Chapter 3
Chapter 3
Chapter 3
AND
ADVANCES
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Updated upto
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3- 4-2021
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(Upto 17:00 Hrs. uploads)
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Compiled By:
Sanjay Gupta
Chief Faculty
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(9414062928)
Vetted By:
Rajesh Gupta
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Chief Faculty
(9987816769)
A Bank may establish a detailed and comprehensive policy, lay down procedures
and systems and provide checks and balances to manage its Credit Administration
function, but unless there is strong core credit culture, such measures will not be of
much use. If the drivers on a highway do not believe in the speed limit and do not
start respecting those limits, the task of the patrolling authority i.e. the Police, cannot
be accomplished. On the other hand, if they start believing that the speed limits are
meant for their safety and smooth traffic movement, the job of the highway patrol
becomes easier to check the rogue individuals from causing harm to others or
themselves. The Bank or the Institutions may not fail because of lack of systems,
policies or procedures, but for a credit culture which encourages making use of these
systems, policies and procedures. The credit culture has to be an integral part of a
risk culture to be facilitated by a strong and clear sense of purpose.
With this in mind and enabling the banker‘s to take an informed decision while
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processing a proposal, it is our endeavor to make the participants aware of
methodology in discharging credit administration function as per Bank‘s systems/
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procedures/ book of instructions/ circulars etc.
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GENERAL DISCLAIMER
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Though every effort has been made to incorporate latest guidelines for updation of
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the contents for ready reference of users, this chapter is not a substitute of
Bank‘s circulars/ guidelines and regulatory directives/ advisories. Also, it may
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be possible that the changed guidelines may get updated at some places in this
chapter with a time lag. If the readers find any such omission/ obsolescence, please
bear with us and bring it to our notice on [email protected] or
[email protected] for necessary rectification.
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12. Investigation of Title and Search Report -Page 59
13. Confidential Reports -Page 61
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14. Credit Information and Opinion on Borrowers -Page 64
15. Pre Disbursement Compliance
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4. Framework for Rejection of Credit proposals, Authority for rejection of
proposal in case of SC/ST, MSE, Education Loan, various Government
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sponsored schemes, and Export borrowers have been conveyed Vide LA
circular 50/2021. Format in respect of Proposal of rejection of credit proposal
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has also been annexed with the circular No 157/20 at Appendix I. Sanction of
reduced limits to specified sector as mentioned here in above should
also be reported to the next higher authority immediately with full details for
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5. Loan application would form a part of the loan proposal and should invariably
accompany the proposal being sent to the sanctioning authority.
6. It is desirable to advise the Loan Applicants, in each case, the reasons for
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16. The present activities/interests of the borrower even in other concern need to
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be looked into thoroughly.
17. Wherever applicable, CRs from the bankers where the group concerns have
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their banking arrangements should invariably be called.
18. While granting credit facilities to associate/allied concerns, the quantum and
the need for credit of the sister concerns in conjunction with the facilities
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ascertained.
19. In case of trading finances, it should be ensured that it does not lead to
hoarding/speculation.
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20. Total Bank Credit for working capital purpose for borrower requiring Fund
Based and Non Fund based (LC-DA and BG for financing Current assets)
total limit up to Rs ₹ 5.00 Crore from banking system, the working capital
requirement of the borrower is computed at 25% of the projected annual
turnover of which at least four-fifth i.e. 20% of the projected turnover should
be provided by the Bank as working capital finance and balance one-fifth i.e.
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permissible bank finance will, therefore, be working capital gap less the
amount to be so contributed by the borrower. (L&A circular 227/2020)
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23. The sanctioning authority based on nature of activity of the borrower,
wherever deemed fit, may apply the cash budget system where they feel this
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system is more appropriate as in case of seasonal industries, construction
contractor, Tea, Sugar, IT software, BPO, service sector tec. Cash Flow
based lending is popular in developed countries. Under this method, the
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peak level deficit will be the level of total working capital finance to be
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provided to the borrower by the bank. The peak level cash deficit will be
ascertained form the Proj. Cash Budget Statement submitted by the borrower.
Deficit is worked out and financed subject availability of chargeable assets.
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records. FRMD Internal-36/2011
33. Verification of salary/ income certificate. FRMDInternal-36/2011
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34. Take special care to avoid financing on the basis of multiple title deeds / coloured
photocopies of title deeds / scanned copies of title deeds as primary security as well
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as collateral security. FRMDInternal-36/2011
35. Search be made in CERSAI Portal on the lines of CIR. LA-60/2017 dt 19.07.2017.
36. Branches to ensure that CIN/LLPIN is mandatorily filled in field ―Registration No.‖ in #
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detail of CUMM in all new as well as existing Cust IDs of Companies/LLPs. (LA
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accounts as well as from prospective borrowers irrespective of the loan
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amount. In cases where the concerned person does not have passport, a
declaration to this effect along with an undertaking that he/she shall submit
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the passport details as and when obtained by him/her in future should be
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held. The undertaking, as per Appendix IV, to also state that whenever there
is any change in passport details such as number, validity etc. borrower shall
submit the fresh details to the bank immediately for updation of record.
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Further, it is advised that in small accounts, say upto ₹ 50 lac the capturing of
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passport details may not be insisted upon in routine manner and the
sanctioning authority may decide the same on merits of the case. Also,
obtaining of certified copy of passport from nominee director of Government of
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48. While considering credit facility to a company on the basis of brand name as security,
which does not form any tangible security for the purpose of recovery, the
advance/credit facility should be secured by taking tangible security as far as
possible and atleast two different valuation reports preferably from Govt. Approved
valuer should be obtained and the lower of the two valuations should be accepted.
(LA157/2020)
49. In case of Performance cum Mobilization Advance Guarantees, Escrow
Account should be opened at the time of sanction of such limits to monitor the
cash flows and amount received as mobilization advance should be credited
in the escrow account.
(LA 157/2020)
50. In Jewellery sector advances, it is advised to obtain details of all
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transactions/financial agreement/contract entered into by its subsidiaries with
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their business associates every month. Suitable condition in this regard
should be incorporated in terms of sanction.
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157/2020)
51. Bank has entered into an agreement with the information utility (IU) National
eGovernance Services Ltd. (NeSL) for submission of financial information of
borrowers as part of obligation under IBC, 2016. Information in respect of all
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besides the principal security of book debts. Prescribed minimum margin for such
facility is 40%.
In terms of RBI guidelines, in all borrowal accounts enjoying working capital
limits (fund based) of Rs.5 crore & above from the banking system, banks are
required to finance a minimum of 25% of the credit sales by way of bills. In
other words, the limits sanctioned to such borrowers against book debts
should not be more than 75% of the aggregate limit sanctioned for financing
his credit sales.(LA 45/2020 dated 27.03.2020)
53. For new borrower as well as existing borrower seeking
fresh/enhancement/renewal of credit facilities, the field functionaries at the
time of appraisal shall ensure the following: -
a). As part of due diligence, the status of borrower entity need to be verified
with the MCA /ROC records. The data base of the Income Tax Department
and GST shall be accessed to analyze the status of the company. The facility
to view Company and Limited Liability Partnership (LLP) master data link is
available on http://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do
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56. Revised/updated loan agreements to be used/got executed as conveyed vide
Loan and advance circular 85/2020 dated 08.05.2020
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more vigilant and complete the process of due diligence while dealing with such
companies while taking credit decision.
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Whether all formalities/requirements under various Acts relating to organization of
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the borrowing concern have been complied with viz. compliance of provisions under
the Companies Act, 1956, provisions contained in Memorandum and Association of
the Co., Listing Agreement, if any and provisions of various statutes etc.
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Please ensure Borrower/ Partners/ Company Directors are not figuring in defaulters‘
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http://www.mca.gov.in/MinistryV2/companies_stuckoff_248.html
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It is advised to ensure that the status of all loan accounts under standard
category including SMA accounts (having constitution as Company / LLP) is
checked on MCA website under Company / LLP master data. The information
regarding accounts, if any identified as struck off in MCA records along with
action taken should be submitted by branches to respective ZOs within one
week. The printout of each search shall also be kept on record. In case of struck
off Companies / LLPs, operations in the loan account shall be frozen and the
borrower be conveyed about the freezing of operations in the account and the
reason thereof. In case of any outstanding dues, efforts should be taken for
immediate realisation of the same. vi. It is also advised to have an enhanced due
As part of due diligence, the status of borrower entity need to be verified with the
MCA/ROC records. The data base of the Income Tax Department and GST shall
be accessed to analyze the status of the company. The facility to view Company
and Limited Liability Partnership (LLP) master data link is available on
http://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do
http://www.mca.gov.in/mcafoportal/viewPublicDocumentsFilter.do
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Bank officials shall also check the status of GSTIN and GST return filing of all
borrowing concerns on GST web-site to ensure that GSTIN is active and upto
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date return has been filed. The facility to view the GSTIN status is available on
https://services.gst.gov.in/services/searchtp
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12.10.2020)
While appraising credit proposals, search on the website www.mca.gov.in
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should be in conformity with the past trend of sales and our earlier
experience with the party, if any. The accepted projections should be
thoroughly analyzed and substantiated with adequate justification.
The sanction of facility to finance debtors of allied / associate concern
implies higher risk and requires vigorous credit appraisal. Financing of
Book Debts arising out of the sales to allied and associate concerns may
be considered on merits by the sanctioning authority, subject to the
following conditions:
a) The facility should be allowed only to corporate borrowers engaged in
manufacturing activities and be restricted to 25% of Book Debt limits.
b) Borrower is financially sound and his past dealings are satisfactory.
c) Such debtors have arisen out of genuine trade transactions and shall
not result in double financing.
d) Allied / associate concern should also be financially sound and enjoying
good market reputation.
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The authenticity of the attested documents can be verified by visiting on the UDIN
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Portal at
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https://udin.icai.org
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Comment in brief regarding pre sanction visit should be invariably mentioned
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in the appraisal note at appropriate place. The report should contain date of
visit, name of official who visited the site, important nearby landmarks, name
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of the neighbours or any relevant information regarding the IP.
The Branches while submitting the limit sanctioned statements to the
controlling office should confirm that pre sanction visit has been conducted for
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the proposals sanctioned under BM powers and report in this regard has been
placed in the record.
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Credit Information Companies (CICs) have been set up for creating a database to be
used by the member banks for extraction of Credit Information Reports (CIRs) on the
borrowers for considering their request for credit facilities. After the operationalization
of Credit Information Company (Regulation) Act 2005, banks/FIs can submit data to
Credit Information Companies without obtaining consent of the
borrowers/coobligants/guarantors
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in most of the fraud cases, the appraisal guidelines are not followed and drawing of
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CIR from CICs is ignored. Our bank is presently member of all the four CICs viz
CIBIL, EQUIFAX, EXPERIAN & CRIF HIGHMARK.22
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Since CIRs give vital information about the prospective clients, drawing of CIR from
CICs is mandatory for Borrowers, Guarantors & Co-obligants (both Consumer &
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The field functionaries must invariably check CIC Report before considering any type
of credit facilities including Fund Based and non-fund based facilities before
considering facilities by way of
*Fresh sanctions
* Enhancement of existing credit facilities
* Review/ Renewal of credit facilities
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are generally public servants. b. Nominee /
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Professional Directors on the board of the
companies on behalf of the
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Government Nominee Directors
Consumer Category:
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Note:
i. In case credit score from TU CIBIL comes to -1 (Insufficient History/Data),
report (with score) from second bureau i.e. from Experian or CRIF
Highmark or Equifax to be extracted and analyzed for any default/overdue.
ii. In case of No Hit in TU CIBIL, report (with score) from other bureau(s) i.e.
Experian or CRIF Highmark or Equifax to be extracted and analyzed as
per the Score mapping matrix.
iii. Mapping Matrix of CICs Scores:
CIBIL CRIF Experian Equifax
732-900 767-900 826-900 784-900
690-731 719-767 776-825 720-783
650-689 677-719 701-775 608-719
602-649 631-677 651-700 561-607
300-601 300-631 300-650 300-560
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current application for fresh credit facilities.
o Current CIBIL CV score of the borrower shall not be below 550.
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However ZOCAC-I & above may consider the proposals in their vested
loaning powers having CV score below 650 on merits of the case.
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Commercial Category:
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Less thanRs 50 Lac One CIR from TU CIBIL Note: In case no report
found from this bureau, report from second
bureau to be extracted and analyzed for any
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default/overdue
₹50.00 Lakh and above/ In case Two CIRs as under:
of customers having credit risk 1. Primary: TU CIBIL
rating of B2 and below or having 2. Secondary: One CIR with score from CRIF
Score >46 to<=52 and below Highmark or Experian or Equifax
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SEGMENT CHARGES
Consumer Rs 50 per CIC +GST
Commercial Rs 500 per CIC+GST
The charges so recovered as above shall not be refunded even if the proposal is
declined. In case of the existing borrowers, these charges should be debited to their
accounts
While scrutinizing the Credit Information Reports (CIRs), the following dimensions
should also be investigated by the field functionaries besides cross checking the
details provided by the borrower pertaining to dealings with other banks/institutions,
repayment track record, asset classification of loan accounts with other banks etc in
the loan proposal:
(i) Too many enquiries made by other lenders which can indicate that other lenders
may have rejected credit request.
(ii) Credit facilities availed by the borrower from other lenders which can indicate the
leverage.
(iii) Credit facilities guaranteed by the customer which indicate his / her commitment
level.
(iv) Suit filed against the borrower.
(v) Additional matches, if any.
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The field functionaries shall carry out an in-depth scrutinization of the Commercial
Credit Information Report (CIR) of the borrower /guarantor carrying out enquires
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along the following dimensions with the borrower
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a) Number of Lenders (Credit Grantors) : How many lenders are there? *Are we
the sole lender of the borrower? *Does the number of lenders provided by the
borrower tally with the Credit Information Report (CIR) *Are the number of
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lenders provided by the borrower is less /more than that are appearing in
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Value Interpretation
-1 Individual has no trade & is not reported on the
bureau
Individual has no trade & has only been enquired
upon
Individual has trades on bureau, but all have been
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thereof should also be kept in the file along with other documents
b) In case no Information/Data/Report (NO MATCH FOUND STATUS) is
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obtained under either Consumer or Commercial Segment, the Report/ Web
Page showing such Status shall be printed & kept as record along with
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proposal after being duly countersigned by the concerned officer that correct
details are fed in the system for extraction of CIR.
c) The Branch Heads while sanctioning/recommending credit facility to
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1) For Credit Card Defaults :- In case CIC reports reflect defaults (excluding
Wilfull default) / written off / settled/ Post WO Settled on account of credit card
transactions only, the sanctioning authority shall take their credit decisions
within their Delegated Loaning Powers after due diligence and on merits of
the case after verifying the reasons for default and subject to compliance of
the other policy guidelines of the Bank. Process notes should mention the
justifications for approval of such proposals
2) For Defaults Other than Credit Card :-
i. Fresh/Additional/Enhancement :
a. Facility may be considered by the respective sanctioning authorities after
ensuring that the irregularity/default (if any) is removed from CIC report or the
applicant submits the sufficient proof (i.e. No-dues certificate/Statement of
account/ Deposit receipts etc) for having removed such irregularity/ default.
b. Where ever applicant is not able to fulfil the above conditions, the facility
may be considered by the sanctioning authority not below the level of
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ZOCAC-I and above. In such cases, the reasons for default/irregularity during
past 12 months should be critically examined and based on justification/
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mitigations provided, a view may be taken on a case to case basis.
ii. Restrictions mentioned at S.N. (i) above, shall not be applicable subject to
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fulfilment of all the conditions mentioned below: Such instance of
default/irregularity should be at least 5 years prior to the date of current
application for fresh credit facilities. The aggregate amount of default in
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regard to all the credit facilities provided by the other banks/NBFCs was less
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than ₹1.00 lakh. Current CIBIL CV score of the borrower must be 700 or
above (wherever applicable)
iii. The restrictions mentioned at S.No.(i) shall not be applicable in case of
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It has been observed that sometimes details of credit facilities which are being
enjoyed by the Borrower/ Guarantors/ Co-obligants/ other related entities/individuals
from our Bank/other banks/FIs and which are known to the dealing officials of the
Bank through Balance sheet, application form, etc. are not reflected in the CIR. To
ensure that all the information is duly reflected in the CIR in future, the matter should
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be immediately taken up with MISD, HO for its resolution.
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INCLUSION OF ―CIBIL MSME RANK‖ (CMR) IN COMMERCIAL CIBIL REPORT
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FOR MSME BORROWER : (L&A CIR NO 26 dated 01.02.2021)
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TransUnion CIBIL has launched CIBIL MSME Rank (CMR), a credit risk rank for
MSMEs borrowers, and Bank has subscribed the inclusion of CMR in Commercial
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CIBIL presently provides CMR for borrowers availing credit facilities upto ₹50 Crore
from the Banking system. The CMR shall be delivered in the commercial CIBIL report of
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To begin with, the CIBIL MSME Rank shall be used as indicative measure only and has
not been linked as threshold for entry level or as determining factor for delegated
power/ sanctioning authority of a credit proposal. However, in case of CMR7 to CMR-10
(i.e. High Probability of Default), the Sanctioning Authority shall endeavour to obtain
sufficient collateral security and Personal Guarantee for such credit proposals
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5. CRILC report of group entities shall be invariably obtained in all other cases.
Wherever obtaining of CRILC Report and verification for group entities is not
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complied with, branches should clearly state these facts in the proposal itself
along with the reasons / views/comments so that the Sanctioning Authority may
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take cognizance of the same while considering the proposal and take a final view
in the matter.
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RBI has made it mandatory for corporate borrowers having aggregate fund-based
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and non-fund based exposure of Rs.5 crore and above (introduced in a phased
manner) from any bank to obtain Legal Entity Identifier (LEI) registration and
capture the same in the Central Repository of Information on Large Credits
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Accordingly Bank has now facilitated CRILC user IDs to all Business Divisions at
HO, all Zonal Offices, all LCBs, all Circle offices and all Back Offices for easy
access to CRILC database for checking any default status of a borrower. Bank
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also uploads the RFA & Fraud status of borrowers with other banks in our
Knowledge Centre portal, which is accessible to all employees of the Bank for
proactive steps while sanctioning loans to borrowers
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captured in the appraisal note and its correctness needs to be ensured.
4. Accordingly, as part of due diligence exercise, branches are advised to make
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search on the website www.mca.gov.in.through the DIN no. of the respective
director to verify the name of directors of borrowing company as well as the
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names of group/allied concerns. The report(s) so obtained should be
scrutinized carefully to ensure that the details regarding associate/allied
concerns are duly captured and reported in the appraisal note.
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P&L account in all existing as well as in fresh accounts, the officer concerned should
certify that copy of Balance Sheet and P&L of the Company/LLP have been
downloaded from MCA website, checked with the documents received from the
Company/LLP and found to be in order. The copy of the financials downloaded from
MCA website shall also be held on record.
Industry Ratings are being used as one of the inputs in Internal Credit Risk Rating
models for carrying out credit risk rating of borrower accounts as also in credit
decision making as per extant guidelines. The industry reports are available on our
e-circular site for ready reference of our field functionaries engaged in
appraising/sanctioning credit proposals. Bank has tied up with CRISIL for Industry
Ratings.
The updated Industry Outlook list in respect of Industries as provided by CRISIL has
been circulated vide L&A circular 49/2021 dated 24.03.2021 for reference. In case of
industries not figuring in the annexed list, the Industry Outlook is to be considered as
‗Neutral‘ while carrying out credit risk rating of the borrowal accounts.
As per Credit Management and Risk Policy for the year 2020-21, circulated vide LA
Cir 40/2020 dated 26.03.2020, there are certain restrictions imposed in exercising
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loaning powers in respect of Fresh/ additional exposure to Unfavourable/specific
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Industries. Also, in terms of Loaning Powers guidelines (LA 100/2020 - Item 2.3,
Page -11), the loaning powers have been linked to credit Risk Rating of the
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borrower, but subject to ‗Industry Rating‘ of the borrower. It is reiterated that no
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fresh exposure should be taken upto field level (i.e GBB/ MCC/ RAM) in case of
industries having ‗Unfavourable‘ outlook
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Attention is invited to IRMD L&A Cir. No. 212, 217 & 224 dated 01.12.2020,
10.12.2020 & 17.12.2020 respectively inter-alia conveying the future impact of Covid-
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In view of revival of Indian Economy, its GDP and many other incentive schemes
announced by GoI under ―Atmnirbhar Bharat‖, the Board has approved lifting of the
restrictions made on various industries and approved as under:
(IRMD-Risk circulars 37/2019, 03/2020, 21/2020 and LA circulars 40/2020, 100/2020 and
157/ 2020)
The Bank has in place a multi-tier credit approving system. In order to enable the
field functionaries for taking expeditious decisions and also to attract quality
accounts, the CACs/officials shall exercise loaning powers linked to risk rating of
borrower/rating of the industry, as enumerated in loaning powers & guidelines for
exercising such powers at various levels
On adopting new Organizational structure for credit delivery, there is
comprehensive rating and scoring framework. Rating and scoring tools which are to
be utilized for credit delivery are as under:-
Retail Score - 5 scoring models
MSME Score - 5 scoring models
Farm Score - 4 scoring models
Rating Models - 11 rating models
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Under new organizational structure, Zonal Risk Management Cell (ZRMC) has
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been created at Zonal level. There shall be a two-tier Risk Management structure of
which one part will be Zonal Risk Management Cell (ZRMC) & other shall be HO:
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IRMD.ZRMC will work as an extended arm of HO: IRMD which will help in
percolating Risk Culture in bank down the line.
Ratings for loans above Rs.1 Crore & upto Rs.10 crore will be vetted at ZRMC. For
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loans above Rs.10 crore, ratings will be initiated at ZRMC & vetted at IRMD HO.
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ZRMC will act as 2nd line of defence after ZO (1st line of defence) & ZAO (3rd line
of defence)
(IRMD-Risk circular 21/2020 dated 01.04.2020)
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THRESHOLD EXPOSURE
Internal Risk Rating
Rating Threshold Exposure
PNB Score (For Retail Loans) As per RBD guidelines 31/2020 Dt.31.03.2020
PNB Farm Score As per PSFID guidelines 55/2020
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Dt.27.03.2020
PNB Score SME As per MSME guidelines 55/2020
Dt.27.03.2020
PNB Trac Above Rs 50.00 Lakh
All borrowers having (FB+NFB) limits of above Rs.50 Lacs excluding Retail
borrowers for Housing Loan, Education Loan and Vehicle Loan (loans to individuals),
wherein scoring is done under PNB Score irrespective of amount, should invariably
be rated on these models. Seven Default Rating models, two Transaction Rating
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Corporations (PFCs) irrespective of the limits or turnover
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except new NBFC/ and MFIs
6. Entrepreneur New Borrower setting up new Cost of Project upto
Business Model business and requiring finance Rs.15 Cr .
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above Rs. 50 lac upto Rs. 5 Cr
(AND)
New Non-Banking Financial Companies (NBFCs)/New Micro
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for first year of operations are not yet available and proposal
is only for sanction of WC/NFB/TL facilities and total
exposure is upto Rs 5.00 Crores & project cost upto Rs 15.00
crores .
However, all new trading business irrespective of limits shall
be rated under this mode .
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3. Downgrade from Investment Risk Mitigants such as additional
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grade to non-investment grade collaterals/ guarantees/increase in
eg. PNB B2 to PNB B3 22 margins may be prescribed.
Loan facility adjustment/ possibility be
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Note:
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1. The reason for decline in the rating grade under dynamic review rating model has
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to be analysed on the basis of the parameters rated and suitable remedial measures
are to be taken by the branch.
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2. The above measures are illustrative only. Branches may also consider additional
suitable measures, if any in this regard to secure bank‘s interest. These precautions
act as risk mitigating measures and at the same time inculcate a sense of credit
discipline among borrowers.
3. The above-mentioned measures are to be complied with before the next due date
for dynamic review rating or regular risk rating, whichever is earlier unless waiver for
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a) In view of the ongoing stress and adverse impact of COVID-19 pandemic deferment
of loan related actions in accounts having exposure above ₹50.00 crore due to
decline in Dynamic Review Rating by one notch below existing rating till 30.06.2021 is
allowed.
b) It may be noted that the above benefit of deferment is available only in case if the
downgrade in rating is due to adverse impact of COVID-19 on the borrowers. As such,
the reasons for downgrade should be carefully analyzed before the passing the benefit
of deferment of loan related actions. The factors like availment of Moratorium and
GECL facilities etc. by the borrowers be also considered for allowing aforesaid benefit.
c) The benefit of deferment of loan related action in case of downgrade by one notch
shall be allowed as per criteria and standard operating procedure: I . In case of
decline in rating, the reasons for downgrade should be analyzed to ensure reason for
downgrade. Some basic indicators (as detailed in the circular) which shall be
examined to ascertain that the downgrade in rating is due to COVID related stress. ii.
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In case the decline is by one notch below existing rating, the Branch Head may waive
the loan related actions, after recording the reason in the format as per Annexure-I.
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The benefit of aforesaid deferment should not be passed in cases where the
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downgrade in rating is two or more notches below the existing rating. However, the
competent authority as defined in L&A Cir. No. 100/2020 for waiver of specific loans
related actions in case of downgrade in dynamic rating may waive the actions on
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NPA Model
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All these credit risk rating models applicable to borrowers are available in the on-line Central
Server based system PNB Trac for conducting ratings
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PNB SUPER SCORER: To strengthen the credit risk assessment for all fresh/
enhancement/ additional limit proposals in standard accounts falling within HO power and to
capture changes in risk dynamics post regular rating, a new quantified scoring model ‗PNB
Super Scorer‘ has been developed. The Model will be used by the Raters/Vetters at
IRMD, Head Office.
PNB Super Scorer shall serve as an additional tool on top of regular rating in PNB Trac in
the account to capture fine-tuned riskiness/change in riskiness in borrower since the
previous recent rating.
The Model will be applicable to all fresh/ enhancement/ additional limit proposals in standard
accounts falling within HO power.
Based on the total score obtained above identified parameters, the PNB Super Scorer will
classify the account into four categories as under:
1
fulfilled
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4 120 & below No- Go No- Go
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PNB SCORE :To evaluate risk in retail segment, 8 Scoring models for all the retail schemes
except i) PNB Baghban Scheme (Scheme for Reverse Mortgage) and ii) Loan against Gold
Jewellery & Gold Coins have been developed under the name PNB SCORE. This is
21
applicable to all Retail Loan applications (except exempted categories) for loan upto
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Rs.50.00 Lac, however, for retail loan schemes namely Housing Loan, Education Loan and
Vehicle Loan (loans to individuals), the same is applicable irrespective of amount.
3
The models are as under: 1) Housing Loan/ Loan against IP to Individual 2) Conveyance
Loan 3) Education Loan 4) Personal Loan (Pensioner) 5) Personal Loan (Others) 6) Doctors‟
Loan @ 7) Traders‟ Loan (New)@ 8) Traders‟ loan (renewal)@.
@ These credit scoring models are still part of PNB Score, though some of the schemes
covered under these scoring models are now being looked after by MSME Division. For link
on Finacle Home Page as Non CBS applications PNB IRMDPNB Score.
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PNB SME SCORE:For SME, following models have been developed, which can cater to the
requirements of the schemes under SME sector:
1. SME Manufacturing (New Cases including takeover) - Above Rs.10 Lacs up to Rs.50
Lacs.
2. SME Service (New Cases including takeover) - Above Rs.10 Lacs up to Rs.50 Lacs.
3. SME Manufacturing and Service (New Cases including takeover) - Rs.10 Lacs and
below.
4. SME Manufacturing and Service (Renewal / Enhancement) - Above Rs.10 Lacs up to
Rs.50 Lacs.
5. SME Manufacturing and Service (Renewal / Enhancement) - Rs.10 Lacs and below.
SME scoring models are collectively known as PNB Score-SME and a link on Finacle home
page is available as ―Non CBS applicationsPNB IRMD PNB Score SME‖.
Scoring Model for Credit Card: For scoring of fresh applications for issue of the credit card
to individuals and to assess the credit card limit for Classic, Gold and Platinum Cards.
1
3 Segment Rating Pool-wise default and ratings approach for loans
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Methodology upto Rs.5 Crores and loan under exempted
category of rating.
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The credit risk rating model provides for evaluating the borrower on a 10 point
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scale from ‗PNBA1‘ to ‗PNB-C3‘, with PNB-A1 indicating ―Minimum Risk‖ and
PNB-C3 indicating ―Exceptionally High Risk‖. Default rating grades with their
risk description, risk profile and Investment grades as detailed below :-
3
2. Above PNB- Marginal Risk Very good business credit, asset quality
70.00 A2 and liquidity, debt repayment capacity
up to and coverage.
80.00 Low
3. Above PNB- Modest Risk Good business credit, asset quality, debt Risk
64.00 A3 paying capacity and coverage
up to
70.00
4. Above PNB- Lower Risk Satisfactory business credit, asset
58.00 A4 quality, liquidity, good debt repayment
up to capacity and coverage
64.00
5. Above PNB- Average Risk Acceptable business credit with average
52.00 B1 risk, acceptable asset quality, modest
up to debt capacity. However, adverse
58.0 economic conditions or changing
circumstances are more likely to lead to
a weakened capacity of the obligor to
1
commitments
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9. Above PNB- Very high Risk Not creditworthy. An obligor has minimal
25.00 C2 margin of principal and interest payment High
up to 22 protections, currently highly vulnerable, Risk
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35.00 and is totally dependent upon favourable
business, financial and economic
conditions to meet its financial
commitments
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Rating and vetting authority for credit risk rating in PNB Trac/PNB Score/SME
Score/ Farm Score
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# All scoring done in PNB Score, SME score and PNB Farm score shall be
vetted at RAM/MCC level only. For example scoring applicable in housing, car
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loan, farm score etc. by an officer independent of appraisal especially
designated for all rating/scoring
21
@The vetting authority for review ratings carried out in Dynamic Review Rating
Model, in applicable cases shall be as per extant bank guidelines except
*For branches that are not linked with MCCs, RAMs shall exercise their loaning
powers as defined in the Loaning Powers guidelines for Agriculture and MSME
also in addition to Retail loans.
Validity of Credit Risk Rating: The credit risk rating become due after the expiry of
12 months from the month of confirmation of rating or 18 months from the date of
balance sheet on the basis of which credit risk rating was assigned, whichever is
earlier. The rating shall be treated as „overdue‟ after the expiry of 15 months from
the month of confirmation of rating or 21 months from the date of Balance Sheet on
the basis of which the credit risk rating was assigned, whichever is earlier.
If rating is not renewed within the validity /extended validity period and rating falls
overdue, then rating shall be downgraded and treated as PNB-B3 and re-priced
accordingly, from the day on which rating falls overdue, till rating is renewed in
regular rating model. However, if the rating is already ‗PNB-B3‘ or below, the rating
shall be treated one notch down for pricing. (IRMD 03/19)
The operational guidelines on treatment of overdue credit risk ratings was circulated
vide IRMD Circular No. 02/2019 & 03/2019 dated 02.01.2019 and 07.01.2019
respectively.
However, keeping in the view that amalgamation of PNB with UBI & OBC w.e.f.
01.04.2020 & the ongoing difficulties faced due to COVID-19 pandemic, the
treatment specified for overdue risk ratings has been deferred for a further period of
3 months (i.e. upto 30.06.2021). From 01/07/2021 all overdue credit risk ratings shall
1
be treated as PNB-B3 or one notch down in case rating is already PNB-B3 or below.
All other guidelines in the matter shall remain unchanged (IRMD LA circular 03/21
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dated 30.03.2021)
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However, till such time existing guidelines will prevail and penal interest @ 2% shall
be charged over and above the applicable interest rate for the default period as
specified for overdue credit risk ratings in existing guidelines issued vide IRMD
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Circular No. 23/2017 dated 13.12.2017 and 25/2018 dated 14.09.2018 (IRMD
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33/2019)
In case of downgrade in Dynamic Review rating, various loan related actions (to be
3
taken), have been advised. Competent Authority to waive specific loan related
actions are also advised (L&A circular 144/2019 dated 31/12/2019).
The pricing (ROI and other charges) is linked with credit risk rating. Interest rate is
05
charged depending upon the quality of asset. In normal course of business, better-
rated accounts are priced at lower rate of interest as compared to low rated
accounts. However, in the larger business interest of the bank, the competent
authority can permit lower than card rates on case to case basis strictly on merits by
recording the reasons/justification for making the exception. In respect of borrowal
accounts availing limits over Rs. 20 Lac, interest rates have been linked with the
credit risk rating with certain exceptions.
Situations may arise, where the borrowers would like to know about the rationale of
their rating. Borrowers may be informed about their weak areas such as Financial,
Business/Industry, Management or Conduct of Account. The rating report/individual
parameters in detail are not to be disclosed to them.
No fresh exposure should be taken upto field level for borrowers under
unfavourable industries irrespective of their credit risk rating.
It should be noted that the counterparty shall invariably be internally rated & should
achieve Investment grade. For consideration as ‗Investment Grade‘, both the
conditions w.r.t. Internal & External Risk Rating shall be fulfilled.
The bank shall undertake new relationships in externally rated BBB & above
accounts, & on conduct of their Internal Rating should achieve B1 or B2. In such
cases where the account is Internally Rated B2, it shall be sanctioned at an
appropriate level as per vested loaning powers in terms of extant guidelines.
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(Loan and advance circular 04/2020 dated 10.01.2020& 100/2020 dated 02.06.2020)
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ii. All loans against shares and debentures, units of mutual funds, life insurance
policies.
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iv. Loans to individuals, against mortgage of IPs where market value of IP is at least
150% of the loan amount, who are not engaged in any activity for which annual
accounts are required to be prepared.
v. Advances to individuals under Agriculture (Direct), Agriculture (Indirect), Other
Priority Sectors including Transporters, Artisan and Handicrafts.
vi. Loans under LUCC and advances against warehouse receipts of CWC.
vii. Borrowers who are availing only those loans/limits where full powers have been
granted as per loaning power chart e.g. purchase of cheque drawn by Central &
State Govts. and drafts of public sector banks, ILCs/FLCs where full cover is held by
way of deposits till maturity etc.
viii. Advances against clearing instruments/ bills/ clean overdrafts permitted within
the vested loaning powers at various levels where the client is not availing any other
loan/limit for which risk rating is applicable as per guidelines.
Note: The exemption from credit risk rating under (vii) and (viii) shall be
subject to the condition that the loan/limit allowed is for a short period and is
for a specific transaction. The exemption from rating should be exercised only
1
iii. Their balance sheets mostly reflect funds raised towards margin requirement
(from parent company; by way of debentures/ unsecured loan/ investment etc) and
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debt raised from international banks.
iv. These funds are in turn invested in acquiring companies, capital expenditure and
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other projects; through their WOS / group companies; by way of onward lending.
v. The loan is backed by the guarantee of parent company.
Exemption may be granted on case to case basis by GM (IBD) from internal credit
21
a. Advances under Retail Banking Schemes, where scoring models are not available
(Loan against Gold & Jewellery and PNB Baghban)
b. Loan against Sovereign Gold Bonds
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3.2 CRISIL has issued a unique License Key for our bank. Put this License Key
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CRRW/NHH/SDRT40C3C65316 along with your Email id and personal
details and click Submit button.
3.3 Any existing users who forget their password – Click Sign in, put your registered
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email id and click Forgot Password icon to receive a new password via mail.
Vetting authority shall be one step higher, wherever internal ratings are having
variance of more than one notch with the ratings assigned by approved external
3
rating agency. In case external rating is assigned after the approval of internal rating
then the rating shall be reviewed and vetted on the basis of variation in the rating
(refer IRMD Cir.No.05/2017dt 17.03.2017)
CRR
In terms of guidelines contained in LA Cir 100/2020dated 02.06.2020 competent
authority empowered to permit/continuation of relaxations in rate of interest and
service charges have been conveyed. (LA circular 100/ 2020 dated 02.06.2020)
Kindly refer IRMD Consolidated Circular No. 13 /2018 dated 21.04.2018 vide which
consolidated guidelines on external risk rating has been circulated wherein NCAF
guidelines for insisting External Risk Rating for Borrowers with aggregate exposure
(both Fund Based &Non-Fund Based) above Rs. 5 Crore or total average annual
turnover of more than Rs.50 crore have been advised.
2 For borrowers having IRR PNB-B2 and exempted from requirement of ERR up to
Rs.25 Crs. (as per point 2.1), ZOCAC-II can sanction proposal for
fresh/enhancement/additional/adhoc limits where exposure is secured by the eligible
collaterals of at least 50% or more. The eligible collaterals for this purpose are as
under:-
Collaterals (Eligible)
I. Cash & Cash Equivalents like FDR, NSC, KVP etc.
II. LIC Policies (Surrender Value)
III. Immovable Properties in the form of Residential/ Industrial/ Commercial Properties.
Surplus value of primary securities of Land & Building, if available, can also be
considered for the purpose.
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In event of Non-availability of External Risk Ratings in case of new borrowers, the
sanctioning authority shall provide a suitable time of 3 to 6 months to the new
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borrowers for obtaining external risk rating in terms of sanction.. In case the entity is
externally rated after the period as granted by sanctioning authority and the External
Rating comes below the Investment grade rating i.e. below ‗BBB‘ rating grade, then
21
the rating outcome shall be placed before the next higher authority in case of ZO
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1
be got done from a senior valuer in category A and the average of the two
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valuation reports having difference of not more than 15% be taken.
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Now a ceiling of Rs.5 cr. on value of property has been imposed for valuation
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1 Rs.10 Lac & above but less Rs.20 Lac& Should more than one year old
$ than Rs.1.00 Crore and above $
2 Rs. 1 crore & above, Once in Three Years
$For 1 above, revaluation to be got done only If Branch Head feels that
realizable value of IPs is significantly lower than the one on bank‘s record
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If, at the time of revaluation, negative variance of the individual property is 20% or
more from the earlier valuation, the matter shall be referred to sanctioning authority
to take appropriate safeguards.
Frequent valuation of properties for allowing concession in ROI and sanction of
additional credit facility is not a fair practice and not allowed.
Subsequent valuation should be assigned to the empaneled valuer other than the
valuer who has conducted the previous valuation
Valuation Report
Valuation report must be on prescribed format as per Appendix-I for valuation of all
the Immovable Properties (other than agriculture land), per Appendix-II for valuation
of Flats (other than agriculture land) and Appendix-III for valuation of Agriculture
Land of L&A 53/ 2020.
Valuation report should clearly indicate: i. Date of purchase of immovable property, ii.
Purchase Price of immovable property, iii.Book value of the IP, iv. Realizable Value
However, for the purpose of determining the present value of the property
mortgaged/ to be mortgaged, the realizable or market value whichever is lower
should be taken into consideration
1
Further, in case additional construction has been made during the 1st year,
cost of additional construction given by chartered engineer/valuer may be
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added to the consideration mentioned in the sale deed.
If the duration between the date of allotment and date of conveyance deed /
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sale deed (executed by the development agencies/private builder) is more
than 1 year, fresh valuation shall be obtained.
21
With respect to valuation of land in all proposals including Real Estate, if the land is
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acquired / purchased beyond one year, realizable value or 85% of the market value
whichever is lower assessed by the Bank‘s approved valuer should be taken as
value of the land.
3
i) For new plant and machinery Valuation is the cost price as per quotation/
supplier‘s bill,To be verified through enquiries through other vendors
supplying such machinery.
05
ii) In fresh borrowal accounts for existing plant & machinery, valuation from
the valuer on the Bank‘s approved panel .
iii) If the value of Plant & Machinery is Rs.50 crore & above, valuation from
minimum two valuers on the Bank‘s approved panel.
iv) Valuation report as per Appendix-IV of LA 53/2020.
v) Realizable or market value whichever is lower to be accepted for valuation
purposes.
1
Above ₹ 1 crore and up to ₹ 5 crore. ₹ 8000/-
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Above ₹ 5 crore and up to ₹ 10 crore ₹ 12000/-.
Above ₹ 10 crore 22 ₹ 15000/-
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* Includes Property/Fixed Assets/Plant and Machinery
**The fees are inclusive of out of pocket expenses.
The fee payable to the valuer would be recovered from the borrower
21
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―HCLM‖ vide LA Cir 14/2017 dated 13.02.2017 and further explained vide LA
Cir 21/2017 dated 04.03.2017.
Market value is defined as the estimated amount on the date of valuation for
which an asset should be exchanged between a willing buyer and a willing
seller. The transaction should be at arm‘s-length and after proper marketing. Each
party should act knowledgeably, prudently and without compulsion.(L&A circular
53/2020 dated 31.03.2020)
i. Symbolic Demarcation: Such process is complied with the legal counsel and the
valuer, by indicatively designating the North, South, East, West properties of the
property in question, duly complying guidelines at para 3 above.
1
Since, accurate demarcation of property is scientific/technical aspect which requires in-
:0
depth knowledge, skills of the field and also involved huge cost, it is advised that details
of demarcation / boundaries of property as already covered in extant guidelines
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covering Symbolic Demarcation only including longitude/latitude and co-ordinates of the
Property Location and screen shot (in hard copy) of Global Positioning System
(GPS)/Various Applications (Apps)/Internet sites (eg. Google earth) etc. should be
21
obtained from the valuer as per the standardized valuation formats as advised by L&A
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Field functionaries are advised to further advise the valuers to enter the details of
properties of mixed nature (commercial and residential), while giving their valuation
report, in respect of ratio of their commercial and residential parts and suitably and
realistically evaluate the properties according to their nature under the best suited
05
methodology for valuation considering the nature and location of the property along with
other relevant factors as per the standard industry practices in vogue.Further it is
reiterated that details /reference of at least two latest deals/transactions with respect to
adjacent properties in the areas have to be mentioned in the valuation report. It is
clarified that the deals being quoted should be of properties comparable in nature
This has reference to IRMD L&A circular No 53/2020 dated 31.03.2020 conveying
Policy and Standard Operating Procedure on Valuation of. In the said policy, it has
been advised that Bank shall solely rely upon the valuation reports of Bank‘s approved
valuers irrespective of the credit limit and value of the mortgaged property.
In all agricultural loans above Rs. 2.00Crore, the valuation of agricultural land shall
be continued to be taken from empanelled valuer.
1
This is in reference to L&A Circular No. 53 dated 31.03.2020, inter-alia advising the
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Standard Operating Procedure (SOP) for valuation of assets along with the
standardised formats and other operative guidelines issued on the subject from time to
22
time.
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and GPS information, prevailing market rates and details/references of at least two
latest deals/transactions with respect to adjacent properties in the areas will have to be
mentioned by the valuer. Additionally, it has been stipulated that the valuer shall
3
indicate how the value has been arrived at, duly supported by necessary calculations
and furnish guideline value (on the basis of prevailing circle rates or any other reliable
source), market value as well as realizable value. In case of difference in the market
value and circle rate as applicable in that area, the same should be supported by
cogent reasons in the valuation report.It is also advised that reports submitted by the
05
Empanelled Valuer and Panel Advocate has to be studied with regard to key aspects
such as identification, location and description of the property, ownership, basis for
arrival of the value of the property to ensure that the valuers and advocate adopt
prescribed procedure and guidelines as provided by the Bank.
As a due diligence measure when dealing with Immovable Property, it is now advised
that the official visiting the IP shall submit along with the visit report, his/her
observations in the proforma on counter checking the important particulars from the
valuation report and legal opinion as per Annexure. Further, it is to be ensured by the
visiting official that the valuer submits the value of property of similar nature in the same
locality drawn from any one of the popular property websites such as Magic bricks, 99
Acres, Housing NHB Residex etc., along with the valuation report. The copy of the
same is to be held on record. It is also advised that copy of the Legal Opinion and
Valuation report may be held on record during visit of IP.
7. Insurance
1
cost of the property excluding
land cost
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ii. Officers in SMG Scale IV at specified branches (RAM/MCC/LCB/ELCB) and
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above may waive insurance of collateral security in deserving cases in their own
sanctions only
21
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In addition to Life Policies issued by LIC of India and Non-Life Policies issued by
Public Sector General Insurance Companies, Insurance Policies (Life & Non-Life)
issued by Private Sector Insurance Companies registered with IRDA as per list given
in Appendix to LA Cir 46/2014 dated 23.04.2014 may be accepted.
05
A mortgage is a way to use one's real property, like land, a house, or a building,
as a guarantee for a loan to get money. Many people do this to buy the home
they use for mortgage: the loan provides them the money to buy the house and
the loan is guaranteed by the house.
1
In a mortgage, there is a debtor and a creditor. The debtor is the owner of the
property, while the creditor is the owner of the loan. When the mortgage
:0
transaction is made, the debtor gets the money with the loan, and promises to
pay the loan. The creditor will receive money back with interest over time (usually
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in payments made each month by the debtor). If the debtor does not pay the
loan, the creditor may take the mortgaged property in place of the loan. This is
called foreclosure.
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mortgage money and the instrument (if any) by which the transfer is effected is
called the mortgage deed.
Immoveable Property:
Immovable property includes land, benefits that arise out of land and things
attached to the earth, like trees, buildings, fixed machinery etc. The machinery
which is not permanently attached to the earth and which can be shifted is not
05
Types of Mortgage:
Simple Mortgage
Where, without delivering possession of the mortgaged property, the mortgagor
binds himself personally to pay the mortgage-money, and agrees, expressly or
impliedly that in the event of his failing to pay according to his contract, the
mortgagee shall have a right to cause the mortgaged property to be sold and the
proceeds of sale to be applied, so far as may be necessary, in payment of the
mortgage-money, the transaction is called a simple mortgage and the mortgagee
a simple mortgagee.
i) There is personal obligation/ liability to pay;
ii) Possession is not given;
iii) There is a right to cause the property to be sold through court; and
1
sale.
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Usufructuary Mortgage: 22
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Where the mortgagor delivers possession, or expressly or by implication binds
himself to deliver possession of the mortgaged property to the mortgagee and
authorizes him to retain such possession until payment of the mortgage money,
21
and to receive the rents and profits accruing from the property or any part of
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such rents and profits and to appropriate the same in lieu of interest or partly in
payment of the mortgage money, partly in lieu of interest and partly in payment
of the mortgage money, the transaction is called a usufructuary mortgage and
3
English Mortgage:
Where the mortgagor binds himself to repay the mortgage money on a certain
date, and transfers the mortgaged property absolutely to the mortgagee, but
05
Anomalous Mortgage:
A mortgage which is not a simple mortgage, a mortgage by conditional sale, an
usufructuary mortgage, an English mortgage or a mortgage by deposit of title
deeds within the meaning of section 58 is called an anomalous mortgage.
According to Section 58 (f) of Transfer of Property Act 1882 where a person delivers
to a creditor or his agent documents of title to immovable property, with the intent to
create a security thereon, the transaction is called a ―mortgage by deposit of title
deeds‖. This is also called Equitable Mortgage. This mortgage does not require
registration.
1
These are the documents to the title which exist by way of a single registered
document to title of a property at any given point of time.
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However in case of mortgage by deposit of certified copy of a decree alone should
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not be created because of the fact that there can be more than one certified copy of
a decree unless and until it is accompanied by Original Title deed of the IP (For
details see guidelines at Sr 12 Page 21-22 of LA Cir 53/2016).
21
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of Mortgagor be obtained.
3. All dimensions of IP as per Title Deed/ Approved Map be tallied with actual.
4. Its value be ascertained from Neighbours/ Property dealers in vicinity.
5. Search in CERSAI Portal be made. In case of Hit, it be probed and in case of
No Hit, this report be kept on record.
6. Legal Opinion and Search from Advocate on bank‘s approved Panel on IP be
05
made.
7. Valuation be got done from valuer on bank‘s approved panel as per guidelines
contained in LA Cir. 53/2020.
8. All the documents required for creation of Equitable Mortgage (EM) as per
documents stated in Report of bank‘s counsel along with Original Title Deeds,
Certified copy of Title Deed and Chain of Title Deeds be obtained.
9. Any other document as per Bank‘s counsel report.
10. The terms on which the advance to be secured by the deposit of title deeds
has been made, including the maximum limit of the advances, must be recited
to the mortgagor(s) and his or their verbal acceptance obtained in the
presence of the witnesses.
11. Particulars of the deposit must be recorded in the title-deed register (Form
No.PNB 363) and must be verified and signed therein by two Bank witnesses.
The mortgagor(s) must on no account sign the register.
1
17. Obtain a letter of authority as per APPENDIX -11 (LA Cir 53/2016)
accompanied by Form No.PNB 374 from the owners authorising the Bank to
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effect insurance of the properties mortgaged in the event of their failure to do
so. 22
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18. Intention to create EM and subsequent acknowledgement by bank alongwith
all dates in chronological order is as under:
1. Date of Deposit of Title Deeds (date of EM) i.e. Intent to Create EM-
21
(Verbal)
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19. Stamp duty as per state act be paid (Page 8- BOI 30.06.2016)
1
4. The guidelines with regard to verification of genuineness of the Title Deeds
and obtaining of Search Report in respect of non-encumbrance of the
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property as per Law Division Circular No. 07 dated 30.01.2014 be
observed. 22
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5. A Declaration as per APPENDIX-8 (Of LA Cir. 53/2016)to be obtained
from the owner of property, who is proposing to create mortgage.
21
government/other statutory authorities for the project including approval of the plan,
wherever required.
2. An affidavit-cum-undertaking may be obtained from the proposed borrower applying
for such credit facility that he shall not violate the sanctioned plan, and/or building
bye laws and wherever applicable borrower shall also submit a completion certificate.
3. An architect appointed by the Bank shall give a certificate at various stages of
construction that the construction is strictly as per the sanctioned plan.
05
1
REGISTRATION:
:0
According to Section 59 of the Transfer of Property Act, 1882, where the principal
money secured is Rs.100 or more, a mortgage, other than a mortgage by deposit
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of title deeds, can be affected only by a registered instrument signed by the
mortgagor and attested by at least two witnesses. In case the instrument is not duly
attested and registered, the mortgage will be void.
21
Leasehold Property:
In case of Lease hold property, 1st examine original Title to property to examine
whether person leasing the IP is competent to do the same. Then
1. Obtain Original Lease deed and examine :
i. Unexpired period of Lease Deed
ii. Study the terms and conditions of the lease
iii. If there are any onerous conditions such as the necessity of taking
05
Government dues:
The borrower to produce latest receipts regarding the land revenue or any other
Government dues paid by him.
Revenue record with true copies regarding Title of Land with type of land,
Crops for last five years sown in that land, Summary of share of applicant in
land be obtained, examined. As most of the states do not charge any
1
Registration Fee for mortgage of agriculture land for Agriculture activities,
Registered Mortgage be created and Mortgage deed filed with revenue
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authorities for recording charge of bank in revenue record. Before going for
Registered mortgage, it must be ensured that land being mortgaged in un-
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encumbered.
activities:
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1. (a) It is to be ascertained that the person occupying the land has legal title to occupy
the same and;
(b) If it is there, then the super structure being owned by the individual occupier can be
mortgaged in favour of the Bank subject to obtaining permission of the Cantonment
Board.
2. Equitable Mortgage can be created at the Cantonment Area, if it is a notified town,
otherwise registered mortgage has to be got executed.
3. The value of the land may not be considered while arriving at the value of property
mortgaged, although the same may be got reflected while arriving at value of the
superstructure. Only the realizable value of property, as per guidelines of the Bank, if
sold as it is, may be taken for the purpose of financing.
4. The borrower has to deposit title deed of super structure alongwith Letter of
Authority / Lease from the Cantonment Board showing his right to occupy the same.
Permission of the Cantonment Board to mortgage with the Bank is also to be
furnished.
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If a mortgagor wishes to inspect his title-deeds he may be allowed to do so at
the Bank in the presence of the manager or officer but he must not on any
22
account be permitted to take them away from the Bank.
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On the expiry of the period for which a limit/loan against the security of
mortgage is sanctioned, permission from Circle Head/Head Office should be
3
Balance confirmation on Form No. PNB 139 should be obtained from all the
obligants at the close of each half year.
05
1
the credit facilities,
c. Name(s), parentage and full address of the mortgagor(s),
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d. Correct location/address and description of the ips to be mortgaged,
e. The particulars of chain of title deeds to be deposited
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f. NEC /Legal Opinion-cum-Search Report given by the Advocate,
g. Valuation certificate of Bank‗s approved valuer alongwith valuation certificate
by Branch Head,
21
3. The original title deeds along with the chain of title deeds and all other papers
mentioned in the NEC and legal opinion-cum search report for valid creation of EM
shall be carried by the officer of the lending branch with him for creation of EM at the
3
1
Custody:
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1. Enter in PNB-363, Keep in Fire proof cabinet, on adjustment of a/c Receipt be obtained
and return recorded in PNB 363. 22
2. Movement of TD be recorded in Register as per Appendix-27 of LA Cir 53/2016.
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3. Stock taking of TDs be taken and certified in above Register as per Appendix-27 of LA Cir
53/2016.
4. Physical status of TDs be assessed, if it is torn or fragile, its status report be made and
21
got signed by the party. If the document requires lamination to be done, it should be got
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Measures to be taken in the event of a loss of title deed deposited for creating
3
mortgage:
1. The concerned branch will give a certificate that title deed has been lost from bank‗s
possession.
2. In appropriate matters (like when terrorists have taken away the title deeds) an FIR
be also lodged.
3. If bank‗s officials have lost the title deed, in transit when taking the same out for any
05
purpose, a report from the official be taken. Paper publication be also given.
4. Certified copy of title deeds be obtained from Sub-Registrar of Assurances at Bank‗s
cost.
5. With letter of regret, certificate referred to above as also certified copies of title deeds
be delivered to the mortgagor against receipt.
6. If mortgagor is still not satisfied and takes the matter to Court/Consumer
Forum/Banking Ombudsman, Bank has to go by their orders.
7. Bank‗s Concurrent Auditors/Inspectors while auditing the branches should verify
compliance of above guidelines.
In nut shell: Dates in TD Register and Letter of Intent be taken special care of.
Similarly is case with dates w.r.t. Letter of Continuity. All Columns of TD
Register be filled completely/ accurately.
1
LOANS & ADVANCES CIRCULAR NO. 136/2019:
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In view of various instances of defrauding the bank by borrowers availing multiple
credit facilities from multiple lending institutions against the same property, the
22
pre sanction and post sanction guidelines related to mortgage are recapitulated
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as under:-
Pre sanction Due Diligence of borrowers including KYC verification and CIR
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should be drawn and analyzed properly to know the previous credit facilities
availed by the borrower and property mortgaged for the same.
Independent spot verification of residence, business & mortgaged IP should
3
in the CERSAI on date of creation of equitable mortgage of IPs without waiting for
30 days period specified under the Act. Further, the Branch head must ensure
that in no case disbursement shall be made without entering the particulars of
equitable mortgages by deposit of title deeds in CERSAI site, in order to curb the
frauds due to the gap in entering the particulars of mortgages of deposit of title
deeds.
It should be ensured that charge in respect of mortgages has been got
registered with Registrar of Companies within 30 days from date of creation and
that Registration Certificate is held (in case of Companies).
Branches are advised to be vigilant while getting the reports of Advocate and
other Third Parties Entities and extensive reliance on information given by
outside agencies/professional etc should be avoided.
It is to be ensured that the title deeds held for mortgage are original and in
case copy is held, specific sanction of GM, HO & above has been obtained. If
equitable mortgage is to be created based on deposit of certified copy of Title
1
End use of bank‘s fund should be verified properly.
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The mortgaged properties should be insured in the joint names of bank and
mortgagers. 22
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taken during delivery of the documents to the owner(s) of the property or the
authorized persons as the case may be.
2. After repayment of all dues agreed to/contracted by parties, it is to be ensured
3
that :
A) The process of satisfaction of charge in security interest is to be completed at
the earliest.
B) Primary & Collateral security documents including title deeds are released
immediately but not later than 10 days of closure of loan. (IRMD L&A 99/2019
05
dated 29.08.2019)
At the time of sale of property through auction/ by DRT or under SARFAESI action
respectively, in few cases it comes to the knowledge of the bank that the bank‘s
charge on the IP is defective. As such, before initiation of SARFAESI action or
initiation of auction proceedings by DRT, fresh NEC must invariably be obtained and
legal audit be done to avoid legal, financial and reputational risk to the bank. (LAW
DIVISION CIRCULAR NO. 15 dated 24.9.2020).
1
database of Credit Information Companies (CICs) indicate their past credit
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history, overdue, loan accounts written off or settled by way of OTS, enquiries
made by Banks/FIs reflecting that how many times the borrower has approached
22
a Bank/FI for raising any loan etc.
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verified by examining the title deeds for ownership and a spot inspection be made
for physical verification and valuation purposes.
7. Undertaking from the guarantor to be obtained that properties mentioned in
Net worth should not be disposed off without the consent/permission of the bank
and no charge should be created in favour of any other bank during the currency
05
of loan.
8. Documentation is a critical and important area as the liability of a guarantor(s)
can be enforced in a court of law mainly on the basis of documents executed by
them and entries made in the Books of Accounts and the Registers of Bank. Thus
all documents prescribed for various facilities should be correctly executed.
9. As per clause 9 of Agreement of Guarantee, viz. PNB-58, the authority of the
guarantor has been made specific. It is, therefore, necessary that where the
borrower/borrowers acknowledges/acknowledge on behalf of other borrowers(s)/
guarantor(s) or the guarantor acknowledges on behalf of co-guarantor(s), he/they
should acknowledge. As such i.e. he/they should sign/execute balance
confirmation stating `for self and on behalf of........".It should be ensured that the
aforesaid requirement is invariably met with where the agreement of guarantee is
executed on form No.PNB-58.
10. Branches shall take steps to obtain personal guarantee with maximum cap of
2-3 times of net worth and the same shall be declared at the time of
executing/obtaining the guarantee.
1
19(12) to 18 of the RDDB & FI Act, 1993.
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GUARANTEES & COLLATERAL SECURITY FOR BANK ADVANCES :-
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3rd party means any person other than the Borrower and Constituents of the
21
i. Guarantee for Loan: In case 3rd party is providing unconditional guarantee for full
3
value of Loan Amount beyond the value of specific property provided as collateral &
upto his entire Net worth.
ii. Guarantee by value of Collateral: where the 3rd party is providing specific
Collateral Security in form of IP and the guarantee is specifically limited to the extent
05
of value of collateral.
Law Division, HO has approved an undertaking available as per Annexure (Form No.
PNB 1257), to be obtained from Mortgagor, in cases, where 3rd party is willing to
provide limited liability guarantee to the extent of value of specific collateral security.
The draft undertaking shall be executed by the mortgagor(s), in bank‘s favour in
addition to his specific offer letter and compliance of other existing guidelines w.r.t.
creation of EM. However, if guarantor is willing to provide unconditional guarantee for
full value of loan alongwith mortgage of collateral security, existing Guarantee Form
(PNB 58) shall be continue to be take.
1
As per guidelines: The inspection of title deeds and the verification of the
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borrower's title require thorough legal knowledge. The Photocopy of the Title
deeds should, therefore, be passed on to local counsel for his inspection and
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opinion by Bank Manager personally (LAW Div 04/2017) and in no case
Borrower should know the name of the Bank‘s approved counsel. All queries to
counsel be routed through BM only. Originals can be shown to the advocates
21
before issuing the certificates by them. A report stating name/ PF No. etc. of
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bank official handing over documents and accepting report from Counsel be
placed on record. (LAW Div 08/2020dt.26.03.2020)
3
As such this specialized job has been entrusted to Experts. First and foremost of
05
these jobs is to Inspect that Title Deeds being submitted for Creation of EM are
Genuine. For this complete set of documents relating to IP are passed on to
Bank‘s approved Counsel for Investigation, Search and Obtaining NEC.
A. The title deeds alongwith Chain of Title Deeds and other related
documents should be passed on to local counsel (On Bank‘s approved
panel) with forwarding as per Appendix-7 (Of LA Cir. 53/2016) for his
inspection and opinion. The Special Report and Counsel‗s Certificate (as
per format given in APPENDIX 5 and APPENDIX 6 (Of LA Cir. 53/2016))
shall be accompanied by chain of title and search report as to
encumbrances.
B. Search Report/ Non-Encumbrance Certificate be obtained from Bank‘s
approved counsel (as per format given in APPENDIX 6 –A(Of LA Cir.
53/2016).
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MORTGAGE OF AGRICULTURAL PROPERTIES FOR FACILITIES TO BE
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GRANTED FOR NON-AGRICULTURAL ACTIVITIES :-
(IRMD LA circular 208/ 2020 dated 21.11.2020)
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property, the advocate giving opinion on title shall state that mortgage of
Agricultural property is permissible for the purpose stated and shall give his
advice as to the legal position prevailing under local law.
05 3
Compilation of CR forms part of due diligence exercise which helps the bank to verify the
antecedents of borrowers/co-obligants besides acting as a post sanction follow up tool.
1
in CR with their status, Market Report, ROC Search etc.
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Exceptions where CR need not ordinarily be compiled:
i. Persons borrowing against security of Bank deposits,
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ii. Persons borrowing against government securities and other trustee
securities upto Rs.25000/-.
iii. Makers of bills of small amount which are re-discounted by third parties.
21
ii. PNB 282A (Revised) (Annexure II) of BOI - To be used for Joint Stock
Companies and Co-operative Societies.
iii. PNB 282B (Revised) (Annexure III) of BOI - To be used for Borrowers/
Guarantors – Individuals {other than those covered under (iv) below}, sole
proprietorship firms, partnership firms, H.U.F. firms.
iv. PNB 282C (Revised) (Annexure IV) of BOI – To be used for Individual
Borrowers/ Guarantors, in case of loans under Retail Lending Schemes
(personal segment) i.e. car, consumer, housing, etc.
INDEXING
The CRs compiled on PNB 905 and PNB 282C need not be indexed and should
be part of loan document file, CRs compiled on PNB 282A and 282B should be
filed in CR binders and not with loan document files.
Sr Sanctioning Code Index Here 1st two letters are Code/ Next
Authority alphabet is 1st letter of name of
category Borrower/ Guarantor/ Firm (if
I Branch BR BR/P/5 name of firm starts with ―The‖,
II COCAC CO CO/P/5 Alphabet next to ―The‖ be taken)/
III ZOCAC ZO ZO/P/5 Next Numeral in ‗P‘ series of this
IV Head Office HO HO/P/5 category.
M/s. Parkash Ram Chand Mal will be indexed as CO/P/57 if the facilities are
within the powers of Circle Head and there are already four CRs in "P" series of
this category.
If total No of CRs is small, then same CR binder can be further subdivided into
CRs under various Sanctioning Authority Powers
1
Index number once allotted to a party should in no case be changed irrespective
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of the fact whether CR remains on active record or not and the same index
number should not be allotted to another party.
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and Circle Head Powers. One Copy in Branch Binder and other in Circle Office
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binder. For Category III and IV, CO to give confirmation that CR compiled as per
laid down systems/ procedures/ guidelines.
3
Compilations of CRs:
Means must be verified by evidences and all the evidences should be part of CR.
Securities mentioned under Sr. 10 (Details of IPs) should be personally verified
For individual borrowers availing loans under Retail lending schemes i.e. car,
consumer and housing, etc., brief confidential report on individuals
(borrower/guarantor) is to be compiled on PNB 282 C (Revised) and it is not to
be indexed.
Review of CR:
CRs are to be reviewed annually. CRs should invariably be compiled after the
lapse of every two years even though there may not be any change in the
constitution and financial position of the party. It should be carefully noted that
1
―No Change Certificate‖ must not be sent for more than two years and fresh CR
should be prepared in the third year. In case of adverse development, fresh CR
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may be compiled earlier.
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3
05
Many a times, branches are requested for giving reports/opinion on their customers. Such
requests generally come from:
1. Banks and Financial Institutions;
2. Directorate General of Supplies and Disposal and other Government Departments;
3. Trade Associations;
4. Diplomatic missions, commercial counsellors and trade attaches.
1
GOVERNMENT DEPARTMENTS
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Send the report on the prescribed format (Appendix A) of LA Cir 100/2011 keeping in view
the creditworthiness of the party. 22
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3. TRADE ASSOCIATIONS
Normally, no request from Trade Associations be entertained unless the written consent to
do so is obtained from the customers on whom the credit reports are called for. In this case,
21
trade attaches, the details should be carefully collected and properly worded and
passed on promptly on the prescribed format available at Appendix A of LA Cir
100/2011.
As there is disclaimer attached to report and signed, it should not even be signed by
any official.
05
For Bank giving Report: Report should depict truestate of affairs and they should-
refrain from giving false statements.
Branch should move through CO for this. No direct action be taken in this regard.
1
party), a customer of our Bank is respectable and can be treated as good up to a
sum of ₹................... (Rupees in words).
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It is clarified that this information is furnished without any risk and responsibility on
our part in any respect whatsoever more particularly either as guarantor or
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otherwise. This certificate is issued at the specific request of the customer."
Service charges as per IRMD L&A Circular No. 93/2020 dated 26.03.2020 are to
21
Record Maintenance :-
In order to keep record of such solvency certificates issued by a branch, it is advised
that all such certificates issued be numbered serially and should be entered in the
register named as ‗solvency certificate issue register‘ which should include the
The branch shall obtain all documents to proof the net worth of customers namely:-
Bank deposits
Ownership Proof for Investments
Ownership Proof for immovable property
Latest Balance Sheet
Capital investment.
1
Any other documentary proof for net worth.
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Kindly refer the circular for detail methodology.
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individuals who are under any form of liability to the Bank whether as direct
borrowers or as co-obligants. Full particulars of parties' immovable properties,
where they are situated, whether they are free from encumbrances and in the
case of land, the acreage should be recorded together with fair estimates of their
value. As far as possible, written statements of their properties should be taken in
evaluating properties owned by parties jointly with others. As a rule such properties
should be disregarded in arriving at the net means.
5. Means: cut off amount for classifying the net worth/means of the borrower under various
levels are as under as per LA Cir 77 dated 09.09.2015:
When a party's means He should be reported
are estimated at as having
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21
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3
05
Applicability :- The system of PDC is applicable for all credit facilities apart from
exempted category mentioned below.
Exempted Category
Following category of advances shall be exempted from PDC:
a. Loan to staff members under Staff Scheme or General Public Scheme
1
b. Renewal of Credit Facilities at existing or reduced level without any major change
(i.e. which does not require any documentation formalities) in terms and conditions of
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last sanction/renewal.
c. DL/OD against 100 % FDR. However, other loans fully secured by Liquid Security
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(e.g.BG/LC against 100% FDR/LIP/NSC etc.,) shall continue under PDC.
Clearance of PDC: -
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2. Above ₹10.00 lakh and PDC shall be cleared by any officer in scale-III and
upto₹100.00 Lakh/ above at PLP not involved in the credit appraisal
Retail Loans and sanction of respective proposal.‖ Here, it is
irrespective of limit clarified that any officer in scale-III and above from
sanctioned other segment/field visit team, may be designated
as PDCO. For example: In case loan is sanctioned
05
1
conditions including documentation & mortgage shall be rectified by the
respective branch*.However, in case where compliance is not possible for any
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valid reason, the matter is to be referred to the sanctioning authority and
approval be obtained for any relaxation/deferment/ modification. In both the
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scenarios, the matter will again be referred to the PDCO. PDCO after
ensuring compliance of the observations/qualifications of the PDC, will give
confirmation of compliance. *Here Branch means GBB for GBB/PLP
21
v. The official authorized for clearance of PDC shall submit his/her report in
format (As per Annexure-III) to the concerned Branch Head under intimation
to sanctioning authority. In case the PDC is unqualified, the Branch Head
shall allow the disbursing officer to proceed with the release of sanctioned
limit.
vi. The account shall be disbursed only after getting confirmation of compliance.
05
(IRMD L&A circular 100/2020 dated 02.06.2020 and 157/2020 dated 17.08.2020)
In terms of Loaning Powers guidelines vide LA Cir 100/2020, Item 5.5 page 17, it has
been stipulated that sanctions in respect of working capital and term loan facilities
shall be valid for six months from the date of sanction. Facilities not availed within
the above period should be treated as lapsed and borrower be advised accordingly.
Unless a lapsed sanction is got revalidated by the Competent Authority within a
maximum period of 12 months from the date of sanction, no facility should be
released. Following powers shall be applicable for revalidation of the sanctions:
1
1. Sanctions upto Sanctioning Authority 12 months
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HOCAC III
3. Sanctions made HOCAC-II/III 22 12 months
by MC
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Where documents have been executed within a period of 6 months from the date of
sanction, the sanctions shall be valid for next 6 months from the date of
21
details of borrowers who have not availed the credit facilities within the stipulated
period and the relative sanctions have lapsed, details of sanctions lapsed at the level
of ZOCAC-I & above be submitted by all Zonal Offices to CRMD, on half-yearly basis
(31st March and 30th September) as per the format available at Appendix X (LA
157/2020). The details of sanctions lapsed at the level of LCBs/ELCBs shall be
submitted directly to CRMD.
1. Borrowal account should be taken over from other Banks/FIs on selective basis
by respective sanctioning authority except GBB. GBB may consider the proposal
after obtaining prior approval from the next higher authority.
2. Such approval shall not be necessary in cases where the accounts of other
banks have been adjusted for over 3 months. However in case of borrower was
availing credit facilities from another Bank/ FIs within the period of three months
prior to submitting loan proposal to our Bank, such credit proposal shall be
treated as ‗Deemed takeover‖ and in that case prior approval of next higher
authority shall required.
3. In case of crop loans/KCC, the prior approval from next higher authority is not
necessary even if the accounts from other banks/FIs have been adjusted within
three months subject to the compliance of other takeover parameters and
subject to the condition that only those accounts be taken over wherein there was
no default in payment of interest/instalment during the last previous one year with
1
the previous banker.
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In all cases of takeover of accounts, it is necessary to do proper due diligence including visit
to the premises of the customer, it is advised that laid down guidelines in the matter of pre-
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sanction appraisal and post sanction follow up should be meticulously followed while taking
over borrowal accounts.
21
b. The accounts for consideration of takeover should have a rating of ‗B1 & above‘
as per rating scale and should be duly vetted by Competent Authority as per extant
guidelines on Rating and Vetting. However, HOCAC II & III may consider takeover of
‗B2‘ & ‗B3‘ rated accounts on merits of the case within its vested loaning powers and
MC shall have full powers in this regard.
c. Further, the small loan accounts (aggregate exposure upto and including ₹5 crore)
05
with credit risk rating ‗B2 & below‘ are not to be considered for takeover
Benchmark Financials
a. Audited Balance Sheet (ABS) of last financial year is mandatory for takeover of
accounts. If ABS is older than 3 months, CA Certified provisional financials for last
quarter to be obtained and analysed so as to be satisfied that the activity level and
profitability, liquidity and solvency ratios are broadly in alignment with the estimates /
projections.
b. The accounts should be in the `Standard Asset' category of the existing bank and
the borrower should have earned net profit after tax in the immediately preceding 3
years and have sound financial position. However, ZOCAC-I & above have been
vested with the powers to relax the aforesaid criteria to profit after tax in any 2 years
out of immediate preceding 3 years.
c. In respect of accounts, which are in existence for a period of less than three years,
the unit should have earned cash profit during 1st year of commercial production and
from the 2nd year onwards, unit should have earned net profit after tax. However, in
1
vested loaning powers but not below the level of ZOCAC-I.
However, ZOCAC-I & above shall exercise their vested loaning powers
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for considering takeover of such borrowal accounts.
While considering the proposal, the sanctioning authority should give
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due justification/comment for accepting the account for takeover duly
highlighting the other favourable features of the account.
21
Accounts where the commercial production has not started or just started
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The accounts where the commercial production has not started or just started,
takeover can be considered, if project is found technically feasible and economically
viable subject to the fulfilment of the following conditions:
3
Independent Assessment
a. The branch should make independent assessment of credit requirements of the
borrower, as per norms of our Bank, before actually taking over the liability with the
existing bank by obtaining relevant financial, production and sales data as also the
latest audited annual accounts of the borrower, so that the borrower's genuine credit
needs are met.
b. As soon as possible after the takeover, the transferee bank should make an
independent assessment of the credit requirements of the borrower by calling for
complete financial position, production and sales data, as also the latest annual
accounts of the borrower, so that the borrower's genuine credit needs are fully met
by the bank. If, on the basis of such assessment, grant of additional/enhanced credit
limits is warranted at the time of takeover itself, the same may be considered as per
1
laid down guidelines subject to the following:
In case of working capital limits if enhancement of above 25% is
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considered at the time of takeover, instead of seeking prior approval
from the next higher authority, the proposals shall be sanctioned by the
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next higher authority on merits of the case subject to the compliance of
the other guidelines. In case of ZOCAC-I & II/ HOCAC-I, if the takeover
of working capital facilities involves enhancement of more than 25%,
21
HOCAC II & III shall exercise their normal loaning powers for
considering takeover irrespective of extent of enhancement in the
existing limits.
3
Sharing of Information :-
I. While taking over the borrowal accounts from other Banks/FIs, concrete
justification for the same be indicated in the loan proposal. Before taking over
the account, the transferee bank should obtain necessary credit report from
the transferor bank. In order to enable the transferee bank to be fully aware
of the irregularities, if any, existing in the borrower's account(s) with the
transferor bank, RBI has prescribed standardized format for sharing credit
1
information at the time of takeover of borrowal accounts. Accordingly, while
considering proposals for takeover of borrowal accounts, credit information
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should be obtained on the standardized format available at Annexure-II.
Similarly, upon receipt of request seeking credit information from some other
22
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Bank/FI, necessary credit information should be provided on the said
standardized format to ensure adoption of the same at the industry level.
II. In case of ‗B1 & above‘ credit risk rated accounts, obtention of Credit Report
21
authority may obtain the report about the conduct of account from the existing
banker of the borrower before disbursement of credit facilities. Further, the
statement of account for the last 6/12 months and certificate from the Auditor
3
Loans taken over from new generation banks (i.e. Banks which have started
operations after 1993) require extra caution w.r.t to the health of borrowal accounts.
Field functionaries are advised to do proper due diligence and take all pre –sanction
measures while taking over accounts from new generation bank
1
1. Borrowal account should be taken over from other banks on selective basis.
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2. The permission from the next higher authority shall not be applicable for taking over of
Retail Loan Accounts from other banks/FIs.
22
3. However, Loan Accounts with other banks/FIs are running regular with no defaults in
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payment of interest/instalment.
4. The account should be in the ‗Standard Asset‘ category of the existing Bank/FI.
5. Borrowers should have a rating of ―B2& above‖ as per credit risk rating models (PNB
21
Trac) as applicable in loans to business concerns. However, for takeover of Retail loans
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covered under the PNB Score Models, cut-off levels for sanction of all Retail Loans
circulated by Retail Assets Division, HO shall apply mutatis mutandis.
6. Obtaining of NOC/Credit Report may not be insisted at the time of sanctioning of
3
aforesaid banks, the credit proposal, shall be placed to Board for consideration and such
takeover proposal shall invariably contain the specific reasons justifying the need for
takeover etc.
The Para 7.4 of Annexure-I (Page no.12) of the L&A circular No 08/2021 to be read as
under: ―The collateral securities charged to existing banker should not be diluted. In
cases where deemed necessary, the sanctioning authority upto level of ZOCAC-I,
may permit release of collateral security in shape of Immovable Property (IP) subject
to fulfilment of following stipulations:
a. Internal Risk Rating of the borrower should be A4 & above.
b. After release, at least 125% and/or scheme specific collateral coverage, whichever
is higher, should be available to the bank. For the purpose of coverage, realizable
value of security shall be considered.
ZOCAC-II & above may permit the release of collateral security on merits where
Internal Risk Rating of the borrower is B1 & above and stipulations mentioned at
above are not applicable, in respect of cases falling upto their vested loaning powers.‖
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3
05
1
under Consortium arrangement are indicated hereunder:
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Proposals for sanction of Other
Fresh/enhanced credit limits 22 Export Proposals Proposals
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Gold Card Other
Holder Exporter
Proposals for sanction of 25 Days 45 Days 60 Days
21
(GBBs)
Mortgage based loans 5 Days
(Housing Loan, OD/TL to
Housing Loan borrowers
for personal needs, My
Property Loan, Reverse
Mortgage)
Education Loan 4 days for loans where mortgage is not required. 1
week for loans where mortgage is required 2 weeks
for loans falling under powers of ZOCAC-I & above
Non Mortgage based loan 3 Days
viz. Vehicle, Gold,
Personal, Pension Loans
1
for existing borrowers
(L&A Circular No 73/2020 dated 20.04.2020)
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21
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3
05
Consequent upon the transmutation in the organizational structure of the Bank, the
guidelines on Loaning Powers have been revised and have been conveyed vide LA
circular 100/2020 dated 2.6.2020.
The revised guidelines on loaning powers shall be applicable at all centres where it
is possible to adhere to such guidelines on partial/complete roll out of the modified
structure of the organization. For centres where the modified structure has not yet
been effectuated, and it is not possible to adhere to the revised guidelines, the
circular on Loaning Powers as circulated vide IRMD L&A circular No 122 dated
30.12.2017 shall prevail till the roll out of the modified structure at that centre except
for e-OBC and e-UNI which will be guided by their respective extant circulars on the
subject matter till the roll out of the structure at their centre. For details kindly refer
circular.
1
In terms of modified organizational structure, branches have been classified as
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General Banking Branches (GBBs), PNB Loan Points-Retail, Agriculture, MSME
(RAMs), Mid Corporate Centres (MCCs), Large Corporate Branches (LCBs) and
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Extra Large Corporate Branches (ELCBs). Efforts to be made to keep accounts of
borrower/ allied/ associate concerns at one place.
21
The loaning powers have been prescribed as per scale of officers, however, they
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shall be utilized upto the limits pegged at the respective branch type i.e. LCB, MCC,
RAM and GBBs.
3
The General Banking branches (GBBs) would be the touch points for general
banking operations for customers. GBBs will sanction loans up to 10 Lakh only within
their vested powers. The accounts of loans sanctioned by RAMs shall be opened by
the respective GBB and the GBBs in addition to looking after the operational aspects
05
of such loan accounts shall also be responsible for disbursement of loans. Further,
creation of charge in loans sanctioned by RAM, shall also remain the responsibility
of GBB.
1
power only)
BASED LIMITS in excess
:0
of sanctioned limits, within
available DP, may be
22
allowed for 2-3 days but
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not exceeding 7 days
subject to
21
PNB Loan Point viz. RAM/ i-RAM is for processing, dispensation and sanction of
1
credit facilities as under:
:0
a. Retail Loans: Above Rs. 10.00 lakh
b. Core Agriculture Loans (including KCC/ KGS Loans) Fresh and Enhancement:
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Above Rs. 3 Lakh and up-to Rs. 1 Crore
c. MSME and other Loans except mentioned at a and b: Above Rs. 10 Lakh and
uptoRs. 1.00 crore.
21
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However, at centres where MCCs have not been established, RAMs shall assume
the responsibility of MCCs and shall sanction all loans viz. Retail, Agriculture and
MSME for amount up to 10.00 crores AND shall also process proposals aboveRs.
3
10.00crore and upto Rs. 50.00 crores and forward the same to Zonal Office for
sanction.
Mid Corporate Centres (MCCs) headed by AGM, are for processing and credit
dispensation of credit facilities of above 1 crore and upto 50 crores. MCC will be
responsible for sanction and disbursement of loans up to 10 crores, exercising
loaning powers of duly formed Credit Approval Committees (CACs). However, these
CACs (at MCCs) shall process and recommend the proposals of credit facilities of
above 10 crores and up to 50 crores and forward the same to their respective Zonal
Offices for consideration.
:0 1
Accounts sanctioned by MCCs or processed by MCCs and sanctioned by
respective Zonal Offices shall be opened by MCCs in the SOL of the branches
22
where the business was initiated. Responsibility of disbursement of loans shall lie
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with MCCs for all such accounts. Also, security creation shall remain the
responsibility of MCCs.
21
Large Corporate Branches (LCBs) headed by DGM, are for credit appraisal of loans
and advances above 50 crores. Whereas, Extra Large Corporate Branches(ELCBs)
3
headed by GM, is for credit appraisal of proposals above 500 crores. The LCBs and
ELCBs shall not sanction any loans and will only be dealing with the appraisal of
loans falling within their jurisdiction. The loans shall be processed and forwarded
directly to Head Office for sanction. The accounts so opened after sanction by HO,
shall be maintained at the SOL of LCB.
05
1
of sanctioned limits, within Power
:0
available DP, may be
allowed for 2-3 days but 22
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not exceeding 7 days
subject to
21
Restrictions:
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Based Power
1. Term loan except Retail Loans* 50%
2. Packing Credit advance against firm orders 50%
3. Book Debt Facility 25%
4. Purchase/advance against demand documentary bills 15%
05
1
shall exercise their LC (DA) powers equivalent to Term loan powers in case of
project financing where Term loan has been sanctioned and the documents
:0
under LC (DA) are to be paid to the debit of Term Loan sanctioned for the
purpose provided the underlying assets along with other securities (both
22
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primary and collateral) taken for Term loan are charged to cover LC (DA)
facility as well.
21
level shall exercise their vested loaning powers. As such proposals outside
MSME segment shall be considered by Chief Manager and above within their
vested loaning powers depending on the nature of branches they are posted
3
at
Branch Heads in GBBs shall not exercise powers for allowing OD against duty
draw back and cash incentive.
Where any powers are restricted up to certain level say CM, AGM etc. it is
implied that the authorities above that scale shall have no such restrictions
Unless specified otherwise, the guidelines conveyed in above notes
05
applicable for AGM shall also be applicable for MCC-CAC (headed by AGM).
1
Cycle/Moped/Bicycle Loan to
Members of Staff
:0
2. Negotiation of DA/DP bills on Full Powers
or before due date drawn 22
under bank‘s own ILCs
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NOTES
1
i. Margins prescribed are the minimum. However, higher margins may be
:0
stipulated wherever deemed necessary.
ii. Normal Margins are around 25% in case of Term Loans, and in case of
CC against stocks. For CC against receivables prescribed margins are
22
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40% and above. However, margins have specifically been contoured in
structured circulars issued by Bank from time to time and may be referred
to for particular schemes.
21
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Facilities
MCC- ZOCAC ZOCAC HOCAC HOCAC - II HOCAC –I II
CAC -I - II -I
AGM DGM/ GM/ CGM - Senior MD & CEO
GM CGM Credit Most ED
1- Aggregate 10.00 30.00 50.00 100.00 300.00 800.00*
Commitment - per
05
Borrower
2- Within (1) above
iI Secured FB 10.00 30.00 50.00 100.00 300.00 800.00
ii. Unsecured FB 2.50 7.50 12.50 50.00 150.00 400.00
iii. Non fund based 5.00 30.00 50.00 100.00 300.00 800.00
(There is change in HOCAC-II and HOCAC-III power vide L&A circular 152/2020
dated 13.08.2020)
* Credit Proposals above Rs. 800.00 Cr shall be considered by Management
Committee.
i. ZOCAC-I shall be headed by DGM in case of GM headed Zones and GM in
case of CGM headed zones. Similarly ZOCAC-II shall be headed by GM or
CGM as the Incumbent of Zone may be.
ii. LETTER OF CREDIT (DA BASIS) and LETTER OF GUARANTEE
ZOCAC-I shall exercise 100% of NFB powers for LC (DA) facilities for
Capital goods under Project financing.
1
within the vested powers prescribed in Table B (under Para 2.1 of Chapter-2)
and Book Debt facility respectively.
:0
iv. HOCAC-III may sanction facilities/limits in excess of the aforesaid levels upto
a maximum extent of 10%, but within the overall aggregate commitment of
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Rs400 crore.
v. In case of ZOCAC-I and above, ‗Secured advances‘ may be classified under
two heads: (a) Advances covered by primary security (b) Advances covered
21
vi. In case of Book Debt facility, ZOCAC-I, ZOCAC-II & HOCAC-I shall exercise
50% of their FB (secured) powers and for advance against foreign usance
documentary bills, ZOCAC-I & above shall exercise 50% of their FB (secured)
3
powers.
vii. MCC-CAC shall exercise their loaning powers subject to all guidelines
applicable for AGM (given in Para 2.1of Chapter-2).
viii. The ceiling of Rs 400 crore for HOCAC-III shall be for the aggregate
commitment per borrower including adhoc limits, if any. For group accounts,
HOCAC-III shall take aggregate exposure upto`800 crore.
05
1
After sanction and disbursement of the enhanced amount, the RAM shall
send all papers of the loan to MCC. Similarly, if MCC has not been
:0
established at a centre and the proposed enhanced amount in an account
shall transcend the exposure threshold of RAM i.e. Rs 10.00 crore, RAM shall
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process the proposal and forward it to Zonal Office for sanction. In
circumstances, where account has been moved from MCC to LCB due to
increase in permissible allocated limit of MCC i.e. Rs 50.00 crores, the
21
account, after disbursement, shall be transferred from the SOL of GBB to the
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SOL of LCB.
iv. The files of existing accounts in GBBs which are beyond their sanctioning
powers i.e. Rs 10.00 lakh shall be transferred to RAMs, MCCs or LCBs as
3
The loaning powers have been linked to credit Risk Rating of the borrower. The
CACs/officials shall exercise loaning powers linked to risk rating of borrower/rating of
the industry, as under:-
Rating Loaning Powers
‗A1‘ & ‗A2‘ CMs, AGMs of RAMs and MCCs, ZOCAC-I & above shall exercise
125% of their normal loaning powers*. However, no fresh exposure
should be taken upto field level (branch office level) for such
accounts in case of unfavourable industries in terms of HO IRMD
L&A circular issued from time to time.
‗A3‘ & ‗A4‘ AGMs of RAMs and MCCs, ZOCAC-I & above shall exercise 110%
of their normal loaning powers*. However, no fresh exposure should
be taken upto field level (branch office level) for such accounts in
case of unfavourable industries
‗B1‘ Normal Loaning Powers by officials at all levels to the extent of their
vested loaning powers. However, no fresh exposure should be taken
1
not below the level of ZOCAC-II. However, HOCAC-II & III shall
exercise their normal loaning powers for considering enhancement/
:0
additional/adhoc exposure.
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While exercising higher powers i.e. 125% & 110% of normal loaning powers,
the aggregate commitment per borrower of HOCAC-II/III i.e. Rs 200 Crore/ Rs
400 Crore should not be exceeded by them. Further, while exercising higher
21
powers including the adhoc powers, the Officials/CACs other than HOCAC-
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II/III should ensure that the total commitment does not exceed the aggregate
powers vested with the next higher authority.
After linking loaning powers with credit risk rating, the officials as mentioned
3
above, may exercise 125%, 110% and 100% of their vested powers as per
details given above. However in case of exporters, officials in Scale-III to
Scale-V may exercise loaning powers upto 125% of their normal powers
provided that additional 25% powers are utilized only for export limits.
Relaxation/Deviation other than pricing in respect of ‗C1‘ rated accounts once
05
External RiskRating
The Hurdle Rate for External Risk Rating is as under:
External Rating Investment
Grades Categories
BBB & Above Investment Grade
BB & below Non-Investment
Grade
Internal RiskRating
Investment Grades Rating grades B2 and above (With
score of more than 46.00)
Borderline Risk Grade B3 (Having score more than 40.00 and
It should be noted that the counterparty shall invariably be internally rated & should
achieve Investment grade. For consideration as ‗Investment Grade‘, both the
conditions w.r.t. Internal & External Risk Rating shall be fulfilled.
The bank shall undertake new relationships in externally rated BBB & above
accounts, & on conduct of their Internal Rating should achieve B1 or B2. In such
cases where the account is Internally Rated B2, it shall be sanctioned at an
appropriate level as per vested loaning powers in terms of extant guidelines
No fresh exposure should be taken upto field level for borrowers under
unfavourable industries irrespective of their credit risk rating.
1
i. Loaning powers shall be exercised judiciously with due care and in good faith
:0
having regard to duties and responsibilities attached to the post held by the
sanctioning authority. Further, in the structure pronounced for the
22
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amalgamated entity, respective loaning powers shall be exercised by the field
functionaries as per type of their branch i.e. GBB/RAM/MCC etc for all types
of loans including government sponsored schemes like MUDRA, PMMY etc.
21
Efforts to be made to keep all the associate allied firms together under single
/04 58
Head Office from time to time. Sanctions shall also be subject to margins in
force.
iii. Though various facilities are grouped for delegation purpose, the sanctioning
authority while sanctioning a proposal should clearly specify the nature of
facility, the security, margin etc., along with other norms/terms and conditions
governing the facility sanctioned
05
iv. All loan facilities must be considered after obtaining a loan application from
the borrower(s) concerned and compilation of confidential report(s) on
him/them and the guarantor(s), if any, in accordance with the instructions
given in Book of Instructions on loans and other instructions/guidelines issued
from time to time. However, in case of priority sector advances any specific
instructions issued shall have precedence over these instructions
v. Loaning powers shall not be exercised for sanction of any facility, which shall
be, directly or indirectly, to the advantage of sanctioning authority. Such
proposals should be referred to next higher authority.
vi. Sanctioning authority will sanction facilities within his loaning powers on
regular loan proposals prepared by another officer of the office. Where
second officer is not available, such proposal may be prepared by Special
Assistant of the office, if available. If neither officer nor Special Assistant is
available in the branch, clerk officiating as Special Assistant can recommend
loan proposal for sanction. Any officer deputed to a branch for the purpose of
preparing/appraising of loan proposals shall be treated as officer of such
1
sanctioned by the Branch Head
viii. Total credit facilities proposed to be sanctioned to party shall be considered
:0
by an officer under whose powers they fall.
ix. Higher authority may exercise powers of the same nature/full powers as
22
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vested in a lower authority
x. GENERAL BANKING BRANCHES (GBBs) :
21
a) Branch Head of GBBs may process and sanction loan proposal falling
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within his own vested loaning powers in following cases even though
proposals have not been prepared/recommended by second officer
where no other officer is posted or second man is special assistant at
3
the branch :-
All Priority Sector advances including Govt. sponsored schemes
and ―Loans under Retail Lending Schemes‖ upto ` 1 lakh each
For loans upto Rs 3 lakh under KCC Scheme/other direct
agriculture
For Tractor loans, the ceiling on individual loan will be Rs 3 lakh
05
1
posted at RAMs, MCCs, LCBs or any such centre with requirement of credit
dispensation of above Rs 10 lakh.
:0
xi. Powers will be exercised by Branch Head according to the type of branch and
scale in which he is placed. However, in order to ensure that business
22
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opportunities have not been lost on this count, MD & CEO/ED may delegate
higher loaning powers (of ZOCAC-II) to ZOCAC-I which otherwise should
have been headed by GMs/CGMs.
21
xii. Field functionaries are advised to refer to the Credit Risk and Management
/04 58
xiii. While exercising powers, it may be ensured that proper mix of pre and post
sales limits are considered
xiv. The powers vested in officials can be exercised by them subject to the
ceilings/stipulations, if any, as per Bank's internal schemes, restrictions
imposed by Bank through Credit and Risk Management Policy or any circular
issued by Bank, Reserve Bank of India & Govt. of India guidelines issued from
05
time to time.
xv. MD & CEO may revise/amend any of the above guidelines and explanatory
note of the power chart as and when necessary in the interest of smooth
operations and in the light of experience gained
1
21. Allowing the borrower to open a current account with other banks/another branch
of our bank
:0
22. Interchange of limits
23. Re-schedulement of term loan 22
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24. Waiver of insurance
schemes have increased. In view of the above competent authority has approved to
amend the loaning powers and sanctioning authority in respect of PNB-CECF and
GECL for temporary period up to 30.09.2020. Kindly refer for detail guidelines or go to
‗COVID-19 chapter‘ (at page 216)
05
To attune the credit dispensation model with the transmuted organizational structure,
the constitution of the Credit Approval Committees has been redefined at all levels.
The revised guidelines on CACs shall be applicable at all centres where the modified
structure of the organization has been rolled out. For centres where the modified
structure has not yet been effectuated, the guidelines on CACs as circulated vide
IRMD L&A circular No 62 dated 23.08.2016 shall prevail till the roll out of the
modified structure at that centre.
1
Based Limits & Non Fund Based to Non Fund Based limits (Loans and Advance
:0
circular 153/2020 dated 13.08.2020)
22
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Detailed guidelines in respect of Loaning Powers have been circulated vide IRMD L&A
circular No 100/2020 dated 02.06.2020. The circular L&A 100/2020 dated 02.06.2020
at Para 5.22, Page 22 also covers Powers for Interchange of limits. Powers for
21
allowing Interchangeability from Non Fund Based Limits to Fund based Limits & Non
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Fund Based to Non Fund Based limits was not allowed as per this circular.
Now loaning powers and guidelines for Interchangeability of limits at various levels has
3
been conveyed.
This has reference to Para 7.7 at Page No 29 of IRMD L&A Circular No. 100/2020
05
dated 02.06.2020 which inter-alia stipulates loaning power for financing cold storages.
‗The proposals for setting up of cold storages which includes construction for
preservation and storage of processed agro products, perishable goods such as fruits,
vegetables and flowers including testing facilities for quality shall be considered by
MCC-CAC / PLP Headed by AGM (where MCC is not located) and above within their
vested loaning powers‘.
1
loan amount exceeds the vested loaning powers of GBBs i.e. Rs. 10.00 Lacs.
Similarly, PLP (where branches are linked with MCC) shall be able to sanction
:0
a business loan to a borrower of amount up to Rs. 1.00 crore and in addition to
this business loan, the PLP may also sanction a retail loan to the same
22
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borrower of amount up to Rs. 10.00 crores.
Loaning Powers for Group Concerns: :-
Sanctioning Authority Loaning Power
21
Appendix I.
Business Entity has been sanctioned) be informed of the facility sanctioned and
name of such business entity may also be incorporated in CLAPS / LenS.
ii. The restriction that only 50% of Secured Fund Based Powers can be
exercised for Packing Credit and 25% of Secured Fund Based Powers can be
exercised for advances against Book Debts shall not be applicable for cases
sanctioned by GBBs and PLPs where the branches are linked with MCC (i.e
PLP exercises Loaning powers upto Rs. 1.00 crore.) However such restrictions
shall continue on MCCs and PLPs where the branches are not linked with MCC
and the PLP exercises Loaning powers upto a maximum of Rs. 10.00 crores. In
case of restricted loaning powers for such exposures, the proposal shall be
forwarded to next higher authorities (In case of GBB next higher sanctioning
authority is PLP and in case of PLP/ MCC, ZOCAC-I and above) Further,
restriction of exercising 50% of Secured Fund Based Powers in Term Loan
shall not be applicable for cases sanctioned by GBBs, PLPs and MCCs and in
All fresh credit proposals envisaging total exposure (both fund based and non-fund
based) of above ₹50 crore shall be placed before NBG to take a view by way of
1
―expression of interest‖ and the complete appraisal is to be undertaken. NBG
approvals are in the nature of expression of interest based on broad project
:0
parameters and management, the same do not constitute any commitment on behalf
of the bank to either sanction the loan or in the matter of pricing which could change
22
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after due diligence and risk rating. NBG proposals shall be submitted to Credit
Division in a structured format known as Preliminary Information Memorandum (PIM)
on the prescribed format (L&A circular 33/2020 dated 26.03.2020) for placing the
21
same before the NBG.NBG approval shall be valid for 6 months for considering the
/04 58
regular proposal.
A. NBG-I- Headed by Senior most Executive Director for proposals of above Rs. 50.00
crores and upto Rs. 200.00 crores.
B. NBG-II- Headed by MD & CEO for proposals above Rs. 200.00 crores
05
All the service charges are exclusive of all taxes (e.g. GST etc.)unless otherwise
specified. Accordingly, all taxes, as applicable, at prevailing rates to be charged
additionally.
SERVICES RATES
ISSUANCE OF 0.10% of certificate amount with a minimum of Rs.1000/- and
SOLVENCY maximum Rs.25000/-.
CERTIFICATE Note: Any additional certificate issued within a period of 3 months of
issuance of 1stsolvency certificate, only 50% of the applicable charges
shall be levied.
Processing Fee (Fund based working capital) (Fresh/ Renewal/ Enhancement)
Upto Rs. 500000/- NIL. However (i.e. CIC/CERSAI/Insurance etc.) shall be borne by
the borrower.
Above Rs.500000/- Unified Process Fee @0.50%
&Rs. 10 Lac
- Above Rs.10 Lac Internal Rating Rate
1
A1 to A3 0.25%
:0
A4 to B2 0.30%
B3 & below 0.35%
22
No ceiling
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Documentation/ NEC/ Valuation etc.). However Insurance/ State specific Stamp Duty
charges on actual basis shall be borne by the borrower.
Processing Fees At par with fund based working capital charges
3
(Non-Fund Based
Limits) (Fresh/
Renewal/
Enhancement)
Processing Fees 150% of normal charges mentioned above on the amount of
ADHOC Sanction Adhoc are to be charged on pro-rata basis for the period for which
05
1
assignments, the pricing is not to be disclosed, till mandate is
received
:0
Upfront Fee for Term Loan (including DPG) 22
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Upto Rs. 5 Lac NIL. However(i.e. CIC/CERSAI/Insurance etc.) shall be borne by
the borrower.
Above 5 Lac to Rs 1.25%
21
10 Lac
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Consortium Advances:
Documentation charges shall be applicable in line with Consortium.
Documentation charges on Adhoc:At par of normal documentation
charges.
1
INSPECTION / SUPERVISION CHARGES
Slab Charges(per annum)
:0
Inspection/ Up to₹ 10 Lakh NIL
Supervision Above ₹10 Lakh to ₹1 @0.10%; Min. ₹1000/-
22
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Charges
Crore
Above ₹1 Crore @0.05%; Min. ₹10000/- & Max. ₹30000/-
The above charges shallbe levied quarterly on pro-rata basis
21
through system.
/04 58
Note:
1. Actual conveyance and out of pocket expenses to be
3
1
Syndication/ Multiple Banking Arrangement are to as per Item 10.14 of LA Cir 93/2020 dated
:0
6.05.20 which include, Project Implementation and Monitoring Fee, Security Agency Fee,
Escrow account Maintenance Fee
CONSORTIUM
22
To be decided separately in each case
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ADVANCES/
LEAD Aggregate Limits Charge (As
BANKCHARGES (FB + NFB) from the percentage of
21
₹5 Lac
Above ₹ 50 Crore @0.25%; subject to Min
₹ 15 Lac,
No ceiling
Normal charges, as applicable for accounts under Consortium
Lead Bank Charge as mentioned above shall be recovered at
05
1
Above ₹ 5 cr. – ₹ 50000
:0
Legal Opinion / Exposure Max. Charges per Property
NEC Charges Metro 22 Urban/SemiU Rural
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Upto 1 Rs 3000/- Rs 1500/- Rs 1000/-
Crore
Above 1 Rs 4000/- Rs 2500/- Rs 1500/-
crore
21
borrower.
Valuation Fees Value of Assets ** Fees
3
Up to ₹ 20 Lac Rs 2000/-
Above ₹ 20 Lac to ₹ 50 Rs 3000/-
Lac
Above ₹ 50 Lac to ₹ 1 Rs 4000/-
Crore
Above 1 Crore to ₹ 5 Crore Rs 8000/-
05
Concessions:
Software Application for Risk Adjusted Return on Capital (RAROC) Model:
Risk Adjusted Return on Capital (RAROC) framework is developed by the bank for
corporate borrowers (having/ proposing aggregate exposure above Rs. 5 crore) for
analyzing risk-adjusted return and providing a consistent view of profitability across
loans. RAROC software is applicable only on the fund based and non-fund based
facilities (above Rs. 5 crores) of those corporate where rate of interest / commission
is linked to risk rating of the borrower and borrower is requesting concessions on
card rate of the bank.Detailed guidelines in respect of Software Application for
RAROC Model have been advised. The applicable guidelines have been
Important Instructions:
Processing/upfront fee is to be charged as under:
i) Processing fee For all loans upto one year
ii) Upfront fee For loans over one year, in case loans are sanctioned to
meet capital expenditure
and
Processing fee is to be charged proportionately for the
period of sanction in case loans are sanctioned for working
capital requirements.
Recovery of Processing Charges (Procedure)
1
Processing fee is to be recovered as under:-
1. In existing accounts To be recovered in April Max upto 31st May for full year
:0
2. In 1st Year Proportionately for remaining months upto 31st March
3. For fresh proposals Proportionately for the remaining months upto 31st March
22
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Note: Charges once recovered by the bank for a particular period for specified limit
will remain valid for the entire financial year.
21
/04 58
However, in cases, where the processing/upfront fee could not be recovered due to
non-availment/ disbursement of limits, CMs/Circle Heads & above may consider
waivement of processing/upfront fee, in full, in such cases, on merits.
3
In case the loan proposal is declined or the limit sanctioned is not availed by the
customer within a period of six months the processing fee recovered shall be
forfeited after giving due notice to the borrower.
In addition to above, the actual conveyance & out of pocket expenses (if any) paid to
the employee to be recovered from the borrower irrespective of the exposure.
Further, vide IRMD L&A Circular No. 169/2020 dated 05.09.2020 it has been advised
to expedite recovery of processing fee / annual review charges for term loan for FY
1
2020-21 and complete the same by 31.12.2020 in all eligible borrowal accounts.
:0
However keeping in view that recovery of aforesaid charges are not in line with
previous years, branches has been advised to expedite recovery of processing fee /
22
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annual review charges for term loan / inspection charges applicable upto 31.03.2021
and complete the same on priority basis in all eligible borrowal accounts wherever
recovery is pending.
21
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3
05
It is compulsory for Bank/ Branch to enter loan applications received and disposed in
Loan application receipt/ disposal register, presently PNB-587. An on Line system on
PNB-Non CBS Page has been introduced for this purpose, whereby all loan
applications received are to be entered, Sanctioning authority wise, then progress till
sanction is to be marked in the system. This helps the Bank in MIS about average
time taken for disposal of loan application till its sanction/ rejection etc. This is clear
and transparent system where applicant is also kept posted about development
regarding his/her loan proposal, till it is sanctioned. On entering the loan application
in system, an email/ SMS is auto generated at pre-given email address/ phone no.
The applicant can keep watch and knows the upto dated status. On entering the
proposal, a Proposal Tracking No. is generated, which is also known as Loan
application number and is to be recorded and used for all future references. The
1
system is Menu driven and very easy to use and requires no expertise.
:0
The application Processing window contains the following details:
22
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Branch name : Auto Populated
Proposal number : Auto Populated
Entry date : Auto Populated
21
Type of loan
Email address
3
Phone No.
Sanction authority
Facilities (in Lacks)
Sector
Last status
Pending at- mentions the name of the branch at which the loan is
05
Proposals within BH powers are to marked till its sanction in the branch and
Proposals under Higher Powers viz; RAPC, CO, ZM, HO are to be forwarded to the
sanctioning authority. At the offices other than Branch, Proposals in queue are
There is MIS available under ―Reports‖ Menu as under for Bank as per requirements:
Loan / Credit Proposals Receipt / Disposal Register
Pending Proposals at CO/Hub as on date
List of Proposals Sanctioned
List of Proposals Rejected
Compiled Report
Summary data of Credit Proposals
Summary of Proposals as on Date
:0 1
22
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21
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3
05
Definition
A demand loan is a rare form of loan that can be called for complete repayment
without any prior warning to the borrower. In other words when the lender demands
the money, the borrower must pay it.
A loan with or without a fixed maturity date, but which can be recalled anytime (often
on a 24-hour notice) by the lender and must be paid in full on the date of demand.
Also, the borrower can pay off a demand loan at any time without incurring early-
payment penalties.
Characteristics
1
A demand loan account is an advance for a fixed amount where no further
enhancement is permitted under any circumstances.
:0
No debits to the account are made subsequent to the initial advance except
for interest, insurance premia and other sundry charges.
22
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Any amount credited to a demand loan account has the effect of permanently
reducing the original advance
Any further drawings permitted in the account will not be secured by the
21
Normally, Demand Loans are allowed against the Bank's own deposits,
government securities, approved shares and/or debentures of companies, life
insurance policies, pledge of gold/silver ornaments etc.
(BOI)
Advances made to an HUF concern against the deposits standing in the name
of co-parcener subject to the below mentioned condition.
05
OVERDRAFTS
Characteristics
1
Provision for automatic selection/feeding of interest to be charged on such advances
by fetching the details of FDR/Deposit from CBS is customized.
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S.No. Highlights Brief Description
1- Scheme Code under DLDEP for Demand Loan Facility ODDEP for
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menu HOAACLA/ Overdraft Facility
HOAACOD
2- Menu Optio HLACM- For modifying existing collateral details,
21
Account
c. Advance against Floating Rate Fixed Deposit
scheme d. Advance against Recurring Deposit
5. Key Features :-
a. Advance shall not be allowed on the same date when FDR account is opened in
CBS.
b. Interest rate shall be calculated above the ROI offered on FDR as the case may
be, on the basis of weighted average method.
c. Other loan parameters such as lendable amount, loan tenure and repayment
details shall be reflected on the basis of FDR account number.
d. Linkage of collateral in the form of FDR is integrated in the account opening stage
itself. Lien on FDR shall be marked automatically after verification of loan/overdraft
account.
e. It shall also handle marking of Lien on FDRs of other branches.
f. Renewal of overdraft account using menu HLACM. In case of renewal user has to
1
existing procedure of marking lien shall be continued. Such cases could be advance
against FCNR/NRE/NRO deposits, advance against balance lying in saving/Current
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account, advance against Floating Rate Fixed Deposit scheme and advance against
Recurring Deposit. The lien in these cases shall be marked by base branch (where
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Deposit account is being maintained) and present procedure in vogue shall be
adhered to.
21
own deposits:
i) Advances made to a depositor against a deposit standing in his name
singly or jointly with other depositor(s).
3
1
ADVANCE AGAINST DEPOSITS TO ILLITERATE PERSONS
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Thumb Impression be obtained in presence of Incumbent Incharge, Certificate as per
Appendix-II of LA Cir. 39/21 be signed by I/C with Independent witnesses.
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or regional languages but cannot write such language, the loan document executed
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1
Upto 2 years 5.00
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Above 2 years and upto 3 Years 7.50
Above 3 years and upto 4 years 10.00
A b o v e 4 years and upto 5 Years
22 12.00
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Above 5 years 20.00
Advance against third party deposits 25.00
Staff, Honorably/ Voluntarily retired/ widows of staff
21
(HRDD763/2017 dt 12.10.2017)
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Public
Non-Resident Deposits (FCNR/NRO)
Advance Against FCNR(B) deposit to Depositor
Upto 1 years 10.00
Above 1 years and upto 2 Years 20.00
Above 2 years 30.00
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This supersedes the L&A Circular No. 32 dated 26.03.2020 conveying guidelines in
respect of advance against Bank deposits. Subsequent amendments/modifications in
the guidelines have been advised vide various circulars issued on the subject from
time to time, last being L&A 192 dated 14.10.2020. Now Automation of Interest Rate
Selection (Interest Table Code) for Advance Against Bank‘s Own Deposit has been
conveyed wherein two scheme codes namely DLDEP/ODDEP have been customized.
revised/modified consolidated guidelines have been conveyed vide the circular.
a) Interest rates be charged as advised through L&A Circulars issued from time
to time and shall be fixed for the currency of loan and shall change on
subsequent renewal only. Presently applicable ROI is as under :-
ADVANCE AGAINST DOMESTIC/ NRE DEPOSITS
Self 1.00%*
Third Party Deposit 2.00%* subject to Min. RLLR
*Over the applicable rates of interest on deposits
1
CURRENCY DEPOSIT (RFC) (IN INDIA)
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Self RLLR
Third Party Deposit RLLR + 1.00%
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FOREIGN CURRENCY LOAN AGAINST FCNR / NRE DEPOSITS (IN
INDIA)
Rate of interest is provided by the Treasury Division on case to case
21
basis
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b) In case there is more than one deposit in the name of the depositor(s) with
varied rate of interest, 1% or 2% higher on the weighted average of rate of
3
interest paid on deposits should be taken for calculating interest rate on loan.
It is reiterated that the Weighted Average of Rate of Interest on deposits is the
simple sum of (product of deposit amount and rate of interest applicable)
divided by the total deposit amount.
However for accounts opened under scheme DLDEP/ODDEP WAROI shall
05
RESTRICTIONS
The advance against deposits of the following fixed deposit schemes have been
restricted:
a. PNB Tax saver FDR
b. Capital Gains Account scheme
1
c. Balika Shiksha Fixed Deposit scheme
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d. MIBOR linked deposit scheme which is not permitted
e. In terms of RBD (R) Cir No 15/2020 dated 30.03.2020 Demand Loan is not
permitted against Anupam Fixed Deposit scheme. Only Overdraft facility shall
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be allowed
Other Guidelines
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Demand Loan/Overdraft sanctioned against self FDRs should be credited only to the
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account with same Customer Id duly verifying that the account is in same name
Proceeds after adjustment of DL/OD should be credited in the account with the same
Customer-Id with same name from which proceeds have been originated.
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In case of multiple FDRs the principal repayment and loan expiry date shall be the
maturity date of FDR, maturing on the first coming date
In case of Advance against deposit to staff member, loan amount upto Rs. 10.00 lac
shall be allowed under staff scheme and Margin and ROI shall be mapped
accordingly. In case of multiple accounts, the maximum allowed limit of Rs. 10.00 lac
shall be calculated manually on the basis of outstanding amount under the captioned
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scheme. When the outstanding amount reaches the maximum allowed limit of Rs.
10.00 lac separate account shall be opened under the public scheme. However same
scheme code DLDEP/ODDEP shall be used for staff scheme also
Advances at other than base branch to individual against his/her own deposit shall be
permitted where deposit value is up to Rs. 2.00 crore only
Loaning Powers:
a) Loaning power for granting advance against Bank‘s own deposit is present being
governed by IRMD L&A Circular No. 100 dated 02.06.2020. b) Further in terms of
IRMD L&A Cir No 198/2020 dated 16.10.2020 over and above aggregate
commitment per borrower powers for advance against Bank‘s own deposit are given
as under Bank's
1
Receipt by Former
If revised AOF
For ―Either or Survivor‖/ ― Any one of us or Survivor‖
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obtained for the
Advance to Any one during life time of other/s, without
deposit account 22
reference to Survivor and pledge portion of PNB-308 may
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be signed by depositor making request for advance along
with discharge of FDR/RD Receipt by depositor making
request for advance
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In case No. of A letter of authority signed by all the borrowers to pay the
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This has reference to IRMD L&A Cir. No. 60 dt 11.05.2004 regarding Advances against
Fixed Deposits of PNB Housing Finance Ltd. Now it is informed that the facility of
advance against Fixed Deposits of PNB Housing Finance Ltd. stands withdrawn with
immediate effect. No fresh exposure/enhancement /adhoc facility/renewal is to be
allowed under the said scheme
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Advances against the security of Life Insurance Policies (other than Money Back
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Policies) issued by Life Insurance Corporation of India and Policies issued by
approved Private Sector Insurance Companies, should be considered in individual
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cases on merits after ensuring the following eligibility criteria:
i) All Indian Nationals of 18 years and above shall be eligible under the scheme.
21
ii) Firms/companies provided the offered securities are in the name of those
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firms/companies
iii) Borrower having a satisfactory account with our bank at least for the last 6 months.
3
1
the Insurance company
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Precautions:
LIC Policies effected by a married man for the benefit of his wife and/or children under
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Section 6 of the Married Women's Property Act, should not be accepted as security.
Hence no advance should be allowed against such polic
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The details of Govt. Securities and Bonds issued by State/Central Govt. against which
the advances can be considered are given hereunder:-
I. G.P. Notes/All Type of Bonds issued by the Central and State Government or
Other Public Bodies duly guaranteed by Central or State Govt. except PSU
BONDS.
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II. Securities and Bonds issued by Municipalities and Other Bodies bearing the
Guarantee of Central or State Govt.
However, I. Tax Saving Bonds issued by Banks/PSUs shall not be considered for
financing there against. II. Advance against PSU Bonds shall be considered as per the
guidelines on Advances Against Shares, Debentures and PSU Bonds issued from time
to time.
Scope: Advances should be considered in individual cases on merits, taking into
account the purpose of the advance, repaying capacity of the borrowers etc. and not as
a matter of routine.
Security All type of Central/State Govt. Bonds and Securities and Bonds issued by
Municipalities and Other Bodies, bearing the Guarantee of Central/State Govt which are
endorsable/ transferable and lien can be marked in bank‘s favour for allowing such
advances.
Margin(Public & Members of Staff)
1
Security: Pledge of NSCs / KVPs (For KVPs, Issued on or before 30.11.2011 and on
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or after 23.09.14)
Margin: For NSCs: (LA Cir 74/2017 dt.30.08.2017)
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Period for which NSCs have run at the time of Margin
Advance VIII – IX-
ISSUE ISSUE
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(a) Less than 3 years from the date of NSCs 30% N.A.
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(b)3 years & above but less than 5 years from the date 25% 40%
of NSCs
(c) above 5 years from the date of NSCs N.A. 30%
3
Marginfor KVPs
(LA Cir 83/2020 dated 06.05.2020)
Period for which KVPs have run at the time of Advance Margin
(a) 2 years from the date of issue of KVPs 40%
(b) Above 2 years & upto 5 years from the date of issue of KVPs 35%
(c) Above 5 years from the date of issue of KVPs 25%
➢For advance against KVPs issued on or before 30.11.2011 :20%
Note: Never send NSCs / KVPs through Borrower for pledge. For details, follow
instructions as conveyed videLA Cir 83/2020 dated 06.05.2020
FINANCE AGAINST LIC POLICIES, NSCs, KVPS, PLIs AND GOVERNMENT/ RBI
BONDS- SCHEME CODE and INTEREST TABLE CODE
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21
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3
05
Annual accounts of all borrowers enjoying aggregate credit limits of ₹20 lac & above (both
fund based & non-fund based) from the banking system should be submitted to the
Bank duly audited by Chartered Accountants. However, in case credit facility is
allowed under specific schemes such as mortgage loan scheme, loan to property
owners against future lease rentals, housing loan, etc., where credit requirement is
assessed based on the repaying capacity of the borrower independent of its
business operations/annual accounts, such cases may be exempted from submitting
the audited annual accounts irrespective of the quantum of the credit limits.
Where the borrowers, enjoying credit limits below ₹20 lac, are not able to supply
audited Balance Sheet, such proposals must be accompanied by Proforma Balance
Sheet and Profit & Loss Statement.
1
However, in cases where accounts are required to be audited under any other law
(Income Tax Act, Company account under Company‘s Act, etc.), the borrowers
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should get the accounts audited in compliance of the law, even if the credit limit is
below ₹ 20 lac or credit is availed under specific scheme. The branches should
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ensure that on finalization of audit, a copy of the audited balance sheet must be
submitted to the bank
21
Also, in respect of Non Corporate Micro Enterprises having annual sales less than ₹
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21
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3
05
In case the borrowing company/firm have more than one factory/manufacturing unit,
the responsibility to collect the necessary financial data/other relevant information for
compiling the loan proposal shall rest with the branch where the company/firm
1
desires to avail the facilities.
In case where proposals are sanctioned at an office other than the place of
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manufacturing unit/factory, borrowers may be advised to open Current Account or
avail sub-Limits at the branch near to the manufacturing unit/factory for monitoring of
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sale proceeds effectively.
Loan proposal may be dealt by that branch office of the bank, which is near to the
factory/commercial establishment (e.g. office/ shop in case of trading accounts). The
05
Controlling Authority may demarcate the command area depending upon the density
of the branches in the area, infrastructure/skills available in the branch, location of the
branch, etc.
The guidelines for priority sector advances shall continue to be followed as per PSFID
circulars issued from time to time.
1
a) UNDERSTANDING & ANALYSING FINANCIAL STATEMENTS
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While analyzing financial statements it is to be ensured that they are as per
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provisions of Company Act 2013.
―The financial statements shall give a true and fair view of the state of affairs of the
company or companies, comply with the accounting standards notified under section
133 and shall be in the form or forms as may be provided for different class or
3
company shall disclose in its financial statements, the deviation from the accounting
standards, the reasons for such deviation and the financial effects, if any, arising out
of such deviation.‖
Accounting Standards
Financial Statements are prepared for a definite period i.e. one year. As per Section
2 (41) of Companies Act 2013
- ―financial year‖, in relation to any company or body corporate, means the period
ending on the 31st day of March every year, and where it has been incorporated on
or after the 1st day of January of a year, the period ending on the 31st day of March
of the following year, in respect whereof financial statement of the company or body
corporate is made up‖
1
GENERAL INSTRUCTIONS AS PER SCHEDULE III OF THE COMPANIES ACT
2013:
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1) Additional disclosures specified in the Accounting Standards shall be made in the
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notes to accounts or by way of additional statement unless required to be
disclosed on the face of the Financial Statements.
2) Similarly, all other disclosures as required by the Companies Act shall be made in
21
the notes to accounts in addition to the requirements set out in this Schedule.
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3) (i) Notes to accounts shall contain information in addition to that presented in the
Financial Statements and shall provide where required (a) narrative descriptions
or disaggregations of items recognised in those statements; and (b) information
3
much aggregation.
4) (i) Depending upon the turnover of the company, the figures appearing in the
Financial Statements may be rounded off as given below:—
5. Except in the case of the first Financial Statements laid before the Company (after
its incorporation) the corresponding amounts (comparatives) for the immediately
6. the terms used herein shall be as per the applicable Accounting Standards.
Note:—This part of Schedule sets out the minimum requirements for disclosure on
the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter
referred to as ―Financial Statements‖ for the purpose of this Schedule) and Notes.
Line items, sub-line items and sub-totals shall be presented as an addition or
substitution on the face of the Financial Statements when such presentation is
relevant to an understanding of the company‘s financial position or performance or to
cater to industry/sector-specific disclosure requirements or when required for
compliance with the amendments to the Companies Act or under the Accounting
Standards.
1
Name of the Company…………………….
Balance Sheet as at ………………………
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(Rupees in…………)
Particulars Note 22 Figures as at Figures as at the
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No. the end of end of the
current previous
reporting reporting period
21
period
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1 2 3 4
I. EQUITY AND LIABILITIES
3
TOTAL
II. ASSETS
Non-current assets
1
(c) Deferred tax assets (net)
(d) Long-term loans and advances
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(e) Other non-current assets
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(2) Current assets
(b) Inventories
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Notes
05
1
4. A receivable shall be classified as a ―trade receivable‖ if it is in respect of the
amount due on account of goods sold or services rendered in the normal course
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of business.
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5. A payable shall be classified as a ―trade payable‖ if it is in respect of the amount
due on account of goods purchased or services received in the normal course of
business.
21
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A. Share Capital
3
For each class of share capital (different classes of preference shares to be treated
separately):
1
(i) Reserves and Surplus shall be classified as:
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a) Capital Reserves;
b) Capital Redemption Reserve; 22
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c) Securities Premium Reserve;
d) Debenture Redemption Reserve;
e) Revaluation Reserve;
21
g) Other Reserves–(specify the nature and purpose of each reserve and the
amount in respect thereof);
h) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations
3
(Additions and deductions since last balance sheet to be shown under each of
the specified heads);
05
C. Long-Term Borrowings
(a) Bonds/debentures;
(b) Term loans:
1
date of maturity for this purpose must be reckoned as the date on which the first
instalment becomes due.
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(v) Particulars of any redeemed bonds/debentures which the company has power
to reissue shall be disclosed. 22
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(vi) Terms of repayment of term loans and other loans shall be stated.
(vii) Period and amount of continuing default as on the balance sheet date in
repayment of loans and interest, shall be specified separately in each case.
21
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E. Long-term provisions
F. Short-term borrowings
(iii) Where loans have been guaranteed by directors or others, the aggregate amount
of such loans under each head shall be disclosed.
(iv) Period and amount of default as on the balance sheet date in repayment of loans
and interest, shall be specified separately in each case.
1
(a) Current maturities of long-term debt; (for elaboration see Point 3 (c) above)
(b) Current maturities of finance lease obligations;
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(c) Interest accrued but not due on borrowings;
(d) Interest accrued and due on borrowings;
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(e) Income received in advance;
(f) Unpaid dividends;
(g) Application money received for allotment of securities and due for refund and
21
allotment of share capital. The terms and conditions including the number of
shares proposed to be issued, the amount of premium, if any, and the period
before which shares shall be allotted shall be disclosed. It shall also be disclosed
3
whether the company has sufficient authorised capital to cover the share capital
amount resulting from allotment of shares out of such share application money.
Further, the period for which the share application money has been pending
beyond the period for allotment as mentioned in the document inviting application
for shares along with the reason for such share application money being pending
05
shall be disclosed. Share application money not exceeding the issued capital and
to the extent not refundable shall be shown under the head Equity and share
application money to the extent refundable, i.e., the amount in excess of
subscription or in case the requirements of minimum subscription are not met,
shall be separately shown under ―Óther current liabilities‖;
H. Short-term provisions
I. Tangible assets
(iii) A reconciliation of the gross and net carrying amounts of each class of assets at
the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments and the
1
related depreciation and impairment losses/reversals shall be disclosed
separately.
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(iv) Where sums have been written-off on a reduction of capital or revaluation of
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assets or where sums have been added on revaluation of assets, every balance
sheet subsequent to date of such write-off, or addition shall show the reduced or
increased figures as applicable and shall by way of a note also show the amount
21
of the reduction or increase as applicable together with the date thereof for the
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J. Intangible assets
3
(a) Goodwill;
(b) Brands /trademarks;
(c) Computer software;
05
(ii) A reconciliation of the gross and net carrying amounts of each class of assets at
the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments and the related
amortization and impairment losses/reversals shall be disclosed separately.
K. Non-current investments
1
(h) Other non-current investments (specify nature).
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Under each classification, details shall be given of names of the bodies corporate
indicating separately whether such bodies are (i) subsidiaries, (ii) associates, (iii)
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joint ventures, or (iv) controlled special purpose entities in whom investments have
been made and the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly-paid). In regard to
21
investments in the capital of partnership firms, the names of the firms (with the
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names of all their partners, total capital and the shares of each partner) shall be
given.
3
(ii) Investments carried at other than at cost should be separately stated specifying
the basis for valuation thereof;
1
(b ) Unsecured, considered good;
(c ) Doubtful.
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(iv) Allowance for bad and doubtful debts shall be disclosed under the relevant
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heads separately.
(v) Debts due by directors or other officers of the company or any of them either
severally or jointly with any other person or debts due by firms or private
21
N. Current Investments
3
Under each classification, details shall be given of names of the bodies corporate
[indicating separately whether such bodies are: (i) subsidiaries, (ii) associates, (iii)
joint ventures, or (iv) controlled special purpose entities] in whom investments have
been made and the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly paid). In regard to
investments in the capital of partnership firms, the names of the firms (with the
names of all their partners, total capital and the shares of each partner) shall be
given.
O. Inventories
1
(ii) Goods-in-transit shall be disclosed under the relevant sub-head of inventories.
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(iii) Mode of valuation shall be stated.
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P. Trade Receivables
(i) Aggregate amount of Trade Receivables outstanding for a period exceeding six
21
months from the date they are due for payment should be separately stated.
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(iii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads
separately.
(iv) Debts due by directors or other officers of the company or any of them either
05
severally or jointly with any other person or debts due by firms or private
companies respectively in which any director is a partner or a director or a
member should be separately stated.
(ii) Earmarked balances with banks (for example, for unpaid dividend) shall be
separately stated.
1
(b) Unsecured, considered good;
(c) Doubtful.
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(iii) Allowance for bad and doubtful loans and advances shall be disclosed under the
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relevant heads separately.
(iv) Loans and advances due by directors or other officers of the company or any of
21
them either severally or jointly with any other person or amounts due by firms or
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This is an all-inclusive heading, which incorporates current assets that do not fit into
any other asset categories.
T. Contingent liabilities and commitments (to the extent not provided for)
05
V. Where in respect of an issue of securities made for a specific purpose, the whole
or part of the amount has not been used for the specific purpose at the balance
sheet date, there shall be indicated by way of note how such unutilised amounts
have been used or invested.
W. If, in the opinion of the Board, any of the assets other than fixed assets and non-
current investments do not have a value on realisation in the ordinary course of
business at least equal to the amount at which they are stated, the fact that the
Board is of that opinion, shall be stated.
1
Name of the Company…………………….
Profit and loss statement for the year ended ………………………
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(Rupees in…………)
Particulars 22Note No. Figures as at Figures as at
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the end of the end of the
current previous
reporting reporting
21
period period
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1 2 3 4
I Revenue from xxx xxx
operations
3
Xxx Xxx
Purchases of Stock-in-
Trade Xxx Xxx
Changes in inventories
of finished goods Xxx Xxx
work-in-progress and Xxx Xxx
Stock-in-Trade xxx Xxx
Employee benefits
expense
Finance costs
Depreciation and
amortization expense
Total expenses
1
(1) Current tax Xxx Xxx
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(2) Deferred tax Xxx Xxx
XI Profit (Loss) for the 22 xxx xxx
period from continuing
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operations (VII-VIII)
XII Profit/(loss) from xxx xxx
discontinuing
21
operations
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operations
XIV Profit/(loss) from xxx xxx
Discontinuing
operations (after tax)
(XII-XIII)
XV Profit (Loss) for the xxx xxx
05
1. The provisions of this Part shall apply to the income and expenditure account
referred to in sub-clause (ii) of clause (40) of section 2 (of Companies Act 2013)
in like manner as they apply to a statement of profit and loss.
(B) In respect of a finance company, revenue from operations shall include revenue
from—
Revenue under each of the above heads shall be disclosed separately by way
of notes to accounts to the extent applicable.
3.Finance Costs
1
Finance costs shall be classified as:
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(a) Interest expense; 22
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(b) Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and translation.
21
4. Other income
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(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable to such
income).
05
5. Additional Information
(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages, (ii)
contribution to provident and other funds, (iii) expense on Employee Stock
Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv)
staff welfare expenses].
(b) Depreciation and amortisation expense;
(c) Any item of income or expenditure which exceeds one per cent of the
revenue from operations or Rs.1,00,000, whichever is higher;
(d) Interest Income;
(e) Interest expense;
(f) Dividend income;
1
(b) In the case of trading companies, purchases in respect of goods traded in
by the company under broad heads.
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(c) In the case of companies rendering or supplying services, gross income
22
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derived from services rendered or supplied under broad heads.
(d) In the case of a company, which falls under more than one of the
21
categories mentioned in (a), (b) and (c) above, it shall be sufficient compliance
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(e) In the case of other companies, gross income derived under broad heads.
(iii) In the case of all concerns having works in progress, works-in-progress under
broad heads.
(iv)(a) The aggregate, if material, of any amounts set aside or proposed to be set
05
aside, to reserve, but not including provisions made to meet any specific
liability, contingency or commitment known to exist at the date as to which the
balance sheet is made up.
(b) The aggregate, if material, of any amounts withdrawn from such reserves.
(v) (a) The aggregate, if material, of the amounts set aside to provisions made for
meeting specific liabilities, contingencies or commitments.
(b) The aggregate, if material, of the amounts withdrawn from such provisions,
as no longer required.
(vi) Expenditure incurred on each of the following items, separately for each
item:—
(a) Consumption of stores and spare parts;
(b) Power and fuel;
(c) Rent;
(viii) The profit and loss account shall also contain by way of a note the following
information, namely:—
(a) Value of imports calculated on C.I.F basis by the company during the financial
year in respect of—
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
1
(b) Expenditure in foreign currency during the financial year on account of royalty,
know-how, professional and consultation fees, interest, and other matters;
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(c) Total value if all imported raw materials, spare parts and components consumed
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during the financial year and the total value of all indigenous raw materials,
spare parts and components similarly consumed and the percentage of each to
the total consumption;
21
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(d) The amount remitted during the year in foreign currencies on account of
dividends with a specific mention of the total number of non-resident
shareholders, the total number of shares held by them on which the dividends
3
(e) Earnings in foreign exchange classified under the following heads, namely:—
Note:— Broad heads shall be decided taking into account the concept of materiality
and presentation of true and fair view of financial statements.
Provided that the financial statement, with respect to One Person Company,
small company and dormant company, may not include the cash flow
statement.
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the
1
case may be, in business exceed or exceeds one crore rupees in any previous
:0
year; or
(b) carrying on profession shall, if his gross receipts in profession exceed [fifty]Lac
22
rupees in any previous year; or
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(c) carrying on the business shall, if the profits and gains from the business are
deemed to be the profits and gains of such person under section 44AE or
21
section 44BB or section 44BBB, as the case may be, and he has claimed his
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income to be lower than the profits or gains so deemed to be the profits and
gains of his business, as the case may be, in any previous year; or
(d) carrying on the [business]shall, if the profits and gains from the [business]are
3
deemed to be the profits and gains of such person under [section 44AD] and
he has claimed such income to be lower than the profits and gains so deemed
to be the profits and gains of his [business]and his income exceeds the
maximum amount which is not chargeable to income-tax in any [previous year,]
Following clause (e) shall be inserted after clause (d) of section 44AB by
05
1
(iv) a One Person Company as defined under clause (62) of section 2 of the
Companies Act and a smallcompany as defined under clause (85) of section 2
:0
of the Companies Act; and
(v) a private limited company with a paid up capital and reserves not more than
22
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rupees fifty Lac andwhich does not have loan outstanding exceeding rupees
twenty five Lac from any bank or financialinstitution and does not have a
turnover exceeding rupees five crore at any point of time during thefinancial
21
year.
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Objective: As per Ministry of Corporate Affairs – ―This Standard prescribes the basis
for presentation of general purpose financial statements to ensure comparability both
with the entity‘s financial statements of previous periods and with the financial
statements of other entities. It sets out overall requirements for the presentation of
financial statements, guidelines for their structure and minimum requirements for
their content.‖
05
As per Section 133 of Companies Act 2013 – ―The Central Government may
prescribe the standards of accounting or any addendum thereto, as recommended
by the Institute of Chartered Accountants of India, constituted under section 3 of the
Chartered Accountants Act, 1949, in consultation with and after examination of the
recommendations made by the National Financial Reporting Authority.‖
The Accounting Standards have been notified by Ministry of Corporate Affairs (MCA)
through official Gazette.
Balance Sheet is divided into two parts i.e. Assets & Liabilities. From a banker‘s
1
point of view, a broad classification of assets & liabilities can be as under:-
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ASSETS
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NON-CURRENT ASSETS
CURRENT ASSETS
21
LIABILITIES
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CURRENT LIABILITIES
In a balance sheet of a company assets and liabilities are shown as long term or
short term which needs to be reclassified for analysis as per internal Bank
guidelines. As such, it is necessary to be aware of Bank‘s guidelines issued from
05
The items of Balance Sheet and Profit & Loss Accounts are as per Companies Act
2013 and already discussed above.Reclassification & rearrangement of these items
should be as per Bank guidelines enumerated hereunder:-
In terms of L&A Cir. No.227 dated 19.12.2020– For Balance Sheet analysis,
treatment of unsecured loans raised by the corporate in normal course of their
business may be done as under :-
i. In case of Partnership, Proprietorship and Private Ltd. Companies, the
unsecured loans raised from friends, relatives and Directors etc. which
remain in the business on continuous basis may be treated as quasi
capital to the extent not exceeding 100% of tangible net worth of the
party subject to the condition that these loans shall not be withdrawn
1
etc.) and sundry debtors (receivables).
:0
Keeping in view the above guidelines, items pertaining to sundry creditors are
to be rearranged while calculating Drawing Power.
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Margin Money is insisted upon, by a bank to cover risk, its inclusion in the build-
up of Current Assets would defeat the very purpose for which "Margin Money"
is taken. As such it is advised "Margin Money" should be excluded from the
projected build-up of Current Assets while assessing working capital credit
needs of the borrower.(LA 227/2020 dated 19.12.2020)
1
far as possible, on account of investments made in associate/allied/subsidiary
concerns and inter corporate deposits, the current ratio should not slip below
:0
the stipulated level .
As regards adjustment of such investments for arriving at net working capital
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(NWC), sanctioning authority may permit adjustment, provided the company is
financially sound and its current ratio does not slip back below 1.33: 1 after
such investments.
21
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The tax effect of the timing difference originating during a period (Difference
between Accounting Income & Taxable Income) is referred to as Deferred Tax
Asset/ Deferred Tax Liability depending on whether the Tax rebate relating to
the current accounting period would be available in the subsequent accounting
periods or the rebate available in the subsequent accounting periods has been
claimed in advance during the current accounting period. DTL/DTA is disclosed
under a separate head in the balance sheet from current assets and current
liabilities. Further the break-up of DTL/DTA in the major components is
disclosed in the notes to accounts.
DTA is arrived at through increasing the profits/ reducing the loss. The eligible
tax rebate reflected as DTA can be recognised only if it is reasonably certain
that the company will earn adequate profits in the subsequent accounting
period(s). Till such time, it is in the nature of anintangible asset. Therefore, it
should be reduced from the Net Worth to arrive at the TNW.
Since DTL & DTA are accounting treatments only, DTL is to be added to, and
DTA is to be subtracted from, the net profit for arriving at PAT (DTA / DTL for
this purpose would only mean the amount recognized as such during the
accounting year under reference).
1
advance, this fact needs to be kept in view while deciding upon the estimated /
projected financials.
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c) RATIO ANALYSIS 22
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Analysis of balance sheet not only requires comparison of absolute figures with
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previous periods of the same firm/ company or other firms/ companies but also
requires comparing of various ratios.
3
The simple way to evaluate the financial performance of a unit is to compare the
current year ratios with that of the past. When the financial ratio of a business
entity is compared with each other over a period of time, it is known as Time
Series Analysis. This type of analysis provides an insight to whether units
performance has improved, deteriorated or remained unchanged over a particular
period of time.
The other way of comparison is to compare the ratios of one business entity with
the ratios of other business entities in the same industry at the same point of time.
This type of analysis is called Cross Sectional Analysis and gives the relative
performance of the unit and its standing amongst the competitors.
Current Assets
Current Ratio =
Current Liabilities
Minimum Current Ratio of a business entity should not be less than 1.33:1
implying that current assets will be reasonably higher than current
liabilities to take care of the business entity's short term liquidity. However,
where PBF is assessed under Nayak Committee Recommendations, current
ratio of 1.25 should be acceptable. (LA 100/2000)
Though healthy current ratio is desirable but unreasonably high current ratio
1
tends to pull down the profits of the unit indicating inefficient use of current
:0
assets, which are partly financed by costly long term sources. It may also
indicate undesirable build up of inventory or book debts.
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NET WORKING CAPITAL: Though Net Working Capital (NWC) is not a ratio
still it is an important concept for arriving at working capital requirement of a
business entity from financial institutions. It can be worked out by taking
21
From the view point of a financial analyst, NWC is that part of long term funds
which is employed in the business for operating activities and is also looked
upon as the margin contributed by the owners towards working capital funds.
As such, NWC is arrived as under:-
Net Working Capital = Long Term Sources – Long Term Uses
05
Long Term Debts include long term unsecured loans raised by a business
entity. However, that portion of unsecured loans which is treated as quasi
equity (in case of Partnership, Proprietorship and Private Ltd. Companies)is
to be deducted from long term debts and it is to be included as part of TNW
for arriving at DER.
Our Bank has in place Policy on DER, contained in L&A Cir. No.145 dated
1
31.12.2019,wherein level of DER for project financing under different
industries and vested powers with various authorities has been
:0
prescribed.However DER norms for loan pertaining to Hybrid Annuity Model
(HAM) has been prescribed vide LA circular 102/2020 dated 01.06.2020.
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loans, short term loans and current liabilities OR entire liabilities excluding
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Term Liabilities
Term Liability/ Adjusted TNW = Net Owned Funds – Intangible
Assets
Operating Profit
Operating Profit Ratio =
Net Sales
FIXED ASSET COVERAGE RATIO (FACR): This ratio indicates the degree
of security available to the secured term lenders. It is arrived at by dividing
1
the Net Fixed Assets by the Term Debt outstanding. All those term liabilities,
which have been secured by charge on fixed assets (e.g. Term Loans,
:0
Debentures, Fixed Deposits from Public etc.), should be reckoned. It is
desired that FACR does not go below unity so that the lent funds are secured
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by assets at all times.
present value of cash inflows with the present value of cash outflows of an
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investment. In other words, the internal rate of return equates to the interest
rate, expressed as a percentage that would yield the same return if the funds
had been invested over the same period of time.
3
If the internal rate of return for the project is less than the current bank interest
rate it would be more profitable to put the money in the bank than execute the
project. For any project to be acceptable, it must meet a minimum IRR
requirement. The project would be acceptable only if its IRR is higher than the
opportunity cost of capital (also known as the required rate of return).
05
The value of BEP gives an indication to the margin of safety available while
operating at certain capacity utilization. A high value of BEP indicates that the
entity has to operate on higher capacity utilization to cover its fixed cost
implying low margin of safety. Banker takes calibrated decision for financing
business entities with high BEP considering various factors like past history
(in case of existing unit only), expected business opportunities, managerial
competence, acceptability of the product, level of competition in the market in
that particular industry etc. A low BEP indicates higher margin of safety and
While conducting sensitivity analysis, values of inputs are varied to work out
viability of the project even in adverse scenarios. There can be three adverse
scenarios i.e. rise in critical input cost which the business unit may not be
able to pass to the consumers, reduction of selling price (say due to
completion) thereby reducing total revenue and in worse conditions it may be
a combination of the two i.e. increase in critical input cost with simultaneous
decrease in selling price. Any of these situations will have impact of reducing
1
profits of a unit and adverse impact on DSCR.
:0
The input cost or revenues may be increased or decreased respectively
taking some sensitivity factor, say 5% i.e. if input cost is increased, it will be
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5% more than projected values and if revenues are decreased, it will be 5%
lesser than projected value. Profits are reworked out after taking impact of
such increase in cost or decrease in revenue and fresh DSCR is worked out
21
Working capital for any unit means the total amount of circulating funds required for
meeting day to day requirements of the unit. For proper working a manufacturing unit
needs a specific level of current assets such as raw material, stock in process,
finished goods, receivables and other current assets such as cash in hand/ bank and
05
advances etc. So the working capital means the funds invested in current assets.
The trading units need the working capital for holding goods and allowing credit to its
customers. The service units need the working capital for meeting the expenditure,
for making advance payments to its staff and providing credit to its customers. So all
type of units whether in manufacturing or trading or service sector need working
capital.
Gross Working Capital means total funds required for procuringentire current assets.
Net Working Capital is that part of long term funds which is employed in the business
for operating activities and is also looked upon as the margin contributed by the
owners towards working capital funds.
Role of Banker:The unit should have sufficient amount of working capital. A portion
Stage Time V a l ue
Raw Material Holding period value of RM consumed during
the period
SIP Time taken in converting the RM + Mfg.Exp. during theperiod
RM into FG (Cost of production)
FG Holding period of FG before R.M + Mfg. Exp. +Adm.
being sold overheads for the period (Cost of
sales)
Receivables Credit allowed to buyer RM+ Mfg. Exp. + Adm. Exp.+
Profit for the period (sales)
:0 1
For Holding Period in respect of some major Industries please refer (LA Cir
176/2004 dt 31.12.2004)
The assessment of working capital requirement of business unit has been engaging
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the attention of the Govt., RBI and a series of committees were set up to suggest
appropriate modalities of financing working capital.
21
At present, common methods for assessing working capital are Turnover Method as
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Working Capital requirement of other business entities are assessed as per Nayak
05
To give a comprehensive and straight line method for the assessment of working
capital requirement of the borrowers, RBI constituted a working group under the
chairmanship of Shri P.R. Nayak.In terms of extant guidelines units having
aggregate working capital requirement upto Rs.5.00 crore for MSME units and
Rs.2.00 crore for others from the banking system have to be assessed as per
‗Simplified Turn Over Method‘.
Under this method working capital limits are to be computed on the basis of a
minimum of 25% of their Projected Annual Turn-Over (PATO) assessed on realistic
1
units. Further in case of those units which are also effecting sales through digital
mode, the assessment for fixing limits to the extent of 30% of digital part of Sales
:0
against existing 20% be considered, keeping the prescribed margin (37.5% of annual
turnover registered digitally, shall be working capital requirement and 7.5% shall be
22
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the margin).
Further as per MSME Cir. No.29/2018 dated 02.05.2018, with introduction of GST,
21
it has been decided that WC limit of MSE (Micro & Small) units registered under
/04 58
*(Sales should be as per GST return & Sales must be duly verified by CA). These
guidelines are in addition to the above guidelines for Micro & Small Enterprises.
advisory along with ‗Standard Operating Procedure (SOP)‘ for digital transactions.
Eligibility
Units with minimum 25 percent digital portion of projected Turnover should be
considered.
The Committee gave three methods of lending, out of which second method of
lending is widely used by bankers for assessing working capital requirement of any
business unit.
As per second method of lending, chargeable current assets are worked out based
on holding period of inventory (raw material, stock-in-process, finished goods) and
receivables. Norms of holding has been specified for some major industriesvideLA
Cir 176/2004 dt 31.12.2004. However, where norms are not available, holding period
can be compared with other units of the same industry and also with the past trend
of the same unit. Any major variation needs to be addressed before working out
1
maximum permissible bank finance (MPBF).
:0
Chargeable current assets are those assets on which Bank can create charge.
Assets on which charge cannot be created e.g. cash are to be taken as ‗Other
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Current Assets‘.
The working capital requirement of any business entity as per second method of
21
Definition
A. Performance Guarantees
1
which need not necessarily be related to the creditworthiness of the counterparty
involved. An indicative list of performance guarantees is as under:
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i. Bid bonds; 22
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ii. Performance bonds and export performance guarantees;
iii. Guarantees in lieu of security deposits/ earnest money deposits (EMD) for
participating in tenders;
21
B. Financial Guarantee
The guarantees which are direct credit substitutes wherein a bank irrevocably
undertakes to guarantee the repayment of a contractual financial obligation, are to
be classified as financial guarantees. Financial guarantees essentially carry the
same credit risk as a direct extension of credit i.e., the risk of loss is directly linked to
05
In addition to applying the above criteria for classifying the guarantees, the contents
of the guarantee to be issued are required to be gone through carefully and also the
contract entered into between the principal and the beneficiary to decide as to
whether a particular guarantee is a Performance Guarantee or Financial Guarantee.
1
is duly incorporated in the Guarantee Bond as under :-
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―Notwithstanding anything to the contrary contained herein:-
Our liability under this Guarantee shall not exceed ` [……….]/-;
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This Bank Guarantee shall be valid up to (being the date of expiry of the
Guarantee);
We are liable to pay up to the guarantee amount only and only if we receive
from you a written claim or demand not later than 12 months from the said
21
1
by the bank under Regd. Post (A.D.). In exceptional cases, where the
guarantee is handed over to the customer for any genuine reasons, the
:0
branch should immediately send by Regd. AD an unstamped duplicate copy
of the guarantee directly to the beneficiary with a covering letter requesting
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them to compare with the original receipt from their customer and confirm that
it is in order. The AD card should be kept with the loan papers of the
concerned guarantee. Further, the issuing branch may send the scanned
21
copy of BG bond along with office copy of standard covering letter to the
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A sum of Rs. 110.00 + GST per ILG/ILC message (LA 196/2020), is to be recovered
by branch officials as charges for each bank guarantee message originated through
SFMS at the time of fresh issuance of ILG and subsequent amendment, if any vide
LA Cir 90/2018 Dt 17.09.2018. These charges have been customized vide LA Cir
54/2019 dated 04.05.2019& 54/2019 dated 04.05.2019 and reports to be generated
have also been customized vide the same circular. The process flow to be followed
by the branches in CBS is given in L&A Cir.42/16 &L&A 90/2018.
4- PERIOD OF GUARANTEE:
1
5- Loaning Power:
As per extant guidelines, CMs/AGMs may permit issuance of letter of Guarantee
:0
upto a maximum of 5 years and Branch Heads in scale-II & III may permit issuance
of LG upto the maximum of 1 year, excluding the claim period of 12 months.
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ZOCAC-I may permit issuance of Letter of Guarantee up to a maximum of 10 years,
excluding the claim period of 12 months.
21
be issued on demand only and the sanctioning authority for such issuance shall be
one step higher, of the official with the vested powers for issuance of such letter of
guarantee. However, in case of opening of ILG/FLG against 100% coverage by
3
deposits, the guarantees may be issued irrespective of time period within vested
loaning powers(IRMD L&A cir No 100/2020).
6-SECURITY/MARGIN :
1
Further, it should be ensured that guarantees in favour of court or to Govt. or
:0
any other person on behalf of party/borrower relating to payment of taxes,
excise duty, custom duty or other Govt. dues, in dispute should be issued
22
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only against 100% cash margin.
Marking of lien in Cash Credit/Saving Fund/Current account is not permitted
for cash margin. FDR should be created as per the margin prescribed and lien
21
to be marked appropriately
/04 58
Bank has decided to delegate the power for extension of Bank Guarantees in NPA
accounts as under:
(i) In NPA accounts, Branch Heads may extend the period of bank guarantee,
already issued, within the limitation period of Bank Guarantee even in the
sanctions of higher authorities on existing terms and conditions, if the request is
05
(ii) Commission on the BGs shall be recovered in cash from the account holder at
the time of extension of Bank guarantee. If NPA a/c holder is not in a position to
pay the commission then it should be recorded in memorandum a/c.
8- Reversal of ILGs:
(i) For outstanding ILGs issued from 08.01.1997 onwards but before
18.01.2013/ outstanding ILGs issued from 18.01.2013 onwards having
claim period of less than one year:
In such cases securities and counter indemnities given against such ILGs
1
(ii) For ILGs issued from 18.01.2013 onwards with at least one year claim
period:
:0
Upon expiry of the ILG (including outstanding ILGs) i.e. when the claim period
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has begun a registered acknowledgement due notice should be sent to the
beneficiary informing that the ILG has expired and the original Letter of
Guarantee along with no claim letter should be returned to the bank. If the
21
period.
However, ILGs can be reversed within the validity/claim period on receipt of no claim
letter from the beneficiary thereby discharging Bank from its liability under ILG along
with original ILG.
05
1
after recovery of commission for claim period.
ix. In case of renewal of guarantees, same charges as applicable for issuance of
:0
fresh guarantee may be levied. However, in case renewal is affected before
the expiry date of original guarantee, commission may not be charged for the
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claim period.
x. Minimum charges for one Quarter and a part of a quarter to be treated as one
quarter.
21
xi. Once guarantee commission is charged for a minimum period of one Quarter
/04 58
issued on Loaning Power from time to time shall be referred. (Presently as per
L&A circular no.100/2020 dated 02.06.2020)
1
upto sanctions of ZM level. In case of HO sanctions, relaxations/refund of
:0
guarantee fee may be considered at the level of ZOCAC (Headed by ZM).
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The refund will be granted subject to compliance of certain terms as under: -
Commission to be refunded will be for full-unexpired quarters only.
However, Branch should recover commission for a minimum of two quarters.
If an existing guarantee is extended for a specific period and the guarantee
21
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is being cancelled (after original tenure), commission will be refunded for full
unexpired quarters.
If guarantee is invoked by the beneficiary, commission charged will not be
3
refunded.
PROCESSING FEES
As the bank has to keep a track of the performance of borrowing unit on ongoing
basis for all the facilities including specific BG limit of longer duration, the processing
fee is to be charged annually as per laid down guidelines in respect of all working
05
capital facilities including specific BG limits in line with working capital limits.
The processing fee is not be levied on Bank Guarantees issued against 100%
margin in the shape of Cash/FDR/other liquid securities, where no regular limit is
required to be set up/the regular limit of the borrower has already been exhausted
The Public Notice issued by the Customs Department stipulates, inter alia, that all
bank guarantees furnished by an importer should contain a self-renewal clause
inbuilt in the guarantee itself. The stipulation in the Public Notice issued by the
Customs Department is akin to the notice in the tender form floated by the DGS&D.
Hence, the provision for automatic extension of the guarantee period in the bank
guarantees shall also be made applicable to bank guarantees issued favouring the
Customs Houses.
Based on communication received from IBA, MD & CEO has approved that issuance
of domestic BGs subjecting to ICC rule URDG 758 can be done as per the business
needs where consent of applicant and beneficiary both are available subject to
compliance of due diligence aspect and other laid down guidelines to ensure bank‘s
interest. In other cases existing process may be continued.
1
GUARANTEES FOR EXPORT ADVANCE
:0
RBI has advised that banks should adopt a flexible approach in the matter of
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obtaining cover and earmarking of assets/ credit limits, drawing power, while issuing
bid bonds and performance guarantees for export purposes. RBI has also advised
as under:
21
financial position of the exporter while issuing such bid bonds/ guarantees.
v) Separate limits for issuance of bid bonds may be sanctioned. Within the limits
so sanctioned, bid bonds against individual contracts may be issued, subject to
usual considerations.
RBI has also advised banks that while agreeing to give unconditional guarantee in
favour of overseas employers/ importers on behalf of Indian Exporters, an
undertaking should be obtained from the exporter to the effect that when the
guarantee is invoked, the bank would be entitled to make payment, notwithstanding
any dispute between the exporter and the importer.
Although, such an undertaking may not prevent the exporter from approaching the
Court for an injunction order, it might weigh with the Court in taking a view whether
injunction order should be issued. It is therefore advised to keep the above point in
view while issuing unconditional guarantee in future and incorporate suitable clause
A scheme for revival of construction sector has been announced by NITI Aayog.
Under this scheme, in case of claims where the Arbitration Tribunal has passed an
arbitral award and Govt. Department/ PSU has challenged the Arbitral Award, an
amount equal to 75% of the arbitral award awarded in favour of the Concessionaire/
Contractor may be paid to the Concessionaire/ Contractor against Bank Guarantee
along with interest amount for the tenure of the BG. The BG will be effective from the
date of deposit of the 75% of the Arbitral Award by the Govt. Department/PSU in the
Escrow Account. The Govt. Department/PSU shall deposit the Arbitral Award
Amount within 15 days of the receipt of the Bank Guarantee.
Further, such releases have to be made into a designated Escrow account to be
opened and established by the contractor/concessionaire with some stipulations.
1
The standard template for Bank Guarantee for payment of Arbitral Award Amount
issued by Department of Financial Services (DFS) is given as per Appendix XIV.
:0
In case the subsequent court order requires refund of money paid by Govt.
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Department/PSU into the Escrow Account, the amount shall be refunded by the
Concessionaire/Contractor along with appropriate interest to be decided at the time
of releasing funds into Escrow Account.
21
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The Bank Guarantee shall be valid for 1 (one) year or 2 (two) months from the date
of decision of the court, whichever is earlier. If required, the Concessionaire/
Contractor shall extend the validity of Guarantee for a period of at least 1 (one) year
3
and at least 60 days prior to the expiry. The BG will be revalidated as many times as
required till the time the Court has decided the appeal. For detailed guidelines,
L&A cir. No.13 dated 06.02.2017 and subsequent circulars issued on the
subject from time to time may be referred.
Concessionaire/ Contractor and Govt. Department/ PSU, all the guidelines w.r.t.
issuance of BG in disputed cases should be strictly adhered to.
1
disposal of the case without specific order of the Hon‘ble Court for discharging the
Bank Guarantee and without seeking directions from the Hon‘ble Court.
:0
(v) All new Judicial Proceeding Bank guarantees issued in favour of ―The Registrar,
Court‖ shall be issued in the format provided by court as given in Annexure- XXV of
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the said circular.
This has reference to IRMD Circular No. 53/2012 and ITD/CBS Circular No 31/2012,
wherein it is mentioned that during Issuance of fresh Guarantees forming part of
Capital Market Exposure, branch user is required to select Guarantee Type (Grnty
3
Upon carefully complying above four covenants and taking due approval from the
respective sanctioning authority for release of limit, the branch shall enter such details
1
in the system duly entering the authority for such reduction. A line of confirmation in this
:0
regard under registered / speed post may also be sent to the beneficiary. Charges for
unexpired period of released BG amount can be refunded as per Bank‘s guidelines.
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As per present setup in CBS, the branches are not authorized to modify guarantee
amount. It is clarified that after obtaining approval from sanctioning authority, branches
(GBB / MCC) through their controlling offices viz., Zonal Office and LCB / ELCB directly
21
shall take up with ITD, HO simultaneously making a copy of the same to IRMD, HO
/04 58
alongwith a copy of the sanction obtained. IRMD, HO shall thereafter give its consent to
ITD, HO for permitting branches to modify guarantee amount.
05 3
Letter of credits are of various types and are broadly classified as under:
1
without recourse. Where the beneficiary of a letter of credit is the drawer of a
bill who holds himself liable to the holder of a bill, if dishonoured, the credit is
:0
said to be 'with recourse'. In case he does not hold himself responsible, the
credit is said to be 'without recourse‘.
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3. Documentary and Clean Letter of Credit: Letter of credit which includes a
clause that bill drawn under the credit must accompany Railway Receipts/Motor
Transport Receipts/Bills of Lading, etc. is known as documentary letter of
21
credit. In fact, Bank's undertaking to honour the bills is made conditional on the
/04 58
submission of such documents by the beneficiary.If the letter of credit does not
contain any such clause, it is called clean letter of credit.
4. Sight & Acceptance Letter of Credit: A letter of credit ordinarily provides for
3
'sight' payment i.e. immediate payment against the beneficiary's bills (drawn at
sight). These are usually called sight credits. If the payment is to be made on
the maturity date in terms of a credit, it is an 'acceptance credit' or 'time credit'
or 'term credit' or ‗usance credit‘. An acceptance credit stipulates that the
beneficiary will draw a bill for a particular tenor. It becomes a clean credit
unless the goods purchased by the customer under the credit are charged in
05
Letters of credit established by the Bank on behalf of its customers are generally
irrevocable, without recourse and documentary.
Extant guidelines on Inland Letter of Credit, Pre-sanction credit appraisal & Post-
sanction monitoring of loan accounts, inter-alia, provide as under:
1. Assessment of Limit:In cases where actual Trade Cycle is less than the usance
period, the goods received under such LCs are consumed/sold off and the
1
7. All messages pertaining to issue of ILCs including amendments,
reimbursement authorizations etc. should be sent by the branch through SFMS
:0
network only.
8. Only those bills be negotiated, where ILCs are of Public Sector Banks/Banks
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approved by CAD(O).
9. No such bills are to be negotiated under LCs of Cooperative Banks.
10. While negotiating bills under LC, bearing ‗without recourse‘ clause, it be
21
ensured that the bills are strictly as per the terms of LC and no discrepancy
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exists.
11. It is to be ensured that the bills negotiated relate to genuine commercial and
trade transactions.
3
12. In cases, where the negotiation of LC is restricted to our bank and beneficiary
of the LC is a borrower of another bank, branches may consider negotiation of
such bills, on merits, subject to the compliance of laid down guidelines and
condition that the proceeds be remitted to the regular banker of the beneficiary.
However, as advised by RBI, the prohibition regarding negotiation of
unrestricted LCs of non-constituents will continue to be in force.
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13. Whenever the bills drawn under LC are not paid by the party from its own
resources or out of available DP in the CC account on its due date, the LC is
said to have devolved. Amount in default of devolved LC will be directly debited
to the main operating account of the customer (CC/OD/CA) in the transaction
system (CBS) itself w.e.f. 01.04.2016 and remittance made. The Controlling
Office will be apprised of it and follow up steps/remedial action for
regularization of such accounts will be taken.
14. In case two consecutive bills drawn under LCs opened previously were not
retired by the party from its own resources or out of available DP in the CC
account, further opening of Letter of Credit must not be allowed by the
Incumbents without clearance from their next higher authorities. (Refer LA Cir
72/2013 dt 25.06.2013)
RELAXATION IN COMMISSION
COCAC/Branch Heads of LCBs & above are vested with powers for permitting
1
relaxation in LC charges (negotiation, commitment & usance charges). In case a
relaxation is given to any borrower and upon review it is observed that the credit risk
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rating of account is downgraded below B1, Branches may withdraw the concessions
given in commission 22
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SECURITY/MARGIN
Branches to obtain security by way of cash margin/fixed deposit/earmarking
21
equivalent drawing power in Cash Credit account, as the case may be and/or a
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bank's interest.
The cash margin should be credited to "Margin money on Letter of Credit" account
maintained as current account in CBS. Fixed Deposit Receipt duly discharged and
accompanied by a letter of lien may also be accepted in lieu of cash margin.
Where the Bank feels that it is sufficient to earmark funds/ drawing power (DP) in the
customer's account instead of taking cash margin, proper safeguards must be
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CHARGES OF ILC
Charges and relaxation in charges has been advised vide L&A cir.no.89 dated
21.11.2016.
1
constituents will continue to be in force.
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AMENDMENTS
All requests for amendments must be in writing and when an amendment involves
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an increase in the amount of the credit, additional margin money, wherever
applicable, must be taken. Commission and other charges for amendments should
be charged in accordance with the rates prescribed by the Head Office. All
21
A. CONSORTIUM FINANCING
1
financing banks concerned and the bank, which takes up the largest share of
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the fund-based limits, shall be deemed to be the leader of the formalised
consortium arrangement.
22
Borrowers having multi-division/multi-product companies to be treated as one
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single unit, unless there is more than one published balance sheet. Similarly, in
the cases of merger, the merged unit should be treated as a single unit. In case
of split, the separated units should be treated as separate borrowal accounts
21
It would not be in order, if there is more than one consortium financing each
division of a company with only one published balance sheet.
3
SYNDICATION OF CREDIT
In case of borrowers enjoying fund-based credit limits of Rs.50 crore and
above, the concerned single bank and/or the leader of the existing consortium
will be free to organise `syndication' of the credit limits. An outline of
syndication of credit is available at Appendix-I of L&A cir 31/2020.
05
Pre-Sanction Stage:
1
4. After receiving the additional information/clarifications/replies to the queries
from the borrower, initial consortium meeting should be called by the Lead
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Bank, where a Senior Officer in the rank of Scale-IV & above along with
operating level officials preferably who are well versed with the history of the
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account should be deputed for taking active participation in consortium
meetings
5. The forum should be utilized for firming of project cost, quantum of working
21
any, for any audit, providing further clarifications, etc. Necessary background
papers should be circulated at least 2 working days in advance.
6. Once the basic project parameters/details of the proposal and specific reports,
3
if any, are in place, the Lead Bank/Core Group of Banks (as decided) should
appraise the proposal
7. Subsequent observations of all banks will be sent by the Lead Bank to the
borrower for clarifications, upon receipt of which, final proposal will be made
by the Lead Bank and sent to all participating lenders followed by
simultaneous call for consortium meeting within 7 days
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8. In the consortium meeting, members will finalize the terms and conditions as
also the share to be taken by each member. In case of any shortfall, the Lead
Bank will explore the possibility of increasing the exposure by member banks
or rope in some new bank.
9. After following the above process, Lead bank should convey to borrower its
final sanction within a maximum time period prescribed for formal disposal of
loan proposals:
Export Proposals Other Proposals
Proposals for sanction of 45 Days 45 Days
Fresh/enhanced credit limits
Proposals for renewal of existing 30 Days 45 Days
credit limits
Proposals for sanction of 15 Days 30 Days
Adhoc facilities
1
proportionate disbursement by the participating lenders in accordance with
the draw down schedule and actual requirement of the project during the
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period under consideration.
5. The release order/instructions should be issued by lead bank. The
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information regarding availment/release of limits should be shared among
member banks on weekly basis or as per the need. All participating banks
should share soft/hard copies of statement of accounts at monthly intervals
21
Monitoring
1
progress of the project.
4. Periodical exchange of Information (preferably online) among consortium
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banks on monthly/quarterly basis should be ensured.
5. Unsatisfactory features observed by the Lead Bank or any other member
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bank in the conduct of account, devolvement of LC/BG etc. should be
shared among all banks through the fastest communication mode and
discussed
21
above the sanctioned limits by any of the member bank should be apprised
to consortium. Borrower should not raise finance outside the consortium
without obtaining prior NOC from the consortium.
3
QUANTUM OF CREDIT
(a) Lead Bank in consultation with other member banks should finalise the
quantum of credit for all the participating banks and the same should be got
(a) Maximum time frame prescribed for formal disposal of loan proposals
should be followed for one-off term finance provided application/proposal is
received together with required details/ information supported by requisite
1
financial and operating statements. Thereafter, the borrower will be free to
approach any other bank for sanction of such one-off term finance.
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(b) A bank, desirous of extending the one-off term loan, or opening a letter of
credit for the import of machinery/ equipment or executing guarantee on
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behalf of a borrower, who is not its regular customer, should, within seven
days from the date of sanction, write to the existing regular
bank/consortium/syndicate of the borrower seeking ‗No Objection
21
Objection Certificate'.
(c) In case, `No Objection Certificate' is not received from the regular
bank/ lead bank/ lead manager, the bank(s), desirous of extending the
3
(a) In case of borrowers enjoying fund-based credit limits of Rs.50 crore and
above from one bank and/or from a consortium of banks, and/or under
`syndication', as the case may be, no other bank shall extend any additional
banking facility or open current accounts, or extend bill limits, guarantees/
acceptance, letters of credit etc., without the concurrence of existing single
bank/consortium/syndicate, except in the manner mentioned under the
guidelines. This condition will also apply in case of consortia/syndication
formed on a voluntary basis.
(b) It is not permissible for any bank outside the consortium to extend
additional credit facilities to a borrower, however, certain banks continue to
(a) For various services rendered, lead bank may charge a suitable fee
(presently 0.25% per cent of the limits) per annum exclusive of GST, to be
borne by the borrower. The fee is to be reckoned with reference to the fund-
based working capital credit limits sanctioned by the consortium.
(b) Lead banks are free to negotiate the fee to be charged to the borrower
though such fee should not exceed the ceiling of 0.25% of the fund-based
working capital credit limits, in cases where our bank is the lead bank.
(c) In cases of regular enhancements of limits/sanction of incremental fund-
based working capital limits during a year, i.e. after sanction/renewal of
regular fund-based working capital credit limits, such fee/service charge
would have to reckonedvis-a-vis the amount of enhancement/incremental
limits.
1
(d) The fee is applicable only to the fund-based working capital credit limits
sanctioned under a consortium arrangement and does not cover similar
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sanction through syndication.
(e) As regards negotiations for reduction of fee (as per item b) above, the
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deserving cases on merits can be considered as per the discretionary
powers to permit relaxations in service charges prescribed for credit related
services
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(a) Terms and conditions for different categories of credit facilities, as finalised
3
(i) The borrower should be required to execute only one document, which
will be signed by the lead bank on its own behalf, as well as on behalf of
other members.
(ii) The sharing of security and rights & responsibilities of the banks,
including the lead bank, should be documented by means of an inter-se
agreement among the members of the consortium.
(iii) Such an inter-se agreement could be of the nature of an omnibus
agreement of all the consortia arrangement, executed only one time
among various banks participating in consortia arrangements.
(iv) When documents as above have been executed, it would be
responsibility of the lead bank to initiate legal/recovery proceedings,
wherever necessary and share the proceeds of realisation on the basis
of outstanding in accounts with different members as on the date of
determination for starting recovery proceedings, provided outstandings
1
are within the sharing pattern agreed to initially and no bank has
exceeded its pre-determined share. Where, however, a bank has
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allowed drawings in excess of its share without the concurrence of other
members of consortium, such overdrawings will not be taken into
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account till the outstandings of all banks upto their respective shares,
adjusted.
(v) In certain cases where release of credit facilities on the basis of
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VETTING OF DOCUMENT:
Branches should get all the loan documents with limits of Rs.2 crore and
above (both FB and NFB) vetted from the local approved advocate/ law
officer/law manager of administrative offices , first before their execution and
05
again after execution but before disbursement of the loan. However, where the
documents are executed by the lead bank and a confirmation in having got the
same vetted has been sent by the lead bank to our bank, there is no need to
get the same vetted by the concerned branch of our bank.
HOLDING OF MEETINGS
(a) A Senior Officer in the rank of Scale-IV & above along with operating level
officials preferably, well versed with the history of account should be
deputed for taking active participation in consortium meetings in a
meaningful way and for the purpose they should do necessary ground work
like preparation of notes on assessment of credit needs of the borrower,
conduct of the account, outstanding issues, in principle approval/mandate
from the competent authority to accept the PBF assessment, sharing of
limits, take up proportionate share in the credit facilities, etc., before
attending the meeting.
1
per Appendix-III. Of L&A cir No 31/2020 dt 26.03.2020.
(f) In case consortium advance fall under HO power, Credit Division, HO, may
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also depute HO representative for the meetings in case Circle Office is of
the view that there are certain issues, such as to accept PBF
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assessment/other credit requirements, increase/decrease of sharing ratio of
the bank, allowing diversification, recall of advance and major adverse
features noticed etc.
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GENERAL GUIDELINES
(a) Lead bank will be responsible for preparation of appraisal note, its circulation,
arrangement for convening meetings, documentation etc. Lead Bank should be
vested with the responsibility of arranging for sanction and disbursal of credit,
monitoring of the borrowal account, advising shares of member-banks in the
monthly/ quarterly operative limits. Lead bank (lead manager) in a consortium
1
will also be responsible for submitting prescribed data/information to the RBI on
behalf of the consortium (syndicate).
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(b) Individual banks/consortia/syndicates should review the borrowal accounts during the
first quarter of the current year on the basis of audited statements for the year before
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last, the provisional statements (where audited statements are not available) for the
last accounting year, provisional estimates for the current accounting year and forecast
for the next year.
(c) With a view to expedite decisions by all member banks, lead bank should circulate the
21
soft copy of appraisal note and utilise the services of couriers/ branch network of
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have the authority to convey `in principle' acceptance of the assessment, sharing of
limits, terms and conditions, etc. at the meeting itself.
(d) In case of Consortium/JLA where we are not the leader, copy of Valuation Reports,
NEC of primary/collateral securities, Search Report of ROC, Stock Audit Report and
any other document that are required for the processing of the proposal should be
obtained from the Lead Bank, analyzed and held on record. This should be confirmed
05
1
stock/ Book Debts with emphasis on following points:
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a) Periodicity of inspection of stock/book debts along with unit wise allocation of
22
borrower‘s office/factory premises/godowns to member banks for inspection.
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b) After inspection the inspecting banks may submit the inspection report to the
lead bank and thereafter, the lead bank may calculate the DP and advise the
same to all the member banks.
21
c) In case a member bank fails to conduct the inspection within one month of
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allocation, the lead bank may not allocate further DP till submission of
inspection report by the said bank.
3
d) Periodicity of stock audit and the stock auditor may be decided in advance
and it may also be ensured that the same stock auditor is not being appointed
for consecutive audit.
e) In order to avoid overdrawing of limits by the borrower, it may be endeavoured
that the member banks share the information of limit availed and DP with the
lead bank so that the consolidated information can be made available to all
05
the member banks by the lead bank at regular intervals, at least at quarterly
intervals.
f) Also, necessary communication such as conduct of account, invocation of
LG/devolvement of LC etc. should be communicated to member banks
through the fastest electronic means available e.g. Email/fax, etc.
The above SOP may be got implemented where our bank is lead bank in
consultation with other member banks and where we are a member of the
consortium, the above methodology may be suggested to the lead bank for
implementation thereof.
As per L&A Cir. No.124 dated 23.10.2019, Subsequently, some of the agencies
have indicated certain changes in their particulars such as Contact details, Location
With a view to inculcate the required financial discipline in the borrowers and
enable financing banks to take informed decision on credit matters and as a
risk mitigate, Ministry of Finance has come out with the policy on Joint Lending
Arrangement.
The policy shall be applicable to all lending arrangements involving more than
one public sector bank with a single borrower with aggregate credit limits (both
fund based and non fund based) of Rs.150 crore and above. All non-investment
grade borrowers (External Commercial Rating below BBB or equivalent) under
multiple banking arrangements shall also come under this policy irrespective of
the amount of exposure.
New Borrowers: Lending under joint arrangement shall be mandatory for
public sector banks for borrowers seeking credit limits of Rs.150 crore and
1
above by way of term loan, working capital and non fund based facilities from
multiple banks. The bank from which the borrower has sought the maximum
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credit or any other bank, as mutually agreed by member banks, will be
designated lead bank for the JLA. 22
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There is no ceiling on number of banks in a JLA. It would be open to a borrower
to choose his bank(s) for obtaining credit facilities as also for the bank/(s) to
take a credit decision on the borrower.
21
In case of aggregate working capital exposure (both fund based and non fund
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based) upto Rs. 1000 crore, our share as a member of the JLA should be at
least 10% of the aggregate limit to ensure meaningful participation in JLA. For
working capital exposures of Rs. 1000 crore and above, the minimum
3
Consolidated operative guidelines on the subject along with the updated format of Due
Diligence Report (attuned with Companies Act 2013) has been conveyed. In terms of
guidelines:-
Diligence Report shall be obtained for the borrowers with aggregate (fund and non
fund based) limits of Rs.20 Crores and above with our bank.Obtain regular
certification (Due Diligence Report) by a professional (i.e. Company Secretary/
Chartered Accountant/Cost Accountant) from the approved panel regarding
compliance of various statutory prescriptions that are in vogue, as per specimen given
in Appendix-III. Due Diligence Report shall also be obtained by the Branch Head in
existing accounts as per the prescribed procedure.
1
An Authorization Letter as per Appendix-IV be obtained from the borrower to seek his
consent for authorizing the firms or individual Company Secretary/Chartered
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Accountant/Cost Accountant for obtainment of Diligence Report.
22
However, Public Sector Undertakings/ establishments (Govt. Undertakings) will be
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exempted from such Diligence Report, as they are under audit by Comptroller &
Auditor General of India.
21
The fee payable for issuance of diligence report may be charged @ 0.005% of the
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limit (i.e. Rs.500/- per Rs. 1 crore) with a maximum ceiling of Rs.50000/-. Further,
Branch Heads of LCBs/Circle Heads and above may consider payment of enhanced
fee upto 0.0075% of the limit (i.e. Rs.750/- per Rs.1.00 crore) with a maximum of Rs.
3
At the time of granting fresh facilities, declaration is to be obtained from the borrowers
about the credit facilities already enjoyed by them from other banks in Appendix - I. This
declaration is also to be obtained in case of existing borrowers availing sanctioned
05
limits of Rs.5.00 Crores and above OR wherever it is in knowledge that borrowers are
availing credit facilities from other banks and introduce a system of exchange of
information with other banks.
Subsequently, information should be exchanged about the conduct of the borrowers'
accounts with other banks in the format given in Appendix-II at regular intervals, at least
at quarterly intervals.
Documentation of Loans & advances is a critical and important area as the liability of
a borrower/guarantor can be enforced in a court of law mainly on the basis of
documents executed by them and entries made in the Books of Accounts and the
Registers of Bank.
Thus all documents prescribed for various facilities should be correctly executed.
Loan agreements of the Bank have been revised by uniform addition of Bank‘s Logo,
necessary changes to terms/stipulations, addition of cross default clause etc., to
meet present day requirements and the same have been approved by the competent
authority.
One of the important aspects of proper and accurate documentation is proper filling
1
up of blank spaces provided in the documents and scoring off the alternatives, which
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are not applicable under proper authentication.
It is, therefore, imperative that while executing a loan document, care has to be
22
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taken to ensure that alternatives are scored off retaining only that which is
applicable.
21
All blanks in the documents should be appropriately filled up. All scorings, cuttings
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and deletions etc. should also be properly authenticated by the executants (s). Non-
observance of the instructions/guidelines can result in loss to the bank.
3
Loan agreements of the Bank have been revised by uniform addition of Bank‘s Logo,
necessary changes to terms/stipulations, addition of cross default clause etc., to
meet present day requirements and the same have been approved by the
competent authority.
The list of updated forms is provided in Annexure I. The list of newly added forms
has been provided in Annexure II. The forms are available in the Knowledge Centre
portal under Knowledge Repository tab -> Forms-> All forms.
It is to be ensured that the latest forms are being used at the time of documentation.
The revised forms along with the date of upload have been provided in this respect
in the forms portal.
Manual on Loan documentation is also available in the Knowledge Centre portal
under Knowledge Repository tab -> Manuals->Law Division
The bank‘s suit, if based on such unstamped/under stamped promissory note, bill of
1
exchange or an acknowledgement of debt would, therefore, fail in law.
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DOCUMENTS REQUIRED TO BE WITNESSED;
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1. Assignment on the instrument itself, e.g. a life Insurance policy.
2. Assignment by a separate instrument.
3. Mortgage Deed.
21
4. Guarantee Deed
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5. Power of Attorney
6. Conveyance Deed
7. Gift Deed
3
8. Will.
1. Demand Pronote
2. Usance Pronote or Bill of Exchange
05
3. Letter of lien.
4. Letter of continuity
5. Letter of set off.
6. Cash Credit/Over Draft Agreement.
7. Letter/Agreement of Hypothecation:
Hypothecation of merchandise Goods/Book debts
Hypothecation of goods covered by bill
Hypothecation of plant & machinery.
7. Agreement of Pledge.
8. Letter of Assignment.
9. Letter of Guarantee.
Information Utility (IU) for Bankruptcy Cases under the Insolvency and Bankruptcy
Code 2016
IBA has advised Model Clauses for incorporating in Bank‘s Loan/ Guarantee/
Bank has entered into an agreement with the first information utility called National e-
1
Governance Services Ltd. (NeSL) for submission of financial information of borrowers as
part of obligation under IBC, 2016. The submission of financial information of borrower
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shall be accompanied by a fee to be paid to NeSL as per LA Cir 50/2019 dated
25.04.2019. An undertaking for debiting fee from the accounts to be obtained in each
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account as per Annexure of LA Cir 50/2019 dated 25.04.2019.
reconstruction and Security Interest. It can be used as search engine for finding
out detail of such transactions by any person on payment of prescribed fee. The
search can be made on the basis of asset details as well as Debtor‘s details .
Types of security interest that is required to be filed on the CERSAI portal are as
under:
05
Henceforth, unless the attachment order is filed with CERSAI, the same would
neither be recognized nor be enforceable under the law. Deletion of rule 5 implies
clearly that charges should be registered at the earliest possible instance so that
priority of charge, remains with the bank.
1
In view of the foregoing, it is advised that particulars of the security interest must
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be entered in the CERSAI on the date of creation, modification or satisfaction
without waiting for 30 days period specified under the Act in order to safeguard
22
Bank‘s interest
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On verification of entry, system gives option for downloading the Challan. Branch should
immediately download the challan and keep it with loan documents.
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At branches, Checkers are required to verify records entered in CERSAI by Maker with
the application of Digital Signature. For procurement of Digital Signature, users are
required to send request on prescribed application form to Information Technology
3
1
by any person including online search Exclusive of GST
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of records.
Any application for condonation of 22 Not exceeding 10 times of the basic
delay up to 30 days fee, as applicable
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4 Detail of How to use MCHRG ( Flow Chart given Finance Div. Cir.
and Invoice Printing) 24/2017 Dt 06.10.2017
In order to curb the frauds due to the gap in entering the particulars of mortgages of
deposit of title deeds, it has been decided that particulars of the mortgages created by
deposit of title deeds must be entered in the CERSAI on date of creation of equitable
mortgage of IPs without waiting for 30 days period specified under the Act. Further, the
Incumbent must ensure that in no case disbursement shall be made without entering the
particulars of equitable mortgages by deposit of title deeds in CERSAI site. (LA 53/2016
dt 31.07.2016)
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Guidelines as contained in LA Cir 29/2019 as well as LA Cir 64/2019 must be
adhered to. 22
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All the loan documents in respect of sanctioned limits of Rs.2 crore &above (both
21
FB and NFB) vetted from the local approved advocate/solicitor, first before their
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execution and again after execution but before disbursement of the loans.
End use of bank‘s fund should be verified properly.There should be effective post
disbursement monitoring to ensure end use of funds/prevent diversion of funds and
checking on transactions-cash payment, cheque payment. These transactions
should be related to the trade/business in which the party is engaged The GST
Returns and E-way Bill can be used as an additional document for verification of end
use of funds in specific purpose loans.
1
vii. Obtainment of necessary certificates from the borrowers, particularly in case
of Corporate Loans, Working Capital Finance, Project Finance, Short Term
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Loans etc., certifying that the funds have been used for the purpose for which
these were obtained and are not diverted to Capital Market/some other use.
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viii. Ministry of Finance has advised that Public Sector banks must be vigilant as
regards to the end use of loans & advances granted to its customers and the
cases where the customer utilized the loans for the purpose of repaying debt
21
with other entities (without prior approval of the bank), should be placed
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before the Board of Directors in the ensuing meeting with its salient details as
soon as it comes to the notice
ix. RBI has advised that in case of incorrect certification by the borrowers,
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1
as under :-
Branch Heads/Concerned Official to submit the Statement of Limits
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Sanctioned to the respective Circle Offices/Zonal Offices (to whom they are
reporting). 22
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The designated officials shall exercise their vested powers and such cases
shall be reported every month to respective controlling Offices along with
facilities sanctioned by the Branch Head.
The Monthly Statement of Limits Sanctioned is to be submitted in the
21
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In case where the LSS is not received within 10 days of the close of the
month to which it relates, the Controlling Offices to generate the LSS report
from the EDW Server for overview and thorough scrutiny.
LSS from EDW Server may be drawn from following folder:
PNBEDW_CAD_Monthly_Monthly Statement of Limit Sanctioned
All the updated Annexure (in Word Format) are available at PNB Knowledge
Centre (Circulars>>Division wise Circulars >>Select Division >> IRMD>> Select
Sub Division >> IRMD Loan & Advances >> Special Links >> Click on Plus
Button)
Guidelines :-
i. Inventories of stocks submitted by the borrowers should be thoroughly
scrutinized and checked along with the books of the borrowers to ensure that
the stocks hypothecated to the Bank are in accordance with the inventory.
ii. Unpaid for goods are not to be included by the borrowers in the inventories.
iii. Once inventory has been submitted, no increase in drawing power be
permitted prior to the due date of the next inventory.
iv. The bales, boxes and bags should be properly stacked in the godowns to
ensure ready verification of quantity of stocks.
v. The value of the stocks should be verified from the invoices and ensured that
the same are properly valued.
vi. Old stocks aren't included in the inventories without obtaining necessary
permission from the competent authority.
1
vii. The parties should exclusively deal with our Bank in terms of the sanction
unless otherwise permitted in the sanction to guard against availing of double
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finance.
viii. The entire stocks pledged/hypothecated to the Bank must be got fully
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insured with agreed bank clause and policies held on the records of the Bank
even though the limit is lower.
ix. Description of the goods pledged/hypothecated and their place of storage
21
The allocation among the consortium members shall be done by the consortium
leader pro-rata to the exposure assumed by these banks under consortium. The DP
1
allocation advised to the consortium members will be binding on them for conduct of
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borrower‘s account. This methodology will also apply in case of facilities under
Multiple banking arrangement as well as in case of standalone credit facilities.
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Further, at the time of assessment, sundry creditors should be scrutinized with
utmost care and no DP should be allowed on goods received under LC unless such
stocks are paid for/till the documents are retired. As such, value of devolved LC/BG
21
remaining unpaid to the bank and value of other LC/BGs outstanding as at the month
end as well as the value of goods received under Buyers Credit should not be
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included in DP.
3
In order to arrive at accurate level of drawing power sundry debtors and creditors
have been made part of stock statement along with sales and purchases of stock
which may be used for comparing the movement of stock. Sales/Purchase and
position of debtors(ageing) should be cross checked through GST returns and E way
bills. Branches should generate Appendix C on monthly basis and compare the
same with sales and purchases reported by the borrower in the stock statement
Stock Inspection :
1. Stocks charged to the Bank by way of pledge/hypothecation in various loan
accounts are required to be inspected and physically checked/verified by the
Incumbents once in a month or more often if so required in a particular case
or subject to the stipulations, if any, made by a Competent Authority in the
letter of sanction.
1
sanction.
6. During periodical inspections, the Incumbents should satisfy themselves that
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the security is intact both qualitatively and quantitatively, is readily marketable,
has not become old or obsolete and has not deteriorated in any way.
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7. A report of physical inspection/verification of stocks is to be submitted as per
Inspection Report Form PNB 941 (Appendix-V) in case of all C/C(H) and P/C
accounts with limit of Rs.5 Lacs and above.
21
8. For accounts below Rs.5 Lacs, there is no need to submit this report and the
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9. The reports must not be signed as a matter of routine or mere formality, but
they should be based on inspections actually carried out.
10. Also See Circular FRMD 17/2017 for more details.
11. It is advised that along with the stock statement copy of GST returns
(containing invoice wise/party wise details) shall also be obtained from the
borrower. (See LA 95/2018 dt 04.10.2018)
05
12. GSTIN Number can also be verified from GST site and it can be ensured
whether upto date GST returns have been filed by the borrower.
(See LA 95/2018 dt 04.10.2018)
13. System of E-way bill has been made mandatory for inter-state movement of
goods of more than ₹50,000 in value throughout India, it can be used as an
additional tool to cross check & verify the genuineness of the bills/invoices
received in term loan accounts. Branches are advised to make use of E-way Bill
as a monitoring tool for aforesaid purpose along with bills/invoices, end-use
certificates issued by Chartered Accountants etc.It is also reiterated that GSTIN
Number can be verified from GST site. Similarly, a QR Code printed on each E
Way Bill and validity of the E-way bill along with all other details can be
authenticated by scanning the code from a Smart Phone.
(See LA 38/2019 Dt 08.04.2019)
14. In terms of L&A Cir. No. 104 dated 18.10.2018 confirmation has to be
provided in the appraisal note that GSTIN of the borrower is active and up to
Applicability
a. Annual Stock Audit should be got compulsorily done in respect of all borrowal
accounts enjoying Fund Based & Non Fund Based (NFB) working capital limits of
Rs.5 crores and above from our Bank. All NFB limits, which are being used for
Working Capital Funding like LC, SBLC, BG for purchase of goods for sale and
BGs for mobilization Advances are to be included within threshold limit of Rs.5
crore for stock audit, but Capex LCs, Bid Bond Guarantees etc. need not be
included in NFB limits for the purpose of conducting stock audit.
1
b. In case of borrowers enjoying fund based working capital limits less than Rs.5
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Crore also, Stock Audit may be got done in exceptional cases and/or where
bank‘s interests demand. 22
c. Annual Stock Audit should be compulsorily conducted in all ‗B2‘ to ‗C3‘ rated
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accounts and NPA accounts enjoying fund based and non-fund based working
capital limits of Rs. 3 crore and above.
21
the branch in the operation of account which may be like Abnormal increase or
decrease (30% or more on a monthly basis without due justification) in Stock
receivables/Sundry debtors / sundry creditors Decline (20% or more) in credit
3
Accounts falling under the category ‗A1‘ to ‗A4‘ under the risk rating module
signifying lower risk, may be exempted from annual stock audit, if required,
based on merits and business considerations of each case, facts should
invariably be incorporated at the time of fresh sanction/renewal/review of the
working capital limits. However, in existing accounts where exemption from
annual stock audit has been already permitted by the sanctioning authority, the
1
same shall continue
Time schedule:
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Maximum time taken for such audit varies from 2-4 weeks except in case of
noncooperation by borrowers where it may take some more time. Time frame for
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completion of such audit should be clearly spelt out. It should be ensured that
the agency conducting Stock Audit submits its report on the prescribed format
(Appendix-I) immediately after completion of audit but in no case later than two
21
Stock Audit exercise may be staggered throughout the year so that whole
available in the succeeding months of January/February/ March, which will help
the Bank to take an appropriate view while finalizing the accounts. Time
schedule for completion of stock audit every year is as under
No.
The overall time limit for closure of stock audit shall be 3 months. However, in
cases where stock/receivables audit is conducted more than one time in a
year, the time limit for closure of stock audit shall be 2 months
Charges:
The fee for Stock/ Receivables verification by independent Chartered
Accountant is as under:
WC LIMIT (FB+NFB) FEE PAYABLE
Up to Rs 10 Cr Rs 15,000/-
Above Rs 10 Cr upto Rs 25 Cr Rs 20,000/-
Above Rs 25 Cr upto Rs 50 Cr Rs 30,000/-
Above rs 50 Cr upto Rs 100 Cr Rs 40,000/-
Above Rs 100 Cr Rs 50,000/-
The above fee structure shall be inclusive of all expenses to be incurred by
Auditors on travelling, Boarding, Lodging and other Misc. Expenses etc. The fee
payable to the stock auditors would be borne by the borrowers
1
(L&A circular 148 dated 11.08.2020)
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H. INSURANCE:
(LA 157 dated 17.08.2020, 46 dated 23.04.2014, 113 dt. 26.11.15)
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1. All the securities mortgaged or hypothecated to the Bank should be kept fully
insured against fire and other risks, which may be considered necessary. The
21
insurance policies should be in the joint names of the borrower and the Bank with
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the agreed Bank clause and remain in the custody of the Bank.
Under CBS system, the report relating to insurance of securities PNBRPT 3/2
can be generated and monitored on day to day basis. It should be ensured that
3
In order to ensure that all assets/securities are got insured and in no account
assets/securities are left uninsured, all insurance policies in respect of assets
th
charged to the bank shall be renewed on a common date i.e. 15 May,
th th th
15 August, 15 November and 15 February.
In case, common date falls on Sunday/Holiday, insurance policies shall be
renewed on the preceding working day.
In addition to Life Policies issued by LIC of India and Non-Life Policies issued
by Public Sector General Insurance Companies, Insurance Policies (Life &
Non-Life) issued by Private Sector Insurance Companies registered with IRDA
as per list given in Appendix of the circular (LA 46/2014 dated 03.04.2014)
may be accepted.
The insurance of the stocks should be arranged by the borrowers themselves
with an Insurance Co. In cases where the parties concerned neglect or refuse to
effect the insurance, the bank has to exercise the right to insure the stocks.
1
Ordinarily, therefore, the parties should themselves arrange for insurance with
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the usual bank clause and advances against particular stocks should only be
allowed after the insurance has been effected and the necessary cover note or
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the insurance policy has been deposited with the bank.
The entire stock must be insured and not to the extant sufficient to cover our
outstanding/limit.
21
stocks are shifted from one place to another, the same should be duly intimated
to the bank and insurance cover in respect of new premises should be taken. A
stipulation to this effect should be incorporated in the terms of sanction. Further,
3
the bank should also take cognizance of the stock at the new officially intimated
address.
It is clarified that penal rate of interest for the period of default is to be charged:
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(d) Advances against deposits, life insurance policies & Government securities/gold and
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jewellery where the drawings are within the available value of the security.
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RATE OF PENAL INTEREST/ADDITIONAL INTEREST
(a) In borrowal accounts, where one or more 2% above the normal rate of interest
21
1
In order to make QRS a more effective tool of monitoring, bank has introduced Score
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based QRS in respect of accounts with limit of Rs. 20 Lac and above and upto Rs. 1
Crore, which is in line with PMS report , so as to determine the health of the account.
22
Branches shall assign score for 14 important parameters as per Annexure III of the
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circular LA 107/2012. Total score of 14 parameters will decide the rank of the
account ranging from 1 to 4, based on the seriousness of the irregularities:
21
Rank Category
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1 Healthy
2 Early Warning
3
3 Warning
4 Critical
After preparation of QRS in all eligible accounts of Rs. 20 Lac and above and upto
Rs. 1 crore and assigning score as per Annexure III, branch shall prepare two
statements as per Annexure II & Annexure II A in circular
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Branches are to prepare both the above statements (Annexure II & Annexure
IIA ) for all sanctions (including BM Powers) and submit to Circle Office. LCBs
are to submit a copy of Annexure II to FGMO and HO. Accounts under Annexure
IIA are to be monitored at branch level.
The QMS system consists of two sets of formats namely QMS I and QMS II given in
Annexure I & II respectively and provides different set of formats for following
categories of borrowers:
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(i) General category
(ii) Traders/Merchant Exporters 22
The QMS-I, is to be submitted on quarterly basis within six weeks from the
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1. Applicability:
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If the aggregate limits under FB and NFB facilities put together exceed Rs. 1
crore. (Page 1 of LA 45/2019 dated 18.04.2019 stipulates applicability of
3
QMS-I and QMS-II for 1 Crore and above, where as page 2 stipulates
applicability if exceeds Rs.1 Crore)
In accounts where borrower is enjoying credit facilities (FB & NFB) under
Multiple Banking arrangement and availing only NFB facilities of Rs.1 crore &
above from our Bank, QMS Forms should be obtained to monitor the
company‘s operating and cash generating position on regular basis.
05
In cases where borrowers are enjoying only NFB facilities of Rs.1 crore &
above and do not require working capital assistance in normal course of
business requirement from any Bank/FI, QMS Forms, which includes
operating and fund flow statement should be obtained to keep track of the
borrowers performance/progress and at the same time ensuring end use of
funds. While scrutinizing QMS Forms in case of standalone NFB facilities, the
Branch Heads should take extra care.
If financial/performance guarantee, ILC/FLC is sanctioned on standalone
basis for fulfillment/specific performance of commitments for project
implementation (new/existing), the similar monitoring as applicable for term
loan accounts is required. Accordingly:
For NFB limits of Rs. 25 crore and above the information as per PERT Chart II
should be submitted alongwith the QMS Forms.
For limits of Rs. 1 crore & above but less than Rs. 25 crore, the monitoring
shall be done as per the simplified format for monitoring of term loan as per
2. In case of accounts enjoying aggregate fund based and non fund based working capital
limits of Rs. 1 crore & above from entire banking system and where PBF is computed on
the basis of Simplified Turnover Method, instead of QMS I & II forms, the simplified
QMS Form as per Appendix IV in circular is to be obtained from the borrower within six
weeks of close of every quarter.
3 The borrowers in Tea Industry are exempted from the purview of QMS.
However, the borrowers in tea industry shall submit Cash Flow Statement
showing month wise actuals vis-à-vis projections and Stock Statements on
monthly basis. Further, to safeguard Bank‘s interest, physical inspection of
stocks should be conducted by the Officers/ Agricultural Officers and stocks be
checked with Excise Register.
4. In case of borrowers engaged in Leasing & Hire Purchase/Sugar Industry/ Film
Industry/Service Sector the existing Cash Budget System and formats will
continue.
5. In case of consortium advances, system followed by Lead bank may be different
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from the system adopted by member banks. In such cases it is advised that
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where we are member of consortium, monitoring system, as adopted by Lead
Bank, may be followed. However, where we are the Lead bank, the Monitoring
22
System, as applicable in our bank, may be followed.
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Vide IRMD LA circular 25/21, It is clarified that QMS shall be applicable if the
aggregate Fund Based and Non Fund Based Working Capital limits exceed Rs. 1.00
21
crore.
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In order to enable the bank to manage its funds position more effectively and
economically, the following system of fixing quarterly operative limits especially in
big borrowal accounts is in vogue:
- For all borrowal accounts availing fund based working capital credit limits of
Rs. 5 crore & above from our bank, Quarterly Information System (QIS) Form-
I may be obtained for fixing up of quarterly operative limits in addition to the
QMS Forms. The QIS Form-I as per Appendix Vin circular is to be submitted
in the week preceding the commencement of the quarter to which it
relates.
- In case of consortium advances, where our Bank is leader, the above system
In case of new borrowers with aggregate limit of Rs. 25 crore & above, the cash flow
statement should be obtained at half yearly basis duly verified by the Chartered
Accountants as under:(LA Cir.122/ 2011)
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should be done by calling for the actuals every month and then comparing it with the
estimates.
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In case of tea industry, Cash Flow Statement showing month-wise actuals vis-à-vis
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projections and stock statements on monthly basis is to be submitted.
should be adopted:
Particulars Primary Security Collateral Security
earlier. earlier.
Value of property mortgaged/ At least on half yearly At least on yearly basis
charged is above Rs.20 lac or the basis or as per terms of or as per terms of
credit facilities are of above Rs.1 sanction, whichever is sanction, whichever is
crore, earlier. earlier.
1
In case of any post-sanction visit by Senior Official, the officer
accompanying the Senior Official shall prepare a brief visit report and the
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same shall be held on record at Branch/CO/ZO.
In addition to above, FRMD vide Circular No. 18/2017 has also issued guidelines
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regarding Independent verifications by the bank officials for carrying out the site visit/
IP verifications which may also be referred by the field at the time of pre sanction
appraisal and post sanction follow up.
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The system of Annual Review and Renewal enables the Bank to have a look
3
conscious decision about the continued credit worthiness of the borrower and
whether need-based credit facilities can continue to be granted to the
borrower.
It is, therefore, advised to ensure that working capital limits are positively
renewed/reviewed at least once a year without fail. Branches are also
advised to treat borrowers continuing on lapsed sanction as high risk
borrowers and should monitor the operations in such accounts closely for
safeguarding bank's interest.
Since the system of annual renewal of loan accounts enables the bank to
review the borrower‘s performance and monitor end-use of bank finance, it is
advised that the laid down guidelines for timely renewal of limits should be
strictly adhered to.
A report is available under PNBRPT 3/6 - Accounts where the Limits are
going to fall due/ overdue for Renewal during next 6 months. The SMS alert
is also sent 15 days prior to limit expiry for renewal of Limit. The SMS is
1
authorities. In order that the renewal proposals with complete financial
information are completed in time by the Branch Managers, they should
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adopt the following procedure :-
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a) All renewal cases should be diarized at least 4 months in advance and
followed up by Branch / Circle Offices as the case may be so that all the
sanctions are renewed in time.
21
b) Remind the borrowers four months ahead of the due date and collect all
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1
The review of Term Loans will have no bearing on asset classification and
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income recognition of the accounts.
The annual fee for review of Term Loans shall be as per IRMD L&A circular
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no 93/2020 and subsequent modifications thereupon
However, in deserving cases, sanctioning authority may consider concession
in the annual fee up to 50% whereas MD & CEO/ED may allow 100%
21
concession
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started, the review charges shall be levied on the outstanding amount till the
account is fully adjusted. Further, the annual review fee should be charged on
the anniversary date.
The position of eligible Term Loan limits overdue for review as on the last day
of each quarter be prepared by the branches as per the format at Appendix-
XV and submitted to their controlling offices within 7 days of close of the
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The details of eligible Term Loan sanctions overdue for review above three months
should be submitted to the controlling offices alongwith the statement and reasons/
present status/proposed action plan should invariably be mentioned therein.
It supersedes the IRMD L&A Circular No. 38 dated 26.03.2020 & Circular letter no.
1
(L&A circular 34 dated 16.02.21)
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If the reasons for delay are genuine & beyond the control of the borrower, on request of
22
the borrower competent authorities (as advised vide the circular) can permit extension in
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validity of sanction upto three months from the due date of renewal of limits subject to
following conditions: a) Validity is extended at existing level of exposure as per terms of
last regular sanction b) No change in existing terms and conditions of last regular sanction
21
c) No security dilution. The extension in validity of sanction of the borrowal accounts shall
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be undertaken by the competent authority prior to the expiry of the regular sanction.
In case of constraints such as non-availability of financial statements and other data from
3
the borrowers, the branch should furnish evidence to show that renewal/ review of credit
limits is already on and would be completed soon. The authorities (as per Table-2) , may
permit extension in validity of sanction for further three months form the due date of 1st
validity extension subject to conditions mentioned.
05
Mechanism to be followed in Finacle has also been conveyed vide the circular.
1
documents and subsequently vetting thereof.
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Compliance of all terms and conditions of sanction.
Execution of documents as per sanction.
Creation of primary security.
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3
Each activity mentioned in PERT Charts will be monitored on monthly basis from
Zero date i.e. date of acceptance of sanction. The monitoring shall continue in
individual account till full disbursement of loan/start of commercial production,
whichever is later.
For effective monitoring of term loan accounts of Rs. 1 crore but less than Rs. 25
crore, simplified format as per Annexure to L&A Cir. 103/2011 is required to be
submitted alongwith QRS/QMS.
Now the PMS has been revamped comprehensively to cover 127 early warning
signals which shall also include 42 early warning signals as prescribed by RBI,
emanating from various internal data sources and renamed as PNB-SAJAG
(EWS+PMS) system.
i. NPA Accounts. ii. Advances against Life Insurance Policies. iii. Advances against
Bank‘s own deposit. iv. Advances against Shares. v. Advances against Deposits,
Govt. Securities, Units of UTI. vi. Advances against bullion and jewellery.
1
EWS Comprehensive Report. c) EWS Report based on RBI prescribed signals
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On successful verification of EWS+PMS, all three above mentioned reports shall be
mailed to respective sanctioning authority and concerned BO/ZO/HO. In addition
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user can also parameterize mail id on which user desire to send the generated
reports. These reports shall also be placed under reports section of EWS+PMS.
PNB-SAJAG (EWS+PMS) Reports are to be prepared by the BOs on monthly basis.
21
The data for preparation of EWS+PMS report for a month will be available in the
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system within 3-7 days of next month. Accordingly, the BOs shall prepare the reports
within 15 days from the close of the month and after verification, auto generated
reports shall be sent to concerned offices.
3
Vide IRMD circular 31/2020 dated 15.10.2020 It has been conveyed that w.e.f
15.10.2020 PNB-SAJAG (EWS+PMS) system has been made live for amalgamated
entity and shall capture EWS & PMS of borrowers of all three banks in the system
from September 2020 onwards. The system is accessible through Non CBS Page of
05
Keeping in view the revised credit delivery structure and implementation of PNB
SAJAG in amalgamated entity, certain changes have been done in operational
guidelines of PNB SAJAG (EWS+PMS) circulated through IRMD circular 30/2019
dated 27th Sept 2019
U.Use of Legal Entity Identifier (LEI) -(L&A circular 34/2020 dated 26.03.2020)
RBI has make it mandatory for corporate borrowers having aggregate fund-based
and non-fund based exposure of Rs. 5 crore and above (introduced in a phased
manner) from any bank to obtain Legal Entity Identifier (LEI) registration and
capture the same in the Central Repository of Information on Large Credits
(CRILC).
ITD has made the provision in CRM module of Finacle for capturing the 20 digit LEI
code.
1
Delay in completion of documentation resulting in non-creation/
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registration of charge/mortgage etc.
Non-compliance of important terms and conditions of sanction.
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Credit Division, HO monitors all weak and irregular loan accounts under standard
05
category having outstanding of above Rs.10 Lac on monthly basis. Besides, the
position of all weak accounts under standard category with outstanding of above Rs.
10 Lac having weaknesses such as units incurring operating/cash losses and
accounts with ‗C‘ & ‗D‘ risk rating etc. is also monitored at corporate level on
quarterly basis.
At field level, monitoring of all such accounts is done as under:
User log-in ID & Password - The EDW Users ID has been created centrally for all
Bank employees. The EDW User ID is their PF number (without any initials) and for
password, users may take up matter with their Circle Office or submit their request
through banks e-mail at [email protected]. In case your user-id/ password is not
working, contact MIS Division on 011-23705933, 23766782 or email: [email protected]
Irregular Accounts Dash board has been created with the objective of providing standardised
MIS, meaningful visualisation through charts / graphical representation at various levels, on
Irregular accounts. This dash board provides comprehensive details of every irregular
account including recovery data up to previous day. The main purpose of Irregular Accounts
Dash board is to facilitate field functionaries to take timely corrective steps and arrest fresh
1
slippage to NPA.
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The irregular Dash Board has many features and provides single point access to
manage the irregular accounts. The major features are:
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Summary of irregular accounts, amount-wise, age-wise, non-financial reason
wise and sector-wise.
Irregular accounts with irregularity of one day and above.
21
Part I has the summary position of irregular accounts with number of accounts,
outstanding amount and irregular amount. This data can be viewed through 4 tabs:
05
a) Amount wise (up to 10 Lacs, 10 Lacs to 50 Lacs, 50 Lacs to 1 cr. & above 1
cr)
b) Age wise (viz. 1-30days, 31-60days, 61-90 days, etc.),
c) Non financial reason (like SRM not renewed) summary view.
d) Another tab with an option to view summary report, i.e the FGM wise, Circle
wise summary for any given combination (single page report) with an option to
view amount wise, age wise, sector wise &non financial reason wise is made
available for assessing the impact.
Part II provides graphical view of the summary data. The charts provide the
percentage of various segments of irregular accounts in terms of age, amount,
sector and non financial reasons based on number and amount of irregular
accounts. This facilitates the teams to identify the critical area and draw plan of
action for recovery.
Advantages: The major benefit of this Irregular Dash board is ―monitoring made
easy‖. The progress in regularisation of irregular accounts can be monitored on daily
basis. The analytics view of dashboard enhances the viewer‘s perceptions of
situations and enables to take faster decision. The data can be exported into the
user‘s PC in excel format with an options to Save and Print. Further, Daily Account-
wise detailed master report may be viewed by FGM/CH in their My Inbox available
at Home page of EDW MIS
Access to Irregular Account Dashboard has been provided to all GM‟s at HO,
Field General Managers, Circle Heads, other Senior Officials at FGMO and Circle
Offices.
1
Ad-hoc Data – Apart from pre-published MIS reports, EDW is also facilitating HO
Divisions/FGMOs/COs/Branches by providing ad-hoc data for various activities and
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business development. HO Divisions/FGMOs/COs are requesting ad-hoc data from
EDW, which is being provided on demand basis. To demand ad-hoc data, request
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must be submitted at email id [email protected]. The ad-hoc data request
should contain following:
21
Data Clean - Since, this is a decision support system and the decision may go
wrong if it is based on faulty data. The role of branches is to ensure that proper
code/data is updated in CBS system. The reports relating to data clean are available
under folder Data Clean in EDW which helps the branches in identifying the
flawed fields/data and make necessary corrections in source system.
05
A report has been devised „Credit Summation in Cash Credit Accounts‟ and
made available under folder MISD > Cash Credit of EDW on monthly basis. It
displays list of all CC A/Cs (>Rs. 1 Lacs), extracts their limit, credit summations
during the month, compares the actual credit summation in the a/c against a pre-
fixed benchmark and grade the account as per the appropriateness of the credit
summation (different grades denoted by different colors - lowest Credit summations
are represented by RED colour). Thus branches, simply by mouse clicks, get a pre-
published report of credit summation activities of their All CC A/Cs in One Single
Screen. The actionable accounts are immediately identified through the Red colour.
These are the A/Cs with least Credit summations. FGMOs/ COs/ Branches to sort
out the red coloured accounts and take suitable remedial actions. The report is a
quick identifier of early illness, based on CBS transaction only for CC a/cs.
1
ELBs/VLBs/MCBs to Circle Lac by 7th of
Statement of irregular
the closeaccounts
of monthwith outstanding of
Offices
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above
Rs.1 0 Lac by 7th of the close of month
Circle Offices/LCBs to CPMRD
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Statement of irregular accounts with outstanding of
above
Rs. 50 Lac by 10th of the close of month
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i) The first Quarterly Statement of all Weak Accounts, in a financial year shall be
3
With the monitoring of irregular and weak accounts above Rs. 50 Lac at HO,
constitution /scope/functions of Task Force at HO have been revised as under:
Level Constitution Scope
HO GM (CPMRD) All irregular accounts and weak
DGM/AGM/Chief (Credit Monitoring accounts under standard category
Division) with outstanding of above Rs. 50
GM/DGM & AGM/Chief (Recovery Lac.
Division).
CGM/GM/DGM (Credit)
1
PNB MTOUCH – MOBILE APPLICATION & WEB PORTAL FOR CREDIT
MONITORING & FOLLOW UP (LA 157/2020)
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A Digital Mobile Application cum Web Portal has been developed to capture the
records of all field visits made by the Branch Officials for recovery of overdue amoun.
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The Mobile APP, PNB M Touch is linked to our existing monitoring mechanism to
access the data regarding SMAs / Likely Degradations with functionalities to upload
21
the visit details on real time basis and to download the reports by controlling offices.
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Flash Message / Follow up Reminder Reports for due date / promise date made by
Borrower in the Portal / App.
Search Record Functionality (like Search the Borrowers of same location by using
Pin Code, Irregular for more than 60 days etc.)
Coverage of credit audit: All standard risk rated accounts except:
W. LOAN REVIEW MECHANISM/CREDIT AUDIT POLICY (CARD Cir. No. 02/2020 dated
26.03.2020)
The cut off limit for the purpose of credit audit of risk rated standard accounts shall be as
under:
All Standard Risk Rated Borrowal accounts (fresh proposals and proposals for
renewal /enhancement of limits within 3 months from the end of quarter,
during which loan was sanctioned/first disbursed) of the bank with aggregate
Credit facilities with exposure of Rs. 10.00 Crore& above (FB+NFB)
1
debentures & Mutual Fund ) (c) Accounts which are exempted from Internal
Rating.
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Frequency:
The frequency of credit audit will be as under : -
21
All eligible Accounts shall be subjected to credit audit annually. The frequency of
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review should vary depending on the magnitude of risk (say, for the high risk
accounts - 6 months, for the Medium risk & low risk accounts- 1 year).
3
Frequency of Audit:-
Low Risk Medium Risk High Risk
Yearly Yearly Half-Yearly
A-1 to A-4* B-1 to B-3 C-1 to C-3
*Classification of accounts as per Internal Rating of the borrowal account:-
05
FINANCIAL APPRAISAL
On receipt of a loan application with financial information the banker begins the
process of financial appraisal. To analyze the financial statements, an understanding
‗All eligible rated standard accounts with exposure of Rs.5 cr. Or Rs.10 cr. & above,
as the case may be.
A "wilful default" would be deemed to have occurred if any of the following events
is noted:-
(a) The unit has defaulted in meeting its payment / repayment obligations to the
lender even when it has the capacity to honour the said obligations.
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(b) The unit has defaulted in meeting its payment / repayment obligations to the
lender and has not utilised the finance from the lender for the specific purposes for
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which finance was availed of but has diverted the funds for other purposes.
(c) The unit has defaulted in meeting its payment / repayment obligations to the
21
lender and has siphoned off the funds so that the funds have not been utilised for the
specific purpose for which finance was availed of, nor are the funds available with
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(d) The unit has defaulted in meeting its payment / repayment obligations to the
lender and has also disposed off or removed the movable fixed assets or immovable
property given by him or it for the purpose of securing a term loan without the
knowledge of the bank/lender.
(a) The evidence of willful default on the part of the borrowing company and its
promoter/whole-time director at the relevant time should be examined by a
Committee headed by an Executive Director and consisting of two other senior
officers of the rank of GM/DGM.
(b) If the Committee concludes that an event of willful default has occurred, it shall
issue a Show Cause Notice to the concerned borrower and the promoter/whole-time
director and call for their submissions and after considering their submissions issue
an order recording the fact of willful default and the reasons for the same. An
opportunity should be given to the borrower and the promoter/whole-time director for
a personal hearing if the Committee feels such an opportunity is necessary.
(c) The Order of the Committee should be reviewed by another Committee headed
1
the following cases:
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(a) Education Loans
(b) In case the concerned branch is located in the States/UTs listed herein below:
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1. Andhra Pradesh
2. Andman & Nicobar Islands
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3. Arunachal Pradesh
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4. Assam
5. Karnataka
6. Kerala Note:
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7. Lakshdeep
8. Mizoram
9. Nagaland
10. Telengana
11. West Bengal
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The above list may change from time to time. Before according sanction to publish
the photographs, the Circle Office to check up the status in consultation with the Law
Officer/Panel Lawyer of the respective area, so as to ensure that no adverse order
has been passed by the Court in their area.
3. Once Notice as per para herein below is issued, Circle Head may also permit
publishing of photographs of Wilful Defaulters in the Possession/Sale Notice
itself, instead of publishing separately, depending upon the requirement and on
case to case basis.
―As a precautionary measure, branches should send a Notice through Registered
Post and Speed Post as per the format given in Annexure A/B to the Wilful
Defaulters (borrower/guarantor), in the local language, intimating that in case of non-
repayment of outstanding amount in the loan account, within a month‘s time from the
date of Notice, their names and photographs will be published in the newspapers.‖
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Obstructing sale of securities, etc.
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In effect, a non-cooperative borrower is a defaulter who deliberately stone walls
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legitimate efforts of the lenders to recover their dues.
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• A non-cooperative borrower in case of a company will include, besides the company,
its promoters and directors (excluding independent directors and directors nominated
by the Government and the lending institutions).
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would include persons who are in-charge and responsible for the management of the
affairs of the business enterprise.
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Cut-off Limit for NCB: The cut off limit for classifying borrowers as non-cooperative shall be
those borrowers having aggregate fund-based and non-fund based facilities of Rs. 5 crore
and above from our bank.
Identification and Reporting of NCB:
In terms of definition of non-cooperative borrower as above, the borrower shall be
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the debtors for ensuring the genuineness of transactions.
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No proper sharing of information amongst consortium members.
No check on transactions between associates/ related parties.
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Extensive reliance on information given by outside agencies/professional etc.
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This has been further analysed Vide LA 99/2018 dt 08.10.2018 on 5 different sectors
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namely Trading, Information & Technology, Export Business, Demand Loan and
Letter of Comfort under three captions i.e. Modus operandi, Loopholes/lapses and
suggestion for systemic improvement.
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Some of the major loopholes/lapses detected by CVC are in the following areas:
Many related parties/subsidiaries/associates/key management dealings.
Cross transactions of sale/purchase from the same party.
No record of movement of goods.
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including SMA accounts (having constitution as Company / LLP) is checked on MCA
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website under Company / LLP master data. The information regarding accounts, if any
identified as struck off in MCA records along with action taken should be submitted by
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branches to respective ZOs within one week. The printout of each search shall also be
kept on record.
In case of struck off Companies / LLPs, operations in the loan account shall be frozen
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and the borrower be conveyed about the freezing of operations in the account and the
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reason thereof. In case of any outstanding dues, efforts should be taken for immediate
realisation of the same.
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bank for closer of such accounts at the earliest for compliance of the RBI advisory within
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a timeline of 3 months from the date of the RBI notification i.e. 06.08.2020 i.e. by
06.11.2020. (CRMD 17/2020) 22
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CONTROL MEASURES – OPENING OF CURRENT ACCOUNTS BY BANKS NEED
FOR DISCIPLINE (L&A Advance circular 220/2020 dated 16.12.2020)
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It has reference to IRMD L&A Cir. No. 162 dated 28.08.2020 inter-alia advising revised
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Now RBI has permitted banks to open specific accounts which are stipulated under
various statutes and instructions of other regulators/ regulatory departments, without any
restrictions placed in terms of the existing guidelines. An indicative list of such accounts
is as given below :-
i. Accounts for real estate projects mandated under Section 4 (2) l (D) of the
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Real Estate (Regulation and Development) Act, 2016 for the purpose of
maintaining 70% of advance payments collected from the home buyers.
ii. Nodal or escrow accounts of payment aggregators/prepaid payment
instrument issuers for specific activities as permitted by Department of
Payments and Settlement Systems (DPSS), Reserve Bank of India under
Payment and Settlement Systems Act, 2007.
iii. Accounts for settlement of dues related to debit card/ATM card/credit card
issuers/acquirers.
iv. . Accounts permitted under FEMA, 1999.
v. Accounts for the purpose of IPO / NFO /FPO/ share buyback /dividend
payment / issuance of commercial papers/allotment of debentures/gratuity, etc.
which are mandated by respective statutes or regulators and are meant for
specific/limited transactions only.
The above permission is subject to the condition that the bank shall ensure that these
accounts are used for permitted/specified transactions only. Further, banks shall flag
these accounts in the CBS for easy monitoring. Lenders to such borrowers may also
enter into agreements/arrangements with the borrowers for monitoring of cash
flows/periodic transfer of funds (if permissible) in these current accounts.
Bank shall monitor all current accounts and CC/ODs regularly, at least on a half-yearly
basis, specifically with respect to the exposure of the banking system to the borrower,
to ensure compliance with instructions.
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For large borrowal accounts with overall credit exposure (FB and NFB from the banking
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industry) of more than Rs.250 Crore, appointment of outside Agencies for specialized
monitoring of the account is required. Policy guidelines for appointment of ASMs
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(Agencies for Specialized Monitoring) whose services are to be utilized for monitoring of
large value loans/ (may or may not be of specialized nature by bank) under Sole/
multiple/ consortium banking arrangement is given in the above circular.
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Presently IBA has empanelled 328 ASMs with validity up to 30.06.2022. The ASM audit
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IBA has informed that RBI has decided to exempt following from the purview of the Loan
System for Delivery of Bank Credit guidelines:-
a) Credit facilities extended to State Government/ Union Territory agencies and Food
Corporation of India for procurement /price support activities;
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It has been observed by the Statutory Central Auditors (SCAs) that guideline requiring
the working capital loan to be divided in two separate components as WCL and Cash
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Credit has not been properly complied with by branches wherever the borrower is
availing aggregate fund based working capital limit of ₹150 crore and above which has
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been effective from 01.04.2019. Further, it has also been observed that commitment
charges have not been levied in certain cases.
In this regard, it is advised that the guidelines issued vide aforesaid circular requiring the
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working capital loan to be divided in two separate components as WCL and Cash Credit
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7. Pre-payment of WCDL: Where a borrower intends to pre-pay WCDL before the
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due date, branches may accept the same subject to compliance of 60% of the facility
in the form of WCDL. At the time of pre-payment it should be ensured that the tenor
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of the loan component is not less than seven days.
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8. Commitment charges:
Commitment charges on undrawn portion of FBWC limits sanctioned should
be levied on quarterly basis. In case of credit balance in Cash Credit account,
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recovered.
Undrawn portion of sanctioned limit - The difference between the average
utilization during the quarter and the sanctioned limit. The average utilization
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a) Where our Bank is leader : While sharing the DP, WCDL component on overall
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consortium level limits shall also be shared. A confirmation in this regard should be
obtained from member banks and kept on record.
However, all lenders in the consortium shall be individually and jointly responsible to
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ensure that at the aggregate level, the „Loan component‟ meets the above
mentioned requirements. Information regarding repayment of WCDL, availment of
CC limit etc. to be shared by member banks at regular intervals.
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b) Where our Bank is a member : Our Bank shall ensure WCDL component out of
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the limits enjoyed by the borrower from our Bank is always met (though our stand-
alone exposure is less than Rs.150 crore). In consortium advances, the commitment
charge should be determined with reference to the sanctioned limit allocated to each
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member.
13. Loans under Multiple Banking Arrangement: Under Multiple Banking
Arrangements (MBAs), each Bank shall ensure adherence to these guidelines at
individual bank level. The level of individual bank's share shall continue to be
governed by the exposure norms.
In multiple banking arrangements, the commitment charges should be determined by
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Rate of Interest pertaining to Retail Advances, Agriculture Advances, MSME
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Advances, Other Advances (not specified elsewhere), Specified Categories, various
Concessions and Mapping of Rating Grades & score bands applicable from
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01.04.2020 have been consolidated/ updated.
(L&A circular No 42/2020 dated 26.03.2020)
The Interest rates for all MSME advances (Except Scheme specific rates) and the
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corresponding Interest rate codes w.e.f. 01.04.2020 has been provided with the
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Undertaking from borrower (Annexure I), Application to be filled by the Borrower
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(Annexure II)and Simplified Appraisal Format (Annexure III) to aid the field
functionaries and improve TAT have also been enclose. For detailed guidelines of
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the scheme kindly refer circular. (L&A circular 68/2020 dated 15.04.2020)
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under:-
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Nature of Facility Scheme Code Benchmark Lending Rate Interest Table Code
Demand Loan DLCOV MCLR DLCOM
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RLLR DLCOR
Overdraft ODCOV MCLR ODCOM
RLLR ODCOR
(L&A circular 69/2020 dated 16.04.2020)
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Based Facilities
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MSME Division vide their circular 49/2020 dated 27.03.2020 issued guidelines to ease
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the liquidity position and meet-out the temporary requirement of MSME sector under
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the PNB Stand by Line of Credit scheme. MSME borrowers can avail credit facility
either under PNB Stand by Line of Credit or PNB COVID-19 Emergency Credit Facility
circulated by IRMD vide Circular no. 68/2020 dated 15.04.2020 as per their need.
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Since formats and undertaking for advances under PNB Standby line of Credit were
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not provided in MSME Circular, the same are enclosed at Appendix-I, Appendix II,
Appendix II-A and Appendix II-B with the circular.
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Now Board has approved schemes for reassessment of working capital requirement
of MSME borrowers upto ₹5 Crore and above ₹ 5 Crore have been formulated and
salient features of the scheme/s are appended below:-
Now, relaxations for calculation of drawing power can be permitted by Branch Head
for borrowers availing above mentioned PNB-CECF scheme after satisfying himself of
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EASING OF WORKING CAPITAL FINANCING - REVISED MARGIN NORMS AND
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REASSESSMENT OF WORKING CAPITAL CYCLE
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This has reference to L&A Cir. No. 73 dated 20.04.2020 on timely credit to business in
the context of the Covid-19 pandemic wherein Bank has made available various credit
measures to cater to MSME, Corporate and agriculture borrowers.
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Now,the Banks have to review the working capital sanctioned limits upto March 31,
2021, based on a reassessment of the working capital cycle and the banks to assess
working capital limits sanctioned in the form of CC/OD to borrowers on the basis of
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computation of the ‗drawing power‘ by reducing the margins till August 31, 2020. In all
such cases where such a temporary enhancement in drawing power is considered, the
margins shall be restored to the original levels by March 31, 2021
However, the interest for the month of April, 2020 and May, 2020 will be kept in
partitioned account, to defer actual charging of interest in the accounts. Such
accumulated accrued interest shall be recovered immediately after the completion of
this period.
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Since Bank is extending deferment to all borrowers the consent letter (in term loan
account as advised vide LA circular 57/2020) to be taken to form part of borrower
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record and such deferment should be allowed to all borrowers.
(L&A Circular No 63/2020 dated 07.04.2020)
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CAPITAL FACILITIES
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This has reference to L&A Cir. No. 67 dt. 10.06.2019 on Prudential Framework for
resolution of stressed assets (issued in compliance with RBI notification dated
07.06.2019) interalia prescribes lending institutions to review the borrower account
within 30 days from date of default (Review period) and a resolution plan to be
implemented within 180 days from the end of review period.
Now it has been informed vide the captioned circular that RBI has reviewed and
extended the timelines under Prudential Framework for Resolution of Stressed
Assets. Guidelines are as under :-
i) In respect of accounts which were within the Review Period as on March 1, 2020,
the period from March 1, 2020 to August 31, 2020 shall be excluded from the
calculation of the 30-day timeline for the Review Period. In respect of all such
accounts, the residual Review Period shall resume from September 1, 2020, upon
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expiry of which the Bank shall have the usual 180 days for resolution.
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ii) In respect of accounts where the Review Period was over, but the 180-day
resolution period had not expired as on March 1, 2020, the timeline for resolution
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shall get extended by 180 days from the date on which the 180-day period was
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Standard Operating Procedure for Allowing Funded Interest Term Loan (CFITL)
This is in continuation and reference to Sastra Division Cir. No.12 dated 27.03.2020,
LA Cir. No.57 dated 31.03.2020, 63 dated 07.04.2020 & 104/2020 dated 03.06.2020,
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Now standard operating Procedure for allowing Funded Interest Term has been
conveyed as under:-
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The outstanding balance in CFITL account, if any, as on 01.04.2021
shall be debited to the linked CC/OD account.
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Detail guidelines in respect of exposure wise process in opening of FITL account
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is advised in the circular.
Bank guidelines regarding Moratorium on Term Loan Instalments, including interest and
Deferment of Interest on Working Capital Facilities were conveyed vide SASTRA
Division Cir. No.12 dated 27.03.2020, LA Cir. No.57 dated 31.03.2020, LA Cir. No.63
dated 07.04.2020 & LA Cir. No. 104 dated 03.06.2020. Guidelines for conversion of
interest accumulated on CC/OD accounts into FITL stand conveyed vide LA Cir.
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It is clarified that WCDL accounts, being carved out of existing Working Capital limits,
even if such accounts are opened on or after 01.03.2020, are part and parcel of FBWL
limits and are eligible for all relaxations announced by RBI in this regard, viz. deferment
of interest and conversion of accumulated interest charged in the accounts from
01.03.2020 till 31.08.2020 into a separate FITL account, as per guidelines already
issued vide LA Cir. No. 115 dated 25.06.2020, provided the main FBWC account was
opened on or before 29.02.2020 & is getting COVID19 relaxations.
i. PNB-CECF
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The scheme has been launched as a Standby Line of Credit with maximum limit
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upto 10% of existing Fund Based Working Capital Limits (FBWC) subject to
maximum of ₹100 Crore to existing borrowers by way of Demand Loan/ Overdraft
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with loan tenor of 2 years vide IRMD L&A Circular No.68/ 2020 dated 15.4.2020.
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To avoid inherent delay in sanction, the Credit Approval Committee has been
remodelled for this specific limited purpose with two member committee i.e
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Circle Head shall sanction limits above ₹10 Lakhs and upto ₹1.5 Crore
(AGM) and ₹3.0 Crore (DGM) in accounts, where files have not been shifted
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to MCCs before the cut-off date i.e., 26.06.2020 (date of this circular). This
shall ensure that both MCC and Circle Office can sanction loans thereby
ensuring lesser pendency in processing the loans.
To address the operational issues in MCCs such as MCC have not started
functioning / MCC Head yet to join etc., the proposal shall be sanctioned by
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The scheme has been formulated as a pre-approved loan with limits up to 20% of
total outstanding loans as on 29th February, 2020 with a maximum loan amount of
₹5 Crore in the form of Working Capital Term loan to existing borrowers with total
loan tenor of 4 years vide MSME Circular No. 72/2020 dated 27.5.2020.
To avoid inherent delay in sanction, the Credit Approval Committee has been
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remodelled for this specific limited purpose with two member committee i.e.,
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recommending authority-sanctioning authority model at COs, MCCS and
ZOs. 22
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GBBs shall sanction proposal up to ₹10 lac, and Circle Head shall sanction
limits above ₹10 lac and upto ₹5 Crore in accounts, where files have not
been shifted to MCCs before the cut-off date i.e. 26.06.2020 (date of this
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circular). This shall ensure that both MCC and Circle Office can sanction
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functioning/ MCC Head yet to join etc., the proposal shall be sanctioned by
CO as per powers given in Annexure II.
To address the operational issues such as Circle Offices have not started
functioning/ Circle Head yet to join etc., the Zonal Office shall sanction limits
above ₹10 lakh and upto ₹5 Crore.
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LCBs headed by DGM shall also sanction loans above ₹10 Lakh and upto
₹5 Crore wherein file is in LCBs and account may/ may not be shifted from
LCB.
Turn Around Time (TAT) for sanction under GECL shall be one day at the
level of sanctioning authority.
Pre Disbursement Audit shall be waived for loans sanctioned under GECL as
the limits are backed by government guarantee and risk weighted is 0%.
The post sanction monitoring and follow up shall also be done by disbursing
branches till the account is shifted under new structure.
The captioned arrangement shall be specifically valid only up to 30.9.2020.
After lapse of this period, the powers shall be restored back to the original
level. Further, Bank reserves the right to review the validity, keeping the
stabilization of the new organizational structure in view.
RBI has permitted banks to allow repayment moratorium in Term loan accounts and
deferment of interest in case of Working Capital limits for the period March-August
2020. In order to encourage the Retail/MSME/Food Processing borrowers who are
adhering to credit discipline even during such difficult circumstances it is proposed to
give some financial incentive in the form of interest refund upto 0.25% in the
applicable Rate of Interest as under :- .
―In order to support borrowers adhering to credit discipline, a concession in Rate of
Interest (ROI) in term loan and working capital facilities (―CC/OD‖) upto 25 basis
points per annum shall be provided, for the month the account remains regular/SMA-
0, subject to the applicable rate does not fall below benchmark rate – RLLR (Repo
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Rate + Mark Up+0.35)/MCLR in the accounts falling under Retail, MSME and Food
processing belonging to Regular and / or SMA-0 category, which does not slip into
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NPA till 31.3.2021.‖
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Refund of 0.25%1 in ROI shall be considered for Retail, MSME and Food processing
borrowers as per the cut-offs suggested by the respective business divisions :-
SEGMENT CUT-OFF AMOUNT
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The eligibility criteria for the accounts mentioned in para 5.1 shall be as under:
B. The borrowers who have availed moratorium benefit but make payment of
due instalment/interest by 31.08.2020 i.e. account is standard regular as on
31.08.2020 and keep the account standard regular till 31.03.2021 at the close
of every month
a) Stock Statements may be obtained in the form of scanned copies from the
registered mail id of the customers. Further, no penal interest should be charged
for delayed submission upto 25th day of following month for genuine reasons in
respect of units affected by COVID-19 on account disruption for the period
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01.03.2020 to 31.10.2020
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b) Delay in submission of renewal documents by the borrower for genuine reasons
should not lead to imposition of penalty in respect of units affected by COVID till
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31.10.2020
c) At the time of review/renewal, Covenant breaches should be appropriately
highlighted and any condonement should factor if the same has happened due
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Detailed Standard operating procedure (SOP) for allowing Funded Interest Term Loan
(CFITL) in working capital (CC/OD) accounts (non agricultural) for interest charged
during the Period March 2020 to August 2020 was circulated vide L & A Circular
No.115/2020 dated 25.06.2020. As per the above guidelines exposure wise process for
opening of CFITL accounts were defined as under:
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(1) Borrowers having CC/OD limit upto Rs 50 Lacs (Automatic Opt-in): All such
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borrowers are considered as willing to avail FITL conversion option and if they do not
want to avail they have to submit an undertaking on or before 29.08.2020 and details
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regarding the same to be captured in CBS system through separate menu option.
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(2) Borrowers having CC/OD limit above Rs 50 Lacs (Borrower to Opt-in): All the
borrowers having CC/OD limit Rs.50 lac and above shall not be provided FITL
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conversion by default but they have to submit an application cum undertaking letter on
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or before 29.08.2020 and details regarding the same to be captured in CBS system
through separate menu option.
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On the basis of data captured of CC/OD Borrowers regarding Opt In/ Opt Out in CBS
system, the interest applied in the account during the period March 2020 to August
2020 shall be converted into Covid FITL account centrally during the period 01.09.2020
to 15.09.2020 having tenor upto 31.03.2021 through value dated transaction and
repayment in 3 equal instalments from January to March 2021.
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Vide the captioned circular detail procedure for capturing the opt In/ opt out for CFITL
account in CBS system in all the 03 amalgamated entities has been conveyed.
GUIDELINES IN RESPECT OF CFITL HAVE BEEN CONVEYED VIDE L&A circular
115/2020 AND FURTHER VIDE CRMD CIRCULAR NO 02/20,
03/20,04/20,07/20,08/20.
Considering the above, with the intent to facilitate revival of real sector activities and
mitigate the impact on the ultimate borrowers, RBI has issued guidelines for providing a
window under the Prudential Framework to enable the lenders to implement a
resolution plan in respect of eligible corporate exposures without change in ownership,
and personal loans, while classifying such exposures as Standard, subject to specified
conditions.
Vide the circular policy for Resolution Framework for COVID-19-related Stress has
been conveyed. (Loans and advance circular 172/2020 dated 07.09.2020)
Further modifications and amendments in the above resolution framework has been
conveyed vide LA 180 dated 3.10.2020 and 184/2020 dated 06.10.2020.
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FAQs on Resolution Framework for COVID-19-related Stress, as published by RBI,
have been conveyed for needful guidance in the matter vide LA circular 195/2020 dated
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17.10.2020.Now RBI has updated the FAQs on its website on December 12, 2020,
which have been annexed with the circular L&A 221/2020 dated 16.12.2020.
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Further, vide L&A circular 218/2020 dated 10.12.2020, certain modification in the
existing guidelines have been conveyed.
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invoked. To facilitate the process a draft Inter Creditor Agreement, as provided by IBA ,
has been annexed with the circular that may be adopted by field functionaries for the
aforementioned purpose. The model agreement may be broadly used with suitable
modifications on case to case basis after getting the same vetted by Legal counsel to
safeguard Bank‘s interest. (IRMD L&A circular 5 dated 06.01.2021)
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Bank‘s guidelines on rejecting credit proposal have been circulated vide L&A Circular
no. 97 dated 01.06.2020. Now, vide this circular, modification in guidelines for
rejection of credit proposals has been conveyed.
The consolidated list of approved transport companies has been circulated vide L&A
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Circular No.72 dated 18.06.2019 and other circulars issued on the subject from time to
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time. IBA has advised details of additions/ renewals & change of constitution/ address
with renewal to be incorporated in the list of approved transport operators, for the
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period from 1st February to 28th February 2021 as per Annexure of the circular.
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IBA has informed Banks that they are in the process of reviewing the recommendation
accorded to transport operators provided in Annexure I. In this regard, IBA has
requested banks to report to them in case of any adverse observation/ complaint has
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The same shall be made part of the Terms & Conditions to be conveyed to the parties
upon renewal/ sanction of limits.
It supersedes the IRMD L&A Circular No. 38 dated 26.03.2020 & Circular letter no. 15
dated 05.09.2020, wherein guidelines regarding simplified procedure for review/
renewal of credit facilities i.e. Green Renewal were circulated.
Attention is invited to IRMD L&A Cir. No. 212, 217 & 224 dated 01.12.2020,
1
10.12.2020 & 17.12.2020, respectively, inter-alia conveying the future impact of Covid-
19 on various industries/ sectors and also guidelines relating to loaning powers based
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on industry/ sector wise future impact.
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In view of revival of Indian economy, its GDP and many other incentive schemes
announced by GoI under ―Atmnirbhar Bharat‖, the Board has approved lifting of the
restrictions made on various industries and approved as under:
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Vide the circular MCLR, RLLR and Base rate w.e.f. 01.04.2021 have been conveyed.
There is no change in any bracket in respect of MCLR and RLLR or Base Rate.
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The operational guidelines on treatment of overdue credit risk ratings was circulated
vide IRMD Circular No. 02/2019 & 03/2019 dated 02.01.2019 and 07.01.2019
respectively. However, the treatment specified for overdue risk ratings was deferred
vide IRMD Cir No 34/2020 dated 30.12.2020 and kept in abeyance till 31.03.2021 with
instructions that w.e.f. 01.04.2021 all overdue credit risk ratings shall be treated as
PNB-B3 or one notch down in case rating is already PNB-B3 or below.
However, keeping in the view that amalgamation of PNB with UBI & OBC w.e.f.
01.04.2020 & the ongoing difficulties faced due to COVID-19 pandemic, the treatment
specified for overdue risk ratings has been deferred for a further period of 3 months
(i.e. upto 30.06.2021).
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