitoring Authority Mechanism

th
Rs. 10 crore & Credit Monitoring Cell, Status as on 15 of every month along with comments
above BCC, Mumbai of Branch / RO / ZO to be reached by end of the
month.
Rs. 5 crore and Zonal Head / Chief Zone should identify accounts causing concern
above up to Executive of the showing signals of weakness based on data as of 15th
Rs. 10 crore overseas territory of each month and take up with the Regions and
Branches for remediation by 25th of each month.
Rs. 1 crore and Regional Head/ Chief Region should identify accounts causing concern
above up to Executive of the showing signals of weakness based on data as of 15th
Rs. 5 crore overseas territory of each month and take up with the Branches for
remediation by 20th of each month.
 Branch Manager to monitor all accounts of exposure (FB & NFB) of Rs 1 crore and below. A
monthly list of accounts causing concern to be prepared and sent to Regional Head with details
of stress and the strategies being worked for resolving the same.
 In addition to above at BCC level advance accounts of high risk borrowers (with credit rating
BOB6 & below) with exposure (FB+NFB) of above Rs. 1 crore up to Rs. 5 crore, are to be
monitored based on the Summary Reports of these accounts submitted by Regional Office on
monthly basis.
 Regional Offices are also to monitor:-
o Advance accounts with exposure of Rs. 25 lakh to Rs. 1 crore based on monthly monitoring
reports received from Branches.
o Advance accounts with exposure of Rs. 1 lakh to Rs. 25 lakh based on scrutiny of SMA data.
o Any account showing incipient sickness / early warning signals shall be monitored on a daily
basis by Dy. Regional Head for exposures up to Rs. 25 lakh and by Regional Head for
exposures of above Rs. 25.00 lakh
8.7.2 Accounts causing concern:
 As regards to accounts causing concern, officials from RO/ZO may take appropriate decision to
visit such accounts on case- to-case basis, to conduct on the spot study of the unit and
discussions with the borrower for taking timely remedial actions to prevent slippage in the
account.
 Zones should give special focus for sharpening the credit monitoring process by including
agenda in monthly Zonal Committee Meetings with regard to improving the asset quality,
identifying areas of concern / Branches requiring special attention, working out strategies and
their implementation in a time bound manner. Brief / precise minutes with action points be sent
to Credit Monitoring Department at Baroda Corporate Centre within –3- days of the meeting for
further follow-up / actions.
8.8 Stressed Assets Resolution
RBI vide its notification dated 12.02.2018 has decided to substitute the existing guidelines for
resolution of stressed assets. Accordingly, Resolution of Stressed Assets envisages early

identification and reporting of Stressed Assets for immediate resolution by way of recovery,
restructuring including change in management, conversion of debt into equity/ debenture in fixed
time frame, failing which lenders will have to file insolvency under IBC within 15 days, thereafter.
Restructuring is an act in which a lender, for economic or legal reasons relating to the borrower's
financial difficulty grants concessions to the borrower. Restructuring would normally involve
modification of terms of the advances / securities, which may include, among others, alteration of
repayment period / repayable amount / the amount of instalments / rate of interest; roll over of credit
facilities; sanction of additional credit facility; enhancement of existing credit limits; and, compromise
settlements where time for payment of settlement amount exceeds three months.
Further, all special schemes such as SDR/S4A/CDR/5/25 etc. stands withdrawn including
discontinuation of JLFs and withdrawal of Stand Still Clause for Asset Classification.
Henceforth, all accounts where restructuring has been done, the Asset Classification and
Provisioning has to be as per extant IRAC Norms.
Any Resolution Plan under revised guidelines needs to be approved / implemented by all the lenders,
ICEs (Independent Credit Evaluation) with minimum RP4 Rating. Two ICE’s in case of aggregate
exposure of Rs.500.00 crore and above and at least one such ICE for accounts with aggregate
exposure below Rs.500.00 crore.
Restructured accounts can be up-graded only after recovery of 20% of the principal repayment as
per RP and within “specified period” which is minimum one year from the date of commencement of
repayment & only with rating of BBB- or better i.e. investment grade.
The above guidelines have been struck down by the Supreme Court and fresh guidelines from RBI
in this regard are awaited.
8.9 Curing Policy
Sometimes providing assistance to borrowers suffering from temporary problems may help them
recover from financial distress. However, support provided to borrowers / entities who do not have a
realistic chance of recovery may impede the allocation of resources to healthy entities. Bank may
extend support to entities / borrowers genuinely in need by way of:
 Hand holding operations / Cut- back arrangements: “hand holding operation’ for a period of
two months may be considered. This will allow the distressed borrowers to draw funds from the
cash credit account at least to the extent of their deposit of sale proceeds during the period of
such ‘holding operation’. Further, handholding with reasonable amount of Cut Back arrangement

(minimum 5%) may be considered. Next sanctioning authority may be authorised to reduce
minimum cut back level below 5%.
 Deferment of DCCO: (i) Date of Commencement of Commercial Operations (DCCO) in respect
of project loans, provided, the revised DCCO falls within the period of two years for Infrastructure
Projects and one year for non- Infrastructure projects from the original DCCO prescribed at the
time of financial closure. (ii) DCCO deferment beyond above mentioned time periods may be
extended by further two years (i.e. total extension of up to 4 years) in respect of Infrastructure
Projects involving court cases. (iii) Further extension of 1 year (beyond the extension time
mentioned in (i) above) may be permitted in case of infrastructure project loans where delay is
beyond the control of promoters and non- infrastructure project loans excluding real estate
exposures.
 Deferment of recovery & legal action
 Extending need based additional finance
As and when any advance account falls within the SMA 0 category, such accounts are to be
monitored closely and ascertain the reasons for falling under SMA category. Suitable action to be
initiated to bring back the account to normalcy. In any case, efforts should be undertaken to ensure
that the account remain in standard category. In the following cases, the Bank may assistance to
borrowers under distress:
 Conduct of the account is otherwise satisfactory for at least 2 years.
 The sanctioning authority should be satisfied regarding the viability of the operations
 No case of diversion / fraud
 Account classification is standard.
Authority: Respective sanctioning authorities may consider any of the above curing mechanism
within their delegated powers.
8.10 Credit Systems
System Purpose
Core Banking System (Finacle) Core Banking Transaction system, Asset Classification
BOBRAM Internal Credit Rating system for Corporate Borrowers
LAPS Loan Origination system for Retail Loans
Intranet Industry Profile
Single View Exposure Management
CREMON Credit Monitoring
Loan Lifecycle Process System Integrated system for Loan Origination
(LLPS)
K+, Treasury System for origination of Investment & Derivative
Products, Counterparty Bank Exposure Management

System Purpose
KTP, Treasury accounting & settlement (Back Office functions)
KGR VaR Monitoring of various limits & Counterparty Bank Exposure
9 DATA QUALITY MANAGEMENT
Data is one of the most important assets for the Bank. The quality and effectiveness of the decisions
depend on the availability and quality of the data. Accurate and effective data can be leveraged for
enhancing the quality of the business and profitability. Therefore, to maintain data quality in the
system assumes utmost importance. Data accuracy is of paramount importance to generate MIS,
Key Risk and Performance Indicators and Early Warning Signals besides regulatory reporting.
The responsibility and accountability with respect to data quality and consistency will also form the
part of first line, second line and third line of defence. Respective credit verticals are owners of the
data and are responsible for its quality consistency and accuracy. IT department is responsible for
providing necessary support and infrastructure to maintain the data quality in coordination with the
concerned business vertical.
10 OTHER POLICY MATTERS
10.1 Sanction of Credit Facilities to Companies whose Directors feature in Defaulters’ List
The Directors of a company may be classified as Promoter / Elected / Professional / Nominee /

Honorary directors. RBI has been collecting and circulating information on defaulting companies
amongst banks / FIs, including names of directors of such companies. (This responsibility is now
with Credit Information Companies (CIC)). Where sanction / continuation of credit facilities to such
companies whose directors are in the defaulters' list needs to be examined, the following approach
is to be adopted:
SN If Director of applicant Approach

company is
(i) Promoter Director of a Generally, no ad-hoc / enhancement / additional / new credit
defaulting company or facilities to be sanctioned to the applicant company till the
Director of a defaulting name is removed from the defaulters' list.
company and having a role In case the performance and conduct of the accounts of the
in the day-to-day affairs of applicant company are otherwise satisfactory, renewal /
its management. continuation of the limit at the existing levels may be
considered.
(ii) Promoter Director of a Generally, no ad-hoc / enhancement / additional / new credit
defaulting company or facilities to be sanctioned to the applicant company till the
director of a defaulting name is removed from the defaulter's list.

SN If Director of applicant Approach
company is
company having a role in In case the performance and conduct of accounts of the
day-to-day affairs of its applicant company are otherwise satisfactory, renewal /
management, but who continuation of the limit at the existing levels may be
resigned from the Board of considered.
defaulting company, to
circumvent any obstacle in
getting credit.
(iii) Director in a defaulting Proposal relating to the applicant company to be considered
company, but not on merit. If the defaulting company is an associate/
connected in any way with subsidiary of the applicant company or a group company,
its day-to-day approach mentioned in '(i)' & '(ii)' above may be followed.
management.
(iv) Nominee / professional / Proposal relating to the applicant company to be considered
honorary director of a on usual parameters as these directors are on the Board in
defaulting company, their professional / honorary capacity.
(including associate / group
/ subsidiary company).
 However, specific requests for enhancement / additional / new credit facilities by the applicant
company may be considered, on merits and for reasons to be recorded in writing, by COCC-ED
and above.
 As an additional security, personal guarantee of the Promoter(s) / Director(s) may be stipulated.
 In case of review proposal, Bank may endeavor to stipulate personal Guarantee of the
Promoter(s)/Director(s).
 A covenant in the loan agreements, with the companies in which Bank has significant stake,
shall be incorporated by the Bank to the effect that the borrowing company should not induct a
person who is a promoter or director on the Board of a company which has been identified as a
RBI / CIBIL / Wilful defaulter, and that in case such person is found to be on the Board of the
borrower company, expeditious and effective steps will need to be taken for removal of the
person from its Board.
 In case of taking fresh exposure in the accounts where individuals / proprietor / partner / director
/ guarantor credit card account was written off / settled above Rs. 5,000.00 by our Bank / other
Banks in the past, the sanctioning authority to ensure the following:
o No Dues certificate from the Bank / FIs be obtained in respect of credit card account.
o Borrower be impressed upon for updation of “Satisfactory Status” with the concerned Bank
/ FIs, preferably within the stipulated period.
o Ensure that ‘Bureau Report’ of the applicant/s contains no other adverse remarks.

10.2 Lending to Group/Associate Concerns having any group NPA A/c
The Bank will be very cautious in respect of granting additional exposure where one or more
concern/s of a group/ associate concern (defined later) has failed/defaulted in meeting its financial
obligations to the Bank and/or with other banks/financial institutions.
i) No additional/new exposure to be generally considered and also the Bank shall endeavour to
exit from the existing exposures from all the account/s of the group, provided:-
(a) the default is on account of internal reasons such as lack of resourcefulness, inexperience
of promoters-directors, mismanagement, diversion of funds, major diversification /
expansion without adequate financial closure etc.,
(b) the default is due to External reasons, i.e., reasons beyond the control of the enterprise/its
promoters-directors, such as unforeseen changes in Government policies or natural
calamity or act of God or unforeseen sovereign risks, unforeseeable changes in rupee parity
with hard currencies etc., and the said default have materially threatened the Group as a
whole.
ii) However, if there is no threat to the Group as a whole due to the external reasons stated above,
the Bank may consider to continue/to take additional or new exposure to the existing/new group
entities on merits of individual case.
The decision as to the reasons for default and its materiality and impact on the Group/individual
enterprise, their feasibility and viability may be taken up by the next higher authority i.e. the
authority higher to the authority in whose lending powers the proposal falls.
10.3 Substitution of Securities
In case the value of substituting security is either equivalent to or more than the security to be
substituted, respective sanctioning authority can consider security substitution with adequate due
diligence on the proposed security/ies up to ZOCC- GM-CC / COCC-GM-CC level sanction and for
a sanction above the level of ZOCC- GM-CC / COCC-GM-CC, COCC-ED will be the competent
authority.
In case of dilution of security/ies in respect of sanctions up to ZOCC- (GM- CC) level / COCC- (GM-
CC), the matter should be referred to the next higher authority. COCC-ED/CACB /MCB shall have
full powers on this issue in respect of proposals falling within their respective DLP.
10.4 Interchangeability of limits
1. Interchangeability between guarantees and LCs: While interchangeability between guarantee

facility and LC facility is permissible for similar purposes, automatic interchangeability between
all types of guarantee facilities and LC facilities should not generally be allowed.
2. Conversion from NFB to FB limits or two-way Conversion of limits from FB to NFB limits and

vice versa may be permitted by the sanctioning authority subject to compliance of the following
conditions:
a) NFB limits (only Letter of Credit Limits and Advance Payment Guarantee for procurement
of stocks / raw materials) may be converted into Fund Based limits. Similarly, FB limits may
be converted into NFB limits for purchasing stocks only.
b) Post-conversion, both Fund based limits and NFB limits shall be within the assessed
MPBF.
c) Secured limits are not to be converted into clean limits.
10.5 Allocation of Sub-Limits/Parking Limits/ Transfer of Loan Accounts
 Zonal Authorities are authorised to consider allocation of sub-limits/ parking of limits / transfer
of loan accounts at branches located within the Zone. In other cases, reference should be made
to the Head of respective Credit Vertical for approval.
 With regard to overseas territories, territory head is authorized to consider allocation of sub-
limits, parking of limits, transfer of loan accounts within different branches of the territory. For
allocation of sub-limits at branches located at different overseas territories, reference should be
made to the Executive Director.
10.6 Down Selling
10.6.1 Loan assets acquired through down-selling:

 The Bank may also take credit exposure by sanctioning loans to a borrower, whose credit
proposal is syndicated / underwritten and subsequently sold by another lender /lead arranger
and also purchase of pooled assets.
 However, the mere fact that the exposure is fully underwritten by another FI / Bank would not
be regarded as an absolute comfort for sanctioning the proposal.
 In such cases also, the Bank will follow all the due diligence and credit appraisal standards,
including credit rating, as if the loan was originated by the Bank itself.
 While considering such exposures, the Bank shall also look into the track record, past
experience, quality of credit origination, appraisal standards, NPA and reputation of the Bank /
FI, which has underwritten the loan asset.
10.6.2 Down Selling of the Bank’s Loan Assets:
The Bank may undertake down-selling of its loan assets in order to optimize the overall yield from
the portfolio by churning of assets. The Bank may also undertake down-selling where the no /
marginal head room is available against the prudential limits like single borrower / group / industry
/ sector limits etc. Down-selling may be permitted in such cases by the following authorities:

Criteria Approving authority
Sale at par or premium COCC-GM-CC
Sale at discount COCC-ED / CACB / MCB based on the quantum of discount in
monetary terms within their delegated powers.
10.7 Policy on Inter Bank Participation Certificate (IBPC)
IBPC is a financial instrument to manage short term liquidity as well as to meet shortfall in the priority
sector lending targets as mandated by the RBI. The participation in this instrument is restricted to
Scheduled Commercial Banks and RRBs. IBPCs can be issued with or without risk sharing basis. In
case of IBPC with risk sharing basis, the issuing bank and participating bank would share the
securities (underlying assets) on pari pasu basis. Therefore the exposure of the participating bank
would be on the underlying assets/borrowers and not on the issuing bank. In case of IBPCs without
risk sharing basis, the exposure of the participant bank would be on the issuing bank.
10.7.1 Discretionary Lending Powers for “Participation and Issuance”:
COCC- ED, CACB and MCB are authorized for participation and issuance within their delegated
lending powers.
10.7.2 IBPC Exposure Cap:

The exposure on the underlying assets under Risk Sharing basis will be within the Single Borrower
/ Group Borrower Prudential Exposure limit laid down by the Bank from time to time. The aggregate
exposure cap under outstanding participations at any point of time shall not exceed Rs10,000 Cr.
The exposure cap on individual Banks, in case of participation on without Risk sharing basis, shall
be within the Aggregate Settlement Limits (ASL) set by the bank from time to time.
10.7.3 IBPC Underwriting Criteria:
Criteria IBPC with Risk Sharing IBPC without Risk Sharing

Period Minimum 91 Days Maximum 90 Days
Maximum 180 Days
Rate of Interest Mutually acceptable to the issuing and Mutually acceptable to the issuing
Participating Bank and not below the and Participating Bank and not
relevant MCLR below the relevant MCLR
External Rating BBB & Above BBB & Above
 The Bank to ensure that same underlying assets are not repeated in different participations.
 The underlying assets (Borrower accounts) are standard with a satisfactory interest /
debt servicing history and there are no over dues in the accounts.
 No restructuring has taken place in the underlying assets.

 Residual maturity of the underlying assets is more than the participation period.
 As Issuing Bank we are required to provide sanction appraisals of the underlying assets
(borrower account) as and when desired by Participating Bank. Similarly as Participating Bank
we may call for the sanction/ appraisals of the underlying assets (borrower account) as and
when required.
 In case of prepayment of participated loan, the Issuing Bank will make pro rata pre-payment
under the participation.
 An issuing bank shall service interest to the participating bank on monthly basis (or at RBI
prescribed intervals). Similarly a Participating Bank shall recover interest from Issuing bank on
monthly rests (or at RBI prescribed intervals).
 A participating bank will obtain confirmation from the issuing bank that “The issuing bank shall
incorporate in the loan agreement of the borrowers an appropriate clause permitting the lending
bank to shift a part of the advance to any bank, without notice to the borrowers, by way of
Participations. The agreement may also provide that in the event of issue of Participations, the
Issuing Bank would continue to represent the participating bank in protecting the latter's
interests”.
 None of the companies, whose underlying assets have been considered for sanction of credit
facility, are appearing in RBI Defaulter’s List / Willful Defaulters List and CIBIL Caution List.
10.8 Priority Sector Lending Certificate (PSLC)
To enable banks to achieve the priority sector lending targets / sub-targets, in the event of shortfall,
banks can purchase / surplus banks may sell ‘Priority Sector Lending Certificates (PSLC)’ from / to
the Scheduled Commercial Banks, Regional Rural Banks, Local Area Banks, Small Finance Banks
and Urban Co-operative Banks traded through RBI’s CBS portal (e-Kuber). PSLCs are of 4 types
counting for achievement towards Agriculture, Small/ Medium Farmer, Micro Enterprise and General
(overall PS targets).
 PSLC can be issued up to 50% of previous year’s PSL achievement without having underlying
in its Books. However, as on the reporting date, the Bank must have met the priority sector target,
net of PSLC purchased / issued. The lot size is Rs. 25 lacs and multiples thereof.
 There will be no transfer of credit risk on the underlying as the tangible assets are not transferred.
 The validity of PSLC will be March 31st every year and will not be valid beyond the reporting date
(31st March)
 The fee payable / receivable is market determined.
Bank may issue PSLC subject to meeting respective sector / sub sector targets and having
minimum surplus of 2%.

11 EXIT POLICY
The Board of Directors in their meeting held on 28th October 2005 approved Exit Policy for High
Risk Borrowal Accounts. Under this exit policy, the branches / offices can timely identify the potential
problem of credit accounts and undertake measures to systematically exit from the account. This
would ensure downsizing of the high risk-weighted assets, which will enable the Bank to leverage
on the capital released for increasing good quality assets. The early warning signals, market reports,
government policies / guidelines etc. can be used for identifying the accounts for exit. A list of such
early warning signals / resources for identification, though not exhaustive, is given below,
1. The credit rating/rating score of the account is deteriorating for last two years.
2. The financial performance of the account is showing deterioration in last two years.
3. The borrower has started suffering from liquidity crunch.
4. The conduct of the account is showing unsatisfactory trends such as, poor turnover, return of
cheques for financial reasons, consistent overdues in the account etc.
5. There are symptoms of financial indiscipline.
6. The quality / value of assets charged to bank is deteriorating steadily.
7. The borrower is resorting to high cost borrowings to keep afloat.
8. The regulators are scanning the activity of the borrower.
9. The name of borrower or its promoters/directors are appearing in the defaulters list of
RBI/ECGC or any other regulatory authority.
10. The revenue authorities are raising high value claims on the borrower.
11. There are disputes amongst the promoters / partners of the business.
12. Top management team of the borrower concern is frequently changing
13. There are adverse market reports on the borrower.
14. The borrower has started either defaulting on commitments or requesting repeatedly for
excesses.
15. The accounts of the borrower with us are regular but with other banks/lenders are highly
irregular.
16. The changes in the government policies are likely to have adverse effects on the borrower that
may jeopardise the Bank’s interest.
17. The industry in which borrower is operating is sunset industry.
18. The Bank’s share in consortium accounts should be minimum 10% of the aggregate limits
sanctioned by the consortium. In case of existing relationship, if the share of our Bank in the
consortium is below 10%, take up with the company for increased share or endeavor to exit
from the consortium.
Defining Exit Route

The operating units should be vigilant and track the adverse movements through close monitoring
in the borrowal accounts on continuous basis. They should swiftly initiate actions to assess the extent

of risk to the bank’s exposure due to deteriorating conditions of the borrower. Once it is ascertained
that continuation of exposure on the borrower may jeopardise the interest of the Bank, action should
be initiated on the following lines, to protect the Bank’s interest and eventually exit from the account.
1. Accounts identified for exit should be given focused attention and closely monitored.
2. No ad hoc / excesses or regular increase in the existing limits should be granted to Identified for
Exit Account (IEA).
3. As far as possible discreetly it should be indicated to the Bank’s borrower of the Bank’s
disinclination to take any additional exposure.
4. The strategies such as hand holding operations, cut back in proceeds or credits in the account,
take out finance etc. should be adopted wherever needed to gradually reduce our exposure on
the party.
5. The quarterly operative limits should be strictly enforced and exposure reduced at the first
instance to the extent possible with due notice to the borrower. Obsolete stocks and obsolete
debtors should be scrupulously monitored and excluded for computation of Advance Value /
Drawing Power.
6. Penal Interest / additional interest be charged for breach of the covenants and decline in credit
quality.
7. In case of consortium accounts, wherever possible the Bank’s share should be reduced and no
further increase in the share should be accepted.
The following authorities are authorized to approve the accounts identified under Exit Policy where
remedy is not possible:
Proposals falling up to the delegated powers of Authority for approval

ROCC ZOCC
ZOCC, COCC-GM, Territorial committees COCC- ED
COCC- ED CACB
All other proposals MCB
12 REPORTING OF BREACHES
Risk Management Department will monitor all the prudential limits mentioned under this policy. In
case of any breach, it will promptly inform the concerned business vertical and seek remediation
action plan to bring the position within the limit. It will be the responsibility of the concerned business
vertical to seek confirmation/ ratification of such breach from the Board through Credit Policy
Committee and Risk Management Committee of the Board.

13 TRAINING & DEVELOPMENT
For capacity building in the area of Credit Risk appraisal, monitoring and management, Bank will
initiate following actions:
1. Minimum -1- week training annually to each of the officers working in the area of credit, treasury,
and credit monitoring and risk management.
2. All Officers will be encouraged and incentivized to pursue certification courses in the area of
Credit Risk Management
3. Baroda Apex Academy will also design some of the effective training programs in the area of
credit risk management and the same will be made mandatory for the officers working in credit.
4. Officers will also be encouraged to pursue various ‘mooc’ courses available online through
portals such as ‘edx’, ‘coursera’ etc.
5. In case any special skills are required, identified officers are to be provided training at Bank’s
Training Centers as also external Training Centers, viz. RBI, NIBM, etc.
14 POLICY ADMINISTRATION AND REVIEW
The Policy is prepared by Risk Management Department which is also responsible for its ownership
and maintenance. Any queries related to the Policy or request for addition/ deletion / modification of
any provision has to be addressed to the Risk Management Department which will evaluate such
request and wherever required, the Department may seek necessary guidance from Executive
Director (in- charge of Risk Management) and Managing Director & CEO. If considered necessary,
additions and / or amendments will be put up to the CPC, RMC and Board for approval and on
approval will be notified to all concerned.
The Policy shall be valid up to.30th June 2020. However, review may be undertaken before due date,
if there is any change in the regulatory guidelines or in the Bank’s internal guidelines. The Managing
Director & CEO may allow continuation of the Policy for a maximum period of six months after the
due date of review in case the Policy cannot be reviewed on or before the due date.
Any regulatory guidelines issued by RBI / Government from time to time will automatically be part of
this Policy.
******************************

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Global Credit Exposure

Global Credit Exposure Management Policy Page 1 of 110

2 PURPOSE AND SCOPE OF THE POLICY ........................................................................................................8

3 OBJECTIVES OF THE POLICY ........................................................................................................................9

4 ROLES AND RESPONSIBILITIES ................................................................................................................. 10

4.1 Board ................................................................................................................................................... 10

4.2 Risk Management Committee of the Board: ....................................................................................... 10

4.3 Credit Policy Committee: ..................................................................................................................... 10

4.4 Product & Process Approval Committee: ............................................................................................ 10

4.5 Risk Management Department: .......................................................................................................... 12

4.6 Credit Risk Evaluation Process ............................................................................................................. 12

5 Governance in Credit Administration ...................................................................................................... 13

5.2 Credit Expansion Planning: .................................................................................................................. 14

5.3 Credit related Product Programme and Launching Process: ............................................................... 14

5.4 HR Capacity for Credit Risk Management: .......................................................................................... 16

6 CREDIT STRATEGY .................................................................................................................................... 16

6.1 Credit Risk Strategy .............................................................................................................................. 16

6.1.1 Target Sectors and Target Markets: ................................................................................... 17

6.1.2 Credit rating matrix – other than retail ............................................................................... 17

6.1.3 Credit risk matrix – retail ...................................................................................................... 19

6.1.4 RAROC ................................................................................................................................... 19

6.1.5 Requirement of cross-selling and ancillary business: ..................................................... 20

6.2 Assessment Parameters/Guiding Principles ........................................................................................ 20

6.3 Credit Delivery Channels ..................................................................................................................... 20

6.3.1 Branches ................................................................................................................................ 20

6.3.2 Specialized Mortgage Stores (SMS) .................................................................................. 21

6.3.3 Centralized Processing Centre (CPC) ............................................................................... 21

6.3.4 MSME Loan Factories (SMELF) ......................................................................................... 22

6.3.5 International Merchant Banking Cell (IMBC) .................................................................... 22

6.3.6 Global Syndication Centre (GSC) ...................................................................................... 23

Global Credit Exposure Management Policy Page 2 of 110

6.4 Facility Structure .................................................................................................................................. 23

6.5 Exposure Norms .................................................................................................................................. 24

6.5.1 Single/ Group exposure limits: ............................................................................................ 24

6.5.2 Substantial Exposure Cap ................................................................................................... 26

6.5.3 Individual, Non-Corporate & Private Limited Co .............................................................. 27

6.5.4 Other Limits: .......................................................................................................................... 28

6.5.5 Capital Market Exposure ..................................................................................................... 28

6.5.7 Exposure to Banks:............................................................................................................... 30

6.5.8 Investment in Bonds / Debentures / Commercial papers: .............................................. 31

6.5.9 Specific Industry / Sectoral Limits ...................................................................................... 32

6.6 Restricted Exposures ........................................................................................................................... 33

6.7.1 Activities Not Encouraged by the Bank ............................................................................. 43

6.7.2 Activity Clearance ................................................................................................................. 43

6.7.3 Agreement In Principle (AIP)............................................................................................... 45

6.7.4 Industries for which Industrial Licensing Is Compulsory ................................................. 46

6.8 Repayment Period for Term Loans: ..................................................................................................... 46

6.9 Underwriting Criteria ........................................................................................................................... 47

6.9.1 Risk Adjusted Return on Capital ......................................................................................... 47

6.9.2 Internal Credit Rating: .......................................................................................................... 47

6.9.2.1 Domestic Exposure: ......................................................................................................... 48

6.9.2.2 Overseas Exposure: ......................................................................................................... 48

6.9.2.3 Cut-off scores and grades for Retail Scoring models:................................................. 49

6.9.3 External Credit Rating .......................................................................................................... 49

6.9.4 Margin / LTV Ratio ................................................................................................................ 51

6.9.4.1 Priority Sector: ................................................................................................................... 51

6.9.4.2 Retail Lending: .................................................................................................................. 52

6.9.4.4 C &IC, EC / MSME Loans ............................................................................................... 53

Global Credit Exposure Management Policy Page 3 of 110