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Quick Success Series Remittance & Collection

QUICK SUCCESS SERIES was initiated in the year 2010

by Team SBLC Deoghar with a motive of learning
support to the candidates of promotional
examinations of different grades in the Bank they had
to undergo. With the passage of time QSS became
popular among its readers and SBLC Deoghar is
receiving overwhelming demand for its updated
version year after year from employees of SBI located
in various parts of the country. We extend our sincere
thanks to the readers of QSS for placing with us the
demand of QSS whenever the date of promotional test
is announced.


We take this opportunity to acknowledge active

persuasion of Sri Manish Tandon, our Circle
Development Officer for its updation before schedule.
I take pride in representing a Team comprising of Sri
Champak Das, Chief Manager (Training), Sri Rakesh
Roshan, Chief Manager (Training) & Sri Mukul
Manohar, Chief Manager (Training), who have
maintained the trend of SBLC Deoghar and are
constantly contributing towards its value addition and
keeping it relevant, up to date for the users & they
took extra pain for its updation.
We hope that QSS 2015 edition will be equally useful
for various promotional exams. Though every care has
been taken while updating th contents, we also
request our readers to point out any lapses at the
earliest. This book is however not a substitute for
circular instructions issued by the Bank from time to
time. For detailed guidelines please refer to Banks
latest circulars. Soft copy of this edition is available on
our in QSS folder & on SBI


Team SBLC Deoghar is humbled by the response and

recognition, it is receiving from various readers. Our
Team wishes the readers grand success in their
S P Singh
Assistant General Manager,
State Bank Learning Centre,
Deoghar- 814112
Phone- 06432-232895
Fax - 06432-231810

Updated By: Rakesh


Chief Manager (Training),

SBLC Deoghar
Mobile- 9162370185

Updated upto
15th January 2015

Page 1


Updated up to January 15, 2015
Loan Policy (Applicable to domestic Lending)Important Points
(RBI cir-RBI-2014-15/66 dtd 01.07.2014)
All Scheduled Commercial Banks(excluding RRBs)
Prudential Credit Exposure Norms
It has been prescribed by RBI.
Single Borrower :- Maximum exposure 15% of
Capital funds; for infrastructure lending 20%.
Group Borrower :- Maximum exposure 40% of
Capital funds; for infrastructure lending 50%.
(Capital funds includes Tier I and Tier II capital)
Individual Borrower :- Maximum aggregate credit
facilities ( FB and NFB ) of Rs. 25 cr (excluding
loan against specified securities).Rs.50 cr (H/L
Non Corporates :- Maximum aggregate credit
facilities ( FB and NFB ) of Rs. 100 cr (excluding
loan against specified securities).
Corporates :- 15% of Banks capital funds for
single borrower exposures and 40% of capital
funds for group exposures.
A credit facility extended by lenders (i.e. banks
and select AIFIs) to a borrower for exposure in the
Transport, Energy, Water & Sanitation,
Infrastructure & their infrastructure sub-sectors
will qualify as 'infrastructure lending'.
Exposures to NBFCs
The exposure (both lending and investment,
including off balance sheet exposures) of a bank
to a single NBFC / NBFC-AFC (Asset Financing
Companies) should not exceed 10% / 15%
respectively, of the bank's capital funds as per its
last audited balance sheet. Banks may, however,
assume exposures on a single NBFC / NBFC-AFC
up to 15%/20% respectively, of their capital funds
provided the exposure in excess of 10%/15%
respectively, is on account of funds on-lent by the
NBFC / NBFC-AFC to the infrastructure sector.
Exposure of a bank to Infrastructure Finance
Companies (IFCs) should not exceed 15% of its
capital funds as per its last audited balance sheet,
with a provision to increase it to 20% if the same
is on account of funds on-lent by the IFCs to the
infrastructure sector. Further, banks may also
consider fixing internal limits for their aggregate
exposure to all NBFCs put together. Infusion of
capital funds after the published balance sheet

date may also be taken into account for the

purpose of reckoning capital funds. Banks should
obtain an external auditors certificate on
completion of the augmentation of capital and
submit the same to the Reserve Bank of India
(Department of Banking Supervision) before
reckoning the additions to capital funds.
Lending under Consortium Arrangements
The exposure limits will also be applicable to
lending under consortium arrangements.
Food credit
Borrowers, to whom limits are allocated directly
by the Reserve Bank for food credit, will be
exempt from the ceiling.
Guarantee by the Government of India
The ceilings on single /group exposure limit would
not be applicable where principal and interest are
fully guaranteed by the Government of India.
Loans against Own Term Deposits
Loans and advances (both funded and non-funded
facilities) granted against the security of a banks
own term deposits may not be reckoned for
computing the exposure to the extent that the
bank has a specific lien on such deposits.
Exposure to Leasing, Hire Purchase and Factoring
Banks have been permitted to undertake leasing,
departmentally. Where banks undertake these
activities departmentally, they should maintain a
balanced portfolio of equipment leasing, hire
purchase and factoring services vis--vis the
aggregate credit. Their exposure to each of these
activities should not exceed 10 per cent of total
Irrevocable Payment Commitments (IPCs)
Banks issue Irrevocable Payment Commitments
(IPCs) in favour of stock exchanges on behalf of



Updated up to January 15, 2015

domestic mutual funds/FIIs to facilitate the

transactions done by these clients.
The maturity of Term Loan should not exceed 8
years, including moratorium period (except cases
under CDR mechanism approved by the bank,
Housing Loan, Infrastructure Loans, Education
Loans and ATL under approved schemes etc.)
Quantitative Credit Standard Appraisal
Minimum Current Ratio desired for
- 1.33

Min. Current Ratio desired for others

- 1.20
(for FBWC limits above Rs. 5cr). 1.00 (for
FBWC limits up to Rs. 5 cr).
- 3.00


Maximum TOL/TNW desired for Others

- 5.00

Minimum Net DSCR desired for

manufacturing company & others
- 2:10

Minimum gross DSCR desired for

manufacturing company & others
- 1.75:1

Maximum Debt/Equity
- 2:1

Maximum Debt/Equity
- 2:1

desired for

desired for others

Credit Risk Assessment (CRA)

Models designed in conformity with
Internal Ratings Based (IRB) requirements
of Basel-II.
Separate models for Non-Trading Sector
(NTS) and Trading Sector (TS).
Two-dimensional structure for Risk Rating
Borrower Rating and Facility Rating.

Borrower Rating (BR) expanded to 16

grades (SB-1 to SB-16).
Hurdle rate is SB 10.
Facility Rating (FR) would also range from
FR-1 to FR-16
The new CRA models will be applicable to all
accounts with Aggregate Exposure (FBL + NFBL) of
Rs. 25 lacs and above, for both Non-Trading
Sector (C&I, SSI & AGL segments) and Trading
Sector (Including Services).
Simplified Model covers accounts with exposure
of Rs. 25 lacs and above, but upto Rs. 5 crores.
Regular Model covers accounts with exposure
above Rs. 5 crores.
Facility Rating (FR) will be applicable only for
exposures covered under the Regular Model
Borrower accounts rated SB 10 and below would
be rated at half-yearly intervals considering the
risk severity of the loan.
Take Over of Advances (Except AGL and PER
The proposed policy envisages strict compliance
of the following norms:
(a) Borrower account proposed to be taken over
should be a Standard Asset in the books of the
transferor bank / FI.
(b) The Borrower should be rated not below SB 6
on the basis of the audited Balance Sheet not
older than 12 months with a stipulation that the
financial score shall not be less than 40 out of the
possible 65.
External Credit Rating, wherever applicable, shall
have to be BBB (investment grade) or above (Both
CRA & ECR norms to be complied with, wherever
(c) The Units CRA rating must be in consonance
with the latest industry outlook by the CRMD,
wherever applicable.
Takeover proposals satisfying the above referred
criterion will require no administrative clearance.
The above norms for takeover are considered
sacrosanct, in as much as no deviation will
normally be permitted by the Sanctioning
Authority. However, deviations, if warranted, may
be considered in select cases on the basis of
following considerations only:
(a) In respect of MSEs covered under CGTMSE
scheme, CRA up to SB 8



Updated up to January 15, 2015
may be considered.
(b) Units with Credit enhancement by way of
urban tangible immovable
(Non- Agricultural) collateral with a minimum of
40%, besides meeting credit appraisal criterion
and in no case have credit rating of less than SB 8.
(c) Units with Corporate Guarantee of Group
Company with acceptable ECR of BBB & above,
and CRA of SB 6 & above.
Audited Financials should not be older than 12
months. But in all cases where Audited Financials
are older than 6 months, provisional financials not
older than 3 months are to be obtained and
analysed to satisfy that the activity level and
profitability, liquidity and solvency ratios are
broadly in alignment with the estimates /
projections. Important parameters such as
Gross/Net Sales,
Inventory, Receivables, Sundry
Unsecured Loans, Conversion of Share Application
Money into PUC, Additions to Gross Block may be
certified by a Chartered Accountant.
The unit should have earned net profits (post tax)
in each of the immediately preceding 3 years. If it
does not have a track record for 3 years, it should
have earned profits for at least two years. In other
words, units for takeover should have at least two
years of full fledged commercial operations
backing their track record.
Generally, takeover of loans below Rs 25 lacs is to
be discouraged. However, in case of exceptional
circumstances, operating units may consider
takeovers on a case to case to basis where
product specific minimum scores shall be the
threshold for considering such takeovers. As and
when New Scoring Models for loans up to Rs 25
lacs are rolled out, loans categorized/ graded as
Good Loans Clear Lending Decision shall only
be considered for take-over.
Takeover of units from Associate Banks is not
In all cases of take-over, branches should ensure
completion of proper documentation and other
formalities within a period not exceeding a month
or as approved by the Sanctioning Authority, to
protect the interests of the Bank.
In the case of take over of loans from other
banks/ institutions, as the original title deeds will

be available to the Bank only after the entire dues

to the existing bank/ institution is repaid, an
interim report has to be obtained from the panel
Advocate based on certified copies of the title
deeds based upon which branches can go ahead
and takeover loan accounts from other
banks/institutions pending actual creation of the
equitable mortgage,
Norms for takeover of advances under
Agriculture segment
i) The minimum amount eligible for takeover
would be as under:
a. ACC : Rs. 1.00 lakh
b. ATL for Allied Activities : Rs. 10.00 lakhs
c. ATL for other than allied activities : Rs. 2.00
(iI) The maximum amount eligible for takeover
would be Rs. 50.00 lakhs. However, administrative
clearance should be obtained from the Local Head
Office in case, loans above Rs. 50.00 lakhs are
required to be taken over.
(iii) The account should have been a standard
account in the books of the other Financial
Institution (FI) during the preceding 2 years.
(Iv) ATLs with a minimum 2 years repayment
programme left are only eligible.
(v) Advances to borrowers falling outside the
Service Area of the branch are also permitted for
takeover, subject to adherence of the other
(vi) Crop loans converted to Term Loans and Term
Loans, which are rephased, are not eligible for
takeover irrespective of their quantum.
(vii) Takeover from our Associate Bank is not
Stock Audit
a) Stock and Receivables Audit shall be conducted
at yearly intervals for all exposures above Rs. 1
crore and upto Rs. 25 crores.
b) For units having credit limits of Rs. 25 crs and
above, the frequency of Stock and Receivables
Audit will be half yearly. For CAG/MCG accounts,
all unlisted companies falling under speculative
Grade, frequency of Stock and Receivables audit
will also be half yearly.
c) All other accounts of Rs. 5 crores and above
with Credit Rating of SB-8 and below, or accounts
where slippage in Credit Rating is by two notches



Updated up to January 15, 2015
or more, irrespective of the rating, will also be
subjected to Stock and Receivables Audit at half
yearly intervals. (e-cir- 324 dt 04/07/2012)
d) In respect of accounts which are B and
below, Stock & Receivable Audit to be conducted
at quarterly intervals.
e) In respect of all accounts eligible for Stock
Audit, verification of Invoice by the Stock Auditor
should be made part of the Stock Audit. Failure of
verification of invoice should be suitably dealt
with. (e-cir- 794 dt 15/10/2013)
Legal Audit
Reserve Bank of India told banks to do legal audit
and re-verification of title deeds of loans above Rs
5 crore to check fraud. Two years back, banks
were told to put a system a place wherein the
concurrent auditors were required to look into
the genuineness of the title documents especially
for large value loans. This move was prompted by
an RBI study of large value frauds, especially in
the housing loan segment.
The Legal Audit shall be conducted preferably 3
months before the commencement of RFIA /
Credit Audit, so that auditee branches can comply
with rectification of the deficiencies pointed out.
A separate Legal Audit Report Format (LARF) to be
submitted by Legal Auditor has been designed.
The format contains Value Statements pertaining
to documentation, mortgage, charge creation,
etc., corresponding to Value Statements in the
existing Credit Audit Report Format (CARF).
Credit Audit
Credit Audit Department (CAD) is a specialized
wing of Inspection & Management Audit
Department, Corporate Centre, Hyderabad,
exclusively dealing with high value Credit
Accounts (with an exposure of Rs.10 crore and
above) domiciled at Branches all over the country.
Takeout finance
Banks also grant term loans for infrastructure
projects like road, telecom, ports etc for 12 to 15
years. But the banks resources are for relatively
short periods. So the banks face ALM problems in
Development Finance Company (IDFC), provides
finance for infrastructure projects. It also provides

takeout finance to banks. Under this IDFC agrees

to take over the loan after 5 years from the bank.
recommended introduction of Factoring in India.
Factoring is purchase of a trade debt by a factor.
Clayatons Rule
It is incorporated in S 59-61 of Indian Contract
Act. It is related to appropriation of Payment
towards debt. The first item of debit is offset by
the first payment. It is the sum first paid that is
treated as first paid out. This rule is applicable to
running a/cs like OD, CC etc., only.
Various Types of Borrowers
Minor: - As per S 11 of Indian Contract Act, a
contract with minor is void-ab-initio (from the
beginning). Money lent to a minor cant be
recovered from him even after he attains
majority. But if the money is spent for the
necessaries or for the benefit of his estate, the
minors estate would be liable.
Joint Hindu Family (JHF): All adult co-parcener are
required to sign the security documents. If a Joint
Hindu Family has a minor co-parcener, his
guardian should sign the documents on his behalf
to bind the minors interest in the JHF. Loan
granted to a JHF binds the share of the minor in
JHF property, but not his personal property, if
any. Loan granted for a business which is not
ancestral will not bind the co-parceners.
Partnership: All partners are jointly and severally
liable for all the debts of the firm. The liability of
the partners is unlimited. The properties of the
firm as well as the properties of individual
partners are liable for the satisfaction of the
liabilities of the firm. Guarantee of the partners in
their personal capacity is also obtained. This is
done with a view to ensure that the Bank will rank
along with the private creditors of the partners to
claim the dividend from the personal property of
the partners, in case of their insolvency. RBI has
decided to prohibit NBFCs (both deposit and non
deposit taking ) from contributing capital to any
partnership firm or to be partners in partnership
firms. In cases of existing partnerships, NBFCs may
seek early retirement from the partnership firms.



Updated up to January 15, 2015

Trust: No trustee can delegate his power to the

other parties for operation of the account. An
advance can be granted to a Trust only if the trust
deed gives power to borrow money. In the case of
advances to Public Trusts, prior permission of the
Commissioner of Charity is to be obtained.
Liquidator: Official liquidator of a company is
appointed by the court and the courts specific
sanction for the borrowing must be obtained.
Generally no advance is granted to the liquidator.


Receiver: Receiver is appointed in respect of

individuals and firms who have declared
insolvency. Generally no advance is granted to the
Highlights On New Indian Companies Act, 2013


1. Immediate Changes in letterhead, bills or

other official communications, as if full
name, address of its registered office,
Corporate Identity Number (21 digit
number allotted by Government),
Telephone number, fax number, Email id,
website address if any.
2. One Person Company (OPC): It's a Private
Company having only one Member and at
least One Director. No compulsion to hold
AGM. Conversion of existing private
Companies with paid-up capital up to Rs
50 Lacs and turnover up to Rs 2 Crores
into OPC is permitted.
3. Woman Director: Every Listed Company
/Public Company with paid up capital of Rs
100 Crores or more / Public Company with
turnover of Rs 300 Crores or more shall have
at least one Woman Director.
4. Resident Director: Every Company must h
ave a director who stayed in India for a tot
period of 182 days or more in previous cal
endar year.
5. Accounting
Every company shall follow uniform accou
nting year i.e. 1 st April -31st March.
6. Loans to director The Company
CANNOT advance any kind of loan /
guarantee / security to any director,



Director of holding company, his partner,

his relative, Firm in which he or his
relative is partner, private limited in which
he is director or member or any bodies
corporate whose 25% or more of total
voting power or board of Directors is
controlled by him.
Articles of Association- In the next
General Meeting, it is desirable to adopt
Table F as standard set of Articles of
Association of the Company with relevant
changes to suite the requirements of the
company. Further, every copy of
Memorandum and Articles issued to
members should contain a copy of all
resolutions / agreements that are
required to be filed with the Registrar.
Disqualification of director- All existing
Identification Number (DIN) allotted by
central government. Directors who
already have DIN need not take any
action. Directors not having DIN should
initiate the process of getting DIN allotted
to him and inform companies. The
Company, in turn, has to inform registrar.
Financial year- Under the new Act, all
companies have to follow a uniform
Financial Year i.e. from 1st April to 31st
March. Those companies which follow a
different financial year have to align their
accounting year to 1st April to 31st March
within 2 years. It is desirable to do the
same as early as possible since most the
compliances are on financial year basis
under the new Companies Act.
Appointment of Statutory AuditorsEvery Listed company can appoint an
individual auditor for 5 years and a firm of
auditors for 10 years. This period of 5 / 10
years commences from the date of their
appointment. Therefore, those companies
have reappointed their statutory auditors
for more than 5 / 10 years, have to
appoint another auditor in Annual
General Meeting for year 2014.

Negative Lien:- It does not create any charge in

favour of the bank but merely prohibits the



Updated up to January 15, 2015
company from creating further charge in favour if
the third parties. (COS 245)
Paripassu Charge: In consortium advances, the
borrower creates paripassu charge over his assets
in favour of all member banks. This is a charge
over the securities given to more than one
creditor with the condition that all the creditors
will be entitled to the charge on equal footing in
proportion to the amount of their advances.
The Central Registry of Securitisation Asset
Interest of
India (CERSAI) is a company licensed under
section 25 of the Companies Act, 1956 and
registered by the Registrar of Companies, New
Delhi. CERSAI was promoted by central
government to prevent frauds involving multiple
lending by different banks on the same
immovable property. It became operational on
March 31, 2011.
The Company is a Government Company with
a shareholding of 51% by the Central Government
and select Public Sector Banks and the National
Housing Bank are also shareholders of the
The Company is providing the platform for filing
registrations of transactions of securitisation,
asset reconstruction and security interest by the
banks and financial institutions.
Any person can also search and inspect the
records maintained by the Registry on payment of
fees prescribed under the Securitisation and
Reconstruction of Financial Assets and
Enforcement of Security Interest (Central Registry)
Rules, 2011.

The process of registration of transactions of

creation of security interest, securitization and
asset reconstruction will be carried out through
the web-portal of the Central
As the registration of transactions of creation of
security interest, securitization and asset
reconstruction has been made mandatory in

respect of all mortgages created on or after 31st

March 2011.
The filing has to be done on an ongoing basis
within the 30 day.
A fee of Rs 500 is payable to CERSAI for each
The Registrar has the discretion to permit
registration of charges up to 60 days from the
date of the charge subject to payment of late fee
up to ten times of the prescribed amount of the
fee on the Banks/FIs However, the Central
Registry has so far allowed for filing of charge
within the next 30 days following expiry of the
initial period of 30 days, without levying any
penalty or additional fee. With the insertion of
Section 26 A in SARFAESI Act , if the particulars of
the transaction are not filed with the Registry
within a period of 60 days from the date of
transaction, the secured creditor has to approach
the Central Government to get the delay
condoned under the Act.


CERSAI after
the date of transaction

Additional fee proposed to be

charged if
the loan amount is:
Upto Rs.5

Above Rs. 5

From 31st to 40th day



From 41st to 50th day



From 51st to 60th day



To strengthen measures to ensure proper end use

of Term Loan proceeds-Plant and machineries to
be purchased out of Banks loan are procured
directly from the manufacturer/authorized dealer
instead of intermediaries. Borrowers have to
submit quotations from the manufacturer/
authorized dealer, at the time of request for
sanction of Term Loan, which should contain the
details of RTGS Code and Account Number to
which the TL proceeds have to be remitted.

Early Sanction Review (ESR): There is a

system of review of pre-sanction process of loan
accounts with exposure of Rs.5.00 cr and above
under Loan Review Mechanism (LRM). It has been
decided to introduce a system of quick review of
sanctions, covering exposures of above Rs.1 cr
and below Rs.5 cr also which are largely
sanctioned / renewed by RCCs and
ZCCs.(e.cir:835/2014-15 dt:13/10/2014)



Updated up to January 15, 2015
(RBI CIR RBI/2014-15/95 dtd 01.07.2014)
Domestic commercial banks / Foreign banks with 20 and
above branches
Total Priority 40 per cent of ANBC or credit equivalent amount of OBE,
whichever is higher.


Foreign banks with less than

20 branches
32 percent of ANBC or credit
equivalent amount of OffBalance Sheet Exposure,
whichever is higher.

18 per cent of ANBC or credit equivalent amount of OBE, No specific target. Forms part
whichever is higher. Of this, indirect lending in excess of of total priority sector target.
4.5% will not be reckoned for computing performance
under 18 per cent target.

Micro & Small Advances to MSE sector will be reckoned in computing No specific target. Forms part
achievement under the overall priority sector target of 40 of total priority sector target
percent of ANBC or credit equivalent amount of OBE,
whichever is higher.
(i) 40 percent of total advances to micro and small
enterprises sector should go to Micro (manufacturing)
enterprises having investment in plant and machinery up
to Rs. 10 lakh and micro (service) enterprises having
investment in equipment up to Rs. 4 lakh;
(ii) 20 percent of the total advances to micro and small
enterprises sector should go to Micro (manufacturing)
enterprises with investment in plant
and machinery above Rs. 10 lakh and up to Rs. 25 lakh,
and micro (service) enterprises with investment in
equipment above Rs. 4 lakh and up to Rs. 10 lakh.
Export credit
Export credit is not a separate category. Export credit to No specific target. Forms part
eligible activities under agriculture and MSE will be of total priority sector target.
reckoned for priority sector lending under respective
to 10 per cent of ANBC or credit equivalent amount of OBE, No specific target in the total
whichever is higher.
priority sector target.
*Adjusted Net Bank Credit (ANBC) (Net Bank
Credit plus investments made by banks in non-SLR
bonds held in HTM category)
(i) Loans to individuals up to 25 lakh in
*OBE - Off-Balance Sheet Exposure.
metropolitan centres with population above 10

For foreign banks with 20 and above

lakh and 15 lakh in other centres for
branches, priority sector targets and sub-targets
purchase/construction of a dwelling unit per
have to be achieved within a maximum period of
family excluding loans sanctioned to banks own
five years starting from April 1, 2013 and ending
on March 31, 2018.
(ii) Loans for repairs to the damaged dwelling
units of families up to 2 lakh in rural and semi1. EDUCATION
urban areas and up to 5 lakh in urban and
Educational loans granted to individuals for
metropolitan areas.
educational purposes up to Rs. 10 lakh for studies
(iii) Bank loans to any governmental agency for
in India and Rs. 20 lakh for studies abroad.
construction of dwelling units or for slum



Updated up to January 15, 2015
clearance and rehabilitation of slum dwellers
subject to a ceiling of 10 lakh per dwelling unit.
(iv) The loans sanctioned by banks for housing
projects exclusively for the purpose of
construction of houses only to economically
weaker sections and low income groups, the total
cost of which do not exceed 10 lakh per dwelling
unit. For the purpose of identifying the
economically weaker sections and low income
groups, the family income limit of 1,20,000 per
annum, irrespective of the location, is prescribed.

Separate strategic business unit viz.

Agriculture Business Unit (ABU), was created
during 2004.
The credit policy and procedures for
agricultural segment are by and large
determined by RBI and NABARD and the State
Level Bankers Committee (SLBC).
The policies and procedures substantially differ
from those of other segments. Lending to this
sector is characterised by the twin features of
Service Area Approach (SAA) and scale of

'Direct Finance' for Agricultural Purposes(RBI/01

FEB. 2014)
(i) Loans to individual farmers [including Self Help
Groups (SHGs) or Joint Liability Groups (JLGs), i.e.
groups of individual farmers] engaged in
Agriculture and Allied Activities, viz., dairy, fishery,
animal husbandry, poultry, bee-keeping and
(ii) Loans to corporates including farmers'
producer companies of individual farmers,
partnership firms and co-operatives of farmers
directly engaged in Agriculture and Allied
Activities, viz., dairy, fishery, animal husbandry,
poultry, bee-keeping and sericultureup to an
aggregate limit of `2 crore per borrower.
(iii) Loans to small and marginal farmers for
purchase of land for agricultural purposes.

(iv) Loans to distressed farmers indebted to noninstitutional lenders.

(v) Bank loans to Primary Agricultural Credit
Societies (PACS), Farmers Service Societies (FSS)
and Large-sized Adivasi Multi Purpose Societies
(LAMPS) ceded to or managed/ controlled by such
banks for on lending to farmers for agricultural
and allied activities.
Analysis of Financial Statements
Important Financial Statements Balance Sheet
& Profit & Loss Statement
Balance Sheet Statement of assets and
liabilities of a concern as on a particular date
Asset What the business entity owns
Liabilities What the business entity owes
Assets can be classified into Current Assets,
Assets, Intangible Assets and Fixed Assets
Liabilities can be classified into - Current
Liabilities, Term Liabilities and Net worth
Current Asset Likely to be converted into cash
in 12 months.
Examples Cash and Bank Balance, Investments,
Stock (Raw Material, Stock in Process and Finished
Good), Sundry Debtors, Pre Paid Expenses (
Insurance Premium Paid, Advance Tax Paid, etc)
Exceptions 1. Sundry debtors outstanding up to
6 month only are classified as Current Asset,
outstanding beyond 6 month are classified as Non
Current Asset
2. Investment in Banks TDR are classified as
Current Asset irrespective of Period of Deposit
Non Current Asset Previously current, but now
not likely to be converted into cash
Examples Obsolete stocks, Non Moving Stocks,
Sundry Debtors due beyond 6 months
Miscellaneous Asset Advance to employees,
Investment in associate firms, Investment in
equity shares
Intangible Asset Goodwill, Copy Right, Trade
Mark, Patent, Royalties, Licences, Preliminary and
Pre operative expenses incurred by the firm, Debit
balance in Profit & Loss A/c.
Fixed Asset Assets employed for aid in the
production process but not used up in the
production process
Examples Land & Building, Plant & Machinery,
Furniture & Fittings, Office equipments, etc. Fixed



Updated up to January 15, 2015
assets go through wear and tear on their use.
Depreciation by Straight Line Method (SLM) or
Written Down Value Method (WDV) is applied on
these assets every year. Depreciation is a non
cash expense to the business entity.
Current Liabilities dues of the firm payable
within 12 months from the date of balance sheet
Examples Bank Borrowings (Cash Credit,
Overdraft, etc), Sundry Creditors, Advance
Payments Received from customers, Term Loan
Installments due within 12 months
Term Liabilities dues of the firm Payable after
one year from the date of balance sheet. Source
accumulated losses and raising working capital
margins. Examples Term Loan from Bank & FIs,
Debentures, Deferred Credit from supplier of
Capital equipments, Deposits from Public
(Repayable beyond one year) Term Liabilities are
repaid out of Cash Accrual (Profit after Tax +
Depreciation + Other Non Cash expense)
Definition of Net Worth
Net worth would comprise Paid-up capital plus
Free Reserves including Share Premium but
excluding Revaluation Reserves, plus Investment
Fluctuation Reserve and credit balance in Profit &
Loss account, less debit balance in Profit and Loss
account, Accumulated Losses and Intangible
Assets. No general or specific provisions should be
included in computation of net worth. Infusion of
capital through equity shares, either through
domestic issues or overseas floats after the
published balance sheet date, may also be taken
into account for determining the ceiling on
exposure to capital market. Banks should obtain
an external auditors certificate on completion of
the augmentation of capital and submit the same
to the Reserve Bank of India (Department of
Banking Supervision) before reckoning the
additions, as stated above. Tangible Net Worth
Net worth Intangibles
Ratio Analysis
Financial Ratios can be classified broadly under
four heads
a) Liquidity Ratio Indicates ability to meet
current dues out of Short Term Assets

b) Solvency Ratio Indicates extent of

dependence on outside liabilities and the
feasibility of meeting them if need arises
c) Activity Ratio Indicates efficiency of the unit
in utilizing present available resources
d) Profitability Ratio Indicates capacity of the
unit to generate profit and its rate of return
Liquidity Ratio
i) Current Ratio = Current Asset/Current Liabilities
ii) Quick or Acid test ratio = (Current Assets
Inventory) / Current liabilities
iii) Net Working Capital (NWC) or Margin or Liquid
Surplus = (Long Term Sources Long Term Uses)
or (Current Asset Current Liability)
Solvency Ratio
i) Debt Equity Ratio = Debt / Equity or Term
Liabilities / Tangible Net Worth
ii) Financial Leverage Ratio = Total Outside
Liabilities/ Tangible Net worth
iii) Debt Service Coverage Ratio = (Profit After Tax
+ Depreciation + Interest on TL)/(Principal
Repayment of TL + Interest on TL)
Activity Ratio
i) Assets Turnover Ratio = Net Sales/Net Tangible
ii) Stock Turnover Ratio = Cost of goods sold
(COS)/ Average Inventory
COS = Net Sales Gross Profit
Average Inventory = (Op Stock + Closing Stock)/2
iii) Debtors Period = Average Sundry
Debtors/Average daily credit sales
Average Sundry debtors = (Opening + Closing
iv) Creditors Period = Average Sundry Creditors/
Average daily credit purchases
Profitability Ratio
i) Return on Investment (ROI) = (Profit after Tax/
Total Tangible Assets) x 100
ii) Return on Equity (ROE) = (PAT / Tangible Net
worth) x 100
Bank Guarantees
Proper Classification- Financial or Performance
Credit Conversion Factor (e-cir-365-16.07.2013)
Financial guarantees, attract a CCF of 100 per
Performance guarantees, attract a CCF of 50 per



Updated up to January 15, 2015
(Modifications in the obtention of Valuation
Reports for Loans, applicable to all segments
irrespective of the amount)
( 229/2014-15 dt:04/06/2014)
In case of variation of 10 % or more in the
valuation proposed by the valuer and the
Guideline value provided in the State Government
notification or Income Tax Gazette, justification
on variation has to be given by the Valuer. The
same should be brought out in the Appraisal
Memorandum for the Sanctioning Authority to
take a view.
Details of last two transactions in the area also to
be incorporated in the Valuation Report.
Valuers are to be provided with precise details of
the property to be valued. A copy of the TIR
obtained from the Empanelled Advocate for the
property to be valued should be given to the

CC/OD/DL/WCDL (Limits Rs.5 Crore and above) for

accounts where External Rating is not available,
Transfer Price is to be charged/applied on Internal
rating basis.
Term Loans (Limits Rs.5 Crore and above) for
accounts where External Rating is not available
Transfer Price is to be charged/applied on Internal
rating basis.
Accounts where there is neither External nor
Internal ratings, such accounts irrespective of the
limit transfer price is charged as under Food
Credit Accounts and others limits below Rs. 5
Crores Base Rate + 15 bps
Restructured Accounts
(As per details obtained from CBS/BU)
Base Rate + + 50 bps

As per the published accounts of the Bank as on

31.03.2014, the total capital funds (Basel III -Tier
I and Tier II) stood at Rs.1,40,151.00 crores and
Banks Net Worth stood at Rs.1,12,242.24 crores.

As per extant instructions, Staff Accountability is

to be conducted when an account becomes NPA
or a fraud has been detected.

Conveying reason(s) leading to rejection of loan

proposal and providing a copy of loan document
to the borrower is detailed under Fair Practices
Code for Lenders in line with RBI guidelines.

It has now been decided to enable Cash Credit

accounts and Current Accounts with sanctioned
overdraft limits under non-retail segments for
transactions through Mobile Banking Service. All
other conditions remain the same.
( dt.02.07.2014)

Manual on Loans & Advances, Part-2, Chapter-18,

para 1.3 (iii) on the captioned subject says The

pledge of goods on the companys assets is a
specific/ fixed charge. Therefore, the relative
document does not require registration with the
Registrar of Companies.
Revised Instructions: it has been decided that till
any future clarification is issued by the Ministry of
Corporate Affairs, operating functionaries should
register charges created by pledge under the
option Other under Type of Charge in Form
CHG 1. ( 242/2014-15 dt:07/06/2014)
( 267/2014-15 dt:11/06/2014)
For rated accounts, differential Transfer Pricing
Rates for limits from Rs. 5 Crores to 25 Crores and
Rs.25 Crores and above, are introduced To
sensitize the branches for follow-up of NPAs, the
Transfer Price Rates has been Increased
Transfer price is applied for Savings Bank and
Current Account deposits on the portfolio
outstanding balance of the branch.
For Limits Rs.5 Crs. and above but below Rs. 25
Crores Transfer Price is applied on External Rating
basis.(i.e. External Agencies)

Ministry of Corporate Affairs had introduced efiling system in 2006.

As a part of information to be submitted quarterly

on large borrowers (CRILC), starting from June
2014, Reserve Bank of India required the Banks to
furnish the information on non-cooperative
borrowers with exposure of Rs.5 cr and above. RBI
also prescribed higher/accelerated provisions on
new loans/exposures sanctioned to such
borrower entities as well as new loans/exposures
to any other entities promoted by such
promoters/directors or to a company, on whose



Updated up to January 15, 2015
board any of the promoter/directors of identified
non-cooperative borrower entity is a director.

Definition: Reserve Bank of India defined a noncooperative borrower as

One who does not provide necessary
information required by a lender to assess its
financial health even after 2 reminders; or

Denies access to securities etc. as per terms of

sanction or

Does not comply with other terms of loan

agreements within stipulated period; or

Is hostile/indifferent/in denial mode to

negotiate with the bank on repayment issues; or
plays for time by giving false impression that
some solution is on horizon; or

Resorts to vexatious tactics such as litigation to

thwart timely resolution of the interest of the
( dt:07/07/2014)
Provisions applicable: The higher/accelerated
provisions applicable in cases where a borrower is
identified as non-cooperative borrower are as
Sub-standard (secured)
Upto 6- months--15%
6 months to 1 year25%
Sub-standard (Unsecured-ab-initio)
Upto 6- months--25%
6 months to 1 year40%
Doubtful-I- 2nd year- 40% (secured
portion) & 100% (unsecured portion)
Doubtfull II- 3rd & 4th Year-100% for
both secured and unsecured portions
Doubtfull III- 5th year
Onwards- 100%


APPLICATION FORM: it has been decided
that in addition to the PAN No., Mobile
No. & email IDs of
promoters /
guarantors, all other details viz. Aadhar
No., Passport No., Social Media IDs etc.
are also to be captured in the loan
application form. These details may be

inserted in item no. 14 & 20 (a) of the

captioned application.

reclassification of major infrastructure related
construction activities viz. Roads, Ports, Airports,
Railways, Transport Terminals, Bridges, Tunnels
and Dams, from the existing Services Sector, to
Industry Sector. Following this reclassification, the
Collateral Security norms applicable to Working
Capital and Term Loans to units under the
Services Sector, will not be applicable to units
engaged in the eight aforementioned major
infrastructure related construction activities.
(e.cir. dt:29/10/2014)

TUFS-Technology Upgradation Fund Schemesubmission of Asset Verification Certificate has

been made mandatory for release of subsidy
under TUFS from quarter ended June 2014

It has been decided to give separate value

statements in CRA (framework is to be used for all
internal credit rating models) more relevant for
assessment of New Units under Management &
Corporate Governance parameter.

Whenever a breach of covenant takes place, a

suitable communication be sent to the CEO of the

Company expressing concern of the Bank.
( dt:12/12/2014)


( dt:24/12/2014) In case
of variation of 20 % or more in the valuation
proposed by the valuer and the guideline value
provided in the State Government notification or
Income Tax Gazette, justification on variation has
to be given by the Valuer.

Details of last two transactions are additionally to

be provided in the Valuation Report, if available.
Selfie of the Inspecting Official at the site, with or
without the borrower should be taken as an
integral part of inspection and the same should be
kept along with the security documents. This
exemption (with or without the borrower) will
apply only in respect of Housing Loans.



Updated up to January 15, 2015
In respect of prospective new connections where

our estimated exposure is Rs. 5 crore or above

(aggregate of fund based and non-fun based
exposures), the Bank has entered into an
agreement with a service provider M/S Cubictree
Technology Solutions Pvt. Ltd., (CTSPL)for prescreening services.
Obtention of CIR is mandatory prior to sanction of
credit facilities when the borrower is having
Multiple Banking Arrangement or considered
under take over norms. The genuineness of the
CIR should be ascertained diligently and carefully
i.e. to be verified by way of branch visit,
telechecking, examining statements of accounts
It has been decided that Branch Managers, Case
Lead Officers or Case Officers in SAMBs and
Officers from SARBs/ Branches in the Circle / MCG
/ CAG can file RTI application with Income Tax
Department, Sub-Registrar of Assurances and
Municipal Corporation for ascertaining details of
income and properties owned by the borrowers /
guarantors. Further the Income Tax Authorities
cannot claim exemption as furnishing the details
would involve overriding public interest for
recovery of money due to the Bank which is public
money. In case the CPIOs or the respective
Appellate Authorities reject the application or
deny the information, the Bank can consider
taking up the matter with CIC and subsequently
with High Court and Supreme Court, if necessary.
( dt:20/05/2014)