PUNJAB & SIND BANK – New Appraisal Note Format (H.O.

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APPENDIX 2
Annexure - 1
ASSESSMENT OF WORKING CAPITAL REQUIREMENT:

(a) Justification for estimated / projected Sales:

In case of existing units, while accepting the projected Sales/Turnover, the past trends in sales should be
carefully analyzed.

In case of new units, the demand for the product vis-à-vis orders in hand etc. must be properly examined.

(b) Computation of limit as per Turnover Method, wherever applicable:

(Rs. in Crore)
1 Annual Turnover as projected by the Borrower
2 Turnover as accepted by the Bank
3 Working Capital Requirement (25% of 2 above)
4 Minimum Margin Required (5% of 2 above)
5 Actual Margin Available
6 Shortfall in margin (4-5)
7 MPBF (Item 3 – item 4)
8 (Item 3 – item 5)
9 Restricted MPBF (Lower of 7 and 8- but restricted to four times of 5)*
10 Shortfall in working capital requirement as per MPBF (7-9)

Normally, if actual margin available is lower than the minimum required, MPBF is restricted as per margin available.
This scenario require detailed analysis as to what impact it will have on business projections / manufacturing capacity,
as the borrower shall continue to face liquidity crunch, ultimately leading to gap in drawing power. . In such a
scenario, borrower should bring in deficit up front as a pre-condition and submit CA certificate to this effect,
to the satisfaction of disbursing authority.

(c) Assessment of working capital facilities as per Traditional Method:

(i) Information for calculating levels of inventory, Receivables & Creditors

(Rs. In Crore)
Year ended Audited _____ Audited _____ Current year Next year
Actual Actual Estimates Projections
RM Consumed during the year*
Cost of Production
Cost of Sales
Domestic Sales
Export Sales
Purchases
* RM consumed (Opening Stock + purchases during the year – closing stock of RM)

(ii) Calculation of holding levels:

(Rs. in crore)
Actual Actual Estimated Projected
Days Amt Days Amt Days Amt Days Amt
1. Raw Material (Stock of RM ÷
RM Consumed x 365)
2. Stock in Progress (Stock of SIP ÷ Cost
of Production x 365
3. Finished Goods ( Stock of Finished
Goods ÷ Cost of Sales x 365
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4. Domestic Receivables ( Inland Debtors
÷ Domestic Sales x 365
5. Export Receivables (Export receivables
÷ Export Sales x 365
6. Other Current Assets
7. Total Current Assets
8. Sundry Creditors
Creditors ÷ Purchases x 365
8. Other Current Liabilities
9. Total Current Liabilities

(iii) Comments on holding levels:

(Estimated / projected holding levels of each item to be compared with past actual levels and justification/ reasons for
variations to be given. Justification for level of creditors should include comments on credit available under LC(DA), if
any)

(iv) Calculation of MPBF:

Actual Actual Estimated Projected

Year ended 31.03.__ 31.03.___ 31.03.___ 31.03.___
1. (a) Total Current Assets
(b) Less: Export receivables
(c)Net Current Assets (a-b)
2. Total Current Liabilities (excluding bank borrowing)
3. Working Capital Gap (1a – 2)
4. Minimum stipulated Net Working Capital [25% of Current
Assets (Excl. Export Receivables)]
5. Actual/Projected Net Working Capital
6. Item No. 3 – 4
7. Item No. 3 – 5
8. Maximum Permissible Bank Finance (Item 6 or 7, whichever
is lower)
9. Excess borrowing representing shortfall in NWC (4 - 5)

(d) Break up of MPBF and justification of proposed limits:-

(Justification for each facility like cash credit, packing credit, post shipment etc. to be given)

(e) Assessment as per Cash Budget Method, wherever applicable.

The cash budget system envisages providing of working capital by the bank based on the peak deficit
projected as per the cash flow statement. This is applied to certain seasonal industries such as tea and sugar
and to specific industry such as Information Technology and Software etc. Besides, sanctioning authority
may apply the cash budget system where they feel this system is more appropriate as in case of construction
contractors.

The cash budget is basically a simple projection of cash account – usually month wise indicating cash
receipts and cash payments/disbursements. The net gap i.e. peak cash deficit shall be the required working
capital from the Bank. The availment of Working Capital Limit or Drawing Power, shall be regulated
according to accepted monthly cash budget which should be drawn on realistic assumptions. For e.g.,

a. Total cash outflow from business operations.

b.Total cash inflow in business operations
c. Cash gap in business operation (column a-b)
d.Amount of margin / proposed to be brought in by the borrower or from other sources i.e. cash surplus.
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e. Net Cash Gap for business operations to be financed by the bank (column c-d)

A sample Performa of cash budget is given as under. The items under the Receipts and Payment head would
vary depending upon the type of industry/advance.

Cash Budget:

Month or quarter
Receipts

Cash sales
From debtors
Capital / Margin
Contribution
Other Income
Total `A’
Payments

Cash Purchases
To creditors
Wages & Salaries
Power/Elec Charges
Transport, packings
Rent, Rates etc.
Bank/Interest charges
Dividend
Taxes
Capital Expenditure
Total `B’
Working Capital Gap*

*working capital gap, which is higher than four time of capital receipts, represent excess borrowing, necessitating
additional margin requirement to be brought upfront.

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Annexure - 2

ASSESSMENT OF LETTER OF CREDIT LIMIT (DP / DA):

(Rs. in _____)
For Raw Material Inland Foreign
1. Estimated Purchases against L/C
2. Lead Time (No. of Days)
3. Usance Period (No. of Days)
4. Total No. of Days (2+3)
5. No. of Cycles in a Year (365/Total No. of Days)
6. L/C requirement (1 / 5 )

Additional Information

1. Tenure of LC to be Opened (DP / DA)

2. Usance Period of LC to be opened ______No. of Days

3. Purpose of LC facility Purchase of ______

4. Names of Principal Suppliers

Others

(Proper justification for LC limit should be given As per circular no. I.D.CIRCULAR NO. 1580
Date: 19.07.2005 regarding Strengthening of Appraisal & Monitoring of Non-Funded Facilities.)

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Annexure -3

ASSESSMENT OF BANK GUARANTEE LIMIT:-

i) in case of Construction Contractors:

(Rs. in _____)
PARTICULARS Value of Amount of
Contracts Bank
Guarantees
1. Existing Bank Guarantee Limit
2. Bank Guarantees issued and outstanding for Contracts in
Hand/Under Implementation.
3. Value of Contracts in pipeline for which bid bond guarantee /
earnest money guarantee & percentage thereof to be made
4. Other incidental requirements
5. Total (2+3+4)
6. Less: Bank Guarantees likely to be reversed for Contracts to
be completed in the current year.
7. Bank Guarantee requirement (5-6)

Limit to be fixed at the level of 1 or 7 of the above table, whichever is lower

ii) Additional Information

1. Types of Guarantee to be issued (Performance / Financial)

2. Name of the Beneficiaries on whose

favor Guarantee is to be issued
3. Purpose of the Guarantee

iii) Others

(Proper justification for BG limit should be given As per circular no. I.D.CIRCULAR NO. 1580
Date: 19.07.2005 regarding Strengthening of Appraisal & Monitoring of Non-Funded Facilities.)

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Annexure - 4

ASSESSMENT OF TERM LOAN REQUIREMENT:

(a) Details of Project: ( also covering Location of the Project – SEZ etc, Tax Holiday Zone , Benefits
/ incentives if any.)

(b) Cost of Project & Means of Finance:

(Rs. in _____)
Particulars Already incurred To be incurred Total
Cost of Project
Land & Land Development
Building
Plant & Machinery
Furniture and Fixtures
Other Fixed Assets
Pre-Operative & Preliminary Expenses
Contingencies
Margin on Working Capital
Interest during construction period
Total
Means of Finance
Capital including Share Premium
Internal accruals
Govt. Subsidy (if any)
Unsecured Loans
Term Loan (if any)
Others (Specify)
TOTAL

(c) Calculation of Term Loan eligibility:

(Rs in ______)
Asset Cost of Asset Margin (%) Admissible Term
Loan
Land & Land Development
Building
Plant & Machinery
Furniture and Fixtures
Other Fixed Assets
Preliminary Expenses
Interest during construction period
Others (Specify)
TOTAL

(d) Comments on Project Cost:-

(i) Land and Building:

(ii) Plant and Machinery:
(iii) Other Fixed Assets:
(iv) Preliminary & Pre-operative Expenses:
(v) Contingencies:
(vi) Working Capital Margin:
(vii)Interest during construction period

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(e) Comments on other Infrastructural facilities:

i) Power:
ii) Water:
iii) Labour:
iv) Effluents disposal:
v) Availability of Raw Material:
vi) Means of transportation (both procurements / supplies) in case of large projects / infra projects /
refineries etc like railways sidings / pipe lines etc and approval thereof.

(f) Production Process / Technology (in brief):

(g) Status of various statutory approvals and clearances

(for e.g., Land acquisition, change of land use, pollution control, environmental clearances, FSI & plan
approval, fire department, licenses, Defence, Airport Authority and RBI/Ministry/Other regulatory
approvals as applicable)

(h) Present physical / Financial status of project (including financial tie-up)

(i) Implementation schedule

Activity Starting Date Completion Date

(j) Draw Down Schedule:

Period of Draw Down Amount (Rs. In Crore)

(k) Projected Profitability, Projected Balance Sheet and Cash Flow Statement to be commented
upon:

Particulars Year Year Year Year

Comments on Projections / Assumptions:

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Repayment Schedule :

(l) Calculation of DSCR (for the period covering repayment period of TL)

(In case of existing Term Loans DSCR be given for residual period)
(Rs. in Crore)
Particulars Year Year Year Year Total
Net Profit
Depreciation
Other non-cash expenses
Interest on Term Loan
Total funds available for debt servicing (A)
Term Loan Installments
Interest on Term Loan
Total Debt obligation (B)
Net DSCR (A / B)
AVERAGE NET DSCR

(m) Break Even Point and Internal Rate of Return:

(In case of Project Term Loans of Rs.50.00 crore & above)

(n) Sensitivity Analysis:

Particulars Average Minimum

DSCR DSCR
Base Case
Case 1: Decrease in Sales by ___ %
Case 2: Increase in RM Cost by ____%
Case 3:

(o) SWOT Analysis:

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Annexure - 5
VARIOUS UNDERTAKINGS TO BE OBTAINED FROM THE BORROWER ON LETTER PAD
(As applicable according to the constitution of the borrower / to be discussed with the borrower before
stipulating any undertaking)
The borrower shall undertake:
1. To maintain deposits (unsecured loans) by family members, friends & relatives or directors / partners at
estimated / projected level, treated as quasi capital or part of net working capital, during the currency of the
Bank’s advance.
2. That the names of Borrower or its Directors/Partners or Guarantors do not figure in any list of defaulters
circulated by RBI or any bank and Financial Institution nor the names of partners/directors appear in
caution list issued by RBI/CIBIL/ECGC etc.
3. That name of the borrowing identity or any of its promoters/guarantors has not been declared as willful
defaulter by any of the Bank / Financial Institutions.
4. That the Bank has the right to share credit information as deemed appropriate with Credit Information
companies (CICs) or any other institution as approved by RBI from time to time.
5. That in case of consortium/syndication/multiple banking arrangement, the Bank may share the related
information as per RBI norms or as per mutual consent among bankers.
6. That in case of default in repayment of the loan/advances or in the payment of interest thereon or any of
the agreed installment of the loan on due date(s) by the borrowers, the Bank has an unqualified right to
disclose or publish the borrowers’/units’ name and its directors / partners / proprietor as defaulter / willful
defaulter in such manner and through such medium as the bank in its absolute discretion may think fit.
7. That in the event of default in repayment to our Bank or if cross default has occurred, the Bank will have the
right to appoint its nominee on the Board of Directors of the borrower to look after its interests.
8. That in stressed situation or restructuring of debts, the regulatory guidelines provide for conversion of debt
to equity. The bank shall the right to covert loan to equity or other capital in accordance with the regulatory
guidelines.
9. To deal exclusively with our Bank/member banks.
10. To declare dividend only after obtaining approval from the Bank [in case of default in payment of
interest/installments of Term Loan].
11. Not to pay any consideration, in whatever form, to the guarantors/guaranteeing directors, either directly or
indirectly (except without prior approval of the Bank) for guaranteeing the credit limits sanctioned by the
Bank. [Similar undertaking shall also be obtained from the guarantors.]
12. Not to obtain any financial assistance from any other source without express approval of the Bank in
writing.
13. Not to effect any change in promoter directors or in the core management team nor any merger/
acquisition/ amalgamation shall be done without express permission of the Bank in writing.
14. Not to extend finance to associate concerns during the currency of the Bank’s advance without the Bank’s
prior written consent.
15. Not to effect any adverse change in the company’s capital structure.
16. Not to implement any scheme of expansion/modernization/diversification/ renovation (except normal capex)
or sell any fixed assets during any accounting year, except under such scheme, which has already been
approved by the Bank.
17. Not to Invest in shares/debentures or lend or advance funds to or place deposits with any other concern
except normal trade credit or security deposits in the normal course of business or advances to employees.
18. Not to undertake guarantee obligations on behalf of any other company, firm or person without the Bank’s
prior permission in writing.

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19. Not to effect any upward change in the remuneration payable to the directors either in the form of sitting
fees or otherwise. (In case of any default in payment of interest / installment)
20. Not to create any further charge, lien or encumbrance over the assets and properties of the company / firm,
charged / to be charged to the Bank, in favour of any other bank, financial institution, Company, firm or
person.
21. To confine its entire banking business relating to activity including deposit, bill business, foreign exchange
business to our bank / the member banks of the consortium (as the case may be). In case of Multiple
Banking Arrangement, pro-rata share of the banking business shall be routed through our Bank.
22. To keep the Bank informed of the happening of any event likely to have a substantial effect on their profits
or business.
23. To maintain adequate books and records which should correctly reflect their financial position and scope of
operations and should submit to the Bank at regular intervals such statements as may be prescribed by the
Bank in terms of RBI instructions issued from time to time or otherwise. The borrower shall give an
undertaking that the Bank reserves the right to periodically inspect their records and books of accounts to
ensure the correctness of information furnished by them.
24. To submit Audited Financial Statements etc. to the Bank within the stipulated period of time. The borrower
will be liable to pay penal interest in case of any delay in submission thereof.
25. (In cases where the latest audited financial statements of the borrower are not available and the
assessment has been made based on the Provisional financial statements certified by the Company’s
Statutory Auditor)
 That the adverse variation between Provisional and Audited financial statements shall not be more than 5%
in respect of Sales, Networth, Networking capital, unsecured loans (treated as quasi-equity) and the bank
has the right to charge additional interest @ 1% p.a. or recall the limit

26. (In case of new borrowers, the following additional undertaking to be obtained):
 I / we undertake that none of our associate/group concerns is classified as willful defaulter by any other
Bank/Financial Institution.
 I/ we undertake that I/ we shall not induct any person, who is a director on the Board of a Company
which has been identified as willful defaulter and further undertake that in case, such a person is found
to be on Board of Borrower Company, I /we would take expeditious and effective steps for removal of
any such person from the Board of the Company within 30 days of such fact coming to notice.
 I/ we undertake to furnish appropriate undertaking /affidavits/ certificates as the Bank may require from
time to time certifying that the funds comprising of entire amount of loan/ facility/sum due/ amount
outstanding in the account have been used exclusively for the purpose for which they were obtained and
the same have not been diverted / siphoned off and no misrepresentation of any kind has been made or
accounts falsified or any fraudulent transaction has been carried out.
 I /we undertake that upon identification of aforesaid account as a willful defaulter on account of any of
the reasons stated above including any similar reason as stated above, I / we would be debarred from
availing bank finance for floating new ventures for a period of 5 years from the date the name of willful
defaulter is disseminated in the list of willful defaulters by RBI. I/ we agree that in case of any false
/wrong information, the Bank may consider any legal proceedings, civil or criminal, as may be
necessary, including publishing of my/ our names alongwith photos in newspaper/ CIBIL records / other
credit information Bureau.

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Annexure - 6
GENERAL COVENANTS/ TERMS & CONDITIONS TO BE STIPULATED & APPLICABLE TO ALL
FACILITIES
(To be discussed with the borrower before stipulating Terms & Conditions)
1. Registration with Central Registry of Equitable Mortgage created
 The branch shall register mortgage with Central Registry within 30 days of creation of the mortgage.
Modification of the charge on the property should also be registered with Central Registry as per
latest guidelines prescribed from time to time. CERSAI registration charges to be recovered from the
borrower.
2. Obtaining Latest Valuation Report
 Branch shall obtain from an approved valuer latest valuation reports of the properties charged to the
Bank. The valuation report should show the market, realizable and insurable value of the properties.
3. Obtaining Title Clearance & Non-encumbrance Certificate
 Legal opinion, Non-encumbrance certificate in respect of property to be mortgaged as primary /
collateral security shall be obtained in the prescribed format and effective & valid mortgage shall be
created before disbursement of credit facilities, unless otherwise permitted by the sanctioning
authority.
4. Comprehensive Insurance of Securities
 All the securities charged to the Bank, movable or immovable, shall be kept comprehensively
insured with ‘Agreed Bank Clause’.
5. Obtaining Undertaking for Payment of Tax
 An undertaking shall be obtained from the owners of the properties mortgaged to the Bank that there
are no arrears of tax including interest leviable thereon under various provisions of Income Tax Act,
against them.
6. Recovery of Process fee/ Upfront Fees and other charges
 Process fee, documentation charges and other charges shall be recovered as per schedule of
charges subject to concessions approved if any. Sanction shall be conveyed to the borrower only
after recovery of processing/ upfront fee as per guidelines of the Bank. The Bank reserves the right
to withdraw the concessions granted (if any) without assigning any reason.
7. Statutory / Regulatory Permissions
 All statutory and/or regulatory permissions from local or other competent authorities shall be
obtained by the branch/borrower (as applicable).
8. NOC from other Banks
 NOC from other banks from whom the company is enjoying/sanctioned credit facilities shall be
obtained and necessary security/charge creation, documentation formalities to be completed.
9. Registration of Charge with ROC
 The charge shall be got duly registered/ modified (as applicable) with the Registrar of
Companies within the prescribed time limit.

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10. Obtaining latest CRs of Directors / Guarantors / Proprietor / Partners

 Latest CRs of the directors/guarantors/proprietor/partners to be compiled and a copy thereof
to be submitted to respective sanctioning authority, if not already submitted.
11. Submission of QIS Statements
 The borrower shall submit all the prescribed QIS statements at regular intervals within the
prescribed time limit, as applicable, failing which penal interest as per bank’s guidelines
shall be charged.
12. Joint Documentation
 Documents shall be obtained as per Banks guidelines
13. Financial Tie-up
 The increase in limits is to be made effective only when share of other banks is tied up,
unless otherwise approved and all terms of sanction are complied with.
14. End-use of facilities sanctioned
 Advance/Facility sanctioned shall be used for the specific purpose for which it is sanctioned
and not for any other purpose. End use of the funds/facility shall be ensured by the Branch.
15. Display of Bank’s name plate
 Bank's nameplate shall be affixed on all the assets charged to the Bank. Bank’s name plate
also to be affixed at prominent place in the godowns / shops / factory premises, where the
goods hypothecated / pledged are stored.
16. Pending Inspection / Audit irregularities
 All pending inspection/audit irregularities shall be got rectified.
17. Pollution control clearance
 The Borrower shall ensure that the NOC/Clearance/permission of the Pollution Control
Board is obtained and renewed from time to time, wherever applicable.
18. Stock Audit
 Stock audit shall be got done by the professionals / authorized persons, as appointed by the
Bank, as per extant guidelines.
19. Search Report
 Search report in respect of charges already created shall be kept on record.
20. Credit Risk Rating
 The borrower shall take steps to improve the credit rating under all relevant parameters.
 The Bank Reserves the right to increase the rate of interest on advances to the borrower in
case of any down-gradation in the external / internal credit risk rating of the borrower during
the currency of the loan.

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21. Non-induction of long term funds / withdrawal of unsecured loans

 Penal interest as per sanction terms shall be levied from the date of sanction if the borrower
does not introduce the long term funds or level of unsecured loans is not maintained (as per
terms of sanction) which affects the agreed / benchmark ratios.
22. Change in Ownership / Management of the borrower
 Prior permission of the Bank in writing shall be obtained in case any change is effected in
the ownership pattern / management structure of the borrowing entity. The Bank reserves
the right to recall the advance in case any change in ownership pattern / reconstitution /
management structure is effected without obtaining Bank’s prior approval in writing. (The
management change could be either change in Promoter / Promoter Director or the core
management team)
23. Undertaking about legal heirs
 Branch to obtain an undertaking on affidavit about the names, age and addresses of legal
heirs of the borrower / obligants / guarantors, which shall be recorded and updated from
time to time.
24. Declaration from Borrower / Guarantor to provide information to CIBIL / other credit
information bureau
 Necessary documents/declaration from the borrower/guarantors pertaining to Credit
Information Bureau of India (CIBIL) shall be obtained.
25. Acceptance of Terms & Conditions of sanction
 The borrower shall be informed of the terms & conditions in writing and acceptance thereof
shall be obtained.
26. Drawing Power allocation for Packing Credit
 In case of borrower enjoying both Packing Credit and Cash Credit (Hyp) facility against
common stock, Drawing Power allocation should first be towards Packing Credit.
27. Pledging of shares to any institution
 The borrower(s)/ promoter(s) shall take prior permission of the Bank before pledging their
share of the borrower company for raising finance. While seeking permission in such cases,
particulars relating to purpose, amount, rate of interest, terms & conditions, source of
repayment etc must be furnished to the Bank.
28. Review / Renewal of Credit Facilities
 Renewal / Review exercise of Credit facilities should begin 2 months prior to the due date for
renewal / review / expiry of validity of sanction. The borrower shall submit the relevant
information / paper accordingly.

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Annexure - 7

FACILITY WISE TERMS & CONDITIONS OF SANCTION:

Name of the Account:__________
Branch:______________________

Nature of facility Term Loan

Amount
Purpose
Primary Security
Collateral Security
Margin
Interest …………% (Bank’s spread) over Base Rate (present BR of the
bank is …..%) which works out to ……% at present with monthly
rests, subject to changes in BR/ Spread from time to time. Penal
Interest @ 2 % p.a. over & above the normal rate on overdue
portion shall be charged. Also, our interest shall not be lower than
the Lead Bank/other lenders (in case of Consortium/Multiple
Banking Arrangement)
Interest Reset, if any.
Moratorium Period
Repayment Repayable in ….. monthly / quarterly / half yearly installments of
Rs. ……… after a moratorium of --- months from the date of first
disbursement. Interest shall be recovered as and when due (Not
applicable if the repayment is in Equated installments)
Insurance The assets created out of banks’ advance (besides promoter’s
contribution) shall be insured for full value by the borrower / branch
and all expenses in this regard (including timely renewal of the
insurance cover) shall be borne by the borrower.
Annual Review The account shall be reviewed on annual basis and applicable
review fee shall be recovered.
Any other condition

Other terms & conditions:

1. Meeting Margin Requirements & End use of facilities
The borrower shall deposit the stipulated margin in the account and the payment shall be
made to the supplier directly and the advance amount shall be utilized strictly for the
purpose for which it is sanctioned.
2. Invoices
Original invoices or a list of machinery/ equipment etc. duly certified by Chartered
Accountant of the borrower along with photocopies of the Invoices shall be kept along
with the loaning documents.
3. New Equipment / Machinery
The facility shall be utilized for purchase of new equipment/ vehicles only, unless
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otherwise permitted.
4. Registration of Land & Mortgage thereof
In case of Term Loan against land & building, loan amount for construction of building
shall be disbursed only after the land is registered in the name of the borrower and
mortgaged in favor of the Bank.
5. Disbursement
Disbursement shall be made in phases depending on the progress of construction, which
shall be verified by the Branch by obtaining suitable evidence and by making periodical
visits.
6. Scope of Project
The Borrower shall not change scope of project without prior approval of the bank (lead
bank in case of Consortium accounts).

Nature of Facility Cash Credit (Hyp.)

Limit
Security Hypothecation of stocks of raw materials, stock-in-process, finished
goods, stores & spares and receivables on pari-passu basis in case
of Consortium / Multiple Banking Arrangement.

Collateral Security
Margin
Insurance The assets created out of banks’ advance (besides promoter’s
contribution) shall be insured for full value by the borrower / branch
and all expenses in this regard (including timely renewal of the
insurance cover) shall be borne by the borrower.
Rate of Interest/ …………% (Bank’s spread) over Base Rate (present BR of the bank
Penal Interest is …..%) which works out to ……% at present with monthly rests,
subject to changes in BR/ Spread from time to time. Penal Interest
@ 2 % p.a. over & above the normal rate on overdrawn portion shall
be charged.
Term of Sanction One year

Any other condition

TERMS FOR CASH CREDIT (HYPOTHECATION) LIMIT:

1. On opening of CC account, the current account of the company, if opened, to be closed

immediately and the party to route the sale proceeds through CC account only.
2. Stock/Book Debt statements are to be submitted every month along with Monthly Select
Operational Data (for borrower enjoying working capital facilities from Rs. 50 lac and
above upto Rs. 5.00 cr) in bank’s prescribed formats on or before 10th of succeeding
month to which it belongs.
3. Drawing Power: For the purpose of calculation of drawing power in the account following
general principles shall be applied:
a) Bad and doubtful debts and/ or where any cause of action/ dispute has arisen or
debts older than the stipulated period shall not be taken into account while calculating

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drawing power.
b) Valuation of stocks to be done at cost/invoice/ market price, whichever is lower.
c) D.P. shall not be allowed against the following:-
i. Obsolete Stocks
ii. Stocks released to the borrower against trust receipt in case of Letter of Credit
established on DA basis till the bills are retired by the borrower.
iii. Debtors more than _______ days old.
iv. Book debts of associate / group concerns, except those arising out of genuine
trade transactions.
v. Unpaid creditors, to be netted off against the value of stocks
vi. Drawing Power shall be calculated strictly in accordance with the guidelines in
force.

4. Drawings would be regulated as per MPBF based on the QIS returns subject to the
availability of drawing powers.
5. All the assets charged/to be charged to the Bank to be kept fully insured at all times
against all risks (FRSD, Burglary, comprehensive risks etc.) and original Insurance cover
note/policy in the name of the Bank a/c borrower firm/Company with Banks
Hypothecation clause to be lodged with the bank.
6. Inspection of stocks / unit visit shall be undertaken as per periodicity fixed by the Bank or
as and when warranted. The bank has the right of deputing its officials/person(s) (like
qualified auditors or management consultants or technical experts) duly authorized by the
bank to inspect the unit, assets, books of accounts/records etc. from time to time,
charges for which shall be debited to the borrower.
7. The bank shall appoint stock auditors for complete checking of the account as per policy
of the Bank, cost of which to be borne by the borrower.
8. QUARTERLY INFORMATION SYSTEM: For working capital limits above Rs. 5.00
crores, the borrower shall submit QIS I, II & III statements as follows:
a) QIS I (showing estimates) is required to be submitted one week preceding the
commencement of the quarter to which it relates.
b) QIS II (showing performance) within six weeks from the close of the quarter to which
the statement relates, and
c) QIS III ( half yearly operating statement) within two months from the close of the half
year.
9. Detailed age wise Book Debt statement to be submitted along with stock statement every
month. CA certified book debt statement with age wise classification to be submitted on
quarterly basis. The borrower shall certify that the book debts have arisen out of genuine
trade transactions and no credit facility has been availed against these book debts from
any other source.
10. CC limit to be used for business purposes only and Bank has the right to recall the limit
and take other punitive measures to protect interest of the Bank in case of any violation.
11. Credit In Accounts: In such cases, where remittances by the borrower are pooled with
one bank/consortium leader, an express consent from that bank/lead bank should be
obtained for immediate transfer of our bank’s share of recovery to us.
12. Delayed submission of stock/book debt statement, shall attract penal interest @1%.
Delayed submission of MSOD/QIS, also attract penal interest of 1% p.a. in addition to
above.
13. In the event of non submission of stock/book debt statements for 3 months continuously,
Drawing Power will be withdrawn and the limit shall be recalled.

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PUNJAB & SIND BANK – New Appraisal Note Format (H.O./ZO)
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Nature of facility Packing Credit

Limit
Purpose
Primary Security
Collateral Security
Margin
Rate of Interest As per RBI directives / Head Office guidelines issued from time to time.
Term of sanction One year
Any other condition

Other terms & conditions:

1. Specific Approval List (SAL) of ECGC
Packing Credit facility would be permitted as long as the borrowers' name is not included in Specific
Approval List issued by ECGC from time to time.
2. Running Account Packing Credit
In case running account packing credit facility is allowed without insisting on confirmed order / LC, the
same shall have to be produced by the borrower subsequently within the prescribed time and packing
credit shall be adjusted by export proceeds at the time of purchase / discount of Export Bills following
the principle of 'First-in-First Out'.
3. Disbursement & Adjustment
In case Packing Credit is allowed against a specific confirmed order/LC
the advance shall be disbursed depending on the operating cycle & delivery schedule and shall be
adjusted by export proceeds at the time of purchase/ discount of Export Bill covering that specific
consignment.
4. ECGC Coverage
Advance shall be covered under ECIB - WTPCG obtained by the Bank from ECGC and the premium
shall be borne by the borrower.
5. Stock Statement
The borrower shall furnish a stock statement on the prescribed format by 10th day of close of previous
month and the drawing power shall be calculated by maintaining the margin prescribed in the sanction
against the goods meant for export.
6. Inspection of Securities
Inspection of goods charged to the Bank and that of the borrower’s books/ records shall be conducted
periodically by an authorized official of the bank. All expenses in this respect shall be borne by the
borrower.
7. Valuation of Stock
Goods charged to the Bank shall be valued at cost or market price/ realizable value/controlled price,
whichever is lower.
8. Compliance of RBI guidelines
All RBI guidelines relating to export credit shall be complied with.
9. Compliance of ECGC Guidelines
All operating guidelines issued by and conditions stipulated by ECGC for providing cover under
WTPCG shall be complied with.
10. ROI to be charged, if not exported
Commercial rate of interest shall be charged from the date of advance if the export does not take place
at all.
11. Drawing in PC a/c will be permitted up to FOB value of export orders /contracts / LC, less stipulated
margin. Any advance payment received against such export order / contract / LC, shall be adjusted before
allowing permissible PC. In the event of fixation of Drawing Power in the case of running account PC
facility, advance payment received shall also be deducted along with unpaid creditors for arriving at
Drawing power.
12. Forward exchange cover in respect of export transactions will have to be booked by the Company
whenever considered necessary by the Bank.
13. Credit report on foreign buyer to be obtained & kept on record.
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Nature of Facility Documentary Demand-cum-Usance Bills Purchase / Discount limit under
L/Cs
Limit
Purpose
Security Documentary Demand and/or Usance Bills drawn under L/Cs having
maximum tenor of ____ days accompanied with RRs and/or TRs of approved
transport operators in case of upcountry parties or accepted Hundies
accompanied with receipted Challans & inspection notes along with invoices in
case of local parties covering consignment of goods.
Collateral Security
Margin
Rate of Interest/ …………% (Bank’s spread) over Base Rate (present BR of the bank is …..%)
Penal Interest which works out to ……% at present with monthly rests, subject to changes in
BR/ Spread from time to time. Commercial rate of interest shall be charged
from the date of purchase till the Bank remains out of funds, in case the Bills
are returned unpaid.
Commission/other charges As per Bank’s schedule of charges

Term of Sanction One year

Any other condition
Other terms & conditions:
1. Approved RR /TR
Advance shall be allowed against Railway Receipts/ Transport Receipts issued by Transport Companies,
whose name appears in the approved list issued by Indian Banks' Association from time to time.
2. Genuine Trade Bills
Advance shall be allowed against genuine trade bills representing goods in which the party deals regularly
and the bills drawn on associate/ allied concerns shall not be purchased/ discounted.
3. Credit Report of Drawees
In case of usance bills, the specimen signatures of the drawees duly attested by their bankers shall be
obtained and kept on record along with the credit report of the drawees
4. Recovery of out of Pocket Expenses
Out of pocket expenses incurred by the Bank/ interest in case of returning of bills shall be recovered as per
the Bank’s schedule of service charges as amended from time to time.
5. Supply to Govt. Department / PSUs
Power of Attorney shall be got registered with the respective Government Department/ Undertaking/
Corporation to ensure direct payment in case of supply to such buyers.
6. Valuation of Stocks
The valuation of goods as mentioned in the accompanying invoice shall also be verified to see that there is
no over-valuation of stocks.
7. Sub-limit for drawee
Sub limit for each drawee shall be fixed in consultation with Regional Office.
8. Disbursement for Bills under LC
The proceeds of the bills shall be released to the borrower only after getting confirmation from the LC issuing
Bank that the LC has been issued by them and that they will make payment on due date.
9. All L/Cs shall only be issued / received as per SFMS / SWIFT only to be operative. No advance shall be
granted on the basis of physical letter of credit. B.G.s however may be issued / received in physical paper
form, but shall be operative only confirmed message as per SFMS/SWIFT.
10. Value of stocks released under DA L/Cs, shall be excluded from the total value of stocks, to the extent of
unpaid LCs/Bills under LCs.
11. The margin stipulated by the bank for issuance of letters of credit will be released only at the time of
retirement of bills.
12. Opinion/status report on the overseas/domestic supplier shall be obtained, if found necessary by the Bank, at
the cost of the borrower.
13. Confirmation charges/all incidental charges and other out-of-pocket expenses are to be borne by the
borrower.

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Nature of Facility Clean Bills Purchase
Limit
Purpose
Security Third party cheques / Demand Drafts
Collateral Security
Margin
Rate of Interest / Penal Interest …………% (Bank’s spread) over Base Rate (present BR of the bank is …..%)
which works out to ……% at present with monthly rests, subject to changes in
BR/ Spread from time to time. Commercial rate of interest shall be charged from
the date of purchase till the Bank remains out of funds, in case the cheque /
Demand draft are returned unpaid.
Commission/other charges As per Bank’s schedule of charges
Term of Sanction One year
Any other condition
Other terms & conditions:
1. Self-drawn cheques and of associates concerns
Advance shall not be allowed against
a) Post dated/ self drawn cheques
b) Cheques drawn by allied/sister concerns
c) Cheques above Rs.5000 at any one time in case the borrower
deals in sensitive commodities.
2. Drawee Sub-limit
Suitable sub limit for each drawee to be fixed.

Nature of Facility Discounting of Co-accepted Bills

Limit
Purpose
Primary Security
Collateral Security
Margin
Rate of Interest / Penal Interest …………% (Bank’s spread) over Base Rate (present BR of the bank is …..%)
which works out to ……% at present with monthly rests, subject to changes in
BR/ Spread from time to time. Penal Interest @ 2 % p.a. over & above the rate on
overdrawn portion shall be charged.
Commission/other charges As per Bank’s schedule of charges
Term of Sanction One year
Any other condition
Other terms & conditions:
1. Co-acceptance of in-house / accommodation bills
a) No finance shall be permitted against co-acceptance of in-house bills/ accommodation bills drawn by
group concerns on one another.
b) The bills shall be got co- accepted from the authorized officials of the other bank directly and the finance
shall be allowed after obtaining written confirmation of the concerned Regional/ Zonal Office of the other
bank if the amount of the bill(s) is above Rs.____ lacs in case of a single party or a group of parties.
2. Monthly Confirmation
a) If the co-acceptance of bills facility is allowed on regular basis, monthly confirmation of the total
outstanding in the account shall be obtained from the other bank.
3. Reporting to HO of co-accepting Bank
a) In case, the liability becomes disproportionately large, the matter shall be brought to the notice of the
Head Office of the co- accepting bank.
4. Record Maintenance
a) Proper records of such co- accepted bills shall be maintained so that payment of each bill is recovered
from the other bank on due date.
5. Genuine Trade bills to be discounted
a) Only genuine trade bills shall be accepted and the branch shall ensure that the goods covered by bills co-
accepted are actually received in the stock account of the borrowers.

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Nature of facility Foreign Documentary Bill Purchased (FDBP)/ Foreign Usance
Documentary Bill Purchased (FUDBP) / FCBRD
Limit
Security Foreign Documentary Demand/Usance Bill having maximum
usance of ____days accompanied by Airway Bills/Bill of Lading
evidencing shipment of goods dealt in by the borrower and drawn
under irrevocable letter of credit / Confirmed orders.
Collateral Security
Margin
Rate of Interest/ As per RBI directives/Head Office guidelines issued from time to
Penal interest time.
Commission/other charges As per Bank’s schedule of charges.

Term of sanction One year

Special conditions Advance against confirmed orders shall not exceed Rs. ……..
within the overall bills limit of Rs……..
Any other condition
Other terms & conditions:
1. Authenticity of LC / order – verification
The bills shall be negotiated/purchased/discounted after verifying the authenticity of the
confirmed order/ Letter of Credit.
2. ECGC Policy
The bills shall be negotiated/purchased/discounted only after the borrower has obtained
from ECGC (unless otherwise waived) Comprehensive Policy in case of Export against
orders.
3. Buyer-wise ECGC Limit
Single party liability shall not exceed the buyer-wise limit approved by ECGC wherever
ECGC Policy has been obtained. Further, it shall be ensured that exporter is regular in
declaring export shipments and making payment of premium to ECGC.
4. Political Risk cover of ECGC
In case, bills are drawn under Letter of Credit, necessary cover from ECGC shall be
obtained by the borrower to cover political risks wherever warranted, depending upon the
country of Export.
5. Credit Report on drawees
Credit Report on the drawees shall be obtained from their bankers / reputed agencies like
Dun & Bradstreet periodically in case the bills are drawn against confirmed orders.
6. End-use of facility
Proceeds of the bills shall be utilized for adjustment of the Packing Credits wherever
granted.
7. Premium on ECGC – WTPSC coverage
Advance shall be covered under ECIB – WTPSG obtained by the Bank from ECGC and
the premium shall be borne by the bank.

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Nature of Facility Letter of Credit (Import/Inland)/ Buyer’s Credit / Letter of Comfort

Limit
Security (1) Documents of title to goods in case of L/C on DP basis.
(2) Hypothecation charge over the goods in case of L/C on DA basis and
the documents shall be delivered against Trust Receipt.
Collateral Security
Margin …….% in the shape of un-encumbered duly discharged FDRs/CDRs.
(Along with interest accrued thereon)
Purpose For procurement of raw material and spares (machinery etc in case of TL)
Favouring Various suppliers of the above items.
Tenor DP or DA with usance up to _____ days.
Commission and As per Bank’s schedule of charges.
all other charges
Any other
condition
Other terms & conditions:
1. Undertaking for retirement of documents under LC
Borrower shall undertake to retire the documents under LC without devolving liability on
the Bank.
2. Restriction on opening of fresh LC
Fresh LC shall not be established till the account remains irregular due to non-payment of
bills drawn under the Letter of Credit (unless otherwise permitted by the competent
authority).
3. Building up Margin
The borrower to gradually build up margin upto 100% so as to have adequate funds for
meeting liability under LC on due date (particularly when LC limit is on isolation basis).
4. Standard format for issuing LC
LC shall be issued on Standard Format of the Bank and no onerous clause shall be
incorporated therein.
5. Compliance of RBi / FEMA guidelines
While establishing import LCs, all the relative RBI exchange control guidelines / FEMA
guidelines shall be complied with.
6. Compliance of Exchange / Import trade regulation
The borrower shall undertake to comply with all the exchange/import trade control
regulations of RBI in respect of the imports.
7. Exchange Fluctuation Risk
The borrower will furnish an undertaking to the effect that in respect of the transactions
relating to the Import LCs, they will bear exchange fluctuations risk, if any and that they
will arrange for necessary forward cover, whenever called upon to do so by the bank.
8. Restriction on LC favoring group concern
LC shall not be opened in favour of group concerns.
9. Credit Report on Beneficiary
Credit Report on the beneficiary shall be obtained before opening first LC in favour of a
new beneficiary.
10. LC on DA Basis
In case of LC issued on DA basis:-
a. The goods covered under LC but released on trust shall not be taken into account for
the purpose of calculation of drawing power in the CC (Hyp.) account till the bills
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PUNJAB & SIND BANK – New Appraisal Note Format (H.O./ZO)
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drawn under LC are retired by the borrower.
b. Loaning documents shall be obtained for combined limit of Cash Credit and Letter of
Credit.
c. The sale proceeds shall be routed through the Cash Credit/ Current Account and/ or
deposited with the Bank so as to honour the liability on the due date.
11. Tenure of LC
The total usance period of LC / Buyer’s Credit / Letter of Comfort (including rollover) will
not exceed the tenor permitted as above.
12. Buyer’s Credit
In case of Buyer’s credit
a) All in cost should not exceed the ceiling advised by RBI from time to time.
b) The information of issuance of LOC be reported to HO IBD as per Bank/RBI
guidelines.
c) Normal operating / trade cycle shall be kept in view while permitting rollover of buyer’s
credit.

Nature of Facility Guarantee (Performance/Financial)

Limit
Security Counter guarantee of the Borrower.

Collateral Security
Purpose
Margin (1) Financial : …..%
(2) Performance : …..%
Margin shall be kept in the shape of unencumbered duly discharged
FDRs/CDRs. Interest on FDRs/CDRs shall not be released during
the currency of guarantee facility.
Beneficiary(ies)
Period of Guarantee Not to exceed __________months/ years.

Commission and all Commission and other charges shall be recovered at the time of
charges issuance of guarantee as per the Bank’s schedule of Service Charges
as amended from time to time, unless otherwise permitted by
sanctioning authority. In case the guarantee period is extended, the
commission for the extended period shall also be recovered.
Commission shall be recovered for the claim period if any.
Term of Sanction One year
Any other condition
Other terms & conditions:
1. Mandatory clause in BG
The Bank Guarantee form shall incorporate the following clause:
“Notwithstanding anything contained herein:
(i) Our liability under this Bank Guarantee shall not exceed Rs.______ only;
(ii) This Bank Guarantee shall be valid up to _______; and
(iii) We are liable to pay the guaranteed amount or any part thereof under this Bank
Guarantee only and only if you serve upon us a written claim or demand on or
before________ (date of expiry of Guarantee).”
2. Specific & unequivocal BG
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Guarantees issued shall be specific and unequivocal as regards
i) Amount; ii) Period iii) Beneficiary iv) Purpose.
3. Type of Guarantees not to be issued
The following type of guarantees shall not be issued:-
a) Guarantees having unlimited validity/ maturity of more than 10 years except in favour
of courts backed by 100% margin.
b) Guarantees in respect of deposits/ loans received by any person/ Non- Banking
Finance Companies from any source.
4. Onerous clause in BG
The Bank Guarantee issued by the Branch shall not contain any onerous clause or
liability for payment of interest. As far as possible, it should be issued on the 'Model
Form' as approved by the Bank. If deemed necessary, the guarantee format may be got
vetted from the Legal Retainer at Regional Office.
5. Export Guarantees
In case of Export guarantees, the same shall be covered under ECGC’s advance
payment guarantee/export performance guarantee or as per rules of ECGC and the
relative ECGC premium to be borne by the borrower. The borrower shall comply with the
formalities for obtaining due coverage and all relative charges/fees of ECGC to be borne
by the borrower.
6. Charge over current assets as applicable
(Where stipulated as per terms of sanction and agreed to by the borrower or as agreed
by the consortium)- The borrower will be required to execute hypothecation agreement
extending charge over the company’s current assets to the extent of guarantee limit as a
cover for all guarantees issued and/or to be issued by the bank on behalf of the borrower.
7. Recovery of claim from beneficiary
The borrower shall give an irrevocable letter of authority to the bank for debiting their
account straightaway with the amount of claims received from the beneficiary plus
incidental charges.
8. No commitment to allow any additional credit limit
Guarantees will be issued by the bank on behalf of the borrower without in any manner
implying a commitment to allow additional credit facilities to the borrower for payment of
claims against guarantees.
9. Demand and recover margin
The Bank shall be entitled at any time during the currency of the guarantee, to demand
and recover margin to the extent of 100% of the guarantees and in case of default in
payment by the borrower of the margin so demanded, the Bank reserves its right to
recover such margin by debiting any of the borrower’s accounts and such debit shall be
recoverable from the borrowers as their dues.
10. Foreign BG – Compliance of RBI guidelines
In case of Foreign Bank Guarantee, all Exchange control guidelines of RBI relating to
issuance of such guarantees shall be complied with.
11. Takeover of BG outstanding by other Bank
In case any guarantee is outstanding and the account is taken over by some other bank,
the securities shall be released only after obtaining 100% margin or Guarantee of that
bank containing a specific clause that their liability under the said guarantee shall exist till
the original Guarantee Bond is received or a release letter from the beneficiary is
received by PSB.

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FINANCING OF NBFCs, HIRE PURCHASE, LEASING:-

Terms & conditions:
1. Submission of stock on Hire Purchase
In respect of Hire Purchase transactions, a statement of stock on hire net of unmatured
finance charges and statement of outstanding credit in respect of leased assets shall be
submitted to the bank on monthly basis by third week of each month.
2. Full payout lease
Bank finance shall be restricted only to 'full pay out' leases i.e. those leases where the
cost of asset is fully recovered during the primary lease period itself.
3. Routing through Account
The receipt of lease rentals/hire purchase installments in respect of the assets charged to
us shall be routed through the account with concerned lending branch.
4. Tenure of lease / hire purchase agreement
Lease Agreements exceeding 5 years and Hire Purchase Agreements exceeding 3 years
shall not be entered into by the company without express permission of the Bank. Even if
such transactions are permitted, the Lease Rentals/ Hire Purchase Installments beyond
this period shall not be considered for calculation of drawing power.
5. Drawing power computation
Drawing Power shall not be allowed in respect of:-
a) Overdue installments, whether received or not.
b) Assets leased out/hired in excess of 15% of the Net Owned Funds
of the borrower to a single lessee/ hirer or 25% of the NOF to a
group of lessees/hirers.
c) Assets leased out/hired to partners/promoter directors/employees or their immediate
relatives without express permission of the bank in writing.
d) Transactions exceeding Rs.50.00 lacs unless specific permission has been obtained
from the bank in writing.
e) Transactions like Investments/ Bill Discounting etc.
f) Assets in respect of which lease/ H.P. agreements/original bills/invoices/ copies of
registration certificates and route permits etc. in case of vehicles have not been
deposited with the bank unless permitted to contrary.
6. Intimating R.T.O.
Intimation shall be sent to Regional Transport Authority in respect of vehicles leased
out/hired indicating Bank's interest in the vehicle.
7. Submission of certificates & statements
The company shall furnish to the bank:
a) A Chartered Accountant’s certificate about the outstanding lease credit on the
Balance Sheet date.
b) A quarterly statement showing progress in collection of installments/ period-wise
overdue position of lease rentals/ H.P. installments.
c) A Power of Attorney duly executed on a stamp paper in favour of the Bank
authorizing it to collect lease rentals/H.P. installments directly from the lessees/
hirers.
d) A certificate that it has not raised any finance from any other source nor shall it do so
without the express permission of the bank.

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Annexure - 8
PUNJAB & SIND BANK

BRANCH OFFICE: _____________________________________

DUE DILIGENCE REPORT

SN PARTICULARS REMARKS
1. Name of the Borrower/ Applicant
2. Existing / Proposed Activity
3. Type of borrower for which due diligence is done.
(New / Existing)
4. Banking Arrangement
(Sole / Consortium/ Multiple Banking Arrangement
/ Joint Lending Arrangement)
5. Promoter(s), Guarantor(s) and Group, if any
6. Experience of the Promoter(s) in the line of
existing/ proposed activity
7. Details of Existing Banker(s) and dealing since
8. Securitisation of statement of Bank account of the
borrower for at least 6 months to ascertain
conduct of account like volume of transactions vis-
à-vis unit’s turnover, continuous/ frequent
overdrawing, frequent returning of cheques,
repayment irregularity etc.
9. Observation on scrutiny done in :-
 CIBIL / other credit information bureau
report,
 RBI defaulters list
 RBI caution list
 ECGC-Specific Approval List,
 Credit Report of existing banker(s)
 Caution list issued by PSB (defaulters /
settled cases / declined cases etc.)
10. Observations made by external rating agencies in
the Credit Risk Rating Report of the borrower
(where available)
11. Verification of ROC records
(Through website: www.mca.gov.in)
12. Observation on Tax Registration/ Tax payments
by the borrower such as PAN/ TAN / Service Tax/
VAT/ Excise Duty registrations (as applicable).
(Tax payment as applicable to the borrower in the
past shall be scrutinized for being in line with the
business activity of the borrower.)
13. Comments on Unit / Office visit conducted
14. Names of market reference contacted & their Name Name of the Relation /
opinion (with relation to the borrower / promoter/ of the firm/ company/ Connection, if
group companies) person Promoter(s)/ any, with the
Guarantor(s) borrower

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PUNJAB & SIND BANK – New Appraisal Note Format (H.O./ZO)
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15. (In case of existing/fresh sanctions of Rs 5 Crore
& above)
Whether CRILIC report has been verified and if
there are any adverse remarks regarding same.

Whether audited financial statements submitted to

the Bank to be compared with the last available
financial statements filed with ROC.
(Major variations (if any) shall be analyzed along-
with the reasons and shall be reported to the
sanctioning authority. The matter shall be taken up
with the borrower and appropriate action to be
initiated.)
16. Obtaining information from public domain such as
google and other search engine / CMIE-
Prowess/information available in news paper etc.
17. Any other information related to the party which
may help in taking credit decisions.

We have undertaken the due diligence on the applicants/ borrowers from the sources as mentioned above
and are satisfied about their credentials/ credit-worthiness.

LOAN IN-CHARGE BRANCH INCUMBENT ZONAL MANAGER

(Accepting Authority)

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Annexure - 9

COMPLIANCE OF RBI/BANK’S POLICY GUIDELINES FOR FINANCING TO INFRASTRUCTURE

I. COMPLIANCE OF RBI GUIDELINES

The RBI guidelines for financing to infrastructure sector and compliance of the same are
given hereunder:

S RBI Guidelines Compliance

N
1. Financing Promoter's Equity
 Bank can finance the acquisition of the promoter's shares in
an existing company, which is engaged in implementing or
operating an infrastructure project in India subject to following
conditions:
a. The bank finance would be only for acquisition of shares of
existing companies providing infrastructure facilities.
Further, acquisition of such shares should be in respect of
companies where the existing foreign promoters (and/ or
domestic joint promoters) voluntarily propose to disinvest
their majority shares in compliance with SEBI guidelines,
where applicable.
b. The companies to which loans are extended should, inter
alia, have a satisfactory net worth.
c. The company financed and the promoters/ directors of
such companies should not be a defaulter to banks/ FIs.
d. In order to ensure that the borrower has a substantial
stake in the infrastructure company, bank finance should
be restricted to 50% of the finance required for acquiring
the promoter's stake in the company being acquired.
e. Finance extended should be against the security of the
assets of the borrowing company or the assets of the
company acquired and not against the shares of that
company or the company being acquired. The shares of
the borrower company / company being acquired may be
accepted as additional security and not as primary
security. The security charged to the banks should be
marketable.
f. Bank should ensure maintenance of stipulated margins at
all times
g. The tenor of the bank loans may not be longer than seven
years. However, the Boards of banks can make an
exception in specific cases, where necessary, for financial
viability of the project.
h. This financing would be subject to compliance with the
statutory requirements under Section 19(2) of the Banking
Regulation Act, 1949.
i. The banks financing acquisition of equity shares by
promoters should be within the regulatory ceiling of 40 per
cent of their net worth as on March 31 of the previous year
for the aggregate exposure of the banks to the capital
markets in all forms (both fund based and non-fund
based).
j. The proposal for bank finance should have the approval of
the Board.

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2. For takeout finance
a. In case of Substantial Takeout (more than 50% of the
outstanding loan by value):
i. Such loans should be 'standard' in the books of the
existing banks, and should have not been restructured in
the past;
ii. Such loans should be substantially taken over (more than
50% of the outstanding loan by value) from the existing
financing banks / financial institutions; and
iii. The repayment period should be fixed by taking into
account the life cycle of the project and cash flows from
the project.

b. In case of where substantial takeout is not possible:

i. The aggregate exposure of all institutional lenders to such
project should be minimum Rs.1,000 crore;
ii. The project should have started commercial operation after
achieving Date of Commencement of Commercial
Operation (DCCO);
iii. The repayment period should be fixed by taking into
account the life cycle of and cash flows from the project,
and, Boards of the existing and new banks should be
satisfied with the viability of the project. Further, the total
repayment period should not exceed 85% of the initial
economic life of the project / concession period in the
case of PPP projects;
iv. Such loans should be ‘standard’ in the books of the
existing banks at the time of the refinancing;
v. In case of partial take-out, a significant amount of the loan
(a minimum 25% of the outstanding loan by value) should
be taken over by a new set of lenders from the existing
financing banks/Financial Institutions; and
vi. The promoters should bring in additional equity, if required,
so as to reduce the debt to make the current debt-equity
ratio and Debt Service Coverage Ratio (DSCR) of the
project loan acceptable to the banks.

3 Flexible Structuring may be undertaken in case of existing long

term projects to infrastructure and core industries sanctioned
before July 15, 2014), in which the aggregate exposure of all
institutional lenders exceeds Rs.500 crore, subject to conditions
enumerated by RBI/ Banks policy on flexile structuring.

4 Flexible Structuring may be undertaken in case of existing long

term projects to infrastructure and core industries sanctioned after
July 15, 2014), subject to conditions enumerated by RBI/ Banks
policy on flexile structuring.
5. In respect of projects undertaken by PSUs:
 Term Loan may be sanctioned only for corporate entities (i.e.
public sector undertakings registered under Companies Act or
a Corporation established under the relevant statute).
 Public Sector Units may include Special Purpose Vehicles
(SPVs) registered under Companies Act set up for financing
infrastructure projects.
 Financial assistance to State PSUs is not to be extended, if
the loan is in lieu of or to substitute budgetary resources

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S RBI Guidelines Compliance
N
envisaged for the project. The term loan could supplement the
budgetary resources if such supplementing was contemplated
in the project design.
6. Classification of advances (secured/ unsecured) granted for
road projects under Public-Private Partnership (PPP):
 In case of PPP projects, the debts due to the lenders may
be considered as secured to the extent assured by the
project authority in terms of the Concession Agreement,
subject to conditions stipulated by RBI in its master circular
on prudential norms.

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II. COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s policy guidelines for financing to infrastructure sector and compliance of the same are
given hereunder:

S Bank’s Policy guidelines Compliance

N
1 Tenor of Loan & Moratorium:
 The maximum period of repayment cannot exceed 20
years
 In case of Take out financing arrangements and flexile
structuring, the maximum period can be of longer tenure
2 Risk factors viz. Sponser Risk, Pre Construction Risks, post
construction Risk, Political Risk, Force Majeure Risk
evaluated and suitable mitigants on case to case basis
stipulated, as per Banks Policy
3 Financing of Infrastructure under Special Purpose
Vehicle (SPV):
 In case of infrastructure project, the sponsor company
forms SPVs for implementation of particular project, it will
be ensured that during the currency of Bank finance ,
promoters holding in SPVs does not fall below 51% at any
point of time.
4 Other conditions:
 Due diligence report and TEV study to be submitted.
 In case of foreign participants in the project, the
credentials of the foreign participants should be obtained
from accredited agencies approved by the Bank such as
Dun & Bradstreet Corp etc.
 Debt Equity ratio (in case of TL) and TOL/ TNW ratio (in
case of WC) of 3:1 is benchmark for non-trading units.
However the same may be considered acceptable upto
3.50:1 and upto 6:1 in case of Infrastructure projects &
NBFCs
 Ratio higher than these levels may be accepted only in
exceptional cases, after careful consideration by the
sanctioning authorities, giving proper justification.

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Annexure- 10

COMPLIANCE OF RBI/ BANK’S POLICY GUIDELINES ON FINANCING TO COMMERCIAL REAL ESTATE

III. COMPLIANCE OF RBI GUIDELINES

The RBI guidelines for financing to Commercial Real Estate and compliance of the same are given hereunder:
RBI Guidelines Compliance
1. Construction activities not eligible for bank credit:
 Extending finance for fund based or non fund based
facilities to private builders for acquisition of land even as
a part of cost of project is not permitted. However, the
cost of land would form integral part of the total cost of
the project.
 Branches should not grant finance for construction of
buildings meant purely for Government/Semi-
Government offices, including Municipal and Panchayat
offices.
 Loans cannot be extended to Government entities where
the loans are envisaged to be repaid out of budgetary
allocations.
2. Obtaining clearances from Regulatory Authorities.
 It must be ensured that before release of funds, various
clearances from regulatory authorities have been
obtained. The facility may, however, be sanctioned
subject to the condition that the same shall be released
only after obtaining necessary clearances from the
competent authority.

IV. COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s Policy guidelines for financing to Commercial Real Estate and compliance of the same are given
hereunder:
Bank’s Policy guidelines Compliance
1. Margin Requirement:
 The margins on advances would be minimum of
40% but could be reduced to 25% only in case of
urban projects allotted/ auctioned by the Govt.
development agencies like DDA, NOIDA, GDA, PUDA
etc.

 Sale advance received from customers may be

considered as margin on case to case basis by the
competent sanctioning authority. Cases, where the
margin is lower than the above prescribed margins, to be
sanctioned by next higher authority within the respective
delegated authority.
2. Repayment Period
 Prescribed repayment period for Real Estate Loans
(excluding housing loans) is 10 years or as per decision
of the Consortium. Maximum Extension up to 24 months
can be allowed with same EMI in case of increase in
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interest rates. However, in case of consortium accounts,
maximum extension will be as per decision of the
Consortium.
3. Other policy guidelines for financing CRE projects:
 Interest Rate on CRE shall be charged as per present
guidelines in vogue for charging ROI linked to Credit
rating of the borrower
 Discretionary lending powers of all field functionaries
upto the level of Zonal Managers for sanctioning of Real
Estate Loans, have been withdrawn (unless otherwise
specifically provided). Such proposals can be considered
at Corporate level i.e. HO/ LHO, which also includes
Field level GM/s/ DGM (vested with powers of G.M.) if
any.
 ZMs / BMs shall ensure that all accounts in CRE sector
have been correctly classified according to the purpose of
Advance and Nature of Business.

4. Additional Information to be provided for Real Estate Projects

a) Information about projects undertaken by the company:

Particulars Status
Name of the project
Cost of project envisaged at the start of project
Actual cost incurred on the project
In case of major increase in the cost of project, reasons in
detail along with source of finance of additional cost
COD envisaged originally
COD achieved on
If COD achieved with delay or yet to be achieved, reasons
thereof

b) Information about ongoing projects of the company:

Particulars Status
Name of the project
Cost of Project
Name of Banker
Amount of borrowings
Present status of the project
Whether the same is running as per schedule, if not
reasons thereof

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Annexure – 11

COMPLIANCE OF RBI/BANK’S POLICY GUIDELINES FOR RESTRUCTURING CASES

1. COMPLIANCE OF RBI GUIDELINES

The RBI guidelines for Restructuring cases and compliance of the same are given hereunder:

S.No RBI Guidelines Compliance

1 Deferment of DCCO and consequential shift in
repayment schedule for equal or shorter duration
(including the start date and end date of revised
repayment schedule) will not be treated as
restructuring provided conditions stipulated in bank’s
guidelines/ RBI guidelines are complied with
2 Banks may restructure project loans, by way of
revision of DCCO beyond the time limits quoted at
paragraph 1 above and retain the ‘standard’ asset
classification, if the fresh DCCO is fixed within the
limits stipulated in Bank’s/ RBI guidelines, and the
account continues to be serviced as per the
restructured terms.
3 On restructuring, the unit should be viable. The Non
Infra unit should be viable in 5 years and Infra unit is
8 years. Viability tools such as ROCE, DSCR, Gap
between IRR and Cost of Funds, amount of provision
required in lieu of diminution in the fair value of the
restructured account, EBITA margin, Loan Life Ratio,
Cash and operating Break Even point may be used
for all cases.
4 Roll over of short term loans upto two times (if proper
pre sanction assessment has been made and no
concession is allowed due to credit weakness) shall
not be restructuring. Third roll over shall be
restructuring.
5 Promoters’ contribution should be minimum of 20%
of Bank’s sacrifice or 2% of restructured debt,
whichever is higher. This shall be brought in up-front
6 Conversion of debt into equity permitted only in listed
companies and upto 10% of restructured debt and
subject to section 19 of BR Act 1949
7 Right of recompense is mandatory in CDR cases and
non CDR cases. Minimum amount of recompense for
CDR and Non CDR cases is 75% of recompense
worked and 100% in case a restructured facility is
below Base rate like FITL or WCTL.
8 PG of promoters necessary in all cases. Corporate
Guarantee can replace PG only if the promoters of a
company are not individuals but other corporate
bodies or where the individual promoters cannot be
clearly identified.

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2. COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s policy guidelines for Restructuring cases and compliance of the same are given hereunder:

S.No Bank’s policy Guideline Compliance

1 Lending powers
 Delegated powers for restructuring of cases
sanctioned by BI is next higher authority at
ZO. For cases sanctioned by Zonal Head/ HO
shall be respective delegated authority.
 Renewal/ Review of restructured accounts
may be done by respective sanctioning
authorities within their normal delegated
powers irrespective restructuring authority
 Granting of fresh / enhancement / additional /
adhoc facilities in restructured accounts within
one year of restructuring may be done by
delegated authority provided conditions
stipulated in Banks Loan policy are complied
with
 Granting of fresh/enhancement/additional
/adhoc facilities in restructured accounts
AFTER ONE YEAR of restructuring may be
done by delegated authority provided the
borrower has fulfilled the restructured terms
and conditions as per banks Loan Policy. In
case conditions are not fulfilled –next higher
authority.
 However, a copy of the appraisal note
granting the facilities shall be forwarded to
Zonal Office/Head Office along with the
control returns (MDP/ZMDP) for review.
2 ROI
i. In case of Restructured Loans, if some of the
WCTL, FITL etc. need to be granted including
the interest of Working Capital and Term
Loan, below the applicable rate but not below
the Base rate of the Bank, for purpose of
viability where there are recompense etc
clause, then such concession will be allowed
by the sanctioning authority in whose case
restructuring proposal falls
ii. In case of Restructured Loans where some of
the WCTL& FITL need to be granted below
Base Rate for the purpose of viability and
there are recompense etc clauses, such
cases will be allowed/ approved by next
higher authority.

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Annexure - 12

COMPLIANCE OF RBI/BANK’S POLICY GUIDELINES ON INTER BANK PARTICIPATIONS

1. COMPLIANCE OF RBI GUIDELINES

The RBI guidelines for Inter Bank Participations (with risk sharing or without risk sharing)
and compliance of the same are given hereunder:
RBI Guidelines Compliance
I) Applicability:
a) With risk sharing: Can be issued by scheduled
commercial banks. However, RRBs can also issue
IBPC to scheduled commercial banks against their
priority sector advances.
b) Without risk sharing: Can be issued by scheduled
commercial banks (excluding RRBs) only.
II) Eligibility:
a) With risk sharing:
 Only those accounts which are ‘Standard’ assets
with the issuing bank with no overdue in relation
to principal/ interest/ other charges.
 External rating should not be below ‘BBB’/P3 or
equivalent as per Basel II norms,
 The Bank shall not participate in any externally
unrated account.
b) Without risk sharing:
 Only those accounts which are ‘Standard’ assets
with the issuing bank.
 Issuing bank should have CRAR not less than
9% for nationalized banks and 12% for private
commercial banks / foreign banks operating in
India.
III) Period/tenor:
a) With risk sharing: The minimum period of
participation will be 91 days while the maximum
period will be 180 days.
b) Without risk sharing: The maximum period of
participation will be 90 days.
IV) Amount:
a) With risk sharing:
 The aggregate amount of such participation in any
account should not exceed 40 per cent of the
outstandings in the account at the time of issue
(within prudential exposure ceiling to individual
borrower/ group).
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RBI Guidelines Compliance
 During the currency of the Participation the
aggregate amount of Participation should be
covered by the outstanding balance in the account.
 In case the outstanding balance falls short of the
participation outstanding, the Issuing bank will
reduce the Participation to the extent necessary and
if need be, issue Participation for smaller amounts.

b) Without risk sharing:

 The Issuing Bank is entitled to allot a part of
outstanding balance in the Borrower’s account to
the participating Bank, subject to maximum
permissible limit within Inter-Bank Liability Limit of
the Issuing Bank.

 The Bank’s aggregate exposure under this category

shall not exceed the prescribed credit exposure limit
(including loan to commercial banks, LC backed bill
discounting, loan against guarantee of other banks,
LC/LG backed by LoC/guarantee of other banks,
Inter-Bank Participation on non-risk sharing basis) to
banking sector within overall inter-bank exposure
limit.

V) Rate of interest:
a) With risk sharing:
 To be decided by the issuing and participating
banks based on Credit Risk of borrower and
prevailing market conditions.
 Payable on monthly basis.
b) Without risk sharing:
 To be decided by the issuing and participating
banks based on our Bank’s liquidity position and
prevailing market conditions.
 Payable on monthly basis.
VI) Transferability:
a) With risk sharing:
 Participation is not transferable.

b) Without risk sharing:

 Participation is not transferable.

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2. COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s policy guidelines for IBPC and compliance of the same are given hereunder:

S.No Bank’s policy Guideline Compliance

1 MC/ CACB is authorized to grant sanction and
approve cases for taking exposure upto Rs.
2000.00 cr. (Rs. two thousand crore only) for
participation in advance portfolio of other banks.
2 Branch Manager of disbursing branch jointly with
Zonal Manager/ Chief Manager of Zonal Office to
execute the document with the participating/
issuing Bank.
3 Per Bank exposure not to exceed Rs.2000 crore
under IBPC
4 The instrument will be by way of participation
contract as per IBA guidelines
5 Proposal for these products are to be considered
at HO Advances Deptt. only.

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Annexure -13

COMPLIANCE OF RBI/BANK’S POLICY GUIDELINES FOR TAKEOVER OF BORROWAL ACCOUNTS

COMPLIANCE OF RBI GUIDELINES

The RBI Guidelines for transfer/ takeover of borrowal accounts from one bank to another bank and
compliance of the same are given hereunder:

SN RBI Guidelines Compliance

1 Credit Report of borrowal accounts:
Credit information report from existing Banks/FIs as per
format prescribed by RBI before taking over an account be
obtained.

COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s policy guidelines for transfer/ takeover of borrowal accounts from one bank to another bank and
compliance of the same are given hereunder:
SN Bank’s Policy guidelines Compliance
1 Minimum Credit Rating:

 Credit rating of Borrowal Account based on last audited Balance

sheet should be in the range of 1-4 as per Bank’s Internal Credit
Rating Module. In case of Corporate
 Borrowers having credit rating from approved external credit
rating agencies, the credit rating should not be less than BBB.
2 Confidential Report of borrowal accounts:
 Confidential report from the existing bankers, details of all credit
facilities enjoyed by the borrower and its associate/group
concerns to be obtained on the format prescribed by RBI along
with declaration from the borrower that he is not enjoying any
other credit facility from any other Bank/FI for the same business
 While considering proposals for takeover of borrowal accounts, it
should be ensured that Bank takes over the entire funded and
non funded credit facilities enjoyed by the party. Bank will issue
letter of comfort /Counter guarantee for the remaining period of
the outstanding BGs/LCs etc.so as to ensure that all securities
charged against these facilities are transferred.
3 Reporting of Takeover Accounts
 The existing system in place for reporting for cases sanctioned by
competent authorities as per ID circular no. 1483 dated
22.08.1997 and ID circular no.1657 dated 29.05.2012 shall be
followed in case of takeover accounts
4 Sanctioning authority
 Sanctioning authority for takeover of Borrowal Account will be as
per bank’s extant Policy on delegation of Lending power.
 The competent sanctioning authority can consider need based
enhancement in existing credit facilities enjoyed by the borrower
with the existing banker.

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SN Bank’s Policy guidelines Compliance
5 Restriction on Borrowal Accounts to be taken over from other
banks:
If the borrowal account to be taken over by the Bank belongs to the
banks where any of its ED or CMD has worked earlier then such cases,
irrespective of amount, shall be sanctioned only by the Board of Directors
with specific reasons justifying the need for taking over such accounts
Monitoring System of takeover Accounts

(i.) Credit Audit of account with total exposure of Rs.2.00 crore and
above be got conducted as per extant guidelines of the Bank.
(ii.) Stock Audit is to be got done before disbursement/takeover of
facilities by external auditors where cash credit exposure exceeds
Rs.50.00 lac. For exposure less than Rs.50.00 lac, Branch incumbent
to verify the stocks and place on record his report having
checked/verified the stocks as per extant guidelines of the bank.
(iii.) For cases with exposure of Rs.3.00 crore and above, Zonal Manager
or any other officer deputed from ZO to visit the unit periodically.
Compliance of (i) and (iii) above is to be followed for the first two
years of takeover and normal guidelines with regard to credit
monitoring will be followed there after.
6 Other Due Diligence to be undertaken:
 The Borrowal account should be classified as Standard Asset
with the existing Bank in terms of RBI extant guidelines on
IRAC and running regular on the date of takeover. No
restructured account is to be taken over by the Bank.
 Borrowers which are in existence and earning profit for the
preceding 3 years.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. However, in such cases one audited
Balance Sheet should be available before hand. For
assessing the criteria of cash profit in the first year of
commercial production, the working of 12 months should be
reckoned.
 The net worth of the unit should be positive as per last
audited Balance sheet and should not be less than 75% of its
peak net worth during the preceding 3 years.
 The name of borrowal account/promoters/guarantors should
not appear in RBI/CIBIL’s defaulter list /caution list /willful
defaulters list
 None of the Borrowal/Group concerns accounts should have
been settled under any OTS scheme of the Banks/FIs.
 The outstanding for take over account be taken from the
transferor bank and amount be remitted directly subject to
release and transfer of all the securities charged to them
directly to our bank
 A brief note from borrower giving details of his Bankers in the
previous five years and reasons for switching over from
present Banker to our bank be obtained and analysed in right
perspective of spirit of banking. After analyzing the facts
given by the party and synchronizing the same with prevailing
Banking practice, RBI/Bank’s guidelines and organizational
goals, Branch Manager to put on record justification report for
taking over the account by the Bank.

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Annexure - 14

COMPLIANCE OF RBI/BANK’S POLICY GUIDELINES FOR FINANCING TO NBFC

(j) COMPLIANCE OF RBI GUIDELINES

The RBI guidelines for financing to Non Banking Finance Companies (NBFCs) and
compliance of the same are given hereunder:
SN RBI Guidelines Compliance
1 NBFCs eligible for bank finance:
 All NBFCs registered with RBI as well as NBFCs not
requiring registration as per RBI guidelines.
2 Activities of NBFCs not eligible for bank finance:
The Bank will not finance to NBFC undertaking the activities
like:
 loans and advances to their subsidiaries, group
companies / entities.
 Investments, both of current and long-term nature, in
any company/ entity by way of shares, debentures, etc.
 Unsecured loans / inter-corporate deposits to / in any
company.
 lending to individuals for subscribing to IPO and for
purchase of shares from secondary market.
 Bills discounted / rediscounted by NBFCs, except for
rediscounting of bills discounted by NBFCs arising from
sale of Commercial vehicles (including light commercial
vehicles), Two wheeler and three wheeler vehicles,
subject to certain specified conditions.
3 Benchmark Financial Ratio:
The benchmark financial ratios applicable to NBFCs are as
under:
 Minimum CRAR for Deposit/ Non-Deposit taking
systemically important NBFCs is 15%.
 Tier I CRAR for Captive NBFCs shall be atleast 12%
from the time of registration.
 Minimum Tier I CRAR for NBFCs predominantly
engaged in lending against Gold will be 12% by
01.04.2014.
 NBFCs predominantly engaged in lending against Gold
should strictly comply to the following regulatory
restrictions:
o The Loan-to-Value (LTV) ratio not exceeding 60 per
cent for loans against collateral of gold jewellery.
o NBFCs should not grant any advance against
bullion/primary gold & gold coins.

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SN RBI Guidelines Compliance
4 Other Prohibitions:
 No Bridge loans/ interim finance to be extended.
 No advance against collateral security of shares to
NBFCs:
 No guarantees to be extended for placement of funds
with NBFCs.
 Bank can extend financial assistance to NBFCs involved
in factoring business provided the criteria stipulated by
RBI for such companies is complied which inter-alia
include deriving atleast 50% of their income from
factoring activity and receivable purchased/ financed
shall form atleast 50% of the assets of the factoring Co.

(k) COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s policy guidelines for financing to Non Banking Finance Companies (NBFCs) and
compliance of the same are given hereunder:
SN Bank’s Policy guidelines Compliance
1 Exposure to NBFC

Internal exposure cap specifically fixed for individual/all

NBFC, based on type of NBFC, issued vide H.O. Risk
Management Department is to be followed.
2 Debt Equity ratio

 Debt Equity ratio (in case of TL) and TOL/ TNW

ratio (in case of WC) of 3:1 is benchmark for non-
trading units. However the same may be
considered acceptable upto 3.50:1 and upto 6:1 in
case of Infrastructure projects & NBFCs
Ratio higher than these levels may be accepted only in
exceptional cases, after careful consideration by the
sanctioning authorities, giving proper justification.
3 Security: Minimum security coverage to be 1.1 times of
loan at all times.

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Annexure - 15
COMPLIANCE OF RBI/BANK’S POLICY GUIDELINES ON
SECURITIZATION/ POOL PURCHASE

1. COMPLIANCE OF RBI GUIDELINES

The RBI Guidelines for financing Securitisation Companies and compliance of the same are
given hereunder:
SN RBI Guidelines Compliance
1 Assets Eligible for Securitization/ Pool Purchase:
 As per RBI guidelines, in a single securitization
transaction/ Pool purchase, the underlying assets
should represent the debt obligations of a
homogeneous pool of obligors. Subject to this
condition, all on-balance sheet standard assets except,
the following, are eligible for securitization by the
originators:
 Revolving credit facilities (e.g. Cash Credit accounts,
Credit Card receivables etc.)
 Assets purchased from other entities
 Securitization exposures (e.g. Mortgage-backed/asset-
backed securities)
 Loans with bullet repayment of both principal and
interest. However, loans with tenor up to 24 months
extended to individuals for agricultural activities (as
defined by Rural Planning and Credit Department of
the Reserve Bank of India, in the Master Circular -
Lending to Priority Sector) where both interest and
principal are due only on maturity and trade
receivables with tenor up to 12 months
discounted/purchased by banks from their borrowers
will be eligible for securitization. Further, only those
loans/ receivables will be eligible for securitization
where a borrower (in case of agricultural loans) /a
drawee of the bill (in case of trade receivables) has
fully repaid the entire amount of last two
loans/receivables (one loan, in case of agricultural
loans with maturity extending beyond one year) within
90 days of the due date.
2 Securitization Activities/ Exposures Not Permitted:
 As per RBI guidelines, banks in India including their
overseas branches, are not permitted to undertake the
securitization activities or assume securitization
exposures as mentioned below.
 Re-securitization of Assets: A re-securitization
exposure is a securitization exposure in which the risk
associated with an underlying pool of exposures is
tranched and at least one of the underlying exposures
is a securitization exposure. In addition, an exposure
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SN RBI Guidelines Compliance
to one or more re-securitization exposures is a re-
securitization exposure. This definition of re-
securitized exposure will capture Collateralized Debt
Obligations (CDOs) of Asset Backed Securities,
including, for example, a CDO backed by Residential
Mortgage-Backed Securities (RMBS).
 Synthetic Securitizations: A synthetic securitization
is a structure with at least two different stratified risk
positions or tranches that reflect different degrees of
credit risk where credit risk of an underlying pool of
exposures is transferred, in whole or in part, through
the use of funded (e.g. credit-linked notes) or
unfunded (e.g. credit default swaps) credit derivatives
or guarantees that serve to hedge the credit risk of the
portfolio. Accordingly, the investors’ potential risk is
dependent upon the performance of the underlying
pool.
 Securitization with Revolving Structures (with or
without early amortization features): These involve
exposures where the borrower is permitted to vary the
drawn amount and repayments within an agreed limit
under a line of credit (e.g. credit card receivables and
cash credit facilities).Typically, revolving structures
will have non-amortizing assets such as credit card
receivables, trade receivables, dealer floor-plan loans
and some leases that would support non-amortizing
structures, unless these are designed to include early
amortization features. Early amortization means
repayment of securities before their normal contractual
maturity. At the time of early 27 amortization there are
three potential amortization mechanics: (i) Controlled
amortization; (ii) Rapid or non-controlled
amortization; and (iii) Controlled followed by a
subsequent (after the completion of the controlled
period) non-controlled amortization phase.
3 Minimum Holding Period (MHP) of Securitized / Pool
Assets:
 Minimum Holding Period will be defined with reference to
the number of installments to be paid prior to securitization.
Minimum Holding Period applicable to various loans
depending upon the tenor and repayment frequency
 Minimum Holding Period will be counted from the date of
full disbursement of loans for an activity/purpose;
acquisition of asset (i.e., car, residential house etc.) by the
borrower or the date of completion of a project, as the case
may be.
 The Minimum Holding Period will be applicable to
individual loans in the pool of securitized loans.
 Minimum Holding Period will not be applicable to loans

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with tenor up to 24 months extended to individuals for
agricultural activities (as defined by Rural Planning and
Credit Department of the Reserve Bank of India, in the
Master Circular - Lending to Priority Sector) where both
interest and principal are due only on maturity and trade
receivables with tenor up to 12 months
discounted/purchased by banks from their borrowers will
be eligible for securitization.
 The Bank will invest in only those securitization assets /
purchase pool assets where the originators have fulfilled the
criteria of Minimum Holding Period of securitized assets in
its Book as per RBI guidelines.
4 Minimum Retention Requirement in Securitized /Pool
Assets:
 The Bank will invest in only those securitization assets /
purchase pool assets where the originators have fulfilled the
criteria of Minimum Retention Requirement in securitized/
pool assets Book as per RBI guidelines.
 Minimum Retention Requirement applicable to various
loans depends upon the tenor of loan as specified in RBI
guidelines.
 The MRR should not be reduced either through hedging of
credit risk or selling the retained interest. The MRR as a
percentage of unamortized principal should be maintained
on an ongoing basis except for reduction of retained
exposure due to proportionate repayment or through the
absorption of losses. The form of MRR should not change
during the life of securitization.
 MRR will have to be maintained by the entity which
securitizes the loans. In other words, it cannot be
maintained by other entities which are treated as
‘originator’. "Originator" refers to a bank that transfers
from its balance sheet a single asset or a pool of assets to an
SPV as a part of a securitization transaction and would
include other entities of the consolidated group to which the
bank belongs.
 In the case of long term loans, the Minimum Retention
Requirement may also include a vertical tranche of
securitized paper in addition to the equity/subordinate
tranche, to ensure that the originating banks have stake in
the performance of securitized assets for the entire life of
the securitization process.
 The MRR should represent the principal cash flows.
Therefore, banks’ investment in the Interest Only Strip
representing the Excess Interest Spread/ Future Margin
Income, whether or not subordinated, will not be counted
towards the MRR.

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5 Limit on Total Retained Exposure of Originator in

Securitized Assets/ Pool Assets:
 Total investment by the originator in the securities
issued by the SPV through underwriting or otherwise
will be limited to 20% of the total amount of
securitized instruments issued.
 Credit enhancement, liquidity support and
counterparty credit exposures in the case of interest
rate swaps/currency swaps with the SPV are outside
this limit of 20%.
 However, under the Basel II requirements, there
should be transfer of a significant credit risk
associated with the securitized exposures to the third
parties for recognition of risk transfer.
 In view of this, the total exposure of banks to the loans
securitized in the following forms should not exceed
20% of the total securitized instruments issued:
 Investments in equity/subordinate/senior tranches of
securities issued by the SPV including through
underwriting commitments.
 Credit enhancements including cash and other forms
of collaterals including over-collateralization, but
excluding the credit enhancing interest only strip
 Liquidity support.
 If the originating bank exceeds the above limit, the
excess amount would be risk weighted at 1111%.
 The 20% limit on exposures will not be deemed to
have been breached if it is exceeded due to
amortization of securitization instruments issued.
6 Due Diligence to be undertaken by the bank while
investing in Securitized Assets/ Pool Assets:
 The Bank can invest in or assume exposure to a
securitization position only if the originator (other
banks/FIs/NBFCs) has explicitly disclosed to the
credit institution that it has adhered to MHP and MRR
as stipulated in the Bank’s policy guidelines on
investment in securitized assets and will adhere to
MRR guidelines on an ongoing basis.
 Further while undertaking the due diligence for the
investment in securitized assets, the following points
shall be analyzed and recorded:
 Information disclosed by the originators regarding the
MRR in the securitisation, on at least half yearly basis;
 The risk characteristics of the individual securitisation
position including all the structural features of the
securitisation that can materially impact the
performance of the investing bank’s securitisation
position;
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 The risk characteristics of the exposures underlying
the securitisation position.
 The reputation of the originators in terms of
observance of credit appraisal and credit monitoring
standards, adherence to MRR and MHP standards in
earlier securitizations, and fairness in selecting
exposures for securitization;
 Loss experience in earlier securitizations of the
originators in the relevant exposure classes underlying
the securitization position, incidence of any frauds
committed by the underlying borrowers, truthfulness
of the representations and warranties made by the
originator;
 The statements and disclosures made by the
originators, or their agents or advisors, about their due
diligence on the securitized exposures and, where
applicable, on the quality of the collateral supporting
the securitized exposures;
 Further, where applicable, the methodologies and
concepts on which the valuation of collateral
supporting the securitized exposures is based and the
policies adopted by the originator to ensure the
independence of the valuer.
 When the securitized instruments are subsequently
purchased in the secondary market by a bank, it
should, at that point in time, ensure that the originator
has explicitly disclosed that it will retain a position
that meets the MRR.
7 Risk Weight for investment in Securitized / Pool
Assets:
 As per RBI guidelines, the investment in securitized
assets will attract a risk weight as per external rating
assigned by the approved credit rating agencies to the
securitized portfolio.
 However, if the Bank does not comply with the
standards for due diligence, Stress testing and credit
monitoring guidelines for investment in securitized
assets then such investment exposure in securitized
assets will attract a risk weight of 1111%.
8 Classification of investment in Securitized Assets/
Pool Assets:
 As per RBI guidelines, Investments by banks in
securitized assets representing loans to various
categories of priority sector and outright purchase of
any loan asset eligible to be categorized under priority
sector, shall be eligible for classification under the
respective categories of priority sector (direct or
indirect), provided the loans purchased are eligible to
be categorized under priority sector.
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2) COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s policy guidelines for financing to Securitisation Companies and compliance of
the same are given hereunder:
SN Bank’s Policy guidelines Compliance
1 Other Conditions to be Met Before Taking Exposure in
Securitisation of Assets:
 Originating company should be rated Minimum “AA” from
a RBI approved rating agency and that rating should be
reviewed on an annual basis.
 In case of Non Priority Sector, the Pool should be
necessarily rated minimum “A” with RBI Approved rating
agency, and that rating should be thereafter reviewed on an
annual basis. However, in case of pools under Priority
Sector, the condition of rating may be waived.
 To cover Credit & Liquidity risks, the bank may undertake
the Credit Rating exercise and/or Loss Ratio Evaluation
through a Rating agency of the Pool and ensuring
compliance of the Minimum Retention Requirement
(MRR) on an ongoing basis. Probability of default (PD)
and Loss Given Default (LGD) history of individual
segment (Car, Home, etc.) of the pool to be obtained from
originator duly certified by their CA to assess the overall
risk.
 The default rate (ultimate losses) of the pool as per Loss
Ratio Evaluation report of the approved rating agency
should be less than the default rate of our bank for the
similar portfolio. The losses at the pool level could be
additionally impacted because of geographic concentration,
geography-specific performance, and stress caused by any
economic, political, legal, or force majeure risks/events. In
such a situation, the estimated ultimate losses could be
more than the ultimate losses estimated for the pool.
 Originating company should be in the same line of business
for minimum 5 years.
 The loan to value (LTV) for Auto loan (only new car )and
for Mortgage loan as per RBI guidelines.
 Pool should not contain any Non Performing account
 Pricing of the Pool will depend on the IRR of the pool,
interest rate scenario and other market conditions.
 The total exposure on Pool Assets shall not exceed at any
point of time 10% of the total advances of the Bank.
 Proposal relating to Securitisation of Assets will be dealt at
HO only.
 The originator or its Agent would act as collection and
Service agent of the pool and would continue to hold PDCs,
Securities, Documents etc. on behalf of the assignee and
would receive and collect all the amounts falling due from
the underlying borrowers from time to time and enforce
obligation of the borrowers and all securities created by
them. For these services, the collection & service charges

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payable for Priority Sector pools would be negotiable on
case to case basis for non priority sector pools , upfront
charges for the entire period of pool shall be maximum upto
Rs.10000/.
 The “securitisation of assets Portfolio” will be built up
through Direct Assignment of Cash flows and the
underlying Securities. And shall be reviewed at yearly
intervals. The performance of the pool of assets purchased /
assigned directly in favour of the Bank shall be reviewed
periodically and if there is any short fall in collections,the
same shall be made good through credit / liquidity
enhancements provided by the originator.
 All securitization transaction shall be in conformity with
regulatory compliance which includes SARFAESI Act
2002 and RBI guidleines o the subject. The regulatory
norms for capital adequacy, valuation, profit/loss on sale of
assets, income recognition and provisioning for originators
and service providers like credit enhancers, liquidity
support providers as well as investors as also the
accounting treatment for securitisation transactions and
disclosure norms as enunciated by RBI shall be followed
strictly.
2 Transactions Involving Transfer of assets through Direct
Assignment of Cash Flows and the underlying Securities –

Standards for Due Diligence

a) Bank shall obtain the certificate from the originating bank

regarding the conduct of due diligence in respect of Securitised
assets at the time of sanction of each loan and ensure
satisfactory. Further, the originating bank shall also confirm the
holding of such reports and make available to the Bank
whenever required.
b) The Bank while purchasing shall conduct the due diligence with
the same rigour as would have been applied while sanctioning
new loans by the bank and same shall not be outsourced.

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Annexure - 16

COMPLIANCE OF RBI/ BANK’S POLICY GUIDELINES ON FINANCING TO CAPITAL MARKET

COMPLIANCE OF RBI GUIDELINES

The RBI guidelines for financing to capital market and compliance of the same are given
hereunder:
RBI Guidelines Compliance
1) Margin Requirement:
 Minimum margin of 50%.
 In case of guarantees issued to stock brokers, a minimum
margin of 50% of which 25% shall be cash margin and
balance 25% may be in the shape of chargeable tangible
securities.
2) Statutory Restrictions:
 Loans to companies for buy-back of shares/ securities are not
permitted.

 Bank should not hold shares in any company whether as

pledgee, mortgagee or absolute owner, of an amount
exceeding 30 percent of the paid-up share capital of that
company or 30 percent of its own paid-up share capital and
reserves, whichever is less.

 Bank should not hold shares whether as pledgee, mortgagee

or absolute owner, in any company in the management of
which any managing director or manager of the bank is in any
manner concerned or interested.
3) Regulatory Restrictions:

 No loans to be granted against partly paid shares.

 No loans to be granted to partnership/proprietorship concerns

against the primary security of shares and debentures.

 No loan is to be considered against the shares which are in

physical form.

 No loans to be granted for subscription to IDRs or against

security/collateral of IDRs issued in India.

 No loans to be granted for the purpose of Promoter's

contribution towards Equity Capital or advance against shares
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to enable the borrower to acquire or retain controlling interest
in a company.

 Bank shall not extend credit facilities directly or indirectly to

stockbrokers for arbitrage operations in Stock Exchanges.

4) Exposure ceiling for Capital Market Exposure:

 Aggregate exposure to Capital Markets should not exceed
40% of its net worth as on 31st March of the previous year.
 Direct investment in shares, convertible bonds/ debentures,
units of equity oriented Mutual Funds & all exposures to
exposure to Venture Capital Funds or aggregate indirect
exposure (advances to capital market) should not exceed
20% of its net worth as on 31st March of the previous year.
 Total exposure of the Bank to Stock Brokers and Market
Makers should not exceed 15% of its net worth as on 31 st
March of the previous year.
 For any single stock broking entity and market maker –
Rs. 5 Crore.
 For any single stock broking entity and market maker
including associates – Rs. 10 crore
 Loans against security of shares, convertible bonds,
convertible debentures and units of equity oriented mutual
funds to individuals from the banking system should not
exceed the limit of Rs. 20 lacs per individual and should not
exceed the limit of Rs.10 lakh for subscribing to IPOs.
 Exposure to Indian Joint Ventures/Wholly-owned Subsidiaries
Abroad and Overseas Step-down Subsidiaries of Indian
Corporates will be subject to a limit of 20 percent of banks’
unimpaired capital funds (Tier I and Tier II capital).

5) Issue of Irrevocable Payment Commitments (IPCs) to

Stock Exchanges on Behalf of Mutual Funds (MFs) and
Foreign Institutional Investors (FIIs)
 The Bank as custodian can issue Irrevocable Payment
Commitments (IPCs) in favour of the Stock Exchanges /
Clearing Corporations of the Stock Exchanges, on behalf of
their FII clients for purchase of shares and convertible
debentures under the portfolio investment scheme (PIS)

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RBI Guidelines Compliance
6) Financing for Acquisition of Shares of PSUs
 Bank may extend finance for acquisition of shares of PSU
under a divestment program approved by Government of
India, including the secondary stage mandatory open offer.

7) Financing Acquisition of Equity in overseas

companies.
 The Bank may extend financial assistance to Indian
companies for acquisition of equity in overseas joint
ventures/wholly owned subsidiaries or in other overseas
companies subject to the RBI Policy/ policy guidelines
enumerated in the Loan policy.

8) COMPLIANCE OF BANK’S POLICY GUIDELINES

The Bank’s Policy guidelines for financing to capital market and compliance of the same are
given hereunder:

Bank’s Policy guidelines Compliance

1. For computing the exposure to the capital markets,
loans/advances sanctioned and guarantees issued for capital
market operations would be reckoned with reference to
sanctioned limits or outstanding, whichever is higher.
However, in the case of fully drawn term loans, where there is
no scope for re-drawal of any portion of the sanctioned limit,
bank would reckon the outstanding as the exposure. Further,
banks’ direct investment in shares, convertible bonds,
convertible debentures and units of equity oriented mutual
funds would be calculated at their cost price.
 Banks exposure in capital market is capped as 1.50% of total
advances which shall not exceed RBI’s ceiling of 40% of
Bank’s net worth of previous year as on 31st March. For the
industries/ sectors under Bank's caution list, 50 % of various
prescribed industry exposure limits will be applicable.

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Appendix 3

GUIDANCE NOTE ON POINTS TO BE TAKEN CARE OF WHILE PREPARING THE

PROCESS NOTE

Along with the details mentioned in the new loan appraisal note format, following General
guidelines to be kept in mind at the time of preparing appraisal note are as follows:

i. Analysis of financial Indicators/ Performance Detail

General
 Comments on performance should capture/ assess in essence the company’s business
model Performance should be with specific focus on activity levels, PBDIT, profits and
profitability ratios.

 Key elements of the company’s business model that differentiates it from its peers and
contribute to its success are to be commented upon.

Sales/ Turnover - Discuss the following:

 Actual sales should be compared to the sales of the last year as well as estimated/
projected sales submitted earlier and reasons for decrease in sales from last year and
variations from the estimated/ projected sales.
 The current year estimates and its acceptability with due justification. Justification for
accepting the estimated sales to be given based on sales achieved till date during the
current year, capacity expansion, orders in hand etc.
 If the sales exceeded industry trends or otherwise –reasons for the same. Strategies for
achieiving the estimated/ projected level of sales. Segmental analysis of sales.
Customerwise analysis of sales – if relevant (order book position may be given in an
annexure if required)
Profitability - On similar lines as above
Liquidity - To include comment on the current ratio, debtors ageing analysis. Adverse
features pointed out in the Stock and Receivables Audit. If any, and its impact on liquidity to
be commented upon.
Paid Up capital/ TNW
 In case there is movement in paid up capital, reasons viz. issue of fresh capital, issue of
bonus shares, conversion of FCCB into equity, buy back of shares, etc. should be
mentioned. In case of issue of fresh capital, premium amount, if any, IPO or private
placements, should be mentioned. There should be comment whether the company is
making provisions for redemption of FCCB on due date. Comments on residual period of
preference shares should be given.
 Share Application Money is to be included in TNW if it is supported by an undertaking to
convert it into Paid up Capital within a given time frame, however the date of conversion
of the amount in to PUC to be mentioned in such case. Also, stipulation for conversion to
be made for release of new limits. A copy of board resolution along with a copy of
applicable form filed with ROC to be obtained.
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 In case of partnership/proprietorship firm, stipulation is to be made that the firm would
maintain the capital at the actual/estimated level during the currency of advance.
 In case of infusion of fresh capital / share premium specific sources be explained

ii. Renewal/ reviewal of credit facilities:

 The overdue amount “if any” under different types of facilities must be mentioned
alongwith duration of irregularity, since when irregular, the month / quarter to which the
overdue pertains.
 The confirmation of compliances of pre-disbursement conditions must be given.
 In case where renewal has been done on the basis of provisional Balance Sheet, a
condition for submission of audited B/S should be stipulated alongwith time frame. On
receipt of Audited Balance sheet, the same should be compared with Provisional
Balance sheet and variations, if any, should be discussed in the note.

iii. Concession in ROI/ Service Charges - Whenever concession in ROI / other charges has
been recommended, detailed justification should be given.

iv. External Rating - In case, the borrower has been externally unrated, reasons for remaining
unrated must be clearly mentioned alongwith the action taken for getting the account
externally rated giving timeframe for getting the account rated.

v. Project Loans:

 Name of the agency which has appraised the project / done TEV study must be
mentioned.
 “Physical Progress” vis-à-vis “the projections” made must be captured in the process
note. The progress of completion in percentage terms must be indicated. In case of
variation, detailed reasons must be furnished in the process note.
 The position of time overrun vis-à-vis time schedule envisaged for each stage of
completion must also be given.
 The “Financial Progress” vis-à-vis the projections made must be captured in terms of
the borrower contribution brought in and the corresponding D/E ratio, cash flows
actually generated vis-à-vis estimates.

 Delay (if any) in DCCO must be explained with reasons.

viii. Source of Promoters Contribution – Sources of Promoter’s funds to be clearly specified,

e.g details of assets, investments to be liquidated, in case of Investments from Associates -
their Cash Accruals to be examined over the project implementation period with reference to
past performance and debt servicing/ CAPEX and other requirements.

ix. Loss/ Haircut to the Bank - Loss haircut suffered by the Bank on account of Compromise/
Writeoff/ references to CDR, including Recompense clause, in respect of exposures on
Companies including companies floated by Groups/ Asssociates/ Related parties/ Directors/
Guarantors to be commented upon.

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x. Changes in Covenants - Whenever approval is sought for changes in key covenants like
borrowers constitution, substitution/ release of security, Substitution / release of personal
guarantee of promoter etc., the detailed justification should be furnished and the impact of
the change on Bank’s exposure should be discussed in the note.

xi. Investment in group Concerns - Wherever investment in group concerns is done by the
borrower, the same should be explained alongwith key financials of the investee companies.

xii. LC For Capital Expenditure - Where LCs have been opened for capital expenditure, the
status of procurement of equipment purchased under the LC must be indicated alongwith
the arrangement for retiring the documents under LC on due date.

xiii. Latest tax Return - The date of the latest returns filed and assessments completed with
regard to the income tax for borrower / constituents must be clearly indicated.

xiv. Unit Visit - The date of last unit visit must be reported in the process note alongwith
observations of the visiting officials.

xv. Consortium/ Multiple Banking/ JLF accounts:

 The date of last consortium meeting held should be reported alongwith deliberations held
and decisions arrived at.
 Position of disbursement of facilities by co-lenders (wherever applicable) should be
given.
 If other banks are not taking up their respective shares, reasons for the same must be
mentioned clearly.
 Position of sanction by other banks must be commented.

xvi. Security:

 In case of primary / collateral security, the type of charge held by the Bank must be
clearly reported viz., 1st exclusive charge, 1st pari-passu charge, 2nd pari-passu charge
etc.
 Where collateral is shared between more than one lender, total value of the collateral
should be shown alongwith our share in the value of collateral (amount as well as
percentage).
 In case the value of property / security is reported, the same shall be with reference to the
latest valuation, giving the date of valuation report.
 Compliance of guidelines as contained in legal audit policy issued by H.O. Inspection
Deptt. to all Zones vide mail dated 27.02.2015 and H.O. L& R Cir. No. 183 to be ensured.

xvii. Approval from various Authorities - Proposal for sanction of credit facility for different
businesses / projects require different approvals from various regulatory / statutory and
other authorities which may vary depending upon the type of business done, the stage of
implementation at which the approval is required etc. Accordingly, the process note should
show the status of the clearances / approvals obtained / to be obtained. Indicative list of
clearances include Land/ Site availability, Environmental and Costal Regulation Zone
clearance, NOC from Pollution Control Board, Stack height clearance, Forest clearance,
Power connection, Water connection, Chief Controller of Explosives from Petroleum and
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Explosives Safety Organisation, NOC form Defence, Rail Route Clearance, Customs
landing Permit, Permission from the State Government for extraction of boulders from
quarry, License from Inspector of Factories or other competent Authority for setting up
Batching Plant, Permission from State Government for cutting of trees, Any other
permission/ clearances required under applicable laws for the specific proposal clearance.

xviii. Formatting - All figures should be Right justified and the amount should be mentioned `
Crore uniformly throughout the process note.

xix. Rate of Interest - Rate of interest charged by other Bank should be clearly brought out and
Date of reset of ROI (if applicable) should be given.

xx. Total borrowings of Borrower and Group from Banking system - The total borrowings
of borrower and the group to whom they belong to must be ascertained and mentioned

xxi. Other Directions - Any other information as directed by the Bank’ Circular/ Board / RBI
from time to time shall also be provided in the Process Note.

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