S.

No Description
1 Pre-sanction visit report compilation, signed by appropriate authority.
2 CIR on borrowing Company from all banker's / FIs obtained. Credit information reports
from the existing bankers on the applicant Company in the IBA approved format to be
obtained
3 Audited Balance Sheet (ABS) to the Bank within 6 (six) months of close of the Financial
Year (F.Y.) i.e., last date for submission of ABS will be 30th September if F.Y. closes on
31st March.
4 CMA data is to be obtained from the borrower in the following forms:
Form - I: Particulars of existing/proposed limits from the banking system
Form - II: Operating statement
Form – III: Analysis of balance sheet
Form - IV: Comparative Statement of Current Assets (CA) and Current Liabilities (CL)
Form - V: Funds flow statement
For unlisted companies Renewal/ enhancement in credit facilities may be carried out
throughout the financial year based on Audited financials which are not older than 18
months old and unaudited financials (provisional) not more than 6 months old.

5
KYC documents in respect of the auditor firm / obtain a copy of GSTN Invoice (issued by
the Auditor to our borrowers) and keep the same on record.
6
S.No Vs No Value Statement Description Guidelines
 Genuineness of financial statements submitted by borrowers are to be verified by
making an independent reference to the Chartered Accountant who has signed the
Balance Sheet (from the Chartered Accountant firm concerned) directly by letter/e-
mail/fax.
Ref: Manual on loans & advances, Part 1, Chapter 5, item 1-5-1.1 (xi)
10 5.1 Estimation made is in line with the While commenting on the Performance and Financial indicators, Interim Financials (on
interim financials, if not satisfactory Net sales, PAT etc) for various quarters of current and last year have to be mentioned in
justification has been provided. the appraisal format and if the interim financials are not in tune with the estimates,
justification needs to be provided.
Appraisal note to contain comments on amount of actual turnover till last month of the
current year and whether the actual achievement (till last month) is in tandem with the
estimated turnover or not. This gives an idea to understand the possibility of achieving the
estimated turnover in the current year during the remaining period of Financial Year.

11 8.3 Corporate Guarantees extended to In case our Borrower has extended Corporate Guarantee to any Associate/ Subsidiary/
the Group Companies Group Company, such details needs to appear in the Audited Balance Sheet under
"Contingent Liability".

Further:
1. Permission from the Bank must have been obtained for extending Corporate
Guarantee to any Associate/ Subsidiary/ Group Company.

2. 20% of the Corporate Guarantee extended by the Company in favour of

Associates/Subsidiaries or any other companies for securing credit facilities or otherwise
should form part of total outside liabilities for the purpose of calculating financial ratios
(Refer Loan Policy 2020).
S.No Vs No Value Statement Description Guidelines
12 10.1 Borrowing unit's domestic / As a part of appraisal, comments should be given on domestic/international standing,
international standing, market share, business strategies, competitive advantage, price trend, competitiveness of the borrower
business strategies, competitive etc. and the information should conclude with the outlook for the unit, as well as its Group.
advantages & Competence,
Reputation in respect of the Comments to focus on:
borrowing Company and its group are  Market Share of the company
discussed.  Key customers and Vendors of the Company
 Details of Key Products
 Trend in pricing of raw materials, finished goods and operating margins
 Details of Exports
 Details of Exports to Associate concerns, if any
 Ability to compete against imports
 Critical Success factors

Ref: Manual on loans & advances, Part 1, Chapter 5, C3. Market & Industry Analysis
13 12.1 Validation of estimated level of CA & The estimated levels of current assets & current liabilities should be examined in the
CL: assessment exercise in relation to the following.

[i] Variations in level of current (i) Trend of past levels of the unit (for current assets and current liabilities) vis-à-
assets & current liability. vis estimated and projected levels and comment whether the variations are
justifiable.
[ii] Adequate justifications have
(ii) Inter-firm comparison of the levels and justification for the same.
been provided for stipulating higher
cover period than the average (iii) Borrowers’ operational strengths and weaknesses and the need to hold the
realisation period of Receivables. current assets at the levels projected.

[iii] Estimated / projected ABF is in (iv) Borrowers’ ability to absorb the cost of carrying inventory/ receivables at the
line with the incremental buildup of levels proposed.
S.No Vs No Value Statement Description Guidelines
current assets. (v) The cover period for receivables should be fixed according to the average
realisation period of receivables. Normally, cover period of receivables should
While assessing FB Limit, the LC not exceed the average realization period. For this, the period of Receivables /
facility limits, the aggregate of fund Gross sales * 365 (from the Estimated balance sheet) to be arrived and looked
based working capital finance and the into.
LC facility is commensurate with the
projected buildup of chargeable (vi) Further, book debts exceeding six months, should not be financed. However, in
current Assets. exceptional cases, book debts of longer duration may be considered for
14 12.2 Assessment of Working Capital funds financing with the prior sanction by the competent authority.

(vii) To ensure that the estimated / projected Bank Finance is in line with the
incremental buildup of current assets. For this, comparison of BF/ TCA over the
years needs to be looked into.

(viii) Care should be taken to ensure that while assessing CC and LC limits, the
aggregate of both these (CC + LC) is commensurate with the projected buildup
of chargeable current Assets i.e., Percentile growth in WC limits (CC + LC)
should normally commensurate with proportionate percentile growth of
chargeable current assets.

The finance sought by the borrower, will be validated with reference to the operating cycle
of the borrower, projected level of operations, nature of projected build-up of CA/CL,
profitability, liquidity, etc.

The information relating to WC assessment and ABF to be presented under the head
‘Assessment of Working Capital requirements and Assessed Bank Finance’ in the Credit
Appraisal Format.
S.No Vs No Value Statement Description Guidelines
In cases of manufacturing units, for overall fund based limits upto Rs.25 lacs, the
simplified formats of application and assessment prescribed by RBI for SSI units should
be used.

For limits of Rs.25 lacs and above, PBS method, turnover method or cash budget method
may be adopted for assessment of working capital.

Ref: Manual on loans & advances, Part 1, Chapter 7, Item 1-7-1.2.5, 1-7-1.2.6
15 12.2.1 Assessment of Limits carried out Ref: Circular No.: CRO/CPPD-ADV/112/2020 – 21 dated 04.11.2020 for guidelines on
appropriately including Financing Financing Gems & Jewellery Industry.
Gold and Jewellery Business as per
revised guidelines OR Assessment of
Working Capital Demand Loan
(WCDL) as per modified instructions.
16 12.2.2 Assessment of facilities like EPC / EPC assessment has to be made exactly on the lines of assessment done for normal
FBD/ PCFC/EBR etc. are properly working capital advances.
carried out.
The period for which the Bank gives packing credit depends upon the manufacturing /
Required approval for Running trade cycle or specific requirements of the individual export, normally not exceeding 180
Account facility of EPC/PCFC has days, extendable by another 90 days i.e., 270 days.
been obtained.
The percentage of margin depends on the nature of order, commodity, capability of
exporter etc.

The amount advanced under EPC should be recorded in ‘Packing Credit Register’ in the
relative order/letter of credit under the signature of an authorised official.
S.No Vs No Value Statement Description Guidelines
Running Account Facility
Subject to Sanction, Branches may extend the ‘Running Account’ facility to those
exporters whose track record has been good as also to Export Oriented Units (EOUs)/
Units in Free Trade Zones / Export Processing Zones (EPZs) and Special Economic
Zones (SEZs) on ‘First In First Out’ (FIFO) basis.

Running account facility should not be granted to sub-suppliers or a supporting

manufacturer.

Ref: Manual on loans & advances, Part 2, Chapter 13

17 12.3 LC Bill Discounting limit correctly The bills drawn under LCs can be purchased/ discounted only by those branches
assessed based on volume of Sales specifically authorised by CGM (Circle). All CAG & CCG branches are authorised to do
expected to be backed by LCs. this business. While fixing the limits for purchase/discount of bills drawn under LCs, the
following approach should be adopted.
Whenever the limit is fixed, or
enhanced subsequent to sanction of (a) Bank’s existing customers:
ABF, assumptions regarding level of Limit fixation should be done based on the volume of sales expected to be backed by LCs
receivables made at the time of i.e., limit should not be more than the volume of LC backed sales. Fixing these limits
sanction of limits should be reviewed should, as far as possible, coincide with the sanction/renewal of Assessed Bank Finance
and if required, ABF is to be (ABF).
reassessed to ensure that there is no
over financing. In case the limits are fixed or enhanced subsequent to the sanction of ABF, the
assumptions with regard to the level of receivables made at the time of sanction of limits
should be reviewed and if required, ABF needs to be reassessed to avoid over financing.

It should be ensured that the receivables backed by LCs are excluded in the stock
statement while arriving the drawing power.
S.No Vs No Value Statement Description Guidelines
(b) For borrowers of other banks:

In respect of non-Borrowers, the bills discounting shall be restricted to CCG/ CAG

branches, and Branches authorised by DMD (RB) under R & DB. In the case of non-
borrowers (including borrowers of other banks), past financial data should be called for
and the following aspects to be looked into.

i) Business is conducted satisfactorily;

ii) There are no liquidity problems in the business;
iii) Net worth is adequate;
iv) Past experience in regard to payment of bills purchased is satisfactory.

In such cases, there is no need to obtain NOC from the financing bank. A brief note
covering the above aspects and the nature of the transactions covered by the LC and the
need for security should be recorded for this purpose.

i) The extent of requirement of additional working capital against such bill discounting is
separately assessed and appropriate bill discounting limits against letters of credit,
sanctioned to such borrowers. The discounting of such bills should not result in double
financing and the bills discounted should be proportionate to the sales turnover of the unit.

ii) The borrower’s existing Bankers are separately advised for having sanctioned this
facility to the borrower by our Bank.

iii) All the formalities under the KYC guidelines are meticulously complied with.

iv) In cases where negotiation of bills drawn under LC is restricted to the Bank, and the
beneficiary of the LC is not our constituent, we may negotiate such an LC, subject to the
condition that the proceeds will be remitted to the regular bank of the beneficiary.
S.No Vs No Value Statement Description Guidelines
v) Branches/Operating Units shall not open LCs and negotiate / purchase/ discount bills
drawn under LCs bearing the “without recourse to beneficiary” clause, except where the
LC is issued / confirmed by our own branches or by First Class Banks or by
Correspondent Banks.

Ref: Manual on loans & advances, Part 2, Chapter 9, item 2-9-3.1

18 12.5 Compliance to regulator’s prescription Guidelines for extending NFB Facilities to Non-Constituent Borrowers:
on extending non-fund-based facilities
to Non-constituent borrowers of the 1. The non-constituent borrowers can be sanctioned Letters of Credit (LC) (Inland &
Bank is examined and no deviation is Import), Bank Guarantee (BG) (Domestic & Foreign) and these NFBWC facilities can be
observed. extended under Sole Banking or Consortium or Multiple Banking Arrangement (MBA).

Non-fund-based facilities including 2. NFB facility, for purposes other than Working Capital (WC) cannot be sanctioned to
Partial Credit Enhancement (PCE) non-constituent borrowers. However, in cases like Project LCs, where the transactions are
can be extended by the Banks to backed by way of a Term Loan, sanction of NFB facility for such purpose(s) would be
those customers, who do not have considered.
any fund-based facility from any of
3. Corporate borrowers with a track record of at least three (3) years in the line of
the banks in India.
business/activity are eligible for availing the above facilities. Further, the company should
have earned post tax Profit (PAT) in the preceding three years.

4. Applicant borrower with CRA of SB-5/ECR of ‘BBB’ or better will be exempted from
eligibility criteria i.e., 3 years in the line of business/ activity. However, the unit should
have made a post-tax profit in the previous year and TNW is to be positive. When both
internal and external ratings are available, worse of the two may be considered for
eligibility criteria.

5. Central/State PSUs and Government Departments/ Undertakings will be exempted

from eligibility criteria i.e. 3 years in line of business/activity, Profit & CRA/ECR.
S.No Vs No Value Statement Description Guidelines
6. Compliance with guidelines on Know Your Customer, Anti Money Laundering,
Combating of Financing of Terrorism and Prevention of Money Laundering Act shall be
ensured by the operating units.

7. Operating units shall ensure that the borrower has not availed any FB facility from any
Bank operating in India. For this purpose, the borrower:

(a) Shall submit a Board resolution/declaration (signed by authorised signatory) along

with Statutory Auditor’s certificate that it has not availed any FB facility from any
bank operating in India.

(b) The declaration should also include details of NFB facilities already enjoyed from
other banks and it should be backed by Statutory Auditor’s certificate.

(c) In addition to the above, details of credit facilities enjoyed (if any) should be verified
by operating units with company’s financial statements, MCA/ RoC portal, CRILC
etc.

8. Credit information relating to grant of NFBWC facility shall be shared with Credit
Information Companies.

9. All other guidelines pertaining to Working Capital finance i.e. Margin, Security,
Processing Fee/Service Charges, Renewal/Review, Deviations etc. will be equally
applicable for this product also.

10. Operating units have to open Current Account in borrower’s name to facilitate day to
day operations. In case of overdrawing in Current Account due to LC devolvement/BG
invocation, interest rate as applicable to corresponding CRA rating plus penal interest of
2.00% per annum on the irregular portion has to be charged for the period of irregularity.
S.No Vs No Value Statement Description Guidelines
11. The borrower should not have Current Account with any other bank (other than those
that have extended NFBWC facilities) and the following has to be ensured:
a. Opening Current or Other accounts, with bank(s) outside the arrangement without
obtaining Bank’s ‘No Objection Certificate’ (NOC), would amount to an event of
default.
b. Any act of the borrower in opening or continuing an account with a bank outside
the arrangement without the permission of the existing bank(s) will be treated as an
act of wilful default.

c. Non-compliance of the instructions would result in withdrawal of all concessions, if

extended and a freeze on grant of any additional facilities.

12. The borrower should furnish an undertaking by way of Board resolution stating that
they will not avail any FB limit from any bank operating in India.

13. The borrower shall maintain Debt Service Reserve Account (DSRA) to the extent of
LC bills falling due for payment in next 30 days.

14. At a later date, if the CRA rating or ECR deteriorates and the borrower becomes
ineligible for NFBWC limits, the borrower has to provide 100% cash margin or 100%
collateral security within a period of six months. In case the borrower is not able to comply
with the requirement, Bank shall exercise exit option by recalling the credit facility.

15. In case concessions in LC/BG service charges have been extended and there are
devolvement/invocations, review/withdrawal of concessions has to be undertaken by the
operating unit.

Ref: Manual on loans & advances, Part 2, Chapter 9, item 2-9-2.2

S.No Vs No Value Statement Description Guidelines
19 12.6 LC limits have been assessed for In the appraisal format, computation of LC limits as mentioned in Appraisal Format with all
Inland / Foreign as also separately for the details has to be meticulously carried out.
Working Capital and Capital Goods.
Separate assessment is to be carried out for Inland LC and Foreign LC as per the
following table (Ref: G1 - Computation of LC limit, Section G, Chapter 5, Part 1 of
Manual on Loans & Advances). Similarly, separate assessment is to be done for
Working Capital and Capital Goods. LC limit for capital goods needs to be backed by term
loan.

Computation of LC limit: (Rs in lakhs)

Foreign LCs Domestic LCs Total LCs
Total Purchases of RM (Esti/Proj) 96 960 1100
Procurement out of LC (%) 100 50
Monthly RM purchases out of LC = M 8 80 88
a) Usance (average) (in months) 3 3
b) Lead time (average) (in months) 1 0.50
Total Time (a + b) = (T) (in months) 4 3.5
LC Limit required (M x T) 32 280 312
LC recommended = (A) 30 280 310
LC for Lead Time for which creditors 8*1/30 = 0.27 80*0.50/30 = 1.60
are not created (Monthly RM out of 1.33
LC*b/30) = (B)
Level of Creditors (LC backed) (A-B) 29.73 278.67 308.40
Recommended LC limit 30 280 310
S.No Vs No Value Statement Description Guidelines
Our share 310
Documentary:310 Non Documentary:0
Margin (%) (Existing / Proposed): 25/25
Usance / Sundry Creditors:
Maximum Usance Period of LC estimates No of days
Domestic LCs 90
Foreign LCs 90

Usance / Sundry Creditors: Ensure that Sundry Creditors (under LC) days in CMA
should be equal to or more than the Usance Period.

It is to be ensured that the LC limits sanctioned for purchase of Raw Materials are not
used for CAPEX or other purposes.

Capex LCs can be established for payment to suppliers of capital goods, within the
sanctioned term loan. Lien is to be marked in the term loan account for the outstanding
LC. Margin in respect of Capex LCs should be the same as per the accepted financing
pattern for Term Loan.

For import LCs, requisite hedging must be in place unless liability under LC is to be
settled out of foreign currency funds arranged by the borrower.

Ref: Manual on loans & advances, Part 1, Chapter 1, item 1-1-7.10 and 1-1-7.11
S.No Vs No Value Statement Description Guidelines
20 12.7 Usance period reckoned for The usance period should ordinarily have relation to the working capital cycle and should
assessment of LC Limit is in line with not, generally, exceed the production cycle.
the Working Capital Cycle.
Ref: Manual on loans & advances, Part 1, Chapter 1, item 1-1-7.10
In order to avoid funds diversion if any, it has to be ensured that Usance period should not
be more than the Working Capital Cycle.
21 12.8 The period of Buyers’ Credit should The period of Buyers’ Credit should not exceed the Operating Cycle or Maximum Usance
not exceed the Maximum Usance Period of LC considered in the Proposal. Further, care should be taken that usance period
Period of LC / Working Capital Cycle should not exceed the operating cycle/ WC cycle period.
Period.
Reserve Bank of India has discontinued the issuance of LOU/LOC for Trade credits vide
Appropriate Sanction obtained from its circular dated 13.03.2018. To provide an alternate product to the Corporates to meet
the sanctioning authority for the their import obligations, new products ‘Stand by Line of Credit (SBLC) and Non-LC
Buyers' Credit facility. Reimbursement Finance (NLRF)’ have been introduced. Appropriate Sanction to be
obtained from the sanctioning authority for extending the above facilities.

Ref: Manual on loans & advances, Part 2, Chapter 9, item 2-9-11.

S.No Vs No Value Statement Description Guidelines
22 12.9 BG limit has been assessed taking 1. Bank guarantees are required for various purposes - Bid Bonds for bidding for projects
into consideration estimated or contracts, Advance payment guarantees for mobilisation money received by
requirements separately for inland / contractors, Performance and Retention money guarantees, guarantees in favour of
foreign, as also for Performance Government and Statutory bodies, Courts etc.
Guarantees / Financial Guarantees /
with further requirements of EMD / 2. There is no difference between the due diligence process for bank guarantees as
Mobilisation advance / Retention compared to other credit facilities and the instructions with regard to credit rating,
Money / Bid-bonds, Advance assessment, nature and quantum of bank guarantee facility, margins, collateral security,
Payment Guarantees etc., as per standing and means of the borrower / promoters / directors / guarantors etc. are equally
extant guidelines. applicable.

3. Whenever a request for the issue of bank guarantee is received, it is always advisable
to be satisfied about the following aspects:

(a) The need for the bank guarantee and whether it is related to the applicant’s normal
trade/business.
(b) Whether the requirement is one-time or on a regular basis.
(c) The nature of bank guarantee i.e., financial or performance.
(d) Applicant’s financial strength/capacity (through an analysis of his financial
statements, cash/ funds flow position and opinion reports) to meet the liability/obligation
under the bank guarantee in case of invocation.
(e) Past record of the applicant in respect of bank guarantees issued earlier; e.g.,
instances of invocation of bank guarantees, the reasons thereof, the customer’s response
to the invocation, etc.
(f) Present outstanding on account of bank guarantees already issued.
(g) Margin.
(h) Collateral Security offered.
(i) KYC of the borrowers & guarantors.
S.No Vs No Value Statement Description Guidelines
A customer may require BG limit for following purposes:
i. Earnest Money Deposit (EMD) for participating in tenders.
ii. Towards security deposit on those tenders awarded to our Customer.
iii. For Submitting Advance payment Guarantee on orders bagged by the Company.
iv. For providing Retention money/Maintenance Guarantee on the job completed by
our customer.
v. For Miscellaneous purposes like Guarantee required to be submitted to
different tax authorities, disputed tax liabilities etc.

An illustrative example, how a BG limit should be assessed is given hereunder.

(Rs. in crs)
Opening balance of BGs as on 01.04.2021 8.60
Guarantees required as under:
i) Earnest money deposits: 2% of additional tenders worth Rs. 100 crs during FY 2.00
2021-22
ii) Security Deposits: 5% of tenders worth Rs. 80 cr expected to be awarded
during FY 2021-22 # 4.00
iii) Advance Payment Guarantees: 10% of new orders worth Rs. 80 cr expected
during FY 2021-22 8.00
iv) Retention Money / Maintenance Guarantees: 10% of the jobs valued at Rs. 40
cr expected to be completed during FY 2021-22 4.00
v) Guarantees on account of Sales Tax, Commercial tax and excise duty 1.50
payments
vi) Total 28.10
vii) Less: Bank Guarantees to be cancelled during FY 2021 - 22 including those
included above in (i) to (v), if any 2.80
viii) Limit required 25.30
ix) Say / Rounded off 25.00
S.No Vs No Value Statement Description Guidelines
# Normally expected tender awarded should be lower than tender participated and
the same is linked with success rate of the contractor.

7. Separate Bank Guarantee limits should be sanctioned for Project Exports and Export
Advances.

Ref: Manual on loans & advances, Part 1, Chapter 1, item 1-1-7.14 and Chapter 5,
item G2.

How to arrive at average success rate while assessing BG limits?

2020- 2019- 2018- 2017- 2016- 2015- Averag
Particulars 21 20 19 18 17 16 e

Tenders 68000 52000 35000 42000 40000 39000 46000

Participated

Orders Bagged 10000 7500 6500 7500 9500 4600 7600

Strike Rate 14.70% 14.42% 18.57% 17.86% 23.75% 11.79% 16.52%

23 12.11 Assessment of CEL / Forward Assessment of Credit Exposure Limit (Forward Contract/Derivative Limit) as mentioned in
Contract Limit justified as per extant Appraisal Format has to be meticulously carried out, with a specific focus on Past
norms based on past utilisation. Performance Method, Documentary Evidence Method and Interest Rate Contracts. The
format for assessment of Credit Exposure Limit is available in the Manual of Loans and
Advances, Part-1, Chapter-5, item G3.
S.No Vs No Value Statement Description Guidelines
24 13.1 Description of the project, purpose of The appraisal memorandum for term loan should cover the following aspects:
TL (expansion, modernisation,
diversification, construction, (a) Particulars of the project along with the details of technology, manufacturing process,
acquisition, R&D) recorded. availability of construction/production facilities etc.,

(b) Cost of the project along with the details of assets acquired/ to be acquired, details of
preliminary/preoperative expenses and working capital margin requirements.

(c) Means of finance indicating the extent of promoters’ contribution including share
capital, Unsecured loans, proposed term loan, deferred payment guarantees, foreign
currency loans etc.

(d) Working capital requirements at the peak level, i.e., when the level of gross current
assets is at the peak during the first year of operations after commencement of
commercial production.

(e) Breakeven and Sensitivity analysis.

(f) Debt service coverage ratio (DSCR) to know the Commercial viability and for fixing the
repayment period and the quantum of instalments.

(g) Internal rate of return (IRR) to ascertain the income generating capacity of the total
funds used in the project over its lifetime.

(h) Project implementation schedule.

(i) Board of Directors, their qualifications, experience and competence of the key
personnel during the construction period and the executives to be in charge of the
functional areas of purchase, production, marketing and finance after commencement of
commercial production.
S.No Vs No Value Statement Description Guidelines
(j) Demand projection based on the overall market prospects together with a copy of the
market survey report.

(k) Estimates of sales, cost of production and profitability.

(l) Projected profit and loss account and balance sheet for the operating years during the
currency of Bank’s term loan.

(m) Repayment program.

(n) Projected funds flow statement covering the entire period of term loan including
construction period.

(o) Details of the securities offered along with valuation.

(p) Consent from Government/ other authorities for establishing the unit.

(q) Appraisal report from financial institutions/other bank/debt arranger (syndicated loan)
in case appraisal done by them.

(r) ‘No Objection Certificate’ from term lenders if already financed by them and report from
Merchant bankers in case capital market is being accessed, wherever necessary.

(s) Industry scenario.

(t) Risk/SWOT analysis.

S.No Vs No Value Statement Description Guidelines
(u) It is likely, particularly for large projects, that some of the project aspects may not have
been finalised at the time of appraisal. Suitable terms and conditions need to be stipulated
in such cases for compliance thereof to the satisfaction of the Bank before first disbursal
or stipulated timelines.

Ref: Manual on loans & advances, Part 2, Chapter 11, item 2-11-2.3.2

Also, refer Manual on loans & advances, Part 2, Chapter 11, Annexure TL - 1 to
Annexure TL - 8 for detailed guidelines.
25 13.2 Status of various approvals obtained/ Required approvals for establishing a particular unit along with the current status/
pending are recorded and timeline for timelines to obtain the same are to be recorded in the proposal.
obtention are also mentioned.
In this regard, copies of all the clearances have to be obtained and kept on record. In
case of pendency of any approval at the time of putting up the proposal, an undertaking
from the borrower need to be obtained regarding timelines for getting the approvals and
the same needs to be recorded in the proposal.
26 13.3 In case of Corporate Loan the extant Refer guidelines issued in Manual on loans & advances, Part 4, Chapter 31
norms & guidelines were strictly
adhered to.
27 13.5 Assumptions made in the proposal in The projected turnover, profitability and balance sheets should be furnished by the
respect of projected turnover / profit company for the entire period of the term loan and all these assumptions are to be in line
are in line with the TEV Report, if with the TEV Report and validated independently.
done or validated independently.
Inaccurate estimate of the total project cost i.e., underestimation will lead to cost overrun
Details of each item of Cost of and hamper the project implementation and overestimation, on the other hand, will inflate
Project, item-wise Margin and Means the total project cost giving scope for diversion of funds.
of Finance have been justified.
S.No Vs No Value Statement Description Guidelines
28 13.7 Promoters' equity contribution A very reliable test is to express the total cost of the project per unit of the installed
capacity (e.g., per tonne) and compare it with per unit cost of similar projects in the same
industry. The appraising official should, after due scrutiny and crosschecking, satisfy
himself that the cost estimates are reasonable and realistic. In large projects, assistance
of external consultants may be taken for this purpose.
29 13.7.1 Source of promoter's equity validated.
While appraising a proposal, the following points should be kept in mind.
(only comments)

Cost of the Project and Means of Finance:

Cost of the project: The cost estimates should be scrutinised item by item to ensure that
30 13.7.3 In case of Cost & Time overrun, they have been arrived realistically after considering all the relevant cost factors.
standby arrangement through equity / Appraising Officials need to furnish detailed comments about the various components of
debt commitments are ensured. the total cost as under:

1. Land (including site development): Examine the suitability of the land selected for
the project with reference to:
31 13.8 Adequate provision for contingencies
a. The surrounding topographical features
[5-15%] and WC Margin has been
built into the cost of project.
b. Availability of transport facilities, nearness to rail head/port

c. Proximity to sources of water, power, labour, raw material and market for finished
goods.

d. Suitability of land by conducting soil testing.

e. Sufficiency of the land to take care of the present needs and future expansion.

f. If the land covers agricultural or mining areas, examine whether they would have
any impact on the project.
S.No Vs No Value Statement Description Guidelines
g. In case of purchase of land, state whether the price paid/payable for the land is
comparable to and is in line with the prevailing prices for similar lands in the area.

h. Examine the borrower’s title to the land and state whether it is freehold or
leasehold. If there are any legal disputes about the title to the land, furnish the
details in the appraisal memorandum (If there is any legal dispute regarding the
title, better not to accept such property)

i. In the case of leasehold land, examine the lease deed to:

 Ascertain whether the terms of the lease provide for mortgaging/ assigning
the lease rights.

 Ascertain the lease period is longer than the proposed repayment period of
the Bank’s term loan.

 In case the lease period is more than 11 months, then the lease deed has to
be registered. Any claim over the goods may not be challenged in the Court
of Law, if the lease deed is not registered.

 State whether the premium (if any) paid and the lease rent payable are
reasonable.

 Check whether there are any clauses prejudicial to the Bank’s interest.
S.No Vs No Value Statement Description Guidelines
j. The various items of cost estimates are to be scrutinised as under:
Items to be included Documents/ particulars to be cross checked
Cost of land Cost to be considered as mentioned in Agreement for sale /
Sale Deed
Registration of land Legal charges for registering the land
Cost of levelling the land Total area of the land to be levelled and the cost of levelling
per square metre to be examined with the prevailing market
rates.
Cost of fencing Total length of fencing/compound wall requirement and the
/compound wall cost of the fencing/ construction per meter thereof.
including the gates

2. Buildings:
a) Any construction must have the plan approval from concerned Govt body i.e.,
Gram Panchayat, Municipality, Corporation etc. Broadly, the items to be included
under this head are:

a. Main factory buildings

b. Ancillary factory buildings
c. Godowns/ warehouses, canteen, guest house, garages, sheds etc.
d. Quarters for essential staff
e. Compound walls/roads
f. Silos, tanks, wells, sewers, drainages etc
g. Architects’ fees.

b) Furnish a list of the buildings contemplated for the project, indicating the floor
space and nature of construction.
S.No Vs No Value Statement Description Guidelines

c) Examine whether the proposed buildings are sufficient having regard to the size of
the plant and the proposed scale of operations and will permit further additions, if
needed, in future.

d) Office buildings envisaged should be restricted to essential/ functional

requirements and all non- essential building plans should be discouraged,
especially in the early stages of the project.

e) As for workers’ quarters, the company should be advised to approach the

Government housing agencies, wherever feasible, for suitable soft loans.

f) If the buildings are to be acquired on lease, examine the terms of the lease and
comment whether the lease arrangement is satisfactory.

g) Where all the buildings are to be constructed, indicate the arrangements made by
the company for the purpose and comment on the adequacy and suitability of
these arrangements.

h) Examine the cost estimates for various items under this head with reference to the
type of construction and the rate per square foot in respect of each type of
construction and state whether the cost of construction assumed is reasonable.

3. Plant and machinery: Furnish a list of the items of plant and machinery, classified
under two heads together with the names of the suppliers.

i. Imported items
ii. Indigenous items
S.No Vs No Value Statement Description Guidelines

a) Examine these items in relation to the requirements of plant and machinery

recommended in the technical feasibility report or indicated in the process chart in
the project report and state how they will be suitable and adequate for the
envisaged production program.

b) Exchange risk associated with imported items, hedging requirements etc and its
impact on the project cost to be examined.

c) Comment on the status of the machinery suppliers and their reputation for proven
quality of the machinery supplied by them. If they have supplied plant and
machinery for similar projects financed by the Bank, obtain a report on the
functioning of such plant and machinery and state whether it is satisfactory.

d) In the case of imported items of plant and machinery, status reports on all the
suppliers should be obtained and their experience and expertise in the
manufacture of the respective items should be commented upon.

e) Opinion reports on suppliers should be invariably obtained/ compiled for at least

75% of the cost of the proposed equipment being procured under Bank’s finance.

f) Plant and machineries to be purchased out of Bank’s loan are procured directly
from the manufacturer/ authorised dealer instead of intermediaries.

g) Examine the supply contracts entered between the company and the suppliers of
plant and machinery and comment on:

(i) the performance guarantees (if any) obtained from the suppliers by the
company, and the nature of the penalty clauses incorporated therein;
S.No Vs No Value Statement Description Guidelines

(ii) the arrangements proposed for serving the plant and machinery, affording
technical assistance etc.

(iii) State whether the prices quoted are on firm basis or subject to cost escalation.
If the supply contracts contain price escalation clause, check whether sufficient
contingency provision has been made to take care of the possible price
escalation.

(iv) Comment on the arrangements made for erection/installation of the plant and
machinery.

(v) If the contract for supply of plant and machinery is on turnkey basis, comment
on the suppliers’ experience in this line and whether they have executed similar
turnkey contracts in India or abroad.

(vi) If the erection/installation work is to be entrusted separately to outside

agencies, comment on their competence. In case it is to be undertaken by the
company themselves, state whether they have the necessary experience and
expertise to undertake such work.

(vii) The cost estimates of the various items of plant and machinery should be
examined carefully with a view to establish their reasonableness by cross-
checking with the competitive quotation obtained by the company and by
making independent references to reputed machinery manufacturers.

(viii) In respect of imported items, comment whether the estimates include landed
cost (CIF price + import duty + clearing, loading, forwarding and unloading
charges) and erection/installation charges.
S.No Vs No Value Statement Description Guidelines

(ix) As for indigenous items, state whether the estimates include provisions for
transit insurance, freight, local taxes, octroi levy and erection/installation
charges.

(x) The total cost estimates in respect of plant and machinery should also include a
provision for a reasonable quantum of machinery spares/ stores and essential
tools.

(xi) Comment whether the company has made firm arrangements with the suppliers
(both indigenous and foreign) for effecting the deliveries in a phased manner in
accordance with the implementation schedule.

(xii) In respect of imported items, state whether the company hold valid import
licence or have made the necessary arrangements to obtain them.

4. Technical know-how, engineering and consultancy fees: Examine the basis of

selection of the technical consultants for providing technical know-how/design
engineering. The fees payable under this head should be checked with the terms of:

(a) the relative contract entered by the company with the technical consultants or

(b) the supply contracts (if the suppliers themselves are to provide the technical know-
how/detailed design engineering)

Comment whether the estimates of technical know-how/engineering fees are reasonable

in relation to:
 The services contracted for the Project.
 Whether the fees paid is comparable in respect of similar projects in the same
S.No Vs No Value Statement Description Guidelines
industry.
Expenses on foreign technicians and training of Indian technicians abroad: The expenses
under this head will include:

(i) salary and allowances, boarding, lodging and other expenses payable in
respect of foreign technicians required to be present in India during project
implementation and trial runs and

(ii) expenses incurred on Indian technicians sent abroad for training.

Comment whether the estimates of all the expenses under this head are reasonable.

5. Miscellaneous fixed assets: This includes other assets which are not directly involved
in the manufacturing process such as steam generation system, power generation-cum-
distribution system, electrical installations, laboratory equipment, workshop equipment,
fire-fighting equipment, fixtures, furniture and office equipment, effluent disposal plant,
vehicles, railway siding etc.

General guidelines applicable to verification of cost estimates under ‘Plant and Machinery’
should be applied to verify the cost estimates under this head also. Further, care should
be taken to ensure that none of the items covered under plant and machinery is repeated
under this head.

6. Preliminary, capital issue and pre-operative expenses:

Preliminary expenses include:

i. Expenses on floatation of the company such as cost of printing the

Memorandum and Articles of Association, registration charges, legal fees,
travelling expenses and other miscellaneous expenses incurred before the
S.No Vs No Value Statement Description Guidelines
incorporation of the company.
ii. Expenditure incurred on feasibility/project reports, market/other surveys, and
engineering services relating to the project at the initial stage.

Capital issue expenses include brokerage, underwriting commission, fees of managers

to public issue and other expenses such as legal, advertising, printing, etc. relating to
raising of capital.

Pre-operative expenses:
Expenses incurred during the period between incorporation of the company and
commencement of commercial operations and include the following:

 Establishment expenses, rent rates and taxes.

 Interest and other financial charges on borrowings accrued and payable
during the construction period.
 Mortgage expenses (like legal fees, stamp duty, registration charges etc)
 Miscellaneous expenses incurred on insurance, stationery, travelling,
publicity etc.

Examine the assumptions and comment whether they are reasonable having regard to
the nature of the organisation, the size of public issue and the project implementation
schedule.

7. Provision for contingencies:

Contingency provision will range from 5% (minimum) to 15% (maximum) and the provision
is to take care of the following contingencies:

 Escalation in the cost of the items because of increase in prices, import duty,
excise duty, sales tax, transportation charges, fluctuations in foreign exchange
S.No Vs No Value Statement Description Guidelines
rates etc.
 Delay in the implementation of the project owing to technical or other factors

 Unforeseen expenses cropping up during project implementation

 Any other items/expenses initially omitted, as the same could not be envisaged at
the time of project formulation.

Examine the basis on which the contingency provision has been estimated and comment
whether it is reasonable and adequate.

8. Working capital margin:

Working capital margin can be calculated at the minimum of 25% of peak level of gross
current assets during the first year of operations after the commencement of commercial
production.

The additional margin money required during the subsequent years has to be met out of
internal cash generation.

In case of projects with long gestation, working capital requirement may undergo a
change because of inflation and other factors like supply constraints, etc. Hence, the
working capital requirement may need to be reassessed at the time of commercial
production, and the borrower may have to bring in additional equity towards increase in
working capital margin, if any.

Means of financing:
Under Means of Finance, examine the suitability of the various sources of finance and
comments may be furnished on the following lines.
S.No Vs No Value Statement Description Guidelines

A. Equity Component:

(a) Share Capital:

1) Indicate the composition of the share capital i.e. the proportion of equity shares and
preference shares.

2) In respect of the equity shares, furnish the break-up for the subscription by the
promoters and the public.

3) In the case of preference shares, comment on the nature and type of the shares
and the special rights, if any, carried by them.

4) Based on the Debt Equity, state whether the stipulation regarding the minimum
contribution to be brought in by the promoters is complied with or not.

5) The appraising Official has to critically examine and comment on the source of
capital, how it is proposed to be brought in and also through which account the
funds are routed through. Mere obtention of Chartered Accountant Certificate is not
enough.

6) In respect of Public Companies raising funds by issue of capital, state whether it

will be by way of Public issue, Rights issue (in the case of existing companies) or
Private placement.

7) If the share capital is to be raised by Public issue, state briefly the terms of issue
and indicate the position regarding Government consents, underwriting
arrangements and SEBI requirements.
S.No Vs No Value Statement Description Guidelines
8) In the case of issue of shares by Private placement, indicate the details of
placement.
(b) Internal Cash Accruals:

Following to be kept in mind, while recommending for Internal Cash Accruals by the
existing company as a part of Means of Finance.

1) The net working capital (NWC) of the borrower should not be allowed to deteriorate
but should improve over a period. Accordingly, borrowers who have built up their
NWC by ploughing back profits or by infusion of long-term funds should not
ordinarily be allowed to dilute the position.

2) Relaxations in this regard may be considered in the case of industrial units with
good past performance record and a sound current ratio. Borrowers with a
current ratio of more than 1.33:1 may be permitted to utilise a portion of the earlier
as well as current internal cash accruals for part financing of projects, if the
resultant current ratio does not work out to less than 1.33:1 after the
implementation of the project.

3) In respect of borrowers with a current ratio lower than 1.33:1, whose net working
capital is less than 25% of the total current assets and who propose to expand their
activities without infusion of appropriate long term funds (either by way of additional
equity or by raising term loans), the proposals would need to be examined closely
with a view to ensuring against the deterioration of the financial position after the
intended expansion.

(c) Any others (like Central/ State subsidies etc):

 Indicate the exact source i.e., whether it is Central Subsidy or State Subsidy.
Examine the requirements, if any stipulated by the Central Government or the
S.No Vs No Value Statement Description Guidelines
concerned State Government and state the unit’s ability to comply with the
requirements, if any.
 As normally subsidies are received close to commercial operation or subsequently,
the timing thereof should be carefully examined and the promoter has to bring in
matching contribution towards the subsidy component to complete the project.

B. Debt Component:

(a) Term Loans:

1) While granting term loans to companies, examine the upper ceiling on term
borrowing as per Section 293 (1) (d) of the Companies Act.

2) Section 293 (1) (d) pertains to borrowing powers of the company i.e., the amount
upto which a company can borrow is specified in its Memorandum and Articles of
Association. In case the term loans are exceeding the borrowing powers stipulated
in Memorandum and Articles of Association, the same needs to be ratified by a
special resolution, which needs to be approved by the members in General
meeting. Operating functionaries should ensure that the company’s total
borrowings from all sources for part- financing the project, including term loan,
would not exceed the prescribed limit. Where, however, the total borrowings
exceed the prescribed limit, it should be ensured that the requirements of Section
293(1)(d) of the Companies Act as above are complied with by the company.

3) In case of Consortium advances, comment briefly on the arrangement and the

amount of individual term loans extended by the participating lenders.

4) Obtain copies of arrangement/ sanction letters issued by all the participating

lenders and scrutinise them with a view to ensure that the company will have no
difficulty in complying with them and that they are also in line with the terms and
S.No Vs No Value Statement Description Guidelines
conditions stipulated by the Bank.

5) If foreign currency loans are envisaged as part of the term loans, state whether the
company has obtained the necessary approval from the Government of
India/Reserve Bank of India and comment whether the company will be in a
position to comply with all the relevant Import Trade Control/ RBI/FEMA
requirements.

(b) Unsecured loans/deposits:

1. Verify the sources of the unsecured loans, the rate of interest payable, the terms of
repayment and the firm arrangement made for obtaining these funds.

2. In respect of deposits, examine the position relating to the company’s compliance with
the directives of Reserve Bank of India/ Government of India, regarding:
(a) the quantum of deposits that can be accepted by non-banking non-financial
companies,
(b) the minimum and maximum period permissible for such deposits and
(c) the percentage of every year’s maturities required to be deposited with scheduled
commercial banks or invested in Government or other approved securities.

3. Where the unsecured loans/deposits are treated as part of the equity, state whether the
requirements stipulated by the Bank i.e., non withdrawal of these funds during the
currency of the term loans and the rate of interest payable (should ideally be less that the
Rate of Interest charged by us) are duly complied with.

(c) Debentures:
 Examine the terms such as the nature of debentures, the rate of interest, the date
of redemption, the security offered, etc.
S.No Vs No Value Statement Description Guidelines
 State whether the debenture holders are entitled to any special rights.

 Comment on the arrangement made for the debenture issue and the underwriting
support, if any.

 In case any Debenture Trust is proposed to be created, furnish brief comments on

the nature of the Trust, the names of the trustees and their duties and
responsibilities.

(d) Deferred Payment Guarantee (DPG):

 In respect of the DPG to be executed by the Bank, scrutinise the terms of the
contract entered into by the company with the suppliers of machinery/ equipments
with a view to ensure that they do not contain any clause prejudicial to the interests
of the Bank.

 In the case of Foreign DPG (required for import of capital goods), examine the
terms of the contract entered into by the company with the foreign suppliers with a
view to ensure that they are in agreement with the terms and conditions stipulated
in the relative import licence and that there are no clauses prejudicial to the Bank’s
interests.

 Further, as in the case of foreign currency loans, it should be ensured that all the
relevant Import Trade Control/exchange control requirements are duly complied
with in the case of foreign deferred payment guarantees also.

 If the DPG is required under the IDBI/SIDBI Bills Rediscounting Scheme, it should
be ensured that all the requirements of the respective scheme with regard to the
draft format of the guarantee, the period of deferred payment, interest on deferred
principal etc. are duly complied with.
S.No Vs No Value Statement Description Guidelines

(e) Any others (like Central/State sales tax loans, development loans, etc.): Indicate
the exact source of finance under this head. Furnish brief details of the terms and
conditions governing the loan like the rate of interest (if applicable), the manner of
repayment etc.

(f) Promoter’s contribution to meet overrun:

 Comment whether the promoters have the capacity to bring in proportionate or
higher additional contribution to meet any possible overrun in the project cost.

 An undertaking to this effect should be obtained from the promoters and kept on
record along with the application.

Debt/ Equity:
1. There is no standard project debt/equity ratio prescribed for any project. The
stipulation of this ratio for a particular project will be based on a number of factors
such as the nature and size of the project, location, capital intensity, gestation
period, promoters’ capacity, importance to the National economy, Government
policy etc.

2. Normally, projects may be financed in the ratio of 70:30 for debt and equity, though
ideally 67:33 is most preferred and 75:25 is considered an acceptable level for
projects in infrastructure or large size projects, subject to the condition that
prescribed norms for DSCR, Term Debt to EBIDTA, and interest coverage ratio are
in acceptable range.

3. Where a project is financed by a consortium, the project debt/equity stipulated by

the lead institution in consultation with other lenders.
S.No Vs No Value Statement Description Guidelines

Ref: Manual on loans & advances, Part 2, Chapter 11, item 4

32 13.9 Suitable LC / Buyers' Credit Limit (for In respect of plant & machinery which involves import of capital goods, capex LC limit can
import of capital goods) has been be fixed as a sub limit of term loan. Following precautions are to be taken while fixing
assessed as a sub-limit of TL. Capex LC as a sub limit of Term Loan.

 Opinion report from the bankers of supplier or CICs should be obtained.

 Lien is to be marked in the term loan account for the outstanding LC. The margin
on capex LCs should be the same as per the accepted financing pattern for term
loan.

 Irrevocable and unconditional funding commitment from other banks/ financial

institutions to be obtained in cases of partially or fully backed LC and the risk of
forex rate shall be to the account of the other bank / FI.

 For import LCs, requisite hedging must be in place unless the liability under LC is
to be settled out of foreign currency funds arranged by the borrower.

Reserve Bank of India has discontinued the issuance of LOU/LOC for Trade credits vide
its circular dated 13.03.2018. To provide an alternate product to the Corporates to meet
their import obligations, new products ‘Stand by Line of Credit (SBLC) and Non-LC
Reimbursement Finance (NLRF)’ have been introduced. Appropriate Sanction to be
obtained from the sanctioning authority for extending the above facilities.
S.No Vs No Value Statement Description Guidelines
Ref: Manual on loans & advances, Part 2, Chapter 9, item 2-9-2.6 and 2-9-11

33 13.10 Estimated / Projected Net Sales, Net CMA data should be furnished by the company for the entire period of the Bank’s term
Profit, Cash Accruals have been loan. While scrutinising the projected balance sheet, the following points should be borne
validated based on capacity utilisation in mind for the purpose of cross-checking.
level/ past trend / assumptions
Cost of the project, Means of finance, Profitability, Funds flow and the projected balance
accepted/ expected changes in
sheets - all are inter-related and any change in any one of them will necessitate
environment, etc.
consequent changes in others. Thus, if there is any overrun in the project cost, the means
of financing would require to be revised, setting in train other consequential changes in
interest charges, profitability estimates, cash accruals, loan repayments, funds flow
projection and projected balance sheets.
Likewise, if there is a subsequent change in the assumed capacity utilisation, the working
capital margin will require to be revised suitably necessitating a chain impact on the cost
of the project and the means of financing with further consequential changes as above.
Similarly, if there is a change in any of the components of the costs of production, it will
have an immediate effect on the cash accruals and the debt servicing capacity warranting
further consequential changes in the loan repayments, funds flow projections and
projected balance sheets.
The projected balance sheets should, therefore, be scrutinised analytically with reference
to all the other related essential data so as to ensure that all the projections, made
realistically and accurately, have been woven into well coordinated financial statements.
Ref: Manual on loans & advances, Part 2, Chapter 11
S.No Vs No Value Statement Description Guidelines
34 13.11 Correct computation of Gross DSCR, Gross DSCR, Net DSCR, Current Ratio needs to be computed both for the present
Net DSCR, Current Ratio to the project as well as the unit as a whole.
project, and the borrowing unit as a
whole discussed.

Annual Repayment obligation of all

Debt Service Coverage Ratio (DSCR):
Term Loans along with interest
‘Debt’ means maturing term obligation viz., instalment payable during a year under all the
commitments with all Term Lenders
term loans/deferred payment guarantees and ‘service’ means cash accruals comprising
have been factored while computing
net profit plus depreciation and non-cash expenses written off.
commercial viability.
The debt service coverage ratio measures the extent of cash accruals (service) available
Adequacy of Cash Accruals in to cover the maturing term obligations (debt) during each year. This ratio has to be
meeting the existing/proposed TL calculated for the entire tenor of term loan.
liabilities, Working Capital
requirement, Fixed Assets, The minimum Desired DSCR in respect of both manufacturing and Trade & Services
investments etc. examined and segment is = > 1.50.
justified.
Gross DSCR = [PAT + Depreciation and other non cash expenses** + Interest on term
loan] / [Annual Principal instalments + Interest on term loan]

** Amortization, unrealized gains, unrealized losses etc.

An ideal position would be a uniform pattern of the Gross DSCR above 1.75:1. The
moderate risk range of the ratio would be from 1.50:1 to 1.75:1. The level of the ratio
below 1.50 will indicate that the element of risk is on the high side.

Net DSCR = [PAT + Depreciation and other non cash expenses] / [Annual Principal
instalments]
S.No Vs No Value Statement Description Guidelines

An ideal position would be a uniform pattern of the Net DSCR of 2:1 during the entire
repayment period. A ratio of more than 2:1 indicates surplus cushion available and thus
the need for accelerating the repayment of instalments accordingly. The level of the ratio
between 1.75: 1 and 2:1 will be in the moderate risk range. The level of the ratio below
1.75:1 will indicate that the element of risk is on the high side.
Average Gross DSCR: It is calculated by dividing sum total of cash accruals+ Interest on
term loan for the entire period of term loan with sum total of Annual Principal instalments
+ Interest on term loan for the entire period of term loan.
Example:
Year 1 2 3 4 5 6 Total
1. PAT A 1.00 5.00 14.00 14.00 13.00 6.00
2. Depreciation B 3.00 3.00 3.00 3.00 3.00 3.00
Cash accruals C=A+B 4.00 8.00 17.00 17.00 16.00 9.00 71.00
3. Interest on TL D 4.00 4.00 3.00 3.00 2.00 2.00 18.00
Cash accruals + E=C+D
interest on TL 8.00 12.00 20.00 20.00 18.00 11.00 89.00
1. Repayment of TL F 0.00 2.00 5.00 5.00 5.00 3.00 20.00
2. Interest on TL G 4.00 4.00 3.00 3.00 2.00 2.00 18.00
Total repayment H=F+G
obligation 4.00 6.00 8.00 8.00 7.00 5.00 38.00
Net DSCR I = C/F 4.00 4.00 3.40 3.40 3.20 3.00
Gross DSCR J = E/H 2.00 2.00 2.50 2.50 2.57 2.20
Average Gross K 89 / 38 = 2.34
DSCR
If we observe the above table, yearly repayment obligations are not uniform and have
been tweaked to have comfortable DSCR in every year. Hence, it is not mandatorily
S.No Vs No Value Statement Description Guidelines
required to have uniform repayment structure in respect of term loan if the DSCR is
working out to less than 1.50, ideally.
While calculating DSCR, existing term loan(s) availed by the unit and its repayment
obligations should also be considered along with proposed term loan.

Ref: Manual on loans & advances, Part 2, Chapter 20

35 13.12 Security Margin is adequate Security Margin = WDV of fixed Assets (-) Aggregate term loan outstanding
throughout the currency of term loan.
Security Margin is required to understand the comfort level of fixed assets available after
deducting the term loan outstanding from the amount of net block of fixed assets.

It is always calculated from the estimated balance sheet onwards i.e., from current year to
the final year in which TL is going to be repaid completely.

For example, against the asset value of Rs 4 cr (with depreciation of 20% every year), if
we are sanctioning a term loan of Rs 3 cr in December’2021 and it is going to be repaid
by March’2025 (in annual instalments of Rs 1 cr from 2022-23), security margin is arrived
as under.

Particulars 2021 – 22 2022 - 23 2023 - 24 2024 - 25

Net Fixed Assets (NFA) (A) 4.00 3.20 2.56 2.05
Aggregate TL outstanding (B) 3.00 2.00 1.00 0.00
Security margin (C) = (A) – (B) 1.00 1.20 1.56 2.05
% of margin D=C/A 25 37.50 60.94 100%

The percentage of margin available should be calculated by using the following formula:
{(NFA - OTL) /NFA} × 100
NFA = Net fixed assets i.e. written down value of fixed assets; and OTL = Outstanding
S.No Vs No Value Statement Description Guidelines
term liabilities
As a general rule, the advances may be restricted to a maximum of 50% of the book
value of fixed assets (including those to be acquired)
Ref: Manual on loans & advances, Part 2, Chapter 20
36 13.13 Break-Even Analysis carried out and In respect of term loan proposals, Break-Even Analysis (BEA) needs to be carried out and
its acceptability is justified. its acceptability to be justified.

Under break-even analysis, expenses need to be classified into fixed, semi-fixed and
variable expenses.

Fixed expenses are those expenses which would be incurred irrespective of the level of
production. Example for fixed costs: Power and fuel, wages and salaries, repairs and
maintenance, overheads, depreciation, interest, administrative expenses etc.

Semi-fixed expenses are those expenses that remain fixed upto a certain level of
production but become variable when the scale of operation crosses the level requiring
more units of the input consistent with the increased level of production.

Variable expenses are those expenses that vary directly in proportion to production.
Example for variable costs: Raw material, packing material, consumables etc.

Break even analysis helps in determining the point of production at which the revenue
equals the costs i.e., a point at which a unit reports ‘No Profit – No Loss’ situation.

BEA is to be carried out for (i) the first full year of production and (ii) the year of maximum
capacity utilization.
S.No Vs No Value Statement Description Guidelines
Break Even Point = Fixed Costs / Contribution per unit x 100
(Where contribution is “Net Revenue – Variable Costs”)

Ideal levels for Break Even: The level between 51% and 65% is in ‘low risk’ range, the
level between 66% and 70% is in medium risk range, the level between 71% and 85% is
in ‘high risk’ range. The level beyond 85% represents ‘very high risk’ range.
The cash break-even (i.e., without considering ‘Depreciation’ as fixed cost) at installed
capacity should normally be below 50%.

Cash Break Even Point = (Fixed Costs – Depreciation) / Contribution x 100

Ref: Manual on loans & advances, Part 2, Chapter 11

37 13.14 a. Whether the Sensitivity Analysis The purpose of the Sensitivity analysis is to study whether the project can withstand the
captured the Span of Resiliency of aberrations in performance owing to shortfalls in the profitability on account of unexpected
applicable range of “Narrow”, uncertainties.
“Medium” and “Wide”. In case of
deviation if any, acceptable mitigating The uncertainties could impact the profitability of a project in three ways – by way of
factors have been examined and changes in the cost of production, volume of production and change in selling price.
justified.
Sensitivity analysis is to be carried out for the year with operating profit nearest to the
average operating profit (total of the operating profits for all the years divided by the
b.Sensitivity analysis also includes a
number of years).
scenario involving time over run (say
of 6 months to 12 months in case of In general, a project should be able to withstand reasonable changes in
large projects) and the resultant cost cost/volume/price.
over run and its impact on viability of
the project.) If a project cannot sustain even a 5% change in the above three variables, its ‘span of
resiliency’ will be in “Narrow range” and even minor uncertainties can throw the project out
of gear.
S.No Vs No Value Statement Description Guidelines
If a project can sustain changes in the three variables up to 10%, its ‘span of resiliency’
will be in the “Medium range” and the project can withstand the adverse impact from
minor uncertainties without severe setback on the profitability.

Where a project can sustain changes in the three variables up to 15%, its ‘span of
resiliency’ will be in “Wide range” that even major uncertainties cannot throw the project
out of gear.
Ideally, in any situation, DSCR should not come to less than 1. In a given situation, where
minimum DSCR is found to be low/ less than 1, specific comments together with
mitigations are to be provided in the appraisal memorandum.

Ref: Manual on loans & advances, Part 2, Chapter 11

38 13.15 Other factors related to TL Disbursement of term loan by way of reimbursement of expenditure:
assessment viz., reimbursement,
Following authorities are vested with the powers for permitting post sanction modifications
required approvals & clearances,
in the terms & conditions of term loan including Disbursement of term loan by way of
risks perceived and mitigation thereof,
reimbursement of expenditure.
project implementation schedule &
clear documenting on Date of
Sanctioning Authority Approving authority
Commencement of Commercial
Operation of the project etc. ECCB CCCC
CCCC and below credit committees Sanctioning Authority

Ref: Manual on loans & advances, Part 2, Chapter 11, item 2-11-17.3 and 2-11-17.4
39 13.15.1 Approval for reimbursement
Required approvals & clearances:
recommended and approved.
Based on Bank’s Panel Engineer’s /CA/ TEV Report, required approvals and the present
position may be tabulated as under:
S.No Approvals required Authority to accord approval Present status
S.No Vs No Value Statement Description Guidelines

For all the approvals, a copy of the same needs to be verified with the original for its
genuineness and a copy needs to be retained at the Branch. In the proposal, timelines for
obtaining pending approvals, if any needs to be documented after getting written
statement from the borrower and also ascertaining the factual position.
Indicative list of Approvals/ Clearances: Land/ Site availability, Environmental clearance,
Stack height clearance, Forest clearance, Power connection, Water connection, Chief
Controller of Explosives from Petroleum and Explosives Safety Organisation, NOC form
Defence, Rail Route Clearance, Customs landing Permit, Permission from the State
Government for extraction of boulders from quarry, License from Inspector of Factories or
other competent Authority for setting up Batching Plant, Permission from State
Government for cutting of trees, Any other permission/ clearances required under
applicable laws for the specific proposal.

Ref: Manual on loans & advances, Part 2, Chapter 20

Risks perceived and mitigation thereof:

Perceived risks in respect of equity, availability of required infrastructure, Land, Power,

Water, Statutory Approvals, Environment related approvals, raw materials, Market Risk,
Forex risk etc have to be brought out in the proposal along with mitigations in order to
ensure successful implementation of the project, despite the risks anticipated.
Project implementation schedule:

Furnish details of the main stages in project implementation and state whether the time
schedule for construction of buildings, erection/ installation of plant and machinery, start-
up/trial runs and commencement of commercial production is reasonable and acceptable.
S.No Vs No Value Statement Description Guidelines
Examine the project implementation schedule with reference to Bar Chart or PERT/ CPM
Chart (if proposed to be used by the company for monitoring the implementation of the
project) and in the light of actual implementation schedules of similar projects.
Ref: Manual on loans & advances, Part 2, Chapter 11

Clear documenting on Date of Commencement of Commercial Operation of the

project:
Date of Completion’ and the ‘Date of Commencement of Commercial Operations’
(DCCO), of the project to be clearly documented in the appraisal note.
Ref: e-Circular 812-CPPD -ADV/83 dated 06.11.2012.
40 14.1 Primary & Collateral securities are In the appraisal note, under Security column, full details of security (facility wise) have to
distinctly defined. be provided for both Primary and Collateral along with the details of Khata no./Survey
41 14.2 Particulars / Type of Cash Collateral No./Patta No, Flat No, House No, Area/extent of land, address etc.
Securities are properly defined.
Specific details need to be mentioned on the following aspects:
1. SARFAESI Compliant: (Y/N)
2. Type of ROC charge: Mortgage/ Hypothecation/ Pledge/ Lien etc
42 14.3 Securities available for CEL facility 3. Value (In case of Consortium/MBA Accounts our share to be provided. Details of
appropriately mentioned Total security for the facility and for the Banking system may be shown in
brackets):
4. Date of Valuation:
5. Basis of Valuation:
6. Status of search report with regard to noting of charge with ROC/ CERSAI:
7. TIR date:
8. TIR obtained from (details of Bank’s empanelled Advocate):
9. Owner of the Property:
S.No Vs No Value Statement Description Guidelines

With regard to Personal Guarantee, mention the details of:

1. Name of Guarantor:
2. Net Means:
3. As on date:

Always note that “As on date” should be 31 st March of the relevant financial year, but not
any other date. For example, in the assets and liabilities statement, the date of assets and
liabilities should always be as on 31 st March of the relevant financial year and compilation
date should be the date on which we are compiling the opinion report.

With regard to Corporate Guarantee, mention the details of:

1. Name of Guarantor:
2. TNW:
3. TNW as on:
4. Internal Rating, if any:
5. Internal Rating as on:
6. External Rating, if any (both short term and long term):
7. External Rating as on:

With regard to ECGC/CGTMSE/others:

1. Nature of Guarantee:
2. Guarantee Amount:

Comments on change in Security (Primary / Collateral /Guarantees) from the last sanction
to be given in detail.

Ref: Manual on loans & advances, Part 1, Chapter 5, item ‘I’

S.No Vs No Value Statement Description Guidelines
43 14.5 Nature of charge (hypothecation / Nature of charge (hypothecation / mortgage/ pledge/ assignment/ lien), ranking of charge
mortgage/ pledge/ assignment/ lien), (1st / 2nd / pari-passu, etc.), nature of land (agri land / industrial land / commercial plot),
ranking of charge (1st / 2nd / pari- nature of rights (freehold / leasehold) and location particulars recorded.
passu, etc.), nature of land (agri land
Status of SARFAESI Compliant and percentage of non-SARFAESI compliant security to
/ industrial land / commercial plot),
total security to be justified.
nature of rights (freehold / leasehold)
and location particulars recorded. Additional information on Security to be provided with specific reference to LTV (Loan to
Status of SARFAESI Compliant and value ratio) for:
percentage of non-SARFAESI
a. Stocks:
compliant security to total security to
be justified. b. Receivables:
c. Receivable from Associates & Subsidiaries, if any:
d. Fixed assets (for term loans):
In respect of companies, if charge with ROC is not filed, then details regarding timelines
for filing the same along with details of permitting authority for delayed filing to be
provided.
Provide details of total value of immovable property along with the following details:
 Whether Agricultural property: Yes / No
 If yes, whether there is any restriction on sale: Yes / No
Further provide details on the composition of property in terms of composition and its
value viz.,
i) Agricultural:
ii) Residential:
iii) Commercial:
iv) Factory land & building:
S.No Vs No Value Statement Description Guidelines
v) Plant & machinery:
vi) Others:

In addition to the above, the following details need to be mentioned.

a) Our Share of security in the immovable property:

b) In case of pendency of any property valuation, mention the date by which the
valuation will be completed.

c) In the appraisal note, confirm regarding enforceability of the property i.e., whether
SARFAESI compliant or not. Also, highlight any negative features, if any with any
of the properties proposed to be mortgaged along with detailed justification for
accepting such a property as security.

d) In respect of liquid security like shares (other than those of borrowing entity),
mutual funds, fixed deposits etc, mention total value of the security along with our
share.

e) Mention total Collateral security percentage (first charge only) in relation to facility
extended i.e.,

 First Charge on immovable property as % of exposure:

 First Charge on liquid instruments as % of exposure:

f) Total collateral coverage by way of second charge on fixed assets / immovable

property, if any: %
S.No Vs No Value Statement Description Guidelines

g) Minimum FACR (in case of TLs)-----and the year in which it is minimum.

Ref: Manual on loans & advances, Part 1, Chapter 5, item ‘I’
44 14.6 Adequacy of overall Security Overall Security Coverage to the exposure includes “both Primary and Collateral
Coverage to the exposure is justified. securities” and specific comments need to be given on the adequacy/ inadequacy of
overall Security Coverage with justification.
45 14.7 Brief write-up on the third party Operating units shall examine the following aspects while accepting mortgages offered by
mortgages along with the reasons for third parties when they are not connected to either the promoters or the borrowing
accepting such mortgages is provided entities.
in the Appraisal Memorandum as per
the laid down instruction. (comments a. Before accepting the third party property, it has to be ascertained as to why the third
only) party property is offered and the branch should satisfy itself about the genuineness of
reasons.
b. A brief write up on third party mortgages along with reasons for accepting such
mortgages shall be provided in the loan proposal.

c. A detailed KYC has to be done on the third party guarantor so as to avoid the
possibilities of impersonation.

Ref: Manual on loans & advances, Part 2, Chapter 18, item 2-18-3.5

46 15.4 Auditor to examine appropriateness In CRA exercise, Operating functionaries have to mention the reasons for the fluctuation
of the causes recorded for the in scores of Financial, Business & Industry Risk and Management Risk parameters, item/
fluctuation in scores resulting in ratio wise resulting in upgradation or deterioration in rating.
upgradation or deterioration in rating
by more than one notch. Fluctuation in scores resulting in upgradation or deterioration in Rating by more than one
S.No Vs No Value Statement Description Guidelines
47 15.5 Auditor to examine and comment notch is to be commented upon in the appraisal note.
upon, upgradation in rating only on
account of higher score in parameters If improvement in CRA rating is on account of higher score in Business & Industry Risk
other than Financial Risk. and Management Risk parameters (other than Financial Risk Parameters), the same
needs to be critically examined and commented upon in the appraisal note.

Ref: Manual on loans & advances, Part 1, Chapter 3, item 1-3-2.16

48 15.7 CRA Rating of Corporate Guarantor, In case of loan proposals having Corporate Guarantor, CRA rating of the such corporate
wherever applicable has been guarantor has to be carried out and furnished in the appraisal memorandum.
validated.
Ref: Manual on loans & advances, Part 1, Chapter 3, item 1-3-2.11
49 15.8 CRA Rating Review exercise at half- 1. For units which are assigned CRA rating up to SB-10, CRA is to be reviewed
yearly interval for borrowal accounts annually.
(SB-11 & above) carried out and duly
approved in applicable cases. 2. For units having CRA SB-11 and worse, the CRA should be reviewed at half-yearly
intervals.

3. In case dynamic review is done, half yearly review has to be carried out within six
months from the date of dynamic review.

Ref: Manual on loans & advances, Part 1, Chapter 3, item 1-3-9

50 15.9 Dynamic Review of Internal Rating Dynamic Review of Internal Rating has to be carried out for borrowers who are having:
(a) total exposure of Rs.10 Crores & above in all Business Groups “with triggers”.
(b) total exposures of Rs.500 Crs & above - Half yearly dynamic review, without triggers.
Dynamic Review of CRA is “purely subjective”, based on both qualitative and quantitative
information.
S.No Vs No Value Statement Description Guidelines
Only downgrades in rating can be done as part of dynamic review. Upgrades will be
based on full review of annual audited financials.
Ref: Manual on loans & advances, Part 1, Chapter 3, item 1-3-2.20

51 15.10 Whether divergence, if any, observed In both Simplified and Regular Models, for sanctioning a new loan / enhancement in an
while examining the CRA Rating has existing loan, overall Hurdle (Threshold) is SB – 10 with a Score Range 45-49
the effect of breaching the threshold (corresponds to SB10) related to Non Trading, Trading, Services, EPC Contractors etc.
stipulated for sanctioning a new loan /
enhancement in an existing loan In case of any divergence, detailed comments along with reasons/ justification to be given
account. (Detailed comments on the in the proposal.
divergence observed with reasons to
be recorded) Ref: Manual on loans & advances, Part 1, Chapter 3, item 1-3-2.16
52 16.1 Comments on the level of contingent In the appraisal note, while giving the details under the Head Statutory dues/Other
liability and its impact (decline) on Contingent liabilities, operating functionaries need to go through the Audited Balance
TNW recorded in the appraisal note. Sheet (ABS) and arrive at the amount of disputed dues, if any.

In the appraisal memorandum, mention the Amount Quantified in the ABS and arrive at
the % of impact on TNW. If at all any negative score is awarded in CRA on account of
these items, the same needs to be brought out in the proposal. Further, comments to be
provided in the appraisal note regarding impact of these liabilities on the company with
detailed course of action/ justification.

Ref: Manual on loans & advances, Part 1, Chapter 5, item C6.

53 21.1 Loan appraisal confirm to Bank's / In order to establish the prima facie acceptability of the proposal, operating functionaries
RBI Lending policies and within the should examine the following aspects.
Govt. Guidelines etc.  Bank’s lending policy and other relevant guidelines/RBI guidelines
 Prudential Exposure norms
S.No Vs No Value Statement Description Guidelines

 Advisories of CRMD in respect of approach towards lending

 Industry Exposure restrictions

 Group Exposure restrictions

 Industry related risk factors

 Credit risk rating
 Whether the activity being performed by the company is legal and profitable

 Profile of the promoters/senior management personnel of the project

 List of defaulters viz., RBI list of defaulters/wilful defaulters, CIBIL, Central Fraud
Registry of RBI, Caution lists, ECGC Caution List, CGTMSE cardinal principles etc

 Acceptability of the promoter and his ability to bring his margin/promoter’s stake

 Compliance regarding transfer of borrower accounts from one bank to another, if

applicable

 Government regulations/legislation impacting on the industry; e.g., ban on

financing of industries producing/consuming Ozone depleting substances

 Applicant’s status vis-à-vis other units in the industry

 Financial status in broad terms and whether it is acceptable

 Scrutinise carefully the company’s Memorandum and Articles of Association to (i)

ensure that there are no clauses prejudicial to the Bank’s interests, (ii) ascertain
whether any limitations have been placed on the Company’s borrowing powers and
operations and (iii) the scope of activity of the company.
S.No Vs No Value Statement Description Guidelines
 Credit risk assessment to be carried out to ascertain the Financial, Business and
Industrial & Management risks.

Ref: Manual on loans & advances, Part 1, Chapter 5, item A2, Annexure PCP- 1.
54 21.2 Exposure Norms Proposed exposure details for the unit as well as Group have to be mentioned in the
appraisal note under the head “Credit limits (Company & Group)” and “Group exposure
particulars”. The details of prescribed exposure levels are as under:

Constitution of Borrower Maximum ceiling on Exposure prescribed by

Bank (Excluding facilities granted against
55 21.2.1 Proposed Exposure is within the specified securities)
Bank's Risk Sensitive Internal Individuals as borrowers Maximum aggregate exposure of Rs. 100 cr or
Prudential Exposure Limit [for its equivalent.
Individual Company, Group] and Non-corporates (Partnerships, Maximum aggregate exposure of Rs. 250 cr or
discussed adequately to avoid any Trusts, HUFs, Associations and its equivalent. The above ceiling is also
breach. Real Estate Investment Trust) applicable to the aggregate of all facilities
sanctioned to partnership firms which have
identical partners.
Corporates (Companies, Societies, As per the Prudential Exposure Norms
Govt. Departments, Institutions and prescribed by RBI, which are as under.
Statutory Corporations and Limited
Liability Partnerships)
Single Counterparty 20% of Bank’s Tier I Capital *
Group of Connected Counterparties 25% of Bank’s Tier I Capital
Single NBFC 20% of Bank’s Tier I Capital *
Group of Connected NBFCs 25% of Bank’s Tier I Capital

* Additional 5% of the Tier I capital with the approval of Chairman.

S.No Vs No Value Statement Description Guidelines
Other Guidelines:
1. The exposure shall be calculated based on Tier-I capital as on 31st March/ 30th
September.
2. Bank may extend Sole Banking facility for exposures up to Rs. 500 Cr.
3. In cases, where sole banking exposure exceeds Rs. 500 Cr, endeavor should be made
to bring the exposure under consortium. In consortium, our Bank’s share may be at a
minimum of 10% and participating banks are limited to maximum 10.
4. Exposures to SB-10 & below rated borrower shall be Maximum Rs. 1000 Cr (However,
products under schematic lending shall be guided as per the norms of the Scheme).
5. Normally, the above exposure norms should not to be exceeded. However, in
exceptional circumstances (Domestic/IBG Proposals), if the exposures in excess of the
above norms are to be considered, the approval from the respective sanctioning authority
should be obtained as a template item.
6. BUs may obtain specific approval from MD of the Vertical for the borrower/ borrower
group where deviations from the above norms are required.
7. Passive Breaches (Individual): An action plan for complying with exposure norms, with
timeline not exceeding three years should be included in the sanction note. Deviation, if
any, to be approved by the sanctioning authority as a template item.
8. Passive Breaches (Group): An action plan with timeline not exceeding three years for
bringing the exposure within the limit should be put up by the Business Unit (which is
having banking relationship with the flagship entity) to CCCC for approval. The approved
action plan should be circulated to all other BUs/ Branches who are having Banking
relationship with other entities of the Group. Deviation (including additional exposure to
existing entity or new entity in a group), if any, to be approved by CCCC.
S.No Vs No Value Statement Description Guidelines
56 21.2.3 Whether Single Borrower credit Following are applicable for sanctions up to 31.03.2019.
exposure norms are complied with
(a) The credit exposure to single borrower should not exceed 15% of Bank’s capital funds.
[Applicable for sanctions up to
An additional 5% exposure will be considered for credit to infrastructure projects. Further,
31.03.2019]
another 5% exposure of Bank’s capital funds can be allowed with the approval of the
Board under exceptional circumstances subject to the borrower consenting to disclosure
(a) The credit exposure to single
of the information in the Bank’s Balance-sheet.
borrower should not exceed 15% of
Bank’s capital funds. [An additional
(b) In case of oil companies that have been issued oil bonds (which do not have SLR
5% exposure will be considered for
status) by Government of India, the exposure should not exceed 25% of Bank’s capital
credit to infrastructure projects.
funds, plus an additional 5% credit to infrastructure projects.
Another 5% exposure of Bank’s
capital funds can be allowed with the
(c) If the unit is an Infrastructure Finance Company, the exposure to this company should
approval of the Board under
not exceed 15% of Bank’s capital funds, plus an additional 5%, provided the additional
exceptional circumstances subject to
exposure is on account of funds on-lent by the NBFC-AFC to the infrastructure sector.
the borrower consenting to disclosure
of the information in the Bank’s
(d) Bank’s exposure to leasing or Hire purchase or factoring activities, (for each of these
Balance-sheet].
activities) should not exceed 10 percent of total advances.
(b) In case of oil companies that have
Revised exposure norms with regard to single counter party under ‘Large Exposure
been issued oil bonds (which do not
Frame Work’ (LEF), applicable for exposure renewed/reviewed /newly sanctioned after
have SLR status) by Government of
01.04.2019:
India, the exposure should not
exceed 25% of Bank’s capital funds,
(a) The exposure to a single counter party should not exceed 20% of the Bank’s Tier-I
plus an additional 5% credit to
capital at all times. In exceptional cases, Bank’s Board may allow an additional 5%
infrastructure projects.
exposure of the Bank’s Tier-I capital at all times.
(c) If the unit is an Infrastructure
(b) In case of Large Borrowers [with exposure exceeding 10% of Bank’s Tier-I Capital
Finance Company, the exposure to
funds], the total exposure of the Bank to all the “large borrowers” including this unit should
this company should not exceed 15%
S.No Vs No Value Statement Description Guidelines
of Bank’s capital funds, plus an not exceed 800 % of Bank’s Tier I Capital Funds.
additional 5%, provided the additional
exposure is on account of funds on- Exposure norms with regard to Group Borrowers: Applicable for sanctions up to
lent by the NBFC-AFC to the 31.03.2019
infrastructure sector.
The exposure ceiling limits would be 40% of capital funds in the case of a borrowing
(d) Bank’s exposure to leasing or Hire group. An additional 10% will be considered for credit to infrastructure projects. Another
purchase or factoring activities, (for 5% of Bank’s capital funds can be allowed with the approval of the Board under
each of these activities) should not exceptional circumstances subject to the borrower consenting to disclosure of the
exceed 10 percent of total advances. information in the Bank’s Balance-sheet.
OR Whether revised exposure norms
with regard to single counter party Exposure norms with regard to Group of Connected Counter Parties under ‘Large
under ‘Large Exposure Frame Work’ Exposure Frame Work’ (LEF) applicable for exposure renewed/ reviewed newly
(LEF) are complied with? sanctioned after 01.04.2019:

(Applicable for exposure Exposure to a Group of Connected Counter parties shall not exceed 25% of Bank’s Tier-I
renewed/reviewed /newly sanctioned capital at all times.
after 01.04.2019)

(a) The exposure to a single counter

party should not exceed 20% of the
Bank’s Tier-I capital at all times. In
exceptional cases, Bank’s Board may
allow an additional 5% exposure of
the Bank’s Tier-I capital at all times.

(b) In case of Large Borrowers [with

exposure exceeding 10% of Bank’s
Tier-I Capital funds], the total
S.No Vs No Value Statement Description Guidelines
exposure of the Bank to all the “large
borrowers” including this unit should
not exceed 800 % of Bank’s Tier I
Capital Funds. [Observations to be
recorded, if ‘N’ is marked] -
Mandatory field.
57 21.2.4 (I) Whether Credit Exposure norms
with regard to Group Borrowers are
complied with?

[Applicable for sanctions up to

31.03.2019]?

(a) The exposure ceiling limits would

be 40% of capital funds in the case of
a borrowing group. An additional 10%
will be considered for credit to
infrastructure projects. Another 5% of
Bank’s capital funds can be allowed
with the approval of the Board under
exceptional circumstances subject to
the borrower consenting to disclosure
of the information in the Bank’s
Balance-sheet.

OR

(II) Whether revised exposure norms

with regard to Group of Connected
S.No Vs No Value Statement Description Guidelines
Counter Parties under ‘Large
Exposure Frame Work’ (LEF) are
complied with? (applicable for
exposure renewed/ reviewed newly
sanctioned after 01.04.2019)

Exposure to a Group of Connected

Counter parties shall not exceed 25%
of Bank’s Tier-I capital at all times.
[Observations to be recorded, if ‘N’ is
marked] - Mandatory field.
58 21.2.5 (I) Whether credit exposure norms Credit exposure norms with regard to single NBFCs - applicable for sanctions up to
with regard to single NBFCs 31.03.2019:
[Applicable for sanctions up to The exposure (both lending and investment, including off- Balance sheet exposure to a
31.03.2019] are complied with? single NBFC&NBFC-AFC (Asset Finance Company) shall not exceed 10% & 15% of
Bank’s capital funds (an additional 5% can be considered provided the funds are on lent
The exposure (both lending and by the NBFC to the infrastructure sector.
investment, including off- Balance
sheet exposure to a single Exposure norms with regard to Single NBFC under ‘Large Exposure Frame Work’ (LEF) -
NBFC&NBFC-AFC (Asset Finance applicable for exposure renewed/ reviewed newly sanctioned after 01.04.2019:
Company) shall not exceed 10% & (a) Exposure to a single NBFC shall not exceed 15% of Tier-I Capital of the Bank.
15% of Bank’s capital funds (an
additional 5% can be considered (b) Exposure to a Group of Connected NBFCs or Group of Counter parties having NBFCs
provided the funds are on lent by the in the Group shall not exceed 25% of Bank’s Tier-I Capital.
NBFC to the infrastructure sector).

OR

(II) Whether revised exposure norms

S.No Vs No Value Statement Description Guidelines
with regard to Single NBFC under
‘Large Exposure Frame Work’ (LEF)
are complied with?

(applicable for exposure renewed/

reviewed newly sanctioned after
01.04.2019)

(a) Exposure to a single NBFC shall

not exceed 15% of Tier-I Capital of
the Bank

(b) Exposure to a Group of

Connected NBFCs or Group of
Counter parties having NBFCs in the
Group shall not exceed 25% of
Bank’s Tier-I Capital [Observations to
be recorded, if ‘N’ is marked] -
Mandatory field
59 21.2.6 Compliance to regulatory guidelines i) While extending credit facilities to Indian Joint Ventures/ Wholly Owned Subsidiaries
on taking exposure on Indian abroad or extending Buyers’ Credit /acceptance finance to overseas parties for facilitating
JVs/Wholly Owned Subsidiaries export of goods and services from India, the Bank will ensure that such exposure is
abroad and Overseas Step-down restricted to 20% of the Bank’s capital funds. For higher limits, Bank would approach RBI
subsidiaries of Indian Companies is on a case-to-case basis.
examined and no deviation is
ii) The cap of 20% is not applicable to credit extended from overseas operations i.e. when
observed.
the funding is out of resources raised abroad (such resources are mobilized by our foreign
offices through their customers/brokered deposits or inter- bank reciprocal credit lines and
Bank’s Exposure to Indian JVs/Wholly
borrowings etc.). However, the concentration risk exposure (single borrower and group
owned Subsidiaries
S.No Vs No Value Statement Description Guidelines
abroad and step-down subsidiaries borrower) would apply to the Bank as a whole.
which are wholly owned by the
iii) Bank can also extend financial assistance to Indian companies for acquisition of equity
overseas subsidiaries of Indian
in overseas joint ventures / wholly owned subsidiaries or in other overseas companies,
Corporates are subject to a limit of
new or existing, as strategic investment under the approved policy. Such acquisition(s)
20% of Bank’s unimpaired capital
should be beneficial to the company and the country. The finance would be subject to
funds (Tier-I and Tier-II capital).
compliance with the statutory requirements under Section 19 (2) of the Banking
Regulation Act, 1949. Exposure to this activity will not exceed 10% of the Bank’s net-
worth. Further, such advances will form part of the capital market exposure and will be
considered for the overall ceiling of 40% of Bank’s net-worth prescribed for capital market
exposure.
iv) The above provision would not include offshore SPVs / Companies financed by the
foreign offices for acquisition of equity in overseas entities.
Ref: Item 3.7.11 of Loan Policy Guidelines 2020.

60 21.6 Compliance to Statutory restrictions Section 19 (2) of the Banking Regulation Act, 1949 states that no banking company shall
on holding shares of the company by hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an
the Bank u/s 19(2)/19(3) are amount exceeding thirty per cent of the paid-up share capital of that company or thirty per
examined and no deviation is cent of its own paid-up share capital and reserves, whichever is less”.
observed.
Section 19 (3) of the Banking Regulation Act, 1949 states that notwithstanding anything
(a) Under Section 19 (2) of the contained in sub-section (2), a banking company shall not, after the expiry of one year
Banking Regulation Act, 1949 Bank’s from the date of the commencement of this Act, hold shares, whether as pledgee,
should not hold shares in any mortgagee or absolute owner, in any company in the management of which any
company except as provided in Sub- managing director or manager of the banking company is in any manner concerned or
section (1), whether as pledgee, interested”.
mortgagee or absolute owner of an
amount exceeding 30% of the Paid- Ref: Item 10.1.5 of Loan Policy Guidelines 2020.
Up Share Capital of that company or
S.No Vs No Value Statement Description Guidelines
30% of its own paid up share capital
and reserves, which is less.

(b) Under Section 19(3) of the

Banking Regulations Act, 1949, ‘Bank
should not hold shares whether as
pledgee, mortgagee or absolute
owner, in any company in the
management of which any Managing
Director or Manager of the Bank is in
any manner concerned or interested.
61 21.7 Compliance to regulatory guidelines Bank shall not provide loans to companies for buy-back of their shares / securities.
on extending credit to companies for
Buy back of their securities is Ref: Item 4.8.4 of Loan Policy Guidelines 2020.
examined and no deviation is
observed. No loan should be
sanctioned to the company for buy
back of its own shares /securities.
62 21.8 No advance has been granted for No advance to be granted for purchase of gold in any form, including primary gold, gold
purchase of gold in any form, bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units
including primary gold, gold bullion, of gold Mutual Funds.
gold jewellery, gold coins, units of
gold Exchange Traded Funds (ETF)
and units of gold Mutual Funds.
However, Bank can provide finance
for genuine working capital
requirements of jewellers.
63 21.9 shares and loans/advances to a) In terms of Section 20(1) of the Banking Regulation Act, 1949, the Bank cannot grant
S.No Vs No Value Statement Description Guidelines
Directors of the Bank or other Banks, any loans and advances on the security of its own shares.
/relatives of the Directors of the Bank
or other Banks is examined and no Ref: Item 4.8.1 of Loan Policy Guidelines 2020.
deviations is observed.

(a) No loan/advance should be (b) In terms of Section 20 (1) of the Banking Regulation Act, 1949, the Bank cannot grant
granted against Bank’s own shares in loans and advances to the directors, and the firms in which they hold substantial interest,
violation of Section 20(1) of Banking barring admissible exceptions.
Regulation Act,1949?
Ref: Item 4.8.1 of Loan Policy Guidelines 2020.
(b) As per Section 20(1) of the BR
Act, 1949, barring admissible (c) Bank is prohibited from entering into any commitment for granting any loans or
exceptions, no loan/advance shall be advances to or on behalf of any of its directors, or any firm in which any of its directors is
granted to the Directors of the Bank interested as partner, manager, employee or guarantor, or any company [not being a
and their firms in which hold subsidiary of the banking company or a company registered under Section 8 of the
substantial interest. Companies Act, 2013, or a Government company] of which, or the subsidiary or the
holding company of which any of the directors of the Bank is a director, managing agent,
(c) No commitment is given by for manager, employee or guarantor or in which he holds substantial interest, or any
grant of any loan /advance to or on individual in respect of whom any of its directors is a partner or guarantor.
behalf of any company (not being a
Ref: Item 4.8.5.2 of Loan Policy Guidelines 2020.
subsidiary of the Banking company or
a company registered under Section (d) Without prior approval/ knowledge of the Board, no loans and advances shall be
8 of the Company’s Act, 2013 or a granted to relatives of the Bank’s Chairman/Managing Director or other Directors,
Government Company) of which, or Directors (including Chairman/Managing Director) of other banks and their relatives,
the holding company of which any of Directors of Scheduled Co-operative Banks and their relatives, Directors of
the directors of the Bank is a Subsidiaries/Trustees of Mutual Funds/Venture Capital Funds set up by the Bank or other
director, Managing Agent, Manager, banks, as per details given below:
employee or Guarantor or in which he
holds substantial interest, or any Unless sanctioned by the Board of Directors/Management Committee, Bank shall not
S.No Vs No Value Statement Description Guidelines
individual in respect of whom any of grant loans and advances aggregating Rs.25 lacs & above (Rupees twenty-five lacs and
its directors is partner or guarantor above) or its equivalent to - i) Directors (including the Chairman/Managing Director) of
other banks (*); ii) any firm in which any of the directors of other banks (*) is interested as
(d) No loan/advance is granted a partner or guarantor; and iii) any company in which any of the directors of other banks
(without specific approval/knowledge (*) holds substantial interest or is interested as a director or as a guarantor.
of the Board) to relatives of Bank’s (*) [Including directors of Scheduled Co-operative Banks, Directors of Subsidiaries /
Chairman/Managing Directors or Trustees of Mutual Funds/Venture Capital Funds]
other Directors, Directors (including
Chairman/Managing Director) of other The restrictions as contained in Section 20 of the Banking Regulation Act, 1949 would
Banks and their relatives, Directors of apply to grant of loans and advances to spouse and minor / dependent children of the
Scheduled Co-operative Banks & Directors of the Bank. However, loans or advances can be granted to or on behalf of
their relatives, Directors of spouses of the B a n k ’ s Directors in cases where the spouse has his / her own
Subsidiaries/Trustees of Mutual independent source of income, and the facility so granted is based on standard appraisal
Funds/Venture Capital Funds set up and assessment procedures. All credit proposals for Rupees twenty- five lacs and above
by the Bank or other Banks (Not should be sanctioned by the Bank’s Board of Directors / ECCB. The proposals for less
applicable if loans/advances are than Rupees twenty- five lacs may be sanctioned by the appropriate authority as per
granted to or on behalf of spouses of delegated financial powers.
the Bank’s Directors where spouse
has her/his independent source of Ref: Items 4.9.1 to 4.9.3 of Loan Policy Guidelines 2020.
income and facility so granted is
based on standard appraisal & (e) Restrictions on Grant of Loans & Advances to Officers and Relatives of Senior Officers
assessment procedure). (Officers in the grade of Chief Manager and above) of Banks: The following guidelines
should be followed while extending credit facilities to officers and the relatives of senior
(e) No sanction of credit facilities is officers:
accorded to relatives of senior
officers of the bank (Scale-IV & i) Loans & advances to officers of the Bank No officer or any Committee comprising, inter
above) is reported to the Board. The alia, an officer as member, shall, while exercising powers of sanction of any credit facility,
credit facility is sanctioned by an sanction any credit facility to his/her relative. Such a facility shall ordinarily be sanctioned
authority, other than the Board to any only by the next higher sanctioning authority. Credit facilities sanctioned to senior officers
S.No Vs No Value Statement Description Guidelines
firm in which any of the relatives of should be reported to the Board.
any senior officer of the financing
bank holds substantial interest, or is ii) Loans & advances and award of contracts to relatives of senior officers of the bank
interested as a partner or guarantor; Credit facilities sanctioned to the relatives of senior officers should be reported to the
or any company in which any of the Board.
relatives of any senior officer of the Further, when a credit facility is sanctioned by an authority, other than the Board to: -
financing bank holds substantial
i) any firm in which any of the relatives of any senior officer holds substantial interest, or is
interest, or is interested as a director
interested as a partner or guarantor; or
or as a guarantor,
ii) any company in which any of the relatives of any senior officer holds substantial interest
or is interested as a director or as a guarantor, such transaction should also be reported
to the Board.

Scope of certain expressions:

i) The scope of the term ‘relative’ is Spouse, Father, Mother (including step-mother), Son
(including stepson), 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 and Sister (including step-sister)
of the spouse.

ii) The term ‘Senior Officer’ will refer to - a. any officer in Senior Management level in
Grade IV and above in a nationalised bank, and b. any officer in equivalent scale – in the
State Bank of India and in any banking company incorporated in India.

iii) The term ‘credit facility’ will not include loans or advances against –

a. Government securities
b. Life Insurance policies, Fixed or other deposits
c. Temporary overdrafts for small amount i.e. upto Rs. Twenty-five thousand and casual
purchase of cheques up to Rs. Five thousand, at a time.
S.No Vs No Value Statement Description Guidelines
d. Credit facility will also not include loans and advances such as housing loans, car
loans, consumption loans, etc. granted to an officer of the Bank under any scheme
applicable generally to officers.

Ref: Items 4.9.8 of Loan Policy Guidelines 2020.

64 21.10 such Compliance to regulatory Bank shall not extend finance for setting up of new units consuming/producing Ozone
guidelines on sanction of loan Depleting Substances (ODS) and to small/medium scale units engaged in the
facilities to units not complying with manufacture of aerosol units using chlorofluorocarbons (CFC) and companies not
the environmental laws is examined complying with environmental laws prevailing in the country/host country.
and no deviation is observed:
Ref: Items 4.10 of Loan Policy Guidelines 2020.
(a) No loan/ advance shall be
granted to units producing
/consuming ozone depleting
substances (ODS) are examined and
no deviations are observed

(b) No loan/advance is sanctioned to

new units for setting up facilities the
consume /produce ozone depleting
substances or small and medium
scale units engaged in manufacture
of aerosol units using CFC and
companies not complying with the
environmental laws prevailing in the
country/host country.
65 21.11 Compliance to exposure norms on Bank’s exposure to real estate (including residential mortgages, commercial real estate
real estate sector is examined and no and indirect finance etc.,) will not exceed 30% of the Bank’s total advances. Within the
S.No Vs No Value Statement Description Guidelines
deviation is observed. Bank’s overall ceiling of 30%, the limits for sub segments (Presently for i.e., Residential
exposure to real estate including Mortgages -20%, Indirect exposures- 5.5%, Other Commercial Real Estate (OCRE)- 3%,
residential mortgages, commercial Infra Related Commercial Real Estate (ICRE)-1.5%)
real estate and indirect finance etc
shall not exceed 30% of Bank’s total
Ref: Items 3.7.3 of Loan Policy Guidelines 2020.
advances.
66 21.12 Compliance to exposure norms on The Bank’s aggregate exposure to the capital markets shall not exceed 40% of its net-
capital markets is examined and no worth as on March 31 of the previous year.
deviation is observed.
Within the overall ceiling of 40%, Bank’s investment in shares, convertible bonds /
Solo basis: Bank’s aggregate debentures, units of equity-oriented mutual funds and all exposures to Venture Capital
exposure to capital markets shall not Funds (VCFs) [both registered and unregistered] shall not exceed 20% of Bank’s net-
exceed 40% of Bank’s net-worth as worth as on March 31 of the previous year. Also within the overall ceiling of 40%, the
on 31st March of previous year. Bank’s exposure to stockbrokers shall not exceed 10% of its net-worth as on March 31 of
the previous year.
Within overall ceiling of 40%, Bank’s
investments in shares/ convertible Ref: Items 3.7.9 of Loan Policy Guidelines 2020.
bonds/debentures, units of equity
oriented mutual funds and all
exposures to Venture Capital Funds
(VCF) [both registered and un-
registered] shall not exceed 20% of
Bank’s net-worth as on 31st March of
previous year. Also within the overall
ceiling of 40%, Bank’s exposure to
stock brokers shall not exceed 10%
of its net-worth as on March 31st
previous year.
S.No Vs No Value Statement Description Guidelines
Consolidated basis: The aggregate
exposure of a consolidated bank to
capital markets (both fund-based and
non-fund based) should not exceed
40 per cent of its consolidated net
worth as on March 31 of the previous
year. Within this overall ceiling, the
aggregate direct exposure by way of
the consolidated bank’s investment in
shares, convertible bonds /
debentures, units of equity-oriented
mutual funds and all exposures to
Venture Capital Funds (VCFs) [both
registered and unregistered] should
not exceed 20 per cent of its
consolidated net worth.
67 21.13 Compliance to exposure norms on Banks have been permitted to undertake leasing, hire purchase and factoring activities
leasing, hire purchase and factoring subject to the exposure to each of these activities not exceeding 10 per cent of the Bank’s
activities is examined and no total advances as at the close of the immediately preceding financial year.
deviation is observed. Banks have
been permitted to undertake leasing, Ref: Items 3.7.10 of Loan Policy Guidelines 2020.
hire purchase and factoring activities
subject to the exposure to each of
these activities not exceeding 10 per
cent of total advances. [Observations
to be recorded, if ‘N’ score is marked]
- Mandatory field.
 Credit Audit – Positive score areas in Pre sanction – Tips on Value Statements in Credit Auditable accounts upto Rs 50 Cr

Annexure 1

C.O.S. 26

State Bank of India

Branch

(STRICTLY PRIVATE & CONFIDENTIAL)

Please note that this opinion is given in confidence and without responsibility or guarantee
on the part of the State Bank of India or its officers and that it is a condition of this letter
that the Bank’s name be not disclosed in the event of our reports being passed on to your
clients.

Name of the party:

Means of the party:

U. Ravi Kiran, 4259424, SBILD Secunderabad, 05/2021 Page 76 of

 Credit Audit – Positive score areas in Pre sanction – Tips on Value Statements in Credit Auditable accounts upto Rs 50 Cr

State Bank of India

Branch :

(STRICTLY PRIVATE AND CONFIDENTIAL)

Credit information report

1. Name

2. Address

3. Constitution (Please tick)

 Individual
 Private Limited Company
 Proprietorship
 Public Limited Company
 Joint Hindu Family
 Public Sector (Central Govt.)
 Partnership
 Public Sector (State Govt.)
 Others.

4. Name of the proprietor, partners/directors/ Karta and Co-owners of Joint Hindu Family.

5. Nature of account (Please indicate)

 Savings Current Cash Credit Others

6. Banking since Year No. of years

7. Business / company established/incorporated on (Date) / /

8. Nature of business activity and location (main activity of the firm)

9. Other allied activities (if known to the Bank)

10. If limited company, authorised capital Rs

Paid-up Capital Rs

11. Net means of the proprietor /firm /company

12. Names and address of Associate concerns of the firm (if known to the Bank)

13. Experience as to their dealings (brief write-up)

14. Asset classification as per IRAC norms :

Note : The information given is without any responsibility on the part of the Bank and
information should not be furnished to third parties ascribing source to our Bank.

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 Credit Audit – Positive score areas in Pre sanction – Tips on Value Statements in Credit Auditable accounts upto Rs 50 Cr

Annexure 2
State Bank of India
Branch:

(STRICTLY PRIVATE AND CONFIDENTIAL)

To

Dear Sir/Madam,

Credit Information Report

On

With reference to your inquiry of , we forward the enclosed opinion,

which is given in confidence and without responsibility or guarantee on the part of the
State Bank of India or its officers. Please note that it is a condition of this letter that the
Bank’s name be not disclosed in the event of our reports being passed on to your clients.

Yours faithfully,

Branch Manager

U. Ravi Kiran, 4259424, SBILD Secunderabad, 05/2021 Page 78 of

 Credit Audit – Positive score areas in Pre sanction – Tips on Value Statements in Credit Auditable accounts upto Rs 50 Cr

Annexure 3

CREDIT INFORMATION REPORT

(To be compiled at the Branch)
1. Name Source of information
2. Address
3. Constitution
4. Name of Directors
5. Nature of Account
6. Banking Since
7. Date of Incorporation
8. Nature of Business Activity
9. Other Allied Activities (If known to
Bank)
10. Authorised Capital

Paid Up Capital

Share Application Money

11. Net Means of Proprietor/Firm/
Company
12. Name and Address of Associate
Concerns (If known to the Bank)
13. Experience as to their Dealings Not applicable
(brief write up)
14. Asset Classification (IRAC) as on CRILC

15. Any other direct/indirect liability

Credit Analyst Relationship Manager

Date:

Branch Head

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 Credit Audit – Positive score areas in Pre sanction – Tips on Value Statements in Credit Auditable accounts upto Rs 50 Cr

Annexure 4

“RIGHT OF RECOMPENSE REGISTER”

1 Name of the unit
2. IRAC status
3. Whether BIFR or non-BIFR case
4. (a) If BIFR/AAIFR case.
i) Case No.
ii) BIFR/AAFiR sanction date
5. Date of sanction of the package by the Bank and the authority
i) Nature of facility : Funded interest (mention the appropriate)
Loan/working Capital Term Loan/Regular Term Loan/Working Capital
6. Put-off date for downward Interest revision
i) Prepackage rate : -% above Base Rate effective rate %
ii) Interest rate for the facility as per the package
iii) Loss of interest percentage
i) (i) – (ii) above

6. Notional loss arrived at the time of sanction of the package for this facility for the
entire package period
Name of the company Facility Date Particulars
Current Interest Rate of Difference Products Bank’s sacrifice
Cumulative Rate applicable interest between (3) for the (for the
sacrifice (concessional & (4) quarter/ differential as per package) period rate mentioned in
(5)

(1) (2) (3) (4) (5) (6) (7)

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