Sole Banking:In AAA and AA rated accounts where we are sole bankers, we should endeavor to retain such accounts.

Borrowers shall normally obtain our prior approval in case they would like to switch over to Multiple Banking Arrangement or consortium lending. Whenever a customers credit requirements exceed 50% of the exposure ceiling or Rs 100 crores whichever is higher, the borrower would be encouraged to scout for another Bank/institution to share the credit facilities under Multiple Banking, Consortium or syndication arrangement. Multiple Banking:Where we are the sole bankers and the borrower desires to avail of credit limits from other bank/s without a formal consortium arrangement, the reasons for the borrower wanting to shift to another bank should be ascertained and recorded. We may decide to permit the borrower to bank elsewhere provided the borrower agrees to furnish from time to time details of the various facilities availed from other bank/s and also provided that the total working capital limits availed by the borrowers are within a 0% tolerance of the working capital limits assessed by us. Acceptance of distinct and separate security or otherwise may be considered by the sanctioning authority on the merits of each case. In such cases, Banks exposure for working capital needs should normally not exceed 75% of the total working capital requirements of the borrower. Where it exceeds this limit, justification for the same shall be mentioned in the Appraisal note.

Consortium Lending:Banks have given the freedom to frame the ground rules for lending under consortium arrangement. The ground rules are given in Annexure I. Addition/modification in this regard may be considered and approved by the Credit Risk Management Committee. In case of accounts where we are members, we may accept the rules framed by the leader, provided they do not jeopardize Banks interest and generally conform to Bank policies.

Syndication:A Syndicated credit is an arrangement between two or more lending institutions to provide a credit facility using common loan documentation. We shall encourage financing under such arrangements. Bank will also act as syndication leader whenever such opportunity is spotted.

Corporate Credit Rating:Ratings can be assigned to short-term and long-term debt obligations as well as securities, loans, preferred stock and insurance companies. Long-term credit ratings tend to be more indicative of a countrys investment surroundings and/or a companys ability to honor its debt responsibilities. The ratings therefore assess an entitys ability to pay debts. There are various organizations that perform credit rating for various business organizations. Dena Bank follows a finely defined Credit Rating Model for assessing the creditworthiness of the applicant. The credit rating models asses various aspects of the project and assigns scores against them determining the risk level involved with the project.

Credit Rating Framework:A Credit-risk Rating Framework (CRF) is necessary to avoid the limitations associated with a simplistic and broad classification of loans/exposures into a good or a bad category. The CRF deploys a number/ alphabet/symbol as a primary summary indicator of risks associated with a credit exposure such a rating frameworks is the basic module for developing a credit risk management system and all advanced models/approaches are based on this structure. Broadly, CRF can be used for the following purposes: Individual credit selection, wherein a borrower or a particular exposure/facility is rated on the CRF. Pricing (credit spread) and specific features of the loan facility. This would largely constitute transaction level analysis. Portfolio level analysis. Surveillance, monitoring and internal MIS. Assessing the aggregate risk profile of bank/ lender. These would be relevant for portfolio-level analysis. For instance, the spread of credit exposures across various CRF categories, the mean and the standard deviation of losses occurring in each CRF category and the overall migration of exposures would highlight the aggregated creditrisk for the entire portfolio of the bank. The Following step-wise activities outline the indicative process for arriving at riskratings: Step I: - Identify all the principal business and financial risk elements Step II: - Allocate weights to principal risk components Step III: - Compare with weights given in similar sectors and check for consistency. Step IV: - Establish the key parameters (sub-components of the principal risk elements)

Step V: - Assign weights to each of the key parameters Step VI: - Rank the key parameters on the specified scale Step VII: - Arrive at the credit-risk rating on the CRF Step VIII: - Compare with previous risk-ratings of similar exposures and check for consistency. Step IX:- Conclude the credit-risk calibration on the CRF The risk rating process would represent collective decision making principles and as indicated above, would involve some in-built arrangements for ensuring the consistency of the output. The rankings would be largely comparative. As a bank perception of the exposure improves / changes during the course of the appraisal, it may be necessary to adjust the weights and the rankings given to specific risk-parameters in the CRF. Such Changes would be deliberated and the arguments for substantiating these adjustments would be clearly communicated in the appraisal documents.

Risk Rating:The assessment of financial risks would be made on the basis of the analysis of the performance of the borrowers as obtained from the last audited balance sheet/Profit & loss account. Additionally, the trends for the past 2-3 years may be considered to give a dynamic character to the variables selected.

A. Financial Profile-static parameters 1. Current Ratio:The benchmark Current ratio would be determined for accepting any proposal for financing. In order to recognize value of owned funds/long term sources of finance; we may progressively increase the marks for higher levels of current ratio than the benchmark.

2. Debt Equity Ratio:The ratio of total outside liabilities to tangible net worth is an indicator of gearing. We may allot full marks for benchmark D.E.R. No marks may be allotted for high ratios. While financing specific industries where higher level of debt/ equity ratio is permitted by RBI/Govt/Bank (industries such as NBFCs, Shipping etc), marks allotted to be suit ably modified to incorporate relaxations.

3. Profitability (Gr.Profit i.e. PBD (after tax)/Net sales):-

As profit is the source from which all debts are to be ultimately repaid and which also provides funds for further growth, we would give adequate weight age to this parameter. The ratio of cash profit after tax vis--vis net sales will be the criterion.

4. Interest Coverage Ratio:With the revised norms on income recognition and provisioning for non performing assets, timely servicing of interest has assumed great importance. Interest coverage ratio denotes the ability to service the interest and hence it would be given adequate weight age.