2025-26

MSME lending
Monitoring
Recovery
 TABLE OF CONTENT

1. LOAN POLICY .................................................................................................. 3

2. POLICY GUIDELINES ON MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) 2024-25 ............... 28
3. GUIDELINES ON LENDING TO MICROFINANCE INSTITUTIONS (MFI) FOR ON LENDING TO MICRO
BORROWERS ................................................................................................. 36
4. POLICY ON LENDING TO REAL ESTATE SECTOR ......................................................... 40
5. BILL DISCOUNTING POLICY 2023-24 ...................................................................... 45
6. POLICY ON CAPITAL MARKET EXPOSURE ................................................................. 49
7. POLICY ON GUARANTEE AND CO-ACCEPTANCE.......................................................... 50
8. GUIDELINES ON DIGITAL LENDING ........................................................................ 59
9. GUIDELINES ON CREDIT RISK MITIGATION TECHNIQUES & COLLATERAL MANAGEMENT ........... 62
10. GUIDELINES ON STOCK AUDIT ............................................................................. 65
11. POLICY ON TECHNO ECONOMIC VIABILITY (TEV) AND EMPANELMENT OF EXTERNAL ENGINEERS/
FIRMS FOR TEV STUDY / LENDERS INDEPENDENT ENGINEERS (LIE) ................................... 67
12. POLICY ON VALUATION OF PROPERTIES AND EMPANELMENT OF VALUERS 2024-25 ................ 75
13. POLICY ON CO-LENDING BY BANK & NBFC/ HFC, TRANSFER OF LOAN EXPOSURES AND
SECURITISATION OF STANDARD ASSETS 2024-25 ........................................................ 84
14. POLICY ON DELEGATION OF LOANING POWERS ......................................................... 86
15. PRUDENTIAL EXPOSURE CEILING .......................................................................... 93
16. CREDIT MONITORING POLICY .............................................................................. 97
17. TRANSFER OF LOAN EXPOSURE ........................................................................... 116
18. POLICY ON PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND
PROVISIONING OF ADVANCES (IRACP) ................................................................... 123
19. RESOLUTION OF STRESSED ASSETS ....................................................................... 129
20. GIST OF CIRCULAR ON FRAMEWORK FOR REVIVAL AND REHABILITATION OF MICRO, SMALL AND
MEDIUM ENTERPRISES (MSMES) ........................................................................... 139
21. REVIVAL AND REHABILITATION OF MSME : .............................................................. 139
22. POLICY ON RELIEF MEASURES BY BANKS IN AREAS AFFECTED BY NATURAL CALAMITIES -2024-25
............................................................................................................... 142
23. POLICY ON NON-COOPERATIVE BORROWERS AND WILFUL DEFAULTERS ............................ 144
24. RECOVERY MANAGEMENT POLICY ........................................................................ 148
25. PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS(PPIRP) ......................................... 160
26. GUIDELINES ON SARFAESI ................................................................................. 167
27. STAFF ACCOUNTABILITY IN CREDIT RELATED AREAS .................................................. 179
 LOAN POLICY

Latest Loan Policy was circulated vide IC 04545-2024 dated 12.01.2024. Further, various operational
Guidelines hitherto enumerated in Loan Policy are now separately as “Operational guidelines to
Policy‟ vide IC 04689-2024 dated 26.03.2024. Credit Risk Management Committee (CRMC) is
empowered for modification in operational guidelines to the policy.

The Loan Policy applies to Domestic Lending. For Foreign Branches we have separate policies which
have been framed by Treasury & International Banking Department (TIBD) taking into account the
banking and other regulations of the host country on one hand and the Govt of India/Reserve Bank
of India guidelines /regulation on the other hand.

Definitions:

 Subsidiary is an enterprise that is controlled by another enterprise (known as parent)

 An Associate is an enterprise in which the investor has significant influence and which is neither
a subsidiary nor a Joint Venture of the investor.
 Joint Venture is a contractual arrangement whereby two or more parties undertake an economic
activity, which is subject to joint control.
 Significant Influence is the power to participate in the financial and/or operating policy decisions
of the investee but not control over their policies.
 Corporate Borrowers will include Limited Liability Partnership (LLP), Private Limited Companies
and Public Limited Companies.
 Non-Corporate Borrowers will include individuals and other entities like proprietorship,
partnership, HUF etc not covered under Corporate.
 Verticals at CO:
- Large Corporate Vertical shall process (New/ Enhancement/ Renewal/ Miscellaneous etc)
various requests for approval in credit proposals above Rs 250.00 Crore.
- Mid Corporate Vertical (MCV) - MCV will focus on mid-corporate segment through Mid
Corporate Branches (MCBs). Mid Corporate Branches(MCBs) shall process credit proposals
above Rs 50.00 Crore and up to Rs 250.00 crore, unless falling within the same group.
- MSME Vertical at Central Office shall process (New/ Enhancement/ Renewal/ Miscellaneous
etc) various requests for approval in credit proposals (including proposals beyond the
delegation of ZH) up to Rs 50.00 Crore & up to Rs 75.00 Crore for zonal offices headed by
CGM.

Preliminary Information Memorandum:

Preliminary Information Memorandum (PIM) is a structured format for submitting the new proposal
for approval before submitting the detailed regular proposal to the sanctioning authority.
PIM is applicable for new credit connections of above Rs 20.00 Crore. However, putting-up of PIM
before NBG for approval shall not be mandatory in below cases:

- In case of a new company, from a group, which has applied for credit facility where such
group is having credit facility with our Bank.
- Credit facilities to AA & Above rated accounts, Banks, Government (Central & State), PSUs.

Credit Limit Approving Authority

MCB (amount exceeding delegation of CAC:I) / CAC:I NBG:I
(above Rs 250 crore to Rs 800 crore)
CAC:II (above Rs 100 crore to Rs 250 crore) NBG:II
CAC:III (above Rs 50.00 crore to Rs 100 crore) NBG:III
For credit proposals falling under the delegation of RLCC/ZLCC, PIM will be put up to respective
delegated authority for approval.
Time limit of 7 to 15 days is adequate for disposal of PIM from the date of receipt and respective
authority should adhere to the same.

AREAS OF LENDING
THRUST AREA STABLE AREA LOW PRIORITY AREA
- Priority sector with - Cement - Casting of Iron & Steel in raw
emphasis on agriculture - NBFC/MF/FIs form.(Use of casting process to make
(including micro - Real Estate – Financing final products like equipments/auto
finance). Housing Projects / parts of iron and steel will not be low
- Export. Commercial priority)
- Retail Finance. Space(excluding Malls / - Naptha / Fuel Oil (FO)/ Low
- Micro & Small Enterprises Multiplex) Sulphur(LS)/ Low Sulphur Heavy
Medium Enterprise. - Capital Market Stock (LSHS) based fertilizer plants
- Trade Service sectors like - Software/IT Enabled - Manufacture of Plastic in primary
Tourism, Health, and Services Sector including form includes plastic compounds like
Transportation. BPO / Call Centres resin/adhesive/Polymers/stabilizers.
- Food Processing including - Auto Ancillaries - Refractories
Branded Foods (excluding - Carbon credit - Solvent Oil Extraction (excluding
Rice Mills). Biotech. - Integrated Sugar Mills rice bran oil)
- Fast Moving Consumer - Petroleum Refineries - Vegetable Oil and Vanaspathi sector
Goods (FMCGs) including - Pharmaceuticals - Newsprint Paper
Cosmetics, Toiletries, - Plastic Products - Telecom cables / Telecom
Oral care, Soaps & - Breweries/Distilleries - Texturising/Spinning Cotton & Jute
Detergents. - Rent Receivable Finance (on standalone basis)
- Channel Financing (Union Rent) - Steel Intermediaries including Pig
- Advance against - Infrastructure finance Iron, Sponge Iron/Direct Reduced
warehouse receipts to (Except those Iron(DRI)
Farmers / Processors / specifically mentioned in - Diamonds Cut & Polished
Traders. Thrust/Low Priority - Multiplexes/Malls
- Non conventional areas) - Gems & Jewellery
renewable energy - Engineering (comprising - Manufacturing of Steel Alloys, Steel
including Bio-mass, Solar electrical equipments, Flat-HR (excluding trading in finished
& Wind Energy Integrated earthmovers, mining material/products)
Textile Mills, equipments and defence - Steel Flats-CR,GP/GC
- Garment Manufacturing equipments amongst - Sugar Industry (Standalone)
- Paints / Varnishes. others. Also includes - Airline Services
- Healthcare [Manufacture companies working on - Film Production and Media
of Healthcare turnkey projects) Production / Entertainment
Products/Equipments, - Aluminium - Financing of State Electricity Board
- Setting up of - Equipment Financing (SEBs) / Distributor companies of
Gymnasiums/Spas] - Chemicals PSUs
Affordable Housing HAM - Financing to Road Sector - Iron ore Mining
Project- NHAI Data (only Hybrid Projects / - Financing to Road sector (other than
Center- Infrastructure Annuity Based Hybrid Projects / Annuity Based
- Warehousing Industry Projects/Toll Projects / Toll Receivable Financing)
- Electric Mobility. Receivables Financing.) - Oil and Gas exploration
- Solvent Oil Extraction - Shipping Industry
(only rice bran oil) - Generation of power (excluding
- Projects awarded by renewable energy) - Only Coal based
NHAI/Government Generation
Authorities based on EPC - Electricity Distribution
- Rice Mills
-
 Based on the economic scenario, industrial outlook, and market conditions, credit deployment
priorities are set annually in the Loan Policy, categorized as Thrust Areas, Stable Areas, and Low
Priority Areas. Key parameters like industry outlook, loan book composition, and stress levels
determine the thrust areas. The Policy is dynamic, market-driven, and provides guidance for
business strategies. Operational guidelines list the areas under each category.
 The delegation for proposals falling under low priority area shall be with next higher authority for
proposals falling up to the delegation of RLCC-I.
 The Credit facility granted to any trader up to Rs.25.00 crores covered under any schematic
lending, even if engaged in trading of commodities classified under Low Priority Areas will be out
of the purview of Low Priority Areas.
 Similarly, credit facilities up to Rs. 5.00 crore for priority sectors, even if they fall under Low
Priority Areas, will not be considered low priority if approved by RLCC-I or higher authorities.
 Activity covered under Cluster Scheme & TReDS may be considered by same sanctioning authority
without referring to the next higher delegatee.

Prohibited Areas:

- Fresh exposures under Lease Financing

- Industry producing Ozone depleting substances
- Virtual Currencies, also referred to as crypto currencies and crypto assets
- Issuance of Letter of Undertaking (LOUs) / Letter of Comfort (LOCs)

Trade Credits:

Trade Credits (TC) refer to the credits extended by the overseas supplier, bank, financial institution
and other permitted recognized lenders for imports of capital / non-capital goods permissible under
the Foreign Trade Policy of the Government of India. Depending on the source of finance, such TCs
include suppliers‟ credit and buyers‟ credit from recognised lenders. Respective sanctioning
authorities are allowed to sanction “Bank Guarantee limit for Trade Credit” to facilitate Trade Credit
for imports.

Restricted Areas:

- No loans/advances will be granted against the security of the Bank’s own shares.
- No loans/advances will be granted against gold or silver bullion or primary gold.
- Gold loans to farmers/others against jewellery (up to 75% of value) are not under restrictive
category.
- Loans can be granted against specially minted gold coins (up to 50 grams per customer).
- No advances for the purchase of gold in any form, including bullion or ETFs.
- Finance is allowed for genuine working capital needs of jewellers.
- No loans/advances to companies for buy-back of their own securities (except FCCBs).
- No loans/advances will be granted against Certificates of Deposit, except Mutual Funds.
- No loans/advances will be granted against partly paid shares.
- No loans/advances to firms/sole proprietors against shares or debentures as primary security.
- No financing for Badla transactions.
- No advances against FDRs/Term Deposits of other banks.
- No accommodation bills will be purchased, negotiated, or discounted.
- No loans for subscription or collateral of Indian Depository Receipts (IDRs).
- The Bank shall not hold shares in any company whether as a pledgee / mortgagee or absolute
owner, of an amount exceeding 30% of the paid-up share capital of the company or 30% of
Bank’s paid-up share capital and reserves, whichever is less. The Bank must ensure adherence
to SEBI guidelines on pledged shares disclosure.
- The Bank cannot hold shares where its Managing Director or Manager has interest.
- No loans/advances for units consuming/producing Ozone Depleting Substances (ODS).
- No loans for small/medium units manufacturing aerosol using chlorofluorocarbons (CFCs).
- No loans for acquiring/investing in Small Savings Instruments like Kisan Vikas Patras (KVPs).
Loans and advances to Directors and their relatives
Unless sanctioned by the Board of Directors/ Management Committee, Bank should not grant loans
and advances aggregating Rupees Twenty Five Lakh and above. The proposals for less than Rs 25.00
lakh may be sanctioned by RLCC:I in terms of the powers delegated to them but the matter should
be reported to the Board.

Personal Loans:

The Board of Directors/Management Committee can approve personal loans of Rs. 5.00 crore or more
for any director (including directors of Scheduled Co-Operative Banks, subsidiaries, or trustees of
mutual funds/venture capital funds) of other banks. The proposals for less than Rs 5.00 crore in case
of personal loans may be sanctioned by RLCC:I & above but the matter should be reported to the
board.

Personal Loans include:

- Consumer credit
- Education loans
- Loans for creating/enhancing immovable assets (e.g., housing)
- Loans for investing in financial assets (e.g., shares, debentures)

Sanction of credit proposal to Relatives of / Employees:

Commercial loans:

Credit proposals for staff relatives under Rs.25 lakh can be approved by the next higher authority. If
these accounts perform well, future enhancements may be considered based on merit by the next
higher authority. For relatives of senior officers (Scale IV and above), the approval must be reported
to the Central Office and then to the Board for information. In case of new proposal of Rs.25.00 lakh
and above to staff relative, the delegation shall vest with CAC-II and above. Renewal may be done as
per the normal delegated loaning power.

Other Loans:

The respective delegatee, excluding self or their own relatives, may approve secured loans against
deposits, loans against NSC/LIC policies, and agricultural production finance (crop loans) for staff
and their relatives. In all other cases, the delegation shall be with RLCC & above.

Definition of relative:

- Spouse
- Father
- Mother (including step-mother)
- Son (including step-son)
- Son's wife
- Daughter (including step-daughter)
- Daughter's husband
- Brother (including step-brother)
- Brother's wife
- Sister (including step-sister)
- Sister's husband
- Brother (including step-brother) of the spouse
- Sister (including step-sister) of the spouse
Non-constituent Borrowers:

Bank should not, extend fund-based (including bills financing) or non-fund based facilities like
opening of LCs, providing guarantees and acceptances to non-constituent borrower or / and non-
constituent member of a consortium / multiple banking arrangement / Joint Lending Arrangement.
RBI has allowed to grant non-fund based facilities including Partial Credit Enhancement (PCE) to those
customers, who do not avail any fund based facility from any Bank in India, subject to the following
conditions:

- Branches/offices must verify that the borrower has not received any fund-based facility from
other banks in India.
- For non-fund based facilities, branches must get a declaration from the customer about any
existing non-fund based credit from other banks.
- Credit appraisal for non-fund based facilities should follow the same standards as for fund-
based facilities.
- Adhere to RBI and other regulatory guidelines on KYC, AML, and CFT for all credit facilities.
- Credit information for these facilities must be reported to Credit Information Companies
authorized by RBI.
- Delegation for sanctioning these facilities is 50% of the usual limit set for CACs (ALCCs, MLCCs,
RLCCs, ZLCC) at field level, with CACs at Central Office able to sanction up to their delegated
powers.
- Guarantees with 100% cash margin should be sanctioned according to usual delegation, even
if issued on a stand-alone basis.

Legal Entity Identifier (LEI)

Legal Entity Identifier (LEI) is a 20 digit unique code to identify parties to financial transactions
worldwide. In terms of RBI guidelines, Non-Individual borrowers enjoying aggregate exposure of Rs
5.00 crore and above from Banks and Financial Institutions (FIs) shall be required to obtain LEI codes.
Further, Borrowers who fail to obtain LEI codes shall not be sanctioned any new exposure nor shall
they be granted renewal / enhancement of any existing exposure.

Due Diligence

 At the time of renewal / enhancement, for credit exposure of Rs 50 crore and above before
placing the proposals to sanctioning authority, concerned credit verticals shall obtain comments
of Credit Monitoring & Credit Compliance Vertical, Central office based on review of Monthly
Credit Monitoring Report.

 In case of total exposure (existing/ proposed) of the party from all Banks/FIs is Rs.25 lakh and
above, audited balance sheet is required to be submitted as per set periodicity with exception
to Kisan Credit Card Scheme including Animal Husbandry and Fishery (where assessment is based
on scale of finance).

 Generally in following cases, Audited Balance Sheet is required:

Business Type Turnover Auditing Requirement

Revenue / Income > 50 lakh
Audited Balance Sheet Required
per annum
Engaged in Profession
Revenue / Income < 50 lakh
Audited Balance Sheet Not Required
per annum
Sales Turnover > 1 crore per
Engaged in Business Audited Balance Sheet Required
annum
 Sales Turnover < 1 crore per
Audited Balance Sheet Not Required
annum
Audited Financials under Companies
All Companies Irrespective of turnover
Act (in addition to tax audit report)
Audited Financials under respective
All Trust / Society Irrespective of turnover
Act (in addition to tax audit report)

 To prevent fraud involving altered or forged insurance policies for prime and collateral securities,
branches should verify the authenticity of policies covering more than Rs. 1.00 crore by
contacting the insurance companies directly.

 It may be ensured that due diligence is carried out preferably by an officer other than the
processing officer. Further, in case of advances above Rs.1.00 crore, the Branch Head should
invariably lead the due diligence verification.

 There may be cases wherein certain due diligence is not feasible e.g. obtaining credit report
from bankers of large number of group concerns. In such exceptional cases exemption may be
permitted by next higher authority above the sanctioning authority up to ZLCC level.

 Branches / Offices should carry out sensitivity tests/scenario analysis while sanctioning Term
Loan for large projects with credit limits of Rs.10 crore and above

 Branches to obtain Credit Report (Business Information Report) from external agencies like D&B,
wherever available, atleast once a year for accounts availing credit facility of Rs.5.00 crore &
above for major domestic Buyers/Supplier i.e. 20% of sales/purchase from particular
buyer/supplier.

 Business Information Report from agencies empanelled by the Bank like MIRA, D&B etc to be
obtained for new borrowers while on-boarding the borrowers with credit facilities (including
issuance of LCs) of Rs 25.00 crore & above. This provision shall be extended to all new accounts
subsequently.

 CRILC report of the borrower having exposure of Rs 5.00 crore and above from the banking system
is to be obtained and verified before sanction of accounts.
 Due Diligence on supplier of the machinery to be carried out if the cost of any single machinery
is above Rs.5.00 crore.

 Passport details of the proprietor / partners / directors / guarantors of the borrowal accounts
should be held on record, mandatorily in cases with credit limits of Rs.50.00 crore and above.

 Benchmark Ratios:

- Current Ratio (CR) of 1.15 and above ( for export-oriented units shall be 1.10 and above)
- Debt Equity Ratio (DER) <= 3.00:1, Debt Equity Ratio (DER-Operational Phase) <=4.00:1
- Debt Equity Ratio Hybrid Annuities Project: <=4.00:1
- Total Outside Liabilities to Net Worth Ratio (TOL/TNW) of <= 4:1,
- Average DSCR (tenor of the loan) of 1.5:1 with Minimum DSCR of 1.2:1,
- Average DSCR of 1.3:1 (tenor of the loan) with Minimum DSCR of 1.1:1 only for Infrastructure
projects for categories falling under Transport, Energy, Water & sanitation and
Communication.
- Interest Service Coverage ratio shall be applicable for Term Loan (Project Loan) and Working
Capital Facilities with benchmark ratio of minimum 1.25:1.
- Total Outside Liability to Adjusted Tangible Net Worth Ratio : <= 5:1
 The Current Ratio, Debt Equity ratio, TOL/TNW ratio, ISCR, TOL/ Adj TNW ratio and Total Debt
EBITDA ratio (as per cut off) to be benchmarked as per the latest Audited Balance Sheet (ABS) of
the concern. ISCR, DSCR and DER are to be based upon the projections in case of fresh term loan.
 UNION RENT will be out of the purview of the financial discipline as CR/DER/DSCR etc are not
applicable for financing of future rent receivables under the scheme.
 the above benchmarks in respect of Current Ratio, TOL / TNW, DSCR, Interest Service Coverage
Ratio, IRR and DER shall not be applicable for financing to NBFCs / Financial Institutions in view
of the nature of industry and separate RBI Regulatory framework.

 The monitoring Benchmarks with regard to GNPA & NNPA for NBFCs/ HFCs and CRAR shall be as
under:

- GNPA and NNPA of the NBFCs should be below industry average of 6.6% and 3% respectively.
- GNPA and NNPA of the HFCs should be below industry average of 6.7% and 4.6% respectively.
- CRAR to be 2% above the regulatory required level of 15%.

 Internal Rate of Return (IRR - Project):

IRR is the discount rate which makes the Net Present Value (NPV) of future cash flows equal to zero.
The guiding principle to decide whether any project is acceptable is that its IRR should be greater
than the weighted average cost of capital. The IRR approach is used for assessment of Term Loans of
Rs 25 crore and above with repayment period of 5 years or more. A project will be generally accepted
if its IRR is 3% more than 3 year MCLR at the time of sanction of loan. However, in the case of projects
under Solar power, the accepted IRR should be equal to or greater than cost of borrowing of borrower
and for projects under Hybrid Annuity model the accepted IRR should be 3% above the Weighted
Average Cost of Capital (WACC). The permission for approving relaxation in IRR should be taken from
the next higher authority up to RLCCs

 In case of Retail loans of Rs.20 lakh & above for Rural branches, Rs. 30 lakh & above for Semi-
Urban Branches, Rs.75 lakh & above for Urban branches and Rs. 100 lakh & above for Metro
Branches, Branch Heads/RLP Heads should invariably lead the due diligence verification of the
borrower and securities offered as per given table:

Loan Originating Loan Sanction Due Diligence to be Done by

Centre Authority
Branch Branch Senior Manager or above / Branch Head
Branch RLCC/ZLCC/CAC/MCB Senior Manager or above / Branch Head
Branch (Sending RLP Senior Manager or above / Branch Head
in LAS) (Here property due diligence will be done
by RLP)
RLP RLP Senior Manager or above / RLP Head
RLP RLCC/ZLCC/CAC/MCB Senior Manager or above / RLP Head

Assessment of Working Capital requirement:

 The Assessment of the Working Capital of the borrower can be done under anyone of the following
four methods:

- Turnover Method
- Flexible Bank Finance Method(FBF)
 - Cash Budget Method
Net owned Fund for NBFCs.
-
 In the case of MSE borrowers, seeking/enjoying fund based working capital facilities up to Rs.500
Lakh from banking system, the limits shall be assessed on the basis of turnover method. It is also
applicable for non MSE borrowers requiring working capital facilities up to Rs.100 lakh from the
banking system.

 Flexible Bank Finance method is normally applicable for account with credit limits of above Rs.
5 crores for MSE advances & above Rs.1 crore for other advances.

 Cash Budget Method may be adopted in case of specific Industries/Seasonal activities such as
Software Development, Construction Industry, Film Industry, Sugar, Fertilizers etc., and working
capital short term loans.

 RBI vide its Master Circular on “Bank Finance to NBFCs‟ has withdrawn Net Owned Funds method
for NBFCs except for Residuary Non-Banking Companies (RNBCs). The assessment in such cases
shall be as per Cash Budget Method.

Loan System of Delivery of Bank Credit

In respect of borrowers having aggregate fund based working capital limit of Rs.150 crore and above
from the banking system excluding export credit limits (pre & Post shipment) and bills limit for Inland
sales, a minimum level of “loan component‟ of 60% (percent) is effective from July 1, 2019.
Accordingly, for such borrowers, the outstanding “loan component‟ (Working Capital Loan) shall be
equal to at least 60 percent (w.e.f.1st July 2019) of the sanctioned fund based working capital limit,
including ad hoc limits and TODs. Hence, for such borrowers, drawings up to 60 percent of the total
fund based working capital limits shall be allowed from the “loan component‟. Drawings in excess of
the minimum “loan component‟ threshold (i.e. 40% of sanctioned working capital limits) shall be
allowed in the form of Cash Credit facility.

Reserve Bank of India; vide their notification dated 22.10.2019, on review of the Loan system for
Delivery of Bank Credit mechanism, has decided to exempt the following from the purview of
captioned guidelines:
- Credit Facilities extended to State Government Union Territory agencies and Food
Corporation of India for procurement price support activities;
- Credit Facilities extended to Central Counterparties;
- Credit facilities extended by overseas branches of Indian Banks.

Standalone DSCR

In case term loan requirement is of Rs.50.00 lakh and below or 20% of the existing credit exposure in
aggregate, whichever is less, credit assessment of term loan for the specific project is to be done on
standalone basis subject to the following conditions:

- There is no overdue in any of the existing term loans.

- Operation in WC is satisfactory.
- The DSCR in the existing term loan should be minimum 1.2 / average 1.5 or above at the time
of assessment of new term loan.
- The existing credit rating should be minimum CR4/UBC4 as per latest ABS. No fresh rating for
the facilities is to be done, provided the rating has already been done based on the latest
ABS as per cut-off date prescribed in policy.
Brand as Security

The brand has a value and the same can be considered as security/collateral security for the loans
and advances extended to a borrower company. While accepting the brand as security the following
broad parameters are to be followed:

- The borrower should be a limited company incorporated under provisions of the Companies
Act 1956 or PSU/Semi-PSU Company or a Corporation.
- The Threshold external credit rating shall not be below A or equivalent
- The valuation of the brand should be got done from at least two valuers empanelled with the
bank.
- The owners of the brand should be a highly reputed corporate in existence for at least 10
years.
- The brand must have been patented along with the trade mark and registered with the
competent authority.
- Acceptance of Brand as security can be decided on a case to case basis at Central Office level
(at CAC-I and above) only.

Quasi-Equity

 Own contribution is generally brought in by the promoters by way of equity. However sometimes
it is proposed to be brought in by way of unsecured loans by the promoters/family
members/friends/associate concerns.
 Such unsecured loans shall be accepted as promoters‟ contribution and treated as Quasi Equity
provided;
- It is subordinated to the Bank's loan.
- The unsecured loan should not be repaid during the currency of the Bank loan or without
prior concurrence of the Bank.
- It should not carry interest at least up to DCCO.
- After DCCO, if such a loan carries interest (which shall be less than the rate of interest
charged in the account), it should be only with prior consent of the Bank.
- An undertaking to the above effect should be obtained from both the Borrower Company and
the lenders of the unsecured loans.

Sl No Exposure Ceiling for considering Quasi Equity

1 Up to Rs. 5 Crore No Ceiling
2 MSME Exposure No Ceiling
3 Above Rs.5 Crores up to Rs.25 Crores up to 75% of the paid-up capital + General &
Specific reserves including share premium +/-
P&L surplus/ deficit
4 Above Rs.25 Crores up to 50% of the paid-up capital + General &
Specific reserves including share premium +/-
P&L surplus/ deficit
5 Green Field Project, for “A” and above No Ceiling
rated companies or companies floated
by sponsors having ECR of “A “and
above

Promoter’s Contribution

Promoter’s contribution (margin) is basically a commitment of the promoter towards the project. Out
of the promoters’ contribution, at least 50% should come by way of equity in case of project loan.
The lower level of promoter contribution by way of equity / capital can be accepted by ZLCC &
above. In case infusion of additional funds by the promoters in the concern is stipulated, Sanctioning
Authority to decide upon proper mix of quasi-equity and equity capital. The following may be treated
as a part of equity.
- Compulsorily Convertible Debentures (CCD),
- Perpetual/Cumulative/Compulsorily Convertible Preference Share to be converted into
equity after the prescribed time,
- Optionally Convertible Debentures, Optionally Convertible Redeemable Preference Shares
(OCD/OCRPS – having lock-in period more than Loan Tenure)

Upfront Contribution

There should be infusion of 50% promoters’ contribution upfront before disbursement of Term loan
by Bank(s) with balance to be brought in stages in predefined manner, and infusion of entire
promoters‟ contribution upfront to be encouraged. ZLCC may consider 25% promoters‟ contribution
upfront before disbursement by Bank(s) with balance to be brought in stages in predefined manner
in Large Industrial/Infrastructural Projects/ Syndicated Loans as per their respective delegated
powers on case-to-case basis. However, CACs at Central Office may consider lower upfront
promoter’s contribution on merits of the case.

Minimum Bank Share in Consortium Lending

Aggregate Exposure Minimum Bank Share

Below Rs. 250 crore Rs. 25 crore
Rs. 250 crore to Rs. 2000 crore 10% of aggregate exposure
Above Rs. 2000 crore Rs. 200 crore (10% threshold not applicable)

Guarantee of Shareholders

 Mandatory guarantee of shareholders should be stipulated as one of the terms and conditions in
cases, where shareholders hold equity of 20% and more
 Aforesaid condition is not mandatory for corporate with external credit rating of A/AA/AAA or
equivalent, PSUs and Government Owned Bodies (including societies), the companies promoted
by PSUs / private sector, JVs promoted by PSUs/private sector.
 In case of down gradation of rating below “A”, Branch to insist for guarantee of the shareholders
holding equity of 20% or more otherwise Branch may exercise exit option in such accounts.
 Sanctioning Authority shall have the authority to waive such guarantee, on case to case and based
on merits of each case.
 In case of Hybrid Annuity Model, Corporate Guarantee of Sponsor company (ies) shall not be
mandatory wherever rating of sponsor is “A and above‟ and Personal Guarantee of all Directors
except Professional and Independent directors is obtained.

Period of Book Debt for computation of Drawing Power

Generally, Book Debts for more than 90 days is not to be considered for the purpose of Drawing
Power. However, in view of borrower’s industry / sector and credit assessment, the sanctioning
authority may permit Book Debts above 90 days to 180 days for calculation of Drawing Power with an
exception of Branch Heads. The relaxation in period of book debt for calculation of Drawing Power
in proposals falling under the delegation of Branch Heads can be permitted by RLCCs. Book Debt
above 180 days for calculation of Drawing Power may be permitted by next higher authority above
the sanctioning authority up to ZLCC level and by respective sanctioning authority above ZLCCs.

Inspection / Valuation of Securities

 In respect of any particular property/ies offered as prime/collateral security valued at Rs.2.00
crores and above (Fair Market Value), Title Search Report from two empanelled advocates
approved by the Bank shall be obtained.
 Two independent valuations are to be obtained from the panel valuers in cases where the value
of any particular property (ies) is Rs 5 crores and above (Fair Market Value).
 Inspection of Fixed Assets shall be carried out minimum once in six months for primary security
and minimum once in a year for collateral security or more frequently as per sanction
stipulations.
 Branches/offices may accept the existing immovable properties held as primary security for a
particular credit facility as collateral security for the other credit facilities. However, the value
of property to be considered for the purpose of collateral security to be restricted to the balance
of value of property (As per valuation by Bank’s approved valuer) in excess of 133% of the
outstanding or exposure (whichever is higher) of the loan facility against which the property is
held as prime security.
 Further, accepting of existing immovable properties for credit facilities of subsidiary / other
concerns shall be in excess of 150% of the outstanding or exposure (whichever is higher) of the
loan facility against which the property is held as prime security.
 The valuation of properties to be reckoned with reference to their registered price during first
year after the registry has been made. Though the valuation in respect of these securities should
be done but the value of registered price is to be taken as value of security or valuation as per
valuer report whichever is lower so as to avoid acceptance of inflated value of securities in case
of newly purchased securities.

Credit Evaluation Grid (CEG)

 CEG will apply to all new/enhancement proposals of Rs 100.00 lakh and above in Chief Manager
headed Branches and in case of Rs 200.00 lakh and above in AGM & above headed Branches,
except Retail Lending schemes falling within the DA of branch head (where MLPs are not present).
 The renewal proposals of Rs 100.00 lakh and above in Chief Manager headed Branches and in case
of Rs 200.00 lakh and above in AGM & above headed Branches at existing level where fresh credit
rating based on latest Audited Balance Sheet duly vetted by Branch Head as per IRB Module, has
deteriorated to be routed through Credit Evaluation Grid.
 It is to be noted that CEG is entrusted with Credit Evaluation, and it is not an approval authority.
CEG should examine the compliance on existing guidelines and comment upon it in case of need.

Validity of sanctions

 All fresh sanctions, if not documented within a period of 3 months in case of working capital (FB
/ NFB) facilities and 6 months in case of term loans from the date of sanction, would lapse and
require validation from the competent/delegated authority.
 Further in case of consortium accounts, all fresh sanctions, if not documented within a period of
6 months in case of working capital (FB / NFB) and term loans from the date of sanction, would
lapse and require validation from the competent/delegated authority.
 In case of enhancement in existing working capital limits, this provision will not apply. In such
cases a view can be taken at the time of next review / renewal which generally falls due within
a maximum period of 12 months.
 Revalidation of sanction will not extend the date of original sanction for calculation of due date
of review / renewal.

Disbursement on Reimbursement basis

 In genuine cases, the loans and advances may be disbursed by way of reimbursement after
verifying actual incurrence of expenditure and source thereof on the basis of Lenders‟ Engineers‟
Certificate, wherever applicable or empanelled valuer (for P&M/L&B, as the case may be) and
 CA‟s Certificate specifying source of funds and actual verification by Bank‟s officials on case to
case basis. Further, expenses to be considered for reimbursement should be restricted to
expenses made in previous 12 months only.
 However, such cases should be referred for concurrence to next higher authority for loans
sanctioned up to Deputy General Manager as Branch Head / RLCCs and by respective sanctioning
authority above RLCCs.

Extension of Expired Limit

 If due to unavoidable circumstances and genuine reasons the party is not able to furnish the
required particulars, generally, the extension of the limits by review should be allowed for 3
months which can be extended for further period of 3 months.
 An account where limit (regular /adhoc) have not been reviewed/ renewed within 180 days from
the due date/ date of adhoc sanction will be treated as NPA.
 The extension of tenability of limits up to first 3 months (1st Short Review) can be done through
a review by the respective sanctioning authority i.e. maximum upto 3 months from the due date
of original review/ renewal. Any extension of tenability of limits thereafter for a further
maximum period of 3 months (2nd Short Review) can be considered by one higher level delegatee
up to RLCC:I level i.e. for accounts under the RLCC:I delegation shall be referred to ZLCC.
Accounts under the delegation of MLCC:I/II/ALCC shall be referred to RLCC (Headed by DGM/
AGM respectively), else ZLCC where RLCC:I is headed by AGM (for MLCC headed by AGM). For
accounts under the delegation of ZLCC and above, the respective committee itself can extend
the tenability for second short review also.

Credit Process Audit

Credit Process Audit (CPA) shall be applicable in respect of following:

- All advance accounts with aggregate credit limits of Rs 1.00 crore and above.
- In case of Retail loans (disbursed on or after 01.04.2013), of Rs.10 lakh and above for Rural
& Semi Urban Branches and Rs.50 lakh and above for Urban and Metro Branches
- Adhoc facilities sanctioned by CACs at Central Office.
- Advance against deposit with credit limits of Rs. 50.00 crores & above except for account
pertaining to Central/State PSUs.
- In case of KCC loan the limits above Rs.25.00 lakh.
- For projects like fisheries the CPA officer shall be given additional assignment to verify the
genuineness of land records, seasonality for pisciculture and cash flows etc.
- Wherever ASM/LIE is not appointed, a CPA to be conducted for all term loans with exposure
above Rs. 50 Crore before each disbursement which is linked to milestone achievement.

Documentation Standards

 Documents in respect of advances above Rs.10 lakh and up to Rs.1 crores are to be vetted by law
officer attached to RO/ZO/panel advocate and
 Documents in respect of advances above Rs.1 crore are to be vetted by approved advocates
before release of limits.
 Documents in respect of advances up to Rs.10 lakhs are to be vetted /certified by Branch
Manager/ Advance Officer himself/herself.
Transfer of loan accounts:

The delegation for approval of loan account transfer should be as per the following:

Account Transfer Type Approval Committee

Inter zone CAC II
Inter Region (within zone) ZLCC
Inter Branches (within Region) RLCC

Drawdown Schedule:

In respect of Term Loans for infrastructure facilities, our share shall be as per overall exposure
norms/asset-liability mismatch. In project loans Drawdown Schedules have to be submitted by the
sponsors and the actual disbursements should be monitored against the expected draw downs in next
12 months as per Project Drawdown Schedules. Branch to feed the drawdown schedule of every term
loan of Rs.5.00 crs and above as submitted in Finacle and disbursement is to be monitored

Bank Finance to Non-Banking Finance Companies (NBFCs)

 NBFCs refer to the Non-Banking Financial Companies registered with the Reserve Bank of India,
which shall also include Housing Finance Company (HFC) registered under Section 29A of the
National Housing Bank Act, 1987.
 HFCs extend housing finance to individuals, co-operative societies, corporate bodies and lease
commercial and residential premises to support housing activity in the country.
 NBFCs can be classified on the basis of a) asset/liability structures; b) systemic importance; and
c) the activities they undertake.
 In terms of liability structures, NBFCs are subdivided into deposit-taking NBFCs (NBFCs D) - which
accept and hold public deposits - and non-deposit taking NBFCs (NBFCs-ND) - which source their
funding from markets and banks. Among non deposit taking NBFCs, those with asset size of Rs.500
crore or more are classified as non-deposit taking systemically important NBFCs (NBFCs-ND-SI)

Capital Market Advance

 As per RBI Guidelines, Loan against debentures and bonds may be granted to individuals to meet
contingencies and personal needs or for subscribing to new or rights issues of debentures / bonds
or for purchase in the secondary market, against the security of debentures / bonds held by the
individual.
 Loans against the security of debentures and bonds should not exceed the limit of Rupees ten
lakhs per individual if the securities are held in physical form and Rupees twenty lakhs per
individual if the securities are held in dematerialised form.

Quick Mortality

 All accounts becoming NPA within a period of 12 months from the date of first disbursement in
respect of the limits sanctioned for the first time.
 In cases where repayment holiday is given either of interest or instalments, the period of 12
months shall be reckoned after the expiry of the repayment holiday.
 All accounts renewed / reviewed with or without any enhancement shall be excluded for this
purpose.
Channel Finance

 This is the concept of “supply chain‟ with the chain having three perceptibly distinct links – the
pre-production, production and post- production.
 Channel Finance can meet the requirements of the Original Equipment Manufacturers (OEMs) as
an end-to-end solution starting from Vendor’s Vendor, Vendor, OEM, Dealer and finally the retail
buyer.
 Trade Receivables Discounting System (TReDS) -TReDS is a digital platform to help MSMEs to get
their trade receivables financed (without recourse) at a competitive rate through an auction
mechanism where multiple financiers can bid on invoices accepted by PSUs / Corporate Buyers.
TReDS will allow MSMEs to post their receivables on the online platform and get them financed
at competitive rates as per online bidding process. This will not only give them greater access to
assured finance but will also put greater discipline on Corporates to pay their dues on time.

Loan Assets acquired through Down Selling Route

Bank may also take credit exposure by sanctioning loans to a borrower, whose credit proposal is
syndicated /underwritten and subsequently sold by another lender /lead arranger. However, mere
fact that the exposure is fully underwritten by another FI / Bank would not be regarded as an absolute
comfort for sanctioning the proposal. In such cases also, Bank shall follow all the due diligence and
credit appraisal standards, including credit rating, as if the loan was originated by the Bank itself.
While considering such exposures, the Bank shall also look into the track record, past experience,
quality of credit origination, appraisal standards, NPA and reputation of the Bank/FI, which has
underwritten the loan asset.

Financing of 2nd Hand Machinery / Equipment:

 The borrower to submit the Chartered Engineers certificate

 Margin for financing shall be 50% of the eligible value of machinery/ equipment.
 The residual life of Machinery/ Equipment should preferably be at least 1.5 times the projected
loan period.
 The delegation for sanction of second machinery/ equipment, unless otherwise specified, shall
be considered by RLCC:I and above.

Financing of 2nd Hand Vehicle:

 The borrower to submit the certificate / valuation report from automobile certification agency/
valuer regarding the condition of the commercial vehicle, value and residual life of the vehicle.
 Margin for financing shall be 40% of the eligible value of commercial vehicle.
 The vehicle to be financed shall not be more than 3 years old from the date of original
registration.
 The repayment period shall be fixed on case to case basis, subject to the condition that tenure
of the loan shall not exceed 7 years (84 months) from the original date of registration of such
vehicle.
 The delegation for sanction of second hand vehicle, unless otherwise specified, shall be
considered by RLCC:I and above.

Guidelines for Corporate Loan Segment:

 Loans to corporate sector are mostly governed by Loan Policy, modified from time to time.
 The loans can be considered to PSUs, other Govt. organizations, listed companies, other
corporates for any genuine funding purpose in line with the business activity of a customer.
 The said facility may be made available to Corporates externally rated as AA and above.
 There should be security coverage of minimum 1.25 times. However, Govt. owned PSU/Entities
may be considered based upon merit irrespective of external credit rating & security coverage.
 Investment in capital market, purchase of land, any speculative activities or any other purpose
which is restricted under RBI/ Government guidelines or which is falling under statutory/
regulatory restrictions stipulated under RBI/Government guidelines shall not be covered.

TAKE-OVER OF ADVANCES CODE

 Takeover norms are not applicable to Retail lending schemes except Union Mortgage Schemes.
 The CVC guidelines apply to accounts that were closed with another bank within the last 3
months. Banks should follow specific procedures when accepting such customers, similar to those
used for account takeovers. This may include additional due diligence checks to verify the
customer's identity and financial history.
 The specific reasons for shifting the account from Financial Institution / other Bank to our Bank
should be ascertained.
 The advance to be taken over should be rated CR4/UBC4 or better.
 Besides obtaining Credit Report from the existing lenders, Branches are advised to make discrete
inquiries with at least 3 people in the similar line of activity / buyers / suppliers and their view
about the prospective borrower’s credentials.
 The account should have been a Standard Asset in the books of the other Bank/FI during the
preceding 3 years or years for which the credit facility is availed from other Bank/ FI whichever
is lower, subject to a minimum credit history of 12 months.
 The unit should be in existence for minimum 3 years.
 The unit should have earned net profits (post tax) in each of the immediately preceding 3 years.
However, in case of project loan, the unit shall be in existence for three years. The net profit
(after tax) shall be reckoned after the DCCO. In such cases, the Net Profit (after tax) shall be
minimum for a period of 1 year or for immediately preceding 3 years, whichever is higher.
 Statement of account of the existing bank for preceding 6 – 12 months is to be obtained and
verified.
 Current Ratio of 1.17 However, CR may be considered on case to case basis upto 1.10 by
sanctioning authority.
 TOL/TNW Ratio of 4:1 and in case of Trade accounts <= 5:1.

 It must be ensured that the existing security and guarantee with the Bank/FI (from where the
account is being taken over) is maintained and no dilution in existing security coverage is
permitted for the amount taken over, by releasing the existing security charged to the existing
banks.
 Substitution of existing security given to other Banks/FI may be permitted for justifiable reasons,
provided the realizable value of the security offered is not less than the realizable value of
existing security with other banks. Similarly, substitution of guarantor(s) may be permitted with
similar guarantee standards. Substitution of such existing security/ guarantee, on case to case
basis, shall be permitted by next higher authority up to ZLCC.
 The average DSCR for the project should not be less than 1.50 at the time of take-over or for the
remaining period of advance.
 The project should not be in the implementation phase at the time of takeover of the loan. In
other words, it should have commenced commercial production and surpassed the break-even
level and the moratorium period for repayment of loan should be over. (Relaxation may be
permitted by CAC-III & above).
 The term loan proposed to be taken over should not have been rephased by the existing FI / bank
after commencement of commercial production. The subject clause is not applicable in cases
where the dispensation is allowed by RBI during COVID19 pandemic (RBI notification on COVID19
Regulatory Package - Asset Classification and Provisioning).
 In case of takeover of only Term Loan, the remaining period of scheduled repayment in future,
after take over, should be at least 2 years and the repayment in future, after take over, too
should be as per the original / existing schedule only. In case more than one term loan is to be
 taken over, one Term Loan should be at least with remaining repayment period of 2 years.
However, in case of taking over of credit exposure in the form of both Working Capital and Term
Loan the sanctioning authority may consider taking over of limits in case remaining period of
repayment of term loan is less than 2 years on the merit of the case and complying all other
guidelines.
 After takeover of account at reduced / existing / enhanced level of exposure, no enhancement
or adhoc should be granted for 6 months from the account opening date. In case of any
enhancement / adhoc in such accounts, the same may be considered by CAC-III and above at
Central Office.
 Financial covenants of erstwhile Bank/ FI (viz the Bank/ FI from where the loan is being taken
over), wherever available shall be commented upon during the assessment of loan.
 In consonance with the best Corporate Governance practices, the Bank would not take over from
any Bank where any of our EDs or MD&CEO have worked earlier. However, in case, any such cases
need to be taken over, the proposal above Rs 7.50 crore (including enhancement/ additional
exposure, if any) in case of all loans (including retail/ agriculture) will need to be put up to the
Management Committee of the Board with specific reasons justifying the need for taking over
the accounts.
 While takeover, borrowers with exposure above Rs 25 Crore (from the banking system) and having
valid external rating, the hurdle rate of BBB is to be considered along with Internal credit rating
of CR:4. Such takeover proposals below BBB will be considered as relaxation which shall be
permitted by CAC:II & above on case to case basis with proper justification.

Approval for take-over norms

 The approval of takeover norms (without deviation or with deviation) is to be obtained from next
higher authority up to RLCC-I.
 In case the sanctioning authority is ZLCC - without deviation, approval of next higher CAC i.e.
CAC-III is not required.
 Takeover proposals up to RLCC level, RLCC: I can permit the relaxation to one Financial
benchmark ratio. (except where the delegation for relaxation is defined for higher authority).
 Takeover proposals up to ZLCC level, ZLCC can permit the relaxation to Financial benchmark
ratios viz. CR, DSCR, ISCR & profitability and Non-Financial Deviations (except where the
delegation for relaxation is defined for higher authority).
 The Change in Management along with replacement of debt shall not be reckoned as Takeover of
Credit facility. Delegation of loaning powers in such cases shall rest with next higher authority
up to ZLCC.

Cut-off date for Pricing:

 The cut-off date for pricing of loan as per credit rating will be 8 months from closure of financial
year as adopted by each company. Branches/ offices should ensure that the credit rating in all
eligible accounts is completed on or before the cut-off date.
 If annual review of internal credit rating is not completed within the cut-off date, all the
concession, if any, shall be withdrawn immediately, and
 Applicable interest rate linked to internal rating of one notch below shall be charged.
 However, the concessional rate of interest shall be restored by the branch once the subsequent
rating is completed.
 Additional interest on adhoc (Except Export Facilities) is 2% p.a. However, during the validity of
interest concession on regular limits, if ad-hoc facility (Except export facility) is permitted by
the competent authority, additional interest is to be charged on Ad-hoc Facility at normal
applicable rate as per credit rating or 2% over the concessional rate, whichever is higher subject
to overall spread approved by the Bank.
 The system has 10 grades for credit rating up to CR/UBC-10. Unless otherwise specified,
applicable interest rate for UBC/CR-9 & UBC/CR-10 rated account will be treated as CR-8/UBC8
for pricing purpose.
 In the case of new applicants where the entity is newly established [without any past business
track record or Audited Balance Sheet] they be rated as CR3/UBC-3 and interest be decided
accordingly. If the actual rating is inferior to CR3/UBC-3 based on projections and managerial
dimensions, then the rate of interest applicable to such rating is to be stipulated.

Continuation of concession:

 The continuation of concession can be done by delegatee subject to the following conditions:
 Fresh credit rating based on latest audited balance sheet is carried out,
 Fresh credit rating is vetted by the Risk Manager, and there is no deterioration in the credit rating
as compared to previous credit rating, based on which the concessions were granted.
 In case of up-gradation in credit rating, the continuation of concession shall be as detailed below:
- Existing concessional rate of interest i.e. appropriate MCLR/EBLR + Spread as per previous
rating or Applicable rate of interest as per upgraded credit rating, whichever is lower. Thus,
concessional rate of interest may be continued without passing the benefit of up-gradation
in credit rating.

RISK RATING:

 For borrowers rated with Bank’s own models, the hurdle rate for new borrowers / green field
projects will be CR-5/UBC-5 and for takeover and CRE loans to builders the same will be CR-4/
UBC-4.
 Hurdle rate for new accounts, if rated by external credit rating agencies is BB and for takeover
accounts is BBB.
 For Infrastructure projects, hurdle rate for sponsors rated by external credit rating agencies
should be BBB or above.
 In case of External Credit Rating, unless otherwise specified, the specific rating criteria shall be
inclusive of both ‘+’ & ‘-’symbols.
 The Bank has developed a comprehensive Risk Rating Model based on which risk rating is assigned
to borrowers. The following risk grades are allocated:

RATING RISK NOMENCLATURE

CR1 / UBC1 Lowest Risk
CR2 / UBC2 Minimal Risk
CR3 / UBC3 Moderate Risk
CR4 / UBC4 Satisfactory Risk
CR5 / UBC5 Acceptable Risk
CR6 / UBC6 Watch List
CR7 / UBC7 Risk Prone
CR8 / UBC8 High Risk
CR9 / UBC9 Substantial Risk
CR10 / UBC10 Default Risk

CIBIL MSME Rank:

CIBIL MSME report shall be applicable to MSMEs with aggregate commercial borrowings above Rs.25
lakh to Rs.25 crores (including proposed exposure).

Customer Type Rating (CMR) Decision Process

ETB (Existing To CMR:1 to CMR:5 Request for additional credit facility or enhancement to be
Bank Customer) considered by the respective sanctioning authority.
 CMR:6 to CMR:10 Request for additional credit facility or enhancement to be
considered by the next higher authority, up to RLCC:I
level.
ZLCC & above can consider such proposals without
referring to a higher authority.
Cogent justification for sanction/enhancement to be
recorded in the process note.
Sanctioning authority should stipulate additional collateral
in these cases.
Renewal of Credit Renewal for existing borrowers (irrespective of CMR rating)
Facilities to be carried out by the respective sanctioning authority.
NTB (New To CMR:1 to CMR:5 Considered by the respective sanctioning authority.
Bank Customer) CMR:6 to CMR:7 Considered by the next higher authority up to RLCC:I level.
ZLCC & above can consider such proposals without
referring to a higher authority.

Implementation of Capital Adequacy Framework:

 All accounts enjoying Fund Based and Non Fund Based limits above Rs.25.00 crores (exposure
from the banking system) are to be rated by the External Credit Rating Agencies.
 Exemption for external rating for having banking exposure above Rs. 25 crore up to Rs 50 crore
can be given to any borrower under specific cluster scheme, where external rating is not insisted
by their existing lenders (also applicable in cases of takeover where due to enhancement the
exposure increases from below Rs. 25 Crore up to Rs. 50 Crore). Cluster specific report from
agency approved by the bank to be scrutinized before extending such exemptions. The review
report from the approved agency should not be older than one year. This exemption can be given
by respective sanctioning authority, minimum being CAC-III.
 Unrated borrowal accounts with above mentioned cut-off limits from cut-off time period will
attract risk weight of 100%.

 With effect from April 1, 2019, all unrated claims on corporate, AFCs, and NBFC-IFCs having
aggregate exposure from banking system of more than Rs.200 crore will attract a risk weight of
150%.
 However, claims on corporate, AFCs, and NBFC-IFCs having aggregate exposure from banking
system of more than Rs.100 crore which were rated earlier and subsequently have become
unrated will attract a risk weight of 150% with immediate effect.
 RBI accredited the external rating agencies i.e. CRISIL, CARE, INDIA RATINGS AND RESEARCH PVT
LTD, ICRA, Acuite Ratings & Research Ltd (previously known as SMERA Ratings Limited) and
Infomerics for Basel –II compliant rating of the loan facilities of the borrowers of our Bank. The
services of Acuite Ratings & Research Ltd, CRISIL, CARE, ICRA and ONICRA can be utilized for
external credit rating of the SMEs.

Time Schedule for review / renewal of credit limits

The Bank shall adopt discriminatory time schedule for renewal / review of credit limits above Rs. 25
lakh and above based on the credit rating assigned.

Risk Rating Maximum Period of Review/Renewal

CR1/UBC1 to CR5/UBC5 Annual (12 months)
CR6/UBC6 to CR8/UBC8 Half-yearly (6 months)

However, advances where credit rating is not applicable, retail loans (irrespective of quantum of
loan) and advances up to Rs 25 lakh will continue to be reviewed / renewed once in a year.
Time limit for Disposal of Proposals:

Disposal of loan applications for Priority sector advances:

Bank's Initiative Time Limit

Proposal falling within the delegated authority of Branch Head - 7 days
MSMEs
Proposal falling within the delegated authority of Branch Head - A fortnight
Other than MSMEs (Credit limit up to Rs. 25,000/-)
Proposal falling within the delegated authority of Branch Head - 8 to 9 weeks
Other than MSMEs (Over Rs 25,000/-)
Proposal beyond delegated authority of Branch Head (within 12 days
delegated authority of RLCC/SARAL) - MSMEs
Proposal beyond delegated authority of Branch Head (within 10 weeks (the above period
delegated authority of RLCC/SARAL) - Other than MSMEs over Rs includes time limit at Branch
25,000/- also)

Disposal of loan applications other than above:

As per Fair Practice Code adopted by the Bank Time Limit

Credit proposals for export finance including those under consortium: 45 days
Sanction of fresh/enhanced credit limits
Credit proposals for export finance including those under consortium: 30 days
Renewal of existing credit limits
In respect of consortium advances other than exports: Sanction of 45 days
fresh/enhanced credit limits
In respect of consortium advances other than exports: Renewal of existing 45 days
credit limits
All other applications 10 weeks

Disposal of Retail Loan Applications:

Level For Sanction of New Loan For Approval of Deviation

Branch / ULP TAT (T) TAT (T)
RO T+3 T+2
ZO T+5 T+4
CO T+12 T+9

Where “T” is standardized TAT as given below for each scheme:

Scheme TAT (T)

Union Home 5 days
Union Vehicle loan 2 days
Union Education 7 days
Union Mortgage 7 days
Union Personal 3 days
Other Retail Schemes 7 days

MSOD/QPR/HOF

 MSOD, QPR and Half yearly operating / Funds flow statement (HOF) shall be submitted by
borrowers engaged in manufacturing activities with credit limits of Rs.5 crores and above.
 QPR needs to be submitted within 30 days from close of each quarter
 HOF needs to be submitted within 45 days from close of each half year by the borrower.
 However, in case of listed companies submission of MSOD/QPR/ HOF is not required as turnover
and production details are available in BSE/ NSE website.
 Quarterly certificate (with UDIN) for verification of Book debts by Chartered Accountants should
be submitted for working capital limits of Rs.1 crore and above.

Central Repository of Information on Large Credits (CRILC)

 Threshold of Total Exposure (TE) for reporting to CRILC is Rs.5.00 Cr & Above.
 Total Exposure = Total Credit Exposure (Both Domestic Exposure & Overseas Exposure clubbed
together) + Treasury Exposure (Forward Contracts, Derivatives & Investments)
 Our Bank has created a designated Cell for CRILC at CCM, CO which can be approached at
ubicrilc@unionbankofindia.bank.
 The reports submitted under CRILC are:
- CRILC Main: (Monthly Reporting)
- RLC (Return on Large Credit): (Quarterly Reporting)
- Defaulted Borrower Report (DBR): (Weekly- Every Friday)
- RFA / FRAUD: (As and when basis)

Large Exposure Framework:

 The Bank inter-alia has to comply with the LEF norms at two levels viz. Consolidated (Group)
level and Solo (Individual) level.
 In terms of LEF norms, single party exposure should not be higher than 20% of Tier I Capital of
the bank. In case of group of counterparties accounts, exposure should not be higher than 25% of
the Tier I Capital of the bank.

 The exposures that will be exempted from the LEF are:

- Exposures to the Government of India and State Governments which are eligible for zero
percent Risk Weight under the Basel III – Capital Regulation framework of the Reserve Bank
of India
- Exposures to Reserve Bank of India
- Exposures where the principal and interest are fully guaranteed by the Government of India
- Exposures secured by financial instruments issued by the Government of India, to the extent
that the eligibility criteria for recognition of the credit risk mitigation (CRM) are met in terms
of RBI detailed guidelines
- Intra-day interbank exposures
- Intra-group exposures
- Borrowers to whom limits are authorised by the Reserve Bank for food credit
- Banks' clearing activities related to exposures to Qualifying Central Counterparties (QCCPs)
as detailed in RBI circular
- Rural Infrastructure Development Fund (RIDF) deposits placed with NABARD

Large Borrowers through Market Mechanism:

 Aggregate Sanctioned Credit Limit (ASCL) means the aggregate of the fund based credit limits
sanctioned or outstanding, whichever is higher, to a borrower by the banking system. ASCL would
also include unlisted privately placed debt with the banking system.
 “Specified borrower”, means a borrower having an ASCL of more than a. Rs.25,000 crore at any
time during FY 2017-18; Rs.15,000 crore at any time during FY 2018-19; Rs.10,000 crore at any
time from April 1, 2019 onwards.
 Normally permitted lending limit (NPLL), means 50 percent of the incremental funds raised by
the specified borrower over and above its ASCL as on the reference date (date on which a
borrower becomes a „specified borrower‟) in the financial years (FYs) succeeding the FY in which
the reference date falls.
 From 2017-18 onwards, incremental exposure of the banking system to a specified borrower
beyond NPLL shall be deemed to carry higher risk which shall be recognised by way of additional
provisioning and higher risk weights as per RBI guidelines.

Short Term Loan (STL)

 Short Term Loan is any credit facility generally in the nature of loan for financing short term
working capital requirement / temporary mismatch in cash flows for a short period, and will be
in the form of demand loan.
 STLs should generally be given to Navratna/Maharatna/Miniratna Public Sector Units (PSUs), State
Government PSUs with good track record and large business conglomerates with credit rating of
AAA/AA or equivalent.
 Tenor: Unsecured STL initially for a maximum period up to 6 months. Secured STL initially for a
maximum period up to 12 months.
 CAC I and CAC II can sanction secured STLs as per the scheme of delegation of loaning powers
presently in vogue. Management Committee can sanction both secured / unsecured STL.
 STLs will be repayable either by a bullet payment or repayment in a few installments based on
cash flows of the borrower.

Pooled Municipal Debt Obligation (PMDO):

 The Bank shall participate in structured debt obligation such as Pooled Municipal Debt Obligation
(PMDO) facility, sponsored by the development financial institutions, Public Sector Banks,
Reputed Private Sector Banks, NBFCs etc.
 The ultimate beneficiaries of such programmes shall be Municipal Corporations, Urban Local
Bodies, Local Authorities, etc. for developing Urban Infrastructure projects across cities in India
on an integrated basis. In other words, the pooled funds shall be utilised by way of term lending
to Municipal Corporations, Local Bodies, and Local Authorities etc.
 The maximum amount of participation shall not exceed Rs. 100.00 Crore in any one such pooled
debt. The aggregate exposure under Pooled Municipal Debt Obligation Facility shall not exceed
Rs. 1000.00 Crore at any point of time.
 Borrower shall open a Trust & Retention Account with the sponsor / any of the participating
banks, who in turn allocate the share to each of the participating banks towards equated
quarterly installments (EQI).
 The tenor of such loans shall not normally exceed 15 years from the last disbursement under each
project.
 The delegated authority for sanction of loans to PMDO will vest with CAC-II and above at Central
Office. Such proposals will be handled only by LCV irrespective of amount involved and shall be
repository of all the information related to lending to PMDO.

Structured Mezzanine Debt Facility:

 The Structured Mezzanine Debt Facility (SMDF) is being established primarily to provide
mezzanine funding to Indian Companies to enable them to scale up their size of operations by
exploiting opportunities in the current phase of growth in the Indian economy.
 The ultimate beneficiaries of such programmes shall be Corporates.
 The maximum amount of participation shall not exceed Rs. 100.00 Crore in any one such facility.
The aggregate exposure under Structured Mezzanine Credit Facility shall not exceed Rs. 1000.00
Crore at any point of time.
 Borrower shall open a Trust & Retention Account with the sponsor / any of the participating
banks, who in turn allocate the share to each of the participating banks towards payment of
equated quarterly/monthly installments.
 The tenor of such loans shall not normally exceed 10 years from the last disbursement under each
project.
 The delegated authority for sanction of loans to SMDF will vest with CAC-II and above at Central
Office. Such proposals will be handled only by LCV irrespective of amount involved and shall be
repository of all the information related to lending to SMDF.

Lending to InvITs (Infrastructure Investment Trust)

 InvITs primarily invest in operating and revenue generating infrastructure projects and the Bank
will restrict its exposure to only such InvITs which invest 100% of their Assets Under Management
(AUM) in completed and revenue generating projects.
 Purpose: For acquisition of new infrastructure projects/SPVs.
 The tenure of the loan to be aligned with the projected cash flows/Life of the Projects of the
InvIT, subject to a maximum tenure of 20 years (with a minimum tail period of 15%) considered
from the day of first drawdown.
 Assessment, monitoring, controlling etc of limits under InvITs shall be with select Large Corporate
Branches (LCBs): Mumbai, Delhi, Chennai, Kolkata, Bangalore, Ahmedabad & Hyderabad.

EXIT Guidelines:

 The exit guidelines shall be applicable to accounts with credit exposure of Rs. 5 Crore and above
across all Business Verticals. All Standard accounts (including SMA-0, SMA-1 and SMA-2)
irrespective of External Rating having exposure of Rs.5 Crore & above are eligible.
 CCM Department, CO will be the Nodal Department for implementation of Exit Guidelines.
 The Credit Compliance & Monitoring (CCM) vertical at C.O. shall identify accounts, with credit
exposure of Rs. 5 Crore& above for exit, based on EWS alerts, Red Flags, and other triggers at
the beginning of the financial year.
 Branches/ Offices shall further ensure that the renewal proposals are submitted to the respective
sanctioning authority/ committee within a period of 6 months from the date of receipt of such
accounts or their due date of renewal, whichever is earlier.
 The respective sanctioning authority/ committee shall take a call whether to continue with
remedial measures or the account to be marked for Exit.
 The Branch shall examine the compliance position and the measures taken by the Borrowing Unit
for improving the health of the account for a period of 6 months. In case, the stress in any of the
account eases, Branches / Offices shall submit the renewal proposal to respective sanctioning
authority/ committee recommending for removal of the account from the list identified for exit
and restoration of the normal terms and conditions.
 In case there is no improvement in the health of the account and the stress in the account doesn‟t
ease, such credit facility shall be placed for exit option.
 The indicative list of Exit measures are as under:
- Once a borrower is marked for exit, all interest rate and service charge concessions (except
for loans against fixed deposits and export credit) will be removed.
- No new credit limits will be approved. Additional collateral may be considered, and existing
credit limits will be frozen.
- No temporary or excess withdrawals will be allowed.
- Existing credit limits can be reviewed or renewed until the borrower fully repays the bank.
A proper assessment of the account will be done according to lending rules.
- Transactions will be allowed, but with limits to reduce the overall loan balance.
 - Increase margins on stocks and receivables, and impose higher margins on non-fund-based
facilities. Recover any penalties if needed.
- A forensic or stock audit may be conducted.
- The borrower will be asked to move their account to another bank within a set time. If not,
the bank will take steps to recover its dues after issuing a notice.
- The sanctioning authority can take other steps if needed to help the bank exit the account.

Schedule of Minimum Margin (Primary Security)

Sr. Particulars Margin (%)

No.
1. Land 50%
2. Building and other fixed Assets 25%
3. Plant & Machinery (New) 25%
4. Equipment (New) 25%
5. Stock (including stock in trade) 25%
6. Receivables 25%
7. Packing Credit (stocks) 10%
8. Loan Against Deposit (self) 10%
9. Loan Against Deposit (Third Party) 10%
10. Loan against KVP, Insurance policies for LIC & 10%
Other approved insurers
11. Loan Against NSC (of face value) 15% (if NSCs have completed 3 years &
above)<br>25 (if NSCs have completed
less than 3 years)
12. Commercial Vehicle (Other than Schematic 25%
loans)
13. Bank Guarantee (Cash/ FDR margin) 25%
14. Letter of Credit 25%
15. Agriculture (Equipment, Implements & 25%
Building)
16. Second Hand Machinery/Equipment 50%
17. Second Hand Commercial Vehicle (Non- 40%
Schematic)
18. Post Shipment Nil
19. Unbilled Revenue- For EPC Contractors (up to 35% (limit restricted up to 30% of
180 Days) (Provided Bank has not given BG for Drawing power for the credit facility)
it)
20. Retention Money- For EPC Contractor (Due to 35%
be received in next 12 months)
21. Financing against Government Securities 25%

GROUP APPROACH

 The concept of Group and the task of identification of the borrowers belonging to specific
industrial groups have been left to the perception of Banks by Reserve Bank of India and the
guiding principle is “Commonality of Management and Effective Control”.
 Two or more enterprises is said to belong to the same group, if at any time during the reporting
period or during the period under review, the financial or operating decisions of the said
enterprises are “Controlled” or “persons acting in concert” or “significantly influenced” by the
same enterprises / persons.
 Two or more enterprises are deemed to be controlled by the same enterprise/person when:
 - Controlling / substantial Interest, i.e. holding of shares, conferring voting rights of 20% and
above, is by the same enterprise or by the same individual himself or jointly with his/her
close relatives
- More than 50% of the directors / partners (excluding the ones nominated by Government of
India / Reserve Bank of India / Financial Institutions / Banks / Debenture Trustees) in one
enterprise are the same and / or closely related to each other to those in another
enterprise(s)
- Two or more enterprises have a contractual arrangement to share the power to govern the
financial and / or operating policies of the said enterprises
- One company is subsidiary company (as defined under Companies Act) of another
- If holding company of two or more companies are the same company.
- SPVs formed for execution of specific project.
- Joint Venture for execution of specific project.

 Two or more enterprises are said to be under “Significant Influence” by the same enterprise /
person when:

- “Substantial Interest” i.e. holding of shares, conferring voting rights of 20% or more, is by
the same enterprise or by the same individual himself or jointly with his / her close relatives.
- Two or more enterprises employ the same key management personnel/s or their close
relatives having authority and responsibility for planning, directing and controlling the
operational and financial activities of the said enterprises; and / or.
- Two or more enterprises have entered into a Joint Venture to undertake a common economic
subject to joint control / planning.

 Normally, public limited companies should be outside the purview of Group Accounts subject,
however, the proviso that such companies are not closely-held companies.
 Closely held companies are those where controlling interest in management of the affairs of the
companies is held under tight leash by the Group of family members or where the shareholding
of the family members is say more than 80%.
 Accounts of Public Sector undertaking / Government Bodies are to be kept out of the purview of
Group Approach.
 As far as possible fresh credit facilities should not be normally considered in any new account of
a group/ sister concerns, which come under non-investment grade i.e. CR 6/UBC6 and below.
 When loans are sanctioned to a group concern, the highest sanctioning authority involved in
sanctioning of credit facilities should only sanction the credit facilities to the same group concern
not withstanding such credit delegation power falling under lower level sanctioning authorities.
 The Group Concept is not applicable to Retail Lending Schemes.

PRUDENTIAL EXPOSURE:

Constitution Prudential Limit (Per Prudential Limit (Per

party) for new party) for existing
connections connections

HUF Rs 25 crores Rs 45 crores

Individual / Proprietorship concerns / One-Person Rs.60 crores Rs.200 crores
Company
Trust / Association of Persons (AOP) / Co- Rs 80 crores Rs 300 crores
operative Society
Registered Partnership Concerns Rs.100 crores Rs.300 crores
Limited Liability Partnership (LLP) Rs.100 crores Rs.300 crores
Society / Registered Society Rs.125 crores Rs.400 crores
Private Limited Rs.200 crores Rs.600 crores
 Closely held Public Ltd Rs.200 crores Rs.600 crores
Widely held Public Company/SPVs/Pvt. Need based subject to Need based
Ltd/Public Ltd/LLP floated by reputed large exposure norms
business Group/Conglomerates
Government owned entities / PSUs / Mutual Funds 20% of the Tier-I 20% of the Tier-I
capital of the Bank capital of the Bank

 As far as possible Bank would lend preferably to registered partnership firms. In deserving cases
lending to unregistered partnership firms may be considered and exposure should be restricted
to 50% that of registered partnership firm.
 In case any corporate is having external rating of A(long term) and above, the following prudential
limit should be considered:

External Rating Exposure Ceiling

A 2 X above limit
AA 3 X above limit
AAA 4 X above limit

 CAC-II and above may permit any breach in the above cap.

 Geographical Region-Wise Ceilings:

Region Exposure Cap

West (excluding Food credit) 38.50% - 43.50% - 48.50%
East 3.50% - 8.50% - 13.50%
South 15.00% - 20.00% - 25.00%
North 14.00% - 19.00% - 24.00%
Central 4.00% - 9.00% - 14.00%
Total 100.00%

Miscellaneous Points:

 Export finance is broadly classified as 'Pre-Shipment' and 'Post-Shipment' finance depending upon
the stage at which the finance is extended. Finance extended to the exporters, prior to shipment
of goods is termed as 'Pre-Shipment Finance' while Finance that extended after shipment of goods
is termed as 'Post-Shipment Finance'.
 Project Exports: Export of engineering goods on deferred payment terms and execution of turnkey
projects and civil construction contracts abroad are collectively referred to as “Project Exports”.
 The delegation for sanction of Bridge loans vests with CACs at Central Office as per policy on
Delegation of Loaning Powers.
 To validate the process of restructuring, the proposals with exposure of Rs 5.00 Crore up to Rs
500.00 crore shall be referred to Expert committee at Bank level and with exposures above Rs
500.00 crore to Expert Committee at IBA level.
 In case of any delay in regular renewal and deterioration of rating based on latest ABS, the
existing ROI / service charges shall be permitted for a maximum period of 3 months or till the
date of renewal, whichever is earlier.
 The utilization of limits with us should be at least 60% for considering concession in Rate of
Interest.
 POLICY GUIDELINES ON MICRO, SMALL AND
MEDIUM ENTERPRISES (MSME) 2024-25

INTRODUCTION
In terms of Annual report of Ministry of MSME: 2023-2024, India’s MSME Sectorcomprises of
633.88 lakh units, 51% of which are Rural MSMEs and 49% are Urban MSMEs.

MSME sector has created about 11.10 crore jobs in the country, of which 3.60crore are in
manufacturing segment, 3.87 crore in Trade segment and 3.63 crore in other services.

IMPORTANCE OF MSME
 Highly vibrant & dynamic sector
 Growth engine of economy
 Promotes employment generation
 Promotes entrepreneurship
 Less capital intensive

OBJECTIVES OF MSME POLICY

 To increase MSME client base
 To enhance judicious and prompt credit decision
 To timely meet the credit needs of the existing MSME clients
 To enhance credit appraisal skills and strategies
 To provide flexibility and innovation
 To ensure continuous growth of loan assets
 To ensure compliance of all the directives
 To create awareness among the Branch level functionaries

MSME Vertical to also oversee the growth of MSME business of the Bank as a wholeapart
from the credit thrust Business Banking Branches

MSME VERTICAL FINANCIAL KRAs

 Growth in MSME Credit
 Yield on MSME Credit Portfolio
 Growth in non-interest income from MSME advances
 Growth in number of MSME accounts
 Delinquency rate

MSME VERTICAL NON-FINANCIAL KRA

 Establishment of MSME LOAN POINT (MLPs) where business opportunities exist
– A complete Business Model having adequate manpower with assured TurnAround
Time for quick disposal of MSME proposals.
 Ongoing identification and review of “Business Banking Branches” (BBBs),
“MSME Focused Branches” (MFBs) & “Union MSME First Branches” (UMFBs).
 Holding of periodical MSME camps at various potential Centers/Clusters.
 Launch of Cluster Specific Schemes.
 Publicity of Bank’s MSME schemes and Brand Building Initiatives.
 Building of MSME cadre, a silo of specialized officers who will have expertisein
Credit Appraisal/Processing of MSME proposals, Marketing and Monitoring.
  Comprehensiveness, accuracy and timeliness of policy documents/ databaserelated to
MSME.
 Submission of Returns to RBI and Ministries pertaining to MSME.
 Business planning & periodic reviews.
 Timely rectification of MSME credit related grievances.
 Timely empanelment of Valuer.
 Effective management of following Cells at Central Office
o Credit Guarantee Cells (CGTMSE/ CGFMU /CGSSI /CEGSSC)
o TUFS Cell
o PSBloansin59mintues Cell
 MSME Credit related correspondence with MoF/RBI/IBA
 MSME Credit related RTIs
 Overall operations regarding the NESL

DEFINITION OF MICRO, SMALL & MEDIUM ENTERPRISES

Revised MSME definition adopted composite criteria of investment in P&M and Turnover of the unit
for classification and an artificial demarcation betweenmanufacturing and service sector has been
removed. The revised classification as under:

Segment Classification based on

Micro Enterprise Where the investment in Plant & Machinery or Equipment does not exceed
one crore rupees and turnover does not exceed fivecrore rupees.

Small Enterprise Where the investment in Plant & Machinery or Equipment does not exceed
ten crore rupees and turnover does not exceed fiftycrore rupees.
Medium Enterprise Where the investment in Plant & Machinery or Equipment does not exceed
fifty crore rupees and turnover does not exceed twohundred and fifty crore
rupees.

In case of an upward change in terms of investment in plant and machinery or equipment or turnover
or both, and consequent re-classification, an enterprise shall continue to avail of all non-tax benefits
of the category (micro or small or medium) it was in before the reclassification, for a period of three
years from the date of such upward change.

In case of reverse-graduation of an enterprise, whether as a result of re- classification or due to actual

changes in investment in plant and machinery or equipment or turnover or both, and whether the
enterprise is registered under the Act or not, the enterprise will continue in its present category till the
closureof the financial year and it will be given the benefit of the changed status only with effect from
1st April of the financial year following the year in which such change took place.

All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent
Account Number (PAN) shall be collectively treated as oneenterprise and the turnover and investment
figures for all of such entities shall be seen together and only the aggregate values will be considered
for deciding the category as micro, small or medium enterprise.

CREDIT GUARANTEE SCHEME FOR STARTUPS- TRANSACTION BASED

Government of India, Ministry of Commerce and Industry (Department for Promotion of Industry and
Internal Trade- DPIIT), has introduced the ‘Credit Guarantee Scheme for Startups (CGSS)’ for providing
guarantee cover to Startups, subject to a maximum coverage of Rs.10.00 Crore per borrower.

The Fund and scheme will be managed and operated by National Credit Guarantee Trustee Company
Limited (NCGTC), which is a wholly owned trustee company of Government of India.
The broad objective of CGSS is to provide guarantee up to a specified limit against credit instruments
extended by Member Institutions (MIs) to finance eligible Startups. This scheme would help provide
the much-needed collateral free debt funding to Start-ups.

BECOMING A MICRO, SMALL OR MEDIUM ENTERPRISE

Any person who intends to establish a micro, small or medium enterprise may file Udyam Registration
online in the Udyam Registration portal, based on self- declaration with no requirement to upload
documents, papers, certificates or proof.

During registration by MSMEs in Udyam Registration portal, data of Investment and Turnover either
get auto filled/fetched from the Income Tax Department and GSTN (for those enterprises who have
filed IT & GST returns) or is filed on aself-declaration basis (by those enterprises who are yet to file
the IT & GST returns)

In this regard, Ministry of MSME, Government of India (considering the timeline for filing the returns
and the time required for further processing the return) hasclarified that the following procedure has
been adopted in relation to data (auto

CALCULATION OF INVESTMENT IN PLANT AND MACHINERY OR EQUIPMENT

The calculation of investment in plant and machinery or equipment will be linked to the ITR of the
previous years filed under the IT Act, 1961.In case of a new enterprise, where no prior ITR is available,
the investment willbe based on self-declaration.

The relaxation shall end after the 31st March of the financial year in which itfiles its first ITR.

Plant and machinery or equipment of the enterprise, shall include all tangibleassets (other than land
and building, furniture and fittings).

The purchase (invoice) value of a plant and machinery or equipment, whetherpurchased first hand
or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure
basis, if the enterprise is a new one without any ITR. The value of Plant and Machinery or Equipment
for all purposes and for all the enterprises shall mean the Written Down Value (WDV) as at the end of
the Financial Year as defined in the Income Tax Act.

CALCULATION OF TURNOVER
Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise
whether micro, small or medium, for the purposes ofclassification.

Information as regards turnover and exports turnover for an enterprise shall be linked to the Income
Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.

The turnover related figures of such enterprise which do not have PAN will be considered on self-
declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be
mandatory.

MSME-PRIORITY SECTOR LENDING GUIDELINES:

Target for Micro Enterprises: 7.5 per cent of ANBC or Credit equivalent amount of Off-Balance Sheet
Exposure (CEOBE), whichever is higher.

All eligible manufacturing enterprises under MSME irrespective of credit facilitieswill be classified under
priority sector.
All bank loans to MSMEs, engaged in providing or rendering of services as definedin terms of investment
in equipment and turnover under MSMED Act, 2006, shallqualify under priority sector without any
credit cap.

All loans to units in the KVI sector will be eligible for classification under the subtarget of 7.5 percent
prescribed for Micro Enterprises under priority sector.

Bank loans to Micro, Small and Medium Enterprises, for both manufacturing andservice sectors are
eligible to be classified under the priority sector without anycredit cap.

In terms of the recommendations of the Prime Minister's Task Force on MSMEs, Bank has to achieve:

 20 per cent year-on-year growth in credit to micro and small enterprises,

 10 per cent annual growth in the number of micro enterprise accounts and
 60% of total lending to MSE sector as on preceding March 31 should be to Micro
enterprises.

COMMON GUIDELINES / INSTRUCTIONS FOR LENDING TO MSME SECTOR

ISSUE OF ACKNOWLEDGEMENT OF LOAN APPLICATIONS TO MSME BORROWERS

Bank will encourage Central Registration of loan applications and technology will be used for online
submission of loan applications, processing and tracking of MSE loanapplications to strengthen TAT
and improve customer experience.

CREDIT GUARANTEE SCHEMES (COLLATERAL FREE LOANS): CGTMSE

Credit Guarantee Scheme of Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) was
established in August, 2000 and promoted by Government of India and SIDBI with an objective of
providing the guarantee coverto the collateral free loans extended to Micro & Small Enterprises under
its scheme known as Credit Guarantee Scheme.

No collateral should be accepted in case of loans up to Rs.10 lacs extended to units in the MSE sectors
(whether eligible under Credit Guarantee Scheme or not).

Collateral-free loans up to Rs.10 lakh should be extended to all units financed under the Prime Minister
Employment Generation Program (PMEGP) administeredby KVIC.

Branches/Offices should cover all loans upto Rs. 25 lakh extended to Micro & Small Enterprises and
are eligible for coverage under guarantee scheme of CGTMSE or other approved institutions without
any exception. If at all there is any exception, the same should be only with the prior permission of
their Regional Head.

Collateral free credit limits upto Rs.500 lacs under Credit Guarantee Scheme for MSEs subject to
availability of Credit Guarantee cover, satisfaction of borrower's track record and good & sound
financial position.

CREDIT GUARANTEE SCHEME IS A TOOL FOR

 Widening of credit portfolio
 Better management of risk
 Faster recovery of dues
 Enhancement of profitability
CREDIT GUARANTEE FUND FOR MICRO UNITS (CGFMU):
Under the CGFMU scheme, the guarantee coverage is available on a portfoliobasis for the MUDRA
loans sanctioned up to Rs.10 lacs.

The fresh credit guarantee from CGFMU is confined to PMMY loans sanctioned foragriculture allied
activities and Overdraft in PMJDY accounts only.

CREDIT GUARANTEE SCHEME FOR STANDUP INDIA (CGSSI)

In order to increase the pace of lending under Standup India Scheme, Government of India introduced
Credit Guarantee Scheme for Standup India (CGSSI).

It facilitates Credit Guarantee Coverage of all eligible accounts sanctioned under Stand-up India on
portfolio basis.

The guarantee coverage is available for the loans sanctioned between Rs. 10 lacs to Rs. 100 lacs. In our
bank, new eligible accounts under Stand Up India are beingcovered under CGTMSE at present.

CREDIT ENHANCEMENT GUARANTEE SCHEME FOR SCHEDULED CASTES (CEGSSC):

The scheme is envisaged for extending Term Loans or Composite Loans (combination of term loan,
working capital facility and non-fund based facility) to SC entrepreneurs engaged in Small and Medium
enterprises

SPECIALIZED MSME BRANCHES:

As per Reserve Bank of India guidelines at least one specialized branch is to be opened in each district
and categorization of general banking branches having 60% or more of advances to MSME sector as
specialized MSME branches for providing better service to this sector as a whole is permitted.

Specialized MSME branches is to be ensured in identified clusters/centers with preponderance of small

enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank
personnel to develop requisite expertise.

The existing specialized SSI Branches are also identified as MSME Business BankingBranches by the Bank.
The Bank has identified 200 MSME Focused Branches (MFBs) for all the regions as per Government’s
“Reform Agenda for Responsive and Responsible PSBs” to ensure EASE (Enhanced Access and Service
Excellence).

UNION MSME FIRST BRANCHES

With a view to have focused approach towards lending to MSME, Bank has launchedUnion MSME First
Branch (UMFB).
 UMFB will cater to loan, deposit, third party products and other banking activities pertaining to
MSMEs.
 Only MSME loan products (including Retail loans offered to MSME unit) will beavailable at the
branch.
 Branch shall refer to the nearest General Banking Branch for retail leads andretail requirement
of promoters/staff members/family of MSME unit.
 Gradually, Bank propose to migrate to UMFB structure in place of MFB/BBB forfocused attention
on growth of MSME.
DELAYED PAYMENT ACT FOR MSMES
The period agreed upon between the supplier and the buyer shall not exceed forty-five days from the
date of acceptance or the day of deemed acceptance.

In case the buyer fails to make payment of the amount to the supplier, he shall be liable to pay
compound interest with monthly rests to the supplier on the amount from the appointed day or, on
the date agreed on, at three times of theBank Rate notified by Reserve Bank.

GENERAL CREDIT CARD (GCC) SCHEME

In order to enhance the coverage of GCC Scheme to ensure greater credit linkage for all productive
activities within the overall Priority Sector guidelines and to capture all credit extended to individuals
for non-farm entrepreneurial activity, the GCC guidelines have been revised by Reserve Bank of India
and same is adopted by the bank through “Union General Credit Card Scheme”.

CLUSTER APPROACH
A cluster-based approach to lending may be more beneficial:

 In dealing with well-defined and recognized groups

 Bank has provided 33 MSME Cluster Schemes having outlay of Rs. 20410 Crore
 Availability of appropriate information for risk assessment
 Monitoring by the lending institutions

Clusters may be identified based on factors such as trade record, competitiveness and growth
prospects and/or other cluster specific data. Our Bank is a SLBC Convenor is to be reviewed, especially
in 388 clusters identified by United Nations Industrial Development Organisation (UNIDO) spread over
all states in various partsof the country
The Ministry of Micro, Small and Medium Enterprises has approved a list of clusters under the Scheme
of Fund for Regeneration of Traditional Industries (SFURTI) and Micro and Small Enterprises Cluster
Development Programme (MSE-CDP) located in various Minority Concentration Districts.

CREDIT LINKED CAPITAL SUBSIDY SCHEME (CLCSS)/ SPECIAL CREDIT LINK CAPITAL
SUBSIDY SCHEME (SCLCSS)
Government of India, Ministry of Micro, Small and Medium Enterprises has introduced Credit Linked
Capital Subsidy Scheme (CLCSS) for Technology Upgradation of Micro and Small Enterprises and was
valid till 31.03.2021. The Scheme was subsequently discontinued by the Government of India.

Special Credit Link Capital Subsidy Scheme (SCLCSS) is introduced with a special provision of 25 %
subsidy to SC/ ST MSEs under National SC / ST Hub (NSSH) with following features:

 The Scheme would cover SC/ST MSEs of manufacturing and service sectors. Valid Udyam
Registration is required for availing the subsidy.
 Ceiling on the loan under the scheme is Rs.1 crore.
 The rate of subsidy is 25% in case of SC/ST for all units of micro and small enterprises up to loan
ceiling of Rs 1.00 Crore
BANK’S INITIATIVES FOR STEPPING UP CREDIT TO MSMES
 Separate Organizational set up at Central Office (MSME vertical headed byChief General
Manager)
 The Bank has 224 Business Banking Branches, 200 MSME Focused Branches and105 Union MSME
First Branches (UMFBs) at present
 Centralized Processing Centres (CPC) – MSME Loan Point (MLPs)
 Presently MLP Network is available in all the 125 Regions
 Developing Credit Officers Cadre
 Cluster Approach
 All Regional Offices designated as MSE Care Centers
 Simplified Common Loan Application Form for MSMEs up to Rs 2.00 crore.
 Online Application Facility up to Rs 2.00 crore.
 Straight through Processing (STP) facility to digitally process the loanproposals from end-
to-end without manual intervention.
 STP facility for New as well as existing MSME customers seeking creditfacilities upto Rs.
5.00 crore.

STANDUPMITRA
MSME entrepreneurs can apply for loans online through https://www.standupmitra.in/, which can be
accessed by Bankers and Standupmitra team. As per the preference given by the entrepreneurs,
concerned Bank / branch has to pick up the proposal for processing, sanctioningand disbursement.

UDYAMIMITRA
Udyamimitra is a portal developed by SIDBI for submitting the online loan applications by the MSME
entrepreneurs with various Banks which can be accessed through https://udyamimitra.in/.

ONLINE STRAIGHT THROUGH PROCESSING (STP) FACILITIES

Bank has also put in place a dedicated STP loan facility for Kishore and TarunMudra Loans. It is an ‘End-
to- end Digital loan’ origination platform for enabling existing and new to bank customers to avail loan
up to Rs.10.00 Lacsthrough mobile and web applications interfaces” in self-service-mode.
Bank has also put dedicated STP facility for Union Nari Shakti and Union MSME Superfast Scheme
through our Mobile Banking Application Vyom.

MSME PRODUCTS:
Bank has designed various MSME products looking into the requirements of the borrowers as listed
below:

1. Union Guaranteed Emergency Credit Line: 1.0, 2.0, 3.0, 4.0, 1.0 (Ext), 2.0(Ext) & 3.0
(Ext)
2. Union Ayushman Plus
3. Prime Minister SVANidhi
4. Union Start up
5. Union Credit Guarantee scheme for sub-ordinate debt
6. Union MSME Suvidha
7. Union MSME Superfast
8. Union Progress
9. Financing Traders against Electronic Negotiable Warehouse Receipt (eNWR)
10. Union LAP
11. Union Loan Guarantee Scheme for Covid Affected Sectors (ULGSCAS)
12. Union Rent
13. Union Loan Guarantee Scheme for Covid Affected Tourism Service Sector(ULGSCATSS)
 14. Union MUDRA
15. Union Equipment Finance
16. PMEGP
17. Union MSME Credit Card
18. Union Parivahan
19. Union e-Way Bills Solution
20. Union Nari Shakti
21. Stand Up India
22. Union General Credit Card
23. Union Professional
24. Union Residential Real Estate
25. Inventory Support
26. Union Turnover Plus

MOU/TIE-UP/COLLABORATION WITH FINTECH COMPANIES/OTHER AGENCIES:

The external credit rating enables the MSMEs to compete with the market players on global level.
Similarly, it also helps banks to evaluate MSME’s credit proposalsin a better way.

However, MSMEs in general are not very keen to get their units/accounts rated from the external
credit rating agencies.

In order to motivate the MSMEs, National Small Industries Corporation (NSIC) is providing subsidy
towards the payment of fees of the external credit rating agencies.

CREATION OF THE DEDICATED “CENTRALIZED GUARANTEE CELL” FOR CREDIT

GUARANTEE SCHEMES

In order to have focused approach and freeing field functionaries from marketingactivity and business
growth, operational activities related to credit guarantee are shifted to a dedicated back-office
structure for Credit Guarantee. The Guarantee Cell is set up at MSME Vertical, Central Office.

This is to ensure seamless activities related to obtaining of guarantee coverage under the various
Schemes, claim lodgement and maintenance of the portfolios in bound manner.

Following guarantee coverage Schemes will be dealt at this Guarantee Cell:

o CGTMSE, CGFMU, CGSSI, EGCLS, PMSVanidhi and CGSSS

MSME SUSTAINABLE (ZED) CERTIFICATION SCHEME: CONCESSION IN PROCESSING

CHARGES

Ministry of Micro, Small and Medium Enterprises (MSME), Govt. of India, launchedthe ‘Zero Defect Zero
Effect (ZED)’ Certification Scheme on 11.07.2016 in accordance with the objective of supporting the
effort of ‘Make in India’ and thecall for ‘Zero Defect Zero Effect’. The same was revamped and MSME
Sustainable(ZED) Scheme was launched in April 2022.
The competent authority has approved for extending concession in processingcharges for ZED
rated MSMEs as under

Rating of the Unit Concession in Processing Charges

Gold 50%

Silver 35%

Bronze 25%
 Guidelines on Lending to Microfinance Institutions
(MFI) for On Lending to Micro Borrowers

Definition of a Microfinance Loan:

 As per the latest RBI guidelines (updated as of July 2022), a microfinance loan is defined as a collateral
free loan provided to households with an annual income of up to ₹3 lakh.
 In this context:
 Household refers to an individual family unit, which includes the borrower, their spouse, and unmarried
children.
 The loans can be used for any purpose (no restrictions on the end use).
 Loans can be processed through both physical and digital channels

Important Features of Microfinance Loans:

 Collateral free nature: The loans must not be tied to any deposit account (i.e., no lien on the borrower’s
savings or fixed deposits).
 Repayment Cap: A borrower’s monthly loan repayment obligations cannot exceed 50% of their household
income.
 Repayment Flexibility: MFIs are required to offer flexible repayment options based on the borrower’s needs.

Applicability of Guidelines:

 These guidelines apply to all regulated financial entities, including:-

Commercial Banks
Small Finance Banks
Regional Rural Banks
Cooperative Banks
Nonbanking Finance Companies (NBFCs) and NBFCMFIs (Non-Deposit Taking)
Objectives: The key objectives of these guidelines are to:

 Boost lending under Priority Sector Lending (PSL), targeting underprivileged and low-income segments of
society.
 Ensure quicker and more efficient credit approval processes, benefiting both existing and new MFI clients.

Priority Sector Status:

 Banks’ credit to MFIs can be classified under priority sector advances, provided they comply with RBI’s
guidelines.
 MFIs that adhere to certain regulations can lend to individuals or SHG/JLG members and have their lending
categorized under priority sector lending like Agriculture, MSME, and Social Infrastructure.

Types of MFIs and Regulatory Compliance:

 NBFC-MFIs: These are NBFCs where at least 75% of total assets are microfinance loans. They are subject to
strict RBI guidelines.

 Other MFIs: This includes NGOs, Public Trusts, and Cooperative Societies, which are also allowed to
participate in microfinance if they comply with regulatory standards.
 Eligibility Norms for Lending to MFIs:

To receive financial support from banks, an MFI must meet the following requirements:

 Registration: The MFI must be a registered legal entity with an explicit clause in its by-laws that allows it to
borrow funds from banks.
 Experience: The MFI must have at least 2 years of experience in providing microfinance services to SHGs,
JLGs, or individuals.
 Credit Rating: The MFI must be rated by a recognized credit rating agency. The rating should be valid and
meet the bank's standards.
 Track Record: The MFI must demonstrate a 90% repayment performance in the previous year and maintain
transparent accounting and audit systems.
 Governance: MFIs should be well governed with no political figures in their management structure.

Financial Requirements:
Capital Requirement:

 For NBFC-MFIs, the minimum Net Owned Fund (NOF) required is ₹5 crore (₹2 crore for MFIs in the North-
east region).
 This will gradually increase to ₹7 crore by March 2025 and ₹10 crore by March 2027 (₹5 crore for MFIs in the
North-east).

Qualifying Assets:

 For NBFC-MFIs, at least 75% of total assets must consist of microfinance loans.
 For other NBFCs, the limit for microfinance loans is 25% of their total assets.

Borrowing Standard

The benchmarks in respect of Current Ratio, TOL / TNW, DER, DSCR, Interest Service Coverage ratio, IRR etc
shall not be applicable for financing to Micro Financial Institutions (MFIs). However, the
guidelines/benchmarks to be followed while lending to NBFCs shall be as per latest RBI Master Circular /
Direction on “Bank Finance to Non-Banking Financial Companies (NBFCs).
Following five standards ratios and their benchmark standards shall be considered for all microfinance
proposals finance from our bank

S.N Ratio Formula Benchmark

1 Operational Self Total operating income Above 100%
Sufficiency Ratio divided by total expenditure
(OSS)
2 Portfolio At Risk(PAR) Loan over dues greater than Less than 5 %
30 days 30 days divided by total
outstanding loan portfolio
3 Operating Cost Ratio(OCR) Total operating cost duringthe period Less than 20%
divided by average
outstanding loan portfolio
4 Total Cost Ratio(TCR) Total cost during the period divided by Less than 30%
averageoutstanding loan portfolio

5 Average Borrower No. of Borrowers divided by No. of Between 250 to

per Credit Officer Credit Officers 600
(ABCO)
 Loan Repayment and Borrowing Limit:

 Household Income Assessment: MFI loans should be structured so that households spend no more than 50%
of their monthly income on loan repayments. This ensures that borrowers do not become over indebted.

Multiple Lending:

 A borrower cannot take loans from more than two MFIs.

 Borrowers must also be members of only one SHG or JLG.
 There should be a moratorium period between loan sanction and the first repayment date, ensuring that
borrowers are not immediately burdened.

Pricing of Credit:

 Interest Rate Guidelines:

 MFIs must establish a clear and board approved policy on how they price loans. This includes a breakdown
of the components of the interest rate such as cost of funds, risk premiums, and margins.
 The interest rates charged must be fair and transparent, and the MFI must publicly display the minimum,
maximum, and average interest rates charged.
 There is no prepayment penalty for borrowers, and penalties for late payments apply only to the overdue
amount, not the entire loan.

 Processing Charges: Processing fees should not exceed 1% of the loan amount .

Fair Lending Practices:

MFIs must adopt a Fair Practices Code (FPC) to protect borrowers.
This includes:
a) Transparent communication of loan terms and conditions.
b) Providing borrowers with a loan card that shows all loan details, repayment amounts, and the MFI’s
grievance redressal mechanism.
c) MFIs should not resort to coercive recovery practices such as harassment, threatening, or using abusive
language toward borrowers.

Risk Management:
Provisioning Norms:
 MFIs must set aside provisions for non-performing loans. For loans overdue for more than 90 days, at least
50% of the overdue amount must be provisioned.
 For loans overdue by more than 180 days,100% provisioning is required.

 Capital Adequacy: MFIs are required to maintain a Capital Adequacy Ratio (CAR) of at least 15% of their risk-
weighted assets.

Governance, Audits & Misc.:

 MFIs must have a transparent governance structure with adequate controls in place, including regular internal
and external audits.
 MFIs must comply with RBI’s Master Circular on corporate governance for NBFCs, ensuring that decisions are
made ethically and transparently.
 MFIs must ensure that borrowers are protected by offering financial literacy programs and preventing
overborrowing.
 MFIs should follow fair practices during loan recovery, ensuring borrowers are not harassed. Recovery must
be carried out at a designated central location unless mutually agreed otherwise.
 MFIs must have a system for handling borrower complaints and disputes. This includes displaying contact
details of the grievance redressal officer in all their offices.
 The NBFC-MFIs should be registered with RBI and shall be a member of RBI recognized SRO and in case of
other MFIs (other than NBFC-MFIs) shall be a member of RBI recognized SRO.
 Exposure cap to MFls is fixed at Rs 4000.00 crore till 30.09.2024. The exposure cap is valid from 01.10.2023
to 30.09.2024. This cap excludes direct exposure to micro borrowers through SHG/JLG/other models under
BC model.
 Exposure to single MFI shall be restricted to Rs 600.00 crores.
 No loans / advances shall be granted to those MFIs who are on Rashtriya MahilaKosh‟s or NABARD‟s existing
defaulters list.
 A pre-payment penalty of 1% of the outstanding loan amount is applicable for pre closure of Term Loans
through take over. In other cases, prepayment penalty shallnot be levied.
 MFI should submit abridged book debt statement on quarterly basis with CA certification. Further, in order
to know the end use of funds, MFI shall submit the account wise micro finance loans extended by them on
yearly basis at the time of renewals / enhancements.

Various Aspect of NBFC-MFIs in FAQ Model

Q 1. Whether all members of a household are mandatorily required to become borrowersof a microfinance
loan?

Ans. There is no requirement of treating all members of the household as applicants/ borrowersof a loan
which can be provided to an individual member.

Q 2. Whether loans for consumption (i.e., for buying gadgets, meeting expenses on ceremonies, etc.)
without collateral would be treated as microfinance loans?
Ans. All collateral-free loans to individual/s belonging to low-income households, i.e., households having
annual income up to ₹3,00,000 are treated as microfinance loans.

Q 3. If a loan is backed by hypothecation of any security (gold, equipment, white goods, underlying assets
etc.), will this loan be considered collateral-free and classified as a microfinance loan?
Ans. Loans backed by hypothecation of any security shall not be treated as microfinance loans.

Q 4. Whether the instructions related to limit of 50 per cent on monthly loan repayment obligations of a
household as a percentage of monthly household income apply to non- microfinance loans given to low-
income households?
Ans. Yes, the limit of 50 per cent shall include both microfinance as well as non- microfinance loans.

Q 5. What type of insurance charges are to be disclosed in the factsheet and included for computation of
effective annualized interest rate? Whether charges related to non-creditproducts should also be provided
in the factsheet?

Ans. The insurance charges included in the factsheet are only for credit linked insurance products as these
charges are linked to the microfinance loan. A borrower would not have incurred these charges if he had not
taken the loan. The factsheet should contain information related to only pricing of microfinance loans to keep
it uncluttered.

All non-credit products (both financial products such as investment products, insurance products etc. as well
as non-financial products such as solar lanterns, sewing machines etc.) should be provided only with the explicit
consent of the borrower and REs should ensure that there is no direct or indirect linkage between the loan
provided to the borrower and other non-credit products. No non- credit product shall be sold as a pre-condition
for the loan product.

Q 6. Is the practice of calling a borrower before 9.00 am and after 6.00 pm considered harsh practice only
for recovery of overdue loans or also for normal conduct of business?

Ans. This clause is applicable only for recovery from borrowers having overdue loans. For other borrowers, REs
can continue with the existing timing/ process for business like group meetings, collection in regular accounts,
 etc. as per borrowers‟ convenience.

Q 7. What should a customer keep in mind while availing a microfinance loan?Ans. The customer should
keep in mind, among others, the following:
There is no requirement of keeping any deposit/ margin/ collateral/ primary security withthe lender at any
stage of the microfinance loan.

Lender is required to provide a loan card to the borrower in a language understood by theborrower which
should have following information:

 Information which adequately identifies the borrower,Simplified factsheet on pricing.

 All other terms and conditions attached to the loan.
 Acknowledgements by the lender of all repayments including instalments receivedand the final
discharge; and
 Details of the grievance redress system, including the name and contact number ofthe nodal
officer of the lender.

a) Purchase of any non-credit products is purely voluntary. Fee structure for such productsshall be
explicitly communicated in the loan card.

b) Training provided by the lenders is free of cost.

Q 8. What are the charges that a customer is required to pay for a microfinance loan?
Ans. A customer is required to pay only those charges which are explicitly mentioned in the factsheet provided
by the lender. Besides this, the customer should also note the following

 There is no pre-payment penalty on microfinance loans.

 Penalty, if any, for delayed payment can be applied only on the overdue amount andnot on the entire
loan amount.
 Any change in interest rate or any other charge shall be informed to the borrower inwriting well in
advance and these changes shall be effective only prospectively.

Q 9. How can a borrower find about the current interest rates being charged on the microfinance loans?

Ans. RBI has made it mandatory for lenders to display the minimum, maximum and average interest rates
charged on microfinance loans in all their offices, in the literature (information booklets/ pamphlets) issued
by them and details on their website.

Policy on Lending to Real Estate Sector

Real Estate investment has unimaginable upside potential in boom period and equally disastrous downside risks
in economic down turns. The enormity and rapidity of upside potential attracts an investor. Bank formulated the
separate Policy on Real Estate Sector in June 2006 as per RBI communication dated 29th June, 2005 which
indicated that as exposure of the Banks to the Real Estate Sector, particularly to the land developers and builders
are on the rise, a corresponding control mechanism for managing the risks involved in this sensitive sector. Which
suggested, Banks to put in place the following system for managing the portfolio:

 Banks should have a Board mandated policy in respect of their real estate exposure.
 The Policy to include exposure limits, collaterals to be considered, margins to be kept, sanctioning
authority / level, sector to be financed, etc.
 Banks should have risk management system in place for containing risks involved in the sector, including
price risk, etc.
 Bank should have a monitoring mechanism to ensure that the policy stipulation is being followed by field
functionaries and that their exposure to this sensitive sector is within the stipulated limit.
 The above instructions are indicative in nature and it is left to the individual Banks to adopt an
appropriate system depending upon the portfolio size, business complexities, risk appetite, etc.
The Real Estate (Regulation and Development) Act, 2016 was passed by the Rajya Sabha on 10 March 2016 and
by the Lok Sabha on 15 March 2016. The Act came into force from 1 May 2016 with 69 of 92 sections notified.
The Act seeks to protect home-buyers as well as help boost investments in the real estate industry. RERA Act has
commenced from 1st May 2017. As per Section 84 of the said Act, appropriate government (State/ Union
Territory) are required to make rules for carrying out the provision of this Act and as per section 20 of the said
Act, appropriate government (State/ Union Territory) were required to constitute “Real Estate Regulation
Authority‟. In respect of states who have enforced their respective real estate acts instead of RERA Act, the same
shall be applicable in those states.

In terms of the Real Estate Act it is mandatory for all commercial and residential real estate projects where the
land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority
(RERA) for launching a project. This provision is expected to provide greater transparency in project-marketing
and execution.

As per the provisions of the Act the builders will have to quote prices based on carpet area and not super built-
up area, further carpet area has been clearly defined in the Act. This will be beneficial to home buyers.

The Act will help in establishing state-level Real Estate Regulatory Authorities (RERAs) to regulate transactions
related to both residential and commercial projects and ensure their timely completion and handover. Appellate
Tribunals will be required to adjudicate cases in 60 days. The guidelines on lending to Real Estate Sector is
circulated as Annexure IV to Loan Policy vide IC no. 04545-2024 dated 12.01.2024 and operational guidelines
circulated vide IC no. 04551-2024 dated 26.03.2024

Classification Of Advances under Real Estate

Direct Exposure–Direct Exposure to real estate shall be classified as under:

 Residential Mortgages
 Commercial Real Estate (CRE).
 Commercial Real Estate-Residential Housing
 Investment exposure - including investment in Mortgage Backed Security, CDs or NCD of Commercial
Real estate companies, equity investments, other investments including underwriting and similar
commitments to the projects/borrowers classified under CRE.

Indirect Exposure:

Exposure in the form of Funded and non-funded credit facilities to National Housing Bank (NHB) and Housing
Finance companies (HFCs), Housing Boards, other Public Housing Agencies, etc.

Residential Mortgages
Residential Mortgages refers to “Lending to individuals meant for acquiring residential property which are fully
secured by mortgage of the residential property that is or will be occupied by the borrower, or that is rented”

 Sanction of loans for acquiring residential housing units in a single building or complex upto two units
will fall within the scope of residential mortgage category.
 However, if the total number of such housing units is more than two, the exposure for the third unit
and onwards shall be treated as Commercial Real Estate (CRE) exposure.
 It may be clarified that to classify CRE advance, units owned will be considered instead of loans availed
for purchasing the units.
 In case of loans given to firms/ companies / Associations/Trusts for the purpose of residential
accommodation of their officials, the classification of exposure will be based on the intent of purchase
and necessity of the applicant firm/company to purchase such property as residential quarters.
 If the applicant firms/ companies have no business connection/ activity in the place where properties
are purchased, such exposures will be classified as CRE since the properties are not purchased for the
purpose of carrying on their business activities.

The housing loans shall be segregated for the purpose of reporting to RBI as under:
  Priority sector Home loans - Loans to individuals up to Rs.35 lakh in metropolitan centres (with
population of ten lakh and above) and loans up to Rs. 25 lakh in other centres for purchase/ construction
of a dwelling unit per family provided the overall cost of the dwelling unit in the metropolitan centre
and at other centres should not exceed Rs. 45 lakh and Rs. 30 lakh respectively.
 Non priority sector Home loans – Loans to individuals exceeding Rs. 35 lakh in metropolitan centres and
above Rs. 25 lakh in other centres for purchase/ construction of a dwelling unit per family and if the
overall cost of the dwelling unit in the metropolitan centre and at other centres exceeds Rs. 45 lakh and
Rs. 30 lakh respectively.
 Home loans above Rs.75 Lakhs.

Commercial Real Estate (CRE):

The RBI definition on Commercial Real Estate Exposure is closely aligned to Basel II definition as under: "Income-
producing real estate (IPRE) refers to a method of providing funding to real estate (such as, office buildings to
let, retail space, multifamily residential buildings, industrial or warehouse space, and hotels) where the
prospects for repayment and recovery on the exposure depend primarily on the cash flows generated by the
asset. The primary source of these cash flows would generally be lease or rental payments or the sale of the
asset.

However, the exposure to entrepreneurs for acquiring real estate for the purpose of their carrying on business
activities, which would be serviced out of cash flows generated by those business activities (i.e. sale of goods
and services), shall not fall under CRE.

Loans for multiple houses intended to be rented out: If the loan for the total number of residential housing units
is more than two, the exposure for the third unit onwards shall be treated as CRE exposure.

The Commercial Real Estate – Residential Housing (CRE-RH)

The Commercial Real Estate – Residential Housing (CRE-RH) would consist of loans to builders/ developers for
residential housing project (except for captive consumption). The new segment would also include exposure to
integrated housing projects comprising of some commercial space provided that the Commercial area in the
residential housing project does not exceed 10% of the total Floor Space Index (FSI) of the project. In case of
integrated housing projects where the FSI of the commercial area exceeds the ceiling to 10%, the exposure to
such projects would continue to be classified as CRE (Commercial Real Estate).

In terms of extant guidelines, the new sub-sector within Commercial Real Estate (CRE) i.e. CRE-Residential
Housing (CRE-RH), will attract lower risk weight of 75% and lower standard provisioning of 0.75% as against 100%
and 1% respectively for the CRE exposures. Bank shall, however, abide by RBI directives issued in this regard from
time to time.

Financing to Commercial Real Estate

 While proposals for residential areas will continue to be the thrust area of the Bank, Bank may consider
proposals from developers of properties where the promoters are reputed and have a past reputation
of atleast 5 years in the line of activity with successful projects completion track record.
 As per RBI guidelines in DBOD .DIR.HSG. BC 08/8.12.01/2009-10 private builders shall not be sanctioned
fund based/ non-fund based facilities for acquisition of land even as a part of housing project.
 Bank shall not sanction advances merely for purchase of Plots, Industrial, residential or otherwise except
where the land is allotted by City/Housing Development Authorities.
 Purchase of non-agricultural residential plot from state/central government agencies: Construction of
house on the plot should commence within a period of 18 months from the date of purchase. Further
Moratorium period of 36 months for completing the construction will be permitted. As per the norms
under Union Home finance, loan for purchase of plot is permitted only to individuals.
 Purchase of non-agricultural residential plot from private developers: All necessary approvals for
construction of house e.g. building plans etc. to be obtained within a period of 6 months of purchase
of plot. Construction to be undertaken within a period of 12 months of purchase of plot and
completed within maximum period of 36 months thereafter.
  In case the borrower fails to complete the construction of house after having purchased the land availing
the loan within stipulated time, it will be treated as non-compliance with the covenants of the loan and
the loan will be recalled. The borrower also will be liable to pay interest as applicable for general
commercial advances.
 Builders with satisfactory operations and financials and who secure a minimum rating of CR4/UBC4 or
above alone will qualify for bank lending, fund or non-fund based

Real Estate Activities not eligible for Bank Credit

As per RBI's directives, Bank shall not grant finance for:

 Construction of buildings meant purely for Govt./Semi-Govt. offices, including Municipal and Panchayat
offices. However, Bank may grant loans for such activities, which are eligible for refinance by institutions
like NABARD.
 Projects undertaken by Public Sector entities, which are not corporate bodies (i.e. public sector
undertakings which are not registered under Companies Act or which are not corporations established
under the relevant statutes).
 In respect of projects undertaken by Corporate bodies as above, Bank shall satisfy that project is run on
commercial lines and that Bank finance is not in lieu of budgetary resources envisaged for the project.
 Bank finance for acquisition of land to private developers for setting up of SEZ is not permissible as per
RBI guidelines.
 Bank shall not sanction term loans to corporations set up by Government to finance residential quarters
for allotment to employees where the loans are envisaged to be repaid out of budgetary allocation.
 Bank shall not be permitted to extend fund based or non fund based facilities to private builders for
acquisition of land even as part of a housing project.

Collaterals:
 The real estate property offered as security should be a free-hold property with a clear marketable title.
Based on the need felt, in addition to equitable mortgage/ Registered Mortgage of land proposed to be
developed, other tangible properties in the name of the developer may also be obtained as security to
cover additional value of required amount to ensure that fixed asset coverage 150% is maintained or
higher FACR depending upon the risk profile of the borrower on a case to case basis.
 Even if FACR of 150% or higher is maintained on primary security, minimum collateral security of
50% of the total exposure, by way of other tangible security, should be obtained. Relaxation in
minimum collateral security shall be permitted by CAC: II & above.

Margin:
In respect of loans extended for development/construction of buildings, minimum margin will be at 35% on
overall cost of the project including land value and soft cost. The components of 35% margin should be as
under:

 Minimum 25% by way of promoters' contribution of which minimum 12.50% (50%) from Promoters
own funds and remaining 12.50% (50%) by way of Quasi equity.
 Advance from customers should not exceed 10%.

The margin requirements in case of composite commercial real estate projects are as under:

Nature of borrower Cost of Minimum Margin

Public Agencies Land acquisition 50%
Private developers Land acquisition 100%
Public Agencies Land development construction 35%
Private developers Land development construction 35%
*Private developers are not eligible for financing land acquisition even in case of composite project.

Tenor of Loans:
The tenor of loans shall not generally extend beyond 3 years (2 years for completion of project and 1 year
for repayment) in respect of single construction housing/ commercial project and 5 to 7 years (5 years for
completion of project and 2 years for repayment) in respect of multiple housing/ commercial projects.

Further, in case of Single Construction Housing /Commercial projects where the Carpet Area 1.00 Lakh Sq Ft
and above or Number of units are 60 and above, the tenor of loans may be extended up to 5 years (3 years
for completion of project and 2 year for repayment)

Assessment of Finance- CRE Loans :

 The bank shall assess the inherent group risk of the borrowal account meticulously.
 Bank shall also examine the financial credentials/viability of the relevant unconsolidated related entities
such as Special Purpose Vehicles (SPVs).
 The working capital requirement will be assessed based on specific project(s), under cash budget method
and will be for a short duration of the project.

 The peak deficit envisaged in the project is the requirement of bank finance. The actual construction and
the inflows / outflows made out in the cash budget are verified during field inspections at regular intervals.
 In case of Term Loans the following will be taken into account while appraising the requirement:
 The project cost will be thoroughly vetted with respect to realistic value of construction cost, loan disbursals
matching with actual progress in construction supported by Chartered Engineers / Architect certificate
 Fixed Assets Coverage Ratio (FACR) of 1.50:1 shall be maintained for Commercial Real Estate Proposals
 Minimum DSCR should be 1.10:1 for acceptability of the project with average DSCR of 1.50.
 In cases where repayment is out of sale proceeds of property (flats, houses, etc) proposed to be constructed,
such projected cash flows from sale proceeds are to be factored while arriving at the DSCR
 Debt equity for the project shall be maintained at not more than 2:1.

Others Guidelines:
 At present, general provisions for standard Commercial real estate advances is kept at 1%.
 As per RBI guidelines, exposure to HFCs shall be classified under both, NBFC as well as indirect real estate
exposure.
 The claims on the rated as well as unrated NBFC-NDSI (other than AFCs), regardless of the amount of
claim, shall be uniformly risk weighted at 100 per cent.
 Lending to Special Economic Zones (SEZs) is defined as one of the categories eligible for classification as
“Infrastructure Lending‟ as per RBI guidelines.
 ZLCC shall be empowered to sanction fresh/renewal/review CRE and CRE (RH) proposals as per the Policy
on Delegation of Loaning Powers.
 Further ZLCC can renew the Real Estate proposals within their delegated lending powers subject to
following conditions:
 The renewal of Real Estate proposals shall be done at the existing level.
 Repayment is regular in the borrowal account.
 As a rule, no deviation under real estate loan shall be permitted/approved by any delegatee below RLCC-
I.
 As a rule, no deviation in CRE loans shall be permitted/ approved by any delegatee below CAC-III.
 In certain parts of the country, the local development authority lease the land with the stipulation for
payment of the lease amount over a period of around 10 years as against the lease period of 99 years.
The development authority recognizes bank‟s charge as second charge and subordinated to the lease
amount. Such cases can be considered, if lease is absolute and the balance lease amount payable is only
a charge on the property. Currently, the policy does not provide such eventualities and will not be
treated as deviation.
 BILL DISCOUNTING POLICY 2023-24
The credit facilities under Bills are generally sanctioned in the form of

 UBD (Usance Bill Discounting)

 UBD under LC
 UDBP (Usance Documentary Bill Purchase)
 UDBP under LC
 DBP (Documentary Bill Purchase)
 Buyer’s bills, supplier’s bills, etc.
 Foreign Bills like AFDBC (Advance against Foreign Documentary Bills for Collection) / AFBC (Advance
against Foreign Bills for Collection), FDBP, FUDBP, etc.

The applicable Rate of Interest on credit facilities under Bills will be same as for Working Capital Limits and as
specified under various categories in Interest Rate Circulars issued from time to time.

Reserve Bank of India has issued guidelines for setting up of and operating the Trade Receivables Discounting
System (TReDS) for facilitating the financing of trade receivables of MSMEs. Our bank has introduced a scheme:
Union TReDS, for which the operational guidelines are already in place.

In case of Documentary Bills, documents covering goods as well as invoices must be thoroughly examined, and
correctness of prices verified. Bills should not be accepted for purchase unless documents are accompanied by
invoices duly signed by the drawers. The value given in the invoice should be generally verified with prevailing
market rates. It should be ensured that the Bills are stamped according to the provisions of Indian Stamp Act.
The description of goods in the RR or B/L or Lorry Receipt must agree with the relative invoice and the amount
of the Bill should be approximately equal to the value of goods as per invoice. Bills should cover goods, which
are normally traded by the customers. Documents tendered should not bear the crossing stamp of any other
Bank.

Apart from these thorough due diligences to be done for different mode of transportation of goods as per laid
down guidelines of the bank and RBI.

As a part of conducting due diligence, Branches to monitor alerts related to Trade Based Money Laundering. Bills
purchased on any one particular drawee should be within the limit approved for each drawee.

Bills purchased by the Branch are to be properly controlled in Finacle/LAS. Bills Purchased Account is to be
debited only for the advance value (i.e. Bill amount minus margin). At the time of realization, care should be
taken for setting off the advances value alone (with interest due if any), and the balance amount representing
the margin should be credited to party’s account. While interest / discount will be charged on the advance value
of the bill, collection charges should be charged on the full bill value.

Bills purchased / discounting per drawee shall not exceed 30% of the sanctioned limit for the purpose of Bills
discounting, in case the sanctioned limit is Rs. 25.00 Cr or above. In exceptional cases, specific permission shall
be obtained from the respective sanctioning authority.

It should be ensured that adequate insurance of goods including transit insurance, wherever applicable, covering
all risks with bank clause is obtained.
Apart from these thorough due diligences to be done for different mode of transportation of goods as per laid
down guidelines of the bank and RBI.

RESTRICTIONS
 Accommodation bills are not to be purchased / discounted / negotiated. The underlying trade transactions
should be clearly identified and a proper record thereof maintained at the branches conducting the bills
business.
 An accommodation bill is bill which prepared to accommodate/benefit one/all parties in the transaction
financially without any consideration and these bills are not legally enforceable.
 Bills having following features which suggest that Bills are genuine but are in the nature of accommodation
are not to be purchased / discounted.
 Clean Bills either drawn on connected / allied firms.
 Bills wherein the address of different drawees is the same or where the address is care of a hotel, a lodging
house, a post master or only a post box.
 Bills relating to the movements of goods, in which the party does not normally deal.
 Bills where the lines of business of drawees and drawers are completely different.
 Bills drawn are in respect of commodities, which are not normally consigned from the center at which the
Bills have been drawn.
 Bills relating to the movement of goods to a center to which such goods are not normally consigned. Around
the date on which a Bill discounted by the Bank falls due for payment, the drawee gets another Bill
discounted for a similar amount.
 Bills are retired by the drawee on receipt of funds from the drawer / some other party at the drawer’s
center, or by drawing a Bill on the drawer / some other party.
 Bills are repeatedly drawn for the same amount on the same drawee (unless the drawee is the sole-selling
agent).
 Bills are drawn for round sums, unless drawers are commission agents.
 Bills drawn by drawer making payment on due date / retiring overdue / returned Bill frequently and asking
the Bank to deliver documents to the drawee free of payment.
 While discounting bills in the Services Sector, branches to ensure that actual services are rendered and
accommodation bills are not discounted. Services sector bills are not eligible for rediscounting.
 Bills drawn by front finance companies set up by large industrial groups on other group companies are not
to be purchased / discounted.
 Bills rediscounted should be restricted to usance bills held by other banks. Bills earlier discounted by non-
banking financial companies (NBFCs) are not to be rediscounted except in respect of bills arising from sale
of light commercial vehicles and two / three wheelers.
 Bills drawn by third parties should not be purchased though the party offering the Bills enjoys a BP Limit,
without prior sanction of Sanctioning Authority.
 A Bill purchase limit should be utilized for purchase of Demand Bills and should not be made use of for
discount of Usance Bills unless specifically provided for in the sanction. Similarly, Clean Bills should not be
purchased under limits for Documentary Bills.
 Bill discounting shall not be done for those customers who are mentioned in RBI caution list of EDPMS/IDPMS.

MONITORING
Branches to ensure that Bills purchased are realised expeditiously. Time taken by Bills to be realised should not
ordinarily be more than 10 days for Clean Bills and 30 days for Documentary Bills. Bills with Lorry Receipts should
not generally remain outstanding for more than 15 days.

Due dates of usance Bills as advised by the Collecting Banks / Branches are to be diarized and if proceeds are not
received within 3 / 4 days after the due date, fate enquiry is to be sent. Alternatively, Branches may use the
Finacle menu available in this regard. If a Bill remains outstanding beyond 10 days after due date, the relative
amount advanced is to be recovered, so that the overdue bill can be transferred to collection portfolio.

DISCOUNTING OF EXPORT BILLS

RISKS OF EXPORT
Different risk related to export business are

 Transportation Risk
 Non-Payment Risk
 Quality of Goods Risk
 Exchange Rate Fluctuation Risk
 Legal Risks
 Political Risks

DEFINITION OF POST SHIPMENT CREDIT

'Post shipment credit' means any loan or advance granted or any other credit provided by a bank to an exporter
of goods/services from India from date of shipment of goods/rendering of services to the date of realisation of
export proceeds as per the period of realisation as advised by RBI from time to time and includes any loan or
advance granted to an exporter, in consideration of, or on the security of any duty drawback allowed by
Government from time to time.

TYPES OF POST SHIPMENT CREDIT

Negotiation by payment/acceptance of export bill drawn under a Letter of Credit.

Purchase/Discount of export bill drawn under confirmed contract/orders.

Advance against export bills sent for collection (AFDBC)

At times, FDBP /FUDBP limits sanctioned to exporters are found to be inadequate or utilized fully. Consequently,
bills tendered cannot be negotiated / discounted / purchased. Branches are constrained to handle such export
bills on collection basis and to grant finance against such bills to the exporters only to a limited extent to meet
his emergent needs / to adjust the outstanding Packing Credit.

EXTENSION OF REALISATION OF EXPORT PROCEEDS FOR PERIOD UPTO 9/15 MONTHS

As per the extant guidelines of Reserve Bank of India ,the period of realisation and repatriation of export proceeds
is 9 months from the date of exports for all exporters including units in SEZs, Status holder exporter, EOUs, Units
in EHTPs(Electronics Hardware Technology Parks), STPs(Software Technology Parks and BTPs(Bio Technology
Parks). For exports made to warehouses abroad, the export proceeds are to be received within 15 months from
the date of export. As per Foreign Exchange Management (Export of Goods and Services) Regulation, 2000, the
Softex declaration form must be filed for export of software other than in physical form – i.e. magnetic tapes,
discs and paper media.

Sometimes, the exporters are not able to receive the realisation of export bills within the stipulated period of
realisation and ask for extension of export bills. The extension of export bills can granted on case to case basis.

In such cases the branches can extend the period of realisation of export bills beyond the stipulated period of
realisation upto a period of 6 months, at a time, irrespective of the invoice value.

While granting extension beyond period of 6 months up to 1 year, ECGC approval is to be obtained, if the exporter
is not having the status of Export House. If the exporter is having status of export House, then ECGC approval is
not required for extension up to 360 days. In that case for extension of export bill beyond 360 days prior approval
of ECGC is to be obtained.

The approval for extension of due date up to 180 days from date of shipment can be given by Branch Head of AD
branch. For extension of due dates beyond 180 days to 360 days or beyond DA period as per sanction (if more
than 180 days), permission has to be sought from respective Regional Office, subject to approval from ECGC. In
case of C category branch, the extension will be permitted by the Branch Head of the AD category branch at the
recommendation of the C category branch.

OVERDUE EXPORT BILLS

In case of a demand bill, an export bill is to be treated as overdue bill which is not paid before the expiry of the
normal transit period which is 25 days as per FEDAI guidelines, plus grace period. In case of a usance bill, an
export bill is to be treated as overdue bill which is not paid on the due date.

CRYSTALLISATION OF OVERDUE EXPORT BILLS

The proceeds of all export bill negotiated/ purchased/discounted should be repatriated on or before due date.
The Branch will transfer the exchange risk to the exporter by crystallizing the foreign currency liability into rupee
liability on the 30th day after the NTP /NDD/actual due date. In case the 30th day falls on a holiday/Saturday,
the crystallisation will be done on the next working day. However, in case of diamond exporters, the
crystallisation will be done on 45th day after the NTP /NDD or actual due date whichever is earlier.

For crystallisation into Rupee liability the branch will report notional sale to the Dealing Room and crystallize
the bill at TT selling rate.

If the crystallized Rupee liability is more than the amount originally advanced, branches not to pass on the surplus
to the customer. The overdue post shipment liability is to be controlled with the crystallized Rupee liability and
the amount originally advanced be adjusted. The surplus amount to be remitted to 'A' Category Branch. If the
crystallized Rupee liability is less than the amount originally advanced branches will recover the shortfall from
the customer.

Time limit for filing of claims

Branch should file a claim in respect of an account within 6 (six) months from the date of Report of Default as
per ECGC guidelines (Branches are advised to lodge the claim immediately after filing the Report of Default (ROD)
and in any case not later than 3 months from the date of filing the ROD, notwithstanding the aforesaid timeline).
 POLICY ON CAPITAL MARKET EXPOSURE

Components Of Capital Market Exposure (CME)

 Bank’s capital market exposure would include both direct exposures and indirect exposures. The
aggregate exposure (both fund and non-fund based) of Bank to capital markets in all forms would include
the following:
 Direct Investment in Equity Shares, Convertible Bonds, Convertible Debentures and units of Equity
oriented Mutual Funds, the corpus of which is not exclusively invested in corporate debt.
 Advance against shares/bonds/debentures or other securities or on clean basis to individuals for
investment in equity shares (including IPOs/ESOPs), Convertible Bonds, Convertible Debentures and units
of Equity oriented Mutual Funds.
 Advance for any other purposes where shares or convertible debentures/ convertible bonds or units of
Equity oriented Mutual Funds etc are taken as primary security.
 Advances for any other purposes to the extent secured by the collateral security of shares or convertible
bonds or convertible debentures or units of equity oriented mutual funds i.e. where the primary security
other than shares/convertible bonds/convertible debentures/units of equity oriented mutual funds does
not fully cover the advances
 Financing to Stock Brokers for Margin Trading.

Limits On Banks’ Exposure To Capital Markets

 Statutory limit on shareholding in companies
In terms of Section 19(2) of the Banking Regulation Act, 1949, the Bank shall 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 own paid-up share capital and reserves, whichever
is less, except as provided in sub-section (1) of Section 19 of the Act. Shares held in demat form should
also be included for the purpose of determining the exposure limit. This is an aggregate holding limit for
each company.

 Regulatory Limit / Exposure Ceiling for Capital Market

As per RBI directions, the aggregate exposure to the capital market in all forms (both fund based and
non-fund based) should not exceed 40% of net worth as per last audited Balance-sheet.

 Definition Of Net Worth

Net Worth of the Bank is defined as “Paid up Equity Capital plus Free Reserves including Share Premium,
but excluding Revaluation Reserves plus Investment Fluctuation Reserves and credit balance in Profit &
Loss account, less debit balance in Profit & Loss account, accumulated losses and intangible assets”. No
general or specific provision should be included in computation of net worth.

Items Excluded From Capital Market Exposure

 The following items would be excluded from the capital market exposure:
 Bank’s Investment in own subsidiaries, Joint Ventures, sponsored Regional Rural Banks (RRBs) and
investment in shares and convertible debentures, convertible bonds issued by institutions forming crucial
financial infrastructure
 Tier I &Tier II debt instruments issued by other Banks.
  Investment in Certificate of Deposits (CDs) of other banks.
 Preference Shares
 Non Convertible Debentures & Non Convertible Bonds.
 Units of Mutual funds under schemes where the corpus is invested exclusively in Debt instruments.
 Shares acquired by banks as a result of conversion of debt/overdue interest into equity under Corporate
Debt Restructuring (CDR) mechanism or Strategic Debt Restructuring (SDR) mechanism.
 Term Loan sanctioned to Indian promoters for acquisition of equity in overseas Joint Ventures
(JVs)/Wholly Owned Subsidiaries (WOS) under the refinance scheme of Export Import Bank of India (EXIM
Bank).
 Promoters‟ shares in the SPV of an infrastructure project pledged to the lending bank for infrastructure
project lending.
 Exposure to brokers under the currency derivates segment.

Intra-Day Exposures
 At present, Bank has fixed umbrella limit of Rs. 50 crores for the Capital Market Cell as a whole for Intra
Day Exposures within the overall ceiling of 15% of Net worth prescribed by Bank. The limit is exclusive of
the intraday facility granted to NSE/BSE and others against their sanctioned limits.

Prudential Limits on Intra-Group Exposure

 Single Group Entity Exposure

I. 5% of Paid-up Capital and Reserves in case of non-financial companies and unregulated financial
services companies
II. 10% of Paid-up Capital and Reserves in case of regulated financial services companies
 Aggregate Group Exposure

I. 10% of Paid-up Capital and Reserves in case of all non-financial companies and unregulated financial
services companies taken together
II. 20% of Paid-up Capital and Reserves in case of the group i.e. all group entities (financial and non-
financial) taken together.

Benchmarks

 Stock brokers shall be provided with need based finance for their broking activity against the security of
shares or other collaterals on the basis of commercial judgment. The present cap on financing to
individual Stock brokers is Rs 150 crores and Rs 30 crores for Capital Market cell M S Marg branch, Mumbai
and other branches respectively.

Policy on Guarantee and Co-Acceptance

Latest Policy was circulated by Credit Policy, Risk Management Department, Central Office vide Instruction
Circular no. 04547-2024 dated 23.01.2024. This Policy also encompasses the Policy on Bill Discounting and Policy
on Capital Market Exposures . Further operational guidelines for all these policies were circulated vide Instruction
Circular no. 04553-2024 dated 23.01.2024.
Guidelines :
The guarantees executed by Bank comprise both performance guarantees and financial guarantees. The
guarantees are structured according to the terms of agreement, viz., security, maturity and purpose. As regards
the purpose of the guarantee, as a general rule, Bank should confine itself to the provision of financial guarantees
and exercise due caution with regard to performance guarantee business.

No bank guarantee should normally have a maturity of more than 10 years. However, in view of the changed
scenario of the banking industry where Bank extend long term loans for periods longer than 10 years for various
projects, RBI has allowed issuance of guarantees for periods beyond 10 years. It is decided that the guarantee
with a maturity of more than 10 years may be issued only after prior permission of Credit Approval
Committees at Central Office (CAC-III and above). While permitting to issue such a guarantee with a maturity
of more than 10 years, the impact of very long duration guarantees on the asset liability management should be
considered.

Guidelines relating to conduct of guarantee business:

 For determining the amount of unsecured advances for reflecting in Schedule 9 of the published Balance
Sheet, the rights, licenses, authorisations, etc., charged to Bank as collateral in respect of projects (including
infrastructure projects) financed by bank should not be reckoned as tangible security.

 Bank, may however, treat annuities under build operate–transfer (BOT) model in respect of road/highway
projects and toll collection rights where there are provisions to compensate the project sponsor if a certain
level of traffic is not achieved, as tangible securities, subject to the condition that banks‟ right to receive
annuities and toll collection rights is legally enforceable and irrevocable”.

 Unsecured guarantees on account of any individual constituent should be limited to a reasonable proportion
of total unsecured guarantees of the Bank. Guarantees contain inherent Risks

 Precautions for averting frauds :

 At the time of issuing financial guarantees, it should be satisfied that the customer would be in a position
to reimburse the bank in case the bank is required to make payment under the guarantee.

 In case of financial guarantees, the details of the “designated bank account” for routing the transactions
shall be mentioned in the guarantee document.

 Branches/ Offices may grant non-fund based facilities including Partial Credit Enhancement (PCE) to those
customers, who do not avail any fund based facility from any Bank in India, subject to the following
conditions:

a. Branches / Offices shall ensure that the borrower has not availed any fund-based facility from any Bank
operating in India. However, at the time of granting non-fund based facilities, Branches shall obtain
declaration from the customer about the non- fund based credit facilities already enjoyed by them from
other Banks.

b. Branches / Offices shall undertake the same level of credit appraisal as has been laid down for fund -
based facilities. Credit information relating to grant of such facility shall mandatorily be furnished to
authorized Credit Information Companies

c. The delegation for sanction of such facilities shall be 50% of the usual delegation vested with respective
CACs at field level towards non-fund based limits. CACs at Central Office can sanction up to their
delegated powers.
d. In case of guarantees with 100% cash margin, the same to be sanctioned as per the usual Delegation even
if the same is to be issued on stand-alone basis.

 As per RBI guidelines BG /LC may be issued by scheduled commercial banks to clients of co-operative
banks against counter guarantee of the co-operative bank

 The verification of the guarantees is centralized at CO level by E –Confirmation Cell, CCM Department,
CO, Mumbai having email ecc@unionbankofindia.bank .

 In case of the guarantee of Rs.10 lacs and above, ECC will seek telephonic / electronic confirmation
from BG issuing Branch along with verification from Finacle. However, guarantee below Rs.10 lacs
will be verified from Finacle

 Confirmation of BG can be done by CM and in his/her absence by AGM/DGM in Credit Compliance &
Monitoring Vertical, Central Office.

 A mechanism is devised under which the inland bank guarantee issuing bank will be transmitting two
Cover messages – IFN 760COV and IFN 767COV to the designated Bank as requested by the applicant of
the Bank Guarantee through SFMS.

 Bank guarantees issued for Rs.50,000/- and above should be signed by two officials jointly.

 In case of branch where there is one signatory only, then guarantee for Rs.50,000/- and above only can
be issued after seeking prior approval from the Regional Office

 Bank is permitted to reduce the bank guarantee subject to following conditions:

1) Written request from the beneficiary for reduction in bank guarantee amount with concurrence from
the borrower and ensuring genuineness
2) Any such reduction in Bank Guarantee amount in CBS shall be authorized by the Branch Head
Only.
3) The concerned branch shall send a SFMS message for confirmation to the beneficiary’s Bank for having
modified the amount.
4) The borrower shall submit an acknowledgement of the amendment from the beneficiary.

 In some cases the beneficiary require bank guarantee in their format, different from the Model Form of
Bank Guarantee Bond. In such cases, the guarantee should be vetted by Bank’s legal officer or panel
advocate ensuring that there is no onerous clause including obligation of interest payment on guarantee
amount, even if it is backed by 100% margin.

 In regard to the guarantees furnished in favour of Government Departments in the name of the President
of India, any correspondence thereon should be exchanged with the concerned ministries/ departments
and not with the President of India.

 The initial period of the bank guarantee issued by Bank as a means of security in Directorate General of
Supplies and Disposal contract administration would be for a period of six months beyond the original
delivery period. Bank ay incorporate a suitable clause in the bank guarantee, providing automatic
extension of the validity period of the guarantee by 6 months.

 The Public Notice issued by the Customs Department stipulates that all bank guarantees furnished by an
importer should contain a self-renewal clause inbuilt in the guarantee itself

 The bank guarantee, as a means of security in the Directorate General of Supplies and Disposal contract
administration and extension letters thereof, would be on non-judicial stamp paper.
 A minimum margin of 50 percent has to be obtained while issuing guarantees on behalf of Share and
Stock Brokers/ Commodity Brokers, guarantees issued on behalf of commodity brokers in favour of the
commodity exchanges, registered with SEBI , in lieu of margin requirements as per the commodity
exchange regulations. Out of this 50 percent, a minimum cash margin of 25 percent is to be
maintained.

 RLCC-I and above can waive / sanction loans in their delegated power even without guarantee of
promoters – directors / designated partners where Credit facilities are extended to private limited
companies / LLPs.

 Where personal guarantee is considered necessary, the guarantee should preferably be that of the
principal members of the group holding shares in the borrowing company rather than that of the
director/managerial personnel functioning as director or in any managerial capacity.

 During the formative stages of a company, it may be in the interest of the company, as well as the bank,
to obtain guarantees to ensure continuity of management.

 Guarantees of State Governments could be obtained on merits and only in circumstances absolutely
necessary after thorough examination of the circumstances of each case, and not as matter of course.

 MCMR & Stock and Book Debts to be monitored in case of Non-fund based limits.

Other Stipulations

 In respect of Performance Bank Guarantee issued for implementation of the project, Branch to obtain
status of implementation of each such project on a quarterly basis.

 Guarantees should not be issued for the purpose of indirectly enabling the placement of deposits with
NBFCs and non-banking institutions .

 Other banks would be extending loans on the basis of the guarantees issued by our bank, the first charge
on the securities would be given to our bank. Here the security should be at least 100% of the guarantee
extended and the margin is at least 25% (minimum).

 Guarantee issued in favour of other Banks/FIs/Other Lending Agencies for the loan extended by them is
a financial guarantee and appropriate service charges applicable are to be levied.

 Guarantees in favour of other Banks / FIs and other Lending Agencies in aggregate shall not exceed the
Tier I capital of the Bank.

 Union Bullion Scheme is in place for sanctioning gold loan against guarantee issued by Schedule
Commercial Banks acceptable to bank.

 Exposures assumed by way of credit facilities extended against the guarantees issued by other Banks shall
be reckoned within the prescribed inter-bank exposure limits.

 The delegation of powers for issue of Guarantees in favour of Banks / FIs / other Lending Agencies and
lending against Guarantees of other Banks / FIs / other Lending Agencies shall be exercised by ZLCC and
above

 Quarterly review will also be undertaken by the Management Committee for the exposure undertaken
against the guarantees of other Banks / FIs and issue of Guarantees in favour of other Banks / FIs.
  ZLCC shall immediately report the approvals of credit limits sanctioned against the guarantees issued by
other Banks or the approvals for issue of Guarantees in favour of other Banks / FIs and Other Lending
Agencies to CCM Department at Central Office along with the process note for information.

 The draft of Deed of Guarantee shall be approved by the Legal Services Division at FGMO/RO for ZLCC
and Legal Services Division at Central Office for CACs.

 In respect of infrastructure projects, bank may issue guarantees favouring other lending institutions,
provided the bank issuing the guarantee takes a funded share in the project at least to the extent of 5
percent of the project cost and undertakes normal credit appraisal, monitoring and follow up of the
project.

 The total gross exposure (before margin) in credit contingents i.e. Letter of Credits and Bank Guarantees
shall not exceed 3 times of capital funds as per the last Audited Balance Sheet of the Bank or 30% of
the total advances as per last Audited Balance Sheet of the Bank, at the end of each quarter,
whichever is lower.

Bank Guarantee on behalf of Joint Ventures (JV) / Special Purpose Vehicle

(SPV)/Subsidiary :
 Requests for issuing bank guarantee on behalf of JV/ SPV/ Subsidiary shall be undertaken by earmarking
the BG limit of existing borrower.

 Guarantees on behalf of third parties cannot be issued. However, in cases where company submits bids
to secure large value projects in the names of JV/SPV/ Subsidiary to leverage the financial strength and
expertise of JV/SPV/ Subsidiary participants for such projects, the Bank Guarantees may be considered
on case to case basis.

 Delegation for sanction of such Bank Guarantee limit on behalf of JV/ SPV/ Subsidiary shall rest with the
ZLCC & above. However, ZLCC can sanction only A & above (+/-) rated accounts.

 Further, the parent company BG limit falling under the delegation of ZLCC will be sanctioned by ZLCC
itself and only JV related sanction / deviation should be sent to CAC:III and above.

 Bank Guarantee to JV/ SPV/ Subsidiary should be earmarked out of the main BG limit of parent company
and should not be more than 50% of the limit

 The borrower applying for BG should have participation in JV/ SPV/ Subsidiary i.e. at least 26% share in
JV/ SPV/ Subsidiary.

 Bank Guarantee to be issued only up to the extent of stake or share of our borrower in Joint Venture/
SPV/ Subsidiary.

 In case the BG is to be issued over and above the stake or share of our borrower, the same should be
given against the counter guarantee of Prime Bank or 100% cash margin to the extent of share of other
JV/ SPV / Subsidiary Partner. Relaxation to this clause may be permitted by CAC:III & above on case to
case basis.

 Escrow / current account of the projects for which BG has been issued on behalf of JV/ SPV/ Subsidiary
to be opened with consortium lender/our Bank. In case of sole banking escrow/ current account to be
opened with our Bank.
 Classification of Guarantees
Performance Guarantee: Any guarantee, which lays stress on due performance of contract or an obligation arising
out of the contract within a given time frame will constitute a PERFORMANCE GUARANTEE, though the non-
performance of the obligations results in payment of specified amounts as liquidated damages or refund of all
advance monies received for performance or such obligations with or without interest. Performance guarantees
are essentially transaction-related contingencies that involve an irrevocable undertaking to pay a third party in
the event the counterparty fails to fulfil or perform a contractual non-financial obligation. Instances of such
guarantees are as follows :
1) Bid Bonds
2) Guarantee in lieu of security deposits / Earnest Money Deposits
3) Guarantee on behalf of a manufacturing company in respect of supply/ performance of a product
4) Guarantee on behalf of a contractor for due completion of work
5) Guarantee in favour of Railways for due performance / licence fees / EPC contracts.
6) Export Performance Guarantee
7) Export Performance Capital Goods Guarantee
8) Warranties, indemnities and standby letters of credit related to particular transaction.
9) Performance bonds Guarantees
10) Retention Money Guarantees

Financial Guarantee : “Any guarantee, for discharge of only the pecuniary liability of a third party on
default, will constitute a FINANCIAL GUARANTEE”. Financial guarantees are direct credit substitutes wherein
a bank irrevocably undertakes to guarantee the repayment of a contractual financial obligation. Financial
guarantees essentially carry the same credit risk as a direct extension of credit i.e., the risk of loss is directly
linked to the creditworthiness of the counterparty against whom a potential claim is acquired.

Financial Guarantees are those which guarantee repayment of Debt. The examples of such guarantees are as
follows:

1) Guarantees for credit facilities;

2) Guarantees in lieu of repayment of financial securities;
3) Guarantees in lieu of margin requirements of exchanges
4) Guarantees for mobilization advance, advance money before the commencement of a project and for
money to be received in various stages of project implementation;
5) Guarantees towards revenue dues, taxes, duties, levies etc. in favour of Tax/ Customs / Port / Excise
Authorities and for disputed liabilities for litigation pending at courts;
6) Credit Enhancements;
7) Liquidity facilities for securitisation transactions;
8) Acceptances (including endorsements with the character of acceptance);
9) Deferred payment guarantees.
10) Guarantees issued in favour of Banks/FIs/Chit Funds undertaking repayment of advances/payment of
prize money.

Assessment of Guarantee

 Assessment of Letter of Credit requirement is based on the holding level and linked to Flexible Bank Finance
[FBF], requirement of Bank Guarantee (BG) limits by way of performance / EMD / Bid Bond etc. are
supplementary support to business and the same should not be factored within the FBF.

 BG requirements are integral part of support required by an enterprise. Most of the BG’s remain in a dynamic
state & hence the cash margin retained by banks comes back in the main stream of business cash flows within
a period of 12 months. Hence, margin under BG is treated as a part of current asset.

 As per extant guidelines, there are no prescribed norms for assessment of Bank Guarantee requirements,
other than that the same should be need based and assessed with the same diligence like assessment of Fund
Based limits.
 While assessing the LG requirement, various factors like the purpose of Guarantee, estimated quantum of
Contracts, estimated quantum of Tender amount in percentage terms of Contracts, estimated quantum of
Earnest Money Deposit amount in percentage terms of Contracts, estimated quantum of Mobilization
Advance, amount in percentage terms of Contracts etc shall be considered.

 At the same time the present outstanding under LG limit and the Guarantees expired/returned or due to
expire in the next year shall also be factored in the assessment of need-based requirement.

 BG in favour of courts / various other authorities, as security towards disputed liability, on behalf of the
constituents of the bank shall be issued generally on 100% cash margin basis.

Reversal of Expired Guarantees

 The liability under the guarantee should be reversed immediately on return of the original guarantee / letter
of discharge from the beneficiary.

 The liability under the guarantee should also be reversed immediately, if the payment of the same is made
on invocation, irrespective of whether the amount of the payment towards the claim amount is recovered
from the customer or not.

 Where the final validity period of a Guarantee (including the claim period) has expired without the Branch
receiving from the beneficiary any notice of default by the customer or demand for payment under the
Guarantee Letter, the Branch Officials should promptly request the customer to return the original Guarantee
Letter, together with all the amendments, duly cancelled or to furnish the Branch a letter from the
beneficiary confirming that the Bank stands discharged from all liability under the Guarantee.

 If such a Letter of Discharge is received through Post or furnished by the customer personally – instead of
returning the original Deed of Guarantee – the Branch Officials should formally write to the beneficiary
acknowledging receipt of the letter

 If the customer is unable to return the Guarantee Letter / Letter of Discharge from the beneficiary, despite
his efforts, the Branch should obtain from the customer a letter requesting the Bank to cancel the Guarantee
from his account. Customer has to confirm that he has completed all his obligations under the relative
contract as per terms and that neither there is any dispute on the subject with the beneficiary nor any
claim on him or against the Bank under the guarantee. Customer has to undertake that he continues to be
liable to the Bank notwithstanding the cancellation of the guarantee in the Books of the Bank, in the event
the beneficiary makes a claim on the Bank, in future.

 On receipt of the letter from the customer as above, the Branch Officials should write to the beneficiary by
Registered Post Acknowledgement Due, for either returning the original Guarantee or to send a Letter of
Discharge.

 If there is no response to the letter from the beneficiary 30 days after the Branch received back posted
acknowledgement due card evidencing delivery of letter, the Branch may reverse the relative liability in its
Books.

 Margin / securities held in respect of such Guarantees should not be released to the customers without
prior approval from the RLCC-I.

Invocation of Guarantee

 Where guarantees are invoked, payment should be made to the beneficiaries without delay and demur. When
such demand is made on the Branch within the validity period of the Guarantee, the Branch Officials must
 promptly honour the valid claim under the guarantee to the debit of the customer’s account if there is
sufficient balance/drawing power available or in the alternative to the debit of invoked Guarantee Loan
Account (DL004), irrespective of adequacy of margin/security or even failure of the customers to reimburse
the Bank for the payment made under the Guarantee, unless there is a prior judicial order to the contrary.

 Failure on the part of the Bank to honour its obligation after invocation of the guarantee attracts reputational
risk for the bank.

 The customer has to be put on notice that he is under binding legal obligation to reimburse the bank in
respect of the valid claim received under guarantee issued on his behalf.

 Immediately on the payment of the invoked guarantee, full details thereof should be furnished to the
controlling office

 The matter should be followed up with the customer till the amount is fully recovered together with interest
from the date of payment till full recovery of the amount.

 In case of Invoked BG accounts, the following operational guidelines has to be followed:

- Till the time borrower repays the invoked amount, debit freeze to the extent of invoked amount should be
made in the operative accounts (CC/OD/CA) of the borrower.
- Any debit transaction pending adjustment of invocation should be allowed only with the approval of
Regional Head.
- Ensure that the applicable interest is charged in the invoked accounts.
- No annual debit/credit to be allowed in the contingent office accounts related to Bank Guarantee
- CCM department to take up with DIT to disable menus for manual entries in the Finacle in respect of
transactions pertaining to realization of Bank Guarantees

 Any decision not to honor the obligation under the guarantee invoked may be taken after careful
consideration, at a fairly senior level i.e. Regional Head with information to sanctioning authority.
 Powers are delegated to the Regional Head (with information to sanctioning authority) so that delay on
account of reference to higher authorities for payment under the guarantee does not occur.

Guarantee Claim Period

 The standard BG contains the following terms :

Expiry / Validity period- Contract between debtor and creditor.

Claim period- Contractually agreed by creditor and debtor provides grace period beyond the validity period
to make a demand on the bank for a default which occurred during the validity period of the BG. A claim
period may or may not exist in the BG and guarantor has no role to play.

Enforcement period- Time period within which the creditor can enforce his accrued rights pursuant to a
demand made by him within the validity period or the claim period before a competent court of law.
This period is statutorily governed by Section 28(b) read with Exception 3 to Section 28 of the ICA. In the
absence of any such clause in the guarantee, the said period would be determined by the Limitation Act,
1963.

 In case of counter guarantee, following clause to be added in the Guarantee Bond: “This Counter
Guarantee will be continuing one and will remain in full force until Union Bank of India is finally
discharged of all liabilities under all or any one of such Guarantees and all subsequent renewal or
renewals thereof and have had the discharge confirmed in writing by the beneficiary/ies and received
the Original Guarantees and subsequent renewal or renewals thereof duly discharged”
 Transmission of Bank Guarantee through e-Stamping

 In view of the Digitization of Trade Processes, endeavors are being made for implementation of
“Automated E-Stamping system (AES)”.

 The ultimate goal of AES is to move to digital transmission of bank guarantee and do away with issuance
of paper based bank guarantee.

 This requires the beneficiary to either receive the network message or to accept “advice” from its bank
(i.e. Advising Bank / Beneficiary Bank) about the Bank Guarantee having been created and “advised” in
the banking system.

Co-Acceptance of Bills – Some Important Points :

 Co-acceptance in general terms, is a means of non-fund based import finance whereby a Bill of Exchange
drawn by an exporter on the importer is co-accepted by a Bank.

 By co accepting the Bill of Exchange, the Bank undertakes to make payment to the exporter even if the
importer fails to make payment on due date.

 The co-acceptance by the importer’s banker acts as a guarantee for the exporter for timely receipt of
proceeds from the importer.

 For the Bank, it is a non-fund-based exposure on the importer.

 While sanctioning co-acceptance limits to their customers, the need should be ascertained, and such
limits should be extended only to those customers who enjoy other limits with the bank.

 Only genuine trade bills should be co-accepted and the bank should ensure that the goods covered by
bills co-accepted are actually received in the stock accounts of the borrowers.

 Co-acceptances in respect of bills for Rs.10,000/- and above should be signed by two officials jointly,
deviation being allowed only in exceptional cases, e.g. non-availability of two officials at a branch.

 Before discounting/ purchasing bills co-accepted by other banks for Rs. 2 lakh and above from a single
party, the Branches / Offices should obtain written confirmation of the concerned Controlling (Regional/
Divisional/ Zonal) Office of the accepting bank and a record of the same should be kept.

 When the value of the total bills discounted/ purchased (which have been co-accepted by other banks)
exceeds Rs. 20 lakh for a single borrower/ group of borrowers, prior approval of the Head Office of
the co-accepting bank must be obtained by the discounting bank in writing.

 In the case of LCs for import of goods, branches should be very vigilant while making payment to the
overseas suppliers on the basis of shipping documents.The payments should be released to the foreign
parties only after ensuing that the documents are strictly in conformity with the terms of the LCs.

 In case of Devolved LC, same operational guidelines as applicable for devolved BG should be followed.
 Guidelines on Digital Lending
Digital lending leverages web platforms, mobile apps, and technologies like Artificial Intelligence (AI), Machine
Learning (ML), and big data analytics for authentication, credit evaluation, and loan processing. It streamlines
customer onboarding, risk assessment, and loan disbursement while reducing operational costs and enhancing
customer experience through features like Video-KYC and Aadhar-based KYC. Banks are adopting digital lending
to promote paperless processes, improving efficiency and financial inclusion.

The "Guidelines on Digital Lending" codifies policies and procedures, aligning with statutory regulations for all
domestic branches. The guidelines cover all aspects of digital lending, including customer acquisition,
engagement, and grievance handling. The Credit Policy and Risk Management Department (RMD) oversees the
guidelines, while operational aspects are managed by the Central Office. The guidelines will be updated as per
directives from the government, RBI, or IBA, and decisions may be taken swiftly by the Credit Risk Management
Committee (CRMC) in response to sector changes.

Roles and responsibilities of various stakeholders will be clearly defined, and processes will be refined to ensure
a smooth digital and manual loan journey.

Business Rules Engine (BRE)

The Business Rules Engine (BRE) manages decision processes using predefined logic for eligibility checks and final
approvals for loans or account openings. It enables precise decision-making, especially for complex dependencies
and frequent logic changes. BREs facilitate digital verifications and financial decisions traditionally handled
manually.

Main Uses of BRE:

 Preapproval/Prequalification: Identifies customers eligible for pre-approved digital lending products.

 Eligibility Checks: Assesses customer eligibility at the application stage for non-pre-approved products.
 Operational Checks: Confirms all required details and documents are submitted and checks for
duplicates before underwriting.
 Underwriting: Determines final approval after completing digital and financial due diligence.
 Limit Enhancement: Evaluates limit increases for existing loans.

Creation and maintenance of BREs for digital lending products are handled by the Digitization vertical in
coordination with respective credit verticals.

Back Testing:

 BREs will be tested quarterly/monthly for application and usability, with records maintained.
 The Digitization vertical will regularly monitor back testing and report findings to ED/MD&CEO.
 Audits will monitor loan sanctions, follow-ups, and recoveries from a digital perspective.
 Periodic system audits will assess BRE efficacy in digital loan sanctioning, with reports submitted to
ED/MD&CEO quarterly or more frequently.

Compliance with Existing Policies:

 All business verticals must comply with the Digital Lending guidelines.
 The guidelines of specific policies like Loan Policy, Real Estate Sector Policy, and others, which must also
be followed.
 Existing credit policies bind all digital lending products, with necessary deviations approved by CRMC.
 Digital Lending guidelines should be read alongside other Board-approved Credit Related Policies.
 The bank must adhere to Cyber Security, Information Security, Digital Payment Security, and Data
Governance policies, implementing controls per RBI/Cert-IN/NCIIPC directions for IT infrastructure and
digital products.
Regulatory Guidelines on Digital Lending:

 RBI issued guidelines on digital lending on 02.09.2022, based on recommendations from a working group.

Key Guidelines:

 Customer Protection: All loan servicing and repayment must go directly through the borrower’s bank
account, with no third-party involvement, except for specific regulatory cases (e.g., co-lending).
 Fees and Charges:
o LSP Fees: Paid directly by the bank to the Lending Service Provider (LSP), not charged by LSP to
the borrower directly.
o Penal Charges: Based on the loan’s outstanding amount and disclosed upfront.
 Disclosures:
o Annual Percentage Rate (APR): The full cost of the loan must be disclosed upfront. APR shall be
based on an all-inclusive cost and margin including cost of funds, credit cost and operating cost,
processing fee, verification charges, maintenance charges, etc., except contingent charges like
penal charges, late payment charges, etc.
o Key Fact Statement (KFS): Provided to the borrower before the loan contract, listing all fees,
charges, APR, and recovery terms.
o Digital Documentation: All key documents, such as KFS and sanction letters, must be digitally
signed and sent to the borrower’s registered email or SMS.
o Consent for Credit Limit Increase: Must be explicitly obtained from the borrower.
o List of LSPs: The bank must publish the list of Lending Service Providers (LSPs) on its website.
o Product and Recovery Information: Loan details and recovery agent information must be clearly
communicated to the borrower.

Grievance Redressal

 Nodal Officer: Bank and Lending Service Providers (LSP) must have a grievance redressal officer to handle
complaints. Contact details must be displayed on websites, DLAs, and in the KFS. Complaints should be
resolved within 30 days.
 Cooling Off Period: Borrowers can exit digital loans during a cooling-off period without penalty. The
period is a minimum of 3 days for loans of 7+ days and 1 day for shorter loans. Pre-payment must be
allowed without foreclosure penalties wherever applicable as per RBI guidelines.

Due Diligence for LSPs

 Bank must conduct due diligence on LSPs for technical abilities, data privacy, and conduct with
borrowers.
 Regular reviews and guidance for LSPs acting as recovery agents must ensure compliance with RBI
instructions.

Technology and Data Requirements

 Data Collection & Sharing: DLAs can collect data only with explicit borrower consent. They must not
access resources like files, media, or call logs without prior permission.
 Data Storage: LSPs/DLAs should store only minimal customer data (e.g., name, address). No biometric
data should be collected. All data must be stored on servers located in India.

Privacy Policy for Digital Lending App (DLA) and Lending Service Providers (LSP)

 DLAs and LSPs must have a comprehensive privacy policy in line with laws, regulations, and RBI guidelines,
accessible to the public.

Technology Standards
  Bank and LSPs must comply with RBI's cyber security standards for digital lending.

Regulatory Framework

 Reporting to Credit Information Companies (CICs): All digital lending must be reported to CICs as per
CIC regulations, including short-term and deferred payments. LSPs must comply with outsourcing
guidelines.
 Loss Sharing Arrangement: First Loss Default Guarantee (FLDG) arrangements must comply with RBI
guidelines, and synthetic securitization is prohibited.

Guidelines on Default Loss Guarantee (DLG) in Digital Lending

 DLG Definition: A contractual guarantee compensating for loan defaults up to a specific percentage of
the loan portfolio.
 DLG Provider Eligibility: Only LSPs/Regulated Entities (REs) incorporated as companies can offer DLG.
 DLG Structure: Must be backed by a legally enforceable contract, detailing coverage, form of guarantee,
and disclosure.
 Cap on DLG: DLG cover cannot exceed 5% of the loan portfolio.
 NPA Recognition: Bank must follow asset classification rules, and DLG cannot be offset against individual
loans.
 Tenor: DLG must remain in force for the longest loan duration.
 Disclosure: LSPs with DLG must publish portfolio details on their websites.

Due Diligence for DLG Providers

 Before entering a DLG agreement, banks must ensure providers can honor the guarantee and conduct
regular reviews.

Customer Protection

 Grievance redressal for DLG arrangements must follow digital lending grievance mechanisms.

Exceptions

 Guarantees under schemes like CGTMSE, CRGFTLIH, and NCGTC are not covered under the scope of DLG.
GUIDELINES ON CREDIT RISK MITIGATION TECHNIQUES
& COLLATERAL MANAGEMENT
 The Credit Risk Management Committee (CRMC) will be responsible for operational oversight of the
guidelines.
 RBI and Basel committee have also recognized the significance of eligible collaterals as a Risk Mitigation
technique, while determining the net credit exposure (Gross Exposure minus value of eligible collaterals)
for capital adequacy purposes.
 The term „Collateral Management Cycle‟ covers the entire process of evaluation and appraisal of collaterals
before acceptance, decision on acceptance or rejection and if accepted, creation of security interest,
insurance, monitoring and reappraisal/ revaluation of collaterals and finally, recovery in case of default or
release of collateral, on settlement of dues.
 To mitigate/reduce Credit Risk in an exposure, the following Credit Risk Mitigation techniques are pursued
by the Bank
- Obtaining Security
- Obtaining Guarantees
- Insurance Cover
- Prescribing Margins against security

TYPES OF SECURITY AND ACCEPTANCE CRITERIA

Primary Security- It is connected with and pertaining to the business of the borrower. It is usually an asset
created using the proceeds of the loan. E.g: Building constructed/purchased, stock of goods, book debts, plant
and machinery etc. inspection

Collateral Security- It is an additional or sub-ordinate security given, over and above the primary security or in
substitution thereof. It serves as an additional comfort to the bank for recovery of loans in default situations.

Acceptance of a security for credit decision shall broadly depend upon the Principles of adequacy, liquidity,
marketability, legality, enforceability and legal certainty of title.

As a matter of policy, Bank shall not accept collateral security in case of loans up to Rs 10 Lakhs extended to
units in the MSE sector.

Plant & Machinery should not be accepted as Collateral security. If at all Plant & Machinery is obtained as
collateral security, only the Written-down value (WDV) of the Plant & Machinery

Certain category of securities are treated as non-preferred collaterals even if it satisfies all the above principles,
based on past recovery experiences, legal prohibitions and difficulty in enforcing the rights of the bank.
- Land or buildings used for religious worship,
- Properties of political parties,
- Disputed properties, heavily tenanted buildings,
- Offices of government departments/ services,
- Sensitive / volatile commodities like acids, nuclear material, narcotic drugs, explosives, ozone
depleting substances,
- Mortgage of agriculture land for non-agriculture loans

FINANCE AGAINST WAREHOUSE RECEIPTS

i. Price of the commodity (same variety and comparable grade) prevailing in the local market /
nearest market. Or
 ii. Price mentioned in the warehouse receipt. Or
iii. Price communicated by Regional office. Whichever is lower

RELEASE OF SECURITY

Release of Security to be ensured within 15 days of closure of loan account under general circumstances.

Release of collaterals without substitution due to borrower request

For release of collaterals where collateral coverage is not getting reduced is approved by sanctioning authority.

Generally, release with collateral dilution is not entertained, If accepted, delegation is-

Delegation for sanction / review of Credit Delegated authority for release of collateral security
facilities
Branch/MLCC-I/II RLCC-II RLCC-I
RLCC-I ZLCC
ZLCC & CAC-III and above Respective Delegated Authority

SUBSTITUTION OF COLLATERAL

Substitution of the following collateral securities to be avoided as far as possible:

- Substitution of constructed property with open land.

- Substitution of Residential/Commercial property with industrial/agricultural property.
- Substitution of Financial Collateral(Bank deposits, securities issued by state and central government, NSC,
LIC Policy, Kisan Vikas Patra, Gold (jewellery), Bonds, Debt Mutual Fund units) with non-financial collateral
with less than 150% of value of the financial collateral.
In these cases delegation shall be as under:

Delegation for sanction / review of Credit Delegated authority for substitution of collateral
facilities security
Branch/MLCC-I/II RLCC-II RLCC-I
RLCC-I ZLCC
ZLCC & CAC-III and above Respective Delegated Authority

INSPECTION OF COLLATERAL SECURITIES

i. Branches shall follow the procedures that are outlined below:

ii. Periodicity – Physical Inspection of property shall be done prior to sanction of advances and also before
the disbursal of advance. Thereafter, securities also shall be inspected as per the extant guidelines.
Field Officials will not merely rely on Valuer’s Inspection/Report, but do the inspections independently
and send a Report to Competent Authority. All stocks, book debts and movable assets should be
inspected at least quarterly in case of standard accounts and more frequently in case of SMA and NPA
accounts.
iii. Fixed Assets inspection shall be carried out once in six months for primary security and once a year for
collateral security.
iv. However, in case of receipt of any information/development regarding possession/valuation of
property or any adverse opinion received on property, inspection of property must be carried out
immediately. Sudden decline in turnover in the account or any signs of sickness in the account also
requires alertness for verification of collateral.
 v. In case of 10 or more up to 20 collateral properties, Inspection charges to be levied 1.2 times the
prescribed charges. In case of more than 20 collateral properties, Inspection charges to be levied 1.5
times the prescribed charges.

OTHER GUIDELINES

Mutual Funds can be accepted as collateral subject to following conditions-

- Only Union Mutual Fund units to be accepted

- Investment in Debt oriented/Capital Protection funds or any such Non-equity oriented funds
- Schemes with Lock-in periods not to be accepted till completion of lock-in period
- Branch to periodically monitor/track NAV of the security and update the security value in Finacle on
monthly basis
- If value of the mutual fund investment goes below the initial investment value (negative growth), the
difference to be replenished by the borrower
- Else, DP to be reduced to maintain adequate level of collateral
- Minimum haircut of 10% to be applied on the NAV /repurchase price or market value, whichever is less
for valuation of collateral

Securities under the ownership of Educational Institutions and Hospital shall not be considered as collateral
security for any credit facilities.

Land or Building where Educational Institution / Hospital are located shall not be accepted as collateral security

Minimum 50% eligible collateral to be obtained for loan granted for construction/purchase of premises belonging
to Educational Institutes or Hospitals

Vetting of Documents:
- Documents for advances up to Rs. 10.00 Lacs to be vetted by Branch Manager/ advance Officer before
release of limit
- For Advances above Rs. 10.00Lacs and up to Rs.1.00 crores to be vetted by law officer attached to
RO/FGMO/ empanelled advocate
- For Advances above Rs. 1.00 crores to be vetted by empanelled advocates

Insurance: For all tangible assets provided as collateral other than those assets pledged to the Bank and kept
with the Bank, the collateral provider must have a comprehensive insurance cover with a regulated insurance
company (approved by IRDA). The insurance policy must be preferably assigned in favour of the Bank as loss-
payee. Generally, 110% of the value of security.

Key Man Insurance: Key Man insurance helps a business recover from the loss of its key human assets who are
instrumental to the viability and growth of the unit and the business may suffer in case of their unfortunate
demise. It could be the promoter, key stake holder or a skilled technical staff.

Due Diligence on supplier of the machinery to be carried out if the cost of any single machinery is above Rs.5.00
crore.

For Loan against insurance policies, margin & Loan amount to be fixed on surrender value.

Concentration risk arises where the bank obtains similar collateral assets from a number of borrowers/third
parties and/or consistently receives the same assets. The aggregate pool of collateral may be unduly
concentrated in particular issuers, sectors, asset classes or same location.
Correlation risk arises when a borrower/third party delivered collateral assets are highly/adversely correlated to
borrower‟s credit performance/quality itself. Eg: Obtaining guarantee from parent company whose credit
worthiness/ value is dependent on the borrower, obtaining security of a company whose cash flows depends on
the borrower.

Collateral coverage is to be calculated at NRV instead of FMV

 Valuation of Land & Building and Plant & Machinery charged – both primary and collateral minimum/
regularly once in 3 years as per extant guidelines.
 Fixed Assets inspection shall be carried out once in six months for primary security and once a year for
collateral security.
 As per the present guidelines, any official required by the Branch Head shall carry out the inspection of
property. Property worth Rs. Five cores and more shall be inspected by the Branch Head i.e. Branch
Manager / Chief Manager / Asst. General Manager. An Officer in Scale IV and above may carry out
inspection where Dy. General Manager is the in-charge of the Branch.
 The bank shall obtain DBC (New No. SD-22) has to be obtained from the Borrower on half-yearly intervals.
Composite DBC (New No. SD-23) for Debts & Securities duly filled in and duly signed by Borrowers and
Guarantors may be obtained once in a year within the validity of original/prior security documents.

GUIDELINES ON STOCK AUDIT

SCOPE OF STOCK AUDIT COVERAGE & APPLICABILITY:

 Accounts with working capital limit (in the form of fund based and non-fund based working capital limit) of
Rs.3.00 crores and above in case of proprietary/ partnership accounts and limits of Rs. 5.00 crores and above
in other cases shall be subject to stock audit on yearly basis.

 Following category of loan are excluded for Stock Audit:

- Loans granted to Central Government Bodies/State Government Bodies and its PSUs.
- Working capital Loans granted where primary securities are not in form of stock and book debts e.g. loan
sanctioned against our Banks deposits/Insurance Policies etc.
- In case of any instances of waiver by appropriate authority (as defined in policy)

 RBI has mandated that with a view to bringing down the divergence arising out of difference in assessment
of the value of security, for NPAs with balance of Rs. 5 crore and above, conduct of stock audit at annual
intervals by external agencies would be mandatory, in order to enhance the reliability on stock valuation.

 NPAs where “Holding on Operations” is permitted, with Working Capital limits as per threshold defined in
policy where the primary security is in nature of stock and/ or Book Debts, the same shall fall under the
purview of Stock Audit.

 In exceptional cases like early warning signals/suspected diversion of funds/suspected depletion of stocks
etc, Stock Audit may be conducted for the working capital limits below the above threshold limit also on the
specific direction of the RH in case of need for accounts with branches under respective jurisdiction.

DEFINITION OF LIMITS
 Fund Based limits: Fund Based Limit includes all types of Working Capital Limits sanctioned such as Cash
Credit (Stock), Cash Credit (Book Debts), Cash Credit (Both Stock and Book Debts), Term Loan / Demand Loan
(For Working Capital purpose), Bill limits, Packing Credit Limit, Cash Credit(Pledge) etc.
 Non-Fund Based limits: Non-Fund Based Limits sanctioned for Working Capital purposes such as Bank
Guarantees, Letter of Credit for the supply of goods on credit terms.

Advances under Consortium / Multiple Banking arrangement:

- In case of advances coming under Consortium Banking arrangement, the Bank may fall in line with the
Leader of the Consortium or Highest lender, as the case may be.
- In consortium advances where our Bank is the lead Bank, the stock audit shall be carried out by our Bank.
- In case of multiple banking arrangements, the sanctioning authority is empowered to accept the stock
audit report of the other Banks of multiple banking arrangements.

TIMELINES RELATING TO STOCK AUDIT:

 The Stock Audit should be completed within 30 days from the date of assignment to the Stock Auditor as per
the schedule given below.

- The stock auditors have to give their consent within 7 days of the receipt of intimation of empanelment.
The date of consent will be reckoned as date of assignment.
- Commencement of Audit work – Within 15 days from the date of assignment.
- Conclusion of Audit – Within 10 days from the date of commencement.
- Submission of Audit Report – Within 5 days from completion of Audit.
- Condonation of any delay in above timeline is to be done by RH on merits of the case.

 On receipt of stock audit report, Branch should ensure rectification of reported irregularities and submit COR
to Regional Office. For all eligible accounts pertaining to MCBs/LCBs, branch should ensure rectification of
reported irregularities and submit COR to respective MCV/LCV verticals directly. In any case, the entire
exercise has to be completed by 31st March of every financial year.

GUIDELINES FOR EMPANELMENT OF STOCK AUDITORS

 The applicant should be a qualified Chartered Accountant / Cost Accountants or a firm of Chartered / Cost
Accountants registered with Institute of Chartered Accountants of India/ Institute of Cost Accountants of
India.
 The applicant should have post qualification practicing experience of at least 3 years in different types of
industry/ sectors. In case of Firm etc, the individual experience of the any partners etc of at least 3 years
can be considered.

 There must be minimum 2 trained/Semi trained employees/ Trainees/Apprentices besides a Chartered

Accountant/Cost Accountant.

 Any disciplinary action should not have been taken by governing institute/statutory authorities/RBI/IBA etc
against the Chartered Accountant /Cost Accountants or the concerned firms.

 The tenure of the empanelment shall be for 3 years from the date of empanelment.

MISCELLANEOUS POINTS:
 If the Stock Auditor engages the services of a Chartered Engineer who is registered with The Institution of
Engineers (India), such engineers should possess special knowledge / practical experience about the stock/
product such as coal, minerals, chemicals, oils etc., in which the borrower is dealing with. Before engaging
the services of such outsourced personnel, permission of Regional Head (RH) is needed.
 In case Agencies for Specialized Monitoring (ASM) is appointed in an account and all aspects of stock audit
are included in the scope of work assigned to ASM, separate stock audit from empanelled stock auditors may
not be insisted upon.
 Stock Audit should be conducted for the eligible borrowal accounts once in a year. However, in case of any
Early Warning alerts/signals in any account of branches under RO, RH is authorized for conducting of stock
audit in the intervening period also.
 Payment of fees for the services rendered by Third Party Service Provider (TPSP) as in case of Stock Audit
will be borne by the borrower for whom the stock audit will be done.
 It should be ensured that the stock auditor does not have a direct or indirect interest in business of the
borrower.
 It should be ensured that the report has commented on the timely submission of stock/Book Debts statement,
MSOD, QPR, Half year operating/Fund Flow statement etc, as per its applicability to the credit facility, by
the borrower.
 It should be ensured that the stock audit report contains the details of Direct Balance Confirmation from top
10 debtors of borrowers with exposure of Rs.5.00 cr and above.
 Delegation for waiver of Stock Audit shall be vested with next higher authority up to ZLCC. For the proposals
falling under the delegation of Credit Approval Committees at Central Office, delegation for waiver of stock
audit shall be vested with respective CACs.
 Discretion of assigning Stock Audit for an account is vested with Regional Office.

Policy on Techno Economic Viability (TEV) and

Empanelment of External Engineers/ Firms for TEV
Study / Lenders Independent Engineers (LIE)

Latest Policy was circulated by Credit Policy, Risk Management Department, Central Office vide Instruction
Circular no. 04546-2024 dated 30.01.2024. This Policy also encompasses the Policy on Stock Audit, Valuation of
Properties, Engagement of Collateral Management Agency. Further operational guidelines for all these policies
were circulated vide Instruction Circular no. 04552-2024 dated 31.01.2024.

Background :
One of the reform agenda under EASE is to set up an In-house Techno Economic Viability (TEV) cell by deploying
specialist employees across technical financial and legal domain. Accordingly, TEV cell under Credit Compliance
and Monitoring Vertical is formed at Central office.

The main objective of TEV Cell in the Bank is to ensure continuous growth in the loan portfolio, keeping the
assets secure, performing, standard, improving Turn Around Time (TAT) and increasing the Fee-based income of
the Bank. For the following functions expert of specialist agencies is required :

 To fund large projects especially in the infrastructure sector expertise of specialist agencies is required to
assess the Techno Economic Viability
 Vetting the project cost and monitor the progress of the project vis-à-vis the Program Evaluation and
Review Technique (PERT) Chart

TEV study is a pre-sanction diligence process and compiling Lender Independent Engineers report is a post-
sanction monitoring tool for large projects.

Scope of TEV Consultants/LIE’s Role Functions :

To carry out Techno Economic Viability (TEV) Study by TEV Consultant based on factors, some are detailed below
:
 Nature of product, Use of Product, Demand/Supply & Gap position global as well as local
 Qualification, Means and Experience of the Promoters and their due diligence
 Government restrictions/policies, statutory clearances
 Cash flow statements over the last 2 years and financial indicators viz. DSCR, IRR & Breakeven point.
 To vet the cost of various components of the project & comment on reasonableness of various components
of the project.
 To monitor the progress of the Project on an ongoing basis in terms of time schedule as well as cost angle,
physical progress vis-à-vis availment of credit facilities

 Before Financial closure that includes :

1. Project Review & Assessment ,Project risk and risk mitigants

2. EPC (Engineering, Procurement and Construction) contracts and permits, terms and schedule.
3. Long term agreements like Fuel Supply Agreement (FSA), Power Purchase Agreement (PPA), Operational
& Maintenance (O&M) etc.
4. Verification of cost incurred, value of asset created, whether P&M acquired/installed are new/second
hand, residual life of created asset, etc.

 During Implementation Stage includes :

1. Periodic review of construction schedule
2. Review of compliance of EPC contract and permits
3. Monitor progress of the project with respect to the schedule and reasons for delay (if any) and corrective
action taken (if any), etc.

 Performance Testing: R&R (Repairs and Renovation) programmes environmental and other statutory
clearances and progress

 Annual Operational Review

1. Regular plant audit, maintenance cost and actual – review of amount and major maintenance budgets
2. Outage reports in power project
3. Reviewing all major fixed and variable cost

 To ensure achievement of DCCO

 In case where LIE is appointed by Union Bank LIE to verify and comment on the defined aspects (as applicable)
in addition to the existing areas, Some aspects are :

a) Periodic review of construction schedule

b) Review of compliance of EPC contract and permits
c) Contract amendment and modification orders
d) Comments on margin contribution by promoter/ borrower.
e) Fund/equity infusion vis-a-vis project progress.
f) High value Vendor due diligence, Market values vis-à-vis invoice Price.
g) Technological obsolescence and substitution measures, etc.

 Identification of the key risk parameter with risk level (like High, Moderate and Low) is the success factor
for Techno Economic Viability of the Project. Based on the Project Appraisal Report prepared by the
TEV Cell, Sanctioning Authority may take suitable decision based on the mitigants available on
these key risk parameter.

 The TEV Cell is not empowered to sanction / decline any proposal or to stipulate any condition. TEV Cell
can only highlight their opinion/ concern under the head Risk Analysis and TEV Cell Comment. The opinion
shall be recorded based on the available information / experience in the industry, market demand, peer
group comparison, etc.
Eligibility criteria for TEV and LIE study :
 Techno Economic Viability Study (TEV study) is conducted by Bank’s empanelled Third Party Services
Providers (TPSPs) in case of project finance where union bank’s exposure in respect of fresh Term Loan is
Rs.25 crores & above (excluding working capital if any) or cost of the project (availing Term Loan) is
Rs.50 crores & above.

 Lender’s Independent Engineers (LIE) is employed wherever Bank’s total exposure by way of Term Loan is
Rs.25 crores and above or cost of the project financed through Term Loan is Rs.50 crores and above to
evaluate the progress of the project and assessing the amount invested, compliance of sanction norms, etc.

Techno Economic Viability (TEV) Cell:

For fresh term loan, preparation of Project Appraisal Report/Vetting Report is done at TEV Cell at CO/ ZO on the
basis of quantum of Term Loan from our Bank and Total Project Cost.

ZO TEV Cell :

 Project Appraisal Report, Vetting Report shall be applicable for the Project Loans with Fresh Term Loan
(excluding Working Capital) of above Rs.2.00 crores emanating from branches in Major A class cities and
above Rs.1.00 crore in other cities and up to Rs 75.00 crores for CGM Headed Zonal Offices and up to Rs
50.00 crores for GM Headed Zonal Offices

 Project Appraisal Report/ Vetting Report is prepared by Technical Officer at ZO TEV Cell irrespective of
quantum of Project Cost and is governed based on Account wise limit not as Group
 wise facility

 Project Appraisal Report shall be prepared based on Internal Assessment for Industries such as manufacturing
or processing or production or preservation of goods and services sector like Warehousing (excluding Dairy/
Poultry/ Rural warehouses & Godown / Cold Storage) where in fresh TL sought is below Rs.25 Crores from
Union Bank or Project cost below Rs.50 Crores.

 For agricultural proposals like project loans coming under Dairy / Poultry / Rural Warehouse / Cold Storage
and other related activities for exposure of Rs. 25.00 Crore and above, PAR / Vetting Report needs to be
prepared by TEV Cell in addition to extant credit dispensation process followed by Agri Business Department.

 Technical Inspection for Working Capital Loans may also be carried out by the respective sanctioning
authority with prior approval from TEV Cell, CO.

 For manufacturing units, in the event of enhancement of Fund Based Working Capital facility of beyond 20%
for the borrower having fund based Working Capital Facility of Rs. 5.00 crores and above, Technical
inspection may be carried out by Technical Officer without any prior permission from CO TEV Cell

 On achieving DCCO Banks Technical officer to conduct inspection in all project loans with Fresh Term loan
(excluding working capital) of above Rs 2.00 crores emanating from branches in Major A class cities and above
Rs 1.00 crore in other cities.

CO TEV Cell : Beyond the aforesaid limits, all Project Appraisal Reports/Vetting Report shall be prepared by
Central Office, TEV Cell based on the TEV Report from the empanelled TPSPs/ Detailed Project Report(DPR)/
Information Memorandum (IM)/ Project Appraisal by other lenders.

Selection Criteria for LIE/TEV Consultant:

 Educational Qualifications :
 I. BE/[Mechanical, Electrical, Civil, Electronic/Telecom, Textile, Chemical] or equivalent educational
qualification
II. M Tech from a recognized University in India &/ or abroad
III. Additionally for TEV, Professional qualifications in finance e.g.CA, CS, ICWA, MBA etc from a recognized
University in India and/ or abroad is required.

 Membership of Professional Body (Proprietor/Partner/Director): Registration under Companies (Registered

Valuers and Valuation) Rules, 2017 (for Land & Building or Plant & Machinery) for which Insolvency and
Bankruptcy Board of India (IBBI) is the responsible authority, will be preferred for empanelment.

 Experience : Minimum 5 years experience as TEV / LIE consultants, The TPSPs should be on the approved list
of at least 2 Public Sector Banks.

 Infrastructure : In case of public limited company, minimum 3 Professional Directors with experience as
above and Professional Directors should not be less than 50% of total directors.

 Other Requirements :

I. In case of proprietorship, the proprietor should have the requisite qualification, membership and
experience
II. In case of Partnership Firm / Private Limited Company / LLP, at least one partner / director should have
the requisite qualification and experience
III. Entity, Proprietors, Partners and Directors should not have been blacklisted, caution listed with IBA by
Bank (s) / FIs or statutory bodies.

Tenure of Empanelment and Fees structure:

 The tenure of the empanelment shall be for three years from the date of empanelment.

 The Bank also carry out periodic review (generally once in a year or issue of new lists whichever is earlier)
to deal with additions / deletions to the existing list of empanelled service providers

 The Bank reserves the right to remove any individual / firm / company from the panel any time after giving
15 days notice even before completion of 3 years.

 The payment of fees for the services rendered by TPSP will be borne by the client for whom the consultancy
work will be done, the Bank should directly pay the fee to TEV / LIE consultants by debiting the account of
the borrower in case of sole banking.

Empanelment & Depanelment Procedure:

 Regional office to submit their recommendations for empanelment of LIE/TEV TPSPs as per the prescribed
format to MSME, CO. ZO shall scrutinize the applications received from Regional office and provide their
suggestions to MSME Department, Central office.

 To have arms length distance and better corporate governance TEV/LIE empanelment is undertaken by
MSME, CO and not by TEV, Cell – CCM, CO.

 The responsibility of Empanelment / Re-empanelment / removal / annual review of the TPSPs / Resolution
of conflicts with TPSPs is vested with Committee headed by CGM/ Vertical Head. The members of the
Committee headed by CGM/ Vertical Head would be as under:
a) CGM/ Vertical Head – MSME (Chairperson)
b) GM/ Vertical Head – MCV
c) General Manager (GM)/ Vertical Head – Structured Finance and LC
 d) Chief Law Officer/ GM/DGM – Law
e) GM/ Vertical Head – Recovery
f) GM/DGM (Credit) –MSME

 The Quorum for this committee is minimum 3, where presence of CGM/ Vertical Head (MSME) and Chief Law
Officer/GM/DGM –Law (in his absence GM – Recovery) is mandatory

 The Convenor for the meeting is General Manager/ Deputy General Manager (Credit) - MSME.

 Frequency of the meeting shall be need based with minimum once per year. If there is any deviation with
respect to eligibility criterion, the delegated authority for empanelment for such TPSP will vest with CAC-
II.

 On empanelment, the respective Regional Offices shall circulate to all the Branches under their geographical
jurisdiction (including Wholesale Banking Branches & DGM Headed Branches, if any) the particulars of LIE/TEV
study firms

 It will be the duty of Regional Office (In case of MCB/IFBs, respective Branch Heads) to immediately bring
it to the notice of MSME Department, Central Office under a copy to ZO, any non- adherence to the code of
conduct prescribed for TEV / LIE

 In case removal of TEV / LIE on account of unfair practice, with the permission of Committee headed by
CGM/ Vertical Head , IBA should be informed to place the subject name in the IBA’s Caution list of Third
Party Entities (TPEs) by MSME Department, Central office.

 In cases of frauds being informed , MSME Department after taking permission from Committee of CGMs will
recommend these names to RMD, Central Office (convener of Empowered Forum)

 Empowered Forum (Committee under RMD) shall examine the role of TPE in fraud and decide whether the
TPE shall be put on the Caution list.

 Any TEV/LIE valuer depanelled shall not be reappointed for a further period of 5 years from the date of
depanelment.

Organisation Structure of TEV Cell

 The TEV Cell shall have a lean structure proposed to be headed by GM/DGM at Central Office and Senior most
Technical Officer, preferably in the rank of Chief Manager at Zonal Office , TEV Cell.

 The TEV Cell at ZO is headed by the Senior most Technical Officer of the Zone, preferably in the rank of
Chief Manager

 TEV Cell at Central Office is headed by GM/ DGM and assisted by DGM/ AGM with a team of specialized
officers from Credit/ Technical/ Legal/ Finance fields.

 CGM, CMCC will oversee the functioning of the TEV Cell.

 All the Technical Officers of the Bank shall be under the purview of TEV Cell at Central office.

 Transfer/ posting of Technical officers to be done by Human Resource Department only with the concurrence
of CGM/ GM, Credit Monitoring & Credit Compliance, Central Office.

 The services of Technical officers can be utilized for other activities only after obtaining prior permission of
TEV Cell at CO.
Process flow at TEV Cell

Central office, TEV Cell

 For new borrowal accounts, the Credit verticals at Central Office would refer to CO, TEV Cell for preparing
Project Appraisal Report upon PIM approval at the NBG Meeting

 For existing borrowal account for Project Finance (excluding Working Capital), LCB / MCB/ MLP and other
Branches through FGMO shall issue mandate to CO, TEV Cell for preparing Project Appraisal Report at the
time of taking up the proposal.

 Minimum 20% of the applicable project appraisal charges to be collected from the party upfront, which
will be non-refundable in nature.

 Final Project Appraisal Report shall be released by the TEV Cell within a period of 2-5 working days from the
date of receipt of complete information from the company.

 The report shall be treated as Private & Confidential and is to be used for internal purpose only. However,
in the event of sharing the report with borrower/ other lenders, the report may be shared by taking additional
fees as defined by incorporating suitable Disclaimers.

ZO, TEV Cell

 For new borrowal accounts, the credit proposals falling under the delegation of MLP/RO/ ZO shall be assigned
to FGMO, TEV Cell for preparing Project Appraisal Report upon PIM approval at the NBG Meeting

 For the Project Appraisal falling under FGMO, TEV report from empanelled engineers/firms may be obtained
in special cases (for the Project Loan below Rs 25.00 crores from our bank OR Project Cost below Rs 50.00
crores), subject to permission from the respective Sanctioning Authority.

Empanelment of Industry Experts/ Domain Experts – IMPORTANT POINTS :

 Services of Domain / Industry Experts shall be utilized where the Project Appraisal Report is prepared without
relying on TEV report from external TEV agency.

 In exceptional cases where the TEV study report is obtained from Bank’s empanelled engineers/ Firms and
Project appraisal report is prepared by TEV cell at CO, the services of Industry Experts/ Domain Experts may
also be utilized for vetting the key parameters.

 The Industry Expert/Domain Expert should have minimum experience of 10 years as employee/ in-charge
in the specific industry.

 The appointment will be non-exclusive basis.

 The experts/ consultants shall be evaluated as per the matrix provided as per the format and minimum % of
marks for empanelment shall be 65%.

 The Committee for selection of Domain expert shall be empowered to select the experts. The period of
empanelment shall be valid for 2 years subject to annual review.

 TEV Cell at CO shall oversee and monitor the evaluation and empanelment exercise of Domain/ Industry
Experts. The database and MIS of empanelled consultants shall be under the purview of TEV Cell at CO.

 Selection Committee for empanelment of Domain / Industry Experts:

 a) CGM/Head, CMCC (Chairperson)
b) CGM/Head, LCV
c) CGM/ Head, MSME
d) CGM/Head, MCV
e) GM, CMCC (overlooking TEV Cell)
f) DGM/ Head, Law
g) GM Recovery/ DART
h) In-Charge CO TEV Cell

 The Quorum for this committee is minimum 3, where presence of CGM/Head (CMCC), CGM/ Head (LCV) and
DGM/Head (Law) is mandatory.

 The Convenor would be DGM/ AGM posted at TEV Cell at Co. Frequency of the meeting shall be need based
or minimum once a year

Other Significant Points to be Remembered :

 Under Multiple Banking arrangement, if the TEV study is conducted by any Bank through TPSP who is not on
our Bank’s panel, the said TEV report may be accepted provided that the Bank has also participated as a
lender for the proposed project.

 TEV/LIE report compiled by TPSP who is not on the panel of our Bank, can be accepted by CAC-II and above
on case to case basis. Further, in such cases, a satisfactory report of TEV cell of the Bank shall also be
obtained.

 Delegation for waiver of TEV / LIE study from TPSPs for accounts up to ZLCC shall vest with CAC-III.

 For accounts at Central Office, the delegation for waiver shall rest with respective CACs at CO.

 Relaxation/Exemption for TEV Study :

a) For the Project Loan backed by guarantee from Central Govt/ State Govt.

b) Corporate Loans/ STL/ WCTL where financing does not involve any specific project

c) Fresh Term Loan is proposed for the following purpose :

1. Regular CAPEX programme Modification/Addition/ alteration of Machineries for normal wear & tear which
shall be repaid by existing level of cash flows, sufficient for repayment.
2. Developing Captive Power Project where repayment can be arrived based on Cost Benefit Analysis (i.e.
comparison between savings of operational expenditure and Cost of Capital Expenditure)
3. Increment of Term Loan for fresh project is not more than 10% of existing TL outstanding.
4. In the event of Takeover of the project loan, Project Appraisal is not mandatory since takeover is to be
done after DCCO which indicates technical and economic viability of the project is already established.
However, Project Appraisal report shall be prepared for takeover of project loan in case the takeover
is done before completion of DCCO.

 Waiver of preparation of Project Appraisal Report by TEV Cell

 For the credit proposals falling under delegation of CAC – II and above by the respective Sanctioning
Authority
  For the proposals falling under the delegation of CAC III, the limit may be sanctioned by the respective
Sanctioning Authority after recording proper justification and subsequently permission needs to be
obtained from the next higher authority, i.e. CAC - II.

 Indicative scenarios for exemption / relaxation for Project Appraisal from TEV Cell CO are as below:

1. External Credit rating A+ family and above.

2. Internal Rating UBC-1, 2 & 3
3. Existing borrower having established track record and going for expansion of the project in the similar
line of activity

 A maximum of 15 working days time shall normally be given to the external engineer / firms for TEV/ LIE
study. Maximum time for TEV/ LIE study will be mutually decided by the external engineer/ firms and Branch
depending upon the nature of TEV/ LIE study

 Under following circumstances, detailed Project Appraisal Report continued to be prepared by the TEV Cell:
A) TEV report submitted by the TPSPs not empanelled by our bank OR
B) TEV Consultant has been appointed by the Borrowal company [including our empanelled TPSPs] OR
C) TEV Consultant is appointed by other member lenders where final appraisal note from the lead lender is
awaited.

 All the Project Appraisal report shall be valid for a period of 6 months from the date of release based on the
underlying assumptions made in the report

 All the Technical officers working under FGMO, TEV Cell shall report to In-charge, FGMO, TEV Cell and submit
weekly/ fortnightly report on the progress of the Project.

 FGMO, TEV Cell shall be single point contact for the respective Zone regarding the progress of the Project.
FGMO, TEV Cell shall submit consolidated report to CO, TEV Cell, fortnightly

 The administrative control of the TEV Cell at FGMO, shall vest with the respective Nodal officer, i.e. CMCC,
In-Charge /Deputy Zonal Head, FGMO as the case may be

 CGM, CMCC shall monitor the progress of the TEV Cell to develop Industrial Experience and skill set
required for conducting project appraisals based on In-house TEV report

Fees Structure :
Delegation on concession in Project Appraisal Charges/Vetting Charges

Particulars CAC-I headed by CAC-II headed by CAC-III headed ZLCC headed by

MD&CEO ED by CGM CGM/GM

Delegation for Up to 100% of Up to 75% of Up to 25% of Up to 10% of

concession in normal fees normal fees normal fees normal fees
Schedule
of
Fees

Any modification will be approved by the Board

Fees Sharing with TEV Consultants / Industry / Domain Experts

Project Cost TEV Consultants Industry / Domain Experts

Up to Rs 100.00 Max Rs 2.00 lakh subject to maximum of 25% Max Rs 0.50 lakh subject to
Crore of the approved appraisal Fees receivable maximum of 10% of the approved
from the company Appraisal Fees receivable from the
company

Above Rs. 100 Max Rs 2.50 lakh subject to maximum of 25% Max Rs 1.00 lakh subject to
crores upto of the approved appraisal fees receivable maximum of 10% of the approved
Rs.250 crores from the company Appraisal Fees receivable from the
company

Above Rs.250 Max Rs 4.00 lakh subject to maximum of 25% Max Rs 1.50 lakh subject to
crores upto Rs. of the approved appraisal fees receivable maximum of 10% of the approved
500 crores from the company Appraisal fees receivable from the
company

Above Rs.500 Max Rs 7.50 lakh subject to maximum of 25% Max Rs 2.00 lakh subject to
crores of the approved appraisal fees receivable maximum of 10% of the
from the company approved appraisal fees receivable
from the company

The CGM, CMCC CO is empowered to grant permission for payment of fees to TEV

Consultants / Industry/ Domain Experts up to 25% over and above the aforesaid fees. However, any excess over
and above the maximum stipulated Appraisal Fees shall be borne by the borrowal company.

Way Forward
ZO TV Cell : In-house skill set and expertise shall be developed in order to carry out Project Appraisal Report
based on In-House TEV Study for the fresh Project Loan up to Rs 50.00 crores OR project Cost up to Rs 100.00
crores irrespective of the industry

CO TV Cell : After garnering sufficient experience and expertise, Project Appraisal report shall be prepared based
on an In-House TEV study for term loans with exposure beyond Rs 50.00 crore OR Project Cost beyond Rs
100.00 crores after vetting by Domain/ Technical Experts wherever necessary.

POLICY ON VALUATION OF PROPERTIES AND

EMPANELMENT OF VALUERS 2024-25
Valuation in a broad sense means assessing the worth of something which may be tangible assets or
something intangible like goodwill.

The policy on Valuation of Properties and Empanelment of Valuers is broadly dividedinto 3 parts:

 Part I: Policy dealing with valuation of properties and empanelment of valuers other than
those required under Companies Act, 2013.

 Part II: Policy dealing with valuation of properties and empanelment ofvaluers those
required under Companies Act, 2013.
  Part III: Other Matters

Part I:

Purpose of Valuation and Appointment of Valuers Is Done

 To ascertain the value of the property offered as security

 To periodically ascertain the value of the asset that has been mortgaged

 whether it is increasing or decreasing over the mortgage period

 To realize the value of non-performing assets (NPAs)

 Redemption of properties in cases of default

General guidelines on Valuation

 The valuation should always be got done by an empaneled independentvaluer.

 All the necessary documents should flow directly from the branch to the valuer & vice versa without
routing the same through the borrower/guarantor concerned.

 The Valuation Report to be submitted by the valuers should be strictly as per prescribed Bank
formats.

 In valuation report, Branch officials make a comment on “fair and reasonable market value” which
should not be construed as “Fair Market Value” of the property. The Branch official to use their
judgment for ascertaining the fair and reasonable value of the property.

 For credit limits up to Rs.10.00 lacs, the valuation of property, offered only as collateral
security, should be made by the Bank Officials themselves and details of such valuation
should be incorporated in the simplified format
 However, this is not applicable for valuation of property, which is primary security even if credit
limit in such account are upto Rs.10.00Lacs. The task of valuation in such cases should necessarily
begot carried out through empaneled valuers only.
 Branch should verify the correctness of the valuation by makingindependent verifications with
respect to the valuation and certify to that extent in the valuation report itself as per certificate
given in specified formats.
 Two independent valuations are to be obtained from the panel valuers in cases where the value
of any particular property is Rs.5.00 crores and above. This condition applies when any individual
(single) property value is Rs.5.00 crores and above. In such a case thevalue which is lower as per
report to be taken into cognizance.
 Properties mortgaged / Fixed Assets hypothecated are to be gotrevalued at least once in 3 years.
Further, the net realizable value shallbe reckoned for determining the value of security. The value
 of securities shall be updated in Finacle as per the latest valuation report(not older than 3 years).
 The revaluation of property by same valuer may be permitted in case of NPA accounts by RLCC:I &
above on case to case basis after recordingproper justification.
 Valuers to include photograph of owner with the property in the background, in the
report submitted to Branches for all property (ies). In case owner is not available his/her
representative may be considered for obtention of photograph.
 Valuers to mention longitude/latitude and co-ordinates of the properties valued in the valuation
report for easy identification of theapplicable primary/collateral securities.
 Screen shots (in hard copy) of Global Positioning System (GPS)/VariousApplications (Apps)/Internet
sites (e.g Google earth)/etc., is to be included in the valuation report.

 Reference of at least two latest deals/transactions with respect to adjacent properties in the
areas will have to be mentioned. Valuationreports without those details should be returned to the
valuer for resubmission.
 Valuation report procured directly by the borrowers should not be relied upon even if the report is
from our panel valuer.
 If the borrower produces a valuation report issued by one of our panelvaluers, the property should
be referred to another valuer on our panelfor fresh and independent valuation.
 The valuation of properties to be reckoned with reference to their registered price during first year
after the registry has been made.

Guidelines for valuation of property applicable to all proposals including Real Estate proposals

 The valuation of properties to be reckoned with reference to their registered price during first year
after the registry has been made.
 If the land is acquired / purchased beyond preceding one year, the net realizable value assessed
by the Bank’s approved valuer should be taken as value of the property.
 In case where acquisition / purchase cost of the land is Rs.5 crores and above, and there is wide
variation between acquisition /purchase cost and net realizable value assessed by the Bank’s
approved valuer,valuation of such land should be obtained from two Bank’s approved valuer and
lowest valuation should be taken as net realizable value ofthe property.
 In respect of any property/ies offered as prime/collateral security valued at Rs.2 crores and above,
Title Search Report from twoadvocates shall be obtained.
 The residual age of the immovable property should beat least 5 years more than the
tenure of the loan.
 At the time of substitution of existing property with new property, fresh valuation of existing
property should be obtained, irrespective of when the last valuation was obtained. The higher of
the above i.e. existing or fresh valuation should be considered for the purpose ofsubstitution.
Guidelines for Empanelment of Valuers

Criteria for Empanelment of Insolvency and Bankruptcy Board of India (IBBI) Registered
Valuers

 Effectively IBBI registered valuer will be eligible for empanelmentby Bank on specific request of
the valuers.
 In case of cancellation or suspension of certificate of registration or recognition of valuers, such
valuers will also be delisted from Bank’s panel of valuers and such cases to be placed before the
committee headed by CGM for information.
 In case of valuers is registered by IBBI and empaneled by our Bankbut IBBI has not cancelled /
suspended the registration, such valuers may be delisted based on delisting procedure as applicable
for other valuers.

Criteria for Empanelment of Valuers who are not Registered Valuers of Insolvencyand Bankruptcy
Board of India (IBBI)

 The valuers should be registered under Section 34 AB of the Wealth TaxAct, 1957.

 In order to ascertain the value of properties, external independent valuer/sare appointed by the
Bank for undertaking the valuations.

 The empaneled valuers shall carry out valuation of different types of assetsas under:
i. Land and Building
ii. Plant& Machinery
iii. Agricultural Land
iv. Any other class of Asset

 The valuer should possess proper educational qualifications to make him /her competent to
carry out the task of valuation of securities.

Valuers of Agricultural land

The Valuer of agricultural land ought to have knowledge of following

principles of valuation –

i. Cost, price, value and worth

ii. Various types of value
iii. Value elements – ingredients – characteristics
iv. Annuities – capitalization – rate of capitalization – redemption of capital

v. Three approaches to value viz. Income, Market and cost

vi. Laws applicable to agricultural land
Valuers of Agricultural Land (Plantations) under Wealth Tax Rule 8A (4) –

A valuer of coffee plantation, tea plantation, rubber plantation, cardamom plantation or, as the case
may be, shall have the following qualifications, namely: -
 He/she must have, for a period of not less than five years, owned, or acted as manager of a
coffee, tea, rubber, cardamom plantation or, as the case may be, having an area under plantation
of not less than four hectares in the case of a cardamom plantation or forty hectares in the case
of any other plantation;
 He/she must be a person formerly employed in a post under Government or any other officer of
equivalent rank performing similar functions and must have retired or resigned from such
employment after having rendered service in any one or more of the posts aforesaid for an
aggregate period of not less than five years, out of which not less than three years must have
been in areas, wherein coffee, tea, rubber, cardamom or, as the case may be is extensively
grown.
Valuers of Stock (Inventory), Shares

A Valuer of stocks, shares, debentures, securities, shall have the following qualifications, namely,

i. He/she must be a member of the Institute of Chartered Accountants of India or the

Institute of Cost and Works Accountants of India

ii. He/she must have been practicing as chartered accountant or a cost and works
accountants or a company secretary for a period of not less than ten years and his gross
receipts from such practice should not be less than fifty thousand rupees in any three
of the five preceding years.
Categories of Valuers

Empanelment of valuers shall be in the following categories:

Sr.
Category of Score Value of property for
No
Valuers (in %) assignment of Valuation Work
.

1 A More than 65 % No Limit

2 B More than 50 % & up to 65% Up to Rs 50.00 Crore

3 C More than 40% & up to 50% Up to Rs 5.00 Crore

4 D 30% & up to 40% Up to Rs 1.00 Crore

5 E Below 30% Deviation/ Relaxation*

*Relaxation in assigning of valuation work, in terms of aforesaid categorization, maybe permitted as

under:

 ZLCC & above, on case to case basis or during operational exigencies, may acceptvaluation of lower
 category of Valuer with up to one higher notch i.e., Acceptance of valuation report by valuer under
category E for value of property up to Rs 1.00 Crore (Category D).

 CAC II & above can consider the valuation from any of the category of valuers for any amount
of value of property.
 MSME, CO shall grade the empaneled valuer as per the grading matrix.

References to be submitted by Valuer before empanelment

 Valuer need to submit at least 3 reference letters and quality of services provided by the valuer
in the previous instances is to be verified before empaneling the valuer on the panel.

 The references shall be either (i) bank manager/s where previously the valuerhad done valuations
or (ii) companies for whom the valuer had previously done
valuations.

Obligations of the Bank:

All Branches / Offices has to comply with the following obligations:

 All instructions to the valuer to be given by the Branches / Offices in writing.

 A maximum of 3-5 working days’ time shall normally be given to the valuerto carry out the
valuation.

 Professional fees / payments to the valuers is to be normally paid by theBranch within 45

days of the submission of the valuation.

 In case the valuation report submitted by the valuer is not “in order,” theBranch shall bring
the same to the notice of the valuer within 15 days of submission for rectification and
resubmission.

 In case of valuations under SARFAESI Act, provisions under the Act have to be followed.

 In case discrepancy is noticed in a valuation or between 2 valuations, then,another valuer,

preferably a senior valuer in the A category, may also beappointed by the Bank for fresh
valuation as a prudent measure on case to case basis.

Empanelment Procedure
 All applications from intending valuers seeking empanelment should bereceived in the prescribed
format addressed to Regional Office (RO).

 The empanelment process is to be conducted normally on annual basis. Onceempanelled, the valuer
shall be on the Bank’s panel for a period of three years unless and until removed from the panel.

 The Valuer registered under Insolvency and Bankruptcy Board of India (IBBI) shall begiven priority
at the time of empanelment.
Regional Office to ensure compliance of the following while scrutinizing the application of the
valuer:

 Scrutiny of application received from the eligible applicant strictly in terms of prescribed criteria.

 Obtaining undertaking from the valuer along with the application.

 Evidence of previous experience and qualification etc. to be obtained from the valuer.

 Obtaining reports from other Banks / Financial Institutions, with which the valuers are presently
empaneled, which should make satisfactory readings.

 As empaneled valuers will be conducting valuation for accounts eligible for SARFAESI, Valuer should
be registered under the Wealth Tax Act (Sections 34AA to34 AE).

 The applicant should be tax – payer diligently filing income tax returns for thepast three years.

 The valuers should not have been delisted by our Bank /IBA/any Statutory Authority (IBBI etc.,) for
unfair practice in the past.

 Regional Offices to gather the aforesaid information from the IBA‟s Caution list of Third-Party
Entities (TPEs) before recommending any names.

 If the valuer is found to meet the eligibility criteria for empanelment, the application may be
forwarded to the MSME Department, Central Office along with the recommendations of the
Regional Head in prescribed Format for approval.

 On receipt of the application at MSME Department, Central Office, the application of the valuer is
to be scrutinized again and if found suitable the concerned Regional Office is to be advised the
empanelment of approved valuers.
On empanelment of new valuers, the respective Regional Offices shall undertake following
compliance:

 Conveying approval of empanelment with the Bank to the respective valuer

 Obtaining two passport size photographs of the applicant.

 Circulation to all the branches under their geographical jurisdiction (including Large Corporate
Branches (LCBs) & DGM-Headed Branches, if any) the particulars of valuers.

 Necessarily maintain and regularly update a register of Approved List of Valuers as conveyed to
them by the Central Office from time to time as per prescribed Format.

 All empaneled valuer will be allotted a Unique Identification Number in consonance with the
system/software integration with Lending Automated Solution (LAS).

 On depanelment of the valuers the name should be deleted from LAS database immediately.

 The list of empaneled valuers by the Bank has to be made available on UBINET by MSME
Department, Central Office and has to be updated at regular intervals.

Removal/De-listing of Valuers from Bank’s Panel

If the performance of the valuer is not satisfactory, the valuer can be removed fromthe Panel at the
discretion of the Bank.

 If the name of respective valuer is being considered for removal, no further assignments to be given
to them. Such list to be maintained at respective Regional Offices / Mid-Corporate Branches / IFBs
with information to MSME Department.
 Regional Office (In case of MCB/IFBs, respective Branch Heads) to

 immediately bring it to the notice of MSME Department, Central Office.

 In case removal of valuer on account of unfair practice, with the permission of Committee headed
by CGM, IBA should be informed to place the subject name in the IBA’s Caution list of Third-Party
Entities (TPEs) by MSME Department.

 In case, name of the valuer in panel of our Bank appears in IBA‟s Caution list
of Third Party Entities (TPEs) involved in Fraud, the services of the subject valuer shall be
temporarily suspended.

 In case of any Fraud detected in the account where the valuer complicity is observed, his name
shall be included in the First Information Report (FIR).

The steps involved in the process:

 Issue of Show Cause notice: The valuer shall be given due opportunity toshow cause as to
why action should not be initiated against him or her
 Hearing: The valuer shall be given an opportunity to be heard so that his /her point of view is
made known.
 Deliberation: The matter shall be deliberated by the Empowered Forum /Committee headed
by CGM.
Notwithstanding anything contained in the policy, any valuer depanelled shall notbe reappointed for
a further period of 5 years from the date of depanelment.

Re-Empanelment
Valuers once removed from the panel of the Bank could be re-empanelled again after a period of 5
years from the date of depanelment, based on the recommendations of the Committee of CGMs.

Delegation
The responsibility of Empanelment/Re-empanelment of the valuers/ Removal ofvaluers/Resolution of
conflict with valuers/Annual Review of performance of valuers is vested with Committee headed by
CGM.
The members of the Committee headed by CGM (MSME)would be as under:
i) CGM/ Vertical Head – MSME (Chairperson)
ii) GM/ Vertical Head– MCV
iii) General Manager (GM)/Vertical Head – Structured Finance and LC
iv) Chief Law officer (CLO)/GM / DGM – Law
v) GM/ Vertical Head – Recovery
vi) GM/DGM (Credit) – MSME

The Quorum for this committee would be minimum 3, where presence of CGM/Vertical Head (MSME)
and Chief Law Officer (CLO)/GM / DGM – Law (in his absence GM - Recovery) is mandatory and the
convenor would be General Manager/Deputy General Manager (Credit) –MSME.
 Part II

Policy dealing with valuation of properties and empanelment of valuers those

required under Companies Act,2013

Section 247 of the Companies Act 2013 requires that where a valuation is to be made of any property,
stocks, shares, debentures, securities or goodwill or any assets or net worth of a company or its
liabilities under the provisions of the Act, the same shall be valued by a person having the requisite
qualifications, experience,registered as a valuer and member of a registered valuers organization, in
the manner prescribed in the Rules.

Eligibility, qualifications and registration of valuers in Brief

 Any person, partnership entities (includes limited liability partnerships) are eligible to be
registered valuers, provided they meet the eligibility conditions.

 In case of partnership entities or companies, in order to be eligible as registered valuers (apart

from other conditions), it is necessary that the entity is formed for rendering professional or
financial services including valuation and at least three or all the partners or directors
(whichever is lower), areregistered valuers.

The registered valuer shall make valuation as per –

1) Internationally accepted valuation Standards;

2) Valuation standards adopted by a registered valuer’s organization
.
PART III

Other Matters:
Engagement of Valuers for valuation of security in cases referred to NCLT as per provisions of
Insolvency and Bankruptcy Code 2016 (IBC) –

 For cases referred to NCLT under IBC, IRP/RP shall appoint valuers for valuation of assets of the
corporate debtor by engaging valuers who are registered with IBBI/organizations recognized by
IBBI.

 The scope and fees payable to such valuers shall be fixed by the IRP / RP with approval of
Committee of Creditors (CoC)
 Policy on Co-Lending by Bank & NBFC/ HFC,
Transfer of Loan Exposures and Securitisation
of Standard Assets 2024-25
 Maximum Cap: The maximum cap for any NBFC under the Co-Lending arrangement is Rs. 400
crore.

 Eligibility: Loan under CLM to be provided to individuals, proprietorship concerns, partnership

firms, and Private Limited Companies, closely held Public Ltd Companies (not listed on any stock
exchange)

 Loan Quantum: The range of eligible loan quantum is Rs. 0.01 crore to Rs. 2 crore under priority
sector.

 Loan Types: MSME Loans, Housing Loans, and Retail Loans, Agriculture loan, Other priority sector
loans are eligible under the Co-Lending Model.

 Risk Retention: NBFCs/HFCs must retain a minimum of 20% credit risk on their books till maturity.

 KYC Requirements: NBFCs must share KYC documents with the Bank within 2 days for record-
keeping.

 Co-Lending Parties: Banks can co-lend with all registered NBFCs (including HFCs) except those
belonging to their Promoter Group.

 NBFC Eligibility:
o NBFCs must be in operation for more than 4 years, have a Net Worth of at least Rs. 200
crore.
o In preceding two years Net NPA should be below 2.00% and Gross NPA below 4.00% in each
year

o Minimum Capital to Risk Weighted Asset Ratio (CRAR) of NBFC/HFC should be 15%.

 Rating Requirements:

o NBFCs must have a Long Term Rating of BBB or above and an Internal Risk Rating of UBC-4 or
above, However, the Net Worth of the NBFC/HFC shall be reckoned at Rs.100.00 crore subject
to the condition that such NBFC/ HFC shall be externally rated A & Above,

 Security Acceptance: All properties can be accepted as security if SARFAESI is enforceable.

 Exit Clause: Either party can exit the co-lending agreement with 30 days' prior notice.

 Interest Subvention: The proportionate share of interest subvention must be credited to the
collection account.

 CGTMSE Cover: NBFCs must obtain CGTMSE cover for the entire loan amount.

 Collections: NBFCs are responsible for collections after loan disbursement.

 Valuation Reports: At least 5% to 10% of loans should have valuation reports vetted by bank's
empanelled valuers.

 Asset Classification: Both banks and NBFCs must follow their respective guidelines for asset
classification.
 Legal Verification: Legal verification is required before sanctioning loans, including a legal opinion
from in-house or external legal experts.

 CERSAI Registration: NBFCs must comply with CERSAI registration requirements to avoid
penalties.

 Customer Grievances: NBFCs are responsible for managing customer grievances related to loans
under CLM.

 Loan Disbursement: Final disbursement can occur after all documentation is completed, including
registered assignment deeds.

 Loan Documents: NBFCs manage custody of underlying loan documents post-disbursal.

 Recovery Actions: Recovery actions are coordinated between both parties in case of NPAs.

 Interest Subvention Sharing: Interest subvention is shared between lenders based on their
respective shares in the loan sanctioned.

 Security Properties: All properties where SARFAESI Act applies can be accepted as security.

 NPA Management:

o In case loan outstanding in NPA account is up to Rs 20 lakh, designated branch must initiate
action and serve notice under SARFAESI Act (wherever applicable) as per Bank’s extant
guidelines.

o In case of loan outstanding is above Rs 20 lakh, action under SARFAESI Act (wherever
applicable) will be initiated by NBFC. Branch to obtain the copies of 13 (2), 13 (4) and other
related papers from the Co-lender within 15 days from date of initiation of action in NPA
account

o Under no circumstances NBFC can unilaterally enter into compromise/settlement or write

off process in respect of co-lent loans including his own share.

 General Guidelines on KYC & Account Opening:

o For opening of loan account, CIF number is to be generated
o The ultimate responsibility for customer due diligence and undertaking enhanced due
diligence measures, as applicable, will be with the Bank as the Regulated Entity
o NBFC should reconcile its mirror account(s) with Bank account(s) on a monthly basis
 Centralized Processing Cell (CPC) for Co-Lending:
o MS Marg, Mumbai Branch is identified as Centralised Processing Cell (CPC) for Co- Lending
 Guidelines on Co-Lending by Banks & NBFCs / HFCs to Non-Priority Sector
o The transferor can transfer loans only after a Minimum Holding Period (MHP) which is
counted from the date of registration of the underlying security interest with Central
Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) as
under
 Three months in case of loans with tenor of up to 2 years
 Six months in case of loans with tenor of more than 2 years
 in case of loans where security does not exist or security cannot be registered with CERSAI, the
MHP shall be calculated from the date of first repayment of the loan.
o The maximum value of single asset
 Housing Loan Rs 10.00 Crore
 Loans against Property- LAP (including those categorized under MSME) Rs 5.00 Crore
 Other Retail Loan Rs 5.00 Crore
 MSME Advances (excluding LAP categorized under MSME) Rs 5.00 Crore
 Other Loan No Maximum Fixed Value
 POLICY ON DELEGATION OF LOANING POWERS

 A delegatee / Committee shall exercise the delegated authority subject to the following
conditions:

- In exercising the delegated authority, a delegatee / Credit Approval Committee is expected

to act in good faith and without negligence having regard to the Bank‟s lending policies from
time to time.
- The delegatee / Credit Approval Committee has to exercise the Delegated Authority vested
in him/it judiciously.
- The higher delegate may exercise the power of lower authority in their absence. However,
lower authority is not supposed to exercise the power of higher authority.
-
 The delegation for credit facility for individual/ group shall be arrived at after considering:

- The credit exposure

- Investment exposure
- CCF for derivative products

The credit exposure refers to sanctioned limit or outstanding whichever is higher in case of
working capital limits and Outstanding plus undisbursed limit in case of term loan.

 Following credit facilities will not rank for reckoning in the aggregate Fund Based / Non Fund
Based limits:
- Secured Overdraft / Loan against our bank’s Term Deposit Receipts.
- Domestic Letter of Guarantee with 100% cash margin / Term Deposit or Foreign Letter of
Guarantee with 110% cash margin/term deposit with Letter of Lien.
- Inland Letter of Credit with 100% cash margin / Import Letter of Credit with 110% cash margin
/ Term Deposit with Letter of Lien.
- Advances against Government securities.
- Purchase of foreign documentary demand bills against Letter of Credit of reputed / prime
banks
- Discounting of foreign usance bills against Letters of credit of reputed / prime banks.
- Bills discounting facility under accepted LCs of reputed / prime banks.
- Purchase of foreign drafts, bank cheques, travelers cheques
- Adding our Bank’s confirmation to irrevocable Letters of Credit / Guarantees of reputed /
prime banks
- Retail lending schemes
These powers delegated for various delegatees can be exercised even where the original limits
have been sanctioned by higher authorities subject to however that SOD against deposits which
forms part of the Current Assets, should be within FBF.

 Foreign Currency Loan:

- Minimum delegation for Foreign Currency Loan is ZLCC & above
- Delegation vested with CAC-III & ZLCC is subject to minimum 80% hedging by way
of booking of Forward Contract or Natural Hedge. CAC III will be permitted to waive
hedging requirement with additional pricing.
 Short Term Loan:
- CAC I and CAC II can sanction secured STLs as per the scheme of delegation of loaning
powers presently in vogue.
- Management Committee of Board (MCB) can sanction both secured / unsecured STL.

 Advance to Capital Market other than advance against shares to individuals, advance to NBFCs,
advance against Real Estate, Advance for Film Industry / Media Entertainment can be sanctioned
by CACs at Central Office except ZLCC, Mumbai and Branch Head, M.S.Marg (or any other Branch
designated for Capital Market Exposure) which are empowered to sanction proposals up to Rs.50
crores and maximum aggregate per party delegation of Branch respectively under Capital Market
Exposure. ZLCCs (Other than Mumbai) are also authorized to renew/ enhance/ modify/ sanction
proposals under Capital Market (Advance to Share & Stock Brokers other than for margin trading)
up to Rs.25.00crore (Maximum aggregate Secured FB/NFB - Working Capital facility to any one
party/group) without any deviation / relaxation from the Capital Market Policy subject to overall
outlay of Rs.100.00 crore (Fresh Sanction/Enhancement) per financial year for each zone. The
modification in the outlay amongst the Zones may be approved by CAC-II at Central Office.
The nature of business in the Commodity Exchange is similar to the Stock Exchange except the
underlying assets. Hence, delegated loaning powers for lending to commodity brokers is made
similar to the delegation vested for capital market exposure for ZLCC (Mumbai)/Branch Head (M
S Marg)/Other ZLCCs and above. ZLCC other than Mumbai to restrict its exposure within the overall
ceiling of Rs.100 crore as mentioned above.
 Further, ZLCCs (headed by GM/ CGM) have been vested with delegated loaning power up to
Rs.20.00 crores / Rs 40.00 Crore (FB and NFB) per party and Rs.40.00 crore / Rs 60.00 crore per
group in CRE sector within the specified ceiling of each zone for fresh sanctions subject to the
stipulated conditions duly defined in the policy
 Hurdle rate:
- The hurdle rate for sanction of new proposal is UBI/CR-5 (In case of takeover UBI/CR-
4) for proposals falling up to the delegation of CAC-III
- For new proposal UBI/CR-6 and for takeover UBI/CR-5 delegation lies with CAC-II &
above.
- For renewal proposals rated UBI/CR-6 & below delegation shall rest with Next higher
authority for proposals up to RLCC-I
 ADHOC:
- “Ad-hoc” may be interpreted as any facility, which is sanctioned for a period
normally not exceeding 3 months the need of which has arisen due to unexpected
situation
- CAC-III & Below: Sanction of adhoc limit shall be restricted to a maximum of 25% of
sanctioned working capital limit (viz. max 25% of FB and max of 25% of NFB {only LC}
on standalone basis respectively) subject to the specified delegation therein.
- The ad-hoc proposals falling under low priority areas or having credit rating of
UBI/CR-6 & below (non-investment grade) or equivalent will be placed before next
higher authority
- No adhoc is to be considered by delegatee other than the ZLCC and above if the
account is overdue for review/renewal.
- In a financial year adhoc can be allowed only on two occasions. In case such instance
arises, the delegation will vest with ZLCC & above.
- In accounts where limits have been sanctioned or enhanced, no adhoc generally to
be allowed during the 1st six months. In case such instance arises, the delegation
will vest with ZLCC & above.
- In case the adhoc facility is not adjusted on time as per commitment, any adhoc
facility to such parties can be considered by Next higher Authority
 Excess over Limit

- ZLCCs other than Mumbai are not vested with delegation for allowing excess and TOD
under Capital Market Exposure
- Excess may be interpreted as a facility of a temporary nature sanctioned for meeting
the temporary mismatches in cash flows of the borrowers for a period normally not
exceeding 15 days to the extent of 10% of the regular sanctioned limits or delegated
loaning powers whichever is less
- The ceiling of 10% of limit will not be applicable to the controlling offices and LCB
branches
- In accounts with no drawing power where excess is to be allowed, delegation for
clean facility/TOD only should be used to avoid any transgression of Delegated
Authority.
- For Accounts/ limits rated as CR-6 & below, granting EOL in such accounts/ limits
shall rest with ZLCC & above.
- Branch head of small and medium branches should not allow any excess over
limits/DP & TOD without prior approval from respective Regional Head.

 F1
- The F-1 statement of ZLCC will be placed before CAC-II and above.
- The next higher authority of ZLCC for submission of M-27 statement will be CAC-II.
- Similarly, for F1 statement/M-27 statement & all other administrative/monitoring
purpose related to credit the next higher authority for branches will be RO (RLCC-I).

 The ratification requests falling under the delegation of RO / FGMO / CO should be processed
and sanctioned by RLCC / ZLCC / CAC respectively without involvement of MLP as per following
modalities.
i. If the proposal falls under the delegation of CAC at CO, the ratification proposal shall
be submitted to CAC at CO after ratification by RLCC & ZLCC.
ii. If the proposal falls under the delegation of ZLCC, RO shall ratify the proposal and
submit the same to ZO for ratification by ZLCC.
iii. Often in case of proposals falling under the delegation of MLPs, Branches take
concurrence of RO and give effect to the customer request. In case of any ratification
by MLP of branch action, the RLCC-I should concur with the ratification.
iv. Ratification requests emanating from LCBs / MCBs for CO accounts shall be submitted
to ZLCC for ratification. Thereafter the ratification request shall be sent to Large
Corporate Vertical / Mid-Corporate Vertical at CO for placing before the competent
authority for ratification of their action by the authority from whom the prior
approval is obtained.

 Margin on Inland LC
- In respect of Import / Inland LC on DP basis a minimum margin of 10% should be
obtained.
- In respect of Import / Inland LC on DA basis a minimum margin of 10% should be
obtained at the time of opening of LC and an additional margin of 15% should be
obtained at the time of acceptance of documents such that the minimum margin
should not be less than 25%.
- However, ZLCC & above have the discretion to reduce / waive margin on LCs for
limits coming up to its delegated powers.
-
 Margin for LG: Minimum margin of 25% by way of Cash/FDR/Collateral (w/w minimum 11%
cash/FDR) should be obtained for LG.

 Refund of Excess Interest/Commission erroneously charged by Branches

ZLCC is authorized to approve refund of any excess interest, commission, discount

-
etc. irrespective of delegation erroneously charged by Branches under their
jurisdiction.
- The above powers is extended to RLCC-I for branches under their jurisdiction provided
refund pertains to current financial year charges and do not exceed Rs.3.00Lacs
(RLCC-I headed by DGM)/Rs.1.00Lacs (RLCC-I headed by AGM)
- In case of LCBs headed by DGM/ GMs, delegation for refund up to Rs 3.00 lakh will
vest with Branch Head and beyond Rs 3.00 lakh, the power is vested with CAC:III.
 Rejection of Loan Proposal
The delegation for declining a proposal shall vest with the same delegatee who has the
authority to sanction it.

i. In case of rejection of any loan application under priority sector, Branch may reject
application, provided the cases of rejections are verified subsequently by the
Regional Manager.
ii. If applications in respect of SCs/STs or export advances are to be rejected, the same
should be done at the next higher level instead of at branch level.
iii. However, the Branch should convey in writing the reasons for rejection.

Delegated authority shall not be exercised by the lower authority irrespective of delegated
power in cases where the application of limits is previously declined by any higher authority.

 Internet Facility for transactions in cash credit accounts

- Transaction facility through Internet Banking in Cash Credit accounts with credit rating
CR 1 to CR 4 shall be allowed by Regional Heads.
- In case of account with lower rating, the Regional Heads shall forward their
recommendations to respective Field General Managers for according approval.
 Extension of Due Date in Case of Export Advances
Pre shipment finance First extension up to 180 Branch Head
(Packing Credit) days
Further two extensions of For LCB- LCV
90 days each, up to For others- Regional Office
aggregate 360 days
Beyond 360 days ZO with prior approval of
ECGC
Post Shipment Finance Up to 6 months from the BH of AD branch,
(Purchased/Discounted date of shipment
Export Bills) Beyond 6 months upto 1 BH of AD branch with prior
year approval of ECGC (no approval
needed for export house)
Beyond 1 year BH of AD branch with prior
approval of ECGC
In case of C category branch, the extension will be permitted by the Branch Head of the AD category
branch at the recommendation of the C category branch head.

 Operational Guidelines on CIBIL MSME Rank (CIBIL CMR)

For ETB (Existing To Bank Customer):

I. For CMR:1 to CMR:5 rated accounts, the request for additional credit facility or
enhancement shall be considered by respective sanctioning authority.
 II. For CMR:6 to CMR:10 rated accounts, the request for additional credit facility or
enhancement shall be considered by next higher authority up to RLCC:I level. ZLCC
& above can consider such proposals at respective committees itself without referring
to higher authority. Cogent justification for the sanction / enhancement should be
recorded in the process note. Sanctioning authority should stipulate additional
collateral in such cases.
III. Renewal of credit facilities in case of existing borrower, irrespective of CMR
rating, shall be carried out by respective sanctioning authority.
For NTB (New To Bank Customer):

 CMR:1 to CMR:5 rated accounts, shall be considered by respective sanctioning

authority.
 CMR:6 to CMR:7 rated accounts shall be considered by next higher authority up to
RLCC:I level. ZLCC & above can consider such proposals at respective committees
itself without referring to higher authority.
 The delegation of loaning power for sanction of new loan in case of Micro Finance Institution (MFI)
for RLCC:I (headed by AGM) Upto Rs 5.00 Crore and RLCC:I (headed by DGM) Up to Rs 10.00 Crore
shall seize to exist. However Review/Renewal of the accounts pertaining to MFI shall be done by
the respective delegate under which the exposure falls (including RLCC:I headed by AGM/ DGM)
 Union Gold Loan Point (UGLP) in charge shall have delegation for sanction of Gold Loans up to a
limit of Rs 3.00 lakh per borrower. For Gold loans above Rs 3.00 lakh, the loans shall be sanctioned
by the Branch Head under his delegation of loaning powers.
 Digitally review of the Retail Term Loan with no manual intervention – Permit Branch Head to
digitally review the Term Loan up to Rs 50.00 lakh irrespective of Scheme and Scale of the Branch
Head. Also Digitally review of the Agriculture Term Loan with no manual intervention – Permit
Branch Head to digitally review the Term Loan up to Rs 25.00 lakh irrespective of Scheme and
Scale of the Branch Head.
 In case of sanction of any loan, the loan shall be sanctioned by the highest delegatee based on
the total group exposure
 The sub ceiling available for FB term loans and FB working capital limits within maximum
aggregate per party limit has been withdrawn
 LGs may be issued on behalf of joint ventures/subsidiaries of the concern by obtaining prior
approval from authority at ZLCC & above
 Purchase of bills drawn on associate concerns of the borrower can be permitted by ZLCC and
above.
 Scale I Officials have not been vested with any powers for Non Fund Based facilities except backed
by 100% Cash Margin/ Term Deposits
 The next higher authority for obtaining concurrence of restructuring or takeover proposal or
miscellaneous request of proposals otherwise falling within the power of branch will be RLCCs
 Loans to landlords for construction of / repairs to bank premises, Revolving L/Cs, Bid Bond
Guarantees can be sanctioned only by Executives in Scale V and above as Branch Heads &
RLCC/MLCC and above
 Delegation is vested with CAC-II and above at Central Office in case of Non-Cooperative Borrowers
and their group concerns.
 Extension of limit by short review can be done twice, maximum up to 6 months from the due date
of original renewal. The extension of tenability of limits up to first 3 months (1st Short Review)
can be done through a review by the respective sanctioning authority i.e. maximum up to 3 months
from the due date of original review/ renewal.
 Any extension of tenability of limits thereafter for a further maximum period of 3 months (2nd
Short Review) can be considered by one higher level delegatee up to RLCC:I level.
3rd short review not permitted.

 Delegated authority to sanction Bridge Loan and Bonus Loans vests with CAC-II and above.
 Waiver of ECGC cover (buyer wise policy) for export facilities vests with ZLCC and above.
 Wavier of ECGC Pre-Shipment vests with ZLCC & above considering the merits of the case. Bank
will have to bear the premium and pay to ECGC.
 Revolving L/Cs, Bid Bond Guarantees are to be sanctioned by RLCC/MLCC and above
 Minimum sanctioning (including review / renewal) authority for Trust / AOP / Co-operative Society
or any other society should be RLCC-I
 The delegation of powers for issue of Guarantees in favour of Banks / FIs / other Lending Agencies
or lending against Guarantees of other Banks / FIs / other Lending Agencies shall be exercised by
ZLCC and above.
 The delegation for discounting bills under Bank’s own LC, shall be vested with the respective
delegatee under whose delegation the discounting of bills under L/C falls
 All associate concerns will be treated as “one borrower” for the purpose of determining the ceiling
of accommodation that can be granted by the delegatee.
 Relaxation/Waiver of Penal Interest can be granted only in respect of delay/default in submission
of returns/information by RLCC for Branch /MLP/RLP delegated proposal
 Delegatees/Credit Approval Committees can sanction under retail lending schemes without
applying the Group Concept subject, however, to per borrower ceiling stipulated under the
scheme.
 Where the borrower’s place of residence/business / office or factory does not fall within the same
city / town / area of operations of the branch sanction of facility may be considered with the
concurrence of the next higher authority. However, the same is not applicable for ZLCC onwards
and proposals emanating from LCBs branches.
 Further, in case borrower’s place of residence/business / office or factory is outside geographical
area of the city / town but near to the branch say around 10 Km radius of monitoring then
concurrence of next higher authority is not required.
 Term Loans can be reviewed at the outstanding level (in case of fully disbursed Term Loan) even
if the original Term Loan is sanctioned by the higher authority provided
- The installments/interest is serviced up to date
- The operations are satisfactory
- The account is in the Standard Category and not categorized as SMA- 0/1/2 with our
Bank other than on account of non-review / non-renewal.

 The delegatees in various scales working at Branches / Credit Approval Committees shall adhere
to the Reporting System of use of delegated authority (M-27) and submit a monthly statement to
their next authority (with Process Notes in respect of accounts with fund-based limit above
Rs.10.00Lacs)
 In addition to the aforesaid Reporting System, purchase / discounting of bills drawn under LCs of
reputed / prime banks involving transactions of Rs.50.00 lacs and above should be reported to IBD
for FBP/ FDBP / FUDBP and to respective Regional Office for DBP / UDBP/ UBD under copy to ZO
.
 GUIDELINES ON CREDIT EXPOSURE TO NPA/DEFAULTERS
 If there are defaults on credit cards or otherwise wrongly appearing in CIBIL /Credit
Information Companies up to Rs.2,00,000/- and the applicant produces sufficient proof for
having removed default, the credit facility can be sanctioned by the respective Delegatee /
CAC on being satisfied with the proof of removal of default.
 Management Committee of the Board may consider cases of wilful defaulters taking an overall
view of the case.
 Where advances granted to the same party or/and their associate concerns are classified as
NPA with the Bank or where advance granted to a party or/and their associates are classified
as NPA with other bank (other than Wilful Default and Technical NPA due to non renewal
etc), the delegation for loaning powers (Review/ Renewal) shall be exercised as under:
  Branch Delegation proposals will be referred to next higher committee i.e. MLCC
where MLP is located otherwise RLCC.
 Proposal under the delegation of MLCC-II will be referred to next higher committee
i.e. MLCC-I
 Proposals under the delegation of MLCC-I will be referred to next higher committee
i.e. RLCC-I or ZLCC in case RLCC I (Headed by DGM) is not there.
 Proposals under delegation of RLCC-II will be referred to next higher committee i.e.
RLCC-I.
 Proposals under delegation of RLCC-I will be referred to next higher committee i.e.
ZLCC.
 Proposals under delegation of ZLCC will be referred to next higher committee i.e.
CAC-III
 Proposals under delegation of CACs at Central Office need not be referred to next higher
authority. The delegation for sanction of such proposals shall vest with respective CAC itself.
(However, delegation for enhancement/Adhoc/fresh limits in aforesaid accounts will vest with
CACs at Central Office subject to the overall limit after considering enhancement/adhoc/ fresh
limits as per normal loaning powers vested with CACs at CO.
 The delegation for review / renewal of advances which were NPA due to the technical reasons
such as non-review / renewal etc will vest with the authority under whose delegation the
exposure falls
 The above approach will be applicable for promoters/guarantors in all types of concerns
irrespective of constitution.
 Sanction of Loan to Standard Connection (as on date of loan application/ Due date of Renewal
etc), Defaulter/NPA with Our Bank/Other Bank in the past:
- Fresh Advance as per norms to new standard connection or existing connection
(including enhancement) to the same party or/and their associate concerns , which
was NPA with Our Bank/Other Bank anytime earlier during last 3 years the delegation
will vest with the next higher authority up to ZLCC.
- For accounts up to RLCC:I where fresh advance as per norms to new standard
connection or existing connection (including enhancement) to the same party or/and
their associate concerns, which was NPA with our Bank/ Other Bank during preceding
1 year (from the date of loan application/ due date of renewal etc), the delegation
shall vest with ZLCC.
- The accounts classified as 'standard assets' with our Bank re-classified as 'sub-
standard assets' upon restructuring can be Reviewed/Renewed as per the delegated
authority vested for standard account.
 Sanction of Loans/ Advance to Applicant/ Guarantor who had settled their dues by
Compromise/OTS
- The delegation for fresh finance, enhancement (including review/ renewal) etc as per
norms to applicant/ guarantor who had settled their dues with our bank or other bank by
compromise/OTS will vest with the next higher authority.
- Respective sanctioning authority can exercise delegation as per policy on delegation of
loaning powers in case compromise/OTS is of credit cards default up to Rs.2.00 Lakh.
- Application for fresh finance should be entertained only after the cooling period.
- The cooling period is respect of exposures other than farm credit exposures shall be
subject to a floor of 12 months.
- The cooling period for farm credit exposures shall be: 1 Day: For Agriculture advances
where running ledger is up to Rs 50.00 lakh. 3 months: For agriculture advances where
running ledger is above Rs 50.00 lakh.
- The cooling period for technical write-offs (including farm credit) shall be subject to a
floor of 12 months from the date of closure of account.
 PRUDENTIAL EXPOSURE CEILING
1. Introduction and Purpose

The Prudential Exposure Ceilings are essentially the limits placed on the level of exposure a bank can
have to different categories, including individual borrowers, industries, sectors, and groups of
connected borrowers. These limits are determined based on a bank’s Tier-I Capital and other key
financial indicators such as global advances, total capital funds, and net worth, as calculated from
the bank's Audited Balance Sheet (ABS) as of March 31, 2024.

The rationale behind these exposure ceilings is to ensure the diversification of a bank’s risk portfolio.
By capping exposures, the bank can avoid concentrating too much credit risk on any single borrower
or sector. This also aligns with regulatory requirements and helps maintain the overall health of the
banking system, as it reduces the likelihood of systemic risks.
2. Eligible Capital and other metrics
Key figures of our Bank as of March 31, 2024 is as under:
(Rs. In Crore)
Figures as of Global Advances Eligible Capital Total Capital Net Worth
(Gross) (Tier 1) Funds
31.03.2024 9,04,884 99,622 1,12,689 87,601

These figures provide the basis for calculating exposure limits to various sectors, industries, and
individual counterparties. These ceilings are reviewed and adjusted based on the bank’s audited
financial statements and regulatory requirements.
3. Single and Group Counterparty Exposure Ceiling

The Single Counterparty Exposure Limit refers to the maximum amount a bank can lend or have
exposure to a single borrower. According to RBI guidelines under the Large Exposure Framework
(LEF), the exposure limit for a single borrower is capped at 20% of the bank’s eligible capital base,
which in this case amounts to Rs.19,600 crore. However, in exceptional cases, the bank's board can
approve an additional exposure of up to 5%, bringing the total exposure to 25%, or Rs.24,500 crore.

Similarly, the Group Counterparty Exposure refers to a group of connected borrowers. The exposure
limit to such a group is capped at 25% of the bank’s Tier-I capital (Rs.24,500 crore). A group of
connected counterparties includes entities that are financially or operationally interdependent. The
process for identifying these counterparties follows strict regulatory guidelines, ensuring that
financial risks are distributed and managed effectively.
4. Capital Market Exposure

As per RBI guidelines, the total exposure to the capital market (both fund-based and non-fund-based)
should not exceed 40% of the bank’s net worth, which amounts to Rs.35,000 crore. This limit
encompasses various types of capital market exposure, including investments in:

 Shares
 Convertible bonds or debentures
 Units of equity-oriented mutual funds
 Exposures to Venture Capital Funds (VCFs)

However, the bank has set an internal capital market exposure limit of 15% of its net worth. This
internal restriction helps the bank manage risks better, as capital markets can be volatile and subject
to regulatory scrutiny.
Within this overall ceiling, the bank has also placed sub-limits:

 Credit Exposure - 50% of the internal limit, or Rs.6,550 crore

 Investment Exposure - 50% of the internal limit, or Rs.6,550 crore

This exposure can be interchanged between credit and investment, subject to approval from the
Credit Risk Management Committee (CRMC). This allows flexibility in managing market risks while
adhering to overall exposure guidelines.

5. Exposure to different Industries / Sectors

The bank has decided limits on exposure to specific industries and sectors, considering factors such
as risk, non-performing asset (NPA) levels, current exposure, and the industry outlook. These
ceilings are expressed as a percentage of the bank's total advances, based on the audited balance
sheet.

Name of Industry Ceiling Limit

Amount (Rs. In Crore) As a % to total advance
Mining & Quarrying 22,600 2.50%
Food Processing 54,250 6.00%
Textiles 36,150 4.00%
Leather, Wood and Paper 13,500 1.50%
Petroleum (non-infra), Coal products 63,300 7.00%
(non-mining) and Nuclear fuels
Chemical and Chemical Products 63,300 7.00%
Rubber, Plastic, Glass and Cement 27,140 3.00%
Basic Metal and Metal Products 72,350 8.00%
All Engineering 63,300 7.00%
Vehicles, Vehicle Parts and Transport 13,500 1.50%
Equipment
Gems and Jewellery 8,200 0.91%
Construction 67,850 7.50%

These limits ensure that the bank’s lending to higher-risk sectors is controlled.

6. Exposure ceiling to NBFCs

Exposure to NBFCs is treated as a separate category due to their unique role in the financial
ecosystem. The exposure limit to a single NBFC (excluding gold loan companies) is capped at 20% of
the eligible capital base (Rs.19,600 crore). The bank can expose itself up to 25% of its capital base
to a group of connected NBFCs (Rs.24,500 crore). NBFCs that primarily focus on gold loans have a
separate exposure ceiling.

Sl No Particulars Ceiling Remarks

1 Exposure to Single NBFC 20% of eligible capital i.e
1.1 PSU Category Rs.19,600 Crore
1.2 PVT Category
2 Exposure to group of connected NBFCs or 25% of eligible capital i.e
groups of connected counterparties having Rs.24,500 Crore RBI
NBFCs in the group Prescribed
3 Exposures to NBFCs having gold loan to the extent of 50% or more of its limits
total financial assets
3.1 Single NBFC – Gold Loan 7.50% of total capital
funds i.e. Rs.8350 Crore
3.2 Aggregate exposure to all NBFCs – Gold Loans 20% of total capital funds
i.e. Rs.22,250 Crore
 3.3 Single NBFC – Gold Loan 6% of total capital funds
i.e. Rs.6680 Crore
3.4 Aggregate exposure to all NBFCs – Gold Loans 16% of total capital funds
i.e. Rs.17,800 Crore
4 Aggregate exposure to all private category 14% of total advances i.e.
NBFCs Rs.1,26,650 Crore
5 NBFCs rated A- and below and unrated NBFCs 0.75% of total advances
Internal
i.e. Rs.6,780 Crore
Limits
6 Aggregate exposure to all NBFCs put 22% of total advances i.e.
together Rs.1,99,000 Crore

7. Exposure to Real Estate Sector

The Real Estate Sector is another major area of focus. The bank’s total exposure to real estate is
capped at 30% of total advances. This includes:

Particulars Ceiling Limit

Amount (Rs. In Crore) As a % to total advance
Total Real Estate Exposure 2,71,450 30%
w/w
A. Direct Exposure 2,08,100 23%
Of which
i) Residential Mortgages 1,44,750 16%
ii) Commercial Real Estate 36,150 4%
iii) LRD 27,140 3%
w/w
B. Indirect Exposure
Exposure to NBFCs & HFCs 63,300 7%

8. Exposure to Infrastructure Sector

For the Infrastructure Sector, the exposure ceiling is capped at 15% of total advances with sub-
limits for key infrastructure components:

Sl No Sectors Ceiling Limit

Amount (Rs. In Crore) As a % to total advance
1. Power (1.1+1.2+1.3) 1,35,650 15.00%
Of which
1.1 Generation 90,450 10.00%
w/w
Non Renewable 54,250 6.00%
1.2 Transmission 22,600 2.50%
1.3 Distribution 36,150 4.00%
2 Telecom 18,050 2.00%
3 Roads & Bridges 90,450 10.00%
4 Ports 5,600 0.62%
5 Water & Sanitization 63,300 7.00%

9. Off-Balance Sheet Exposure

The off-balance sheet exposures of the bank are also regulated under the prudential ceilings. These
include contingent liabilities such as Letters of Credit (LCs) and Bank Guarantees (BGs). The ceiling
for these exposures is set at the lower of three times the capital funds or 30% of the total advances,
with a trigger at 90% of these ceilings. This is a precautionary measure to limit the bank's potential
liabilities in case of defaults or non-performance.

10. Unsecured advances and guarantees

The bank’s exposure ceilings on unsecured advances and unsecured guarantees is limited to 30%
of total advances (Rs.2,71,450 crore). Unsecured lending inherently carries higher risk, as it lacks
collateral to recover in case of default. Therefore, these exposure limits ensure that the bank does
not overexpose itself to such high-risk lending.

11. Consumer Credit

The bank has set specific limits on consumer credit, which includes:

 Unsecured Consumer Loans: Capped at 2.5% of total advances (Rs.22,600 crore).

 Mortgage-Based Consumer Loans: Capped at 3.5% of total advances (Rs.31,650 crore).
 Vehicle Loans: Capped at 7% of total advances (Rs.63,300 crore).

These ceilings ensure that the bank’s consumer lending is kept at manageable levels, limiting
exposure to individuals and preventing excessive consumer debt accumulation.

12. Other Exposures

The exposure ceiling for other exposures is prescribed at percentage of total advances based on ABS
2024 as under:

Sl No Particulars Ceiling as %age to total advances

1 Exposures to G-SIBs and D-SIBs 20% of total eligible capital base i.e. Rs.19,600
Crore
2 Exposure to Indian Joint Ventures / Ceiling limit of 20% of bank’s unimpaired
Wholly Owned Subsidiaries Abroad and capital funds (Tier 1 and Tier 2) i.e. Rs.22,250
Overseas Step-down Subsidiaries of Crore
Indian Corporates
3 Exposure to leasing / hire purchases / Ceiling limit of 10% of total advances as of
factoring 31.03.2024 i.e. Rs.90,450 Crore
4 Film Industry and Media Entertainment 0.60% i.e. Rs.5,420 Crore
5 Diamond Industry 0.58% i.e. Rs.5,200 Crore
6 Pool-Buyout 2.25% i.e. Rs.20,300 Crore

13. Large Exposure Framework

The Large Exposure Framework (LEF), as defined by RBI, mandates that any exposure equal to or
above 10% of the bank’s eligible capital base qualifies as a "large exposure". Under this framework,
banks are required to report all large exposures to RBI, ensuring transparency and regulatory
oversight. The connected counterparties / entities that are financially dependent on each other
are treated as a single risk exposure.

The LEF also sets guidelines for reporting exposures and managing credit risk arising from both on-
balance sheet and off-balance sheet items, such as derivatives, forward contracts, and guarantees.
The guidelines ensure that banks remain compliant with the RBI’s regulations while managing their
credit portfolios effectively.
 CREDIT MONITORING POLICY
Objectives and Goals:
The objectives of Credit Monitoring exercises to ensure the following

 The disbursal of credit is done in conformity with laid down procedures and stipulated terms
and conditions
 The safety of the amount lent and its end use is ensured
 Maintain healthy loan book for the bank
 The account continues as a performing asset
 Focus on borrower comprising his/her credibility, capacity and ability to meet commitments.
 Usage of tools/technology and corrective action in case of deviation to monitor the borrower
account optimally throughout its life

Credit Monitoring Goals:

 Periodical monitoring of the actual performance of the assisted borrower vis-à-vis the
projections accepted at the time of credit sanction
 Interact with the borrower on a regular basis to have a better understanding of the day-to-
day operations, specific problems faced by the unit, the market trend and the performance
of the borrower.
 In case of any incipient weakness / stress in a Borrower account, identify the reasons for the
same and explore the option of timely remedial measures

Life cycle of a Standard Loan Account

 The typical ‘Life Cycle of a Standard Loan Account’ has two distinct phases viz., the ‘Pre-
Sanction Phase’ and the ‘Post Sanction Phase’ and represented as under:
Life Cycle of a Standard Loan Account
Pre-Sanction Post Sanction

KYC Disbursement as per

Due Diligence Due Diligence, Continuous Till account is
Appraisal & Sanction Monitoring paid off fully
Appraisal
Sanction Leading to proper
Monitoring is to be done using the
end use of funds &
creation of Asset, for eleven (11) monitoring tools
which loan is mentioned in this Policy
sanctioned.

It is important to monitor loan accounts at all stages in their Life Cycle. It is also important to note
that the stages of ‘KYC, Due Diligence and/or Enhanced Due Diligence, Appraisal & Sanction’
during the ‘Pre-Sanction’ phase are very crucial in the Life Cycle of a loan account

The ‘Post Sanction’ phase is equally important where the Banker/Lender should be alert as well as
vigilant to the happenings, both internal and external, in the account

Monitoring Tools:
To keep the account within same risk level as accepted by the Bank at the time of sanction,
monitoring tools available at the branch / offices are required
Monitoring tools at the Branch level: Branches are to use the following:
Stock Statements CIBIL / CRILC reports
Book Debts Statements Adverse newspaper / market reports
Q-4 / M-6 Inspection Reports Monthly Select Operational Data (MSOD)
Stock Audit / Concurrent Audit Internal Audit / Flash reports
Unit Visit / Technical Inspection Quarterly Progress Reports (QPRs)
Adverse / Search enquiries from other GST Return / Chillan and other records to co-relate
Banks regarding the Account, Promoters with Turnover/Account Operation / Balance Sheet
and / or Guarantors etc.
Audited / Provisional Financial Statements External Credit Rating (ECR) / Internal Credit Rating
(ICR)
Monthly Credit Monitoring Reports CCM Portal
Scrutiny of operations in the account for Annual accounts filed with Registrar of Companies –
poor Turnover vis-à-vis sales realization; verification through search at office of Registrar of
overdue; frequent returns of Cheques / Companies by empaneled Company Secretaries /
Bills; issuing cheques unconnected to main Chartered Accountants or by our own officers,
business; constant excess drawing etc., wherever the need is felt, to ascertain / compare with
the balance sheet particulars as filed with Registrar
of Companies (ROC)
Regular exchange of information with Continuous watch and follow up of EWS alerts from
other lenders (in case of comprehensive IT solution. EWS alerts available in
consortium/multiple banking) CCM Portal also.

Monitoring Tools at Controlling Offices viz., Regional Office (RO) / Zonal Office
(ZO)/ Central Office (CO):

Statutory Audit Report F-1 / M-27 Timely Scrutiny

Internal / Concurrent Audit Q-8 Statement (Guarantee invoked & paid)

RBI Inspection Report Review / Renewal of Accounts

Management Audit Report Advocate Legal Vetting / Legal Audit Compliance

Overdue Bills Statements Attachment orders of Government Agencies

Market / News Information Monthly Credit Monitoring Reports

Credit Reports of Banks Consortium Meetings Minutes

CCM Portal ROC Search reports / CIBIL / CRILC

AQMC Meetings ITR / GST Returns / Assessment orders

ASM Reports Early warning signals from comprehensive IT solution

Stages of Monitoring:

Lesser the stress and weakness in a Borrowal/loan account, lesser will be the efforts required to
maintain the good health of the account. Hence, it is imperative that the Branches/Offices work
upon the Borrowal/loan account from the stage of ‘Potential Stress Accounts (PSA)’ itself.
lesser the stress and weakness, the simpler will be the Resolution Plan (RP) and the process of
resolution.

As the stress increases recovery of the Banks’ dues becomes more complex / cumbersome and leads
to a situation where the Bank may have to take a bigger haircut.

In summary, it can be said that monitoring of Borrowal/loan account should commence at the pre-
sanction stage itself and continue till it is fully paid off by the borrower.

Three different stages as under:

Pre – Disbursement:

 It includes conducting KYC / Due Diligence / Enhanced Due Diligence, Obtaining No

Objection Certificate (NOC) from Banks or Financial Institutions in case of take-over of
accounts, Personal visit to such Institutions for a detailed dialogue, Pre-disbursement
Inspection of the unit, Communication and acceptance of terms of sanction, Execution of
security documents including signing of Letter of Guarantee by the Guarantor(s), Obtaining
Legal Opinion, Creation of Charge/Mortgage on securities (both prime and collateral),
Inspection of the unit, Induction of Promoter’s margin, Vetting of documents, Completion
of Credit Process Audit (CPA) and strict compliance of all Terms and Conditions of sanction.

During Disbursement:
Broadly, monitoring during disbursement consists of following depending upon the nature of facility
i.e., whether Working Capital or Term Loan:
Working Capital - Checklist:

DO’s Don’ts
Compliance of terms and conditions Disbursements to un-related accounts,
Availability of Drawing Power borrowers’ own current / savings
Adequate Insurance of Prime & Collateral account, in cash or transfer to sister
Inspection of Stocks – Quality/Quantity concern accounts, if NOT Permitted by
Verification of major debtors and creditors Sanctioning Authority.

Term Loan - Checklist:

DO’s Don’ts
Obtaining of Proforma Invoices and its Disbursements to un-related accounts,
evaluation borrowers’ own current / savings
Disbursement of Term Loan together with account, in cash or transfer to sister
promoter’s margin by direct payment to concern accounts, if NOT Permitted by
suppliers/vendors. Sanctioning Authority.
Arrangement for financing cost overrun, if any
Impact of time overrun and cash generations
consequent to such overrun
Certificates from various independent
agencies like Architect / Contractor /
Chartered Accountant (CA) for progress in
project implementation
Conducting Due Diligence of the Suppliers as
per extant guidelines of Loan policy.

Post Disbursement:
Some of the monitoring tools that are available post disbursement are:
  Compiling of Post Sanction inspection report
 Tracking of movement of stocks and rejection of stock
 Ensuring that Sales are in line with projections
 Monitoring the realization of debtors / age of debtors
 Verification of books and other records such as invoices, books of accounts, stores
records / registers etc.
 Detecting / avoiding unrelated debits to the account
 Keeping a check on cash withdrawals by the Borrower vis-à-vis limit
 Keeping watch on account operations (Cheques / RTGS / NEFT/Transfers)
 Timely review of credit facilities
 Scrutiny of control returns like Stock Statements / Book Debts statements / QPR /
MSOD
 Periodic inspection of the Unit and Verification of the assets and securities charged
to the Bank
 Reports of Independent Audit Agencies (Stock Audit Report, Concurrent Audit Report
etc.)
 Scrutiny of Audit Report & Financial Statements
 Submission of Monthly Credit Monitoring Reports (MCMRs)
 Prompt and timely recovery of interest / installment / overdue, if possible through
NACH / Standing Instructions
 Watch on Frequent requests for excess or modification in terms and conditions of
sanction vis-à-vis Business Activity / Level of Borrower.
 Timely obtaining Credit Report of other Lenders / Attending Consortium Meetings /
Keeping watch on connected accounts with other Banks.

 Watch on External Information like:

 Market information from Newspapers / periodicals / media reports
 Sourcing of information from borrower’s employees (Munims, Accounts Officers
and Workers etc.
 Information from Borrower’s Customers, Creditors
 Raids / Enquiries by external agencies such as GST / Income Tax / DRI / CBI etc.
 Information on changes in Key Personnel / Management
 Reference from other Bankers regarding other connected accounts of the
borrower
 CIBIL / CRILC Report
 Changes in ECAI Ratings / Internal Rating
 Government Policy/ies relating to borrower’s business.

Administrative Set-up of Credit Compliance & Monitoring

Department:
The vertical is responsible for monitoring of all loan accounts of the Bank. All loans except NPA,
having limit Rs.10.0 crore and above are monitored by this vertical through Monthly Credit Monitoring
Reports (MCMRs).

For specific monitoring purpose, this vertical has created three cells within as under:
 Cell for Monitoring Large exposure of above Rs. 100 crores with specific focus of accounts
with AE Rs 1500 crore from banking system: created to have a specific team with a focused
approach in monitoring large value accounts.
 Cell for Forensic Audit & RFA
  Cell for all accounts of the Bank below Rs. 100 crores (Monitoring Room): This cell is
monitoring all accounts more particularly Retail, Agriculture & MSMEs

Field Vertical: Down the line, the organization has Zonal Office, Regional Office and Branches
wherein Credit Monitoring Officers are posted to act with focused approach.

Reasons for buildup of Stress in Borrowal /loan accounts:

General Reasons for all types of Borrower /loan accounts:

 In most of the instances, end use of fund was limitedly ensured and funds are used for the
purpose other than that meant for. This led to shortage of fund and stress.

 Projects/Units where Foreign Currency is involved, a steep volatility in exchange rate also
caused stress in the borrower account.

 If product is more vulnerable to Government Policies, change in policy attracted stress in the
account.

 Less involvement of Promoter/Management of company and lack of strategies/financial

planning and execution/ capital infusion capacity lead to stress.

 Labor unrest in certain cases has led to building up of stress in borrower account.
 Danger of technology used to become obsolete or fast changing technology or invention of
cheaper replacement product also impacts performance of A/C.

 Competition and major market players’ strategy towards the same impacts the health of a
borrower A/C.

 Under financing or over financing is also major reason for stress in A/C.
 Absence of Timely and adequate insurance leads to loss and stress later on.
 Lack of regular monitoring the account & its operations closely & absence of taking/initiating
corrective actions at the first instance of observance of incipient weakness/stress.

 Tax incidence/Tax Laws/Litigations etc. resulting into attachment of cash flows, Units,
Assets, Properties etc. of the borrower account.

 Lack of Timely & adequate corrective action by Promoter as well as lenders jointly, to cope
up the disruptive circumstances / economic conditions.
 Delay in Project implementation/Cost overrun /Price fluctuation of raw materials.

Reasons specific to Working Capital Loans:

 Cancellation of Government orders / Bulk orders
 where the major debtors of a borrower face stress, the same resultantly creeps into
the Borrowal/loan account also
 Production of defective or substandard product
 Diversion of funds for unrelated activities, excessive buildup of inventory, poor
recovery of Book Debts, delay in realization of export receivable etc.
Reasons Specific to Project / Term Loans:

 Delay in securing various approvals and clearances

 Poor Project Planning/execution/monitoring
 Lack of skilled staff
 Delay in disbursement from lenders

Identification of Stress:

As per RBI guidelines:

 Any amount if unpaid on due date is overdue on the same date
 Due date for EMI loans is fixed on the same date of demand, whereas for term loans loaded
with actual interest charged [ to be demanded] due date is on the next day of
interest/installment charging date.
 Stressed accounts are defined by RBI are classified as under:

SMA Basis for classification –

Sub-Categories Principal or interest payment or any other
amount wholly or partly overdue between
SMA – 0 1 - 30 days
SMA – 1 31 - 60 days
SMA – 2 61 - 90 days

*Agriculture accounts where repayment is governed by cropping patterns, need not be

reported under stress to RBI.
In the case of revolving credit facilities like cash credit:

SMA Sub Basis for classification –Outstanding balance remains

Categories continuously in excess of the sanctioned limit or drawing
power, whichever is lower, for a period of:
SMA-1 31-60 days
SMA-2 61-90 days
*Default for the purpose of Stress means only Financial Default.

Default for the purpose of identifying stress means non-payment of debt when whole or any part or
installment/interest/charges of the amount of debt has become due and payable, is not repaid

However, in respect of revolving facilities like Cash Credit (CC), default would mean,
without prejudice to the above, the outstanding balance remaining continuously in excess
of the sanctioned limit or drawing power, whichever is lower, for more than 30 days

A CC/OD account shall be treated as 'out of order' if:

i. The outstanding balance in the CC/OD account remains continuously in

excess of the sanctioned limit/drawing power for 90 days, or
ii. The outstanding balance in the CC/OD account is less than the sanctioned
limit/drawing power but there are no credits continuously for 90 days, or
 outstanding balance in the CC/OD account is less than the sanctioned limit/
drawing power but credits are not enough to cover the interest debited
during the previous 90 days.

Classification of Agriculture loan accounts:

 Category-1 Agricultural Advances: Where repayment of the loan is based on crop production
and repayment date is aligned with harvesting/marketing of crops.

An agricultural advance becomes NPA if the installment of principal or interest thereon

remains overdue for two crop seasons in case of short duration crops & one crop season for
long duration crops.

 Category - 2 Agricultural Advances: Norms for classification under SMA-0, SMA-1 or SMA-2
categories & their subsequent categorization as NPAs would be done on the same basis as for
non-agricultural advances

Reporting of Stress to RBI on CRILC Platform:

Credit Information, including classification of an account as Special Mention Account (SMA) is to be
reported by the Bank to Central Repository of Information on Large Credits (CRILC), on all borrower
entities having Aggregate Exposure (Fund based and Non-Fund Based) of Rs.5.00 crore and above.

I. Monthly Report: Main Report is to be submitted, by the Bank, on a monthly basis to RBI
The report is to be submitted by the 15th of the succeeding month
II. Weekly Report: Bank is required to report to CRILC, information of all borrower entities
(with AE of Rs.5.00 crore and above) which are in default, on a weekly basis at the close
of business hours on every Friday. If in case, Friday happens to be a holiday, then the
reporting should be done on the preceding working day. The report is to be submitted
by Wednesday of the succeeding week.

In case of observations of default in accounts having total (all Banks) exposure (FB+NFB) of
Rs.1500.00 crore and above immediate steps are required from LCB/ MCB/ RO & ZO to resolve
the issue by signing of ICA and implementation of RP. Where a viable RP in respect of the borrower
is not implemented within the timelines given below, all lenders shall make additional provisions
as under.

a. 20% if RP not implemented within 180 days from end of Review Period.

b. Additional 15% (i.e. total additional provisioning of 35%) if RP not implemented within 365
days from the commencement of Review Period

Submission of Monthly Credit Monitoring Reports (MCMRs):

Monthly Credit Monitoring Reports (MCMRs) are to be submitted in Lending Automation Solutions (LAS)
module by nominated officers at Branch level to respective controlling offices as per cut-off limit
within time line of 7th of succeeding month

 Cut-off limits for Monthly Credit Monitoring Reports (MCMRs):

Credit Monitoring Reports to be submitted

S. No Cut off limit*
By To
1 Concerned Monitoring Branch Head Upto Rs. 1.00 crore
officer at Branch
 Credit Monitoring Reports to be submitted
S. No Cut off limit*
By To
2 Concerned Branch Head Regional Office Above Rs.1.0 crore & upto
Rs. 5.00 crore
3 Concerned Branch Head ZONAL OFFICE Above Rs. 5.00 crore & up
(Including LCBs) to Rs.10.00 crore
4 Concerned Branch Head CCM Dept., Central Above Rs.10.00 crore
(Including LCBs) Office
*Cut-off Limits / Exposure for Submission of MCMR, both Fund Based and Non-Fund
Based limits/exposure, should be taken together. The cut-off limits are based on total
“Limits” and NOT on “Outstanding Balance”.

 Branches headed by GM/DGM & Large Corporate Branches (LCBs) will submit MCMR
as per the cut-off limits, as under:
S. No. Monitoring Reports to be Cut Off Limit
Submitted to
1. Branch Head Upto Rs. 5 Crore

2 ZONAL OFFICE Above Rs.5.00 crore & upto Rs.10.00 crore

3 CCM, Central Office Above Rs.10.00 crore

Monitoring Responsibilities at different levels:

At Branch level: Within the Branch, the Branch Head, the Officer-in-Charge of Credit and the Officer
handling a particular account will have the prime responsibility for ensuring continuous good health
of the account.

They shall also be responsible for the irregularities in the account if not reported to higher tiers
timely

 The branch gets Early Warning Signals (EWS) in any Borrowal account and is expected to
initiate preliminary diagnosis/action there itself.
 In case of glaring irregularities, the Credit Monitoring Officer (CMO) handling the file should
draw the attention of Branch Head (BH) immediately without waiting for the end of the month
to compile the MCMR.
 Branch may also receive letters from RO/FGMO/CO in respect of accounts monitored at their
level where the concerned authority requires confirmation on rectification of certain
irregularities observed by them. The branch, immediately on receipt of such letters, should
take steps to rectify the irregularities and confirm compliance immediately
 The Branch Head and/or the Credit Monitoring Officer shall take all steps for rectification
while preparing and submitting the Monthly Credit Monitoring Report.
 In case of irregularities that cannot be rectified immediately, a specific time frame should
be adopted and communicated to the Regional Office / Sanctioning Authority as the case may
be
 The officials at the branch level are responsible to ensure submission of Monthly Credit
Monitoring Reports (MCMRs) in respect of all eligible accounts to the respective Monitoring
Authority including newly sanctioned or disbursed accounts.

 Branches shall submit Monthly Credit Monitoring Reports (MCMRs) in respect of all stress-free
standard accounts above Rs. 1.00 crore to the respective monitoring authority as per the cut
off limits on quarterly basis except in SMA-0, SMA-1 and SMA-2 accounts
  Monthly Credit Monitoring Reports on all stress-free standard accounts shall be submitted in
the months of February, May, August and November every year for the preceding 3 months
period i.e., November-January, February - April, May - July and August - October,
respectively.

 Branch should regularly generate three reports from ‘Query’ menu of FINACLE i.e. Report No.
62, 63 & 64 as per Circular Letter No. 7165:2019 dated 21.12.2019 issued by CCM, CO. Report
No 62 list accounts wherein overdue & overflow both exist, Report No. 63 list Term Loan
where connected accounts (SB/CD etc.) have credit balance and Report No. 64 shows
accounts where ECS/SI/ NACH are wrongly fed in the account. Such type of avoidable stress
can easily be rectified at branch level.

 Branch Head or the Credit Officer or any other officer assigned with duties of inspection of
security should inspect the prime and collateral securities as below.
i) All stocks, book debts and movable assets should be inspected at least quarterly in case
of standard accounts and more frequently in case of SMA and NPA accounts.
ii) ii. Fixed Assets inspection shall be carried out once in six months for primary security and
once a year for collateral security.

 All Branches/Offices are advised to follow the below mentioned guidelines to restrict SMA-0
which is avoidable stress
I. Use of NACH/Standing Instruction/linking of operative account in all Retail/Term Loan
accounts
II. Use of ‘HACINT’ menu in FINACLE-CBS wherein the borrower maybe intimated, well in
advance, the interest amount that would be applied for the month

 Branch should scrupulously examine the report submitted by If ASM/Stock Auditor is

appointed in any account and take corrective action immediately

 In case SMA 0 is due to the increased rate of interest by RBI the borrower should immediately
be impressed upon to increase the EMI to the corresponding level of change of demand

At Regional Office level:

 The Regional Head (RH) has to identify a Senior Executive in his office who will oversee the
monitoring aspects of all the accounts in the entire Region above Rs.1.00 crore and up to Rs.
5.00 crore.

 Where the Branch has failed to notice the irregularities in an account, it is the duty of those
officers of the RO, to identify the irregularity based on the tools available with them and
take immediate corrective measures to safeguard the interest of the Bank.

 The officials at RO will also be responsible for follow up and rectification of accounts above
Rs. 5.00 crores monitored by ZO/CO

 The Regional Head to identify those Branches under his/her jurisdiction where large number
of accounts exhibit/reveal Early Warning Signals –EWS and take such measures to arrest the
trend and to put the branch on normal track
  The Regional Head to ensure that the Monthly Credit Monitoring Reports in all eligible
accounts are submitted by the branches and they have to reconcile this figure on a monthly
basis.

 The Regional Head to ensure that Asset Quality Management Committee (AQMC) meets every
month and discharges its functions effectively

 As the slippages up to Rs. 10.00 lakh constitutes a major portion of slippages/NPA for the
Bank as a whole, Regional Offices should exercise utmost care in respect of all SMA-0, SMA-1
and SMA-2 accounts

 A senior officer, not below Scale-IV, is to be nominated by every RO as Nodal Monitoring

Officer-RO (NMO-RO) of the Region.

 Monitoring Officials and other senior officials from the Regional Office should also visit the
branches under their jurisdiction having high concentration of stressed assets at least once
in 3 months and in case of other branches once in 6 months to ensure that branches are
carrying out effective monitoring of credit portfolio.

 The Credit Monitoring official at RO shall verify the accounts opened in Finacle-CBS on test
basis to ensure that Rate of Interest, MIS codes, repayment schedule etc. are fed correctly
as per sanctioned terms.

At Zonal Office Level:

 The Zonal Head has to identify a Senior Executive in his office who will oversee the monitoring
aspects of all the accounts in the entire Zone.

 The concerned Executive/Official is responsible for identifying Early Warning Signals (EWS)
in respect of accounts above Rs. 5.00 crore & up to Rs. 10.00 crore and take immediate steps
at their level and advise RO / Branch accordingly.

 The Executive/Official at Zonal Office will also be responsible for accounts above Rs. 10.00
Crore monitored by Central Office (CO) based on the data received from them in respect of
Stressed Assets

 Zonal Head to ensure that Asset Quality Management Committee (AQMC) meets every month
and discharges its functions effectively

 A senior officer, preferably Scale-V, to be nominated by every ZO as Nodal Monitoring Officer-

ZO (NMO-ZO) for the Zone. He/She will be responsible for entire monitoring function of credit
portfolio of Zone

At Central Office level:

 Central Office shall frame policies / strategies for proactive monitoring of advance accounts
and guide ZO/ RO / Branch for implementation of the same.
  At Central Office level, the Monthly Credit Monitoring Reports (MCMRs) are overseen by Credit
Monitoring Officers who are allotted specific Zone(s). It is the responsibility of all such
officers to collect the Monthly Credit Monitoring Reports on time, identify Early Warning
Signals – EWS, speak to the concerned Branches/Regional Offices for rectification and
escalate the glaring irregularities to the AGM/DGM in the Department.

 It is the responsibility of these Credit Monitoring Officers to ensure that prompt follow up is
made with the respective branches and seek compliance of all the irregularities immediately
 The Credit Monitoring Officers shall forward the list of stressed assets furnishing account-
wise details and observations of CO in respect of accounts monitored by CO to the respective
ROs / ZOs for discussion at AQMC.

 AGM / DGM overseeing the Credit Monitoring functions at CO will be responsible for the entire
Credit Monitoring activity and has to use all the resources available to ensure that overall
stressed position of the Bank is in control

 Monitoring of accounts of above Rs.10 crore & where the outstanding is more than the
sanctioned limit/drawing power

 ABC Analysis of the Region: Quarterly Categorization of all the Regions into 3 groups (High
Risk, Medium Risk & Low Risk) is being done based on Quantum/Percentage of Stressed
Assets/NPA, amount reflected in Mock Run and Risk of Slippages

Risk Categorization of all the Regions:

It is based on important parameters of Credit Monitoring which is as under:

i. Stressed assets percentage Vs ceiling (based on last three months average Vs ceiling
on the last month of the quarter)
ii. Mock run control (% to standard assets)
iii. Slippages during the quarter Vs ceiling of the quarter
iv. Pending renewal percentage based on the period of pendency as on last day of the
quarter
v. MCMR submission percentage based on the last month of the quarter
Risk Rating of the Regions henceforth will be done on the following parameters and the weightage
allotted to each parameter is as under:

S No Parameter Weightage
1 Average Stressed Assets Percentage 25.00
2 Average Mock Run 20.00
3 Slippages during the quarter 25.00
4 Review / Renewal 20.00
5 MCMR Submission 10.00
Total 100.00

Based on the overall weightage scored, the risk categorization of Regions will be as under:

Risk Category of Regions Overall Weightage

High Risk <60
Medium Risk 60-80
Low Risk >80
Since the accounts maintained at the Large Corporate Branches (LCBs) are high value accounts, the
LCBs would be categorized under “High- Risk” only.

Visits to High Risk Regions would be undertaken on quarterly basis and to other Regions once in a
half year by executives not below than the rank of AGM from Credit Monitoring Department, Central
Office

Branch Risk Categorization: Based on the position & performance of a branch in various stress
parameters, the Top 10 branches are classified as Critical Branch for each region and Visits to these
Branches would be undertaken on quarterly basis by RO/ ZO Credit Monitoring official

Early Warning Signals (EWS)

 No advance account can turn bad overnight

 Account emits enough signals for us -
 Constantly observe & capture such signals for initiation of timely remedial action
 Careful analysis of warning signals throws enough light on the direction towards which
the unit is going
 Warning Signals which are noticed in Borrowal account primarily at Branch level & mostly
during operations are EWS
 Patterns / trends as well as outside data are used for generating the alert for the creeping
incipient weakness in the loan account

 Entire ownership of the EWS alerts generation has shifted to “Transaction Monitoring & Fraud
Management” vertical. However, CCM vertical will continue to monitor those alerts.

 A Red Flagged Account (RFA) is one where suspicion of fraudulent activity is thrown up by
the presence of one or more Early Warning Signals (EWS), The threshold limit prescribed by
RBI for EWS and RFA is Aggregate Credit exposure of Rs. 50 Crore or more

 A Web based solution provided by BCPL w.e.f. 31.03.2021 shifted to enterprise version RT
360 From 02.05.2024

 EWS alerts flashed by the package for all fund-based accounts above Rs 1 Cr with their non-
fund-based exposure (Earlier thresholds was @ all exposures of Rs.5 Cr & above since
01.09.2022)

 At present a total of 134 rules have been configured in the package comprising RBI prescribed
47 alerts (including 42 main and 5 sub-alerts), 84 alerts as per EASE agenda,

 Three alerts specific to our Bank in the package are customized, viz:

I. Capturing details of RFA/ Fraud declared by other banks,

II. Movements of funds from CC/OD/TLA account to CA/SA/CC/OD account

III. and Information on disclosures to BSE/NSE.

Categories of EWS Alert: Based on the nature and severity, alerts are classified into 3 different
categories namely

I. Highly Critical alerts: Based on such events which are very serious in nature & depict max.
degree of fraudulent connotation
 II. Critical alerts: Based on Alerts which are serious in nature & immediate remedial actions is
required

III. Informatory alerts: Based on Alerts, which are advisory in the nature and incident

 The responsibility of the users includes continuous monitoring of the borrower accounts having
fund-based limit of Rs. 1.00 Crore & above and their non-fund-based exposures to track the EWS,
if any, in the accounts. All alerts shall be closed within 7 days of generation

 Branch shall incorporate the EWS alerts in Monthly Credit Monitoring Reports (MCMR) with
recommendations for Red Flagging, wherever warranted

 While processing credit proposals, the details of EWS alerts generated in the account during the
review period shall be incorporated in the appraisal note

 While marking any EWS alert as false positive, it is prime responsibility of specialized branches
to ensure that false alert is generated for the borrower and satisfactory evidence against such
alerts are kept on record.

 EWS alerts generated up to previous Month in Borrowal exposures of above Rs.5.00 Crore to
Rs.10.00 Crore shall be discussed in AQMC meeting.

 Branches while preparing the MCMRs in accounts with AE of Rs. 50.00 crore and above, should
offer their comments on the manifestation of EWS that may exist in each of the accounts

Monitoring Action Plan (MAP):

Action Plan by the Bank:

1 Immediate discussion with the borrower 8 Stopping further discounting/ purchase of

and even with the guarantors bills/cheques in case of frequent dishonor
of cheques/bill
2 Hiking of margin requirements on primary 9 Increasing rate of interest on entire or
securities excess portion of the outstanding
3 Asking for additional collaterals or 10 Detailed stock inspection through outside
guarantees agency
4 Reducing the limits 11 Taking possession of securities
5 Disposal of certain saleable securities such 12 Asking debtors to pay directly to the Bank
as shares, enchasing surrender value of LIC (where Book Debts are hypothecated)
Policy, margin in the shape of FDRs etc.
6 Restriction on withdrawal by partners 13 Recalling the advance/filing of suit
7 Restriction on dividend declaration 14 Initiating internal investigation wherever
warranted and taking subsequent suitable
action

Action Plan by the Borrower:

1 Stop operations with other Banks 6 Bringing down level of outstanding through
cutbacks
2 Bring in more funds to set right ‘out of 7 Sale of unwanted surplus assets (especially
order’ position fixed assets)
3 Bringing back funds diverted to sister 8 Creation of amortization fund to meet
concerns future liability
4 Quickening debtors’ realization by offering 9 Not to venture into any new business
discounts activity/expansion of business
5 Stop other business activities

Preventive Measures to ensure good health of loan accounts:

Timely Review of the account:

 Timely review of the account is vital, as a thorough analysis of the account is made at the
time of such exercise and it will enable the Bank to take suitable steps at the right time.
 In case of genuine difficulties, branches and/or administrative offices may consider short
review of such accounts. In any case, it should be ensured that no account remains pending
for review at any level.
 The practice of keeping renewal pending due to overdue in an account is not a sound
practice. Follow-up and adjustment of overdue is an ongoing exercise and should not
remain a onetime measure at the time of renewal. Actually, it is prudent to place before
the Competent Authority the correct position on borrower account that too timely.
 In case of multiple credit facilities, the review/renewal date of all the facilities should be
same.
Timely Restructuring of the Account:
 There may be cases of genuine difficulties faced by the borrowers resulting in failure to meet
the commitments on time and as per projections.
 Restructuring should be attempted after an objective assessment of the viability and the
promoter’s intention, and only when the Bank is convinced of turnaround within a prescribed
time frame.
 In respect of totally unviable units as decided by the Bank/Consortium, it is better to take
steps to recover the dues of the Bank and if necessary, resort to disposal of the security,
through legal means, so as to recover whatever is possible before the security further
deteriorates

 The asset classification norms applicable for restructured accounts will be as under:

i. Standard Accounts, if subjected to restructuring, shall be immediately downgraded to

‘sub-standard’ category i.e., non-performing asset (NPA) to begin with.

ii. Non-Performing Assets (NPAs), upon restructuring, would continue to have the same
asset classification as prior to restructuring.

iii. The asset classification, in both the cases, shall be governed by the ageing criteria as
per the extant classification norms.

 It may be noted that there is regulatory forbearance of continuing the same asset classification
for the MSME Accounts eligible under the scheme

Need Based assessment of additional finance: Need based additional finance may be provided,
by the Competent Authority, as per genuine requirement to overcome the temporary problems or
short-term mismatches in form of Adhoc or Working Capital Term Loan (WCTL)

Tendency of recovering only critical amount to be curbed: Efforts should, therefore, be

made to recover entire overdue from the customer and present trend of recovering the critical
amount at the last moment to save slippage of account into NPA category should be stopped
Ledger Scrutiny: Scrutiny of ledger operations is of paramount importance to know whether:
1 The account is operational in proper 6 Cheques are returned for financial reasons
manner
2 In case of multiple/consortium 7 Cheques for bulk amounts and in round sums
banking, pro-rata turnover is to be are issued and also to check for unconnected
routed through our Bank debits
3 There are unrelated debits in account 8 Cheques deposited in the account are returned
(check for diversion of funds) frequently
4 The account is dormant previously and 9 Funds are transferred to sister/associated
now becomes active or the other way concern or other firms not connected with
round business
5 Interest debited is serviced promptly 10 The turnover of the account is commensurate
with the sales of the part

Rectification of irregularities pointed out in audit reports: It is incumbent on the part of the
branch to ensure that the irregularities pointed out in such audit reports are rectified then and there
wherever possible or at the earliest opportunity. Rectification has to take place compulsorily, within
a specific time frame and the responsibility towards the same rests with the Branch Head.

Credit Process Audit (CPA):

 In all accounts for Rs.1.00 crore and above, except Retail Loans, the system of Credit Process
Audit (CPA) is mandatory.
 However, in case of Retail loans, the system of Credit Process Audit will be mandatory in the
following cases:
i. Rural & Semi Urban Branches - for accounts of Rs.10 lakhs and above
ii. Urban and Metro Branches - for accounts of Rs. 50.00 lakhs and above.
 No disbursement can take place in such accounts unless CPA is completed confirming
compliance of all the terms and conditions.

Legal Audit Compliance (LAC):

Title deeds and other documents in respect of all credit exposures of Rs. 5.00 Crore & above are to
be covered under periodic legal audit and such periodic re-verification of title deeds with relevant
authorities shall be done till the loan stands fully repaid.

 Guidelines on periodicity for conducting Legal Audit:

S. Advances Accounts with exposure

Periodicity
NO. (Both FB & NFB Credit Limit) of
1 Above Rs. 5.00 crore Once in 5 years
2 Above Rs. 100.00 crore* First within 2 years of disbursement and
thereafter every 5 years. *

*First Legal Audit in the accounts above Rs. 100.00 crore, where sanction of credit facility is done under
sole or multiple banking and consortium where Union Bank of India is lead bank, should be conducted
within 2 years of disbursement and subsequently the periodicity will be 5 years. For accounts with
exposure above Rs. 5.00 crore and upto Rs. 100.00 crore, first Legal Audit will be due after 5 years from
the date of first disbursement and thereafter as per the periodical interval specified above.
 In case of any change/ substitution of security is done in the intervening period of Loan tenure,
Supplementary Legal Audit shall be done within 3 Months of the change/substitution for that
particular property. In such case, the legal Audit shall be restricted to the changes/ additions
 made and substitution of Security and Legality of documents shall be verified in respect of
changes
 In case of enhancement of limit/fresh limit, if the borrower’s total exposure has reached the
threshold limit of Rs.5 Cr & Above, hence become eligible for Legal Audit; in such scenario Legal
Audit to be conducted as per the extant guidelines i.e. first Legal Audit will be due after 5 years
from the date of first such disbursement since the account becomes eligible for LAC and
thereafter as above.
 Further, Legal Audit should also be conducted for all mortgage-based retail loan accounts with
outstanding of Rs.10 Lacs and above and falling under “SMA-II” category as on 30th April every
year.
 In case of Consortium finance where our bank is only a member bank, LAC should be done by the
lead bank and frequency of Audit as per the lead bank will prevail
 Exemption for conducting legal audit

 Accounts with standalone loans/overdrafts against deposits may be exempted from Legal
Audit.
 Limit sanctioned against 100% deposit may be excluded while arriving at Borrower’s
Aggregate Exposure eligibility (Credit exposure of Rs.5.00 crores and above) for Legal Audit.
 NPA Accounts where Legal proceedings admitted in court of Law viz. Suit/DRTs and/or
original papers are admitted/vetted/deposited in the court, will be further exempted from
Legal Audit process

 LAUDIT MENU: All the information about legal audit compliance has to be entered in LAUDIT
MENU
 In case the Legal Audit report is ‘qualified’, the qualification or the deficiencies pointed out by
Advocate to be noted and discussed with the Branch Head as well as Borrower. The deficiencies,
if any, observed in the Legal Audit Report is corrected and submitted once again to same
Advocate for his/her perusal and it is required to obtain a supplementary Report/Certificate
from the Advocate which confirms that the deficiencies are rectified and obtain an ‘unqualified’
Legal Audit Report.
 Once the ‘unqualified’ Legal Audit Report is received, the Regional Office
must follow step as mentioned in point (v) above. It is advised that if the rectification is taking
time (say more than 7 days), then the data/information must be fed in Finacle-CBS in LAUDIT
Menu. Once, the irregularity is corrected/ rectification done, the record in the Finacle-CBS must
be modified in the LAUDIT Menu again

Transgression / Violation of Delegated Authority (DA): Transgression/Violation of Delegated

Authority (DA) by a Delegate of the loaning powers is doing an act, for which an officer has been
restricted/prohibited from doing the same by regulator or Bank or any such authority, while
exercising his/her DA or exercising the DA for which he/she has no right/authority at all either
through ignorance or intention or malice or mistake of whatsoever nature.

Devolvement of LCs or other NFB limits / Invocation of Guarantees: Frequent devolvement

of Letters of Credit (LCs) or Invocation of Bank Guarantees (BGs) is not a good sign and the party
should be put on notice to avoid such things in future. They indicate improper forecast of cash flows
and should be taken into consideration while reviewing or enhancing the limits.
 Both LCs and BGs are non- fund-based facilities. If the borrower is availing Cash
Credit/Overdraft limit then ‘devolved LC’ or ‘invoked of BG’ should normally be debited to
running Cash Credit /Overdraft account and payment made to the beneficiary.
 However, when ‘devolved LC ’or ‘invoked BG’ is paid by opening a separate demand/forced
loan account, it should be clubbed with Cash Credit/Overdraft limit for the purpose of
monitoring.
Stock Audit: Accounts with working capital limits, both Fund Based and Non-Fund Based, of Rs. 3.00
crore and above in case of Proprietary/Partnership accounts and limits of Rs. 5.00 crore and above
in other cases are subject to Stock Audit on a yearly basis by Chartered Accountants’ firm appointed
for this purpose.
 The purpose of Stock Audit is not only to verify the total quantum of stocks but also to
ascertain the method and accuracy of valuation
 Branches/Offices are also advised to incorporate stock audit observations in executive
summary invariably.

Unhedged Foreign Exchange exposure: Unhedged Foreign Currency exposure, as disclosed by

the customer, should invariably be captured in the MCMR by the branch and the same should be
monitored on an on-going basis.

Post sanction review system: The Sanctioning Authorities at various levels have to report all
their sanctions in M-27 statement along with copies of the process note for limits above Rs. 10.00
lakhs to the next higher authority.

 The higher authority while scrutinizing the M-27 statement can also call for copies of process
notes from Branches/Offices, in accounts with limits below Rs. 10.00 lakhs.

 On receipt of these reports/process notes, the concerned authority should ensure the
following:

i. Proposals sanctioned are within the Delegated Authority

ii. The sanctioning authority adhered to the prudential norms of the Bank as well as of
RBI with regards to security, margin requirements, Rate of Interest (ROI) and other
financial parameters.

iii. Projections accepted for assessment of limits are realistic and based on the past track
record of the party and future market scenario.

iv. Credit rating is scrutinized by the risk officer attached and the same is found correct
as per the guidelines. In case an account is taken over from another Bank, takeover
norms are to be adhered.
v. Any deficiency found in the exercise, by the concerned office, should be
communicated to the respective sanctioning authority for immediate rectification
and/or modification.

Exit Option: Where restructuring of the account is not advisable and where it is found that the
party does not deserve credit assistance from us any longer, due to reasons clearly documented, then
the sanctioning authority with the approval/concurrence of the next higher authority may inform the
party of the intention of the Bank to exit from the account.

 Exit option should normally be resorted to in the following cases:

 Early Warning Signals received indicates likely further deterioration in the long run and
chances that the unit will come out of such problems are remote.
 When the borrower is indulging in any unethical practice and the Bank has come to know of
the same
 Market report suggests that the party is no longer good enough for assistance from the Bank.

Entering/ Updating of Valuation of Properties in Finacle-CBS:

  In terms of extant Policy on Valuation of Properties and Empanelment of Valuers, properties
mortgaged/fixed assets hypothecated to the Bank are to be revalued at least once in 3 years.
As per extant guidelines, system will make the value of collateral as zero, in case of valuation
is older than 3 years. Further, Net Realizable Value shall be reckoned for determining the
value of security.

 Failure to enter details of valuation in Finacle-CBS will have adverse bearing on Bank’s
profitability, CRAR etc.

 The controlling offices may generate the list of expired Collaterals through Menu “Query”
Option- “97” for effective monitoring and follow up.

Implementation of Risk Based approach for Supervision (RBS):

 Reserve Bank of India used to deploy ‘Compliance Testing Approach’ and ‘CAMELS’
framework for evaluation of Banks which was replaced by Risk Based approach for
Supervision (RBS). RBI has since adopted the revised supervisory approach which is
termed as Supervisory Program for Assessment of Risk and Capital (SPARC).
 Asset quality has been posing a bigger challenge in the Banking Sector. Hence one of
the areas of RBS is fresh slippages in relation to recovery in NPA accounts and three
years’ weighted average of fresh slippages to outstanding standard advances. The
slippages come from the stressed assets and hence round the clock monitoring of
advances portfolio assumes more significance.
Accordingly, certain ratios related to fresh slippages as suggested in the RBS were introduced,
as some of the parameters of evaluation of Bank’s performance. Amongst them, the following
ratios are applicable for credit monitoring purposes.

 Ratio of fresh slippages to actual recoveries:

This is the ratio of fresh slippages to actual recoveries during the year. This ratio will be
calculated for each of previous three years to evaluate the trend. Depending upon the same,
a suitable ratio will be fixed by the Bank as target for the next year and will be incorporated
in the business plan every year.

 Three-year weighted average of fresh slippages to outstanding standard advances at the

beginning of the year:
Three-year weighted average of fresh slippages to outstanding Standard Advances at the
beginning of the year is another parameter to be used under RBS. This ratio will be calculated
for each of previous three years to arrive at the weighted average ratio. Depending upon the
same, a suitable ratio will be fixed by the Bank as target for the next year and will be
incorporated in the business plan every year.
 Slippages in restructured accounts:
Under RBS, there is one more parameter stipulated by RBI, wherein trend of three-year rolling
average over the previous three years, of slippages in restructured accounts as a percentage
to total Standard Restructured accounts during the respective years, is to be calculated and
evaluated. It is to be ensured that this ratio of the Bank improves continuously

Conclusion:
 The very purpose of tightening monitoring function is to identify Stressed Assets and initiate
prompt corrective action well in time so that risk is mitigated, and quality of assets is maintained
 Utmost attention to different segments of monitoring, ability to capture adverse signals in the
accounts at the right time, constant interaction with the parties, understanding the finer aspects
and technicalities of the industry/business trends in the area, urge to ensure quality of the assets
at all times, adherence to the “Doctrine of strict compliance” to the sanction terms and
conditions and a commitment towards effective monitoring alone can yield the desired results.

 The above measures, coupled with effective utilization of monitoring tools, constant involvement
of Branches, ROs, FGMOs, and Credit Monitoring & Restructuring Department, Central Office will
collectively contribute not only in arresting further slippages but also in up-gradation of Stressed
Assets to Stress free Standard Assets category.
 Transfer of Loan Exposure

The Policy on Co-Lending by Bank & NBFC/ HFC, Transfer of Loan Exposures and Securitisation of
standard assets for 2024-25 and Standard Operating Procedure (SOP)/ Operational guidelines therein
have been issued vide instruction circular no. 04548-2024 dated 18.01.2024 and 04554-2024 dated
18.01.2024 respectively. Later on, Credit Risk Management Committee (CRMC) based on suggestions
from Credit Vertical, modification to existing guidelines was approved by CRMC.

Scope (Applicability and Purpose)

The provisions of the Policy shall be applicable to the Transfer of Loan Exposures undertaken by the
Bank subsequent to the issue of the RBI directions. Policy shall apply to the following entities
(collectively referred to as lenders in these directions).

a. Scheduled Commercial Banks;

b. All India Financial Institutions (NABARD, NHB, EXIM Bank, and SIDBI);
c. Small Finance Banks
d. All Non Banking Finance Companies (NBFCs) including Housing Finance Companies (HFCs).

Provided that:
(i) All lenders, where permitted to acquire loans, shall only do so from a transferor specified as a
lender above unless specifically permitted.

(ii) Overseas branches of Bank shall be permitted to:

a) Acquire only, “not in default” loan exposures from a financial entity operating and regulated as a
bank in the host jurisdiction.
b) Transfer exposures “in default‟ as well as “not in default‟ pertaining to resident entities to a
financial entity operating and regulated as a bank in the host jurisdiction.
c) Transfer exposures “in default‟ as well as ‘not in default‟ pertaining to non-residents, to any
entity regulated by a financial sector regulator in the host jurisdiction.

SOP / Transfer of Loan Exposures

Loan transfers are resorted to by Banks for many reasons ranging from liquidity management,
rebalancing their exposures or strategic sales. A robust secondary market in loans can be an important
mechanism for management of credit exposures by lending institutions and also create additional
avenues for raising liquidity. Hence Bank has put in place Board approved policy for Transfer of Loan
Exposures.

Operational Guidelines for Transfer of Loan Exposures which are not in Default

The operating guidelines for transfer of loan exposures which are not in default (other than stressed
loans including NPA) are mentioned below:

Maximum Value of Single Asset (loans in the name of obligor) shall be as below:

Particulars Value* Value*

(Max. loan quantum of single asset)
Housing Loan Rs 10.00 crs Housing Loan Rs 10.00 crs
Loans against Property - LAP Rs 5.00 crs
(including those categorized under MSME)
Other Retail Loan Rs 5.00 crs
MSME Advances (Excluding LAP Rs 5.00 crs
categorized under MSME)
Other Loans No Maximum fixed value.
 *Value shall mean outstanding amount in the books of the originator at time of cutoff
date.
Further, it shall be ensured that loans in the name of the obligor shall be restricted to 5% of the
total value of the pool.

(Cutoff date shall mean the date as on which the Assignor has provided information
with regard to the pool of Receivables originated / owned by the Assignor under the
Loan Agreements).

Pools comprising of Priority accounts, MSME accounts or any other priority accounts shall broadly
comply with our Bank norms / policy guidelines.

Minimum Holding Period (MHP)

The transferor can transfer loans only after a Minimum Holding Period (MHP), as prescribed below,
which is counted from the date of registration of the underlying security interest:

a. Three months in case of loans with tenor of up to 2 years;

b. Six months in case of loans with tenor of more than 2 years.

 Provided that in case of loans where security does not exist or security cannot be
registered, the MHP shall be calculated from the date of first repayment of the loan.

 Provided further that in case of transfer of project loans, the MHP shall be calculated from
the date of commencement of commercial operations of the project being financed.

Minimum Retention Requirement (MRR)

Due diligence requirements shall be applicable at the level of each loan. In case of loans
acquired as a portfolio, in case a transferee is unable to perform due diligence at the individual loan
level for the entire portfolio but can perform due diligence at the individual loan level for not less
than one-third of the portfolio by value and number of loans in the portfolio, the due diligence may
be performed at the portfolio level for the remaining, in which case, the transferor has to retain at
least 10 per cent of economic interest in the transferred loans.

Bank should not offer credit enhancements in any form and liquidity facilities in the case of loan
transfers through direct assignment of cash flows.

Bank retention of partial interest in the loans transferred to comply with the MRR indicated above
should be supported by a legally valid documentation.

MRR will have to be maintained by the entity which sells the loans. MRR should not be reduced either
through hedging of credit risk or selling the retained interest. The MRR as a percentage of
unamortised 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 transaction.
Requirements to be met by the Transferee / Purchasing Bank

Conditions on Purchase of Loans:

Bank can purchase loans from eligible lenders in India only if the seller has explicitly disclosed to the
purchasing Bank that it will adhere to the MRR on an ongoing basis.

Constitution of Eligible borrowers in the pool:

Individuals/proprietorship concerns, Partnership firms, Private Limited Companies, Closely held

Public Ltd Companies (not listed on any stock exchange), Public limited companies (widely held /
listed on stock exchanges) shall be eligible borrowers for pool consideration.
However, the following constitution shall not be eligible:
 HUF
 Trust
 NGO
 LLPs
 Organizations prohibited by RBI

Loss Estimation Report by external agency to be obtained and it is to be ensured that the originator
declares and submits loss experience in earlier transfer of loans/portfolios by the originator in the
relevant exposure classes underlying and incidence of any frauds committed by the underlying
borrowers.

It is to be ensured that the Loss Estimation Report shall not indicate loss rate of more than 4.00%.
However, CAC I (minimum sanctioning authority) and above can sanction any portfolio above 4.00%
loss estimation with proper justification.

Quantum of Exposure under the Product:

Prudential ceiling on single/group borrower shall be adhered to for the underlying individual exposure
of the obligors, as per guidelines.

For the originator, exposure under securitization transaction shall be excluded for arriving exposure
on single / group borrowers. However, exposure for each Transferor/ originator shall not exceed
maximum of Rs.2000 crore for particular class of homogeneous pool.

Disbursement:

The disbursements can be made in tranches, with a minimum tranche value of Rs 10 Cr.for MSME and
Rs.50 Cr. for Housing Loans, Loans against Property (including those categorized under MSME) and
Others. The maximum period of disbursement shall be 1 year from the date of first disbursement.

Repayment:

The original repayment tenor of underlying loans of the obligors in the portfolio being repayment
period (including Minimum Holding Period) shall not exceed:
i. Housing Loan- Max. 30 years
ii. Loans Against Property (including those categorized under MSME) - Max. 15 years
iii. MSME (Excluding categorised under LAP) & Others- Tenor of repayment upto 7 years excluding
moratorium period. Maximum moratorium period shall be 18 months.

Rate of Interest / Other Charges

The pricing at the time of sanction of the loan shall be decided by the CAC–I / MCB (competent
sanctioning authority) to sanction the exposure, which will be interplay of the following :

a) Weighted average yield of the Total Portfolio of the NBFC at the time of sanction.
b) Loss Estimation Report.
c) Pricing shall be linked to Bank‟s MCLR/EBLR and shall be on floating basis. Wherever
MCLR is mentioned it shall be read with MCLR/EBLR.

Inspection of Securities

Considering huge number of accounts, it is advised to obtain a certificate from the originator
confirming availability of underlying security.
In case of account reflecting into SMA 2 category inspection report of the underlying asset is to be
submitted by the originator on quarterly basis for accounts with sanctioned loan amount of up to Rs
50.00 lakh and on monthly basis for accounts with sanctioned loan amount of above Rs 50.00 lakh.
However where 3 or more installments in a pool account remains pending and the account slips to
NPA, only in such cases, Bank will insist for physical inspection of securities.

Operational Guidelines for Transfer of Loan Exposures: Stressed Loans including NPA

The operational guidelines shall apply to sale of non-performing financial assets to Securitisation
Companies (SC) & Reconstruction Companies (RC) as per the extant guidelines of RBI. The operational
guidelines shall also apply to sale of standard assets reported as stressed to Central Repository for
Information on Large Credit (CRILC).

Rules for Transfer of Financial Asset to SC/ RC:

The ground rules for transfer of Financial Assets to SC/RC shall be as under:

a. The Transfer shall be on true sale basis and without recourse basis i.e., entire credit risk associated
with the financial asset should be transferred to SC/RC.
b. Effect of sale shall be that the financial asset shall be taken off the books of the Bank save and
except financial assistance in the nature of un-devolved Bank guarantee facility.
c. Sale of a financial asset should not be for a contingent price whereby Bank will have to contribute
proportionately any shortfall in realization of such financial asset.
d. There shall not be any known liability devolving on the Bank after sale save and except any
contingent liability in the nature of Bank guarantee or any counter claim against the Bank, which
under the terms of sale is required to be defended by the Bank.
e. Subsequent to sale Bank should not assume any operational, legal or any other type ofrisk with
respect to the financial asset sold, save and except any contingent liability under Bank guarantee or
any counter claim with respect to the financial asset.

f. While floating the tender, SC/RC should open Trust account with the respective Bank only or in
case of consortium/multiple Banking arrangement, account may be opened with one of the member
Banks, if more than one Bank sells the A/c to the same ARC

g. SCs/RCs have to prepare a plan within a period of six months from the date of assignment for
realization of NPAs of the selling Bank acquired for the purpose of reconstruction.

h. Minimum two/three ARCs should provide the bids otherwise it should be retendered.The Swiss
Challenge method should be followed.

i. If the bid amount quoted looks a cartelization, retendering should happen and if the bid amount
quoted by one ARC is more than 50% to 60% of the other bid, such bid should be subjected to more
scrutiny.

j. It may be preferable to explore SARFAESI action including one auction before sale of assets to
ARCs.

Types of Transfer

Portfolio sale shall include pool of financial assets comprising NPAs of group accounts, NPA accounts
with common security or NPAs of homogenous class such housing loans, vehicle loans, consumer loans
as the case may be can be considered for sale to SC/RC.
Single Credit sale shall include sale of one particular NPA account to SC/RC leveraging the size of
loan and underlying assets to obtain a good price. Sale to SC/RC may be against the consideration of
Cash, Cash plus Security Receipts, bonds and debentures etc.,

Norms for Selection of Assets

Selection of assets for sale should be based on the criterion of comparative merit of retaining the
assets in the books vis a vis removing the assets from the books.

In the case of Single Credit sale “Comparative Merit” will be ascertained as under:

a. Cash recovery in the near term i.e., 6 months to one year is not foreseen in the account;
b. There are no chances of One Time Settlement in the near term i.e., 6 months to oneyear.
c. Cost of carry in the books of the Bank can be significantly reduced through sale.
d. Account/s are such that recovery can happen only in medium to long term and hence
sale to SC/RC merits consideration.
e. Other Banks either under consortium / multiple Banking have sold their financial asset
to SC/RC.
f. Assets specific bottleneck for recovery in near term, e.g;

 Large number of lenders and there are delays in recovery action.

 Miniscule share of Bank in debt exposure of borrower and hence Bank‟s recovery
action does not put significant pressure such that the borrower can be brought to
negotiating table.
 Pooled securities and sharing issues etc.
g. The value and nature of securities, both primary and collateral available to the Bank exclusively
and or paripassu with other lenders is not very significant.

h. BIFR/AAIFR reference wherever applicable and consequent stalemate in recovery.

i. The status of suit filed/decree execution and likely hood of immediate recovery.

j. The position of other group accounts/associate/sister concerns.

As a part of identification and review of assets identified for sale under this Policy, CRD, C.O. shall
place a separate Agenda Note on review of Doubtful Assets above Rs.25.00 crore to Recovery
Management Committee of the Board for a view on the exit options including sale to SCs/RCs.

In case the account is identified for sale against consideration of cash/cash plus security receipts,
then the steps for sale under this Policy shall apply.

Process of sale:

Once in-principle approval is obtained the following steps should be followed for sale to
ARCs, namely:

Step 1: Preparation of Preliminary Information Memorandum (PIM) of the accounts.

Step 2: Ascertaining valuation of financial assets as per the Valuation procedure.

Step 3: Fixation of Reserve Price with the approval of ARC Sale Committee

Step 4: Preparation of Request for Bid and obtaining approval from the ARC Sale
Committee.

Step 5: Arranging due diligence by the interested bidders.

Step 6: Receipt of bids from the interested bidders.

Step 7: Scrutiny of bids by ARC Sale Committee.

Step 8: Approval of sale by competent authority.

Preliminary Information Memorandum (PIM)

PIM plays an important role in reducing the information asymmetry.

Towards that end;
a. Preliminary Information memorandum (PIM) should be as comprehensive as possible with least
information gaps to lend credibility to the process of sale and to instill confidence in the ARCs that
our Bank is transparent, open and is willing to share information.
b. PIM should provide all the details as are necessary and incidental to enable ARCs to
comprehensively carry out due diligence of the accounts and submit the best bid for the account.

Valuation of financial assets

Value of financial asset should be known in order to negotiate and settle bid price with SC/RC who
offer to purchase the financial asset. To ascertain the value, the following principles should be kept
in mind:

a. Valuation of Current assets comprising stock and book debts should be as per the stock audit
reports with reference to the holding period and operating cycle of the underlying business of the
financial asset. If the underlying business is closed for more than a year, then the value of current
assets may be taken as NIL.

b. Valuation of plant and machinery should be at distress sale value or scrap value as the case may
be depending on the condition of the asset as reflected in the valuation report.

c. Valuation of building should be with reference to the condition and utility of the building.

d. Valuation of land should be as per the government guideline value.

e. Personal and Corporate guarantees need not be reckoned for ascertaining value of the financial
asset. However, if Bank has obtained an attachment of an unencumbered asset belonging to guarantor
and recovery from such asset is certain then distress value of such asset can be considered.

f. Where credit exposure being transferred is INR 100 cr. or more, the transferor shall obtain 2
external valuation reports.

Fixation of Reserve Price with the approval of ARC Sale Committee

Reserve Price is minimum price below which the Bank would not be willing to sell the asset. Following
procedure will be followed for fixation of Reserve Price.

a. Asset wise PIMs will be placed before the ARC sale committee along with the recommended Reserve
Price for the Portfolio or Single Credit as the case may be for fixing Reserve Price.

b. ARC sale committee after account wise deliberations will fix reserve price asset wise in the case
of single credit sale and Portfolio Reserve Price in the case of Portfolio sale.

c. Notwithstanding what is stated in point (b) above, Reserve Price fixed should not be generally
below the Net Present Value of realizable value of available securities net of cost of realization.

d. For the purpose of calculation of NPV, time period laid down in the Recovery Policy should
preferably be followed by the ARC Sale Committee. ARCs are basically investors in distressed assets
with their own business model and seek a decent return on investment unlike borrowers under OTS.
Accordingly as per valuation practices followed by the ARCs while bidding for the NPAs, value of each
of financial assets to be reckoned for NPV under this policy is as under:

SL NO Nature of assets Value to be reckoned for Reserve Price

50% of the value declared as per last stock/book debts
1 Current Assets statements (if the unit/business is closed for more than
a year then Nil)
Fixed Assets (Plant & Distress Value (if the unit/business is closed for more
2
Machineries) than 3 years then scrap value)
3 Agricultural Land 40% of the value (Circle Rate / guideline value)
4 Industrial Land Fair Realizable Value
5 Residential land / property Fair Realizable Value
House/Flat in urban /
6 Fair Realizable Value
metropolitan area
Residual value of absolutely
7 Fair Realizable Value
attached assets

Composition and working of ARC Sale Committee

For the purpose of this policy, composition of ARC sale committee shall be as under:

Chief General Manager (SAM) Chairman

General Manager (CFO) Member
General Manager (Treasury) Member
One Retired Senior Banker nominated by MD & Independent Member
CEO/ED
One Retired High Court Judge nominated by Independent Member
MD&CEO/ED
Deputy General Manager /Asst. General Secretary
Manager
(CRD/DART)

Minimum quorum will be of 3 members including one independent member. Further, in any of the
official member is on leave, Alternate General Manager holding charge of that vertical will be
alternate member.

Delegation of Powers

The delegation of powers for sale of financial assets shall be determined on the basis of Sacrifice

Approving Authority Sacrifice

Management Committee Over Rs.200.00 Lacs
CAC – I Upto Rs.200.00 Lacs
CAC – II Upto Rs.150.00 Lacs
CAC – III Upto Rs.100.00 Lacs
 Policy on Prudential norms on Income
Recognition, Asset Classification and
Provisioning of advances (IRACP)
Narasimham Committee recommendations were implemented by Reserve Bank of India in 1993 and
Income Recognition norms were changed from accrual to actual recovery and norms for classification
of loan accounts as Non-Performing Assets (NPAs) were introduced in the Bank.

Non-Performing Asset:
An asset, including a leased asset, becomes non-performing when it ceases to generate income for
the bank.

A non-performing asset (NPA) is a loan or an advance where

1. interest and/ or instalment of principal remains overdue for a period of more than 90 days
in respect of a term loan,
2. the account remains ‘out of order’, in respect of an Overdraft/Cash Credit (OD/CC),
3. the bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted,
4. the instalment of principal or interest thereon remains overdue for two crop seasons for short
duration crops,
5. the instalment of principal or interest thereon remains overdue for one crop season for long
duration crops,
6. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a
securitisation transaction undertaken in terms of the Reserve Bank of India (Securitisation of
Standard Assets) Directions, 2021.
7. in respect of derivative transactions, the overdue receivables representing positive mark-to-
market value of a derivative contract, if these remain unpaid for a period of 90 days from
the specified due date for payment.

Out of Order
A CC/OD Account shall be treated as ‘out of order’ if

1. the outstanding balance in the CC/OD account remains continuously in excess of the
sanctioned limit/drawing power for 90 days, or
2. the outstanding balance in the CC/OD account is less than the sanctioned limit/drawing
power but there are no credits continuously for 90 days, or the outstanding balance in the
CC/OD account is less than the sanctioned limit/drawing power but credits are not enough
to cover the interest debited during the previous 90 days period.

‘Out of Order’ shall be applicable to all loan products being offered as an overdraft facility, including
those not meant for business purposes and/or which entail interest repayments as the only credits.

INCOME RECOGNITION
Interest on advances against Term Deposits, National Savings Certificates (NSCs), Indira Vikas Patras
(IVPs), Kisan Vikas Patras (KVPs) and Life policies may be taken to income account on the due date,
provided adequate margin is available in the accounts.

In cases of loans where moratorium has been granted for repayment of interest, income may be
recognized on accrual basis for accounts which continue to be classified as ‘standard’.

If any advance, including bills purchased and discounted, becomes NPA, the entire interest accrued
and credited to income account in the past periods, should be reversed if the same is not realised.
This will apply to Government guaranteed accounts also.
Interest realised on NPAs may be taken to income account provided the credits in the accounts
towards interest are not out of fresh/ additional credit facilities sanctioned to the borrower
concerned.

On an account turning NPA, Interest charged but not collected should be reversed by debiting Profit
and Loss account and stop further application of interest. However, such accrued interest may
continue to be recorded in a Memorandum account in the books. For the purpose of computing Gross
Advances, interest recorded in the Memorandum account should not be considered.

Substandard Assets
A substandard asset would be one, which has remained NPA for a period less than or equal to 12
months.

It has well defined credit weaknesses that jeopardise the liquidation of the debt and are
characterised by the distinct possibility that the bank will sustain some loss, if deficiencies are not
corrected.

Doubtful Assets
An asset would be classified as doubtful if it has remained in the substandard category for a period
of 12 months.

A loan classified as doubtful has all the weaknesses inherent in assets that were classified as
substandard, with the added characteristic that the weaknesses make collection or liquidation in full,
– on the basis of currently known facts, conditions and values – highly questionable and improbable.

Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external auditors or the
RBI inspection but the amount has not been written off wholly.

Asset is considered uncollectible and of such little value that its continuance as a bankable asset is
not warranted although there may be some salvage or recovery value.

Classification of Assets
The classification of an asset as NPA should be based on the record of recovery.

The outstanding in the account based on drawing power calculated from stock statements older than
three months, would be deemed as irregular.

A working capital Borrowal account will become NPA if such irregular drawings are permitted in the
account for a continuous period of 90 days even though the unit may be working or the borrower's
financial position is satisfactory.

An account where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180
days from the due date/ date of ad hoc sanction will be treated as NPA.

All the facilities granted by a bank to a borrower and investment in all the securities issued by the
borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof
which has become irregular.

The bills discounted under LC favouring a borrower may not be classified as a Non-performing asset
(NPA), when any other facility granted to the borrower is classified as NPA. However, in case
documents under LC are not accepted on presentation or the payment under the LC is not made on
the due date by the LC issuing bank for any reason and the borrower does not immediately make
good the amount disbursed as a result of discounting of concerned bills, the outstanding bills
discounted will immediately be classified as NPA with effect from the date when the other facilities
had been classified as NPA.
Advances under consortium arrangements
Asset classification of accounts under consortium should be based on the record of recovery of the
individual member banks.

Where the remittances by the borrower under consortium lending arrangements are pooled with one
bank and/or where the bank receiving remittances is not parting with the share of other member
banks, the account will be treated as not serviced in the books of the other member banks and
therefore, be treated as NPA.

The bank participating in the consortium should, therefore, arrange to get their share of recovery
transferred from the lead bank or get an express consent from the lead bank for the transfer of their
share of recovery, to ensure proper asset classification in their respective books.

Erosion in the value of security

Erosion in the value of security can be reckoned as significant when the realisable value of the
security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of
last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful
category.

If the realisable value of the security, as assessed by the bank/ approved valuers/ RBI is less than 10
per cent of the outstanding in the Borrowal accounts, the existence of security should be ignored and
the asset should be straightaway classified as loss asset.

Provisioning norms in respect of all cases of fraud

Bank should normally provide for the entire amount due to the bank or for which the bank is liable
(including in case of deposit accounts), immediately upon a fraud being detected.

While computing the provisioning requirement, the bank may adjust Financial collateral eligible
under Basel III Capital Regulations.

bank have the option to make the provisions over a period, not exceeding four quarters, commencing
from the quarter in which the fraud has been detected.

Where the bank chooses to provide for the fraud over 2 to 4 quarters and this results in the full
provisioning being made in more than one financial year, the bank should debit 'other reserves' by
the amount remaining un provided at the end of the financial year by credit to provisions.

Advances to Primary Agricultural Credit Societies (PACS)/Farmers’ Service

Societies (FSS) ceded to Commercial Banks
In respect of agricultural advances as well as advances for other purposes granted by the bank to
PACS/ FSS under the on-lending system, only that particular credit facility granted to PACS/ FSS
which is in default (for a period of 2 crop seasons in case of short duration crops and 1 crop season
in case of long duration crops, as the case may be, after it has become due) will be classified as NPA
and not all the credit facilities sanctioned to a PACS/ FSS.

The other direct loans & advances, if any, granted by the bank to the member borrower of a PACS/
FSS outside the on-lending arrangement will become NPA even if one of the credit facilities granted
to the same borrower becomes NPA.

Agricultural advances
“long duration” crops would be crops with crop season longer than one year and crops, which are not
“long duration” crops, would be treated as “short duration” crops.

The crop season for each crop, which means the period up to harvesting of the crops raised, would
be as determined by the State Level Bankers’ Committee (SLBC) in each State.

Where natural calamities impair the repaying capacity of agricultural borrowers for the purposes
specified, the bank may decide on its own as a relief measure

1. Conversion of the short-term production loan into a term loan or

2. Rescheduling of the repayment period; and
3. Sanctioning of fresh short-term loan

These relief may be treated as current dues and need not be classified as NPA.

The asset classification of these loans would thereafter be governed by the revised terms & conditions
and would be treated as NPA if interest and/or instalment of principal remains overdue for two crop
seasons for short duration crops and for one crop season for long duration crops.

Government guaranteed advances

The credit facilities backed by guarantee of the Central Government though overdue may be treated
as NPA only when the Government repudiates its guarantee when invoked.

This exemption from classification of Government guaranteed advances as NPA is not for the purpose
of recognition of income.

State Government guaranteed advances and investments in State Government guaranteed securities
would attract asset classification and provisioning norms if interest and/or principal or any other
amount due to the bank remains overdue for more than 90 days.

Projects under implementation

1. Deferment of DCCO and consequential shift in repayment schedule for equal or shorter duration
will not be treated as restructuring provided that-

1. The revised DCCO falls within the period of 2 years (Infrastructure Projects) and 1 year (Non-
Infrastructure projects) from the original DCCO stipulated at the time of financial closure.

2. All other terms and conditions of the loan remain unchanged

As such project loans will be treated as standard assets in all respects, they will attract standard
asset provision of 0.40%.

2. Banks may restructure project loans by way of revision of DCCO beyond 2 years (Infrastructure
Projects) and 1 year (Non- Infrastructure projects) and retain the ‘standard’ asset classification,
if the fresh DCCO is fixed within the following limits-

Type of Project Factor Extended time period

Involving court cases Up to another 2 years i.e. total extension
Infrastructure Projects of 4 years
Other reasons beyond the Up to another 1 year i.e. total extension of
control of promoters 3 years
Project Loan for Non-Infrastructure Sector (Other than Up to another 1 year i.e. total extension of
Commercial Real Estate Exposures) 2 years
Project Loans for delayed for reasons Up to another 1 year i.e. total extension of
Commercial Real Estate beyond the control of 2 years
Exposures promoter(s)

Deemed DCCO
A project with multiple independent units may be deemed to have commenced commercial
operations from the date when the independent units representing 50 per cent (or higher) of the
originally envisaged capacity have commenced commercial production of the final output as originally
envisaged, subject to the following conditions:

1. The units representing remaining 50 per cent (or lower) of the originally envisaged capacity
shall commence commercial operations within a maximum period of one year from the deemed
date of commencement of commercial operations
2. Commercial viability of the project is reassessed beyond doubt
3. Capitalization of interest obligation in respect of project debt component attributable to the
units of the plant which have commenced commercial operations has to cease and the revenue
expenditure is booked under revenue account.

Credit Card Accounts

A credit card account will be treated as non-performing asset if the minimum amount due, as
mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned
in the statement.

The Bank shall report a credit card account as ‘past due’ to credit information companies (CICs) or
levy penal charges, viz. late payment charges, etc., if any, only when a credit card account remains
‘past due’ for more than three days.

The number of ‘days past due’ and late payment charges shall, however, be computed from the
payment due date mentioned in the credit card statement.

Provisioning Norms
Considering the time lag between an account becoming doubtful of recovery, its recognition as such,
the realisation of the security and the erosion over time in the value of security charged to the bank,
the bank make provision.

Asset Class Provisioning Norms

 Loss assets should be written off.
Loss assets  If loss assets are permitted to remain in the books for any reason, 100 percent
of the outstanding should be provided for.
Doubtful Secured Portion Unsecured Portion
assets
Period Provisioning
requirement
(%) 100%
Upto 1 Year Doubtful 25%
Aboove1 year to 3 years 40%
Doubtful
Above 3 Year Doubtful 100%
Substandard  A general provision of 15% on total outstanding should be made without making
Assets any allowance for ECGC guarantee cover and securities available
 ‘Unsecured exposures’ – 25% on the outstanding balance
 Infrastructure lending (Having Escrow ac with us) – 20%
Standard  Farm Credit to agricultural activities, individual housing loans and Small and
Assets Micro Enterprises (SMEs) sectors at 0.25%
 advances to Commercial Real Estate (CRE)1 Sector at 1.00%
 advances to Commercial Real Estate – Residential Housing Sector (CRE - RH) at
0.75%
 housing loans extended at teaser rates- 2.00%
 Advances restructured and classified as standard under Relief Measures by Banks
in Areas affected by Natural Calamities – 5.00%
 All other Loans – 0.40% (including Medium Enterprises)
The provisions towards Standard Assets need not be netted from gross advances but shown separately
as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions Others' in
Schedule 5 of the balance sheet.

Bank is required to estimate the riskiness of unhedged position of its borrowers, and make
incremental provisions on their exposures to such entities as per the instructions contained in RBI
Master Direction

In the case of advances classified as doubtful and guaranteed by ECGC, provision should be
made only for the balance in excess of the amount guaranteed by the Corporation.
Banks have been permitted to apply zero risk weight to advances guaranteed by CGTMSE,
CRGFTLIH and NCGTC, subject to certain conditions. In case such advances become
nonperforming, no provision need be made towards the guaranteed portion.

Country Risk
Bank shall make provisions in respect of a country where its net funded exposure is 1% or
more of its total assets.
The provision for country risk shall be in addition to the provisions required to be held
according to the asset classification status of the asset.
In the case of ‘loss assets’ and ‘doubtful assets’, provision held, including provision held for
country risk, may not exceed 100% of the outstanding.

Provisioning requirement in terms of Guidelines on Enhancing Credit Supply for

Large Borrowers through Market Mechanism
In respect of specified borrowers additional provisions of 3% over and above the applicable
provision on the incremental exposure of the banking system in excess of Normally
Permitted Lending Limit (NPLL).
This higher provisioning requirement shall be distributed in proportion to each bank’s funded
exposure to the specified borrower.

Provisioning Coverage Ratio (PCR)

Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross non-
performing assets and indicates the extent of funds a bank has kept aside to cover loan
losses.

Additional Provisions at higher than prescribed rates

The additional provisions for NPAs, like the minimum regulatory provision on NPAs, may be netted
off from gross NPAs to arrive at the net NPAs
For Standard Assets

Policy for making provisions for standard assets at rates higher than the regulatory minimum, based
on evaluation of risk and stress in various sectors need to be in place and to be reviewed in quarterly
basis.

Prudential norms on creation and utilization of floating provisions

The floating provisions can be used only for contingencies under extraordinary circumstances for
making specific provisions in impaired accounts after obtaining board’s approval and with prior
permission of RBI.

Extra-ordinary circumstances refer to losses which do not arise in the normal course of business and
are exceptional and non-recurring in nature. These extra-ordinary circumstances could broadly fall
under three categories viz. General, Market and Credit.

Until such utilisation, these provisions can be netted off from gross NPAs to arrive at disclosure of
net NPAs. Alternatively, they can be treated as part of Tier II capital within the overall ceiling of
1.25% of total risk weighted assets.

Writing off of NPAs

If an advance is a loss asset, 100 percent provision will have to be made thereof. The Bank
may write-off advances at Central Office level, even though the relative advances are still
outstanding in the branch books.

Automation of IRAC process

In any exceptional circumstance where manual intervention is required to override the
System classification, it must have at least two-level authorization. Such exceptions shall
be done at Central office level and suitably documented.
Any such intervention shall have appropriate audit trails and subject to audit by concurrent
& statutory auditors.
Detailed reports of such manual interventions shall be placed before the audit committee
of board quarterly. The system generated logs shall be stored for a minimum period of three
years and not be tampered with during the storage period.

Resolution of Stressed Assets

Strong economic growth and a healthy operating environment in the economy are synonymous of
strong and sustainable growth which generally leads to creation of high-quality assets within the
economy in general and the Banking Sector in particular.

This framework will be applicable to all borrowers viz., Commercial, Retail and Agricultural
borrowers.

Special Mention Account (SMA):

Loans other than revolving facilities In case of revolving facilities like Cash
credit/Overdraft
 SMA Sub Principal or interest payment or SMA Sub Outstanding balance remains
categories any other amount wholly or partly categories continuously in excess of Sanctioned
overdue between limit or drawing power, whichever is
lower, for a period of
SMA-0 Upto 30 days
SAM-1 More than 30 days and upto 60 SMA-1 More than 30 days and upto 60 days
days
SMA-2 More than 60 days and upto 90 SMA-2 More than 60 days and upto 90 days.
days

Above classification of borrower accounts into SMA categories are applicable for all loans (including
retail loans), other than agricultural advances governed by crop season-based asset classification
norms, irrespective of size of exposure of the bank.

Date of SMA/NPA shall reflect the asset classification status of an account at the day-end of that
calendar date.

Central Repository of Information on Large Credits (CRILC) Reporting:

SCBs are required to report credit information, including classification of an account as SMA to Central
Repository of Information on Large Credits (CRILC), on all borrowers having aggregate exposure of ₹5
crore and above with them.

The CRILC Main Report shall be submitted on a monthly basis.

In addition, the lenders shall submit a weekly report of instances of default by all borrowers (with
aggregate exposure of ₹5 crore and above) by close of business on every Friday, or the preceding
working day if Friday happens to be a holiday.

Default for the purpose of identifying stress

Non-payment of debt (as defined under IBC) when whole or any part or instalment of the amount of
debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the
case may be.

For revolving facilities like cash credit, default would also mean, without prejudice to the above, the
outstanding balance remaining continuously in excess of the sanctioned limit or drawing power,
whichever is lower, for more than 30 days.

Potential Stress Accounts (PSA):

The Special Mentions Account (SMA) draws the concept from the extant guidelines only in which the
stress in running loan accounts are more clearly spelt. With the given intent, this framework also
defines the concept of “Incipient Weakness” using Early Stress Signals (ESS) and generation of
Potential Stress Accounts (PSA) in the identified portfolio within asset portfolio of the Bank for
internal use as a part of proactive credit monitoring.

Resolution Committees (RC):

To implement the resolution in stressed assets or accounts with incipient weakness, this framework
envisages the constitution of structure of “Resolution Committees” in each of Regional Offices, Zonal
Offices and at Central Office.

These committees are specifically structured to facilitate fast and prudent decision-making process
in the accounts which are showing the signs of incipient Weakness or Stress.
Credit Head at RO/ZO shall be the Convenor and Nodal Officer (NO) & Convenor for Regional and
Zonal RC while Deputy General Manager (CCM Dept.) looking after the exposure of Rs. 100 crore and
above shall be the Nodal Officer for CO-RC (Central Office Resolution Committee).

Functions of RC

1. RCs shall make a thorough analysis of the facts submitted by the Branch/ MLP/RO/ZO/Credit
Vertical as the case may be.
2. Discuss on the RP to be implemented for resolving the stress in the account and convey its
recommendations (favourable or unfavourable) to the respective Sanctioning authority for
final sanction and implementation of the RP in the account.
3. In case, the RC decides that the RP is not feasible then it should record the same and
accordingly send its recommendation to the respective Sanctioning authority, i.e., RLCC /
ZLCC / CACs along with the reasons for not suggesting a RP and detailing the future course
of action that is to be adopted to safeguard the interest of the Bank.

Resolution Plans (RPs):

A. Rectification with regularization of the account
B. Sale of exposure to other entities / investors
C. Change in Ownership
D. Restructuring
E. Recovery

Since default with any lender is a lagging indicator of financial stress faced by the borrower, it is
expected that the lenders initiate the process of implementing a resolution plan (RP) even before a
default.

IBA has set up an expert committee for undertaking Process validation in Restructuring cases with
exposure above Rs 500.00 Crores.

While the Resolution Plan is under preparation, banks will forbear from taking any civil action or
proceeding under IBC (Stand Still) against the Borrower or other persons that have provided Third
Party Security for recovery of their dues in respect of the facilities or enforcement of any security
interest provided by the borrower or other persons or accelerate any facilities provided to the
borrower.

Review Period:
In any case, once a borrower is reported to be in default (as defined under IBC and includes Fund
Based, Non-Fund Based and Investment Exposures of Banks / Lenders) by any of the lenders, lenders
shall undertake a prima facie review of the borrower account within 30 days from such default
(Review Period).

During the review period, lenders shall conduct Assessment of the account, Borrower capacity to
bailout and if the stress is likely to continue beyond the Review period of 30 days, finalization of
Resolution Plan and signing of Inter Creditor Agreement is to be done within Review period.

Resolution Plan (RP) shall be implemented within 180 days from the end of Review Period.

Inter Creditor Agreement (ICA)

Bank with the largest aggregate exposure will be designated as Lead Bank. Other Member Banks by
signing the ICA confer authority and power on the Lead Bank to run the resolution process.

Lead Bank’s responsibility would among other things include (i) TEV study (ii) Valuation exercise (iii)
preparation of information memorandum (iv) preparation of resolution plan (all forms and structures
are open) (v) seeking approval and implementation of the plan. For the said purposes, Lead Bank is
authorized to engage such consultants, valuers and process advisor as it may deem fit.

Process will be driven by majority decision. For the said purpose, lenders representing 75% by value
of total outstanding credit facilities (fund based as well as non-fund based) and 60% of lenders by
number shall be binding upon all the lenders.

Decision to sign Inter Creditor Agreement (ICA) in case of accounts falling under the delegation of CO
shall be exercised only by MD & CEO and in his/her absence, Executive Director of concerned
verticals. For proposals falling under the delegation upto ZLCC, Zonal Head is authorized to permit
Signing of ICA.

On approval from competent authority, the respective Branch Heads (DGM / AGM in case of LCBs
/MCBs) may be authorized to sign ICA in cases where resolution plan is to be implemented.

ICA to be signed by the officials not below the rank of AGM. In case where Branch Heads (other than
LCBs / MCBs) are below the rank of AGM, respective Regional Head / DY. Regional Head will sign the
ICA.

Final resolution plan will be placed before respective committees for their approval, as the case may
be through Resolution Committee structure as mentioned in this Framework.

Dissenting Lenders
The resolution plan shall provide for payment not less than Liquidation Value due to the Dissenting
Lenders. Such payment shall be made in accordance with the terms of resolution plan.

The liquidation value shall mean the estimated realisable value of the assets of the relevant
borrower, if such borrowers were to be liquidated as on the date of commencement of the “Review
Period”.

Dissenting Lenders shall have the option to sell/transfer their facilities to any lenders to whom the
regulatory framework is applicable, at a price decided mutually in accordance with the applicable
law, provided such lender enter into the Deed of Accession and agrees to be bound by the Resolution
Plan.

Role of Nodal Officer cum Convener of RCs

PSA and SMA data of the Bank is available in the CCM Web Portal which is accessible to all the
Branch/CCM-RO & ZO staff.

Once an account is identified with “Incipient Weakness – PSA” or with “Actual Stress – SMA”, it will
be the role of Nodal Officer at the respective RO/ZO, to

1. To initiate/follow-up with the Branch/RO, discuss the same,

 2. Conduct root cause analysis & prepare a Resolution Plan (RP), for resolving stress,
3. Get the same processed at RO / MLP and place before the Resolution Committee.

Role of Credit Monitoring Officer at RO / ZO:

1. Providing the list of accounts having AE of Rs. 1.00 crore and above showing “incipient
weakness” or “stress” within 7 days of such default to the nodal officer as well as to the
Branch.
2. Support / supplement the nodal officer in conducting resolution mechanism properly.
3. In absence of Credit Head & Head of CCM dept. shall be the convenor for the resolution
committee meeting and he shall be responsible for conducting the RC meeting smoothly.
4. The AQMC to discuss the conduct of RCs and progress made in resolution of identified
accounts.

Role of the Branch

Responsibility of the Credit Officer (in case there is no Credit Officer then the Deputy Branch Head)
of the Branch, along with the Branch Head to

1. Initiate a preliminary analysis of the account by meeting the borrower, inspecting the unit,
scrutinizing the MSOD, QPR, Stock Statement, to understand the reasons for stress from the
borrowers’ perspective and discuss the proposed course of action to be adopted for resolution
of stress.
2. Conduct Unit/Factory Inspection and meet the borrower, to gather first-hand information
about the present status
3. Prepare a report detailing the causes of stress and findings of the inspection for accounts
with Aggregate Exposure (AE) is Rs. 1.00 crore & above and under financial distress.
4. Branch is also expected to immediately initiate the discussion with Borrower as well as with
Nodal Officer at RO/ZO on the resolution mechanism.
5. Branch is expected to obtain a letter from the borrower with the specific intent / period for
the regularization of the account.
6. Branch should endeavour to complete this exercise within 15 days of noticing the stress
(whether PSA or SMA) and in case “Financial difficulty” is assessed, then send the report
along with the recommendations to MLP (or to RO, if no MLP) for necessary processing and
submission to the Nodal Officer at RO.

Formation of Resolution Plan (RP):

The responsibility for drawing out the RP will rest with the respective Nodal Officer at RO, ZO & CO
as the case maybe.

Multiple Banking / Consortium Arrangements- the Branches/Offices should endeavour to arrive at a

consensus with the other member Banks/Lenders in finalizing the RP.

In case our Bank is the leader or lender with the maximum exposure, then the branch in consultation
with their Regional Office (for Large Corporate Branches in consultation with Large Corporate Vertical
and for Mid Corporate Branches with the Mid Corporate Vertical) where the account is held should in
any case initiate steps for formulating the RP within 7 days of noticing the default.

If, however, our Bank is only a member, then the branch where the account is held should inform the
leader about the stress and request for a meeting of all member Banks within 7 days to decide on the
future course of action.

Aggregate Exposure Below Rs. 1,500 crores Rs. 1,500 crores and above
Sole Banking Within 90 days from the date of 210 days (30+180) from the
first default with the Bank. date of first default.
 Multiple/ Consortium Banking Within 90 days from the date of If not implemented – Additional
first default with any of the provision
Banks/Lenders

It should be borne in mind that the Banks/Lenders may look beyond the 90-day period for resolution
of stress in the loan account of the Borrowal entity if the RP is found feasible. The maximum period
in any case should not exceed 180 days.

If the Banks/Lenders are convinced that the process cannot be completed within a maximum period
of 180 days then they should immediately initiate steps to recover the dues by adopting ‘any or all’
of the various recovery methods available to them.

Independent Credit Evaluation (ICE):

RPs involving restructuring / change in ownership in respect of accounts where the aggregate
exposure of lenders is Rs 100.00 Crore and above, shall require independent credit evaluation (ICE)
of the residual debt by credit rating agencies (CRAs) specifically authorised by the Reserve Bank.

Accounts with AE of Rs 500 Crore and above shall require two such ICEs, others shall require one ICE.

Only such RPs which receive a credit opinion of RP4 or better for the residual debt from one or two
CRAs, as the case may be, shall be considered for implementation.

Further, ICEs shall be subject to the following:

a) The CRAs shall be directly engaged by the lenders and the payment of fee for such assignments
shall be made by the lenders.

b) If lenders obtain ICE from more than the required number of CRAs, all such ICE opinions shall be
RP4 or better for the RP to be considered for implementation.

Authorized Credit Rating Agencies (CRAs):

Implementation conditions for RP:

A RP shall be deemed to be ‘implemented’ only if the following conditions are met:

RP not involving RP Involving restructuring/change in RP where lenders exiting the

restructuring/change in ownership exposure by assigning the
ownership exposures to third party or
RP involving recovery action
1. Borrower is not in 1. All related documentation, are exposure to the borrower is
default with any of completed by the lenders concerned in fully extinguished.
the lenders as on
 180th day from the consonance with the RP being
end of the Review implemented;
Period.
2. Any subsequent 2. New capital structure and/or changes in
default after the the terms of conditions of the existing
180-day period shall loans get duly reflected in the books of
be treated as a fresh all the lenders and the borrower; and,
default, triggering a
fresh review. 3. Borrower is not in default with any of
the lenders.

Delayed Implementation of Resolution Plan:

Applicable only for borrowers having aggregate banking exposure of Rs 1,500 Crore and above.

Lenders shall make additional provisions (if RP not implemented within the timeline) as under:

Timeline for implementation of viable RP Additional provisions to be made as a % of

total outstanding,
180 days from the end of Review Period. {i.e. 210 days 20%
– (30+180) from the date of default}
365 days commencement from of the Review Period. 15% (i.e. total additional provisioning of
(i.e. 365 days from date of default) 35%)

The additional provisions shall be made by all the lenders with exposure to such borrower.

The additional provisions shall also be required to be made in cases where the lenders have initiated
recovery proceedings, unless the recovery proceedings are fully completed.

For accounts less than 1500 Cr, the above-mentioned additional provisions for delayed
implementation is not applicable at present

Reversal of above Additional Provision

Cause Time line
RP involves only payment of overdues by the If the borrower is not in default for a period of 6
borrower months from the date of clearing of the overdues
with all the lenders.
RP involves restructuring/change in Upon implementation of the RP.
ownership outside IBC
50% of the additional provisions made may be
reversed on filing of insolvency application and
Where resolution is pursued under IBC
Remaining additional provisions may be reversed
upon admission of the borrower into the insolvency
resolution process under IBC

Where assignment of debt/recovery Completion of the assignment of debt/recovery

proceedings are initiated
Rectification with regularization of the account
The measures initiated are intended to bring about a turnaround in the borrower entity without any
change in terms and conditions of the loan and does not involve any loss or sacrifice on the part of
the existing Bankers/Lenders.

It is worth mentioning here that, for larger exposure say Rs 5 Cr and above, CRILC Report should be
generated at regular intervals and default (if any) with any lenders is tracked.

Implementation of Rectification
 1. A Letter should be sent to the borrower entity by the concerned Branch intimating that there
has been a default in payment of dues on the very next day of occurrence of default with a
request to pay the default amount within the next 7 days.
2. Branch to simultaneously make efforts to recover the amount in default from the borrower
entity within the next 15 days.
3. In case the borrower entity expresses its inability to pay the entire amount in default within
the next 15 days then a specific written commitment should be clearly spelling out the period
within which the amount in default will be repaid in full and the same should be held on
record at the branch.
4. In any case, the specific written commitment / concrete plan of the borrower entity, to
regularize the account, cannot exceed 90 days from the date of first default with the Bank
as this will render the account NPA.
5. If, in spite of the specific written commitment, the borrower entity fails to adhere to the
commitment then the Regional Office should call branch officials along with the Borrowal
entity for a discussion and document the proposed RP.

Sale of Exposure to other Entities / Investors:

Banks/Lenders selling off their exposure to interested parties such as Asset Reconstruction Companies
(ARC), Private Equity Investors (PEI), Securitisation & Reconstruction Companies (SC/ RC) etc., and
exiting from the exposure.

The authority to decide on the ‘Sale of exposure to other entities/investors’ shall vest only with
Central Office (CO).

Restructuring
Restructuring is an act in which a lender, for economic or legal reasons relating to the borrower's
financial difficulty, grants concessions to the borrower.

Restructuring may involve modification of terms of the advances / securities, which would generally
include, among others,

1. Alteration of payment period / payable amount / the amount of instalments / rate of interest;
2. Roll over of credit facilities;
3. Sanction of additional credit facility/ release of additional funds for an account in default to
aid curing of default / enhancement of existing credit limits;
4. Compromise settlements where time for payment of settlement amount exceeds three months.

Asset Classification
In case of restructuring, the accounts classified as 'standard' shall be immediately downgraded as
non-performing assets (NPAs), i.e., ‘sub-standard’ to begin with. The NPAs, upon restructuring, would
continue to have the same asset classification as prior to restructuring.

‘Standard Accounts classified as NPA’ and ‘NPA accounts retained in the same category’ on
restructuring, may be upgraded only when all the outstanding loans/facilities in the account
demonstrate ‘satisfactory performance’ during the period from the date of implementation of RP up
to the date by which at least 10% of the sum of “Outstanding Principal Debt” as per the RP and
interest capitalization sanctioned as part of the restructuring, if any, is repaid.(Monitoring Period)

Account cannot be upgraded before one year from the commencement of the first payment of
interest or principal (whichever is later) on the credit facility with longest period of moratorium
under the terms of RP.

Additionally, for accounts where the aggregate exposure of lenders is Rs. 100 Cr and above at the
time of implementation of RP, to qualify for an upgrade, in addition to demonstration of satisfactory
performance, the credit facilities of the borrower shall also be rated as investment grade (BBB- or
better), at the time of upgrade, by CRAs.
While accounts with aggregate exposure of Rs. 500 crore and above shall require two ratings, those
below Rs. 500 crores shall require one rating.

If the ratings are obtained from more than the required number of CRAs, all such ratings shall be
investment grade for the account to qualify for an upgrade.

If the ratings are obtained from more than the required number of Credit Rating Agencies (CRA), then
all such ratings shall be ‘investment grade (BBB- or better)’ for the account to qualify for an upgrade.

If the borrower fails to demonstrate satisfactory performance during the monitoring period, asset
classification upgrade shall be subject to implementation of fresh restructuring/change of ownership
under this Framework or under IBC. Lenders shall make an additional provision of 15% for such
accounts at the end of Review period.

Restructuring of Frauds/Wilful Defaulters

Borrowers who have committed frauds/ malfeasance/ wilful default will remain ineligible for
restructuring.

However, in cases where the existing promoters are replaced by new promoters and the Borrower
Company is totally delinked from such erstwhile promoters/management, bank may take a view on
restructuring such accounts based on their viability, without prejudice to the continuance of criminal
action against the erstwhile promoters/management.

Default during Specified Period:

‘Satisfactory performance’ means that the borrower entity is not in default at any point of time
during the period concerned.

Specified period means the period from the date of implementation of Resolution Plan up to the date
by which at least 20 per cent of the sum of outstanding principal debt as per the RP and interest
capitalization sanctioned as part of the restructuring, if any, is repaid.

Any default by the borrower in any of the credit facilities with any of the lenders (including any
lender where the borrower is not in “specified period”) subsequent to upgrade in asset classification
as above but before the end of the specified period, will require a fresh RP to be implemented within
the above timelines as any default would entail.

However, lenders shall make an additional provision of 15% for such accounts at the end of the Review
Period.

For accounts restructured under IBC, the specified period shall be deemed to commence from the
date of implementation of the resolution plan as approved by the Adjudicating Authority.

Monitoring Period Specified Period

The period from the date of implementation of RP The period from the date of implementation
up to the date by which at least 10% of the sum of of RP up to the date by which at least 20% of
“Outstanding Principal Debt” as per the RP and the sum of outstanding principal debt as per
interest capitalization sanctioned as part of the the RP and interest capitalization sanctioned
restructuring, if any, is repaid. as part of the restructuring, if any, is repaid.
Period defined for the Upgradation of the account
provided that the account cannot be upgraded It includes Monitoring Period and is an
before 1 year from the commencement of the first extended period after upgradation (i.e.
payment of interest or principal (whichever is later) Monitoring Period) wherein if there is any
 on the credit facility with longest period of default by the borrower with any of the
moratorium under the terms of RP. lenders (even if anyone is not under
In case borrower fails to demonstrate satisfactory specified period), after upgrade but before
performance (No Defaults at any point of time), specified period, then this – would require
upgradation shall be subject to implementation of fresh RP to be implemented within the
fresh restructuring / change in ownership under this timeline.
RBI Guidelines OR IBC.
Lenders shall make additional provision of 15% (i.e., Lenders shall make additional provision of
total additional provisioning of 35%) in case of 15% (i.e., total additional provisioning of
failure during Monitoring Period. 35%) in case of failure for such accounts at
the end of the Review Period
Monitoring / Specified Period shall start from the date of implementation of RP, however for the
accounts restructured under IBC, the specified period shall be deemed to commence from the date
of implementation of the resolution plan as approved by the Adjudicating Authority.

Right of Recompense (ROR)

Right of recompense will be determined up front and will be equal to the sacrifice calculated as per
para above.

The Bank's right to exercise recompense is to be included in the sanction letter to the borrower.
Suitable clause should be added in the sanction letter requiring the unit to show the recompense
amount due to the Bank as a contingent liability in the unit's Balance Sheet every year.

A declaration of the same to be obtained from the borrower and held on record.

In case a decision is taken to “recall the advance” due to failure of the restructuring package, the
loss sustained by the Bank on account of reliefs/concessions extended would also be claimed along
with other dues.

All restructuring packages must incorporate ‘Right to Recompense’ clause. Once the unit has been
revived and surplus cash accruals are available after meeting the repayment obligations under
restructuring package, the Right of Recompense may be exercised.

Additional Finance:
Additional finance, if any, approved under the RP may be treated as ‘Standard Asset’ during the
‘Monitoring Period’ under the approved RP, provided the account demonstrates satisfactory
performance during the monitoring period.

If the restructured asset fails to perform satisfactorily during the monitoring period or does not
qualify for upgradation at the end of the monitoring period, the additional finance shall be placed in
the same asset classification category as the restructured debt.

Change in Ownership
In case of change in ownership of the borrowing entities, credit facilities of the concerned borrowing
entities may be continued/upgraded as ‘standard’ after the change in ownership is implemented,
either under the IBC or under this framework if-

1. Lenders shall conduct necessary due diligence in this regard and clearly establish that the
acquirer is not a person disqualified in terms of Section 29A of the IBC.
2. Additionally, the ‘new promoter’ should not be a person / entity / subsidiary / associate etc.
(domestic as well as overseas), from the existing promoter/promoter group.
3. The new promoter shall have acquired at least 26% of the paid-up equity capital as well as
voting rights of the borrower entity and shall be the single largest shareholder of the borrower
entity.
 4. The new promoter shall be in ‘control’ of the borrower entity as per the definition of ‘control’
in the Companies Act, 2013 / regulations issued by the Securities and Exchange Board of
India/any other applicable regulations / accounting standards as the case may be.
5. The conditions for implementation of RP are complied with.

Upon change in ownership, all the outstanding loans/credit facilities of the borrowing entity need to
demonstrate satisfactory performance during the monitoring period. If the account fails to perform
satisfactorily at any point of time during the monitoring period, it shall trigger a fresh Review Period.

The quantum of provisions (excluding additional provisions) held by the Bank against the said account
as on the date of ‘Change in Ownership’ of the borrowing entities can be reversed only after the end
of Monitoring period subject to satisfactory performance during the same.

Bank will be subjected to stringent supervisory /enforcement actions by RBI as deemed appropriate
on any action by Bank / Lenders with an intent to conceal the actual status of accounts or evergreen
the stressed accounts, including but not limited to, higher provisioning on such accounts and
monetary penalties, which may be in addition to direction to Bank /s to file insolvency application
under IBC.

Gist of Circular on Framework for Revival and

Rehabilitation of
Micro, Small and Medium Enterprises (MSMEs)

This policy outlines a framework for dealing with stressed accounts held by Micro, Small and
Medium Enterprises (MSMEs). It details a committee-based approach to assess the situation,
propose solutions, and potentially restructure the loans. The provisions under the
Framework shall be applicable to MSMEs having loan limits (Aggregate Exposure) upto Rs. 25
crores, including accounts under Consortium or Multiple Banking Arrangement (MBA). This
framework will cover all types of MSME customers such as Individuals, Proprietorship,
Partnerships, Limited Liability Partnership, Association of persons, Companies registered
under Indian Companies Act, etc.

Revival and Rehabilitation of MSME :

Identification of Incipient Stress by Banks or Creditors:
In respect of accounts with aggregate loan limits upto Rs. 10 lakhs and identified as SMA-2,
the account should be mandatorily examined for CAP by the Branch itself under the
authority of the Branch Manager / Designated Official as desired by Regional Office, while
account with aggregate loan limits above Rs. 10 lakhs to be forwarded to committee within
5 working days for suitable Corrective Action Plan(CAP)

Identification by the Borrower Enterprise:

Any MSME borrower, by making an application, may voluntarily initiate proceedings under
this Framework, under the following circumstances, if the Enterprise reasonably
apprehends,

 Failure of its business or

 It’s inability or likely inability to pay debts or
  There is erosion in the net worth due to accumulated losses to the extent of 50% of
its net worth during the previous accounting year.
Committee Structure:
A committee at the regional office level is formed with representatives from the bank,
government, and an independent expert. This committee decides on the resolution options
for stressed accounts.

Account Identification:
Accounts are identified as stressed based on their classification (SMA) or borrower
application. Accounts with loan limits above Rs. 10 lakhs are automatically referred to the
committee.

Application to the Committee for a Corrective Action Plan:

Any Branch / Lender shall forward the cases having aggregate loan limits above Rs.10 lakhs
to the Committee for immediate convening of meeting when a Branch / Lender identifying
an MSME account as SMA-2 or suitable for consideration under the Framework or on receipt
of an application from the stressed Enterprise. Based upon the same the Committee shall
take a decision on the option to be adopted under the CAP, as discussed in the subsequent
part of this framework, within 30 days of convening its first meeting for a specific
Enterprise. The decision so arrived at should be notified to Enterprise within 5 working days
from the date of such decision. If the CAP decided by the Committee envisages
“Restructuring of Debt” of the Enterprise, then the Committee shall Conduct a detailed
Techno-Economic Viability (TEV) study. Finalize the terms of such restructuring, in
accordance with the extant prudential norms for restructuring within

 20 working days (for accounts having Aggregate Exposure (AE) upto Rs. 10 crores)
and
 30 working days (for accounts having Aggregate Exposure (AE) above Rs. 10 crores
and upto Rs. 25 crores) and
 Notify the Enterprise about such terms within 5 working days.
Once the terms of CAP are finalized, the implementation of that plan shall be completed by
the concerned Branch within

 30 days, if the CAP is Rectification and

 90 days, if the CAP is Restructuring

Corrective Action Plan by the Committee:

The committee can consider three main options:

Rectification:

 The borrower takes corrective actions to regularize the account within a specific
time frame, potentially with additional need-based financing.
 The Committee, if necessary, may also consider providing additional need-based
finance to the borrower as part of the rectification process. The need based finance,
is intended only for meeting, in exceptional cases, unavoidable increased working
capital requirement and such additional finance should normally be an adhoc facility
to be repaid or regularized within a maximum period of six months.
  And if this finance or funding not in compliance with the above conditions, will be
tantamount to restructuring. Also, In cases where the account has been reported as
fraud by any lender then no additional finance should be sanctioned under CAP.
Restructuring:

 The loan terms are modified (e.g., extended repayment period) to make them more
manageable for the borrower. Requires a detailed techno-economic viability (TEV)
study for accounts exceeding Rs. 10 crores.
 The Committee can consider “Restructuring” when the unit / business are prima
facie viable and the borrower is not a willful defaulter. In other words, there is no
diversion of funds, fraud or malfeasance etc. Also, the decisions agreed upon by a
majority of the creditors, 75% by value and 50% by number, in the Committee would
be considered as the basis for proceeding with the restructuring of the account.
 It may so happen that Enterprise requires additional finances to restructure or revive
the account. The promoter’s contribution in the additional finance should be equal
to or more than the proportion at the time of original sanction such additional
funding provided under restructuring / rectification as a part of CAP will have priority
in repayment over repayment of the existing debts.
Recovery:

 The process of recovery may be resorted to if the first two options, Rectification and
Restructuring, are not found feasible. If rectification or restructuring is not feasible,
the committee recommends the best legal or other recovery methods to maximize
debt recovery.

Restructuring by the Committee:

The Committee shall take up restructuring of assets only in respect of assets which are
reported as “Standard”, “Special Mention Account” or “Sub-Standard” by one or more
Lenders of the Committee also where it is doubtful with one or two lender/s but is
“Standard” or “Sub-Standard” in the books of majority of the other lenders by value. Willful
defaulters, Cases of Fraud and Malfeasance shall not be eligible for restructuring.

Review Mechanism:
In case the Committee decides that recovery action is to be initiated against an Enterprise,
such Enterprise may request for a review of the decision of the Committee within a period
of ten (10) working days from the date of receipt of the decision of the Committee. A review
application shall be decided by the Committee within a period of thirty (30) days from the
date of filing and if as a consequence of such review, the Committee decides to pursue a
fresh corrective Action Plan, it may do so.
 Policy on relief measures by banks in areas
affected by Natural Calamities -2024-25

Periodical but frequent occurrences of natural calamities take a heavy toll on human life and
developmental role assigned to the commercial Banks and co-operative Banks, warrants their active
support in revival of the economic activities. In terms of National Disaster Management Framework,
there are two funds constituted for providing relief in the affected areas:

I. National Disaster Response Fund and

II. State Disaster Response Fund

12 types of natural calamities are recognized as under

i. Cyclone, ii. Drought, iii. Earthquake, iv. Fire, V. Flood, vi. Tsunami, vii. Hailstorm, viii.
Landslide, ix. Avalanche, x. Cloud Burst, xi. Pest Attack And xii. Cold Wave/Frost.

Of these 12 calamities, Ministry of Agriculture is the nodal ministry for 4 calamities i.e. drought,
hailstorms, pest attack and cold wave/frost and the remaining 8 calamities are looked after by
Ministry of Home Affairs

The Bank's contribution in providing relief relates to rescheduling of existing loans and sanctioning
of fresh loans as per the emerging requirements of the borrowers. These directions are issued
covering following six aspects:

I. Institutional Framework,

II. Restructuring of Existing Loans,

III. Providing Fresh Loans,

IV. Other Ancillary Relief Measures

V. Riots and Disturbances and applicability of guidelines.

VI. Natural Calamities Portal : Monthly Reporting

In the event of the calamity covering entire State/larger part of a State, the convener of the State
Level Bankers' Committee (SLBC) will convene a meeting immediately after the occurrence of
natural calamity to evolve a coordinated action plan for implementation of the relief programme in
collaboration with the State Government authorities. In case the calamity has affected only a small
part of the State/few districts, the conveners of the District Consultative Committees (DCC) of the
affected districts shall convene a meeting immediately. In these special SLBC/DCC meetings, the
position of the affected areas will be assessed to ensure speedy formulation and implementation of
suitable relief measures.

The common thread to extend relief measures including reschedulement of loans by Bank is that
the crop loss assessed should be 33% or more. For assessing this loss, in some States crop cutting
experiments are carried out to determine the loss in crop yield, while some others rely on the eye
estimates/visual impressions.

RESTRUCTURING/RESCHEDULING OF EXISTING LOAN

Short-term Production Credit (Crop Loans)
All short-term loans, except those which are overdue at the time of occurrence of natural calamity,
shall be eligible for restructuring, to be converted into term loan within 3 months from the date of
natural calamity.

A maximum period of repayment of up to 2 years if the loss is between 33% and 50%, 5 years if is
50% or more (including the moratorium period of one year in both cases). No further security
guarantee is required.
Long term (Investment) Credit
The existing term loan installments to be rescheduled keeping in view of the repaying capacity of the
borrowers and the nature of natural calamity.
Natural Calamities where only crop for that year is damaged and productive assets are not damaged.
In such cases Bank will reschedule the payment of regular installment during the year of natural
calamity and extend the loan period by one year. Cases where productive assets are also damaged
fresh loan may be considered in case to case basis depending on the eligibility with max repayment
of 5 years
For other than agriculture loans if decision is taken by SLBC/DCC for providing relief, than case to
case basis bank can assess the viability and postpone the recovery of existing instalments and fresh
finance.
Bank shall also grant consumption loan up to Rs.10,000/- to existing borrowers without any collateral.
The limit may, however, be enhanced beyond Rs.10,000/- at the bank's discretion based on SLBC
recommendation.
The fresh loan shall be granted even if the value of security (existing as well as the asset to be
acquired from the new loan) is less than the loan amount.
As notified by the Government of India, an interest subvention of 2% per annum will be made available
to banks for the first year on the restructured loan amount. Such restructured loans will attract
normal rate of interest from the second year onwards. If High level Committee and sub committee
of National executive committee recommends, an interest subvention of 2 percent per annum will
be made available to banks for the first three years/entire period (subject to a maximum of five
years) on the restructured loan amount. Further, in all such cases, the benefit of prompt repayment
incentive @ 3% per annum shall also be provided to the affected farmers.
In areas where the bank branches are affected by natural calamity and are unable to function
normally, Bank will operate from temporary premises, under advice to RBI. For continuing the
temporary premises beyond 30 days, specific approval to be obtained from the concerned Regional
Office (RO) of RBI.
Bank may take to alleviate the condition of affected persons will be waiving ATM fees, increasing
ATM withdrawal limits; waiving overdraft fees; waiving early withdrawal penalties on time deposits;
waiving late fee for credit card/other loan installment payments and giving option to credit card
holders to convert their outstanding balance to EMls repayable in 1 or 2 years.
RBI advises the bank from time to time to extend rehabilitation assistance to the riot, disturbance
affected persons, and it should be ensured that only genuine persons, duly identified by the State
Administration as having been affected by the riots I disturbances, are provided assistance as per the
guidelines. In the event of large scale riots , where most parts of the State/ Area are affected and
the State Administration is not in a position to identify the riot I disturbance affected persons and
subject to SLBC s specific decision , the onus of identifying 'genuine persons" will rest with Banks.
FGM in case the calamity has affected in a State covering the jurisdiction of respective zone will be
vested with discretionary powers for adoption of relief measures, during the time of natural calamity
for scales of finance, need based restructuring of loans, extension of loan periods, sanction of new
loans keeping in view the total liability of the borrower, margin, and security as per their delegations.
However, if SLBC declares any special scheme for natural calamity affected area, wherein concession
in Rate of Interest, processing charges or any other relaxation is required for new loans, approval for
the same should be obtained from CAC-1.
Restructured portion of the account and additional finance, if any, shall be treated as "standard
asset" and its future asset classification will be governed by the terms and conditions of its sanction,
remaining portion will be governed by existing T & C.
While restructuring the loans in the areas affected by natural calamities, Bank will consider the
insurance proceeds, if any, receivable from the Insurance Company. Bank will adjust these proceeds
to 'restructured accounts' in cases where fresh loans have been granted to the borrowers.

POLICY ON NON-COOPERATIVE BORROWERS

AND WILFUL DEFAULTERS
NON-COOPERATIVE BORROWERS
Definition:
“A Non-Cooperative Borrower is one who does not engage constructively with his lender by defaulting
in timely repayment of dues while having ability to pay, thwarting lenders’ efforts for recovery of
their dues by not providing necessary information sought, denying access to assets financed /
collateral securities, obstructing sale of securities, etc. In effect, a Non-Cooperative Borrower is a
defaulter who deliberately stone walls legitimate effort of the lenders to recover their dues.”

Procedure for Classification and Reporting of Non-Cooperative Borrowers

• The cut off limit for classifying borrowers as non-cooperative would be those borrowers
having aggregate fund-based and non-fund based facilities of Rs.5.00 crores & above from
our Bank.
• Branches shall analyze their credit portfolio on an on-going basis to identify non-cooperative
borrowers and report the names of such borrowers to Regional office in a specified format.
• Regional Office shall scrutinize all the cases/ proposals forwarded by branches strictly in the
line of criteria.
• The consolidated list prepared by RO along with the recommendations of Regional Head shall
be forwarded to Zonal Office as per format.
• ZOs shall consolidate & finalize the names of borrowers to be declared as NonCooperative
for all RO’s & report those names along with recommendations of Zonal Head to SAM Vertical,
Central Office within 10 days after end of each quarter or more frequent basis say monthly
as per format.
• The Branches/Regional Offices shall make efforts to complete the examination for Non-
Cooperative borrower of all the accounts classified as NPA within a specified timeline (say 90
days from the date of NPA). In case of standard accounts, the same shall be completed within
90 days from the date of identifying the borrower as non-cooperative.
• SAM vertical shall consolidate the recommendations received from all ZOs and place before
the ED headed Committee (Approving Committee).
• If the Committee concludes to classify borrower/s as Non-Cooperative, it will advise
concerned RO to issue a Show Cause notice as per format to the concerned borrower, calling
for their submission within a maximum period of 15 days from the date of receipt of the
notice.
• After considering their submissions (vis-a-vis justification/s from Regional Office as per “NCB
Review Format) the committee shall approve the names of borrowers to be reported as Non-
Cooperative under CRILC (Central Repository of Information on Large Credits) by recording
the reasons for the same. The committee may provide an opportunity to the borrower/s for
a personal hearing if it feels the opportunity is necessary. However, borrowers may be
allowed for personal hearing through Video Conferencing (VC) at nearest ZO/RO of Union
Bank of India or from their own device who are unable to attend meetings due to exceptional
reasons after obtaining permission from SAM Vertical. SAM vertical will explore the possibility
of recording the proceedings of personal hearing with the borrower when it is done through
Video Conferencing.
 • The decision of approving Committee shall be reviewed by Review Committee headed by the
MD&CEO along with two independent directors of the Bank and the order of approving
committee shall become final only after it is confirmed by the said Review Committee.
• The whole process of identification of the borrower as non-cooperative borrower shall be
completed within a reasonable time say 3 months. However, if the ED headed Committee
(Approving Committee) doesn’t pass an Order declaring a borrower / guarantor etc. as Non-
Cooperative, then the Review Committee need not be set up for review of such decision.
• Duly approved & reviewed list of Non-Cooperative Borrowers with required information shall
be reported to CRILC under CRILC Main within 21 days after end of each quarter.

Procedure for Declassification of Non-Cooperative Borrowers

• Consequent upon return of Non-Cooperative Borrowers to credit discipline and cooperative
dealings, Branch shall initiate the process of declassifying such borrowers as Non-
Cooperative. Branch shall recommend with specific evidence marking their return to credit
discipline and cooperative dealings to Regional office.
• The request for declassification should be forwarded to SAM Vertical, Central Office with
due recommendations of respective Regional Head & Zonal Head confirming the return
of the borrower to credit discipline and cooperative dealings.

• All the requests for declassification shall be placed before the Board of Directors on half
yearly basis (preferably during the month of August & February) for review. The decision for
declassification/ continuation of Non- Cooperative status as decided by Board of Directors
shall be final.
• Upon approval for declassification by Board of Directors, removal of names from the list
of Non-Cooperative borrowers should be separately reported to RBI (under CRILC) with
adequate reasoning/ rationale for such removal.

Provisioning
• Higher provisioning as applicable to sub-standard assets is to be made in respect of any
fresh loan/exposure to Non-cooperative Borrower.
• Higher provisioning is also applicable to new loans sanctioned to any other company
that has on its Board of Directors any of the whole-time directors /promoters of a non-
cooperative borrowing company or any firm in which such a non- cooperative borrower
is in charge of management of affairs.
• However, for the purpose of asset classification and income recognition, the new loans
would be treated as standard assets.

Reporting
• Information on non-cooperative borrowers should be reported to CRILC under CRILC Main
(Quarterly Submission) return as per the prescribed timelines.

WILFUL DEFAULTERS OF Rs.25 LAKH AND ABOVE

Definition of ‘Lender’, ‘Unit’ and Wilful Defaulter

• Lender: The term ‘lender’ covers all Banks/FIs to which any amount is due, provided
it is arising on account of any banking transaction, including off balance sheet
transactions such as derivatives, guarantee, Letter of Credit, loans, bonds, Non-
convertible Debentures (NCD) or such other investments made by the Bank.
• Unit: The term ‘unit’ includes individuals, juristic persons and all other forms of
business enterprises, whether incorporated or not. In case of business enterprises (other
 than companies), Bank to report (in the Director column) the names of those persons
who are in charge and responsible for the management of the affairs of the business
enterprise. It is clarified that individual as well as corporate guarantor is covered under
the definition of Unit.
• Wilful Default: A "wilful default" would be deemed to have occurred if any of the
following events is noted:

 The unit has defaulted in meeting its payment / repayment obligations to the lender
even when it has the capacity to honour the said obligations.

 The unit has defaulted in meeting its payment / repayment obligations to the lender and
has not utilised the finance from the lender for the specific purposes for which finance
was availed of but has diverted the funds for other purposes.

 The unit has defaulted in meeting its payment / repayment obligations to the lender and
has siphoned off the funds so that the funds have not been utilised for the specific
purpose for which finance was availed of, nor are the funds available with the unit in
the form of other assets.

 The unit has defaulted in meeting its payment / repayment obligations to the lender and
has also disposed off or removed the movable fixed assets or immovable property given
for the purpose of securing a term loan without the knowledge of the bank/lender.

Diversion and siphoning of funds

Diversion of funds, would be construed to include any one of the undernoted occurrences:

• Utilisation of short-term working capital funds for long-term purposes not in conformity
with the terms of sanction

• Deploying borrowed funds for purposes / activities or creation of assets other than those
for which the loan was sanctioned.

• Transferring borrowed funds to the subsidiaries / Group companies or other corporates

by whatever modalities.

• Routing of funds through any bank other than the lender bank or members of consortium
without prior permission of the lender.

• Investment in other companies by way of acquiring equities / debt instruments without

approval of lenders.

• Shortfall in deployment of funds vis-à-vis the amounts disbursed / drawn and the
difference not being accounted for.

Siphoning of funds:
• Siphoning of funds should be construed to occur if any funds borrowed from banks / FIs
are utilised for purposes un-related to the operations of the borrower, to the detriment
of the financial health of the entity or of the lender.
• The decision as to whether a particular instance amounts to siphoning of funds would
have to be a judgment of the Bank based on objective facts and circumstances of the
case.
Cut-off limits:
• All the borrowers identified as wilful defaulters or the promoters involved in diversion/
siphoning of funds, keeping in view the present limit of Rs.25 lakh fixed by the Central
Vigilance Commission for reporting of cases of wilful default by the Bank to RBI, any
wilful defaulter with an outstanding balance of Rs. 25 lakh or more, would attract the
penal measures.
• This limit of Rs. 25 lakhs may also be applied for the purpose of taking cognizance of
the instances of 'siphoning' / 'diversion' of funds.
• All accounts with outstanding amount of Rs.25 lac and above, which are not identified
as wilful defaulters should be reported as non-wilful defaulters by Zonal Office to
Central Office on monthly basis.

Mechanism for identification of Wilful Defaulters:

• Branch has to identify and recommend the wilful defaulter/s out of the accounts those
have slipped into NPA category for each quarter or more frequent basis say monthly in
their region.
• The recommendation as per the “WD Format” should be submitted within 7 days from
the end of each quarter or more frequent basis say monthly to regional office.
• The Branches /Regional Offices shall make efforts to complete the examination for wilful
default of all the accounts classified as NPA within a specified timeline (say 90 days from
the date of NPA).
• ZLCC at ZO shall forward the proposal to SAM Vertical at Central Office along with their
observations/ recommendations. The consolidated list of all such recommendation/s
shall be placed before “Committee headed by Executive Director”.
• Branch should also submit all the documentary evidence justifying Wilful Default along
with their recommendation.
• The submitted evidence (ZO recommendation/s) of wilful default on the part of the
borrowing company and its promoter/whole-time director/guarantor shall be examined
by a “Committee headed by an Executive Director”.
• In case the Committee decides to declare the borrowers / directors / guarantors as
Wilful Defaulter then it will pass an order. The Order of the Identification Committee
and the appeal against the order by borrowers/ directors/ guarantors shall be reviewed
by “Review Committee” and the Order shall become final only after it is confirmed by
the said “Review Committee”.

Reporting:
Inclusion of Director Identification Number (DIN)

• Ministry of Corporate Affairs had introduced the concept of a Director Identification

Number (DIN) with the insertion of Sections 266A to 266G of Companies (Amendment)
Act, 2006.
• In order to ensure that directors are correctly identified and in no case, persons whose
names appear to be similar to the names of directors appearing in the list of wilful
defaulters, are wrongfully denied credit facilities on such grounds, Director
Identification Number (DIN) is to be included as one of the fields in the data submitted
to Reserve Bank of India / Credit Information Companies.

Publishing of photographs of Wilful Defaulters

• Bank may consider publication of the photographs in media of only those borrowers,
including proprietors/ partners /directors / guarantors of borrower firms/ companies,
who have been declared as wilful defaulters as per the mechanism set out in the Policy.
 • This shall not apply to the non-whole time directors who are exempted from being
considered as wilful defaulters unless the special conditions mentioned in the policy, are
satisfied.

Provisioning Norms

• The provisioning in respect of existing loans/exposures to companies having director/s (other

than nominee directors of government/financial institutions brought on board at the time of
distress), whose name/s appear more than once in the list of wilful defaulters, will be 5% in
cases of standard accounts; if such account is classified as NPA, it will attract accelerated
provisioning.
• This is a prudential measure since the expected losses on exposures to such borrowers
are likely to be higher.

RECOVERY MANAGEMENT POLICY

Narasimham Committee recommendations were implemented by Reserve Bank of India in 1993 and
Income Recognition norms were changed from accrual to actual recovery and norms for classification
of loan accounts as Non-Performing Assets (NPAs) were introduced in the Bank.

Regional Office should submit to Central Office Status Reports of NPA accounts of above Rs.5.00 Crore
and above with updated latest information and all remedial measures initiated with a copy to
respective ZO on or before 7th day of succeeding month at the end of every quarter. In case of newly
slipped accounts the Status Report should be submitted within 7 days of account turning NPA without
waiting till the end of the quarter.

RO should call for Status Reports of NPAs of less than Rs.5.00 Crore and corrective actions should be
initiated immediately.

Eligibility Criteria & Principles Governing

It should be kept in mind that compromise settlement is a business decision and not an administrative
decision

Asset tracing of borrowers/guarantors should be done using empanelled Asset investigation Agencies
and wherever properties not mortgaged to our bank are identified, they should be attached through
competent court in all NPA accounts with R/L outstanding Rs.5 Crs and above.

The 'MODULE' approach

Parameter Module-I Module-II
R/L balance is up to Rs.25.00 lac R/L balance > Rs. 25 lakhs upto Rs.
Eligibility and 1.00 Crore and

Age of NPA > 2 years (as on end of previous quarter)

security coverage more than security coverage more than 100%
150%

NPA accounts with age<=2 years as on EPQ

NPA accounts which are classified as fraud/wilful
Exemption
NPA in Credit Cards issued by CC & MAB
NPA in Gold Loans/Loan against Deposits/ KVP/NSC/Insurance policy /
Loan against Bonds which are having unliquidated security
 NPA in Staff Loans

Module-III
Applicable to all accounts above 1.00 Cr and for those which are not fitting under Module I and Module
II approach.

Scoring model for calculation of minimum settlement amount to be sought from the
borrowers/guarantors while entering into compromise settlement.

Realizable value & marketability of available securities charged to the Bank if the advance/loan is
secured, Aggregate means of borrowers/guarantors i.e. income, other unencumbered assets etc.
excluding those that are already charged to the Bank and Legal position of the Bank (when Bank’s
legal position is weak, bargaining power is reduced) are used as inputs for scoring

Crystallized dues
It is defined as the present RL balance plus interest at 1-year MCLR prevailing on the date when an
acceptable offer from the borrower is received at simple rate from the date of NPA till the end of
the previous quarter.
Valuers may not factor in the effect of above legal issues, while giving valuation. In such an event,
opinion from a panel advocate or Law Officer on these legal issues should be obtained and if found
that it is very difficult to disentangle the security from legal issues, then, aggregate score under the
module may be reduced by further 3 points, where aggregate score is 15, under the module.
Minimum Settlement Amounts
The amount that needs to be considered for settlement tabulated as under:

In any case, the settlement amount should not be less than the Net Present Value of realizable value
of available securities net of cost of realization (NPV).

Securities available with the Bank should be released only after receipt of entire OTS amount.
However, the delegated authority may sanction OTS with a provision for release of securities one by
one as part of OTS. In those cases, at the time of sanction it should be ensured that preferably prime
and valuable/easily marketable properties are retained and not released before entire OTS amount
is received by the Bank.

There should not be any penal interest (that is added to the rate of interest charged on the advances)
or penal charges levied on the NPA loan accounts and any penal interest /charges levied prior to the
account turning NPA shall be stopped forthwith

Under Direct Agricultural Advances with balance o/s of up to Rs.10 lac the realizable value of
Primary/ Collateral security will exclude the Agricultural land offered as security. However, security
available other than agricultural land shall be taken in to consideration for arriving at the NPV as
hitherto for.
Net Present Value (NPV):

Discount rate equivalent to 1 year MCLR plus spread of 3% may be applied. Spread of 3% is taken
considering on an average, Bank would be able to deploy the settlement proceeds to a new borrower.

Sacrifice and Total Relief amount:

Difference between crystallized dues and the settlement amount offered by the party is called
Sacrifice. Delegated authority set out in the policy shall be exercised with reference to the said
sacrifice.

Total amount of (Contractual dues - Settlement amount) is defined as Total Relief

Upfront Amount
Upfront Amount of 10% to OTS value to be taken and kept in an ‘Escrow/ ‘No Lien Account’ with a
mandate to appropriate the proceeds towards adjustment of the dues in the event of acceptance of
OTS proposal.

As far as possible, settlement amount should be recovered in a lump-sum within a period not
exceeding 3 months. For the first 3 months from the date of communication of one time settlement
(OTS) sanction, interest is not chargeable on OTS.

In case the borrower requests for payment of Compromise amount beyond 3 months, the request of
the borrower can be considered on merits by the sanctioning authority on the condition that the
borrower has to pay along with interest @ 1year MCLR (simple) as on the date of sanction on
diminishing balances beyond 3 months from the date of communication of compromise approval till
the date of final payment.

As per RBI guidelines, compromise proposal where time for payment of agreed settlement amount
exceeds 3 months shall be treated as restructuring and may attract increased provisioning. For
facilitating proper reporting of the same, separate label is created in Finacle which needs to be
affixed wherever repayment period exceeds 3 months.

Appropriation of recovery other than by way of OTS & NCLT

Term Loans Running Accounts
1. Towards expenses & costs 1. Towards expenses & costs etc
2. Towards unrecovered interest reversed on
the date of NPA 2. Towards interest held in dummy ledger
3. Interest held in dummy ledger (unapplied (unapplied interest) including unrecovered
interest) interest reversed at the time of NPA.
4. Towards arrears of principal/EMI till the
date of recovery 3. Towards principal
5. Towards running ledger balance

Appropriation of recoveries by way of OTS & NCLT

1.Towards principal

2.Towards interest held in dummy ledger (unapplied interest) including unrecovered interest
reversed at the time of NPA
 3.Towards expenses & costs

Settlement in Wilful Default/Fraud

In cases of Wilful Default/Fraud (as reported to RBI) where it is not possible to recover the full amount
and the borrower is coming forward to offer settlement, all such proposals shall be considered on
case to case basis only as a commercial decision.

In all fraud / wilful default cases, where OTS/release of security to be considered, irrespective of
whether it is CBI case or police case, only Management Committee of the Board has the power to
approve the settlement, irrespective of the sacrifice involved.

Technical/ Prudential Write-Off

Technical/ Prudential write off will be resorted at Head Office level in case of domestic NPA accounts
and at Branch level in case of Overseas NPA accounts.

100% provided NPA accounts will be considered for Technical/ Prudential write off

The fact of Technical / Prudential write-off should be kept in strict confidence and not disclosed to
the borrowers under any circumstances. Recovery efforts in such accounts should continue to be
vigorously pursued by Branches (SARFAESIA actions/ Suit Filing/ Decree execution).

Delegation of Staff related NPA accounts

Eligibility Authority
In service staff related,
Staff guaranteed NPA accounts of the Award Staff and RLCC – I / RLCC – II
Officers up to and inclusive of Scale III
Officers in scale IV and above CAC-I
Staff who has given guarantee / availed loan has like any other compromise
retired or is not alive proposal

Delegation of authority for settlement proposals

Sacrifice (in Crores) Table
Approving Where Settlement Amt is not less than Where Settlement Amt* is less than
Authority Modular dues and NPV of Securities (both) Modular dues / NPV of Securities or
and repayment period upto 2 years both or repayment period >2 years
MCB Above 25.00 Above 25.00
CAC – I Up to 25.00 Up to 25.00
CAC- II Up to 15.00 Up to 15.00
CAC-III Up to 10.00 Up to 10.00
ZLCC Up to 6.00 Up to 2.00
RLCC – I Up to 2.00 Up to 1.50
RLCC – II Up to 1.50 NIL

Condonation of delay
Condonation of delay to be exercised only when minimum 25 % of sanctioned OTS amount has been
received.

In case the delay is beyond 3 years, the OTS should be treated defunct/cancelled and fresh
negotiation be held with the borrower and the proposal be placed before appropriate competent
authority for approval.
Approving authority for delay in condonation

Proposal sanctioned by Period of Delay Approving Authority

MCB, CAC I, CAC II, CAC III Up to 2 years CAC III
Up to 6 Months RLCC –I
ZLCC and below
Beyond 6 Months up to 2 years ZLCC
Permission for initiating action under SARFAESI Act
All actions under SARFAESI Act including issuance of Demand Notice under Sec.13 (2) shall be done
by Officers in Scale IV & above as Authorized Officer.

No permission is required for issuance of Notices under 13(2) and 13(4) SARFAESIA.

Permission for non-initiation or keeping abeyance of SARFAESIA Action is required to be obtained

from Zonal head with proper justification.

The Regional Office shall ensure initiation of SARFAESIA action in all eligible accounts by circulating
the eligible accounts at the beginning of each month i.e. within 3 working days and advise the
concerned Branches to confirm having initiated action.

Mega Filing Day:

Second Thursday (Next working day if Thursday is Holiday) of each month for filing Section 14
applications before CMM/DM/CJM.

CMM/DM/CJM orders are to be monitored by the CRD teams at RO/ZO/CO.

Valuation and Reserve Price

Reserve Price (RP) means minimum price below which property will not normally be sold in public
auction.

If the market value of the property is more than 1.00 Crore, minimum 2 valuations should be obtained
from different “Board Approved Valuers”.

If there is a huge variation between the two valuations (i.e.) by more than 10%, one more valuation
(C) should be taken from a different Board Approved Valuer. The average of the market value of the
two higher valuations should be reckoned for the purpose of fixing reserve price.

Valuation report should be as recent as possible but not more than 1 year old in case of
OTS/Compromise/Write off cases /Assignment of debt to ARCs/NBFCs/FIs.

In case of vehicle loans, Branch shall update the value of the vehicle in Finacle based on the latest
valuation obtained/depreciated value/value as per the insurance policy.

Agricultural loans backed by agricultural land as security and property is valued at above Rs.1.00
Crore at any point of time since last renewal then valuation should be obtained from our empanelled
valuer and higher of the value given by the empanelled valuer or circle rate should be taken into
consideration.

Vetting of valuation by Bank officials

Threshold Authority
More than Rs. 50 lacs and up to Rs. Valuation to be verified/ vetted by 2 officials of the Bank
5.00 Crores independently, one of the officials must be Branch Head.
More than Rs. 5.00 Crores Valuation to be verified/vetted by 2 officials of the Bank
independently, one of the officials must be Branch Head and
 other official from RO. In case of SAM Branch, Branch head and
another official from ZO

Re-fixation of Reserve Price after expiry of Valuation report (after 1 year)

Fresh Valuation Report is to be obtained after the expiry of one year.

Fixation of reserve price thereafter shall be based on the latest valuation report as a fresh process.

In case of such refixation, the value to be considered is Lower of (Reserve price for last failed auction
or Benchmark Value on Realizable value as per fresh valuation report).

Refixation of Reserve price when the fresh valuation is more than 125% of the immediately preceding
valuation

(1) Benchmark value on realisable value as per fresh valuation need to be arrived at
(2) Give effect to percentage reduction in RP in the preceding three months

Private Treaty Sale

Before going for private treaty, (In respect of all the property/ies irrespective of value of the
property) at least two attempts should have been made for sale of secured assets

If the time gap between the last failed auction date and the date of private treaty / sale exceed 12
months, fresh valuation report required

Reserve price fixed for the private treaty, should not be less than the last failed e-auction reserve
price.

Express/written consent of the borrower/ mortgager/ guarantor is not required for entering into
private treaty/ sale of the secured assets.

Guidelines for dealing with a case / account in NCLT post admission

Within 3 days of commencement of CIRP, The IRP appointed by the Tribunal invites claims from all
the creditors of the Corporate Debtor.

Sec.29-A deals with persons not eligible to be resolution applicant. (Resolution Professional is duty
bound to examine the eligibility but Banks also ensure compliance).

The CoC may approve a Resolution Plan by a vote of not less than 66% of voting share of the Financial
Creditors, after considering its feasibility and viability.

Dissenting creditor shall be provided with proportionate share of the liquidation value due and the
same should be paid before any recoveries are made by the financial creditors who voted in favour
of the resolution plan.

Holding on Operations
NPA account, unit/business is working and there are cash flows. However, the level of operations is
not adequate for repayment of the entire dues.

Bank may at the request of the borrower permit holding-on operations subject to cutback at a
reasonable percentage
Transfer of NPA A/cs to ARB/SAM Branches and Other Branches
NPA accounts with exposure of above Rs.25 Crore (book balance) and NCLT admitted cases
irrespective of amount shall be transferred to respective SAM Branches and non NCLT accounts with
running ledger amount above Rs.20 lakhs up to Rs.25.00 Crore shall be transferred to respective Asset
Recovery Branches (ARB).

Sale of pledged shares

Pledged shares being easily saleable liquid security should be enforced at first instance after
classification of account as NPA. (not later than a week from the classification of the account as
NPA.)

In case the pledged shares are of unlisted Company/ies, Bank may proceed for sale of pledged shares
by inviting quotations from public through news papers / Bank’s web site etc. Before sale of pledged
shares, a notice of invocation of pledge be issued to the pledgor of shares.

All the loans purchased from NBFCs/HFCs/MFIs/others under pool buy out/co lending policy are also
eligible for onetime settlement as per the modular approach/structured settlement scheme.

No Dues and Settlement Certificate

A “No Due certificate” should be issued only in cases where customer pays total contractual dues.

In cases where an NPA customer who had settled the account by means of One Time Settlement,
seeks for issuance of certificate regarding the same, a “Settlement certificate” should only be
provided.

If the guarantor has not created any security interest over his property but owns property and other
assets in the application for recovery filed before the Debt Recovery Tribunal, the Bank should move
application before DRT for attachment and sale of such property under section 19(12) to (18) of the
RDDB & FI Act, 1993.

Sale of Financial Assets to Asset Reconstruction Companies (ARC)

Financial asset that may be sold include Non-Performing Assets, Group Account, Standard Asset and
Asset reported as SMA-2 to CRILC.

The sale shall be a true sale and “as is where is” “as is what is” “whatever there” and “without
recourse” basis i.e., risk such as Credit Risk, Operational Risk, legal or any other type of Risk
associated with the financial asset should be transferred to ARCs.

Sale of a financial asset should not be for a contingent price whereby Bank will have to contribute
proportionately any shortfall in realization of such financial asset.

SCs/RCs have to prepare a plan within a period of six months from the date of assignment for
realization of NPAs of the selling Bank acquired for the purpose of reconstruction.

As per the revised RBI guidelines, Assets reported as Red flagged accounts (RFA) as well fraud or that
have been originated fraudulently shall be sold to ARCs. However, the responsibilities of the
transferor with respect to continuous reporting, monitoring, filing of complaints with law
enforcement agencies and proceedings related to such complaints shall also be transferred to the
ARCs.

There are 2 types of sale to ARCs

Portfolio sale Single Credit sale

 NPAs of group accounts, NPA accounts with common  sale of one particular NPA
security or NPAs of homogenous class such housing account to ARCS leveraging
loans, vehicle loans, consumer loans the size of loan and
underlying assets to obtain
 NPA accounts of a particular Branch or region or zone a good price
can be considered for sale, if such pool is conducive
and likely to elicit good price bids.

Sale to ARCS may be against the consideration of ‘Cash’, ‘Cash plus Security Receipts’ ‘bonds and
debentures’ etc., or such other structure as may be approved by the competent authority according
sanction for sale.

SAM Vertical, Central Office. shall place a separate Agenda Note on review of Doubtful Assets above
Rs.25.00 Crore to Board/Recovery Management Committee of the Board for a view on the exit options
including sale to SCs/RCs (below Rs.25.00 Crore account may not be included in Exit Option).

Branches/RO/ZO has to submit the PIMs and latest Valuation Report and recommendation for sale.

In case Bank’s approved valuer either does not confirm or certifies that value of stocks/book debts
is negligible, then for the purpose of sale, the value of stocks and book debts should be taken as NIL.

ARCs do not recognize personal/corporate guarantees backing the financial asset. Hence, for the
purpose of reserve price value of guarantees will be taken as Nil.

Similarly, in case of exposures beyond Rs.100 Crore (though the value of financial asset is below
Rs.5.00 core) then also two valuations shall be obtained and higher of them shall be considered as
value for the purpose of arriving reserve price.

In case no bid is received even after two reductions, CAC II will be empowered for further reduction
in the reserve price without any ceiling.

In case of Wilful / fraud accounts delegation vests with MCB irrespective of the sacrifice involved in
the account.

As a matter of Corporate Policy, we discourage bids with Security Receipts. Bank requests only for
“All cash bid” from bidders.

Asset Reconstruction Companies (ARCs) shall not acquire financial assets from the following on a
bilateral basis, whatever may be the consideration

(1) A bank/ financial institution which is the sponsor of the ARC

(2) A bank/ financial institution which is either a lender to the ARC or a subscriber to the fund,
if any, raised by the ARC for its operations
(3) An entity in the group to which the ARC belongs
SALE OF NON PERFORMING ASSETS (NPAs)
Under this policy, any financial asset including assets under multiple Banking or consortium would be
eligible for sale if it is a non performing asset/non performing investment in the books of the Bank,

NPA sale under this policy should be only on cash basis and without recourse. The entire sale
consideration should be received upfront and the asset should be taken out of the books of the Bank
only after receipt of the entire sale consideration.

Under Portfolio sale, each of the asset of the pool selected for sale must have remained as non-
performing asset at least 2 years in the books of the selling Bank.

CRD, C.O. shall place a separate Agenda Note on review of Doubtful Assets above Rs.25.00 Crore to
Board/Recovery Management Committee of the Board for a view on the exit options including sale to
Banks, NBFCs and FIs.

Recovery and Enforcement of Securities through Outside Agencies

Recovery Agents
Regional Office should review the performance of Recovery Agents on annual basis and depanel those
who are ineffective and new names can be added on merits. Performance review note should be
submitted to CRD, Central Office.

Delegation Authority for Empanelment of Recovery Agent/Enforcement Agent/Investigating

Agent/Bid Success Agent/Seizure Agent/e-Auction service provider on Pan India Basis vests with CAC
III at Central Office.

Branches and Regions should ensure that fee/commission/charges is negotiated and fixed upfront at
the time of entrusting the assignment.

Fee structure-

Recovery Amount Age of NPA <4 Years Age of NPA 4 Years and above
Upto Rs. 25 Lakhs 10% of the amount recovered 15% of the amount recovered
Above Rs. 25 Rs 2.50 Lakhs + 2.5% of the amount Rs 3.75 lakh + 4% of the amount
Lakhs and upto Rs. recovered in excess of Rs. 25 Lakhs recovered in excess of Rs 25 lakh
1 crores

Above Rs. 1 crores Rs. 4.37 lakh + 2% of the amount Rs 6.75 lakh + 2.5% of the am amount
and upto Rs. 10 recovered in excess of Rs. 1 Cr recovered in excess of Rs 1 Cr upto
crores upto maximum of Rs. 18 lakhs maximum of Rs 20 lakhs

Above Rs. 10 Rs. 18 lakh + 1% of the amount Rs 20 lakh + 1.25% of the am amount
crores recovered in excess of 10.00 Cr recovered in excess of Rs 10 Cr upto
upto maximum of 25 lakh maximum of Rs 30 lakh

Free access to files should not be allowed; instead Branch should go through the request for
information sought for by Recovery agent and provide necessary information.

Engagement of any Recovery Agent for Recovery in any account is for six months from the date of
their engagement.
In case there are no recoveries in six months from the date of allotment, the Recovery Agents will
have no right for any commission and the accounts will also be withdrawn from them for reallocation
to others.

Further extension in the time period beyond 12 (6 + 6) months from the date of their engagement
will be permitted by their respective Regional Head on case to case basis

Enforcement Agent
Assist the authorized officer appointed by Bank under SARFAESIA

(1) Taking possession of security under SARFAESI Act and selling the same towards the realization
of dues
(2) Seizure of goods/vehicles in exercise of Bank's contractual rights under deed of hypothecation.
(3) Liaise with police and judicial authorities and help the authorized officer of the Bank under
SARFAESIA in removing bottlenecks in realization of security under SARFAESI Act or otherwise.
(4) Assist the authorized officer of the Bank under SARFAESIA in storage, protection and quick
disposal of Security/goods/vehicles taken possession or seized by the Bank

Vacant plot Enforcement Agent (E.A.) should not be engaged. Authorized Officer (A.O.) himself to
obtain physical possession as per rules.

Bid Success Agent

Field functionaries & Authorized Officers have been remaining unsuccessful at the stage of e-auction,
“for want of bidders”. This process involves precious time and some good money.

Bid success agent is to be engaged only after failure of at least one auction of the property.

The role of the Bid Success Agents emerges after the Authorized Officer has taken possession of the
secured properties but before the bid submission date of e auction.

BSA helps in mobilizing the prospective bidders / purchasers for the secured assets put to e-auction
(both movable and immovable properties)

Investigation Agent (IA)

Absence of information about other properties of borrower/guarantors slows down further recovery.
Recovery efforts may not be fruitful if borrower is not traceable.

Eligibility-

(1) Detective agencies accredited by Law enforcement agencies,

(2) Revenue or tax or Police officials of government departments, who have left the service and
are offering Asset Investigation Services and
(3) Individuals actively assisting law enforcement agencies, whose services in the opinion of
Regional Head can be utilized for Asset Investigation work.

Code for Collection of Dues and Repossession of Security – 2019

The customer would be contacted ordinarily at the place of his/her choice and in the absence of any
specified place, at the place of his/her residence and if unavailable at his/her residence, at the place
of business/occupation.

Normally, the Bank’s representatives will contact the borrower between 0700 hrs and 1900 hrs, unless
the special circumstances of his/her business or occupation requires the Bank to contact at a different
time.
In case of hypothecated assets after taking possession if no payment is forthcoming, a sale notice of
7 days time to respond will be sent to the borrower. Thereafter, the Bank will arrange for sale of the
hypothecated assets in such manner as deemed fit by the Bank.

If the amounts are repaid, either as stipulated by the Bank or dues settled as agreed to by the Bank,
possession of seized assets will be handed back to the borrower within seven days after getting
permission from the competent/sanctioning authority and/or court/DRT concerned, if recovery
proceedings are filed and pending before such forums.

The name and address of all Recovery Agents on the Bank’s approved panel of the Bank will be placed
on the Bank’s website for information of the concerned.

Letters of engagement are case specific and hence should be given with respect to each case
entrusted to RA/EA/IA and no general letter of appointment should be given to RA/EA/IA.

Banks should inform the borrower the details of recovery agency firms/companies while forwarding
default cases to the recovery agency.

Banks are encouraged to use the forum of Lok Adalats for recovery of personal loans, credit card
loans or housing loans with less than Rs.20.00 lakh.

Every award of the Lok Adalat shall be deemed to be a decree of a Civil Court and no appeal shall lie
to any Court against the award made by the Lok Adalat.
 Pre-packaged Insolvency Resolution
Process(PPIRP)

Introduction:
Micro, small, and medium enterprises (MSMEs) are critical for India’s economy. They contribute
significantly to gross domestic product and provide employment to a sizeable population. Resolution
of their stress requires different treatment, due to the unique nature of their businesses and simpler
corporate structures. Therefore, it was considered expedient to provide an efficient alternative
insolvency resolution process under the Code for corporate MSMEs, that ensures quicker, cost-
effective and value maximising outcomes for all the stakeholders, in a manner which is least
disruptive to the continuity of their businesses, and which preserves jobs. PPIRP is built on trust and
honours the honest MSME owners by enabling resolution when the company remains with them.

PPIRP has the features, which make a CIRP sacrosanct, and has the rigour and discipline of the CIRP.
It is informal up to a point and formal thereafter.

It blends debtor-in-possession with creditor-in-control. It is neither a fully private nor a fully public
process - it allows the company, if eligible, to submit the base resolution plan (BRP) which is exposed
to challenge for value maximisation.

It safeguards the rights of stakeholders as much as in CIRP and has adequate checks and balances to
prevent any potential misuse. It entails a limited role of the courts and IPs.

Unlike CIRP, it does not yield if there is no resolution plan. Though PPIRP and CIRP are alternate
options, some stakeholders may one over the other in certain circumstances.

Eligibility for PPIRP :

A corporate Debtor (CD), which is an MSME under sub-section (1) of the section 7 of the Micro, Small
and Medium Enterprises Development Act, 2006, is eligible to apply for initiation of PPIRP, if it-

(i) has committed a default of at least ₹10 lakh;

(ii) is eligible to submit a resolution plan under section 29A of the Code;
(iii) has not undergone a PPIRP during the three years preceding the initiation date;
(iv) has not completed a CIRP during the three years preceding the initiation date;
(v) is not undergoing a CIRP; and
(vi) is not required to be liquidated by an order under section 33 of the Code.

PPIRP Process Flow - Key Highlights:

 Applicable only to corporate debtors classified as MSMEs under MSME Development Act, 2006.
 Covers corporate and LLP MSMEs; excludes partnership firms and individuals.
 Minimum due amount: Rs. 10,00,000.
 Special resolution or 75% partner approval (LLP) required to initiate PPIRP.
 Declaration by Directors/partners mandatory before initiating PPIRP.
 Corporate Debtor (CD) provides Base Resolution to Financial Creditors (FC).
 FC approval (66% voting by debt value) required to file PPIRP.
 FCs propose and finalize IRP with 66% voting.
 Application must be filed within 90 days by CD.
 IRP submits report before filing; Adjudicating Authority (AA) decides within 14 days.
 Moratorium and public announcement start upon admission.
 CD submits claims and preliminary memorandum to RP.
 RP finalizes claim list, constitutes CoC, and conducts meetings.
 CoC evaluates and may approve Base Resolution Plan.
  If rejected, other plans invited. Swiss Challenge method used.
 Resolution to be selected within 90 days.
 Sec 29 A exemptions for MSMEs apply.
 CoC approval with 66% voting needed for resolution plan.
 RP submits approved plan to AA or files termination if rejected.
 AA must pass order within 30 days; liquidation or management vesting in RP may apply.
 Penal provisions for Director/partner violations.

PPIRP Process Flow - Sec 29 A Restrictions (with MSME Exemptions):

 Sec 29 A restrictions apply in PPIRP, with exemptions for MSMEs.

 The following persons cannot submit a resolution plan if they, or those acting with them,
are:

1. Undischarged insolvents.
2. Willful defaulters as per RBI guidelines.
3. Convicted for offences with imprisonment of 2+ years (under IBC 2016) or 7+ years
under any law. (Not applicable 2 years after release from imprisonment).
4. Disqualified as a director under the Companies Act, 2013.
5. Prohibited by SEBI from trading or accessing securities markets.
6. Promoters or managers of a corporate debtor involved in preferential, undervalued,
extortionate credit, or fraudulent transactions, as ordered by the Adjudicating
Authority.

General Prerequisite Conditions for PPIRP:

 In the three years before initiation, the Corporate Debtor (CD) must not have:
 Undergone PPIRP.
 Completed a corporate insolvency resolution process.
 Be undergoing a corporate insolvency resolution process.
 No liquidation order should have been issued by NCLT against the CD.
 Sec 29A restrictions apply (with MSME exemptions); ineligibility under Sec 29A prevents PPIRP
initiation.
 Financial Creditors (FCs) holding at least 10% of the total financial debt (non-related parties)
can propose insolvency professionals. RP appointment requires 66% approval from FCs.
 CD's majority of Directors/Partners must declare that:
 Application for PPIRP will be filed within 90 days.
 PPIRP is not intended to defraud anyone.
 The proposed RP is approved by FC.
 Special Resolution:
 Company: CD must pass a special resolution for PPIRP initiation.
 LLP: 75% of partners must approve the application for PPIRP.
 CD must submit a Base Resolution Plan to Financial Creditors.

Appointment of Resolution Professional (RP) :

 Financial Creditors (FCs) holding at least 10% of total financial debt propose the RP.
 RP must be approved by 66% of FCs (non-related parties).
 Once approved, the RP prepares a report confirming that the Corporate Debtor (CD) and Base
Resolution Plan meet IBC requirements.

PPIRP Application Process:

 The Corporate Debtor (CD) must file an application with NCLT (AA) within 90 days, along with
an affidavit and required documents.
  Once all conditions under the Code are met, the CD submits the application in the prescribed
format to initiate PPIRP.

Commencement of PPIRP :
 If the application is complete, the AA must within 14 days:
(a) Admit the application, appoint the RP, and declare Moratorium, or
(b) Reject it if incomplete.

 PPIRP begins on the date of admission, with the CD's management remaining with the Board
of Directors.
 Upon admission, the AA appoints the RP and declares Moratorium.

 The RP, once appointed, must:

 Constitute the CoC.
 Appoint liquidation valuers.
 Prepare the Information Memorandum (IM).
 Present the Base Resolution Plan to the CoC.

 The CoC may approve the Base Plan or request improvements. If not approved, the RP has 21
days to invite new resolution plans.

Evaluation of Resolution Plan:

 The Resolution Professional (RP) presents the resolution plans that meet IBC requirements to
the CoC for evaluation.
 The CoC evaluates and selects one plan. If it is significantly better than the Base Plan, it may
be approved.
 If not, the Swiss Challenge method is used, where the RP discloses the scores of both plans.
 Submitters can improve their plans within 48 hours, and the highest-scoring plan is considered
for approval.
 The plan requires 66% CoC approval. Once approved, the successful applicant must provide
performance security within the specified time.

Order of Adjudicating Authority:

 Approval of Resolution Plan: The authority must approve the resolution plan within 30 days
if it meets requirements and ensures effective implementation.
 Rejection of Resolution Plan: The plan will be rejected if it does not conform to the
necessary requirements.
 Termination of PPIRP: The authority must terminate the PPIRP within 30 days of receiving a
termination application from the RP, addressing any ongoing proceedings for PUF
transactions.
 Vesting of Management: If satisfied, the authority may vest management of the Corporate
Debtor (CD) with the RP based on a resolution supported by 66% of CoC voting share.
 Initiation of CIRP: The authority can initiate the Corporate Insolvency Resolution Process
(CIRP) upon the RP's application, requiring 66% CoC voting share.
 Liquidation Order: The authority may issue a liquidation order if management has been
vested with the RP and the PPIRP needs to be terminated.

The order of approval or rejection is binding on the corporate debtor and all stakeholders, and the
moratorium order will cease to have effect. An appeal against an NCLT order can be filed with the
NCLAT. The Code includes penalties for wrongful submission of the List of Claims or Information
Memorandum (IM) and for fraudulent management during PPIRP. It also provides for the
commencement of CIRP, vesting management of the Corporate Debtor (CD) with the RP, and
liquidation of the CD.

Responsibilities of Corporate Debtor (CD) during PPIRP:

 Submission: Within two days, the CD must provide the preliminary Information Memorandum
(IM), Base Resolution Plan, and List of Claims to the Resolution Professional (RP).
 Management Conduct: The CD must not manage its affairs in a way that harms creditors'
interests or engages in fraudulent activities.
 Transaction Approval: The CD cannot undertake significant transactions without prior
approval from the Committee of Creditors (CoC).
 Monthly Reporting: The CD is required to prepare and send a monthly report to CoC
members.
 Contractual Obligations: The CD must fulfill all contractual obligations.
 Access for RP: The CD must allow the RP access to all relevant records, documents, and
accounts.
 Involvement in Meetings: The RP should be involved in all Board and committee meetings of
directors/partners.
 Value Preservation: The CD must make efforts to protect and preserve its property value
and manage operations as a going concern.

Duties of the Resolution Professional (RP):

Upon appointment/commencement of PPIRP, the RP shall:

 Public Announcement: Announce the initiation of PPIRP within two days.

 Valuation: Appoint two registered valuers within three days to determine the fair and
liquidation value of the corporate debtor.
 Committee of Creditors (CoC): Constitute the CoC within seven days based on the list of
claims.
 Meetings: Convene the first CoC meeting within seven days of its formation and hold
subsequent meetings thereafter.
 Information Memorandum (IM): Prepare, finalize, and submit the IM to financial creditors
(FCs) within fourteen days upon receiving a confidentiality undertaking.
 Claims Confirmation: Confirm and update the details of claims based on the CD's submissions
and relevant records.
 Base Resolution Plan: Present the Base Resolution Plan to the CoC.
 Voting: Allow CoC meetings and voting through video conferencing or electronic mode.
 PUF Transactions: Within thirty days, assess if the CD has undergone any Preferential,
Undervalued, or Fraudulent (PUF) transactions; file an application for adjudication by day
sixty if necessary.
 Resolution Applicants: Within twenty-one days, publish an invitation for prospective
resolution applicants if the CoC does not approve the Base Resolution Plan.
 Evaluation: Present compliant resolution plans to the CoC for evaluation.
 NCLT Application: Submit the approved resolution plan application to the NCLT (Adjudicating
Authority).
 Debt Repayment Notice: Within seven days of the NCLT's approval of a resolution plan, notify
each claimant of the repayment formula.
 Termination Application: File for termination of the PPIRP if no resolution plan is approved
by the CoC.

Role of the Committee of Creditors (CoC):

Prior to Commencement of PPIRP:
 Initiation Approval: Approve or dissent the initiation of PPIRP with at least 66% voting share.
 Resolution Professional (RP) Appointment: Approve the RP with a minimum of 66% of the
total financial debt and fix their fees and expenses.

During PPIRP:
 Fee Ratification: Ratify the fees and expenses of the RP.
 Base Resolution Plan Evaluation: Evaluate and decide on the Base Resolution Plan.
 Opportunity for Revision: Allow the corporate debtor (CD) to revise the Base Resolution Plan
before approval or inviting other resolutions.
 Shareholding Dilution: If the Base Resolution Plan impairs claims, the CoC may require
promoters to dilute their shareholding/control rights in the CD. The CoC must document
reasons for approval if no dilution is provided.
 Resolution Plan Selection: Evaluate and select a resolution plan presented by the RP.
 Evaluation Parameters: Determine criteria for evaluating resolution plans, including what
constitutes a significantly better plan.
 Tick Size Definition: Decide on the tick size, representing the minimum score improvement
required over another resolution plan.
 Other Approvals: Provide necessary approvals for various agendas.
 Resolutions: Pass resolutions to approve a resolution plan, terminate PPIRP, vest
management of the CD with the RP, or commence Corporate Insolvency Resolution Process
(CIRP).

Moratorium
Upon admission of the PPIRP application, the following applies:
 Recovery actions under SARFAESI, DRT, and other mechanisms against the corporate debtor
are halted.
 If any OA/Suit is filed, the advocate must inform the Court about the Moratorium.
 The Moratorium is effective from the order date until the end of the PPIRP period.
 The Moratorium does not extend to sureties in guarantee contracts for the corporate debtor;
thus, recovery actions against guarantors can continue, including DRT proceedings and
SARFAESI actions on guarantor properties.

Valuation
 After receiving resolution plans, the RP must provide the fair value and liquidation value to
CoC members upon receiving an undertaking letter.
 For any clarifications on the draft undertaking letter or if it contains onerous clauses, the
Branch should consult the Law Officer from ZO or LMW.
 If discrepancies arise in asset listings, valuations, or adopted methods, the Branch should
consult with ZO to address these issues with the RP/CoC and ensure resolution.

Information Memorandum
 The RP must submit a copy of the Information Memorandum (IM) to committee members
within 14 days of the pre-packaged insolvency commencement, after obtaining an
undertaking from a committee member.
 The Branch can request additional information from the RP or CD, who must provide it within
a reasonable timeframe if it impacts the resolution plan.
Penal Action for Wrongful Submission of List of Claims or IM
 Individuals who cause loss due to omission or misleading information in the list of claims or
preliminary information memorandum (IM) are liable for compensation.
 This applies to promoters, directors, or partners at the time of submission or those who
authorized the submission.
 Deliberate contravention of PPIRP provisions may result in imprisonment for 3 to 5 years,
fines ranging from ₹1 lakh to ₹1 crore, or both.
 Affected individuals may seek compensation through a court with appropriate jurisdiction for
any losses incurred.

Resolution Plan
 The Corporate Debtor (CD) can submit a base resolution plan either individually or jointly
with others to the RP.
 The RP will present the plan to the Committee of Creditors (CoC) for evaluation.
 The CoC can approve the base resolution plan with at least 66% of the voting share.
 If the CoC does not approve it, the RP will invite prospective resolution applicants to
compete.
 Upon receiving resolution plans, the RP will present them to the CoC for evaluation.
 The CoC will select a resolution plan if it is significantly better than the base plan.
 If no resolution plans are received, the base plan may still be considered for approval.
 If no plans are considered, the RP will disclose scores of the selected and base plans to
applicants and invite improvements using the Swiss Challenge method.
 The plan with the highest score after improvements will be considered by the CoC.
 Upon CoC approval by at least 66% of the voting share, the RP will file for approval with the
Adjudicating Authority (AA).
 If no plan is approved, the RP will file for termination of the PPIRP.
 The AA will decide within 30 days whether to approve the plan, terminate the PPIRP,
liquidate the CD, or initiate the CIRP process based on the RP’s application.
 The Branch will forward copies of the Resolution Plan to RO/ZO on the day of receipt and
provide observations and recommendations within three days.
 The Branch will assist in evaluating the resolution plan, scoring, and selection, while updating
all relevant developments and statuses regularly.
 Branch/RO/ZO will actively work towards finding resolutions through PPIRP in eligible cases
to maximize value and ensure timely recovery.

Time Limit for Completion of PPIRP

 The PPIRP process must be completed within 120 days from the commencement date.
 The RP must submit the resolution plan approved by the CoC within 90 days from the
commencement date.
 If no resolution plan is approved by the CoC within 90 days, the RP will file for termination
of the PPIRP with the Adjudicating Authority the following day.

TIMELINE AT A GLANCE :

Timeline Activities
Prior to filing application for PPIRP
- Convene Financial Creditors Meeting (Not related
90 days for filing PPIRP application by CD
parties)
- Submit Base Resolution Plan and declaration
 - Propose and approve appointment of RP by Financial
Creditors
- RP to submit Report
- Filing application by CD before NCLT

90 Days for Completion of PPIRP from

Admission
PPIRP commences from the date of
admission
T+0 - Appointment of RP and declaration of Moratorium
T+2 - CD to submit Base Resolution Plan, IM & List of Claims
T+2 - RP to cause Public Announcement
T+3 - Appointment of Valuers
T+7 - Constitution of Committee of Creditors
T+14 - First CoC Meeting, submission of IM to CoC Members
Before T+21 - Invitation of prospective resolution applicants
Before T+60 - Filing application for PUF transactions
T+90 - Complete the process of PPIRP and submit to AA
30 Days Timeline - Order of Adjudicating
Authority (NCLT)
- Within T+30 : Pass order on the application filed by RP

Diagrammatic representation of process:

 Guidelines on SARFAESI
Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest
Act 2002

Salient Features of the Act:

1. Enforcement of Security interest without the intervention of the Court.
2. Take possession of secured property by following simple procedure.
3. Auction of secured assets and ensuring early recovery.
4. Secured Creditors shall be paid in priority over all other debts and all revenues, taxes,
cesses and other rates payable to the Central Government or State Government or local
authority.
5. Private treaty sale without the consent of the mortgagor.
6. Restricts redemption of property up to the date of Publication of Sale Notice.
7. CERSAI Registration process eliminates multiple charge creation.
8. Time bound recovery action.

Eligibility Criteria:
1. Account should have been classified as NPA
2. The account should be a secured debt.
3. The dues (including uncharged interest) which are covered by the security held exceeds
Rs.1 Lakh (Rupees One Lakh)
4. The amount due is more than 20% of the principal amount (that had been lent) and interest
thereon.
5. The property held as security is not an agricultural land and used for agricultural purposes.
Where Agricultural lands are used for Non-Agriculture purpose, the same is not exempted.
6. The security held is not by way of lien on any goods, money or security given under the
Indian Contract Act, 1872
7. The security held is not by way of pledge
8. Any right of unpaid seller of goods under Sec. 47 of Sale of Goods Act 1930.
9. The property is not the one exempted from attachment or sale under 1st provision to Sub
Sec. 1 of Sec 60 of Civil Procedure Code, 1908.
10. The security Interest created in favour of the Bank is not in any aircraft under the Aircrafts
Act, 1934 or vessel under Merchants Shipping Act, 1958.

Timeline:
Time Action
O Day Date of Account turning NPA
1 to 7 Days  Ensuring CERSAI Registration
 Issue of Notice under Section 13 (2) of SARFAESI Act.
 Ensuring completion of Notice service.
7 to 15 Days  If returned unserved, issuing paper publication through Regional Office and
pasting notice on the addressee on whom the notice returned unserved.
15 to till possession  If any objection is received, reply to be sent by the Authorized Officer
taking within 15 days of receipt of such objection/s.
 Taking Constructive /Symbolic Possession of secured assets, publication
and pasting of possession notice (within 7 days from the date of
76 to 90 Days constructive /symbolic possession).
 Filling of Caveat wherever required.
 Valuation of secured assets.
 Filing Sec 14 Application for physical possession to CMM/DM/CJM.
 Complete the process of fixing reserve price.
 Time Action
91 to 100 Days  Issue of Sale Notice under Rule 6 (2)/ 8 (6) for sale of secured assets
(Mandatory Period of 30 days for first sale notice to be ensured) and
ensuring service of the said notice to Borrower. If required substituted
service to be completed by affixation and paper publication.
100 to 130 Days  Completion of 30 days period as per Rule 6 (2)/ 8 (6)
 Completing the process of taking Physical Possession through
CMM/DM/CJM.
131 to 165 Days  Publication of Sale Notice for sale of secured assets.
 E-Auction of secured assets.
165 to 180 Days  Remittance of sale price by successful bidder (within 15 days),
 In case Sale failed, issuance of second and subsequent sale notice with
reduction of reserve price.

The above-mentioned timeline is indicative one. However, branches/Authorised Officers shall

endeavour to strictly follow the said timelines to ensure that speedy recovery happens out of
SARFAESIA proceedings.

Issuance of demand notice under Section 13(2):

Authorized Officer to ensure-

1. CERSAI registration-

Section 26D provides that no secured creditor shall be entitled to exercise the rights of
enforcement of securities under SARFAESI Act unless the security interest has been
registered with CERSAI.

Registration of creation, modification and satisfaction of security interest with CERSAI is

made mandatory under SARFAESI Act.

On registration of the same, Bank dues get priority over all other statutory dues, taxes,
cesses, other debts payable to the State or Central Government.

2. Enforceability of documents

Ensure the loan documents including mortgage / charge creation / security documents
pertaining to the securities held are legally enforceable and well within the limitation time
period.

3. Limitation period

As per Article 62 of the Limitation Act, in cases of mortgage period of limitation is 12 years
and for movables 3 years.

Pendency of OA proceedings before the Debt Recovery Tribunal will not save the period of
limitation for a proceeding under SARFAESI Act, 2002.

4. Property Inspection & Present address

In order to ensure proper service of notice under SARFAESI, Branch should have the
communication address provided by the borrower, guarantor and mortgagor.

Compliance of notice service will become easier, if the present address and whereabout of
the borrower/guarantor/mortgagor is available.

5. Legal heir particulars in case of deceased borrower / guarantor

Action initiated against a dead person cannot be sustained in the eyes of law. Hence, where
the borrower/guarantor/ mortgagor expired, the only course open to the Bank is to initiate
 proceedings against the legal heirs of the borrower/guarantor, as the case may be, as the
legal heirs of the borrower/guarantor will have an opportunity to discharge the liabilities in
60 days.

Issuing Notice to all stakeholders

In order to invoke the provisions of SARFAESI Act, the Branch through its Authorized Officer
required to issue a demand notice under Section 13 (2) of the said Act to the borrower,
guarantor/s and mortgagor in writing calling upon them to discharge in full his liabilities to
the Bank within 60 days from the date of notice.

If the borrower / guarantors fail to pay the dues as demanded, the Bank shall be entitled to
exercise all or any of the rights under Sec. 13(4) of the Act.

Demand notice to be issued to all borrowers and all guarantors.

All actions under SARFAESI Act including issuance of Demand Notice under Sec.13 (2) shall
be done by Officers in Scale IV & above as Authorized Officer.

The Regional Head shall nominate Officers in Scale IV & above to act as Authorized Officers
from amongst the officers working in Regional Office/ Nearby Branches /ARBs under their
control for acting as Authorized Officer/s for branches that are headed by Branch Heads who
are below Scale IV.

No permission is required for issuance of Notices under 13(2) and 13(4) SARFAESI. Permission
for non-initiation or keeping abeyance of SARFAESIA Action is required to be obtained from
Zonal Head with proper justification.

As per the SARFAESI Act, Sec 13 (2) notice shall contain the following details-

 The amount payable by the borrower and

 The secured assets intended to the enforced by the secured creditor in the event of non-
payment of secured debts by the borrower.

Timeline for issuance of Sec13 (2) Demand Notice

Sec 13(2) Notice shall be issued within 7 days of account being classified as NPA.

The Regional Office, shall ensure initiation of SARFAESIA action in all eligible accounts by
circulating the eligible accounts at the beginning of each month i.e., within 3 working days
and advise the concerned Branches to confirm having initiated action.

On receipt of the list from Regional Office, Branch shall verify the list and ensure that all
eligible accounts are included, and action has been initiated.

In case any account is left out or to be eliminated, Branches may bring the same to the notice
of Regional Office immediately.

Precaution to be exercised while issuing Sec 13(2) Demand Notice

 Correct postal address of all borrower/ guarantors/mortgagor,

 NPA date
 Full details of the amount payable by the borrower (account wise outstanding balance,
interest accrued but not debited, aggregate principal amount, overdue interest, other
charges if any etc.)
 Interest calculation shall be as per the documents executed/agreed Rate of interest.
 Secured assets to be enforced. Details of the secured assets shall be as per the title
documents and latest valuation report.
No approval is required to be obtained from any authority if the notice under 13(2) is issued
is as per the format. However, if there is any change in the notice format, the same needs
to be referred to Law Officer attached to respective RO for approval.

No notice should be sent in the name of deceased person. In case of non-availability of all
Legal Representatives of the deceased, notice may be sent to the available LRs of the
deceased and along with the LRs the word “others” may be mentioned immediately after the
name of Legal Representative.

In order to have uniform system and tracking process on service and to avoid any possible
challenges, the Registered Post with Acknowledgment Due mode shall be preferred in all
cases except where circumstance warrants other mode of service.

Service of Notice

Constitution Whom to Serve the Notice

Individual Individual Borrower / Guarantor at his / her / their addresses or his / her
/ their agent empowered to accept notice.
death of On the legal heirs / legal representatives of the deceased or the
Borrower/s, Administrator / Executor appointed by the court
Guarantor/s
Mortgagor/s*
Declared Insolvent Official Receiver/Insolvency/Assignee appointed by Court.

Partnership Firm Its place of business / office registered under the Partnership Act
and Rules
Dissolved On all the partners at their place of present business and/ or residence
partnership Firm
Body corporate / The registered office or any of the branches of such body corporate
Company
Under CIRP Resolution Professional*
Under Liquidation Liquidator appointed by the Court*
Society / On the President / secretary at the Registered Office of the society Co-
Cooperative Society operative Society
Limited Liability On the Registered Office of LLP
Partnership
Trust On the Managing Trustee / Trustee at the Registered Office

In case of pending NCLT proceedings, no action under SARFAESI shall be taken against the
secured assets belonging to the person against whom such NCLT proceedings are pending.
However, SARFAESI action can be taken on the Mortgagor against whom no IBC proceedings
have been initiated/pending.

Where there are more than one borrower/guarantor, the demand notice shall be served on
each borrower/guarantor.

Service of Notice on all parties (borrower/s, guarantor/s and mortgagor) is a mandatory

procedure for initiating further action under the said Act.

Refusal to receive the notice by the borrower/guarantor can be treated as served. In such
cases, the cover with return endorsement should be kept properly without opening the cover.

If notice returned unserved-Alternate method of service

If the demand notice is returned unserved for the reason “other than refused to accept” the
notice or service cannot be made, the service in such cases shall be made by:
 1. Affixing copy of the demand notice on the outer door or some other conspicuous part
of the house or building where the borrower/secured debtor or his authorized agent
ordinarily resides or carries on business or personally works for gain and

2. Publishing the contents of demand notice in 2 leading newspapers out of which 1 in

vernacular language having sufficient circulation in the locality.

Publication of Demand Notice shall be done through Regional Office or under the guidance
of Regional Office.

Where the publication of notice is required for multiple borrowers/accounts, the Regional
Office/ branch shall take steps for publication of combined notice which will save the cost
of publication.

Precautions for pasting of notice

Photograph with affixture of notice shall be taken and the copy of the same to be kept on
records.

Photograph shall focus on the premises where notice pasted.

4 copies of each paper publication shall be kept on record for the purpose of evidence.

The newspaper containing the publications should be preserved in whole since cutting of the
portion containing the publication is not accepted by Courts/Tribunal.

Other Precautions

By serving the Notice under 13(2), Mortgagor is restrained to transfer the secured assets by
sale or lease or otherwise. This provision shall act as a deemed attachment and if there is
any alienation after receipt of Sec 13(2) Notice, the same can be challenged.

In case where common security created in more than one account, though one single notice
to secured debtors can be given, Branch shall issue separate notices on borrower wise so as
to avoid challenges and litigations.

In case of consortium or multiple finance where common security is /are involved, no consent
or permission is required from other lenders for issuing Sec 13(2) Demand Notice. Only in
case of taking possession, such consent is required.

Recall of 13(2) Notice

In case the first notice served under section 13(2) is found to be irregular or defective, in
such cases fresh notice under Sec 13(2) shall be issued by either recalling the earlier 13(2)
Notice or in the fresh notice, the secured debtor(s) and guarantors must be informed in the
second notice that the first notice stands withdrawn and be deemed ineffective. In such an
event the statutory period of 60 days shall run afresh from the service of the second notice.

After issuance of Sec 13(2) Demand notice, if the borrower regularizes the account or the
account is reviewed/renewed by the Sanctioning Authority, notice issued under Sec 13 (2)
may be treated as ceased to have its effect. If subsequently the account again becomes NPA,
the action under SARFAESI, is to be taken afresh.

Representation from Borrower against 13(2) Notice

If any representation or objections on 13(2) notice is received, the same is required to be

replied by the Authorised Officer (AO) within 15 days from the date of its receipt.

Law Officer attached to Regional Office (in absence-Zonal Law Officer), on receipt of Branch
comments and copy of representation, shall provide draft reply in a time bound manner so
as to ensure that the reply is sent by the authorized Officer within 15 days from the date of
receipt of such representation by the Branch.

In the event of non-sending reply within 15 days, Branch shall not proceed with further
SARFAESI Action and report the status to Legal Department for further guidance.

If there is a need to make changes/modifications in the demand notice, the Authorised

Officer shall modify the notice and issue a fresh notice within 15 days from the date of
receipt of the representation or objection.

Taking Possession:

In case the borrower/s and Guarantor/s fails to discharge his/her/their liability/ies within
the period of 60 days from the date of receipt of Sec 13(2) Demand Notice, Secured Creditor
gets rights to:

 Take over possession of the secured assets of the borrower including the right to
transfer by way of lease, assignment or sale and realize the secured asset;
 Take over the management of the business of the borrower including the right to
transfer by way of lease, assignment or sale for realizing the secured asset.
 Appoint any person to manage the secured assets the possession of which has been
taken over by the secured creditor;
 Require at any time by notice in writing, any person who has acquired any of the
secured assets from the borrower and from whom any money is due or may become
due to the borrower, to pay the secured creditor, so much of the money as is
sufficient to pay the secured debt.

Where there is a resistance for completing the process of possession, the Authorized Officer
shall not use any force and shall opt for taking possession under Sec 14 i.e. approaching
CMM/DM for taking possession of movables. Where there is no resistance, the following
procedure be adopted for taking movables.

Check point before taking possession/ taking action under sec 13(4)

 Service compliance of Sec 13(2) Demand Notice to all the parties.

 Proof of Service compliance
 Completion of 60 days’ time period.
 Reply within 15 days on representation or objections on 13(2) notice, if any.
 Consent in case of Consortium / Multiple Banking arrangements.
 Encumbrance Certificate or Search report on the Secured Asset/s intended to be sold
shall be verified and held on records and the same shall not be older than 6 months.
 Encumbrance Verification
 Verify the loan documents and ensure that are enforceable.
 In case of Equitable Mortgage, Original title deed is held on records.
 The Branch Manager/ Authorized Officer to make a visit to the secured assets to
know its exact whereabout and approachability

Calculation of completion of 60 days’ notice:

60 days period of the notice must be reckoned with reference to the date of receipt of notice
by the NPA borrower.

For abundant safety, the Authorized Officer must calculate the expiry of 60 days period,
after adding an additional 7 to 10 days for computing service period.

In case where the paper publication has been made for non-service of 13(2) notice, 60 days
period of the notice must be reckoned from the date of paper publication or the date of
pasting the notice on the addressee on whom the notice returned unserved, whichever is
later.
Consent for 13(4) notice in case of Consortium and Multiple Banking Accounts.

Exclusive Common Security on Pari-Passu

Security
 No  Where security is held by more than one Secured Creditor or
consent or jointly financed by Secured Creditors, consent from such
permission secured lenders representing not less than 60% in value of the
is required amount outstanding as on a record date shall be obtained.
from other  In the absence of consent from such other secured lenders,
lenders. Branch shall not proceed to take possession of the secured
assets. However, in such case, Branch shall pursue with the
Lead Lenders/ majority lenders for their consent or initiation
of action by them. Format for demanding Consent is as per
Annexure D.
 Where we are Lead Bank, Branch need to seek necessary
permission from other secured lender/s.
 Where we are not a Lead Bank, Branch need to convey its
consent and request the Lead Bank to initiate action under
Sec 13(4).

Possession of movables

Possession of Movables can be taken only by way of physical possession by preparing a

mahazar/Panchanama (Format F) and inventory (Format G) in the presence of two witnesses.

After taking possession, the Authorised Officer shall keep the property taken possession
either in his own custody or in the custody of any person authorised or appointed by him,
who shall take as much care of the property in his custody as an owner of ordinary prudence
would, under the similar circumstances, take of such property:

The decision of taking possession of the movables shall be based on the followings

 Marketability and realizable value to be ascertained.

 Place and cost of storage, Insurance and security charges to be ascertained.
 Proposed expenditure for completing the possession of movables.

If the movable property is subject to speedy or natural decay or the expense of keeping such
property in custody is likely to exceed its value, the Branch / Authorised Officer to take
immediate steps to sell it at once.
Deliver a copy of the Inventory to the borrower/ mortgagor / hypothecator by way of hand
delivery wherever possible and by way of Registered Post with Acknowledgement Card.

Where the possession of movables is/are in the custody of borrower-

 Call upon the borrowers and the person in possession to hand over the same to the
authorized officer and the Authorised Officer shall take custody of such movable
property in the same manner as afore said.
 in case of shares in a body corporate, directing the borrower to transfer the same to
the secured creditor and also the body corporate from not transferring such shares in
favour of any person other than the secured creditor. A copy of the notice so sent may
be endorsed to the concerned body corporate's Registrar to the issue or share transfer
agents.
 In the case of a debt, prohibiting the borrower from recovering the debt or any interest
thereon and the debtor from making payment thereof and directing the debtor (as per
 the format Annexure H) to make such payment to the Authorized Officer.

Valuation of Movable secured assets

 After taking possession of movable secured assets in any case before sale, the
Authorised Officer shall obtain the estimated value of movable secured assets Within
14 days from the date possession.
 Reserve Price shall be fixed with 15 days from the date of Valuation.
 Sale Notice shall be issued within 10 days of fixation of Reserve Price

Possession of Immovables

Symbolic Possession

Possession of immovable may be on symbolic or physical or both. In terms of SARFAESI Act,

2002, there is no difference between symbolic and physical possession.
Under the provisions of SARFAESI Act 2002, property can be sold based on symbolic
possession. Hence, option to exercising taking over of symbolic possession shall be done in
all cases except where physical possession is warranted to avoid litigation and early
settlement.
Symbolic possession can be taken by delivering a possession notice prepared as nearly as
possible in Appendix-IV to the SARFAESI Rules
Publishing possession notice in 2 leading newspapers, one in English and the other in
vernacular language in vernacular newspaper, having sufficient circulation in that locality of
the immovable property, within 7 days from the date of possession.
In case of non-publication or delay in publication, the possession notice issued shall become
invalid and, in such case, possession notice to be recalled and fresh possession process shall
be initiated.

Procedure to be adopted after taking Symbolic Possession

 Filing Caveat before DRT wherever required. It is to be ensured in all high value cases
to avoid passing of any interim order/injunction order restraining further action,
without hearing the Bank.
 If the DRT reject the application filed against our SARFAESI action, Caveat to be filed
before the DRAT immediately after such Order is passed by the DRT, to avoid any
restraint order being passed against the Bank, without hearing.
 Initiate process of taking valuation and Fixation of Reserve Price in a time bound
manner.
 Issuance of Sale Notice as per the timelines.
 Filing Sec 14 application for taking Physical Possession

Handling Stay Application and Court Cases

 If any case is filed against our Symbolic Possession, Law Officer shall examine the case
and interim stay if any on proposed sale of secured assets under the SARFAESI Act,
2002.
 If there are any defects in the proceedings initiated, remedial measures such as to
withdraw the proceedings and initiation of fresh proceedings to be examined by the
Law Officer in consultation with the dealing Advocate.
  There shall be no delay in filing our reply in such cases and if there is any delay or
negligence on the part of our dealing advocate, it shall be examined for change of
Advocate.
 Wherever required, Law officer shall take steps to engage Senior Advocate to vacate
the stay.
 Where our stay vacate application is rejected or delayed, it shall be examined for
filing appeal before DRAT and before High Court on any adverse order against the
Bank.
Physical Possession

RO Law Officer shall ensure filing Sec 14 application in all entrusted matters within 15 days
from the date of entrustment.
The DM/CMM/CJM shall dispose off the said application within 30 days of the receipt of the
application and for reasons beyond his control shall dispose –off the said application not
more than 60 days from the date of receipt.
If there is any undue delay, law Officer shall explore the possibilities of filing Writ Petition
before the High Court for getting suitable direction for disposal of Sec 14 application.
Law Officer shall ensure execution of Sec 14 order within the timeline i.e. before the expiry
of the warrant.
Wherever required, it shall be ensured by Law Officer that break open permission is filed
before DM/CJM/CMM.
It shall be ensured by Law Officer for obtaining Police Protection through Enforcement
Agent and arrangements for the presence of independent witnesses.
Procedure to be followed while taking physical possession:

 Physical possession to be taken in accordance with the CMM/DM Order. Enforcement

Agent shall arrange all necessary formalities for execution of Sec 14 Order.

 Physical possession of immovables to be taken by drawing Panchanama and Inventory

in presence of two witnesses duly signed by them. Inventory must contain the details
of the assets that has been taken over.
 The entire proceedings to be photographed and video graphed to avoid allegations of
misbehavior or employing illegal methods.
 Arranging separate inventory and Panchanama for the hypothecated goods and it shall
be sent to its owner and shall be called upon to remove such goods forthwith with a
notice that the Bank shall not take any responsibilities for any loss or damages of such
goods.
 If the value of such goods is having higher valuation, it shall be ensured for taking
necessary steps to attach such goods through pending OA proceedings before the DRT.
 If the borrower failed to remove such house hold goods, for sale of such goods through
auction process as per Sale of Goods Act and the proceeds shall be credited to the
owners/ borrowers account and subsequently Branch shall examine in consultation
with law Officer for exercising right of set off.
Procedure to be followed post physical possession

 Deliver a copy Inventory to the borrower/ mortgagor / hypothecator by way of hand

delivery wherever possible and by way of Registered Post with Acknowledgement
Card.
 Delivery of Inventory by Registered Post shall be done as soon as the completion of
 possession.
 Copy of the acknowledgment Card, Postal receipt and returned cover, if returned
unserved shall be preserved along with the documents.
 Arrange custody/godown/storage of the movables and must take care of the property
as an owner of ordinary prudence.
 Arrange for insurance and valuation.
 Authorized Officer shall ensure engagement of security personals wherever required.
 the authorised Officer shall take steps for preservation / protection of the Assets
under lock & key and put Bank's seal on the lock in the presence of two independent
witnesses, take photograph of the same.
 Caution Notice shall be affixed or pained on the assets where physical possession
taken.
 The property under possession should be inspected regularly and adequately insured
till it is sold or otherwise disposed of.
 Arrange for Valuation, fixation of Reserve price and issuance of Sale Notice.

Valuation of Immovable secured assets

 Valuation Report should be less than 12 months old for fixing Reserve Price. Fresh
Valuation shall be obtained if the valuation is more than 12 months.
 Two valuation reports to be obtained for properties valued above Rs.1.00 Crore. If the
difference between the two valuation is more than 10%, third valuation should be
taken from a different Approved Valuer. The average of the market value of the two
higher valuations should be reckoned for the purpose of fixing reserve price.
 If the valuation is more than 9 months old at the time of taking possession, fresh
valuation shall be taken within 15 days from the date possession. RO shall be
responsible for taking valuation and fixing Reserve Price.
 Reserve Price shall be fixed with 15 days from the date of Valuation. Processing of
Reserve Price proposal shall not be taken more than 7 days from the date of its receipt.
Issuance of Sale Notice

Sale Notice shall be Issued within 15 days from the date of fixation of Reserve price.
Ensure Caveat is in force, wherever required.
In all immovable properties where value of the property is more than 5 lakhs, the sale shall
invariably be conducted through e-auction mode.
Sale Notice shall be issued only as per the approved format.
Ensure no subsisting stay/attachment in pending cases.
Encumbrance/ Search to be made and any incumbrances found the same be disclosed in
sale notice.
Auction shall be scheduled only on Mega e-Auction dates communicated by Litigation
Management Wing.

Procedure for issuance of sale Notice

  In case of first-time issuance of Sale Notice, Sale notice to be issued by providing clear
30 days’ notice for conducting auction from the date of service of Sale Notice on the
borrower/s and Guarantor/s or from the date of publication in newspaper or affixation
of Sale Notice on the secured assets whichever is later.
 In case of second and subsequent Sale Notice, in auction failed cases, 15 days sale
notice to be issued for subsequent auctions.
 Sale Notice is to be sent by Registered Post with AD to all borrower/guarantors/ legal
heirs of deceased borrower/s and guarantor/s.
 Sale Notice is to be pasted on the premises/secured assets.
 Take photograph for proof of having pasted the notice on the secured asset/s put for
sale.
 Sale Notice is to be published in two newspapers, one in vernacular and another in
English.
Computation of 30/15 days’ notice period.

 30/15 days period of the notice must be reckoned with reference to the date of receipt
of notice by the borrower or date of paper publication or the date of pasting the notice
on the secured assets intended to be sold, whichever is later.
 For abundant safety, the Authorized Officer must calculate the expiry of 30/15 days
period, after adding an additional 10 days for computing service period.
Uploading Sale Notices and timelines

 On Bank’s website shall be done by RO / Branch before publication of Sale Notice in

newspaper. Photographs shall be uploaded.
 At e-Bikray Portal and Third-Party Platform (99 acres.com, olx.com) is done at
Litigation Management Wing. RO/Branch shall forward necessary information with
images to Litigation management wing within 3 days from the date of issuance of Sale
Notices.
Sale Price Recovery

 Upfront recovery of 10% before auction.

 Ensure the receipt of 15% of the sale price on the same day of conclusion of the e-
auction or not later than the next working day from the date of conclusion of the e-
auction.
 Ensure receipt of remaining 75% of the sale price within the 15 days from the date of
confirmation of sale.
 In deserving cases, extension may be considered on the basis of convincing reasons
recorded in writing.
 Delegation power for extension of time period is vested with RLCC.
 Reminders to be sent to the successful bidders for the balance payment as per the
time provided.
 In case of non-payment as per the timeline, steps for invocation of forfeiture to be
taken within 7 days and the property should be put for auction forthwith.
Issuance of Sale Certificate

 Issue confirmation of Sale immediately after conclusion of auction to highest bidder.

 On receipt of entire sale proceeds, appropriate the same towards the Loan Accounts.
Reduce the Drawing Power to One Rupee simultaneously in all running accounts
 wherever the loan account is not fully recovered / closed.
 Issue Sale Certificate as per the approved format.

Procedure to be adopted in sale failed cases

 In case of Sale failed cases, repeat e-auction shall be conducted by reducing the
reserve price.
 Reasons sale failure to be analysed and take appropriate measures to be taken for
finding bidders.
 Engage Bid Success Agent as per the Recovery Management Policy
Handling e-auction complaints by the successful bidder & third parties

Branch shall forward complaints if any, received from the successful bidder and third
parties to the Regional Office Legal department within 3 days from the date of its receipt
along with its para wise comment and status of case/account.
Law Officer at Regional Offices shall examine and provide guidance to the branch within
15 days from the date of its receipt. (Additional information required by LO to be provided
within 3 days by Branch).
Further Guidance-
Branch - RO Law officer – ZO Law Officer – Litigation Management Wing (LMW)

During the subsistence of such complaint by the successful bidder or by third parties
disputing the title deeds, the sale price so received shall be kept in interest bearing account
till the issue gets resolved.

Complaints Relating to Title Complaints Relating to Non-

Delivery of Physical Possession
 If there is any dispute relating to the
title of the secured assets, the same  Process of filing Sec 14 shall be
shall be examined through the panel initiated and steps to be taken
advocate in consultation with Regional for handing over the physical
Office Legal department. possession as per due process
of Law.
 Opinion of the advocate along with the
observation of the Law Officer shall be
forwarded to the Zonal Head for taking
appropriate decision.
 If found any defects in title and
confirmed by the panel advocate and
legal departments of the Regional
Office and Zonal Office and further the
sale shall be cancelled forthwith and
steps to be taken for return of sale
price immediately.
 If there are no defects, appropriate
reply shall be sent to the complainant
under due legal advice from Law
officer.

Role and Responsibilities

Regional Head and Zonal Head shall monitor all actions under SARFAESI and ensure initiation
and continuation of SARFAESI process till sale or closure of the account.

RO CRD Head shall be responsible for SARFAESI action and ensure initiation and continuation
of SARFAESI action in eligible accounts.

RO Law Officer shall coordinate with CRD and collectively take appropriate steps for
enforcement of SARFAESI actions, early sale of eligible assets and ensuring accelerated
recovery. Both the department shall act in co-ordination and ensure deriving maximum
benefit under the Act.

Branch head shall be responsible for ensuring issuance of 13(2) Notice in all eligible cases,
taking all actions under SARFAESI including taking valuation report, identification of
property, continuation of SARFAESI action till sale or closure of the account.

Role of Law Officers

 Any legal issues / Guidance in issuance of 13(2) notice shall be resolved in 7

days.
 Providing reply under Sec 13(3)A shall be ensured within the time limit
providedunder the Statue.
 Providing draft for combined paper publication or approval on the modification
sought in the SARFAESI format.

 Ensure filing Caveat and extension of the same wherever required.

 Engaging Advocate, payment of their fee as per the guidelines, review of their
performance and taking action against them wherever required.

 Handling Court cases, engagement of Senior advocates, Senior Counsels wherever

required as per the guidelines, diarizing court cases, vacating stay within 3
months or taking appropriate actions for engaging senior advocate or filing appeal
against the stay order, filing our counter / reply within the stipulated timelines
provided, ensuring no adjournment from Banks side and making necessary
objection through our dealing advocate for granting stay or adjournment and
closure of cases filed against the bank in a timebound manner.

 Shall ensure filing and reporting under Section 14 application for physical
possession, monitoring Sec 14 proceedings, ensuring early adjudication and
getting order, filing appeal against adverse order or getting directions from High
Court wherever there is a delay in getting order.

 Shall assist in taking physical possession process and take appropriate steps to
protect the interest of the Bank

 Shall assist for issuance of Sale Notice, conducting auction, handling issues /
complaints related to title, issuance of Sale Certificate, registration formalities.

Staff accountability in Credit related areas

Every employee is duty bound to discharge work faithfully in accordance with:

 Systems and procedures laid down;
 Rules and Regulations in force;
 Guidelines whether general or specific; &
 To work within the authority delegated or when such authority is exceeded, with the
approval of appropriate authority.
 Any violation in the above will lead to accountability of the employee.

The objective of Staff Accountability Policy is to ensure protection of bonafide actions of the
officials taken as per the rules, guidelines, policies and directives of the Bank and to determine
the accountability of the staff who indulge in motivated/ reckless decision making and or
flagrantly violate the rules and regulations of the Bank.

Approach of Staff Accountability:

 The motive of the Staff Accountability is not to discourage the exercise of initiative and decision
making. Bank’s approach for staff accountability is to instil confidence amongst the officials for
decision making and to examine the reasons for the account turning in to NPA and for non-
recoverability of bank funds.
 No Staff Accountability will be studied if the cause of the NPA is essentially due to external factors
and beyond the control of the bank for example change in government policy, revised
environmental norms, Natural calamities, Non release of government subsidy/grant, and takeover
of land or securities by the government agencies etc.
 Staff Accountability should be critically examined to know whether any specific commission/
omission by employee is there which resulted NPA/loss.
 While processing/sanctioning loan proposals, the standard operating procedures (SOP) issued by
the bank for obtaining/handling of third party reports such as for Title Investigation Report,
Valuation Report, Audited Accounts, Legal Opinion, Stock Audit, LIE Report, TEV Report etc. are
to be followed. Then the Bank Employees shall not be held accountable for the lapses on the part
of those experts, provided the officials have followed the guidelines/ SOPs for obtaining/ handling
of such reports issued by respective verticals.
 Once the specific commissions /omissions of the staff which have direct causative relationship to
the loss suffered by the bank is identified, the stage then comes for examining them from the
viewpoint of bonafide decisions, the acts of gross negligence/recklessness, frauds or malafide.
 No accountability should be ascribed on officials involved at sanctioning level if an account turned
NPA due to improper monitoring.
 Where the account has turned NPA solely as a result of external factors, mere existence of
procedural/ operational lapses on part of officials in sanction of the credit facility should not
form the basis for ascribing accountability.
 Responsibility needs to be fixed where it lies e.g. in an account turned NPA due to improper
monitoring, accountability should not be ascribed on officials involved at sanctioning level.
 Past track record of the officials in appraisal/ sanction/ monitoring should be given due
weightage.
 Materiality of the alleged Omission/ Commission.
 Recovery probabilities.
 Staff accountability Policy aims to ensure that only those officials who are responsible for making,
checking and monitoring with respect to specific role / activity, are held accountable for
deviations/irregularities committed and not all officials who have dealt with the account.
 The staff accountability policy rests on the basic premise that loss on account of genuine business
decisions will not attract staff accountability.

STRUCTURE OF EXAMINATION OF STAFF ACCOUNTABILITY IN NPA ACCOUNTS

Consists of 3 parts.

a) Preparation of brief/detailed report on each NPA account

b) Preliminary examination by the Committee to assess whether a case for accountability is
exists or not
 c) If staff accountability exists, a detailed report to be obtained by deputing Assessing
Official/Audit Investigation and take a final view after receipt of their reports.

NPA upto Rs.10.00 Lacs:

No staff accountability to be examined in NPA accounts with outstanding up to Rs.10.00 lacs as

on NPA date which includes pre-approved digital loans with instant disbursement where pre-
sanction/post-sanction visits have been waived by the Bank with exception to

 Wherever an account has been reported as fraud or facts indicating mala-fide intention of Bank
employees.
 Wherever the controlling offices get an indication that there exists intentional and deliberate
negligence on the part of any staff member.
 In case of accounts with limit up to Rs.10.00 lacs, if the fresh slippages (NPA) during the Financial
Year in a branch exceeds 10% in this portfolio of loan accounts up to Rs.10.00 Lac, the Regional
Head will examine the entire credit portfolio of the branch and take appropriate action.
 In case of Compromise or Negotiated Settlements of NPAs, staff Accountability must be examined
well before time.
 The process for conducting Staff Accountability exercise in the above exceptional cases would be
similar as per the procedure laid down for accounts above Rs.10.00 Lac up to Rs.1.00 Crore. The
format for examination of staff accountability in such cases will be as per Annexure-1 and if any
detailed investigation is required, Annexure-3 may be used.

NPA Above Rs.10.00 Lacs up to Rs. 1.00 Crore:

CCM Head and the official looking after the Audit matters at RO will jointly prepare brief reports
as per Annexure-2 on NPA accounts covering the following parameters and shall place before
RLSAC constituted for examining Staff Accountability. Regional Office may also collect relevant
information from the concerned Branch / Audit Office, if required.
a) Summary profile of the account
b) Reasons for account turning NPA
c) Observations in previous Audit Reports for a period of 4 years from the date of NPA including
compliance
d) Chart of the compliance of terms and conditions
 Cases where any Staff involvement is perceived or critical non-compliances are observed, the
staff accountability is to be examined by RLSAC and a detailed report as per Annexure-3 shall be
obtained by deputing an Assessing Officer.
 An Assessing Officer should be of the rank of Chief Manager (Scale-IV) having adequate knowledge
of the subject. In case, suitable person in Scale-IV is not available in the Region, then with the
permission of RH, a Senior Manager (Scale-III) with adequate knowledge may also be deputed for
the purpose. The Assessing Officer shall prepare a report in the prescribed format as per
Annexure-3 and submit the same to respective RLSAC.
 Staff Accountability need not be examined in respect of the accounts where there has been no
adverse audit remark/comment in their audit reports of the preceding 4 years.

NPA above Rs.1.00 Crore up to Rs. 50.00 Crore:

NPA accounts in this range of overall exposure shall undergo a preliminary examination by a
Committee constituted at one step higher than the sanction level. The committee shall be headed
by the Official senior than the Sanctioning Authority. However, in respect of accounts sanctioned
by CAC-III, CAC-II, CAC-I, MCB the preliminary examination will be done by COSAC. Audit Vertical
 shall provide all requisite inputs for this preliminary examination.
 CCM Head and the official looking after Audit matters at Regional Office will jointly prepare
Preliminary reports as per Annexure-4 on NPA accounts under this category covering the
following parameters and shall forward it along with comments of Regional Head to respective
Preliminary Committee to assess whether a case for accountability exists or not.
a) Profile of the account
b) Reasons for account turning NPA
c) Observations in previous Audit Reports for a period of 4 years from the date of NPA including
compliance
d) Chart of the compliance of terms and conditions
e) Possibilities of Recovery/Upgrade of the account

 In NPA accounts above Rs.1.00 crore up to Rs.5.00 crores and fraud accounts above Rs.1.00 Crore
& Less than Rs.3.00 Crore ZLSAC will be the Preliminary Committee to assess whether a case for
accountability exists or not. RO shall forward detailed reports for such accounts to ZLSAC for
preliminary examination.
 In NPA accounts above Rs.5.00 crore and fraud accounts of Rs.3.00 Crore & above, COSAC will be
the Preliminary Committee to assess whether a case for accountability is exists or not. RO shall
forward detailed reports for such accounts to COSAC for preliminary examination through ZO
along with the comments of Regional Head and ZO in turn shall send it to CCM, CO with comments
of ZH.
 If in the preliminary examination, the Committee finds material lapses in any of the Sanction
Process, Documentation, and Disbursement or in Monitoring etc., the respective Committee will
get a detailed examination of staff accountability as per format Annexure-5 by deputing a team
of Assessing Officials comprising one AGM and one Chief Manager as per extant arrangements.
 Zonal Office will appoint Investigating/Assessing Officer for all cases above Rs.1.00 Crore for
account turning NPA and Fraud.

Assessing Officials may rely upon audit report of previous 4 years as well as other guidelines of
the Bank investigation / inspection reports etc. such as
a) Branch Inspection Report
b) Concurrent Audit
c) Stock Audit
d) ASM (Agency for Specialized Monitoring) Report
e) Legal Process Audit Report vi. Credit Process Audit
f) Special Report
g) Control returns relating to monitoring etc. along with internal/ RBI audit reports,
h) Conduct of the account and,
i) Any other relevant report for the purpose of examining Staff Accountability.

 While sending the Assessing Officials Report to COSAC in case NPA accounts above Rs.5.00 crore
and fraud accounts of Rs.3.00 Crore & above, the ZLSAC shall give its
comments/recommendations.

NPA Above Rs.50.00 Crore

 Staff accountability in NPA accounts under this category shall be examined by COSAC in every
account as per the extant practice. Zonal Office shall appoint Assessing Officers for detailed
examination as per the format which will cover profile of account, sanction process,
documentation, disbursement, monitoring & supervision, compliance of terms and conditions of
sanction, CPA report, reason for account turning NPA, previous internal audit reports/stock
audit/legal process audit for a period of 4 years including compliance thereof, possibility of
recovery/upgrade etc.
 The Assessing Officer shall submit their report to concerned Regional Office (as per Annexure-5)
which in turn will send to ZO with the comments of Regional Head. These detailed reports will
 be sent to COSAC with specific comments and recommendations of RLSAC/ZLSAC along with
requisite documents.

COMPOSITION OF STAFF ACCOUNTABILITY COMMITTEE

Central Office Staff Accountability Committee (COSAC):

Sl. No. Designation Department
1. Chief General Manager CCM
2. Chief General Manager Audit & Inspection
3. General Manager Recovery / DART posted at SAMV
4. General Manager SSD
5. General Manager Credit Compliance & Monitoring
(CCM)
Quorum Three Members, w/w CGM CCM & CGM Audit & inspection and
either GM (SSD) or GM (SAMV-DART Recovery) are mandatory
Convener/ DGM /AGM posted at CCM
Member
Secretary

Zonal Level Staff Accountability Committee (ZLSAC):

Sl. No. Designation Department
1. Zonal Head Head ZLSAC
2. Dy. Zonal Head
3. AGM / CM CCM/CRLD
4. AGM / CM Operations Department
5. AGM / CM Credit
6. Zonal Audit Head (ZAH) ZAO
Quorum Three Members, w/w Zonal Head, ZAH and at least one member
either from CRLD or CCM Department are mandatory members.
Convener/ AGM / CM / In charge CCM.
Member
Secretary

Regional Level Staff Accountability Committee (RLSAC):

Sl. No. Designation Department
1. Regional Head Head RLSAC
2. Dy. Regional Head
3. Chief Manager/ In charge CCM/CRLD
4. Chief Manager / In Charge Operations Department
5. Chief Manager / In Charge Credit
Quorum Three Members, w/w RH and at least one member either from
CRLD/CCM Department are mandatory members
Convener/ Chief Manager / In Charge CCM.
Member
Secretary

 If any member had ever been associated with that particular borrowal account as appraising
/recommending /sanctioning /disbursing / post disbursement monitoring authority etc. will
not function as a member of such Committee. In such case, the quorum of the committee
shall be completed by taking another member in his/her place, as nominated by the
respective designated authority namely RH / ZH / MD & CEO. In case of RLSAC Head / ZLSAC
Head has ever been associated with the particular borrowal account, in such event, the Staff
Accountability examination shall be conducted by next Higher Authority.
 If the Central Office Staff Accountability Committee comprise of any member/s who were a
party to the sanction, then he/she should recuse from the meeting. In case any such
member, recusing from a meeting, is a mandatory member for the purpose of quorum,
alternate official as nominated by the Competent Authority shall act as a member. However,
in case such alternate official is also not available, matter will be referred to the MD & CEO
/ ED for appointing an alternate member for the specific purpose.
 Wherever staff accountability is observed by the Committee on any senior officer of the Bank
in the rank of General Manager & above and sanctions from CAC III, staff accountability
committee minutes are invariably to be placed before the committee under the
chairmanship of Executive Director.
The composition of the above committee shall be as under:
Executive Director in charge of CCM.
Committee of Staff accountability at Central Office
BROAD AREAS OF RESPONSIBILITY

Essentially, lapses fall into three broad categories:

a) Procedural lapses or casual negligence in the ordinary discharge of one's duties may or
may not involving financial / legal liabilities/implications for the Bank.
b) Gross negligence, detection of reckless lending.
c) Lapses with apparently malafide intentions.
The broad area of responsibilities for examining the role of officials shall be as under:
i. Appraisal, Processing & Recommendations
ii. Documentation & Security Creation including Mortgage
iii. Post Sanction Follow Up & Monitoring
iv. Renewal/ Review of Credit limits
v. Takeover Quick Mortality Cases
vi. Restructured Accounts
vii. Consortium Advances
DELEGATION FOR EXAMINATION OF STAFF ACCOUNTABILITY

NPA Up to Rs.1.00 Crore RLSAC

Fraud Up to Rs.1.00 Crore

NPA Above Rs.1.00 Crore & Up to Rs.5.00 Crore ZLSAC

Fraud Above Rs.1.00 Crore & Less than Rs.3.00 Crore

NPA Above Rs.5.00 Crore COSAC

Fraud Rs.3.00 Crore & above

 In case of NPA accounts with running ledger up to Rs.1.00 Crore sanctioned at RO

level; the examination of staff accountability will be done by ZLSAC.
 In case of NPA accounts with running ledger above Rs.1.00 Crore and up to Rs.5.00
Crore and fraud account above Rs.1.00 Crore & Less than Rs.3.00 Crore sanctioned
at ZO level; the examination of staff accountability will be done by COSAC.
According to DFS guidelines, while examining the staff accountability aspect, in case of role
of Whole Time Director (WTD) is noticed, the CVO shall prepare a factual report covering,
inter-alia the following aspects, with supporting documents may be sent to DFS for further
examination.
a) Details of the account (including timelines of sanction, enhancement of NPA etc and.)
irregularities in the same.
b) Details of promoters.
c) Role of each WTD in the account.
d) Name of WTDs involved.
e) Specific deviations from noncompliance with applicable regulatory guidelines, Board
approved policies, applicable CVC guidelines or any other applicable regulations, orders
etc. on the part of WTD(s).
f) Copies of relevant guidelines/policies/orders/regulations.

Any other relevant information including status of recovery, whether any criminal case has
been registered/suggested etc.
FOR ACCOUNTS OF FOREIGN / OVERSEAS BRANCH
The guidelines for examination of staff accountability in case of loan accounts related to a
Foreign / Overseas Branch are discussed in detail in the Recovery Management Policy for
Foreign Branches framed by IBD, CO, Mumbai. The accounts classified as NPA on or before
31.03.2022 shall be governed with the said policy.
 However, in respect of accounts turning NPA on or after 01.04.2022, the process for
examining Staff Accountability in NPA account with foreign branches henceforth will be as
under:
 The NPA account with running ledger up to Rs 50 Crores same as domestic NPA accounts.
 Irrespective of running ledger, Delegated authority for Preliminary Examination as well as
finalization of staff accountability will be done by COSAC.
 Compliance officer posted at the foreign branch shall prepare the report covering the areas
given in the IBD Policy and will submit to CA&ID who will examine and submit to COSAC for
preliminary examination.
 If running ledger outstanding is denominated in foreign currency, the converted value in INR
on the day of classifying the account as NPA shall be taken for reporting purpose.
 For NPA account above Rs 50 crore the extant practice of Examination of Staff Accountability
shall be continued.
COMMENCEMENT OF PROCESS AND TIMELINES FOR COMPLETION:
 The Staff Accountability process should be completed within 180 days from the date of
classification of the account as NPA.

 The process of examination of staff accountability to be started after the cooling period of
30 days from the date the account is classified as NPA. If the account gets adjusted without
any compromise or gets upgraded within the cooling period, no accountability shall be
examined. In case of NPA accounts where the accounts are downgraded with backdate by
passing MOC entries, the process of examination of accountability to be started after the
cooling period of 30 days from the date of MOC instead of date of account classified as NPA.
 Revalidation/extension of existing outstanding BGs do not fall under the purview of further
Staff Accountability Examination wherever the exercise has already been completed for the
total exposure (FB/NFB), subject to completion of all the compliances/formalities related
to extension of existing Bank Guarantees.
 In cases of borrowal accounts slipping from Standard to Doubtful/Loss category / quick
mortality cases / or where fraud has been committed the Staff Accountability to be started
immediately.
 If fraud is detected in any account, the staff accountability even if carried out earlier has
to be re-examined and this re-examination of Staff Accountability must be completed within
90 days from the date of classification as fraud.
 In cases where vigilance department has informed certain observations and advised for
relook of accountability done by the Staff Accountability Committee, the re-submission must
be completed within 90 days of receipt of observation from vigilance department.
 The above timeline shall be applicable on the NPA accounts with foreign/ overseas branches
also.
EXAMINATION OF STAFF ACCOUNTABILITY:
In case where the Investigating Officer/Assessing Officer has observed any lapses on the part
of any officer, respective RO/ZO/CO, as the case may be, will call for preliminary reply as
per format (Annexure-6) from the officer concerned for the lapses pointed out by the
Investigating/Assessing Officer and the same will be incorporated in their report to avoid
unnecessary harassment in genuine cases.
Scrutiny of Staff Accountability by CVO

 As per CVC guidelines, accounts having the running ledger balance of Rs.30.00 crore & above,
will be invariably forwarded to CVD for final concurrence. On receipt of final concurrence
of CVO, the matter shall be treated as concluded.
 In cases where vigilance department has informed certain observations and advised for relook
of accountability done by the Staff Accountability Committee, the re-submission must be
 completed within 90 days of receipt of observation from vigilance department.
 In case of persistent difference of opinion between the decision of COSAC and Vigilance
department, the matter may be referred to MD and CEO by Vigilance department for his
necessary advice/ directions. Such matters also need to be brought to a logical conclusion
within 90 days.

STAFF ACCOUNTABILITY EXAMINATION IN FRAUD CASES:

 In fraud cases, there will be no preliminary examination or filtering as proposed above for
accounts up to Rs.50.00 Crore.
 In case of fraud cases, all accounts Rs.3.00 Crore & above will be sent for re-examination of
staff accountability from fraud angle to Central Office Staff Accountability Committee
irrespective of date of NPA.
 The re-examination of staff accountability post declaration of the fraud must be completed
within 90 days from the classification of fraud.
 As per the new guidelines of CVC, all fraud cases involving Rs 3 Crores and above shall be
referred to ABBFF (Advisory Board for banking and financial frauds) for examining the role
at all levels of officials/WTDs (including ex-officials/ ex-WTDs) in PSBs. It will cover the
following fraud accounts in above bracket of amounts:
a) All accounts declared fraud on or after 06.01.2022.
b) Accounts classified as fraud reported to RBI prior to 06.01.2022 but have reached to DA
through IAC/ CVO on or after 06.01.2022.
c) Fraud cases where FMR is filed by PSBs prior to 06.01.2022 but criminal complaint is yet to
be filed with investigating agencies and also yet to reported to ABBFF.
 In view of new guidelines of CVC, the Staff Accountability Examination need to be completed
within time schedule and also ZO to submit information of completion of Staff Accountability
in accounts from Rs 3 Crores up to Rs 10 Crores on monthly basis to CCM.
MONITORING OF EXAMINATION OF STAFF ACCOUNTABILITY & MIS:
 The Bank developed Staff Accountability Module in Stressed Assets Recovery Automation
Solution (SARAS) package from October 01, 2023 wherein RO/ZO/CO to process and update
the information and documents as per policy.
 Monthly updated position shall be submitted by Regional Offices to their ZO and ZO shall
submit consolidated position to CCM, CO through a Fortnightly Progress Report on staff
accountability. ZO while submitting monthly progress report to CCM, CO will also enclose
status of the examination of Staff Accountability in the individual NPA cases with aggregate
sanctioned limit of over Rs.10.00 Crore (Annexure-7).
 Regional Office to monitor disposal of individual NPA account with aggregate sanctioned limit
up to Rs. 1 Crore and submit summary of the status/progress to concerned ZO through
Fortnightly Progress Report. For accounts with aggregate sanctioned limit of over Rs.1 Crore,
status of individual account shall be forwarded along with the summary to the concerned ZO.
 ZO to monitor disposal of all individual NPA Accounts with aggregate sanctioned limit over
Rs. 1 Crore and up to Rs.10 crore and submit statement of the status/progress of these
accounts to CCM, CO through Fortnightly Progress Report. For accounts with aggregate
sanctioned limit above Rs.10.00 crore, status of individual account shall be forwarded to
CCM, CO for further monitoring at their end.
 CCM, CO to monitor disposal of individual NPA Accounts with aggregate sanctioned limit over
Rs.10 Crore. CCM, CO shall place a summary position of examination of staff accountability
on half yearly basis as on 30th September & 31st March in respect of NPA Accounts along with
individual details of all such accounts with limits of over Rs.10 Crore to MD & CEO.