उत्कर्ष -2025

Pawan Singh
GM- Learning & Development
HO: Centre for Learning & Innovations

FOREWORD

Dear Aspirants,

I am delighted to unveil "उत्कर्ष-2025," an initiative from Team STC, Lucknow which is an attempt
to provide a companion to the promotion aspirants in their endeavours.

This booklet has been prepared keeping in mind the upcoming promotion process of the Bank. It
offers valuable insights into the policies, schemes, and guidelines regarding Risk, Audit &
Compliance. This will help the aspirants to propel their preparations to the next level.

Further, with bank going for end-to-end HR Transformation through ongoing “Project UDAAN”,
wherein several unprecedented steps have been taken, one of them being the introduction of Job
Family Concept.
In this context this booklet will also help the Officers to dive deeper into the Job Family of Risk,
Audit & Compliance, and to upgrade themselves to be future ready. This will ensure seamless
transition & succession planning and inculcate a habit of self-paced learning and willingness to
rise.
My compliments to Team STC-Lucknow, for their commitment to improving this resource, making
it even more beneficial than its previous edition through addition of new sections on Inspection
& Audit, and Compliance.

I believe that this resource will serve as an essential tool for providing valuable assistance to all.

Wishing you all the best on your journey toward success.

October 14th,2024 (Pawan Singh)

 उत्कर्ष -2025

INDEX
S. No. PARTICULAR Page No.
PART-A: RISK
A. Bank’s Financial Result as on 30.06.2024 3
B. IRMD L&A Policies
B1 Credit Management & Risk Policy 6
B2 Valuation Policy 81
B3 TEV Policy 86
B4 Co-Lending Policy 89
B5 Factoring Policy 96
B6 Exit Policy 100
B7 Policy for Financing against Future Receivables 103
“PNB Cash Flow Discounting”
B8 Policy for Renewal / Review of Credit Facilities 107
B9 Policy on Obtention of Financials 111
B10 Policy on Penal Charges on Advances 115
B11 Digital Lending Policy 118
C. Basel Guidelines 122
D. IRMD L&A Guidelines
D1 Future Lease Rentals (FLRs) 130
D2 Open Term Loan 132
D3 Corporate Loan 133
D4 Short Term Loan 134
D5 Line of Credit 135
D6 Securitisation of Future Toll Collection/ Discounting of Annuity 137
Receivables in BOT Road Projects & HAM Projects
D7 Extending Financial Assistance for Enhancement and Augmentation 139
of Ethanol Production Capacity
D8 Advance against Bank Deposits 143
D9 Credit Guarantee Scheme for MFIs (CGSMFI) 144
D10 Financing Second Hand Assets 146
D11 Financing Association of Persons 147
D12 Credit Information Reports of the Borrowers provided by CICs 148
D13 Takeover of Borrowal Accounts 150
D14 Financing to Lab Grown Diamond Industry 152
D15 Infrastructure Financing
D15.1 Financing Renewable Sources of Energy 154
D15.2 Financing Windmills 155

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 उत्कर्ष -2025

D15.3 Financing Solar Power Projects 157

D15.4 Financing to Infrastructure Investment Trust (InvITs) 159
D15.5 Financing to Educational Institutions 160
D15.6 Viability Gap Funding Scheme (VGF) 162
D16 Guidelines on Transfer of Loan Exposures 163
D17 Framework for Micro Finance Loan 165
D18 Stock & Receivable Audit 167
E. Important IRMD Policies
E1 Policy for Approval of New Product 171
E2 Risk Management Philosophy and Policy 174
E3 Group Risk Management Philosophy & Policy 180
E4 Disclosure Policy 180
E5 Policy for Risk & Compliance Culture of the Bank 181
E6 Reputational Risk Management Policy and Assessment Framework 183
E7 Operational Risk Management Policy 184
E8 Credit Risk Mitigation & Collateral Management Policy 188
E9 Conduct Risk Management Policy 189
E10 Financing Framework for Green, Social and Sustainability Linked 193
Activities/ Projects
E11 Climate Risk Management Policy 195
PART-B: INSPECTION & AUDIT
F1 Revenue Audit Policy 199
F2 Whistle Blower Policy 203
F3 Policy for Engagement of Retired Senior Officers of PSBs for 205
conducting Credit Audit
F4 Policy For Legal Audit of Title Documents in Respect of Large Value 207
Loan Accounts
F5 Concurrent Audit Policy 210
F6 Risk Based Internal Audit (RBIA) Policy 220
F7 Credit Audit & Review Policy 234
F8 Staff Accountability Policy 239
PART-C: COMPLIANCE
G1 Group Compliance Policy 251
G2 Policy for Implementation and Management of DAKSH 261
PART-D: OTHER
H. Priority Sector Guidelines 264
I. Current Benchmark Rate 273
J. Various Cut Off Limits 275
K. List of Important Internal Circulars for forthcoming Exam 277

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 उत्कर्ष -2025

A. Bank’s Financial Result as on 30.06.2024- Key Highlights (₹ in Crore)

1. Global Gross Business increased by 10.00% on YoY basis to ______ ₹ 24,36,929
2. Global Deposits grew by 8.5% on YoY basis to _____ ₹ 14,08,247
3. Global Advances grew by 12.2% on YoY basis to _____ ₹ 10,28,682
4. Domestic Deposits grew by 8.1% on YoY basis to _____ ₹ 13,69,916
5. Domestic Advances increased to _________ with growth of 11.6% ₹ 9,84,407
6. CASA at ₹ 5,49,079 Crore 40.08%
7. Savings Deposit grew by 4.4% on Y-o-Y basis to ______ ₹ 4,84,377
8. Total Recovery including Cash and Up-gradation improved sequentially to
₹ 3,249
____Crore in Q1
9. GNPA ratio improved by 275 bps (Y-o-Y) to_____ 4.98%
NNPA ratio improved by 138 bps (Y-o-Y) to_____ 0.60%
10. Gross Non-Performing Assets (GNPA) stood at____Crore as against ₹ 70,899 Crore
₹ 51,263
in June’23
11. Net Non-Performing Assets (NNPA) stood at _____Crore as against ₹ 17,129 Crore
₹ 5,930
in June’23
12. Provision Coverage Ratio (PCR) excluding TWO stood at ___ (Including TWO it is
88.4%
95.9%)

13. Credit Cost improved to ____as against 1.99% June’23 0.32%

14. CRAR as June’24_____
Out of which Tier-I is 13.04% (CET-1 was at 10.95%, AT1 was at 2.09%) and Tier-II CRAR 15.79%
is 2.75%
15. Q1-Operating Profit (Y-o-Y growth 10.3) ₹ 6,581
16. Q1-Net Profit (Y-o-Y variation 159.0%) ₹ 3,252
17. Retail, Agriculture & MSME (RAM) Share to Domestic Advances 55.5%
18. Retail, Agriculture & MSME (RAM) Credit grew by 13% on YoY basis to _____Crore ₹ 5,45,954
In Retail Segment: (i) Home loan increased by 14.07% on YoY basis to ₹ 1,01,796 Cr
(ii) Vehicle loan increased by 26.9% on YoY basis to ₹ 21,726 Cr
(iii) Personal loan increased by 9.1% on YoY basis to ₹ 22,378 Cr
Agriculture advances grew by 15.8% on YoY basis to ₹ 1,68,503 Cr
MSME advances grew by 7.9% on YoY basis to ₹ 1,42,886 Cr
Priority Sector
19. PS Advances achievement is___ of ANBC against the mandated norms of 40% 40.29%
20. Agriculture Advances achievement is_of ANBC against the mandated norms of 18% 18.29%
21. Credit to Small & Marginal Farmer, achievement is ____of ANBC against the 10.16%
mandated norms of 10.00%
22. Credit to Weaker Sections achievement is ____of ANBC against the mandated
13.57%
norms of 12%
23. Credit to Micro Enterprises, achievement is ____of ANBC against the mandated 7.70%
norms of 7.5%

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 उत्कर्ष -2025

Other
24. Share of Digital Transactions 89.5%

25. Business Augmentation through Analytics Driven Decision Making 82.7 YoY to____as at
₹10,883 Cr.
June’24 from ₹5956 Cr in June’23
26. Loan Disbursed Through Digital Journeys increased 48.5 YoY to____as at June’24 from
₹2240 Cr.
₹1508 Cr in June’23
27. PNB One Mobile Banking Services (MBS) users increased 50% YoY to____as at June’24
187 Lakh
from 125 Lakhs in June’23
28. WhatsApp Banking Users increased 133% YoY to ____as at June’24 from 14.6 Lakhs in
34 Lakh
June’23
29. Accounts opened under PMJDY (No. in Lakh) 513

30. Deposit mobilized by BCs ₹ 27,834

31. The Bank has _____number of domestic branches. Rural: 3934, Semi-Urban: 2491,
Urban: 2001 & Metro: 1724, 2 International Branches, 12080 number of ATMs and 10,150
32630 BCs.
32. International Branches: 1.Dubai 2. ________ Gift City, Ahmedabad
33. PNB’s share in PNB MetLife India Insurance Co. Ltd 30.00%
34. PNB’s share in Canara HSBC Life Insurance Co. Ltd 23.00%
35. PNB’s share in PNB Housing Finance Ltd 28.13%
36. PNB’s share in India SME Asset Reconstruction Co. Ltd (ISARC) 20.90%
37. Govt. of India shareholding 73.15%
38. Digital Initiatives:
▪ 1st Bank to Launch PM Vishwakarma Scheme in Digital Mode
▪ PNB अन्तः दृष्टि: Debit Card for Visually Impaired & Blind
▪ PNB Digi Car Loan, PNB Digi Education Loan, PNB Digi Home Loan
39. Total RWAs ₹ 7,52,450 cr.
40. Credit RWA ₹ 6,67,095 cr.
41. Market RWAs ₹ 8,992 cr.
42. Operational RWAs ₹ 76,363 cr.
43. Exposure to NCLT accounts (₹ in Cr.), PCR against this exposure 99.88% Breakup:
Parameters Accounts Balance
RBI List 1 3 3542
RBI List 2 10 4440
Filed by PNB 115 7868
Filed by Others 404 40792
Total 532 56643
44. Exposure to NARCL accounts (₹ in Cr.)
Position of accounts with PNB Accounts Balance
Accounts already resolved 14 3778
Bids received from NARCL and in process 2 476
Under process with NARCL - Due Diligence 7 1073
Total 23 5327
45. Business per Employee ₹ 24.80 Cr
46. Business per Branch ₹ 233.26 Cr
47. Net Profit per Employee ₹ 13.66 Lakh
48. Net Profit per Branch ₹ 128.47 Lakh
49. Cost of Deposits (Global, Domestic) (Growth trend) - 1st Quarter G 5.10%
D 5.08%
50. Cost of Funds (Global, Domestic) (Growth trend) - 1st Quarter G 4.54%
D 4.49%
51. NIM (Global, Domestic) (Growth trend) - 1st Quarter G 3.07%
D 3.21%

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 उत्कर्ष -2025

52. Yield on Advances (Global, Domestic) G 8.33%

(Growth trend in Domestic and Global) - 1 Quarter
st D 8.43%
53. Yield on Funds (Global, Domestic) (Growth trend) - 1st Quarter G 7.17%
D 7.23%
54. Yield on Investment (Global, Domestic) (Growth trend) – 1st Quarter G 7.04%
D 7.06%
55. Return on Assets Q-1 (24-25) 0.82%
56. Return on Equity Q-1 (24-25) 16.82%
57. Earnings per share 2.95
58. Book Value per Share 93.87
59. Book Value per Share-Tangible 73.11
60. Operating Profit Q-1 (24-25) (YoY Growth 10.30%) 6,581 Cr
61. Net Profit (YoY Growth 159%) 3,252 Cr
62. Total no. of RRBs sponsored by PNB 9
63. Awards & Accolades
1. Infosys Finacle Innovation Awards 2024:
▪ Ecosystem-led Innovation–Platinum: Krishi Tatkal Rinn
▪ Channel Innovation – Gold: Digital Execution of Locker Agreement
▪ Maximizing Customer Engagement–Gold: AADHAR-based Mobile Onboarding
2. TU Best Data Quality 2023-24: PSB Consumer Award, PSB Commercial Award
3. Award of achievement to Bank for the FY 2023-24 by PFRDA
4. PSE Award 2024: Enterprise Applications category Express Computer- The Indian Express Group

Capital Raising Plan 2024-25 PNB’s Rating

Type of Capital Capital Raising Moody’s Fitch
Plan for FY’24-25 Baa3/P-3/ Stable* BBB-/F3/Stable
Tier I + Tier II ₹15,000 Cr * Baseline Credit Assessment upgraded From ba3 to ba2

Out of Which, PNB’s Bond Rating

Rating Agency Basel III
Tier-I (Equity Capital) ₹5,000 Cr
Additional Tier- Tier-II Bonds
Tier-I (through AT-I) ₹7,000 Cr 1 Bonds Rating Rating
Tier I Total ₹12,000 Cr CRISIL Ratings AA+/Stable AAA/Stable
India Ratings AA+/Stable AAA/Stable
Tier II ₹3,000 Cr
CARE Ratings AA+/Stable AAA/Stable

Guidance for FY’25 vs Actuals for June’24

Parameters Guidance for FY’25 June’24 (Q1)

Credit Growth % (YoY) 11% - 12% 12.20%

Deposit Growth % (YoY) 9% - 10% 8.50%
CASA Share % Around 42% 40.08%
Operating Profit (YOY) 10% - 12% 10.27%
Net Interest Income (YOY) Around 10% 10.23%
NIM % 2.9% - 3.0% 3.07%
Gross NPA % Below 5% (Revised to around 4%) 4.98%
Net NPA % Below 0.5% 0.60%
PCR % (incl TWO) More than 95% 95.90%
Credit Cost Below 1.0% (Revised to below 0.50%) 0.32%
Total Recovery ₹18,000 Crores ₹3249 Cr
RoA % Around 0.8% 0.82%
Slippage (Annualized) Below 1.0% 0.76%

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(Ref. Circular: IRMD L&A 51/2024 Dated 22.04.2024)

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1. OBJECTIVE, STRUCTURE & PROCESSES OF CREDIT RISK MANAGEMENT

OBJECTIVE
The policy lays down the basic credit policy and culture, broad framework of lending norms, regulatory and prudential
guidelines and broad approach to lending rationale and practices.
The cases /matter not dealt in this policy shall continue to be guided by the extant circulars /guidelines issued by
Bank /RBI from time to time.

STRUCTURE & PROCESSES OF CREDIT RISK MANAGEMENT

Definition of “Credit Risk”
“CREDIT RISK” is the possibility of loss associated with changes in the credit quality of the borrowers or counter
parties. The counter parties may include an individual, small & medium enterprise, corporate, bank, financial
institution, or a sovereign. In a bank’s portfolio, losses stem from outright default due to inability or unwillingness of
a borrower or counter party to honor commitments in relation to lending, settlement and other financial transactions.
Credit Risk Management –Framework
The overall framework of credit risk management in the bank would comprise of following building blocks:
• Credit Risk Management Structure
• Credit Risk Policy
• Credit Risk Strategy
• Processes and Systems
CREDIT RISK MANAGEMENT STRUCTURE
AT HEAD OFFICE LEVEL
• Risk Management Committee (RMC): Sub-Committee of Board with overall responsibility of formulating
policies/procedures and managing all the risks. It adopts integrated approach in managing all the risks.
• Credit Risk Management Committee (CRMC)
CRMC was originally constituted by ALCO on 23.09.1999 and the first meeting of CRMC was held on
11.01.2000.
Constitution of CRMC:
SN Member Invitee
1 Managing Director & CEO – (Chairman)
2 All Executive Directors
3 Group Chief Risk Officer – IRMD
4 Group Chief Compliance Officer – Compliance
5 CGM - Corporate Credit Div.
6 CGM – RAM & FI
(MSME & Mid Corporate Credit, Agriculture Credit,
Retail Asset and Financial Inclusion)
7 CGM – IBD 1. CGM – IAD
8 CGM – CRMD 2. CGM – MPD
9 CGM – ITD 3. CGM – Finance (CFO)
10 CGM – Treasury 4. All General Managers of IRMD
11 CGM -SMEAD 5. In addition to above, CGM /GM of any other
12 CGM-DBTD division shall attend the meeting if any
13 CGM-SASTRA Agenda item /ATR pertains to that division
14 Chief Economist officer
Convener: GM-IRMD
Note: In case CGM is not posted/present in any Division, the GM of the Division shall be member of Committee.
Mandatory Members of CRMC
✓ Chairperson of CRMC i.e. MD&CEO. In the absence of MD&CEO, Domain ED (looking after IRMD) shall be the
chairperson of the committee.
✓ Anyone of the Executive Directors

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Quorum of CRMC: Quorum shall be completed when at least 6 members are present including Chairperson
of the committee.
Function sub-categories of CRMC along with approving authority:
SN FUNCTION FUNCTION SUB-CATEGORY APPROVING
AUTHORITY
1. Implementation i. Approval of New Risk rating models on credit risk 1 i. Board
of credit risk ii. Approval of Implementation of BASEL guidelines on Risk
policy/ strategy Management pertaining to credit risk ii. CRMC
approved by the iii. Recommending to RMC, framework for computation of Cost iii. RMC
board of Capital
iv. Recommending to RMC for approval of framework for iv. RMC
computation / assessment of risk parameters under
Standardized and IRB/ IFRS approaches of Credit Risk.
v. Approval of designing process/defining procedure for Credit v. CRMC
dispensation and post-sanction monitoring including
approval of tie-ups/MOU with lending partners
vi. On matters where regulator has sought Bank to undertake vi. CRMC2
detailed study/ corrective action relating to credit risk
vii. Approval of Integration of Risk procedures with Credit vii. CRMC
systems
viii. Score Card for Loans of Retail/MSME upto ₹1.00 cr. viii. CRMC
2. Monitor credit i. Analysis of rating migration of internally rated accounts and i. CRMC
risk on a bank- model wise Historical Default Rate
wise basis and ii. Analysis of Stress testing results and Credit Risk Exposure ii. CRMC
ensure iii. Monitoring Position of various regulatory and internal ceiling iii. CRMC
compliance of as prescribed in Credit Management & Risk Policy
limits approved iv. Monitoring position of Unsecured Advances. iv. CRMC
by the Board
3. Recommend to i. Recommending Policies to be placed to RMC and Board as i. Board
the Board for its per the Calendar of Reviews prescribed by Board Division.
approval, ii. Board
ii. Recommending agendas to be placed to RMC and Board on
policies on
standards for matters pertaining to credit risk wherein it is mandated by
presentation of regulator to have Board approval.
credit proposal, iii. Approval of Credit appraisal format for sanction including iii. CRMC3
financial Renewal, Review, Amendment in Terms & Conditions/
covenants, Concession in ROI/Service Charges, Confirmation of
rating
Action/Issuance of NOC/Adhoc limits etc.,
standards and iv. Board
benchmarks iv. Recommending to RMC and Board, policy on obtainment of
financials
v. Approval of Benchmark ratio for different v. Board
segments/industries
vi. Comparative Analysis of Internal Ratings with Bank Loan vi. CRMC
Ratings/Basel III ratings
vii. Approval of Parametric validation of Rating models vii. CRMC4
4. Devise i. Recommending to RMC and Board, additions/modifications i. Board
delegation of in exercising Loaning Powers at various levels.
credit
ii. Approval of any credit/loan scheme/ product within the
approving ii. CRMC
powers ambit of Board approved policies.
iii. Approval of any credit/loan scheme/ product beyond the
ambit of Board approved policies
iii. Board
5. Prudential limits Recommending to RMC and Board modifications/additions on Board
on large credit Large Exposure Framework, Limits for Substantial exposure,
exposures other regulatory ceilings etc
6. Standards for i. Approval of concession in pricing on account of Collateral i. CRMC
loan collaterals coverage, digital channel adoption etc.,

1
However, any modification in any existing risk rating model shall be approved by RMC.

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ii. Recommendation to RMC and Board policy on valuation of ii. Board

assets.
7. Asset i. Recommending to RMC and Board methodology for setting i. Board
concentration, internal exposure ceiling for Industry/ Group/States/any
portfolio other internal ceiling
management, ii. CRMC
ii. Prescribing internal exposure ceiling
loan review iii. Portfolio review of Industries/Sectors iii. CRMC
mechanism, iv. RAROC portfolio analysis iv. CRMC
risk v. Industry Outlook v. CRMC
concentration,
vi. Position of SMA Accounts vi. CRMC
risk monitoring
and evaluation
vii. Study of MSME/Retail/Pool portfolio vii. CRMC
viii. Portfolio Analysis of distribution pattern of yield on viii. CRMC
advances across various rating categories, based on
internally rated loan portfolio.
8. Pricing of Loans i. Fixation of Credit Risk premium as per the risk profile of the i. CRMC
Borrower
ii. Approval of Credit Risk Premium for loan scheme/product ii. CRMC5
where credit risk premium proposed is within the ambit of
Interest rate policy of the Bank
iii. Approval of Service charges on standalone basis/scheme iii. ED BDRC
level or modification in existing service charges and
concessions/waivers on card rates at product or scheme
level
9. Provisioning, Approval of guidelines on the basis of directives received from CRMC
regulatory/legal Government of India RBI & other Statutory & regulatory bodies’
compliance etc notification issued from time to time on credit risk matters.
1
However, any modification in any existing risk rating model shall be approved by RMC
2
However, same shall be placed to RMC for information
3
However, same shall be placed to Board annually for information
4
However, same shall be placed to RMC for information
5
Approval of credit risk premium for loan scheme/product is accorded on the basis of assessment of credit risk in the particular
scheme/product and risk adjusted reward. Accordingly, same shall be a function of CRMC. However, any change in interest rate policy of
the bank shall be approved by ALCO
Note:
a. GCRO/GM (Credit Risk-IRMD) in the absence of GCRO, shall be the Competent Authority to decide whether the agenda
involves Credit Risk’. Only those agendas relating the ‘credit risk’ shall be placed to CRMC.
b. The aforementioned list is non-exhaustive in nature and CRMC shall consider any such agenda for
approval/information/recommendation on merits.
c. CRMC shall recommend any such agenda in the interest of the Bank for information/approval/confirmation to RMC and Board
on matters pertaining to Business Strategy, Financial Reports and their Integrity, Risk, Compliance, Customer Protection,
Financial Inclusion and Human Resources.
d. All agendas with proposed modifications in any existing policy shall be invariably placed as modifications/amendments in
respective policy as a standing practice, rather than as modifications/amendments in the derived guidelines.
e. CRMC shall approve any change necessitated in the policy due to the regulatory pronouncements made during the validity
period of the policy, subject to information to the Board. Such changes would deem to be part and parcel of the policy, with
the approval of the CRMC, till their formal incorporation in the policy document at its next review.
f. The performance review notes of scheme/product shall continue to be placed to CGM level BRC as prescribed in the extant
policy for approval of new product and as amended from time to time.
g. Discontinuation of credit related scheme/product shall be placed to CRMC and non-credit related scheme/product shall be
placed to ORMC for approval.

• INTEGRATED RISK MANAGEMENT DIVISION (IRMD)

The Division is headed by GCRO with distinct functions related to credit risk, namely:
✓ Framing of policies, inter alia, related to credit risk, development of systems and models for identifying,
measuring and managing credit risks and their implementation;
✓ Monitoring and managing the industry risk;

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✓ Integrated risk management functions;

✓ Credit Intelligence and Support Department (CISD)
✓ Independent vetting of Credit Risk Ratings
• CREDIT AUDIT & REVIEW DIVISION (CARD)

Bank has also set up a Loan Review/Audit Mechanism to be looked after independently by CARD, H.O.
AT FIELD LEVEL
Zonal Risk Management Cell (ZRMC)
➢ In order to perform various risk functions in a more structured way, ZRMC has been created at Zonal level.

There shall be a two tier Risk Management structure of which one part will be Zonal Risk Management Cell
(ZRMC) & other shall be HO: IRMD. ZRMC will work as an extended arm of HO: IRMD which will help in
percolating Risk Culture in bank down the line.

➢ The Internal Risk Ratings shall be initiated and approved as under:

Internal Risk Rating for Loan Initiated at Approved at
Above ₹ 1 Cr and up to ₹ 10 Cr PLP/MCC ZRMC
Above ₹ 10 Cr and up to ₹ 30 Cr ZRMC ZRMC
Above ₹ 30 Cr and up to ₹ 50 Cr ZRMC ZRMC/IRMD, HO
Above ₹ 50 Cr ZRMC IRMD, HO
For Loans (irrespective of amount) falling under vested powers of HO committees (including MC) vetting will be
done at HO: IRMD

➢ ZRMC will act as 2nd line of defense after ZO (1st line of defense) & ZAO (3rd line of defense).

Roles and Responsibility of Zonal Risk Management Cell (ZRMC)

1. Risk Rating 2. Credit Portfolio Monitoring 3. Risk Side Review (GO-NOGO) 4. Operational Risk 5. Single Point of
Contact (SPOC) for all risk related matter
(Other than the roles and responsibilities elaborated as above detailed guidelines relating to work profile of ZRMC
shall be referred from circulars issued from time to time)
Validity & Review of the Policy

➢ Policy shall be reviewed at-least annually, or at more frequent intervals if and when the need arises by

the Board. While reviewing the policy, feedback / suggestions from various users of this policy shall be taken
to ensure the soundness of the policy.
➢ CRMC (functional committee) shall be authorized to:

i. Incorporate any changes necessitated in the policy for the interim period up to the next review, due to

regulatory pronouncements made during the validity period of the policy; and
ii. Extend the validity of both the Policy (Part-I) and Operational Guidelines (Part-II) for a period up to 3

months and the Board will be informed of such extension subsequently at the time of the review.

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2. FAIR PRACTICES CODE

➢ RBI, on the basis of the recommendations of the Working Group on Lenders’ Liability Laws, in consultation with
Government, select banks and financial institutions, has issued guidelines for introduction of the Fair Practices
Code for Lenders and advised Banks/All India Financial Institutions to adopt the same for framing the Fair
Practices Code.
➢ In the light of the guidelines advised by RBI, the Fair Practices Code (FPC) for our bank has been framed and
displayed on the Bank’s website for wider publicity.
➢ Bank’s Fair Practice Code for Borrowers is as under:
A. APPLICATIONS FOR LOANS & THEIR PROCESSING

i. Loan application forms in respect of all categories of loans irrespective of the amount of loan sought by the
borrower shall include information about the margin requirements, interest rate, method of calculation of
interest in the loan account, amount of refundable fee in case of non-acceptance of application, fees/charges
payable for processing, amount of refundable fee in case of non-acceptance of application, pre-payment
options and charges, penalty for delayed repayments if any, conversion charges for switching loan from
fixed to floating rates or vice versa, existence of any interest reset clause etc so that the applicant is aware
of the same before applying for such credit facility to the Bank. The information shall be provided, through
an enclosure (As per Appendix-I (as prescribed in IRMD L&A circular no. 135 dated 01.12.2023) ) to such loan
application forms.

ii. An ‘all-in-cost’ including all such charges involved in processing/sanction of loan application shall be disclosed
to the customers in a transparent manner to enable the customers to compare the rates/charges with other
sources of finance.

iii. Branches will provide the borrower with a checklist of the documents to be submitted (compliant with legal
and regulatory requirements) along with the loan application form to enable him/her to submit the
application complete in all respects. If required, the branch shall assist the borrower in filling up the loan
application form.
iv. Branches will verify the details mentioned by the borrower in the loan application by contacting him/her at
his/her residence and / or on business telephone numbers and / or through any alternative channels and
/ or physically visiting his/her residence and / or business addresses through agencies appointed by the
branch for this purpose, if deemed necessary by the branch. The above guidelines should be implemented
in letter and spirit

v. Branches will send a letter as per Appendix-VII (as prescribed in L&A circular no. 135/2023) to the
proposed guarantor and after receiving the acknowledgement and consent from the guarantor in the
prescribed form as per Appendix-VIII (L&A circular no. 135/2023) shall get the Agreement of Guarantee
Form executed from the proposed guarantor. Branches to ensure that the date of Appendix-VIII (consent
from the guarantor) is to be after the date on which letter to the guarantor as per Appendix-VII is sent
to the proposed guarantor.
vi. The loan applications shall be verified within a period of 7 days. If additional details/documents are
required, the applicants shall be intimated immediately. Upon completion of all requirements/formalities by
the applicants, an acknowledgement for receipt of loan applications shall be given to them on the format
available at Appendix II (as prescribed in cir. no. 135/2023).
Time period within which loan applications upto ₹2 lakh will be disposed of shall be indicated in
acknowledgement of such applications as per prescribed time norms.

vii. In case of rejection of loan applications of all categories of loans irrespective of any threshold limits,
including credit card applications, wherever possible, the branches shall convey in writing the main
reason/reasons, which have led to rejection of the loan applications.

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 उत्कर्ष -2025

viii. Incumbents in charge should report the cases of rejection of loan applications along with reasons in Form
No.585 within 7 days of the close of each month to their concerned controlling offices in terms of
existing guidelines
B. APPRAISAL TERMS & CONDITIONS
i. Need based credit requirement of the borrowers shall be assessed as per Bank guidelines. Margin and security
stipulation shall not be used as a substitute for due diligence on credit worthiness of the borrowers.

ii. Branches shall convey to the borrowers the sanctioned limits along with the terms & conditions thereof for
which following system shall be followed:
• Limits below ₹25 lakh
Branches shall communicate the details of facilities sanctioned along with respective terms & conditions to
the borrowers on a letter as per Appendix – III (as per L&A circular no. 135/2023). The borrowers shall
convey his/their acceptance of the terms and conditions on the letter available at Appendix –IV (as per L&A
circular no. 135/2023).
• Limits of ₹25 lakh & above
Branches shall communicate the details of facilities sanctioned along with respective terms & conditions to
the borrowers on a letter as per Appendix -III (as per L&A Cir. 135/2023).The borrowers shall convey
his/their acceptance of the terms and conditions on the letter available at Appendix –V (as per L&A circular
no. 135/2023).

iii. Branches shall incorporate following clauses (if it is not incorporated) in the loan agreement to be obtained
from fresh borrowers:
“The borrower/s agree/s that: -

1) The disbursal of credit facility viz. ________ is solely at the discretion of the Bank.
2) i) The bank may disallow facility, keeping in view bank’s exigencies.
ii) The bank may disallow drawing beyond the sanctioned limits.
iii) The bank may dishonour/ return cheques issued for the purpose other than specifically stated in the credit
sanction or in this agreement.
iv) The bank may disallow drawing in the account on its classification as a non-performing asset or on account
of non-compliance with the terms of sanction or this agreement.

3) The bank does not have an obligation to meet further requirements of the borrowers on account of
growth in business, etc. without proper review of credit limits.
In case of existing borrowers, branches shall obtain supplementary agreement, containing above
clauses, from them at the time of renewal/enhancement of the credit limits.

iv. Branches shall, invariably supply authenticated copies of all the loan documents executed by him/her at
bank’s cost along with a copy each of all enclosures quoted in the loan document as part of disbursement
welcome kit. However, for providing additional authenticated copies, actual cost incurred by bank shall be
levied.
v. In the case of lending under consortium arrangement, the loan proposal shall be disposed of within the
prescribed time norms, provided applications/proposals are received together with required details/
information supported by requisite financial and operating statements, and decision on financing or
otherwise shall be communicated to the applicant within a prescribed time.
vi. Branches while conveying terms and conditions of sanction to the borrower should also inform that
default/delay in deposit of the installment(s)/ interest as per agreed repayment schedule shall have adverse
impact on its credit rating and past conduct of the account.

vii. The sanctioning authority should invariably incorporate the following clause in the terms and conditions of
sanction:
”Bank will have an unqualified right to pass on to the Credit Reference Agencies the details of his loan account in
such manner and through such medium as the bank in their absolute discretion may think fit.“

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 उत्कर्ष -2025

viii. Branches will give written receipt for all documents to title taken as security/ collateral for any loan.
C. DISBURSEMENT OF LOANS INCLUDING CHANGES IN TERMS & CONDITIONS
i. Branches shall ensure timely disbursement of loans sanctioned in conformity with the terms and conditions
governing such sanction
ii. Changes in the terms & conditions including interest rates, service charges etc. shall be advised to the
borrowers. Changes in interest rate and charges shall be made effective only prospectively. Besides, service
charges, rate of interest, etc. shall also be made available on the Bank`s website.
D. POST DISBURSEMENT SUPERVISION
i. Post-disbursement supervision particularly in respect of loans upto ₹2 lakh, shall be constructive with a view
to take care of any "lender-related" genuine difficulty that the borrowers may face.
ii. Branches will provide the borrower with an annual statement of account of his/her term/ demand loans.

iii. Branches will provide the borrower with the loan statement, more often, if required, at a cost which will be
indicated in the Tariff Schedule.
iv. Before taking decision to recall/accelerate payment or performance under the agreement or seeking
additional securities, branches shall give notice to the borrowers, (except in exigencies) for a period as
specified in the loan agreement or 30 days if no such condition exists in the loan agreement.
v. Branches shall return to the borrower all the securities / original movable/ immovable property documents
/ title deeds to mortgaged property and remove charges registered with any registry including Central
Registry for Securitization, Asset Reconstruction and Security Interest (CERSAI) within 15 days of the
repayment of all dues agreed to or contracted.

If any right to set off is to be exercised for any other claim, the branch will give due notice with full
particulars about the other claims and retain the securities/ documents / title to mortgaged property till the
relevant claim is settled / paid.
vi. In case of delay in releasing of original movable / immovable property documents or failing to file charge
satisfaction form with any registry including CERSAI beyond 30 days after full repayment/ settlement of
personal loan , the branches shall communicate to the borrower reasons for such delay. In case where the
delay is attributable to the bank, bank shall compensate the borrower at the rate of ₹5,000/- for each
day of delay.
Payment of compensation and powers for payment of compensation shall be dealt with in accordance with
the bank’s existing Customer Compensation policy. Accordingly, policy with regard to “Customer
Compensation” issued by Customer Care Centre from time to time shall be adhered to.
vii. In the event of branch losing the securities / original movable/ immovable property documents / title deeds
that the borrower had provided to the branch when he/she availed a loan, branch shall compensate the
borrower for the loss. The branch shall issue a certificate indicating the securities / original movable/
immovable property documents / title deeds lost and extend all assistance to the borrower in obtaining
duplicate documents, etc. at bank’s cost.
For Personal Loan

In case of loss/damage to original movable / immovable property documents, either in part or in full, the
Branch shall assist the borrower in obtaining duplicate/certified copies of the movable / immovable property
documents and shall bear the associated costs in addition to paying compensation as defined in para no.
(vi) above.
However, in such cases, an additional time of 30 days will be available to complete this procedure and
the delayed period penalty will be calculated thereafter (i.e., after a total period of 60 days).

systeThe compensation provided for delay in release of movable/ immovable property documents as
defined in para no. (f) above shall be without prejudice to the rights of a borrower to get any other
compensation as per any applicable law

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 उत्कर्ष -2025

viii. Branch will not levy foreclosure charges / pre-payment penalties on all floating rate term loans sanctioned
to the borrower (in his/her individual capacity).

ix. The borrower shall be given the option of collecting the original movable / immovable property documents
either from the branch where the loan account was serviced or any other branch/office of the bank where
the documents are available, as per preference of the borrower.

x. Timeline and place of return of original movable/ immovable property documents shall be mentioned by
Bank in the sanction letter.
xi. In the contingent event of demise of the sole borrower or joint borrowers, the procedure for return of
original movable/immovable property documents/title deed to the legal heirs has been formulated and is
placed as Appendix-IX (as per L&A circular no. 135/2023)
E. SECURITIZATION OF LOANS / CARD DUES

i. In case the bank securitizes (sells) a borrower’s loans / dues on his/her card to another entity, bank will advise
the borrower the name and contact details of such entity along with the amount of his/her loan / dues
transferred to them. In the normal course, loans / credit card dues, which are Non-Performing Assets (NPAs)
are considered for sale to Asset Reconstruction Company (ARC) through assignments. Where dues are settled
through compromise, assigning such assets to ARC does not arise.
ii. The borrower will then be liable to pay the amount due to the entity to which the loan / dues has been
transferred.

iii. The entity to which the loan / dues has been transferred will continue to report bank’s credit information to
the CICs.

iv. Bank will endeavor to assist the borrower in case he/she has a grievance against the entity to which his/her
loan / dues have been transferred by the bank.
v. For all complaints against the entity to which the borrower’s loan / dues has been transferred by the bank,
bank will remain the Nodal Authority for resolution. Bank will treat these complaints as if they are against the
bank and ensure that these are resolved promptly.
F. GENERAL

i. Bank will not interfere in the affairs of the borrowers except for what is provided in the terms and conditions
of the loan sanction documents (unless new information, not earlier disclosed by the borrower, has come to
the notice of the Bank).
ii. In the matter of lending, discrimination shall not be on grounds of sex, caste and religion. However, this does
not preclude Bank from participating in credit scheme framed for weaker sections of the society.
iii. In the matter of recovery of loans, the Bank shall not resort to undue harassment. viz. persistently bothering
the borrowers at odd hours, use of muscle power for recovery of loans, etc.,
iv. In case of receipt of request for transfer of borrowal account, either from the borrower or from a bank/financial
institution accompanied with a request from borrower, which proposes to take-over the account, the consent
or otherwise i.e, objection of the Bank, if any, shall be conveyed within 21 days from the date of receipt of
request.

v. Besides treating all the personal information of the customer as private and confidential and revealing the
information in exceptional cases as mentioned in the Code, bank will not use the personal information of the
customer for marketing purposes, unless specifically authorized by the customer to do so.
vi. The written permission of the customer(s) will be required before giving any banker`s reference about him/
them.

vii. The customer(s) will be explained of the extent of his rights under the existing legal framework for accessing
the personal records that the bank holds about him/ them.

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 उत्कर्ष -2025

viii. The permission of the customer (borrower) will be obtained for giving confidential information about his
finances to the person giving the guarantee or other security for his (borrower’s) liabilities or to their legal
adviser.
ix. When the borrower avails a loan facility involving immovable property and / or movables as primary or
collateral security, branch will advise him/her the functioning of CERSAI and the fact that their records will be
available for search by any lender or any other person desirous of dealing with the property / assets. Bank
will notify its charge to CERSAI.
x. Complaints arising with regard to non-compliance of Fair Practice Code shall be dealt with in accordance with
the existing Grievances Redressal Mechanism including reporting thereof.
➢ Review of the compliance of FPC and functioning of grievance redressal mechanism at various levels of controlling
offices shall be placed to the Board by Customer Care Division on half-yearly basis.
➢ FPC shall be reviewed annually by IRMD along with the Credit Management & Risk Policy of the Bank.

3. STATUTORY, REGULATORY AND OTHER RESTRICTIONS

➢ Statutory Restrictions
✓ Advances against Bank's own shares
✓ Advances to the Bank's Directors
✓ Restrictions on Holding Shares in Companies
✓ Restrictions on Credit to Companies for Buy-back of their Securities
➢ Regulatory Restrictions
✓ Granting loans and advances to relatives of Directors
✓ Lending to directors and their relatives on reciprocal basis
✓ Restrictions on Grant of Loan & Advances to Officers and Relatives of Senior Officers (Scale IV & above) of
the Bank
✓ Restrictions on financing any activity prohibited under Section 12A of The Weapons of Mass Destruction
and Their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005
✓ Restrictions on Grant of Financial Assistance to Industries Producing/ Consuming Ozone Depleting
Substances (ODS)
✓ Restrictions on Advances against Sensitive Commodities under Selective Credit Control (SCC)
✓ Opening of Current Accounts by Banks
✓ Restriction on payment of commission to staff members including officers
✓ Restrictions on offering incentives on any banking products
✓ Restrictions on other Loan and Advances:

i. Loans and Advances against Shares, Debentures and Bonds

ii. Advances against Fixed Deposit Receipts (FDRs) issued by other banks
iii. Advances to Agents/Intermediaries based on Deposit Mobilization
iv. Loans against Certificate of Deposits (CDs)
v. Restrictions on advances against NR (E) and FCNR (B) Deposits
vi. Finance against Indian Depository Receipts (IDRs)
vii. Advances for purchase of Bullion/Primary Gold
viii. Loans & advances to Real Estate Sector
ix. Grant of Loans for acquisition of Kisan Vikas Patra (KVPs)

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x. Bridge Loans against receivables from Government

xi. Shell Companies/ Strike Off Companies

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4. EXPOSURE NORMS

4.1 PRUDENTIAL EXPOSURE NORMS

➢ Prudential Exposure Limit under Large Exposures (LE) Framework:
Counterparty Exposure Ceiling as percentage of Tier I Capital
For NBFC
Single 20* 20
Group 25 25
*In exceptional cases, Board of banks may allow an additional 5% exposure of the bank’s available eligible capital base.
➢ Framework on Enhancing Credit Supply for Large Borrowers through Market Mechanism:
Objective: To address the issue of concentration risk of the banking system to a single large corporate and
help them to augment alternative sources of credit by gradually tapping the market mechanism for their
funding needs, RBI has advised guidelines on ‘enhancing credit supply to large borrowers’ through market
mechanism.
The Bank has to keep future incremental exposure to large “specified borrowers” within a “Normally Permitted
Lending Limit) (NPLL).

The norms, which was come into effect from financial year 2017-18, define a large borrower as Specified
Borrower who are having Aggregate Sanctioned Credit Limit (ASCL fund-based credit limits sanctioned or
outstanding, whichever is higher by the banking system) of more than:

➢ ₹25,000 Cr at any time during FY 2017-18

➢ ₹15,000 Cr at any time during FY 2018-19
➢ ₹10,000 Cr at any time from April 1, 2019 onwards
NPLL : means 50% or 60% as the case may be of the incremental funds raised by the specified borrower over and
above its ASCL as on the reference date in the financial years succeeding the FY in which the reference date falls.

Breach in NPLL: If the banking system crosses the lending limit prescribed for a specified borrower, the provisioning
requirement on the excess amount would be 3% higher than normal. Additionally, the banking system would have
to assign a risk weight of 75 % over and above the applicable weight for the incremental exposure to the large
borrower.
Once the borrower becomes a specified borrower, the disincentive mechanism will be applicable from next
financial year.
The computation of NPLL is linked to incremental funds raised over and above the ASCL as on the reference date
in the financial years (FYs) succeeding the FY in which the reference date falls For this purpose any fresh loans
extended will be subjected to the prudential guidelines in the FY succeeding the FY in which the reference date falls
irrespective of whether the existing loans of a borrower are repaid or not.
4.2 INTERNAL EXPOSURE CEILING

A. Single Borrower (other than NBFC)

Ceilings
Internal/External Credit Risk Rating
(% of Tier-1 Capital)
Internal Rating‘A1’/‘A2’,External rating ‘AAA/AA’ and PSUs 20%
Internal Rating‘A3’and External Rating ‘A’ 17%
Internal Rating‘A4/B1/B2’and External Rating ‘BBB/BB’ 15%
Internal Rating‘B3/C1’and External Rating ‘B’ 12%
Internal Rating‘C2/C3’and External Rating ‘C’ 9%
Note:
➢ Bank may in exceptional circumstances consider enhancement of the exposure ceiling for single counter party
classified under Large Exposure up to a further 5% over & above the ceiling of 20% in case of:
➢ PSU borrowers based on their cash flows

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➢ Non-PSU borrowers having external risk rating ‘AA’ & above and/or internal risk rating‘A2’&above
“Exceptional Circumstances” for above purpose may be envisaged such as:
➢ Exposure on account of PSU disinvestment Program,
➢ Exposure on account of Liquidity support to Industry/Sector in view of Govt./Regulatory initiatives/instructions,
➢ Exposure exceeding due to decrease in Bank’s eligible capital base.
➢ Advances, where external Risk rating, if applicable is not available or has expired be treated as unrated category
and exposure ceiling, as applicable to ‘BB’ category be treated for the purpose of exposure ceiling.
➢ In case of variance in both the ratings, external or internal, lower of the two will be reckoned for exposure
norms.
B. Single Borrower: NBFC
Ceilings
Internal/External Credit Risk Rating
(% of Tier-1 Capital)
Internal Rating‘A1’/‘A2’, External Rating‘ AAA/AA’ and PSUs 19%
Internal Rating‘A3’and External Rating ‘A’ 12%
Internal Rating‘A4/B1’and External Rating ‘BBB’ 9%
Internal Rating‘B2’&Below*/and External Rating ‘BB’ & Below*/Unrated 5%
*In terms of extant guidelines, fresh exposure should be taken in A & Above externally rated accounts on merits only.
➢ Bank finance to Residuary Non-Bank Companies (RNBCs) registered with RBI will be restricted to the extent
of their NOF.
➢ Ceiling for single NBFC which is predominantly engaged in lending against collateral of gold jewellery i.e.
gold loan company is fixed to 7.5% of bank’s capital fund i.e. Tier I + Tier II. However, the above exposure
ceiling may go up by 5% i.e. upto 12.5% of capital funds if the additional exposure is on account of funds
on-lent by NBFC to the infrastructure sector.
Note: Advances, where external Risk rating, if applicable is not available or has expired be treated as unrated category. In case
of variance in both the ratings, external or internal, lower of the two will be reckoned for exposure norms .
➢ Group of Connected Counterparties: Ceiling for group borrowers have been kept at the level of RBI
prescription i.e. 25% of Tier 1 capital. In the existing cases, where the exposure exceeds on account of
proposed revision under Large Exposure Framework, bank shall bring down the exposure progressively.
C. Exposure based on CONSTITUTION
Constitution Exposure Ceiling
Proprietorship Concern/ AOP ₹50.00 Crore
Partnership Concern/ Limited Liability Partnerships ₹100.00 Crore
Single entity with constitution as Society*, Trust & HUF ₹200.00 Crore
*Excluding the National-Level Cooperative Societies listed in Second Schedule of the Multi-State Cooperative Societies Act, 2002

D. Limit for SUBSTANTIAL EXPOSURE

Substantial Exposure : is defined as sum total of exposures assumed in respect of such “Large Borrowers”
“Large borrower” is defined as the sum of all exposure values of the bank to a counterparty or a group of
connected counterparties is equal to or above 10% of the Bank’s Tier- I Capital. The aggregate exposure to
all “Large Borrowers” should not exceed 800% of Bank’s Tier I Capital.
In order to reduce concentration risk in a few accounts, substantial exposure limit has been fixed as under:-
Particulars % of Tier I Capital
Single Group
Private Sector Borrowers 100% 200%
Public Sector Borrowers 300% 400%
Aggregate of Substantial Exposures 400% 600%
@Tier-I capital as per published accounts as on 31st March of previous year

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E. Limit Counterparty Limit for IBPC / Transfer of Loan Exposures / SPV

➢ Counterparty Limit for Bank/FI
Internal Rating of the Recommended Counterparty Limit for IBPC / Transfer of
S.N. Description
Counterparty Bank / FI loan exposure (with risk sharing) / SPV
1. PNB-A1 Minimum Risk 3.00% of Total Advances of previous quarter
2. PNB-A2 Marginal Risk 2.00% of Total Advances of previous quarter
3. PNB-A3 Modest Risk 1.50% of Total Advances of previous quarter
4. PNB-A4 Lower Risk 1.00% of Total Advances of previous quarter
For Counterparty Banks / FI having internal ratings below PNB-A4 / unrated, no additional exposure shall be taken.
➢ Counterparty Limit for NBFCs
S. Rating of the Counterparty Recommended Counterparty Limit for IBPC / Transfer of loan
Description
N. NBFC exposure (with risk sharing) / SPV
1. PNB-A1 Minimum Risk 2.50% of Total Advances of previous quarter
2. PNB-A2 Marginal Risk 2.00% of Total Advances of previous quarter
3. PNB-A3 Modest Risk 1.50% of Total Advances of previous quarter
For NBFC’s having internal ratings below PNB-A3 / unrated, no additional exposure shall be taken.
Further, Cumulative Counterparty Exposure Limit of the bank in IBPC / Transfer of loan exposure (with risk sharing)
/ SPV Portfolio shall be capped to 20% of Total Advances of previous quarter

F. MAXIMUM INDUSTRY EXPOSURE LIMIT

➢ Bank is having a model for fixing industry wise internal credit exposure limits. The model takes into account
Industry Outlook Assessment, Asset Impairment Assessment, Portfolio Risk Assessment,
Bank’s Outstanding vis-à-vis Outstanding from Banking Industry and Govt Thrust and
Initiative.
➢ Report on Asset Quality (RAQ) submitted to RBI has been the base document for fixing and
monitoring industry wise Internal Exposure Ceiling. The RAQ report divides non-food credit into 5
Segments, viz. i) Agriculture and Allied Activities, ii) Industry, iii) Services, iv) Retail Loans and v) Other
Non-food Credit.
Out of these five segments, “Industry” is further divided into various line items, which have all been
considered for internal ceiling fixation. “Services” is also further divided into various sectors, out of which only
NBFC has been considered for industry internal exposure ceiling fixation.
➢ Industry wise ceiling are fixed as a percentage to Gross Bank’s Exposure of last annual financial result.
Industry /sector with exposure of 1% and more of Bank’s gross exposure shall be considered for fixing
industry /sector exposure ceiling
➢ Moreover, Incremental Industry-wise internal exposure ceiling has also been prescribed for Industry /sector
with exposure less than 1% of Bank’s Gross Exposure as given below:
Industry Exposure Incremental Internal exposure ceiling
(as% of Bank’s Gross Exposure)
<0.50% 0.50%
>=0.50% & <1.00% 1.00%
➢ Industry wise ceiling are fixed as a percentage to Gross Bank’s Exposure of last annual financial result which
are as under:
S.N. INDUSTRY Internal Exposure Ceiling
for FY 2024-25
1. All Engineering (Electronics) 0.83%
2. All Engineering (Others) 1.97%
3. Beverage (excluding Tea and Coffee) and Tobacco – Others 0.54%
4. Beverage (excluding Tea and Coffee) and Tobacco - Tobacco and 0.50%
tobacco products
5. Cement and Cement Products 0.72%
6. Chemical and chemical products - Drugs and Pharmaceuticals 0.69%
7. Chemical and chemical products - Fertilizers 0.56%
8. Chemical and chemical products – Others 0.84%
9. Chemical and chemical products - Petrochemicals 0.66%
(excluding under Infrastructure)

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10. Construction 1.78%

11. Food Processing – Coffee 0.51%
12. Food Processing - Edible Oils and Vanaspati 0.81%
13. Food Processing - Others 5.00%
14. Food Processing - Sugar 0.95%
15. Food Processing - Tea 0.58%
16. Gems & Jewellery 0.62%
17. Glass & Glassware and other non-metallic mineral products (Except 0.61%
Cement and Cement products)
18. Infrastructure - Communication 3.00%
19. Infrastructure – Energy* 9.00%
20. Infrastructure – Other 1.85%
21. Infrastructure - Social and Commercial Infrastructure 0.53%
22. Infrastructure - Transport 8.00%
23. Infrastructure - Water and Sanitation 0.70%
24. Iron and Steel 6.00%
25. Leather and Leather products 0.64%
26. Mining and Quarrying - Coal 0.55%
27. Mining and Quarrying - Others 0.57%
28. NBFC 20.00%
29. Other Metal and Metal Products 0.82%
30. Paper and Paper Products 0.75%
31. Petroleum 4.00%
32. Rubber, Plastic and their Products 1.50%
33. Textiles - Cotton 0.93%
34. Textiles - Jute 0.50%
35. Textiles - Man-made 0.75%
36. Textiles – Others 1.69%
37. Vehicles, Vehicle Parts and Transport Equipment 0.62%
38. Wood and Wood Products 0.61%
*Exposure Ceiling for Renewal Energy is 5 % of Bank’s Exposure within overall ceiling for ‘Energy’ sector.
Internal Exposure Ceiling for Stressed Industry/ Sector

➢ RBI in its notification no. RBI/2016-17/282 DBR.No.BP.BC.64/21.04.048/ 2016-17 dated 18th April 2017 had advised banks
to make provision at higher rates in respect of advances to stressed sectors of the economy, over and above the provisioning
rates prescribed in the Master Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning
pertaining to Advances by RBI.
➢ In this regard, with a view to ensure that Bank have adequate provision for loans and advances at all times, a policy
prescribing the higher rates for charging additional provisioning (Fund Based Advances) under stressed sectors was
approved by Board. Additional provision is charged for industries falling under Highly Stressed, Stressed and Marginally
Stressed category, for all the borrowal accounts. The rate of additional provisioning is as under:
SN Industry Classification Category of Accounts Rate of Provisioning

1 Highly Stressed Industries Accounts with 0.40% above prescribed

ERR of BBB & below provisioning for standard
2 Stressed Industries /unrated/ suspended and 0.20%
assets as per IRAC norms
IRR of B1 & below/ unrated
3 Marginally Stressed Industries 0.10%
in Trac

➢ Once an industry/ sector is classified as “Stressed” or “Highly Stressed” category in a quarter, a downward revision of the
available headroom for incremental exposure by ____and ____ respectively in that industry shall be done: 10% and 20%

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➢ The Industry/Sector classified under these sectors for quarter ended June 2024 is as under:
▪ “Highly Stressed” Category- Nil
▪ “Stressed” Category- Nil
▪ “Marginally Stressed”- Beverages (excluding Tea & Coffee) and Tobacco
➢ As the ceilings proposed are internal ceilings to achieve diversified growth of portfolio and reduce portfolio
concentration, it is provided that the monitoring against such limits would be based on the higher of Outstanding
or Exposure (Credit plus Investment) to the particular industry.
➢ The industry-wise exposures shall also be monitored by Credit Review & Monitoring Division, HO especially those
industries, which have reached trigger level of 85% of exposure limit, so that instances of breach of ceiling could
be averted.

G. UNSECURED EXPOSURE CEILING

➢ The exposure including all funded and non-funded facilities, where the realizable value of tangible security is
not more than 10%, ab-initio of the outstanding exposure shall be treated as ‘Unsecured Exposure’. Further,
all top-up loans extended by the Bank against movable assets which are inherently depreciating in nature,
such as vehicles, shall be treated as unsecured loans for credit appraisal, prudential limits and exposure
purposes.
➢ ‘Unsecured Exposure’ should not exceed 25% of Bank’s exposure as on close of previous quarter.
Internal Exposure Ceiling for Unsecured Consumer Credit

Sector % Ceiling of bank exposure as on close of previous quarter

Credit Card 1.00%
Personal Loan 5.00%
The sectoral ceiling of unsecured consumer credit of 1.00% / 5.00% as mentioned above, is within the overall
unsecured internal exposure ceiling of 25%.
H. LENDING TO STATE GOVT. UNDERTAKINGS/ PSUs- EXPOSURE LIMITS

➢ Overall Exposure to State government 'Entities' (State PSUs/Undertakings/ Corporations etc where State
Government holds at least 51% of the shareholding and/or management control) is fixed at 15% of Bank's
Gross Domestic exposure as of previous quarter. The above internal ceiling shall exclude direct advance to State
government but include exposure guaranteed by State Government.
➢ As per revised methodology internal ceiling has been prescribed for 20 states. 8 states namely Arunachal
Pradesh, Goa, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura have been kept out of the
methodology, However, a combined internal ceiling of ₹2000 cr. has been prescribed for all these 8 states.
➢ Investment in State’s SLR securities shall not be considered as a part of exposure. Further advances against bank
deposit are also excluded from the above ceiling.

➢ All fresh /enhancement /renewal proposals of loss making State Govt. Undertakings /PSUs shall be placed to:
Management Committee for consideration.
➢ All loss making marketing federations having bank exposure be reviewed and monitored. The State-wise
exposures shall be closely monitored by the Credit Review & Monitoring Division, HO. Exposure especially in
States which reach trigger Level of 85% of exposure ceiling limit on quarterly basis along with other
industry exposure ceilings. Any breach in exposure ceiling during the quarter shall be placed to Board for
information. HOCAC II and above shall be the competent authority to consider cases on merits beyond the
prescribed internal ceiling in respect of State entity within the regulatory ceiling.
I. Gross Advances Limit for Geographic Regions and Overseas Branches
Region Limit for FY 2023-24
Central 1,76,500
Eastern 1,30,500
North East 29,000

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Northern 2,94,500
Southern 1,37,500
Western 2,07,900
Domestic Total 9,75,900
PNB DIFC, Dubai 31,000
BO Gift City 13,000
Overseas Branches 44,000
Bank Total 10,19,900

J. EXPOSURE TO REAL ESTATE

Being a sensitive sector, the overall exposure ceiling for real estate sector has been fixed at 15% of the total
advances of the bank as at close of last quarter. Within this ceiling, segment-wise sub-ceilings is as under:
SN Segment Ceiling (in %)
(i) Exposure on NHB & HFCs 7.00%
(ii) Commercial Real Estate- Total 10.00%
of which:
a) Land & Building Developers- other than Residential Housing 2.00%
b) Other Commercial Real Estate i.e IPs (commercial) , Hotels etc. but
1.00%
excluding Future Lease Rentals(FLRs)
(iii) Residential Mortgages Excluded for Ceiling Purpose
Total 15%
Note:
➢ With the fixation of the above sub ceilings, there will be no sub ceiling for CRE-RH and FLRs, but the overall
ceiling for CRE including CRE-RH and FLRs shall continue to be 10% as hitherto fore.
➢ CRMD, HO to monitor the internal ceilings of real estate sector as per extant guidelines on quarterly basis, by putting
up quarterly review to Board, to ensure that the same is well within the prescribed ceilings.
➢ Further, in case of breach in the above noted ceilings, present guidelines of placing the same to the Board, in its next
meeting for ratification, shall also continue to be followed by CRMD, HO.
➢ Residential mortgages segment is kept out of the purview of Real Estate Sector ceiling. However, for reporting
purpose, it shall be part of RE Sector and the position of exposure under Residential mortgages segment shall continue
to be put up along with position of other RE exposure on quarterly basis as per extant guidelines.

K. EXPOSURE TO CAPITAL MARKET

SN Particulars Exposure Ceiling

REGULATORY CEILINGS
40% of Bank’s net worth on a
1. Overall ceiling for both fund based and non-fund based exposure
Solo and on consolidated basis
Advances to individuals against security of Equity Shares/ Debentures/Bonds
2. ₹20 lakh
in Dematerialized Form from entire banking system
INTERNAL CEILINGS
20% of net worth of the bank as on 31s
3. Aggregate advances forming part of exposure to Capital Market t March of the previous year

10% of net worth of the bank as on

3.1 Out of which, aggregate advances to All Stock Brokers
31st March of the previous year
Aggregate advance to any single stock broking entity including its
3.2 ₹100 Crore
associate /inter connected Companies
Financing individuals for acquiring shares under IPO /FPO/ ESOP
3.3 ₹10 Lakh
(Minimum per Individual ₹1 Lakh)
Advances to individuals against security of Equity Shares/
3.4 Debentures/Bonds in Dematerialized Form from entire banking system ₹20 Lakh
(Minimum per Individual ₹1 Lakh)
Equity Oriented Mutual Funds which are held in the form of Statement of
3.5 ₹20 Lakh
Accounts (Minimum per Individual ₹1 Lakh )
3.6 Debt Oriented Mutual Fund (Minimum per Individual ₹1 Lakh) ₹100 Lakh

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L. OTHER EXPOSURE CEILING

SN PARTICULAR Ceiling (₹ in Crore)

1. Film Industry (for aggregate of FB plus NFB facilities for each film/ OTT content. The number ₹50.00
(Per Borrower)
of projects of a producer financed at any point of time shall not exceed 2)
₹400.00 (in FY)

2. Non-Fund Based facility not to exceed ___ Bank’s total Fund Based exposure 100%
3. Asset Reconstruction Companies (ARCs) NIL
(Bank will not take any further exposure on ARCs)
4. Short Term Loan 18%
(_____ of total advance of the bank as at close of previous quarter)
5. Indian Joint Ventures/Wholly Owned Subsidiaries Abroad and Overseas Step-Down
Subsidiaries of Indian Corporates (of banks’ unimpaired capital funds i.e. Tier-I & Tier-II 20%
capital)
6. Leasing, Hire Purchase and Factoring Activities (Each of these activities) ______of Total 10%
Advance
(Presently Bank is undertaking factoring activities through Trade Receivables Discounting
System (TReDS) which facilitates financing of trade receivables of MSMEs from corporate
buyers)
7. Financing to Infrastructure Investment Trust (InvITs)
➢ Lending to InvITs of a particular Infra segment (road, power etc) will be considered as lending to that particular
industry and ceiling of respective industry/sector will also be applicable to InvITs.
➢ Single borrower and group borrower ceilings and internal ceiling should be complied with
➢ Ceiling for exposure by way of Fund Based /Non Fund Based facilities to a Single entity with constitution as Society,
Trust, HUF is restricted to ₹200 Cr. However, in case of exposure to single InvIT it shall be ₹5000 Cr.
(Ref. Cir. IRMD L&A 118/2023 Dt.19.10.2023)

M. INTRA GROUP EXPOSURE

Entity Limit for Financial Entity** Limit for Non-Financial Entity**
Subsidiaries 8% 5%
Joint Venture and Associates 8% 4%
All Group Entities (financial & Non-
15%
financial) taken together
**of Paid-up Capital and Reserves (excluding amalgamation reserves) of PNB as at the end of March of Previous FY.
For the purpose of Intra-Group Exposure Ceilings, the following entities will be treated as group entity:
➢ Subsidiary - Parent
➢ Associate
➢ Joint Venture
➢ Related party
➢ Direct or Indirect ownership of 20% or more in the voting power of the enterprise.
➢ Common Brand Name
➢ Promoters of the Bank
➢ Non operative financial Holding companies
➢ An entity which has any of the first six relations, as above, with the promoters/NOFHC and their step-down entities.
N. Rating Grade & Tenor wise UFCE Limit
Unhedged Foreign Currency Exposure*
Rating Grade Up to 5 Year 5-10 Year 10-15 Year
C1 & Below 1 0.75 0.55
B2 & B3 2 1.5 1.15
B1 3 2.25 1.70
A4 & above 4 3 2.25
*UFCE limit is the number of times of Tangible Net Worth (TNW), the corporate can take UFCE exposure
However, on merits of the proposal, exposure may be allowed over and above the prescribed limits / restriction by
the Sanctioning Authority not below the level of ZOCAC & above.

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4.3 Monitoring of Exposure

➢ In order to ensure compliance of Prudential Exposure ceilings as well as Internal Exposure ceilings, Credit Review
& Monitoring Division (CRMD) to monitor various exposure ceilings on an ongoing basis and to place the annual
review of the implementation of exposure management measures as on 31st March to the Board before the end
of June positively.

➢ Computation of exposure ceilings will be based on: Bank’s exposure (credit plus investment) to the
industry/sector of the previous quarter.
➢ It is also advised that for monitoring the exposure ceilings, the higher of Outstanding or Exposure to
be considered.
➢ Adherence to regulatory ceiling & internal ceiling is to be placed before CRMC on monthly & quarterly basis
respectively.

➢ In any instance of breach in regulatory ceiling or exceeding the internal ceiling, a joint note by the Business
Division with CRMD shall be placed to the Board for information.

➢ Further, adherence and monitoring of sectoral internal exposure ceiling of unsecured consumer credit shall also
be placed before RMC on quarterly basis by CRMD highlighting the sector which has reached trigger level of
85% of the exposure limit, if any, so that instances of breach of ceiling could be averted.

4.4 Regulatory / Internal Ceiling

Ceiling Nature of Limit

Regulatory Ceiling Exposure limits stipulated by RBI, DFS, SEBI or any other regulators (Regulatory)
Internal Ceiling Exposure limits set by Bank internally (Non-Regulatory)
The exposure taken by the Bank beyond the Regulatory Ceiling shall be termed as breach of Regulatory Ceiling.
Similarly, the exposure taken by the Bank beyond the Internal Ceiling shall be termed as exceeding the Internal
Ceiling.

4.5 IMPORTANT DEFINITION

A. EXPOSURE
➢ Exposure shall include Credit exposure (Funded and Non-Funded Credit Limits) and investment exposure
(including underwriting and similar commitments). The sanctioned limits or outstanding, whichever are higher,
shall be reckoned for arriving at the exposure limit. Further, non-fund based exposure should also be reckoned at
100 percent of the limits or outstanding, whichever are higher.
➢ In case of fully drawn term loans, where there is no scope for re-drawal of any portion of the sanctioned limits,
the outstanding shall be reckoned as exposure. However, in the case of other term loans, the exposure shall be
computed as usual i.e. “sanctioned limits or outstanding, whichever are higher”.

➢ Credit Exposure: Credit exposure comprises of the following elements:

i. All types of funded and non-funded credit limits.

ii. Credit Exposure on account of derivative products.
iii. Facilities extended by way of equipment leasing, hire-purchase finance and factoring services.
➢ Investment Exposure: Investment exposure (including underwriting and similar commitments) comprises of
the following elements:
i. Investments in shares & debentures of companies.
ii. Investment in PSU bonds.
iii. Investments in Commercial Papers (CPs).

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iv. Banks’ / FIs’ investments in debentures/ bonds / security receipts / pass-through certificates (PTCs) issued
by a Securitisation Company (SC)/ Reconstruction Company(RC) as compensation consequent upon sale
of financial assets will constitute exposure on the SC / RC.
The investment made by the banks in bonds and debentures of corporates which are guaranteed by a Public
Financial Institution (PFI) will be treated as an exposure by the bank on the PFI and not on the corporate.
B. UNSECURED EXPOSURE
➢ Defined as an exposure where the realisable value of the security, as assessed by the bank/approved valuers
/ Reserve Bank’s inspecting officers, is not more than 10 %, ab-initio, of the outstanding exposure.
‘Security’ will mean tangible security properly charged to the bank and will not include intangible securities
like guarantees, letter of comfort, etc.

➢ The rights, licenses, authorizations, etc., charged to the banks as collateral in respect of projects (including
infrastructure projects) financed by them, should not be reckoned as tangible security. Banks, may however,
treat annuities under build-operate –transfer (BOT) model in respect of road/highway projects and toll
collection rights where there are provisions to compensate the project sponsor if a certain level of traffic is
not achieved, as tangible securities, subject to the condition that banks’ right to receive annuities and toll
collection rights is legally enforceable and irrevocable.

C. CONNECTED COUNTERPARTIES
Two or more natural or legal persons shall be deemed to be a group of connected counterparties if at least one of
the following criteria is satisfied:

a) Control relationship: One of the counterparties, directly or indirectly, has control over the other(s) or the
counterparties are directly or indirectly controlled by a third party.

While assessing the control relationship, the control relationship criteria is satisfied if one entity owns more than
50% of the voting rights of the other entity. In addition, the other control criteria to assess connectedness are
as under:

i. Voting agreements (e.g., control of a majority rights pursuant to an agreement with other shareholders)

ii. Significant influence on the appointment or dismissal of an entity’s administrative, management or

supervisory body, such as the right to appoint or remove a majority of members in those bodies, or the
fact that a majority of members have been appointed solely as a result of the exercise of an individual
entity’s voting rights

iii. Significant influence of senior management e.g., an entity has the power, pursuant to a contract or
otherwise, to exercise a controlling influence over the management or policies of another entity (e.g.,
through consent rights over key decisions, to decide on the strategy or direct the activities of an entity,
to decide on crucial transactions such as transfer of profit or loss).

iv. The above criteria will also be assessed with respect to a common third party (such as holding company),
irrespective of whether the bank has an exposure to that entity or not.

v. Further, the criteria specified in the extant accounting standards shall also be considered for qualitative
guidance while determining control.

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vi. However, where control has been established based on any of the above criteria, the Bank may still
demonstrate to the RBI in exceptional cases, e.g., existence of control between counterparties due to
specific circumstances and corporate governance safeguards, that such control does not necessarily result
in the entities concerned constituting a group of connected counterparties.

b) Economic interdependence: If one of the counterparties were to experience financial problems, in particular
funding or repayment difficulties, the other (s) as a result, would also be likely to encounter funding or
repayment difficulties.

Identification of possible connected counterparties on the basis of economic interdependence shall be

mandatory in all cases where the sum of all exposures to one individual counterparty exceeds 5% of the eligible
capital base (i.e., Tier 1 Capital), and not in other cases.
Establishing connectedness based on economic interdependence is applicable from 1st April 2020.
Scope of counterparties and exemptions
Under the LEF, a bank’s exposure to all its counterparties and groups of connected counterparties, excluding the
exposures listed below, will be considered for exposure limits. The exposures that are exempted from the LEF are
listed below:

a. Exposures to the Government of India and State Governments which are eligible for zero percent Risk Weight
under the Basel III – Capital Regulation framework of the RBI;
b. Exposures to RBI;
c. Exposures where the principal and interest are fully guaranteed by the Government of India;
d. Exposures secured by financial instruments issued by the Government of India, to the extent that the eligibility
criteria for recognition of the credit risk mitigation (CRM) are met.
e. Intra-day interbank exposures;
f. Intra-group exposures as it will continue to be governed by the Master Circular on Exposure Norms;
g. Borrowers, to whom limits are authorised for food credit;
h. Banks’ clearing activities related exposures to Qualifying Central Counterparties (QCCPs);
i. Deposits maintained with NABARD on account of shortfall in achievement of targets for priority sector lending.
j. Exposures to Foreign Sovereigns or their Central Banks that are subject to a 0% risk weight as per Basel III
capital Regulations and denominated in the domestic currency of that sovereign and met out of resources of the
same currency.
However, the infusion of capital under Tier I after the published balance sheet date may also be taken into account
for the purpose of Large Exposures Framework. Banks shall obtain an external auditor’s certificate on completion of
the augmentation of capital and submit the same to the RBI (Department of Banking Supervision) before reckoning
the additions to capital funds. Further, for Indian Banks, profits accrued during the year, subject to provisions
contained in para 4.2.3.1 of Master Circular on Basel III Capital Regulations dated April 01, 2024 (as amended from
time to time), will also be reckoned as Tier I capital for the purpose of Large Exposures Framework.

Bank shall comply with LEF norms at both consolidated and solo level.
IRMD L&A Circular No. 66/2019 dated 10.06.2019 and subsequent modifications may be referred for detailed
guidelines on LEF

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D. EXPOSURE UNDER PPP MODEL

In case of PPP Projects, the debts due to the lenders may be considered as secured to the extent assured by
the project authority in terms of the Concession Agreement, subject to the following conditions:
i. User charges/toll/tariff payments are kept in an escrow account where senior lenders have priority over
withdrawals by the concessionaire;
ii. There is sufficient risk mitigation, such as pre-determined increase in user charges or increase in concession
period, in case project revenues are lower than anticipated;

iii. The lenders have a right of substitution in case of concessionaire default;

iv. The lenders have a right to trigger termination in case of default in debt service; and
v. Upon termination, the Project Authority has an obligation of (i) compulsory buy-out and (ii) repayment of
debt due in a pre-determined manner.
However, in all such cases, bank must be satisfied about the legal enforceability of the provisions of the tripartite
agreement and should factor in the past experience with such contracts.
E. REAL ESTATE SECTOR

Real Estate is generally defined as an immovable asset - land (earth space) and the permanently attached
improvements to it. Income-producing real estate (IPRE) has been defined in Para 226 of the Basel-II Framework,
which is reproduced below:

"Income-producing real estate (IPRE) refers to a method of providing funding to real estate (such as, office buildings
to let, retail space, multifamily residential buildings, industrial or warehouse space, and hotels) where the prospects
for repayment and recovery on the exposure depend primarily on the cash flows generated by the asset. The primary
source of these cash flows would generally be lease or rental payments or the sale of the asset. The borrower may
be, but is not required to be, an SPE (Special Purpose Entity), an operating company focused on real estate
construction or holdings, or an operating company with sources of revenue other than real estate.”
As RBI has prescribed risk weight at 75% for CRE-RH and 100% for commercial real estate, external rating for such
projects need not to be insisted upon.

For detailed guidelines on advances to real estate sector, IRMD L&A circular no. 38 dated 27.03.2023 as updated
from time to time may be referred.

F. CAPITAL FUND AND CAPITAL BASE

i. Capital Fund comprise of Tier I and Tier II and capital base comprise of Tier I capital, as defined in the RBI
Master Circular on Basel III – Capital Regulation dated July 1, 2015 (as amended from time to time) as per
the last audited balance sheet.
ii. However, the infusion of capital after the published balance sheet date may also be taken into account for
the purpose of exposure ceiling.

iii. In the light of above, it is prudent to deduct the capital which was redeemed after the published balance
sheet and any other deduction.

iv. Hence, Capital Fund and Capital Base for determining the exposure ceilings shall be reckoned as per audited
capital adequacy ratio under Base III of the previous quarter.

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G. INFRASTRUTURE
Harmonized Master List of Infrastructure and its Sub-sectors as per Department of Economic Affairs, MoF, GoI
Harmonized Master List of Infrastructure Sub-sectors
SN Category Infrastructure sub-sectors
1. Transport and i. Roads and bridges
Logistics ii. Ports1
iii. Shipyards2
iv. Inland Waterways
v. Airport
vi. Railway track including electrical & signaling system, tunnels, viaducts, bridges
vii. Railway rolling stock along with workshop and associated maintenance facilities
viii. Railway terminal infrastructure including stations and adjoining commercial
infrastructure
ix. Urban Public Transport (except rolling stock in case of urban road transport)
x. Logistics Infrastructure3
xi. Bulk Material Transportation Pipelines4
2. Energy i. Electricity Generation
ii. Electricity Transmission
iii. Electricity Distribution
iv. Oil/Gas/Liquefied Natural Gas (LNG) storage facility5
v. Energy Storage System6
3. Water & Sanitation i. Solid Waste Management
ii. Water treatment plants
iii. Sewage collection, treatment and disposal system
iv. Irrigation (dams, channels, embankments etc)
v. Storm Water Drainage System
4. Communication i. Telecommunication (Fixed network)7
ii. Telecommunication Towers
iii. Telecommunication & Telecom Services
iv. Data Centers8
5. Social and i. Education Institutions (capital stock)
Commercial ii. Sports Infrastructure9
Infrastructure iii. Hospitals (capital stock)10
iv. Tourism infrastructure viz. (i) three-star or higher category classified hotels
located outside cities with population of more than 1 million, (ii) ropeways and
cable cars
v. Common infrastructure for industrial parks and other parks with industrial
activity such as food parks, textile parks, Special Economic Zones, tourism
facilities and agriculture markets
vi. Post-harvest storage infrastructure for agriculture and horticultural produce
including cold storage
vii. Terminal markets
viii. Soil-testing laboratories
ix. Cold Chain11
x. Affordable Housing12
xi. Affordable Rental Housing Complex13
xii. Exhibition-cum-Convention Centre14
1 Includes Capital Dredging
2 “Shipyard” is defined as a floating or land-based facility with the essential features of waterfront, turning basin, berthing and
docking facility, slipways and/or ship lifts, and which is self-sufficient for carrying on shipbuilding /repair /breaking activities.
3 "Logistics Infrastructure” means and includes Multimodal Logistics Park comprising Inland Container Depot (ICD) with minimum

investment of ₹50 crore and minimum area of 10 acre, Cold Chain Facility with minimum investment of ₹15 crore and minimum
area of 20,000 sft, and/or Warehousing Facility with investment of minimum ₹25 crore and minimum area of 1 lakh sq ft.
4 Includes Oil, Gas, Slurry, Water supply and Iron Ore Pipelines

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5 Includes strategic storage of crude oil.

6Includes dense charging infrastructure and grid scale Energy Storage Systems (ESS) with a minimum qualifying capacity of 200
MW-Hr, provided that ESS is not being established on merchant basis.
7 Includes optic fibre/wire/cable networks which provide broadband / Internet.

8Data Centre housed in a dedicated/centralized building for storage and processing of digital data applications with a minimum

capacity of 5 MW of IT load.
9 Includes the provision of Sports Stadia and Infrastructure for Academies for Training /Research in Sports and Sports-related

activities.
10Includes Medical Colleges, Para Medical Training Institutes and Diagnostics Centres.

11Includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine

products and meat.

12 “Affordable Housing” is defined as a housing project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index

(FSI) for dwelling units with carpet area@ of not more than 60 square meters.
13 “Affordable Rental Housing Complex” means a project to be used for rental purpose only for urban migrant/poor (EWS/LIG

categories) for a minimum period of 25 years with basic civic infrastructure facilities such as water, sanitation, sewerage/septage,
road, electricity along with necessary social/commercial infrastructure and the initial rent fixed by Local Authority/ Entities based
on local survey of surrounding area wherein the project is situated.
Project means a listed project having at least 40 Dwelling Units of double room or single room or equivalent Dormitory Units or
a mix of all three in any ratio but not more than one third of total built up area under double bedrooms units.
Dwelling Units (DUs) means a unit comprising of double bed room with living area, kitchen, toilet and bathroom of up to 60
square meters carpet area@ or single bed room with living area, kitchen, toilet and bathroom of up to 30 square meters carpet
area@ .
Dormitory Units means a set of 3 Dormitory Bed with common kitchen, toilet and bathroom in 30 square meters carpet area @
meaning 10 square meters carpet area@ per Dormitory Bed.
@ “Carpet Area” shall have the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and
Development) Act, 2016.
14“Exhibition-cum-Convention Centre” is defined as Exhibition and Convention Centre Projects with minimum built-up floor
area* of 100,000 square metres of exclusively exhibition space or convention space or both combined.
* Built up floor area includes primary facilities such as exhibition centres, convention halls, auditoriums, plenary halls, business
centres, meeting halls etc.
H. NET WORTH: Net worth would comprise Paid-up capital plus Free Reserves including Share Premium but excluding
Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit
balance in Profit and Loss account, Accumulated Losses and Intangible Assets. No general or specific provisions
should be included in computation of net worth. Infusion of capital through equity shares, either through domestic
issues or overseas floats after the published balance sheet date, may also be taken into account for determining the
ceiling on exposure to capital market. Banks should obtain an external auditor’s certificate on completion of the
augmentation of capital and submit the same to the RBI (Department of Banking Supervision) before reckoning the
additions, as stated above.

I. EXPOSURE TREATMENT OF BILLS DISCOUNTED UNDER LETTER OF CREDIT (LC)

➢ Bills purchased/discounted/negotiated under LC (where the payment to the beneficiary is not made 'under
reserve') will be treated as an exposure on the LC issuing bank and not on the borrower. However, in cases where
the bills discounting/ purchasing/negotiating bank and LC issuing bank are part of the same bank, i.e. where LC
is issued by the Head Office or branch of the same bank, then the exposure should be taken on third
party/borrower and not on the LC issuing bank. In the case of negotiations ‘under reserve’, the exposure should
be treated as on the borrower.

➢ All clean negotiations as indicated in para (i) above, will be assigned the risk weight as normally applicable to
inter-bank exposures, for capital adequacy purpose.

➢ In the case of negotiations under reserve' the exposure should be treated as, on the borrower.

*********************

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5. CREDIT DELIVERY - PRE-SANCTION APPRAISAL

5.1 METHODS OF LENDING -Working Capital Facilities
a. Following systems to be followed for assessment of working capital requirements of the borrowers :
i. Simplified method linked with turnover
ii. Working capital Assessment for Micro & Small Enterprises
iii. Traditional Method i.e., MPBF System
iv. Cash Budget System
v. Assessed Bank Finance (ABF) based on Projected Financial Method

b. Further, HOCAC-II & above is empowered to accept any methodology including MPBF, Assessed Bank Finance
(ABF), Cash Budget and Cash deficit/Cash flow mismatch for assessment of working capital requirement, as per
specific business model & operational requirements of the borrower
c. Loan System for Delivery of Bank Credit
In respect of borrowers having aggregate fund based working capital limit of ₹150 Crore and above from the
banking system, a minimum level of ‘loan component’ of 60% needs to be maintained from 01.07.2019. The
eligible accounts are to be identified by accessing information from CRILC database, Credit Information reports,
etc.
Accordingly, for such borrowers, the outstanding ‘loan component’ (Working Capital Loan) must be equal to at
least 60% of the sanctioned fund based working capital limit, including ad hoc limits and TODs. Hence, drawings
up to 60% of the total fund based working capital limits shall only be allowed from the ‘loan component’.
Investment by the bank in the commercial papers issued by the borrower shall form part of the loan component,
provided the investment is sanctioned as part of the working capital limit
The bifurcation of the working capital limit into loan and cash credit components shall be effected after excluding
the export credit limits (pre-shipment and postshipment) and bills limit for inland sales from the working capital
limit
d. Assessment in case of Consortium Accounts
In case of consortium accounts, there may be a situation where other banks are following a different method of
working capital finance as per their bank’s policy. In such case:
i. If our bank is leader or holding the highest share in total working capital finance (i.e., total of funded and non-
funded finance), our bank shall adopt the extant MPBF method and other banks shall be requested to accept
the same though other banks shall be free to follow their own system also. In other words, our bank’s extant
guidelines in respect of consortium lending are to be followed.
ii. If our bank is not a leader (in consortium) in total working capital finance (i.e. total of funded and non-funded
finance), the Sanctioning Authority may accept the method of assessment including the treatment of assets
and liabilities adopted by the Consortium Leader and assessment may be done accordingly
5.2 PARTIAL CREDIT ENHANCEMNT

RBI has issued directions for Partial Credit Enhancement (PCE) to bonds issued by Corporates /Special purpose
vehicles (SPV) and NBFCs for funding all type of projects. PCE is offered to a project as a non-funded subordinated
facility in the form of a non-funded irrevocable contingent line of credit only, which will be drawn in case of shortfall
in cash flows for servicing the bonds to improve the credit rating of the bond issue. The quantum and assessment of
PCE shall be as under:
Quantum of PCE
a) PCE facility exposure to a single counterparty shall not exceed ₹50.00 Crore.
b) PCE facility exposure to a borrower of a group shall not exceed ₹200.00 Crore.
c) Aggregate exposure limit from the banking system to 50 per cent of the bond issue size, with a limit up to 20
per cent of the bond issue size from single bank.

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Risk Assessment
Credit Enhancement (CE) gets drawn only in a contingent situation of cash flow shortfall for servicing a debt / bond,
etc., and not in the normal course of business. Hence, such an event is indicative of financial distress of the project.
Accordingly, the following parameters shall be assessed for considering PCE:
a) In case of project, the project should have a robust and viable financial structure even before the credit
enhancement is taken into account.
b) All the appraisal parameters as specified in Bank’s policy for granting such type of facility (Non-funded
irrevocable contingent line of credit (Revolving / Non-revolving)) including Due-Diligence, Repayment capacity
of the bond issuer, TEV or viability analysis, sensitivity analysis, sponsor risk, security aspect, risk mitigation
measure shall be evaluated.
c) Necessary requisite condition for creation/ establishment of DSRA and sinking fund for repayment of Principal
/ Interest shall be stipulated as per term of sanction of PCE.
d) The Bank shall ensure continuous monitoring of the external rating and migration of the issuers/ issues of PCE
facility extended by the Bank. The capital requirement of such facility shall be factored in computation of
capital requirement at quarterly intervals.
e) The sanctioning authority may prescribe any risk mitigation measure on case to case basis.
5.3 CONSORTIUM AGREEMENT
➢ Minimum 10% share of the aggregate exposure should be taken by our Bank under Consortium arrangement
➢ In cases where our Bank’s share is less than 10% of the aggregate exposure, for sanctions falling under the
loaning power upto the ZOCAC level, administrative clearance shall be sought from HOCAC-I to enter such
consortium. However, administrative clearance may not be required for proposals where the sanctioning
authority is HOCAC-I and above
5.4 CREDIT RISK RATING

➢ Hurdle Rate for considering the proposals:

External Credit Risk rating
Investment Grade Non-Investment Grade
BBB & above BB & Below
Internal Credit Risk rating
Investment Grades Rating grades B2 and above (With score of more than 46.00)
Borderline Risk Grade B3 (Having score more than 40.00 and upto 46.00)
High Risk Grades C1, C2 and C3 (Having score up to 40.00)

➢ The bank shall undertake new relationships in externally rated BBB & above accounts, & on conduct of their
Internal Rating should achieve B1 or B2. In such cases where the account is Internally Rated B2, it shall be
sanctioned at an appropriate level as per vested loaning powers in terms of extant guidelines.

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6. POST SANCTION FOLLOW UP, SUPERVISION & MONITORING

6.1 Review/Renewal of Working Capital Limits/Term Loans

➢ All working capital limits are to be renewed/ reviewed at least once in 12 months from the last date of
sanction/renewal.
➢ In order to have constant monitoring of the portfolio of the bank in the lower rating categories of “C1 to C3”,
review of borrowal accounts (where IRR is C1 to C3), having limits above ₹10.00 crore should be done on:
Half Yearly basis.
In cases where regular renewal is due in less than 6 months period, then instead of aforesaid review, regular
renewal be done as per the due date.

➢ All standalone Term Loans, except retail loans, with sanctioned limit of need to be reviewed annually:
₹2 Crore & above. The Annual review of standalone term loan shall continue till such time the balance
outstanding of the Term Loan account is ₹2.00 Cr and above

6.2 RESTRCUTURING

➢ The basic objective of restructuring is to put in place a transparent mechanism for restructuring of debts of
potentially viable entities facing temporary problems due to factors beyond their control. In particular, the policy
framework will aim at preserving viable units that are affected by certain internal and external factors and
minimize the losses to the creditors and other stakeholders by way of providing timely support through an
orderly and coordinated restructuring programme.
➢ The bank has put in place policy for restructuring of debts in case of potentially viable entities in line with RBI’s
framework along with detailed guidelines for Revival and Rehabilitation for Small and Medium Enterprises (FRR
for MSMEs) has been issued vide IRMD L&A Circular No. 175/2022 dated 24.11.2022 as updated from time to
time.

6.3 LOAN REVIEW MECHANISM

➢ Coverage of LRM/Credit Audit

Eligible Accounts Aggregate
Credit Exposure
(FB+NFB)
▪ All Standard Risk Rated Accounts
(Fresh proposals within 3 months from the end of quarter, during which loan was ₹10.00 Crore &
sanctioned/ first disbursed) above
▪ All Standard Restructured Accounts
▪ All NPA Restructured Accounts
Note: Accounts of sister concerns/group /associate concerns of above accounts, even if
credit exposure is less than the cut off limit of ₹10 crore shall be subjected to credit audit
_____randomly selected sanctions from the rest of the rated portfolio 5-10%
Taken over Borrowal Accounts ₹1 Crore and
Note: The first such audit is to be got done within 3 months from the end of quarter, above
during which loan was sanctioned/first disbursed and the next audit is to be carried out
within 3 months after completion of one year from end of the quarter in which first credit
audit was conducted. In case of takeover accounts having aggregate exposure of ₹10.00
Crore and above, next audit will be conducted at frequency based on its Internal Risk
Rating
Frequency of Audit:
▪ All eligible Accounts shall be subjected to credit audit annually.
▪ The frequency of review should vary depending on the magnitude of risk (say, for the high risk accounts - 6
months, for the Medium risk & low risk accounts- 1 year).

Frequency of Audit as per Internal Risk Rating of the borrowal account:

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Low Risk Medium Risk High Risk

Yearly Half-Yearly Quarterly
A1 to A4 B1 to B3 C1 to C3

▪ Credit Audit of all eligible accounts will be got conducted by Credit Auditors (Scale-III & above) of CA&RD,
HO /Auditors of ZAO’s/Engaged Credit Auditor of CA&RD, HO. A pool of 45-50 officers having exposure of
handling Large Credit/Forex) for conducting Credit Audit of Eligible Accounts will be created at CA&RD, HO
Time Frame for LRM/ Credit Audit
Group-A: Exposure upto ₹250.00 Cr. Group-B: Exposure above ₹250.00 Cr.
2 working days for completion of Audit 3 working days for completion of Audit
Exempted Category:
(a) Retail Banking segments (i) Schematic Lending (housing, vehicles & personal loan) (ii) Advances against consumer durables,
(b) Advances against Bank Deposits, LIC policies, Govt. securities, Gold/silver Jewellery & ornaments, advance against shares,
Debentures & Mutual Fund
(c) Accounts which are exempted from Internal Rating.
Loan Review Mechanism Policy for Overseas Credit Accounts
Type of Accounts eligible for LRM Aggregate
Credit
Exposure
All risk rated standard accounts with exposure of_______. USD 3 Mio &
above
In case of accounts with combined group exposure of USD 3 Mio and above all the account
irrespective of individual limits shall be subjected to credit audit
5% of risk rated standard accounts selected on random basis with exposure of _____& USD 1 Mio
above but less than USD 3 Mio
Exempted Category:
Domestic Borrowal Accounts Overseas Borrowal Accounts
a) Retail Banking segments (i) Schematic a) Those secured by 100% cash security.
Lending (housing, vehicles & personal loan) (ii) b) Buyer’s credit secured by BG / SBLC of approved bank.
Advances against consumer durables
c) Bills discounted under LC issued by approved banks after
b) Advances against Bank Deposits, LIC policies, receiving acceptance from the LC issuing bank.
Govt. securities, Gold/Silver jewelry &
d) Term loan secured by SBLC of approved bank.
ornaments, shares, debentures & Mutual Fund
e) The Secondary Market Purchase/Taken over accounts of
c) Accounts which are exempted from Internal
Banks and Foreign Sovereigns will be excluded from the
Risk Rating, e.g. Loans and Advances - against
purview of Credit Audit. The reason for excluding the
Bank Deposits, Government securities, shares and
debentures, Mutual funds and Life insurance Accounts of Banks and Foreign Sovereigns is as under:
policies, Loans and advances to Central/state i) In loans involving Banks, the exposure is taken within
Government Departments/undertakings/ the counterparty limits allocated keeping in view the risk
establishments not running on commercial basis, rating of the Banks.
staff and under Retail segment, etc., as per ii) In loans involving Secondary Market Purchase/Taken
prevailing IRMD guidelines over accounts of Foreign Sovereigns, the facility is
prefunded and Credit/Risk assessment is already done by
the primary lenders and in Secondary Market transfer is
done through novation. Further, as per RBI guidelines on
Country Risk Management, ECGC also circulates Country
Risk Classification for Sovereign which is also taken into
account while taking credit exposure.
▪ For detailed guidelines refer : CREDIT AUDIT AND REVIEW DIVISION (CARD) Cir No.18/2024 Dt.18.04.2024
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7. DELEGATION OF LOANING POWERS

7.1 Delegated Powers of Loans & Advances

The delegated loaning powers of the various functionaries are to be exercised judiciously within their vested loaning
powers and strict compliance of various guidelines enumerated in loaning powers and guidelines for exercising such
powers at various levels
While exercising the vested loaning powers, the authority shall comply with the general /specific instructions and
guidelines prescribed by the RBI /Head Office /other controlling authority (Regulatory /Statutory) from time to time
7.2 Linking Loaning Powers with Risk Rating

The Bank has in place a multi-tier credit approving system. In order to enable the field functionaries for taking
expeditious decisions and also to attract quality accounts, the CACs/officials shall exercise loaning powers linked to
risk rating of borrower/rating of the industry, as enumerated in loaning powers & guidelines for exercising such
powers at various levels.

7.3 Sanction of limits in anticipation of approval by MC

Shall be considered in case of Existing as well as Fresh Borrowers by HOCAC-III for meeting emergent needs and
ratification of such approval should be moved immediately to MC

7.4 In Principle Consent

In case of genuine and urgent cases falling under MC sanction, “for existing borrowers HOCAC-III/II may convey
the ‘In Principle Consent’ and in case of fresh borrowers HOCAC-III may convey the same”. However, in all cases,
the funds shall be released only after complete appraisal and regular sanction by the Sanctioning Authority.
7.5 Certain Restrictions on Loaning Powers

i. Sanction of limits to NBFCs:

▪ All fresh proposals enhancement/additional/temporary/adhoc facilities to NBFCs shall be considered at
HOCAC-I & above only subject to following:
Sanctioning External / Internal Risk Rating*
Authority
ERR of AAA & AA or IRR ERR of A or IRR of A4 ERR of BBB or IRR of B1
of A1 to A3 & below
HOCAC - I Nil Nil
HOCAC - II Nil Nil
Full Power
HOCAC - III Nil
Full Power
MC Full Power
*In case of variance of external and internal rating, lower of the two will be reckoned for determining loaning power

▪ However the cases for renewal /review of existing facilities shall be considered by sanctioning authority
under whose power the exposure otherwise falls within its vested loaning powers provided there is no
change in T&C of last sanction, T&C of last sanction (sanctioned by higher authorities) is complied with and
there is no deterioration in internal or external rating (wherever applicable).
▪ Ad-Hoc Facilities to NBFC
In emergent circumstances, drawings in Secured FB Limits in excess of sanctioned limits, within available
DP, may be allowed normally up to 3 months and in exceptional circumstances in highly deserving cases for
a maximum period upto 4 months by HOCAC-I and upto 5 months by HOCAC-II & III, subject to:
Up to ZOCAC/ HOCAC-I HOCAC-II HOCAC-III
Branch Heads of
% of Sanctioned Limit or Amount Specified, whichever is lower
LCBs/ELCBs
NIL 30% or ₹ 4.00 crores 35% or ₹11.25 crores 50% or ₹ 15.00 crores
Officials while permitting the adhoc facilities in case of their own sanction should ensure that the total exposure does
not exceed the loaning powers vested in them in case of NBFC financing.

ii. Rubber Industry: Further exposure should not be taken. In case, Branch Heads (LCB) & ZMs find a
bankable proposal, they may recommend it to Credit Division, HO for sanction by the MC of Board on merits.

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iii. Tea Industry: Further exposure should not be taken except for the Branches in West Bengal & North
East states where sanction would be done at RAM/MCC {CM/AGM} and above only within their vested loaning
powers).
In case Branch Heads (LCB & E-LCBs) & ZMs find a bankable proposal in any other region, they may recommend
it to Credit Division, HO for sanction by the HOCAC-I & above. However, competent authority may sanction
additional/adhoc/enhancement facilities in case of existing accounts in Tea Industry on merits.
iv. PSU Disinvestment announced by Govt.: Loaning powers are to be exercised by MC on merit basis.
v. Purchase of Gold: No advances shall be granted for purchase of gold in any form, including primary gold,
gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold Mutual
Funds.
vi. Gems & Jewellery Sector: Proposal for fresh credit facilities and additional/ enhancement/ Adhoc in existing
facilities to both Traders & Manufacturers (for borrowers having IRR B1 & above) shall be considered as under:
Sanctioning Authority Minimum collateral security
(in the form of land/ land & building or Liquid security)
CHCAC & ZOCAC upto their vested powers 100%
HOCAC-I upto their vested powers 50%
HOCAC-II upto ₹150.00 Cr.
HOCAC-III upto ₹300.00 Cr. NIL
Management Committee (Full Powers)
Exception: Cases where Sanctioning Authority shall be other than MC:
i. Proposals regarding Lab Grown Diamonds shall be sanctioned by ZOCAC & above as per vested loaning powers.
ii. Financing to Jewellers against Mortgage of IP under PNB Sampatti scheme will continue as per extant IRMD/MSME scheme.
Note: Renewal of limits shall continue to be considered by competent authority as per vested loaning powers.
vii. Infrastructure Sector: Shall be sanctioned by ZOCAC & above only. However following infrastructure
proposals can be sanctioned by PLP-CAC /MCC-CAC and above, within their vested loaning powers:
Proposals related to Sanctioning
Authority
Agro-Processing and Supply of Inputs to Agriculture
Setting up of Cold Storages/ Construction of warehouse and Godowns for storing agriculture PLP-CAC /MCC-
produce including testing facilities for quality CAC & above
Construction/ Purchase/ Setting up of Hospitals including Equipment financing used for running
the hospital
Water Supply Project, Irrigation Project, Water Treatment System, Sanitation & Sewerage System CHCAC & above
or Solid Waste Management System
The assistance of technical cell, HO/ZO/reputed consultants of the relative field for technical appraisal
may be sought, wherever felt necessary
Mini Hydropower Projects
Note: 1. In case of construction of educational institutions and hospitals by companies/individuals engaged in construction or development
of real estate projects, the loaning powers for financing real estate projects shall be exercised.
2. Where the proposal/project falls under the ambit of both Real Estate and Infrastructure, the loaning powers for financing real estate
projects shall be exercised
All other proposals relating to infrastructure projects except those mentioned above shall continue to be
sanctioned by ZOCAC and above within their vested powers. However, while considering proposals pertaining
to infrastructure segments other than listed above, prior administrative approval/ clearance of HOCAC–I is
required to be taken. Solar power projects upto ₹10 Cr. shall not require prior administrative
clearance. Further, it is clarified that captive power plants shall continue to be kept out of purview
of administrative clearance.

viii.TOD / Adhoc Limits: In order to facilitate operational convenience, TOD and Adhoc Limits have been
defined and will be exercised as under:
➢ Temporary Overdrawings (TOD)
▪ In fund-based secured advances, over drawings may be allowed for payment of statutory dues, salaries,
wages or any other justifiable debits for very short period say 2-3 days, but not exceeding 7 days
(including roll over, if any) to meet temporary mismatch of funds in unforeseen circumstances by officials
within their vested loaning powers.

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▪ The respective TOD permitting authority may allow TODs in fund based secured advances for maximum of
12 occasions within a year from the date of last sanction/ renewal/ enhancement of the regular limit.
▪ However, TOD in fund based secured advances for more than 12 occasions within a year shall be allowed by
the following authorities:
For Proposals Dealt At TOD Permitting Authority
LCBs/ELCBs HOCAC-I
GBB/PLP/MCC/CBB ZOCAC
➢Adhoc Facilities
▪ Adhoc limit/facility should be granted as regular sanction for fixed period to the borrower after analyzing
the financials & requirements of the borrowers only for unexpected business and subject to the other
laid down stipulations for sanction of adhoc limits.
▪ In case of Adhoc/TOD, no further debits or extension in time be allowed and the account remains
overdrawn beyond the sanctioned period, no confirmation of action is required in case of non -adjustment
of TOD/Adhoc
ix. Confirmation of Action
▪ Any direction (including telephonic direction) for taking action in any case in respect of matters, on which
the senior officer or his subordinate has powers to decide, shall ordinarily be conveyed in writing.
▪ The officials shall exercise the vested loaning powers diligently and shall not exceed the vested powers.
However, in exceptional circumstances and for bonafide exigencies, wherever such powers are exceeded,
reporting the same immediately to the controlling authority for confirmation by the competent authority not
later than 3 days from the date of the transaction in any case shall be done on the prescribed format.
x. Takeover of Accounts form Other Bank
➢ It should be ensured that takeover of only standard borrowal accounts is considered without increasing our
risk profile. The accounts for consideration of takeover should have a IRR of ‘B1 & above’. However,
HOCAC II & III may consider takeover of ‘B2’ & ‘B3’ internally rated accounts on merits of the case and
MC shall have full powers in this regard.
➢ Small loan accounts (aggregate exposure upto ₹5 Crore) with IRR ‘B2 & below’ are not to be considered
for takeover.
➢ In case borrower was availing credit facilities from another Bank /FIs within the period of 3 months prior
to submitting loan proposal to our Bank, such credit proposal shall be treated as ‘Deemed takeover’.
Takeover norms would apply on Deemed takeover also. However, in case where such credit facility has
been repaid by the applicant borrower as per the terms & conditions of the original sanction, such credit
proposals shall not fall under the purview of Deemed Takeover.
➢ With the objective of preventing unethical/ unjustified takeover of borrowal accounts, it is advised that
takeover of borrowal accounts from the banks, where our present EDs and Managing Director & CEO have
worked earlier, need not be considered. However, in all loans (including retail/ agriculture) having limits
upto ₹ 7.50 Crore, the above restriction shall not apply and shall be considered by respective sanctioning
authority. For borrowal accounts above ₹7.50 Crore, in exceptional cases where takeover is considered
from the aforesaid banks, the credit proposal shall be sanctioned by sanctioning authority as per existing
delegation of power after obtaining prior administrative approval from the Board and such takeover
proposal shall invariably contain the specific reasons justifying the need for takeover.
(Detailed guidelines on takeover of accounts circulated vide IRMD L&A Circular No. 185/2022 dated 16.12.2022 as
updated from time to time shall also be adhered to.)

xi. Quoting of Bids

➢ It is observed that many public sector entities/ highly rated corporates having ERR “A” and above where the
default probability is very low and therefore competition is intense, call for bids in ROI /Combined bids for
advances, akin to that of deposits.
➢ Although the powers vests with the respective competent authority, however, due to limited time window
available during bidding process for fresh as well as for existing borrowers, MD & CEO may be empowered to
approve the bids. In the absence of MD&CEO, Domain Executive Director (looking after Corporate Credit) shall
be empowered to approve the interest rates for such bidding process.

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8. INTERNAL CREDIT RISK RATING/SCORING - PROCESS AND SYSTEMS

A comprehensive credit risk management process encompasses the following steps:

A. Credit Risk Identification and Measurement

B. Grading of Borrowers under the Rating System
C. Reporting and analysis of Credit Risk
D. Portfolio Management
E. Use of Securities as Risk Mitigants
F. Use of Guarantees as Risk Mitigants

8.1 CREDIT RISK IDENTIFICATION AND MEASUREMENT

➢ Credit Risk Management process involves identification, measurement, monitoring and control. The bank has
put in place strong credit risk management structure, which ensures continuous identification of possible areas,
which may adversely affect the credit quality of a borrower and/ or portfolio.
➢ The process of identification of credit risk is done by:
▪ Identifying potentially good and weak industries to manage risk in portfolio through industry wise exposure ceiling
model.
▪ Identifying potential credit risk in a new as well as existing borrower through various credit risk rating models.
▪ Identifying signals of weakness in an existing borrower through preventive monitoring system.
▪ Identifying weak accounts having incipient sickness.
INDUSTRY OUTLOOK
➢ Bank has established Industry Research Desk to carry out in-house risk assessment of Industries. The
result in the form of industry outlook is available on Knowledge Centre.
➢ Further, for better understanding of industry outlook, the output of industry risk assessment exercise carried
out has been translated into Industry Handout of each industry. The Handout presents executive summary
and brief of various industry risk parameters. Industry Handouts are used as inputs in Bank's credit risk rating
and while taking informed credit decision.
➢ In addition to the above, for keeping track of development in an industry on an ongoing basis to identify any
emerging stress or opportunity in the interim. A subjective guidance to outline the developments in an industry
at a quarterly interval, namely quarterly trend in industry outlook shall also be carried out.
➢ Industries are classified into three categories based on outlook; Favourable, Neutral and Less
Favourable.
➢ ‘Less favourable’ does not mean that proposals under these industries will not be considered for sanction.
Delegated Authorities as per loaning power may consider the sanction on case-to-case basis.
➢ The industries not rated are to be treated as neutral so far as applicability of loaning power restrictions are
concerned. Besides, other guidelines on the subject shall be adhered to.
CREDIT RISK RATING MODELS
The different online software platforms for rating/scoring of borrowers in different segments are as under:
Covers the risk rating models, including default risk
A PNB Trac
rating and Transaction/Facility Rating models
B PNB Score Scoring Models for Retail Segment
C PNB Score SME Scoring Models for MSME Segment
D PNB Farm Score Scoring Models for Farm Sector
E Scorecards for PNB Insta Loans* Scoring model for PNB Insta Loans
Scorecard for Co-Lending arrangement with Scoring model for Co-lending schemes under Co-lending
F
NBFCs* arrangement with NBFCs
G Risk Underwriting Model for Credit card* Scoring model for assessment of credit card applicants
Scorecard for Easy Renewal Scheme* Simplified scorecard for easy renewal scheme for facilities
H
with exposure upto ₹10.00 Lakh
*These models are not available on some separate portal as these are in-built in the respective credit appraisal applications

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8.2 Grading of Borrowers under the Rating system

Rating Risk Description
Grade Significance
Excellent business credit, superior asset quality and excellent track record of debt
PNB-A1 Minimum Risk
repayment capacity and coverage.
Very good business credit, asset quality and liquidity, debt repayment capacity
PNB-A2 Marginal Risk
and coverage.
PNB-A3 Modest Risk Good business credit, asset quality, debt paying capacity and coverage.
Satisfactory business credit, asset quality, Liquidity, good debt repayment
PNB-A4 Lower Risk
capacity
Acceptable business credit with average risk, acceptable asset quality, modest
debt capacity. However, adverse economic conditions or changing circumstances
PNB-B1 Average Risk
are more likely to lead to a weakened capacity of the obligor to meet its financial
commitments.
Marginally An obligor is less vulnerable in the near term. However, it faces major ongoing
PNB-B2 Acceptable uncertainties and exposure to adverse business, financial, or economic conditions
Risk which could lead to the inadequate capacity to meet financial commitments.
An obligor is more vulnerable than the obligors rated 'B2', and currently the
Cautiously
obligor has the capacity to meet its financial commitments. Adverse business,
PNB-B3 Acceptable
financial, or economic conditions will likely impair the obligor's capacity or
Risk
willingness to meet its financial commitments.
Not creditworthy, generally acceptable on case-to-case basis, Currently
PNB-C1 High Risk vulnerable and dependent on favorable business, financial and economic
conditions to meet financial commitments.
Not creditworthy. An obligor has minimal margin of principal and interest
payment protections, currently highly vulnerable, and is totally dependent upon
PNB-C2 Very high Risk
favorable business, financial and economic conditions to meet its financial
commitments.
Unacceptable business credit, Currently highly vulnerable obligations, normal
Exceptionally
PNB-C3 repayment in jeopardy, inadequate projected net worth and paying capacity.
high Risk
Default of some kind appears imminent.
➢ Rating grades B2 and above (With score of more than 46.00): Investment Grades
➢ B3 (Having score more than 40.00 and up to 46.00): Borderline Risk Grade
➢ C1, C2 and C3 (Having score up to 40.00): High Risk Grades
NPA Rating Categories under Credit Risk Rating System
As and when a rated account becomes NPA, the NPA rating classifications need to be marked, which will be treated
as new ratings and again as and when there is change in Asset Classification of NPA account, NPA classification is
to be remarked accordingly. Any subsequent up-gradation of the borrowal account to standard category would
require fresh view on the rating of borrower.
The NPA rating categories are as under:
Score Obtained Rating Grade Description
Defaulted Accounts PNB-NS NPA - Sub-Standard
(Accounts that have slipped to NPA PNB-ND NPA - Doubtful (I,II and III)
category) PNB-NL NPA - Loss

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8.3 Portfolio Management

Desired Distribution of Loan Portfolio under various Risk Rating Categories:
S. N. Risk Profile Credit Risk Rating Loan portfolio distribution
1. Low Risk A1, A2, A3 &A4 ≥40%
2. Average Risk B1 &B2 35% - 50%
3 Borderline Risk B3
≤10%
4. High Risk C1, C2 and C3

The rated portfolio of the loan accounts should be monitored by IRMD periodically to ensure proper mix of
various risk category accounts and thereby the asset quality of the portfolio. With this aim the bank has taken
the following measures:
i. Evaluation of rating wise distribution of borrowers in various industries is done to assess/appraise
the quality of bank’s portfolio.
ii. Industry scenario analysis is being undertaken taking into consideration the changes in industrial and
external environment e.g. changes in Economic/Fiscal/Monetary policies, general slowdown/ boom in the
economy etc.

iii. The Bank has appointed “Relationship Managers” in its Large Corporate branches with the aim of proper
monitoring of bank’s exposure in high value accounts so as to ensure constant surveillance on the substantial
share of the loan portfolio of the bank which can alter its risk profile

8.4 Collateral Management Policy

Apart from primary security, Bank takes collateral security in borrowal accounts to mitigate the risk as per extant
guidelines. Detailed guidelines on creation of valid charge, valuation and verification of various types of collateral
security are issued from time to time.
Collateral Management Policy has been conveyed vide IRMD circular no. 8 dated 19.02.2024 as updated from time to time

8.5 Use Of Guarantees as Risk Mitigants

Appropriate acceptable guarantee is obtained as risk mitigant in various borrowal accounts. The understanding
of the field functionaries to use Guarantees as risk mitigant is also well established. Present credit risk rating
system evolved in the bank is aimed at measuring the Probability of Default of the borrower. To measure the
impact of Credit Risk Mitigants, Bank has also implemented Facility Rating Model.

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Cut- off levels for Scoring Models for Credit Decision

1. PNB SME SCORE

A. For Loans under Govt. Sponsored scheme (eg. PMEGP scheme etc.) above ₹2.00 lakh & up to
₹100.00 lakh where Capital subsidy/ Interest subsidy/ concession etc. is available
Score Range Colour Zone Implications
Upto 40 Red Application cannot be considered for sanction.
Above 40 upto 75 Green Application can be considered for sanction by respective
Above 75 Blue Sanctioning Authority as per their vested loaning powers.

B. For non-Govt. sponsored schemes loans above ₹2.00 lakh upto ₹100.00 Lakh
Score Range Colour Zone IRR as per Implications
PNB Trac
Upto 46 Red C3 to B3 Sanction Authorities may exercise its vested loaning power in
case of Fresh/ Additional/ Enhancement/ Adhoc/ Renewal of
facilities as prescribed for B3, C1, C2 and C3 rated accounts.
>46 to <=52 Yellow B2 Sanction Authorities may exercise its vested loaning power in
case of Fresh/ Additional/ Enhancement/ Adhoc/ Renewal of
facilities as prescribed for B2 rated accounts.
Above 52 Green B1 & above Normal Loaning Powers by officials at all levels to the extent of
their vested loaning powers.
Note: No fresh/ additional /enhancement exposure should be taken upto field level (GBB/PLP/MCC level) for such accounts
in case of less favourable industries in terms of HO IRMD L&A circular on industry outlook issued from time to time .
Reference: IRMD L&A Circular on Loaning Powers No. 50/2024 Dt. 19.04.2024

2. PNB SCORE FOR RETAIL LOANS

This rating model is used for conducting credit risk rating of retail loans upto ₹1.00 Crore. However, Housing
Loan, Education Loan & Conveyance Loan to individuals irrespective of loan amount are to be rated under PNB
Score (i.e., even if the loan amount is more than ₹1.00 crore then also, we will use PNB SCORE for Credit Risk
Rating)
Score Range Colour Zone Implications
Upto 40 Red Cannot be considered for sanction except Education Loan
Above 40- up to 50 Yellow Can be considered by next higher authority for sanction with proper justification
Above 50- upto 75 Green Can be considered for sanction at Branch level
Above 75 Blue May be considered for price discount by competent authority
Reference: RBD (A) Circular 31/2020 Dt.31.03.2020

For Vehicle loans to ‘New to Bank’ (NTB) Non-individual entities for personal use of their Executives
Score Range Colour Zone Credit Decision
50 & above Green Can be considered as per the vested loaning powers
40 & above and <50 Yellow Can be considered by next higher authority with proper justification
< 40 Red Cannot be considered
Reference: RAD Circular No. 39/2023 Dt. 20.03.2023, However, for existing to Bank (ETB), Non- individual customers the
existing scoring/rating model in PNB SME Score/PNB Farm Score/PNB TRAC (as per eligibility) will continue to be applicable

3. PNB FARM SCORE

Applicable for Cash Credit /Production Credit loan more than ₹3 lakh and for investment Credit /Term Loan more than
₹1 lakh
Score Range Color Zone Credit Decision
0<40 Red Applications cannot be considered
40<50 Yellow Applications can be considered by next higher authority with proper justification
50<75 Green Applications can be considered for sanction by competent authority
75 & above Blue Can be considered and may be considered for price discount in future
For detailed guidelines on PNB Farm Score, PSFID /Priority Sector /Circular No. 22/2020 dated 26.03.2020, No.27/2022 dated
09.05.2022 and its subsequent modifications may be referred

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9. IDENTIFICATION OF TARGET MARKET FOR THE BANK - THRUST AREAS

9.1 RETAIL SEGMENT

Bank will continue to use retail as a growth trigger and direct its policies towards boosting advances to retail
segment, mainly through Lead Generating Branches and PLPs.
The retail segment should not be construed as defined by RBI as regulatory retail in the New Capital Adequacy
Framework (NCAF). For the purpose of NCAF applications, not only the individual borrowers covered by schemes
of RAD, but also other small and medium borrowers, who comply with qualifications under NCAF would be applied
a risk weight applicable to regulatory retail. Hence, retail segment for business thrust and for NCAF must be
understood properly, while applying provisions of the policy.
Although regulatory guidelines stipulate that maximum aggregated retail exposure to one counterpart should not
exceed the threshold limit of ₹7.5 Crore, yet individual housing loans will form part of retail banking segment for
the purpose of reporting irrespective of any upper ceiling.
Advances under following retail loan schemes will be encouraged to increase the priority sector portfolio / boost
the country’s economic development and meet the needs of various segments of Society, including those hitherto
deprived, students and senior citizens:
➢ Housing Loans with its variants
➢ PNB PRIDE – Housing loan & Car Loan to Central Govt. & State Govt employee with concession in rate of interest.
➢ Education Loans // Vehicle Loans // PNB Green Car (e-Vehicle) Loan // Personal Loan //Pre Approved Personal Loan
➢ PNB myProperty Loan
➢ Loans to Pensioners // Pre Approved Personal Loan to Pensioners
➢ Loan against Gold jewellery/ Ornaments and Sovereign Gold Bond
➢ Financing Installation of Grid connected rooftop and small solar power plants at residential houses – under
housing finance scheme for public
➢ DCEMI- Debit Card EMI
➢ Digital Home Loan-Digi Home Loan
➢ Personal Loan to New to Bank Customer- PNB SWAAGAT
Following areas will be focused to build robust and quality-based retail loan portfolio:
➢ Product, Research and Innovations
➢ Leveraging of Information Technology
9.2 PRIORITY SECTOR CREDIT
Bank will continue to direct its policies for boosting advances to all segments of Priority Sector to remain ahead of
the national goals under priority sector, agriculture, weaker sections, women beneficiaries etc.
The thrust is to provide financial and all other assistance to the farming segment in the line with goals of Govt. of
India to double farmers’ income by promoting farmers’ welfare, reducing agrarian distress and bringing parity
between income of farmers and those working in non-agriculture professions.
Focused attention shall be paid to increasing investment credit in Agriculture under following:
➢ Agriculture infrastructure like cold chains, refrigerated vans etc. for transport and preserving perishable goods.
➢ Scheme for construction/ renovation/ modernization of cold storages.
➢ Financing Green Houses/Poly Houses
➢ KCC for working capital for Animal Fisheries and Fisheries
➢ Allied agricultural activities like poultry, fishery, piggery, sheep/ goat etc.
➢ Cluster based financing model of Agri Commodities and regions will be explored
In addition to the above, thrust shall be on lending for micro irrigation facilities like drip irrigation, sprinkler
irrigation etc., organic farming, financing to FPOs, supply chain build up, Agri. Logistics, agri transportation
network and agri export. Loans for pre and post-harvest activities will be encouraged for increasing agriculture
lending.
Efforts will be made to increase flow under the schemes launched by GoI under Atmanirbhar Bharat Abhiyaan

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Microfinance Loans

A microfinance loan is defined as a collateral-free loan given to a household having annual household income (actual
as well as projected) up to ₹3.00 Lakh. Loans provided directly by the bank to individuals and individual members
of SHG/JLG satisfying the criteria for microfinance loan is eligible for classification under priority sector.
For detailed guidelines on microfinance loans IRMD L&A circular no. 134 dated 19.09.2022 on Regulatory framework for
Microfinance Loans as updated from time to time may be referred

Co- lending by Banks and NBFCs (including HFCs) to Priority Sector

Banks are permitted to co- lend with all registered NBFCs (including HFCs) based on a prior agreement. The co-
lending banks will take the share of the individual loan on a back-to-back basis in their books. However, NBFCs
shall be required to retain a minimum of 20% share of the individual loan on their books.
Policy On Co- Lending by Banks and Non-Banking Financial Companies (NBFCs) Including HFCs to Priority Sector has been
conveyed vide Agriculture Division circular no.33/2023 dated 19.04.2023 as updated from time to time

Classification of Lending by Banks to NBFCs and MFIs For On-Lending Under Priority Sector

In order to boost credit to the needy segment of borrowers, bank credit to registered NBFCs (other than MFIs) for
on lending will be eligible for classification as priority sector under respective categories subject to the following
conditions:
i. Agriculture: On-lending by NBFCs for ‘Term lending’ component under Agriculture will be allowed up to ₹10
Lakh per borrower.

ii. Micro and Small enterprises: On lending by NBFC will be allowed up to ₹20 Lakh per borrower
➢ Housing: On-lending by HFCs upto aggregate loan limit of ₹20 lakh per borrower
For detailed guidelines on Priority Sector Lending – Targets and Classification, Agriculture Division Circular No. 95/2024 dated
11.07.2024 may be referred
Other Instruction
➢ Loans for social infrastructure development like schools, health care facilities, drinking water facilities and
sanitation facilities in Tier II to Tier VI Centres, use of renewable energy will be encouraged.
➢ Apart from thrust on investment credit efforts will be made to cover all the eligible KCC/ Kisan Gold borrowers
with PNB KisanRuPay Card (KCC Debit Card) and mandatory crop insurance coverage.
➢ Moreover, considering the benefits extended under the Crop Insurance Scheme in terms of commission
available @ 4% of the premium collected by the Bank and potential for bringing new farmers in Bank’s fold,
efforts should be made for covering maximum number of non-loanee farmers under crop insurance coverage.
➢ Bank will also explore new ventures in rural areas in partnership model with Govt. agencies/ Corporates.
9.3 MICRO, SMALL & MEDIUM ENTERPRISES (MSME)
The Bank shall continue to lay emphasis on financing Micro, Small & Medium Enterprises and our existing MSME
credit portfolio shall be enlarged with special focus on lending to Micro Enterprises.
Definition of Micro, Small and Medium Enterprises
Ministry of MSME, GoI, vide Gazette notification no. S.O.2119 (E) dated June 26, 2020 has communicated detailed
guidelines viz. Classification of Micro, Small & Medium enterprises, Registration of MSME on Udyam Registration
portal, Updation of information on Udyam Registration portal etc. The new criteria has come into effect from July
1, 2020. In terms of revised guidelines, classification is as under:
Criteria
Classification Where the investment in P&M or equipment & Turnover
Does not exceed
Micro Sector ₹1.00 Cr & ₹5.00 Cr
Small Sector ₹10.00 Cr & ₹ 50.00 Cr
Medium Sector ₹50.00 Cr & ₹ 250.00 Cr
Note 1: Exports of goods or services or both, shall be excluded while calculating the turnover.

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Note 2: The value of Plant and Machinery or Equipment shall mean the Written Down Value (WDV) as at the end
of the Financial Year as defined in the Income Tax Act and not cost of acquisition or original price.
➢ All MSMEs are required to register online on the Udyam registration portal and obtain ‘Udyam Registration
Certificate’
➢ For PSL purposes bank shall be guided by the classification recorded in the Udyam Registration Certificate
(URC).
(Ref: MSME & Mid Corporate Division Circular No.96/2020 dated 04.09.2020,58/2022 dated 14.11.2022, 90/2023 dated
13.12.2023 and amendment therein from time to time may be referred)
Targets for MSME Lending
In terms of the recommendations of the Prime Minister’s Task Force on MSMEs, banks are advised to achieve:
➢ 20% year-on-year growth in credit to MSE.
➢ 10%annual growth in the number of Micro Enterprise accounts and
➢ 60% of total lending to MSE sector as on preceding March 31st to Micro enterprises.
As per RBI stipulation the target fixed for the Micro Sector in MSE is as below:
Category Sub- Targets
Micro Enterprises 7.5% of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher

Disposal of Loan Application

(Time limit start from the date of submission of complete information/data by the applicant)
For MSE Borrowers
CREDIT LIMIT TIME SCHEDULE (Maximum)
Loans up to ₹ 25 Lakh 14 Working Days
Loans above ₹ 25 Lakh 6 Weeks
For Other than MSE Borrower (Except Retail Lending Schemes):
CREDIT LIMIT TIME SCHEDULE (Maximum)
Loans up to ₹ 2 Lakh 2 Weeks
Loans above ₹ 2 Lakh and upto ₹50 Lakh 4 Weeks
Loans above ₹ 50 Lakh and upto ₹1 Crore 5-6 Weeks
Loans above ₹1 Crore & upto ₹100 Crore 6-7 Weeks
Above ₹100 Crore 8-9 Weeks

Type of Loan / Facility

The Bank provide all types of fund based and non-fund based facilities to the borrower under this sector viz. Term
Loan, Cash Credit, Overdraft facility, Bill financing, Letter of Credit, Packing credit, Bank guarantee, etc. A composite
loan with maximum limit up to ₹1.00 Cr. should be considered by bank to enable the Micro and Small Enterprises
(both for manufacturing and service sector) to avail of their working capital and Term loan requirement through
Single Window
Co- lending by Banks and NBFCs to Priority Sector
In terms of Co- Lending Model of RBI, Banks are permitted to co- lend with all registered NBFC (including HFCs)
based on a prior agreement. To augment the business under the said model, Bank has entered into tie up
arrangement with NBFCs /MFIs under co-lending arrangement for exploring new avenues of business for MSME
segment.
Credit to Deposit (CD) Ratio
Endeavour would be to take up hi-value agri-projects and cluster based lending to small and medium enterprises,
to enable bank to surpass the benchmark of 60% under CD ratio of rural and semi-urban areas.

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National Goals under Priority Sector and Sub- sectors

Sector National Goal (Computed against ANBC or credit equivalent of Off Balance
Sheet Exposure whichever is higher)
Priority Sector 40%
Total Agriculture 18%
Within Agriculture, Loans 13.78% for FY 2022-23
to non-corporate farmers
Within Agriculture, Phase Financial Year For Small and Marginal Farmer For Weaker Sections
wise targets 2023-24 10% 12%

Micro Enterprises 7.5%

Other Strategies
➢ To improve Non-Fund Based Business,

➢ To bring quality accounts into our fold by take over from other bank/lending instruction.

➢ To consider buy out of loans from other institutions as a strategic decision after due diligence and ensuring
that it will be a profitable proposition for the bank. Under the buyout of loans, bank has to pay the outstanding
amount plus premium payment (difference between NPV of interest chargeable as per sanction of the selling
institution and interest rate at which loan has been purchased by our bank) and the total amount has, therefore,
to be debited to the term loan. In our books it will be a Term Loan like any other Term Loan with the only
difference that a part of amount is towards premium payments.

➢ Transfer of Loan Exposure: Loan transfers are resorted to by lending institutions for multitude of reasons
ranging from liquidity management, rebalancing their exposures or strategic sales. “Transfer” means a transfer
of economic interest in loan exposures by the transferor to the transferee(s), with or without the transfer of
the underlying loan contract, in the manner permitted in above master direction of RBI.

➢ To consider Short Term Loans

➢ Digital Lending: Bank has taken following initiatives towards digital lending e.g. PNB e- Mudra (Shishu)
Scheme, PAPL, Digi Home Loan, PABL, eGST, GST SAHAY, PNB SWAGAT, Digi Gold Loan, Digi Journey of KCC
through JanSamarth Portal, Krishi Tatkal Rin (KTR) etc.

********************

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10. CAPITAL CHARGE FOR CREDIT RISK

10.1 Credit Risk Policy

With the objective to improve the banking sector’s ability to absorb shocks arising from financial and economic
stress, Bank has implemented the Basel III guidelines w.e.f. 01.04.2013 on the basis of regulatory prescription.
As such, the credit policy deals with short-term implementation as well as long term approach to credit risk
management. The policy of the Bank embodies in itself the areas of risk identification, risk measurement, risk
grading techniques, reporting and risk control systems /mitigation techniques, documentation practice and the
system for management of problem loans.

10.2 Capital Charge under Standardized Approach

In terms of the RBI guidelines, Bank has implemented Standardized Approach through CRISMAC ‘RWA
Computation Engine’ developed in-house under ‘PNB EDW 2.0’ software.
Under Standardized Approach, loan assets have been classified into following major categories:
➢ Claims on Domestic/Foreign Sovereigns
➢ Claims on Public Sector Entities (PSEs)/ Primary Dealers
➢ Claims on Banks/ Claims on Corporates/ Claims on NBFCs
➢ Claims included in the Regulatory Retail Portfolio
➢ Claims Secured by Residential Properties
➢ Claims under Specified Categories/ Other Assets
➢ NPA/ Off Balance Sheet Items

PRESCRIBED RISK WEIGHTS AS PER RBI GUIDELINES

S.N Particulars Risk Weight
Claims on Central Government, Central Government guaranteed, State Government,
1 RBI, DICGC,CGTSME , Credit Risk Guarantee Fund Trust for Low Income Housing 0%
(CRGFTLIH)
Claims on State Government guaranteed, ECGC, Domestic Banks, AAA rated Corporates
2 20%
/PSE /NBFC Securitisation Exposures & Staff Loans secured by SA or mortgages
Claims on AA rated Corporates/ Domestic PSE/ NBFC/ Securitisation Exposures/
3 30%
Restructured & Corporate/ PSE/ NBFC
Claims on A rated Restructured Corporates / Domestic PSE/ NBFC, Unsecured NPA
4 50%
exposure where specific provisions is at least 50%
5 Claims on Regulatory Retail (RRP), CRE – RH, Education Loans 75%
Claims on Unrated & BBB rated Corporates/ PSE/ NBFC/ Securitisation exposure,
6 Unsecured NPA exposure where specific provisions is atleast 20% but less than 50% , 100%
Commercial Real Estate
Foreign Sovereign/ Foreign PSEs attracts risk weight as per the rating assigned by
7
international rating agencies namely Standard & Poor, Moody’s and FITCH
Domestic PSEs/ Primary Dealers attracts risk weight in a manner similar to claims on
8
Corporate
Claims on Banks:
➢ Under Basel III, Risk Weights are based on Common Equity level (CET) & applicable Capital
9 Conservation Buffer (CCB) of the concerned Bank.
➢ Claim on foreign banks & foreign central bank attracts risk weight as per the ratings assigned
by international rating agencies
10 Restructured
10.1 Rated Restructured As per Rating
10.2 Unrated Restructured 125%
Claims on BB & below rated Corporates /Domestic PSE/NBFC/Restructured, NPA
11 150%
Unsecured exposure, specific provisions less than 20%
Claims under Specified Categories: Risk Weights
▪ Consumer credit exposure including personal loans, but excluding housing loans, education loans,
12
vehicle loans and loans secured by gold and gold jewellery, shall attract a risk weight of 125%.
Credit card receivables attracts risk weight of 150%

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▪ As gold and gold jewellery are eligible financial collaterals, the counter party exposure in respect of
personal loans against gold and gold jewellery are worked out under the comprehensive approach
after netting the value of security from outstanding and then applying risk weight of 125%.
▪ Capital Market Exposure : 125% or higher, if warranted by the external rating or lack of it
▪ Claim on venture capital fund :150%
13 Investment in JV/ DTA due to timing difference 250%
*RWA has been calculated after considering netting of available Credit risk Mitigants available with Bank
CLAIMS ON NBFCs:
• In terms of extant norms, exposures of SCBs to NBFCs, excluding core investment companies, are risk
weighted as per the ratings assigned by accredited external credit assessment institutions (ECAI)5. On a
review, it has been decided to increase the risk weights on such exposures of SCBs by 25 percentage
points (over and above the risk weight associated with the given external rating) in all cases where the
extant risk weight as per external rating of NBFCs is below 100%. For this purpose, loans to HFCs, and
loans to NBFCs which are eligible for classification as priority sector in terms of the extant instructions
shall be excluded.
• Further, RBI vide notification dated 16.11.2023 has decided to increase the risk weight by
25% points (over and above the risk weight associated with the given external rating) in all
cases where the extant risk weight as per external rating of NBFCs is below 100%. For this
purpose, loans to HFCs and loans to NBFCs which are eligible for classification as priority
sector in terms of the extant guidelines shall be excluded.
• Exposures to CICs, rated as well as unrated, will continue to be risk-weighted at 100%.

➢ Number of External Credit Rating Agencies accredited by RBI: Seven (7) CRISIL, ICRA, CARE, INDIA
RATINGS, Brickwork, Acuite Rating & Research (formerly SMERA Ratings Limited) and
INFOMERICS Valuation and Rating Pvt. Ltd. (INFOMERICS).
➢ Depending on the contractual maturity of bank loan facility, the rating as well as the respective risk weight are
as under:

➢ Long Term: The bank loan facilities having contractual maturity of more than one year.
➢ Short Term: The bank loan facilities having contractual maturity up to one year.
Claims on Corporate - Risk Weights
External Rating-L AAA AA A BBB BB & Below Unrated
External Rating-S A1+ A1 A2 A3 A4/D Unrated
Risk Weight 20% 30% 50% 100% 150% 100%1

➢ Regulatory Retail Portfolio

Exposures (including both Fund-based and non-fund based) shall be classified as retail claims for regulatory capital
purposes if they meet the four criteria listed below. Claims in this portfolio shall be assigned a risk-weight of 75%,
except if RBI mandates otherwise:

Qualifying criterion: The exposure is to an individual person or persons or to a small business.

Product criterion: The exposure is in the form of revolving credits, lines of credit (including overdrafts), term
loans/leases/small business facilities and commitments.
Granularity criterion: Aggregate exposure to one counterpart does not exceed _____of the overall regulatory
retail portfolio. NPAs under retail loans are to be excluded from the overall regulatory retail portfolio while
assessing the granularity criterion for risk-weight purposes:0.2%
Low value of individual exposures: The maximum aggregated retail exposure to one counterpart should
not be more than the absolute threshold limit of : ₹7.50 Crore

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➢ Under Regulatory Retail Portfolio, Small business is one where the total average annual turnover is less
than:₹50.00 Crore
➢ The turnover criterion will be linked to the average of the last ______in the case of existing entities; projected
turnover in the case of new entities; and both actual and projected turnover for entities which are yet to
complete three years: 3 Years

Claims secured by Residential Properties

➢ Recognizing the criticality of real estate sector in the economic recovery, given its role in employment generation
and the inter linkages with other industries, it has been decided, as a countercyclical measure, to rationalize
the risk weights by linking them only with LTV ratios for all new housing loans sanctioned w.e.f. 16.10.2020
up to March 31, 2023 which are as under:
(RBI circular DOR.No.BP.BC.24/08.12.015/2020-21 dated October 16, 2020)
Outstanding loan LTV ratio (%) Risk Weight (%) Standard Asset
Provision (%)
≤ 80 35
Irrespective of Amount 0.25%
> 80 and ≤ 90 50

➢ After 31.03.2023, the following LTV ratios, risk weights and standard asset provisioning rate:
Outstanding loan LTV ratio (%) Risk Weight (%) Standard Asset
Provision (%)
Up to ₹30 lakh ≤ 80 35
> 80 and ≤ 90 50
Above ₹30 lakh and up to ₹75 lakh ≤ 80 35 0.25%
Above ₹75 lakh ≤ 75 50
*Loan to Value Ratio (LTV) is computed as a percentage of outstanding in the account (Principal + Interest + Other charges
without any netting) in the numerator and the latest realizable value of the residential property mortgaged to the bank, exclusive
of stamp duty, registration and other documentation charges, as per bank record, in the denominator. However, in cases where
the cost of the house/dwelling units does not exceed ₹10 lakh, bank may add stamp duty, registration and other documentation
charges to the cost of the house/dwelling unit for the purpose of calculating LTV ratio.
Risk Weights for NPAs

SN Particulars Residential Other NPAs

Mortgage (Unsecured Portion)
1 Specific provisions are less than 20% of O/s of NPA 100% 150%
2 Specific provisions are at least 20% and less than 50% of outstanding
amount of NPA 75% 100%

3 Specific provisions are at least 50% of outstanding amount of NPA 50% 50%
If NPA is fully secured by the following collateral that are not recognized for credit risk mitigation purposes, either
independently or along with other eligible collateral, a 100% risk weight may apply, net of specific provisions, when
provisions reach:15% of the outstanding amount.
✓ Land and building valued by an expert valuer and with valuation not more than 3 years old, and
✓ Plant and machinery in good working condition at a value not higher than the depreciated value as
reflected in the audited balance sheet of the borrower, which is not older than 18 months.
Off Balance Sheet Items
➢ Non market related off balance sheet items such as direct credit substitutes and trade & performance related
contingent items are also subject to risk weights. First credit equivalent amount in relation to these items is
determined by multiplying the contracted amount of that transaction by the relevant credit conversion factor
(CCF) followed by deduction of eligible CRMs and then the stipulated RW is applied to arrive at the RWA.
➢ Under the RBI guidelines, RW is also applicable where the fund based facility is undrawn or partially undrawn
and the same is not unconditionally cancellable. The amount of undrawn facility is included in the non-market
related off balance sheet item after application of relevant CCF.

➢ The undrawn portion of cash credit/ overdraft limits sanctioned to the large borrowers availing aggregate fund
based working capital limit of ₹150 Crore and above from entire banking system, irrespective of whether
unconditionally cancellable or not, shall attract a credit conversion factor of 20%.

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➢ Commitments other than securitisation liquidity facilities with an original maturity up to one year and
commitments with an original maturity over one year will receive a CCF of 20% and 50%, respectively.

➢ Exchange rate contracts with original maturity upto one year or less will receive CCF of 2%, above one year
upto 5 years CCF of 10% and above 5 years CCF of 15%.
Guidelines regarding credit conversion factors applicable on non-fund based business have been circulated through
IRMD Circular No. 36 dated 23.12.2022.
Note:
1Claims on Corporates, NBFCs excluding CICs having aggregate exposure from banking system of more than ₹100 crore which

were rated earlier and subsequently have become unrated attracts a risk weight of 150% and a higher risk weight of 150% will
be applicable on all unrated claims on corporates having aggregate exposure of more than ₹200 crore from the banking system
with effect from FY 2019-20 onwards
2In order to reduce the cost of credit for this segment consisting of individuals and small businesses (i.e. with turnover of upto

₹50 crore), and in harmonization with the Basel guidelines, it has been decided that the above threshold limit of ₹5.00 crore for
aggregated retail exposure to a counterparty shall stand increased to ₹7.50 crore from RBI notification date 12.10.2020. The
risk weight of 75 % will apply to all fresh exposures and also to existing exposures where incremental exposure may be taken
by the bank upto the revised limit of ₹7.50 crore. The other exposures shall continue to attract the normal risk weights as per
the extant guidelines.
EXTERNAL RISK RATING
➢ In view of Basel III regulations (NCAF Guidelines), the borrowers of having aggregate exposure (FB+NFB)
above ₹5 Crore or total average annual turnover of more than ₹50 crore, shall get their credit facilities
rated from any of the External Rating Agencies

➢ However, as per our Bank’s guidelines All borrowers of our Bank with total exposure (both FB+NFB) of up
to____ from our bank., be exempted from securing External Risk Ratings:₹25 Crore
In case external rating of the borrower is available its cognizance should not be taken for reckoning loaning
power however Risk Weight & pricing shall be applied based on available valid external risk rating.
➢ Further, Borrowers availing credit exposure (Both Fund Based and Non Fund Based) above ₹25 crore and
upto ₹50 crore are exempted for obtention of external risk rating subject to conditions mentioned in
Operational Guidelines of CMRP>>Chapter-5 MSME
i. All borrowers with an internal risk rating from A1 to A4, the exemption of external risk rating shall be allowed
for credit exposure (both Fund Based and Non Fund Based) upto ₹50 crore (Subject to the overall credit
exposure from Banking Industry is upto ₹100 crore).
ii. In case borrowers with an Internal Risk Rating of B1/B2 i.e. not below the investment grade, offer collateral
(Immovable property /Liquid Security) equivalent to atleast 50% of total exposure, the exemption of obtaining
External Risk Rating for credit exposure (both Fund Based and Non-Fund Based) up to ₹50 Crore shall be
allowed.
iii. Further, for borrowers with an Internal Risk Rating of B1/ B2 i.e. not below the investment grade, in case the
sum total of collateral (Immovable property / Liquid security) and primary security (Immovable property/ liquid
security) is equivalent to at least 100% of total exposure, the exemption of obtaining External Risk Rating for
credit exposure (both Fund Based and Non-Fund Based) up to ₹50 Crore shall be allowed.
iv. The exemption in external rating, once provided shall continue to be allowed irrespective of down gradation in
internal rating. (Only in case of renewal of credit facilities)
➢ Penal charge @1% shall be levied in respect of those borrowers, who are otherwise eligible and have not got
themselves externally rated from any of the approved rating agencies or whose external rating has expired.

INTERNAL RATING BASED APPROACH

➢ The IRB approach allows banks, subject to the approval of RBI, to use their own internal estimates for
some or all of the risk components (Probability of Default (PD), Loss Given Default (LGD),
Exposure at Default (EAD) and Effective Maturity (M)) in determining the capital requirement for a
given credit exposure.

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➢ Under the IRB approach, to arrive at the risk weighted assets (RWA) for exposure, internal risk ratings is used
and banking book exposures is categorized into following six asset classes broadly:
a) Corporate b) Sovereign c) Bank d) Retail e) Equity f) Others
➢ The IRB approach is again classified into Foundation IRB (FIRB) approach and Advanced IRB (AIRB) approach.
The bank has got approval from RBI to participate in the parallel run of the Foundation IRB (FIRB) approach
of credit risk.

CREDIT RISK MITIGATION TECHNIQUES

➢ RBI has prescribed list of eligible financial collaterals, method of valuation of these collaterals and haircut
thereon etc., which helps the bank in reducing the exposure amount by permitting offset of such collaterals
against the exposure.
➢ Banks use a number of techniques to mitigate the credit risk e.g. exposure may be collateralized in whole or in
part by cash or securities, deposits from the same party, guarantee of a third party etc.
➢ RBI guidelines under Standardized Approach of credit risk allow a wide range of credit risk mitigants to be
recognized for regulatory capital purposes provided these techniques meet the requirements of legal certainty.
It may be added that while the use of CRM technique reduces or transfers credit risk, it simultaneously may
increase other risks such as residual risks. The Bank ensures that all these risks are also monitored and
controlled.
➢ RWA Computation Engine developed in-house under ‘PNB EDW 2.0’ software takes care of CRM techniques,
as mentioned above for computation of RWA under credit risk
➢ The following securities (either primary or collateral) are eligible for treatment as credit risk mitigants:
i. Cash (as well as certificates of deposit or comparable instruments issued by the lending bank) or deposit with the bank
which is incurring the counter-party exposure.
ii. Gold: Gold would include both bullion and jewellery. However, the value of the collateralized jewellery should be
benchmarked to 99.99 purity.
iii. Securities issued by Central and State Governments.
iv. Kisan Vikas Patra and National Savings Certificates, provided no lock in period is operational and if they can be encashed
within the holding period.
v. Life insurance policies with a declared surrender value of an insurance company, which is regulated by an insurance
sector regulator.
vi. Debt securities rated by a recognized Credit Rating Agency where these are either:
(a) at least BBB- when issued by public sector entities; or
(b) at least A3 for short-term debt instruments
vii. Debt securities not rated by a recognized Credit Rating Agency where these are:
a) Issued by a bank; and
b) Listed on a recognized exchange; and
c) Classified as senior debt; and
d) All rated issues of the same seniority by the issuing bank that are rated at least BBB- or A3 by a chosen
Credit Rating Agency ; and
e) The bank holding the securities as collateral has no information to suggest that the issue justifies a rating
below BBB- or A3 (as applicable) and;
f) Banks should be sufficiently confident about the market liquidity of the security.

viii. Units of Mutual funds regulated by the securities regulator of the jurisdiction of the bank’s operation mutual funds where
a. a price for the units is publicly quoted daily i.e., where the daily NAV is available in public domain; and
b. Mutual fund is limited to investing in the instruments listed in this paragraph(Equities including convertible bonds are
no longer part of CRM)
The above mentioned is an indicative list of eligible financial collaterals. The detailed guidelines are available in Credit Risk
Mitigation and Collateral Management Policy.
➢ Eligible IRB collaterals: In addition to the eligible financial collaterals as mentioned above for standardized
approach, some other collaterals recognized under IRB approaches of credit risk are as under:-
i. Eligible Financial Receivables
ii. Commercial or Residential Real Estate (CRE/RRE)
iii. Other physical Collaterals
➢ Cash Credit exposure though generally sanctioned for one year or less, is tend to roll over. Hence these
exposures should be reckoned as Long Term Exposures and accordingly the Long-Term Ratings accorded by
the Credit Rating Agencies will be relevant.
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11. SANCTION OF PROPOSALS BEYOND THE PURVIEW OF CMRP

a) Definition of Relaxations/Waiver and Deviation:
▪ Relaxations/Waiver which are already prescribed: In respect of those issues where Delegated
Authority is defined, the respective Delegated Authority shall exercise the approved delegated powers as
prescribed under Credit Policy/Scheme/other guidelines. The same shall not be construed as
deviation.
▪ Relaxations/Waiver which are not prescribed: In respect of those issues where Delegated Authority
have not been defined, the Management Committee (MC) of Board may consider Relaxation/Waiver in the
extant Credit Policy/Scheme/ Guidelines but within the Statutory & Regulatory framework. The same shall
not be construed as deviation. However, the same shall be reported to the Board in its next meeting for
information.
▪ Deviations: Those issues which are in variance to extant Statutory and Regulatory framework are
considered as deviations.

b) Management Committee may permit Relaxation/Waiver beyond the purview of Credit Management & Risk
Policy. While permitting Relaxation/Waiver from the policy guidelines, sufficient reasons for permitting such
Relaxation/Waiver need to be clearly outlined in the note for allowing such Relaxation/Waiver. Such
Relaxation/Waiver considered expedient in the interest of the bank in the normal course of business must be
reported by the respective Division/Department to the Board in its next meeting for information.

c) Further, HOCAC-II/HOCAC-III/MC may consider cases on merits in respect of the following matters in the
larger interest of the bank, to the extent of their vested loaning powers:
i) Waivement of stock audit in case of accounts with credit risk rating ‘B1 & below’.
ii) Relaxation in the ceiling of ₹100 crore prescribed for single stock broking entities including their allied concerns/inter-
connected companies.
iii) Sanction of short term/corporate loan for the purpose not specified in the guidelines/policy.
iv) Sanction of proposals of proprietary concerns/partnership firms/limited liability partnerships/HUFs, Societies, Trusts
beyond the exposure ceiling of ₹50 crore/ ₹100crore/ ₹200crore.
v) Sanctioning loans beyond the prescribed internal ceiling in respect of individual/group borrowers, but within the
ceiling prescribed by RBI.
vi) Sanctioning loans beyond the maximum ceiling prescribed from time to time under various schemes.
vii) Amendments in the Restructuring Policy by HOCAC-III based upon experience gained for smooth implementation
thereof.
viii) HOCAC-II & III may relax the prescribed margin in respect of advances against bank’s deposits including DRI/FCNR
(B) deposits as well as in case of advances against PSU Bonds/RBI Relief Bonds/postal securities/life insurance
policies/liquid securities of similar nature on merits of each case.
d) To facilitate operational convenience and to take care of meritorious proposals, HOCAC-II & above within
their respective vested loaning powers are empowered to approve relaxation in the
scheme/guidelines which otherwise do not fit in laid down schemes/ guidelines but is within
overall statutory and regulatory framework. Such cases where the HOCAC-II/ HOCAC-III has
exercised relaxation in the scheme/guidelines the same shall be treated as relaxation and shall
be put up to MC of the Board for Information.
e) Wherever financial powers have been delegated to board, it shall mean MC of Board.
f) It has been observed that sometimes, the loan proposal falls within the loaning powers of a sanctioning
authority but involves some relaxation/ waiver from the scheme/guidelines under which finance is required
and such relaxation/ waiver requires approval of the delegated authority. In order to adopt a uniform
approach in such cases and also to avoid duplication, it is advised that “the sanctioning authority can sanction
such proposals and thereafter, refer the relaxation/ waiver to delegated authority for approval. In such a case, the
sanction accorded by the sanctioning authority is subject to approval of such relaxation/ waiver.”
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(Ref. Circular: IRMD L&A 51/2024 Dated 20.04.2024)

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1. CREDIT DELIVERY STRUCTURE

Bank has created proper credit delivery channels for building up a sound credit portfolio. Bank has created
specialized structure, wherein relationship management concept has also been introduced. The purpose of
creating specialized structure is to ensure prompt credit dispensation and improving credit risk management
practices.
1.1 Customer Acquisition Centre (CAC)
The CACs consists of cells headed by product/ functional heads as under:
a) Home loan and Builders Tie Up
b) Vehicle loan and other retail loans
c) Current deposits and Merchant Acquiring Business
d) Corporate Relationships (only at 8 major cities- at other centres role entrusted to Current Deposit and MAB Cell)
e) Saving Deposits, NRI Business, Credit Cards and Other liability products
f) Business Loan Segment (For loan above ₹10.00 lakh)
Detailed guidelines on Customer Acquisition Centre has been circulated vide MPD Circular no. 13 dated 11.12.2023 and as
updated from time to time.

1.2 Government Business Vertical

The Government Business Vertical focuses on business generation through liaisoning and identifying
opportunities through State Government, Municipal Corporations, PSUs and Defence establishments.
Detailed guidelines in this regard has been circulated vide MPD Circular no. 15 dated 18.07.2020 and as updated from time
to time

1.3 The Credit delivery structure focuses on delivery of credit through 5 types of structures equipped with skilled
staff having separate verticals for pre & post sanction by retaining operational work at Branches. The model
focuses on delivery of Credit through specialized verticals wherein duties assigned are outlined as under:

➢ LCB/ELCB: The structure deals with Pre sanction appraisal, post sanction monitoring and operational work
with the clear segregation of pre & post sanction activities. LCB handles loan accounts above ₹50 Crore,
whereas ELCB handles loan account above ₹500 crores.

➢ CBB: To cater to the business at Centres not having LCBs or where existing LCBs are having limited business
potential. Bank has introduced Corporate Banking Branch (CBB) Structure (by conversion of existing General
Banking Branches and LCBs) to handle corporate accounts above ₹10 Crore.
➢ MCC: MCC deals with Pre sanction appraisal and post sanction monitoring of Loans having exposure above
₹1 Cr to ₹50 Cr. For accounts above ₹1 Crore, only operations to be handled by Branch and all Pre & Post
Sanction responsibilities to be handled by MCC. Where LCB is not present, MCC handles accounts above ₹50
Crore as well.

➢ PLP: PLP deals with Pre sanction appraisal and sanction of loan accounts above ₹10 Lac and upto ₹1 Crore
(above ₹1.00 crore where MCC is not located). Post sanction monitoring and operations to be handled by
Branch. There are two type of PNB Loan Point Centres:
PLP: Such centres cover all the branches of a defined Circle irrespective of distance.
Hybrid PLP: At certain centres, MCCs have been converted to PLP or rationalized with shifting of business
to PLPs and setting up of credit monitoring cell for post sanction responsibilities of Non-Retail Accounts
having exposure above ₹1 Crore
C-PLP: To have focused approach, dedicated processing center and to improve further efficiency &
turnaround of leads, a Centralized Structure for handling Retail loans leads sourced through PNBCSL (PNB
Cards & Services Ltd.), christened as Centralized PNB Loan Point (C-PLP) has been set up.
C-PLP is limited to retail loan products viz., Housing loan (Above ₹10 lakh), Vehicle Loan (Above ₹ 10 lakh)
and Education Loan (Above ₹ 7.5 lakh) sourced through PNBCSL.

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1.1 Credit Approval Committees and Respective Delegated Powers

CAC at MCC/ CO/ ZO/ HO level Headed by Credit proposals
CM Above ₹1 Crore to ₹4 Crore
PLP-CAC
AGM Above ₹1 Crore to ₹10 Crore
MCC-CAC AGM Above ₹1 Crore to ₹10 Crore
CHCAC AGM Above ₹10 Crore to ₹15 Crore
CHCAC DGM Above ₹10 Crore to ₹30 Crore
ZOCAC GM Above ₹30 Crore to ₹50 Crore1
ZOCAC CGM Above ₹30 Crore to ₹75 Crore1
HOCAC Level-I CGM-Credit Above ₹50 Crore to ₹100 Crore2
HOCAC Level-II ED- Corporate Credit Above ₹100 Crore to ₹300 Crore
HOCAC Level-III MD & CEO Above ₹300 Crore to ₹800 Crore
Management Committee MD & CEO Above ₹800 Crore
1
As ZOCAC is next higher authority to CHCAC, they shall also consider proposals above ₹15 Crore to ₹30 Crore
emanating from Circles headed by AGM.
2 HOCAC Level-I shall consider proposals above ₹75 Crore to ₹100 Crore emanating from CGM headed Zones.

Note: It should be ensured that the committee structure at field shall not have the appraising officer as part of the committee.
Detailed guidelines regarding constitution, scope, quorum and other operational modalities of CACs at various levels have been
advised by IRMD L&A circular no. 44 dated 01.04.2023 on Loaning Powers as updated from time to time.

1.2 NEW BUSINESS GROUP (NBG)

➢ The system of NBG is in place at HO level to examine the large credit proposals in respect of new
borrowers and take a view whether the same is support worthy or not. The purpose of setting up of NBG
is to cut down the time period involved in making the credit decision and to consider the credit proposal
in a structured format, so as to reach a consensus about the proposal.
➢ All fresh credit proposals envisaging total exposure (both FB and NFB) of above ₹50 crore shall be
placed before NBG in a structured format known as Preliminary Information Memorandum (PIM).
However, where the zone is headed by CGM, the proposal envisaging total exposure (both
fund based and non-based) of above ₹75.00 Crore shall be placed before NBG
➢ NBG-I (Headed by ED-Corporate Credit): Total exposure of above ₹50 crore or ₹75 Crore (For CGM
Headed Zone) and upto ₹200 crores
➢ NBG-II (Headed by MD & CEO): Total exposure of above ₹200.00 crores
➢ In case, complete proposal is available beforehand placing of Preliminary Information Memorandum
(PIM) before NBG is not mandatory i.e. the branches/sanctioning authorities are free to submit/consider
the proposal even without approval of NBG. The purpose of NBG is only to take quick decision based on
PIM because preparation of complete proposal normally takes more time and not to prohibit submission
of proposal without NBG’s approval.
➢ Validity of NBG: shall be valid for 6 months for considering the regular proposal.

1.3 SCREENING COMMITTEE FOR RISK BASED REVIEW OF CREDIT PROPOSALS

➢ In compliance with EASE Reforms, a Screening Committee (SC) at Head Office (HO) and Zonal Office (ZO)
for scrutiny of all fresh /enhancement proposal in standard category falling within vested powers of HO
Committees and ZOCAC have been constituted, respectively.
➢ The Screening Committee (SC) shall give its observations and recommendations relating to consideration or
non-consideration on all fresh /enhancement proposals, which shall be advisory in nature.
➢ However, decision of the Sanctioning Authority regarding consideration /non-consideration of the proposal
shall prevail.

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2. CREDIT DELIVERY- PRE-SANCTION APPRAISAL

To ensure the quality of loan portfolio, pre-sanction appraisal is given special attention. Over the years, Bank
has developed useful credit appraisal methodology, which is constantly toned up in the light of the experience
gained.
The detailed guidelines regarding Pre-sanction Credit Appraisal of loan accounts have been conveyed vide the
following circulars:
SN Details L&A Circular No. * Date
1. Control Measures - Pre-Sanction Credit Appraisal & Post- 157 17.08.2020
Sanction Follow-Up of Loan Accounts
2. Guidelines On Pre-Sanction and Post-Sanction Visit 41 23.03.2022
3. Control Measures: Due Diligence of Borrowers 85 11.08.2023
4. Policy on Obetintion of Financials 115 18.10.2023
*Modifications if any as updated from time to time shall be referred

2.1 DUE DILIGENCE

➢ Due diligence is a process carried out by a lender prior to granting a loan/ signing a contract, so as to
confirm all related facts. It refers to certain standard of care, to be taken before granting a loan / entering
into an agreement.
➢ Due diligence and market intelligence on borrowers/borrowing firms are important ingredients of Credit
Management. All credit proposals are subjected to due diligence processes in regard to the credentials of
the borrower, scrutiny of past credit history of all Borrowers/Promoters/Directors/Guarantors, purpose of
the loan, financial position of the borrower, need based requirement of credit facilities for working capital
and capital expenditure, capability to service the loans and security offered. Before sanction and
disbursement of loan, visit of the unit, market report on borrowers and guarantors, besides other pre-
sanction/pre-disbursement guidelines issued from time to time, should be a part of corporate culture.
➢ Careful selection of borrowers is essential to maintain asset quality. Hence, scrutiny of past credit history
of all Borrowers /Promoters /Directors /Guarantors needs to be carried out with a view to being satisfied
about their credentials, and for ensuring compliance with the guidelines on KYC and AML under Prevention
of Money Laundering Act.
➢ Due diligence is required to be carried out at :
✓ Pre-sanction stage (Borrower due diligence, Financial due diligence, Security due diligence etc.,);
✓ Post-Sanction stage (Pre-Disbursement & Post-Disbursement) and
✓ On-going basis (through reporting & monitoring)

2.2 CENTRAL ECONOMIC INTELLIGENCE BUREAU (CEIB)

➢ For proposals of ₹50 Cr and above, the report shall be sought from CEIB on the prospective borrower at
the time of pre sanction stage through the nodal officer of our bank. Report to be properly analysed and
if any adverse/significant feature in the report is noted with regard to the prospective borrower/entity etc.,
the same be taken cognizance of and be mentioned in the proposal.
➢ It is mandatory to seek the report from CEIB prior to placing the proposal before the sanctioning authority
for taking credit decision.
➢ Sanction may be accorded if CEIB report does not come within reasonable time.
However, it shall be mandatory to obtain report from CEIB prior to disbursement if the report is not
received at the time of sanction. The disbursement shall take place after ensuring that the report does not

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contain any adverse remark. In case of any adverse remark, the matter shall be referred to Sanctioning
Authority for their consideration.
➢ Corporate Credit Division at Head office shall designate a Nodal Officer as a point of contact for seeking
CEIB report. All request seeking CEIB report in prescribed format shall be sent by bank’s Nodal Officer to
designated e-mail id [email protected]. No physical copies of the requests shall be sent to CEIB.
➢ Corporate Credit Division has designated a nodal point of contact for seeking CEIB report and a dedicated
e-mail id [email protected] has been created for the purpose for seeking report from CEIB for
prospective Borrowers and for NPA Accounts.
➢ CEIB would try to adhere to a timeline of 15 working days for disbursing the report after receipt of a
complete request.
➢ The report received from CEIB is only for the exclusive use of the Bank and under no circumstances it
should be shared with the applicant or any other entity by the Bank.
For detailed guidelines on seeking report from CEIB, IRMD L&A circular no. 128 dated 24.11.2023 as
updated from time to time may be referred.
2.3 LEGAL ENTITY IDENTIFIER (LEI) REGISTRATION
➢ Legal Entity Identifier (LEI) is a 20 digit unique code that identifies every legal entity (across the globe) or
structure that is party to a financial transaction, in any jurisdiction.
➢ RBI has made it mandatory for non-individual borrowers enjoying aggregate exposure of ₹5 crore
and above from banks and financial institutions (FIs) to obtain LEI codes as per the timeline.
➢ Borrowers who fail to obtain LEI codes from an authorized Local Operating Unit (LOU) shall not be
sanctioned any new exposure nor shall they be granted renewal/ enhancement of any existing exposure.
However, Departments/ Agencies of Central and State Governments (not Public Sector Undertakings
registered under Companies Act or established as Corporation under the relevant statute) shall be
exempted from this provision.
➢ Definition of exposure: “Exposure” for this purpose shall include all fund based and non-fund based
(credit as well as investment) exposure of banks/FIs to the borrower. Aggregate sanctioned limit or
outstanding balance, whichever is higher, shall be reckoned for the purpose. Lenders may ascertain the
position of aggregate exposure based on information available either with them, or CRILC database or
declaration obtained from the borrower.
➢ Timelines for obtainment of LEI nonindividual borrowers having total exposure from ₹5 cr to ₹50 cr:
Total exposure to Banking System LEI to be obtained on or before
Above ₹ 25 Crore 30.04.2023
Above ₹ 10 Crore to ₹ 25 Crore 30.04.2024
₹ 5 Crore to ₹ 10 Crore 30.04.2025

2.4 ASSESMENT OF CREDIT FACILITIES

The purpose of sound credit appraisal in the Bank is to enable to take an informed decision as to the credit
worthiness of any proposal; that is, whether it is prudent, worthwhile and desirable for the Bank to take a
credit exposure on the applicant entity. The methods for assessment of working capital facilities is discussed
in Credit Management & Risk Policy (Part 1 - Policy). Assessment of other credit facilities has been discussed
hereunder:
2.4.1 ASSESMENT OF TERM LOAN (TL)
a) Assessment of earning potentials and generation of cash surplus is the vital ingredient in the appraisal of
term loans. The unit should make enough surplus earnings after meeting all the expenses, taxes and
other necessary provisions and the same should be adequate for servicing the loan and interest thereon

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within a reasonable period of time. The appraisal of term loan broadly involves an analytical assessment
of the following:
i. Purpose, cost of project and how it is to be tied up,
ii. Future trends of production and sales,
iii. Estimates of costs, expenses, earning and profitability, and
iv. Cash flow statements during the period of the loan.
b) While appraising proposal for term loan, the following four fundamentals should be carefully studied and
analysed:
i. Technical feasibility of the project.
ii. Economic viability of the project.
iii. Financial viability of the project.
iv. Managerial competence.
c) The tenor including moratorium for scheme specific term loans should be as per the approved schemes
guidelines. In other cases, term loans are normally granted for periods varying from 3 to 7 years
depending upon type and nature of project. Term Loans for Infrastructure Projects may be allowed even
with longer repayment period upto 20 years.
d) The period of the loan should be fixed keeping in view the cash generation capacity of the borrower.
Moratorium may be allowed during the implementation period and /or for the period where cash inflows
from project has not started. Normally the moratorium is allowed upto 2 years. However, in long
duration projects such as core industry, infrastructure, power projects, real estate projects and for NBFCs,
moratorium may be allowed for longer period upto 5 years, depending upon the cash flows of projects
/company. However, HOCAC-III and above may permit moratorium beyond the above prescribed period
on merits of the case.

2.4.2. Assessment of Non-Fund based facilities (NFB)

Assessment of NFB facilities shall be subjected to the same degree of appraisal, scrutiny as in the case of fund
based limits because outstanding in these facilities are to be reckoned at 100% for exposure purposes.
Therefore, need based requirement of a borrower should be assessed after reckoning the lead time, credit
period available, source of supply, proximity of supplier, etc. While assessing non-fund based facilities,
cash flow aspects should also be taken into account.
Non Fund Based Facilities to Non-Constituent Borrowers: RBI has advised that SCBs can grant NFB
facilities to those customers, who do not avail any fund based facility from any bank in India. Accordingly, non-
constituent borrowers can be sanctioned NFB facilities subject to the adherence of guidelines conveyed vide
IRMD L&A Circular No. 78/2023 dated 25.07.2023 as updated from time to time.
It should be ensured that the borrower has not availed any fund based facility from any bank operating in India
from scrutiny of balance sheet of the borrower, statement of account, RoC details (if applicable), Credit
Information Reports (CIR) extracted from the data-base of Credit Information Companies (CICs), sharing of
information, as prescribed by RBI, due diligence, etc.

2.4.3. Export Credit

Export finance is by and large regulated through the directives /guidelines issued by the RBI, Director General
of Foreign Trade (DGFT) and the Foreign Exchange Dealers’ Association of India (FEDAI). Export finance is
broadly classified into two categories:
a) Pre-shipment Export Credit

i. Pre-shipment Credit /Packing Credit is extended as working capital for purchase of raw materials,
processing, packing, transportation and warehousing of goods meant for export. As goods and services
going in to Special Economic Zone area (SEZ) from Domestic Tariff Area (DTA) are treated as exports,
RBI has advised that supply of goods and services from DTA to SEZ area would also be eligible for export

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credit facilities. Both, manufacturers as well as merchant exporters, are eligible to avail Rupee Packing
Credit at concessional rate of interest.

ii. It has two essential features, viz., (a) existence of an export order and /or letter of credit and (b)
liquidation of the credit by submission of export documents within a stipulated period. In case of exporters
of proven standing, the facility can also be extended on a running account basis provided the conduct of
the account is satisfactory and orders are lodged subsequently within a reasonable time.

iii. There is no fixed formula for determining the quantum of finance to be granted to an exporter against
specific orders /LCs. The guiding principle to be applied in all such cases is the concept of need-based
finance. The period for which the Bank gives packing credit depends on the manufacturing /trade cycle
or specific requirements of the individual export, normally not exceeding 180 days.

iv. RBI has laid down guidelines for disbursal of loan amounts, maintenance of accounts, follow up and
monitoring and liquidation of packing credit, which form the basis of our policies and procedures and
same has been advised by IBD from time to time. As the advance is granted on concessionary rates and
on relaxed terms and conditions, it is obligatory on the part of the exporter to comply with the terms and
conditions of the advance. In case of any default, the advance will attract rate of interest for Export
Credit, not otherwise specified (ECNOS) ab- initio.
b) Post-Shipment Export Credit

'Post-shipment Credit' means any loan or advance granted or any other credit provided by a bank to an
exporter of goods/services from India from the date of extending credit after shipment of goods/rendering
of services to the date of realization of export proceeds as per the period of realization prescribed by RBI
and includes any loan or advance granted to an exporter, in consideration of or on the security of any duty
drawback allowed by the Government from time to time.
Detailed guidelines on rupee export credit may be referred from IRMD L&A Circular No. 158 dated
04.11.2022 and subsequent circulars issued from time to time on the subject matter. IBD circulars may be
also referred for guidelines on export credit.

2.4.3.1 Foreign Currency Loan (FCL & FCTL)

a) Foreign currency loan shall be applicable under working capital for making payment for merchandise imports.
In this regard, guidelines contained in RBI Master Direction No. 17/2016-17 dated 01.01.2016 (Updated as
on January 06, 2022) - Import of Goods and Services may also be kept in view.
b) Loans shall also be in substitution of Working Capital Demand Loan or Cash Credit component. In case the
facility is released for domestic purchase of goods, the amount will be disbursed to the borrower in Indian
Rupees equivalent to the foreign currency advanced at prevailing TT buying rate. However, the liability
of the borrower will be denominated in foreign currency only.
c) Foreign Currency Term Loan (FCTL) may be allowed to importer of capital goods (under LC mechanism or
outside LC mechanism), in substitution of term loans approved by the Bank in favour of constituents in Indian
rupees, takeover of high cost Rupee term loans from other banks and financial institutions in India and for
Pre-payment of high cost External Commercial Borrowings subject to RBI norms, guidelines and prior
approval wherever necessary.
For consolidated guidelines on Foreign Currency Loan (FCL and FCTL) to Indian Borrowers, IBD /Foregn Exchange
Circular No. 46 dated 02.04.2020 and other circulars issued from time to time may be referred.
For details on guidelines related to Alternate Reference Rate (ARR), spreads over ARRs and card rates of FCL, FCTL,
PCFC, PSCFC and FOBD upon LIBOR cessation IBD Foreign Exchange Circular No. 82/2021 dated 08.12.2021 and other
circulars issued from time to time may be referred.

2.4.4. Methodology for Calculation of Exposure

Exposure calculated as per RBI LE framework and the exposure calculated as per methodology prescribed in
Credit Management & Risk Policy (para 4.4.1 of Policy(Part-I)) shall be comprehensively captured in the Credit
appraisal format for limits above ₹ 25.00 crore. For detailed guidelines in this regard, IRMD L&A circular no.
32 dated 20.03.2023 as updated from time to time may be referred.

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2.4.5. Tail risk embedded in project financing

a) Tail risk, though inherent in project, is not accounted for generally, but can occur due to occurrence of rare
events. It is something that is unlikely to happen, but still could. Adequate precaution, with an eye on the
tail risk must also be taken, while appraising the project.

b) Projects may get delayed due to several factors like non-availability of Right of Way, natural calamities, legal
issues, etc., which result in time and cost overrun for the project completion. Approval for funding of cost
overrun by the lenders take considerable time because of the procedural aspects followed by each lender.
Delay in approval of cost over run funding further halts the project progress.
c) As such, even though, contingency is already a part of the originally envisaged project cost, an effort be
made to anticipate cost overrun at the time of initial project funding and the same be included in contingency
cost.

2.4.6. Scrutinize Group Balance Sheet and ring-fencing of cash flows

a) For scrutiny of group balance sheet it is advised that while appraising /sanctioning the proposal,
consolidated group balance sheet must be examined and group leverage ratio be also kept in view to judge
the impact of risk emanating from group companies.
b) For ring-fencing of cash flows, the guidelines on TRA /Escrow accounts have been issued which provides
that TRA /Escrow arrangements to be followed in true spirit right from the disbursement stage. TRA
provides for all revenues of the project to be directed into a single account, which is then allocated in a
predetermined manner to various requirements including debt servicing. Similarly, Escrow Arrangement
provides for directing a pre-determined payment stream from the customers of the borrower to a special
account maintained with a designated agent.

2.4.7. TEV STUDY (Lending on the basis of Projects Appraised by Other Institutions)

Many times TEV study is carried out for Project Lending by nationalized banks, appraising institutions,
consultancy organizations and other institutions are received by the Bank. To have a uniform approach regarding
vetting of projects appraised by such institutions, guidelines detailing the procedure to be followed, outsourcing
of some part of Project Appraisal like due diligence, market potential studies, stage of business cycle, technology
related inputs and cost components including the reports on equipment /raw material suppliers, comparative
study of similar projects and preparation of financial models for the individual project and cut-off level for TEV
Study have been framed.

Cut Off limit for conducting TEV study:

Type of Project Cost of Project
a. Fresh Project Above ₹20.00 Crore
b. Existing Account – Project involving change / diversification from core activity
Expansion in existing activity Above ₹40.00 Crore
Exception: TEV study need not be conducted in following cases:
a) In normal circumstances, for conventional industrial units like Dal Mills, Rice Mills, Flour Mills and
units in Micro, Small and Tiny sectors,
For certain sectors like HAM Projects, Toll Projects (as commercial viability/debt servicing potential of such
Projects can be better assessed on the basis of their financial Models, Traffic Study (wherever applicable) by
the concerned credit desk and the credit decision can be taken by assessment of Group's net worth etc.
b) In case of industrial units operating in cluster and such cases to be considered using Model Projects emanating
from Technical Cell at Zonal Offices as a base project report.
c) In case the project is appraised by any Govt. Agency/PSU or any AAA externally rated company,

d) However, for point (a), (b), & (c) above, if the sanctioning authority desires complete TEV study report or
vetting of TEV report of project, they may decide the matter on case to case basis.
IRMD L&A circular no.20/2024 dated 16.02.2024 as updated from time to time may be referred for detailed guidelines on
Empanelment of outside Consultants for TEV Study.

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2.4.8. Viability Gap Funding (VGF)

Government of India has notified a scheme for Viability Gap Funding (VGF) to infrastructure projects, under
which grant support one-time or deferred is made available for certain PPP Projects by Govt. of India, with
the objective of making the project commercially viable.

2.4.9. Benchmark ratios for different Segments/Industries

In accordance with EASE Reforms, guidelines on benchmark ratios for different segments /industries have been
specified. Benchmark Ratios shall be applicable where facilities availed from our Bank is more than ₹1.00
Crore. IRMD L&A Circular No. 04/2023 dated 09.01.2023 and subsequent circulars issued from time to time may be referred
for detailed guidelines.

2.4.10. Drawing Power Calculation

a) Under Simplified Turnover Method:

Sundry creditors (for purchase of stock and for job-work etc.) be netted against sundry debtors and the
excess amount of sundry creditors, if any, be deducted from the value of stocks to arrive at the value of
security and the drawing power be calculated after providing for the stipulated margin.
b) Under MPBF Method:
Drawing Power would be calculated and allocated based on the MPBF methodology as under:
Total Value of Stocks A
(Closing balance of stocks, their value as per market rates or cost price, whichever is lower)
Less: Excess of Sundry Creditors (For stocks) B
Excess of Other Sundry Creditors C
Over the level assumed at the time of assessment
Net Value of Stocks D=A-B-C
Add: Eligible Trade Debtors including advance for stocks and expenses as envisaged at the time E
of assessment
Less: Outstanding under Bills discounted BD
Net Value of Debtors F=E-BD
Total eligible Current Assets G= D+F
Less: Stipulated Margin H
Drawing Power G-H
IRMD L&A Circular No. 227/2020 dated 19.12.2020 shall be referred for detailed guidelines.

2.5 GROUP APPROACH

➢ For identification of a group, the guiding principle is : “Commonality of Management and Effective
Control”
➢ Under LEF, counterparties with specific relationships or dependencies such that, were one of the
counterparties to fail, all of the counterparties would very likely fail are defined as Group of Connected
Counterparties
➢ Two or more natural or legal persons shall be deemed to be a group of connected counterparties if at least
one of the following criteria is satisfied:
i. Control relationship: one of the counterparties, directly or indirectly, has control over the other(s) or
the counterparties are, directly or indirectly, controlled by a third party (bank may or may not have
exposure towards this third party). The control relationship criterion is satisfied if one entity owns more
than 50 % of the voting rights of the other entity.

ii. Economic interdependence: if one of the counterparties were to experience financial problems, in
particular funding or repayment difficulties, the other(s), as a result, would also be likely to encounter
funding or repayment difficulties.

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2.6 BANKING ARRANGEMENT

➢ CONSORTIUM ARRANGEMENT:
▪ Minimum 10% share of the aggregate exposure should be taken by our Bank under consortium
arrangement.
▪ In case where our Bank’s share is less than 10% of the aggregate exposure, for sanction falling under the
loaning power upto the ZOCAC level, administrative clearance shall be sought from HOCAC-I to enter such
consortium. However, administrative clearance may not be required for proposals where the sanctioning
authority is HOCAC-I & above.
IRMD L&A Circular No. 31/2020 dated 26.03.2020, 162 dated 15.11.2022 and subsequent circulars issued from time to
time may be referred for detailed guidelines.

➢ MULTIPLE BANKING ARRANGEMENT:

▪ Under MBA, each Bank is free to negotiate terms and conditions, including margin, rate of interest etc.
Based on the communication received from IBA, the common code for financing under Multiple Banking
Arrangement, particularly in respect of sharing of information as well as common securities has been
adopted by the bank.
▪ In existing Multiple Banking Arrangements where our borrowers have total exposure upto ₹50 Cr,
efforts to be made convert such accounts into sole banking arrangement.
➢ SYNDICATION:
In view of thrust of Government on infrastructure projects, there is a business opportunity for the banks
towards part financing such projects by way of project appraisal and syndication, to augment bank’s fee
based income. This activity is being looked after by Corporate Credit Division, HO.
IRMD L&A Circular No. 31/2020 dated 26.03.2020 and subsequent circulars issued from time to time may be referred
for guidelines on syndication of credit.

➢ JOINT LENDING ARRANGEMENT (JLA):

All lending arrangements, involving more than one public sector bank, with a single borrower with
aggregate credit limits of ₹150 Crore and above and all non-investment grade borrowers
(External Commercial Rating below BBB or equivalent), enjoying credit limits from more than one
public sector bank, irrespective of the amount of exposure shall be under JLA.

2.7 SHARING OF INFORMATION

Sanction of fresh /ad-hoc /renewal of loans to new/existing borrowers should be done only after
obtaining/sharing necessary information on the prescribed format in case of lending under consortium/multiple
Banking Arrangements/Joint Lending Arrangement.

2.8 VALIDITY OF CREDIT LIMIT SANCTIONED

➢ Sanctions in respect of Working Capital and Term Loan facilities shall be valid for____from the date of
sanction: 6 months,
➢ Facilities not availed within 6 months should be treated as lapsed and borrower be advised accordingly.
Unless a lapsed sanction is revalidated by the competent authority within a maximum period of _____from
the date of sanction, no facility should be released: 12 months
➢ However, where documents have been executed within a period of 6 months from the date of sanction,
the sanctions shall be valid for ____from the date of documentation: Next 6 Months
➢ Following powers will be applicable for re-validation of the sanctions:
SN Sanctions made by Competent authority to Time period upto which revalidation can
consider re-validation be considered from the date of sanction
1. Sanctions up to HOCAC- III Sanctioning Authority 12 months
2. Sanctions made by MC HOCAC-III 12 months
However, to safeguard the bank’s interest, while permitting revalidation, the competent authority shall obtain
and study the latest financials of the borrowers/units and also ensure that the projections submitted at the
time of original sanction continue to hold good.

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2.9 USE OF DATA OF CREDIT INFORMATION COMPANIES AND DEFAULTERS’ LIST

a) With the aim of taking informed credit decisions, the Bank is presently a member of all the four Credit
Information Companies (CICs) namely Credit Information Bureau (India) Ltd., M/s Experian Credit
Information Co. of India Pvt. Ltd., M/s Equifax Credit Information Services Pvt. Ltd. and M/s CRIF High
Mark Credit Information Services Pvt. Ltd., which have been set up for creation of the database in respect
of the Borrowers, Guarantors and Co-obligants of banks /FIs and sharing the same with its member
banks. Credit Information Report (CIR) should be drawn, while considering fresh/enhanced/renewal
proposal. This initiative helps the bank in better credit decisions thereby resulting in lower NPAs.
For detailed guidelines on Credit Information Reports (CIRs) of the borrowers provided by the Credit Information
Companies (CICs), IRMD L&A Circular No. 130/2024 dated 01.10.2024 may be referred.

b) In cases, where name of a company appears in the list of defaulters and the Director(s) of such company
are also Director(s) in another company seeking credit facilities from our Bank, such case should not
normally be considered. However, Sanctioning Authority not below the level of CHCAC can take a view in
this regard after conducting due diligence exercise.

c) IBD has empanelled the services of M/s. Dun & Bradstreet Information Services India Pvt. Ltd, M/s. Mira
Inform Pvt. Ltd., M/s. Unified Credit Solutions P. Ltd. and M/s MNS Credit Management Group Pvt Ltd
(MNS) besides ECGC for obtaining Credit Information Reports on overseas companies /buyers /suppliers
in respect of export and import transactions.

2.10 WILLFUL DEFAULTERS AND ACTION AGAINST THEM

Policy for wilful defaulters were last issued by SASTRA Division vide Circular No. 31/2024 dated 25.04.2024

2.11 CLIMATE RISK

The Bank shares concerns about environmental issues. Bank feels that besides creating awareness about
pollution which is responsible for global warming, there is a need for taking steps for reducing pollution by
banking system as a whole.
As a step towards its concern about environmental issues, it should be ensured that, wherever required, all
necessary statutory and other approvals /permissions including from Pollution Control Board, have been
obtained by the company before disbursement of Term Loan.
Climate related financial risk is an emerging risk and approaches for assessment of the risk in an objective
manner are still in nascent stage. Policy with respect to climate risk is awaited and Bank intends to put in place
strategies and mitigation plans, viz., portfolio rebalancing, additional covenants, etc., in line with the RBI
Framework for acceptance of Green Deposits circulated vide notification no. RBI/2023-24/14 DOR.SFG.REC.
10/30.01.021/2023-24 dated 11.04.2023. To assess climate risk in the credit appraisal process, appraisal format
for loans above ₹ 25 Cr. has been modified & comments on compliance of ESG parameters has been added.

2.12 SECURITY

Advances can be granted to the borrowers either on secured basis or unsecured. 'Secured Advance' call for
a security in shape of tangible asset whereas 'Unsecured Advance' are granted only considering the
creditworthiness of borrowers without insisting upon any tangible security like land, building, plant or stocks.
Security can be classified in two categories as under:

➢ Primary security is an asset created out of the credit facility extended to the borrower and / or which
are directly associated with the business / project of the borrower for which the credit facility has been
extended. For example: hypothecation of stocks & books debts for cash credit facility. Hypothecation is
the established practice whereby a borrower offers to the lender charge on an asset as security for a loan,
while retaining ownership of the asset and enjoying the benefits therefrom. With hypothecation, the lender
has the right to seize the asset if the borrower cannot service the loan as stipulated by the terms in the
loan agreement.

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➢ Collateral security is any security, other than Primary Security, offered to additionally secure the credit
facilities sanctioned by the Bank. Collateral security is normally obtained as a risk mitigating measure and
to sustain the promoters’ interest in the venture & fall back on its liquidation in case of need.

2.13 PRICING

2.13.1 Linking of pricing with Credit Risk Rating

➢ In respect of borrowal accounts availing limits over ₹20 lakh, interest rates have been linked with the credit
risk rating with certain exceptions.
➢ Situations may arise, where the borrowers would like to know about the rationale of their rating. Borrowers
may be informed about their weak areas such as Financial, Business/Industry, Management or Conduct of
Account. The rating report/individual parameters in detail are not to be disclosed to them.
➢ Situations may arise, where the borrowers would like to know about the rationale of their rating. Borrowers
may be informed about their weak areas such as Financial, Business /Industry, Management or Conduct of
Account. The rating report /individual parameters in detail are not to be disclosed to them.
For detailed guidelines in this regard, IRMD L&A circular no. 184 dated 14.12.2022 as updated from time to time may be referred.
2.13.2 Risk Adjusted Return on Capital (RAROC) Framework
It is used for all corporate loan (FB and NFB) aggregating above ₹5 crore, where ROI/ commission is linked
to risk rating of the borrower and borrower is requesting concessions on card rate of the bank.
2.13.3 Reference Lending Rate
MCLR RLLR

➢ All rupee loans (other than linked with external ➢ RBI has advised that floating rate Personal or Retail
benchmark) are priced with reference to the MCLR, loans (housing, auto, etc.) and floating rate loans to
which comprise of Marginal cost of funds, Negative Micro, Small & Medium Enterprises extended by banks
carry on account of CRR, Operating costs and Tenor shall be benchmarked to one of the following:
premium. ▪ Reserve Bank of India policy Repo Rate
▪ Government of India 3-Months Treasury Bill yield
published by the Financial Benchmarks India
➢ MCLR is reviewed on monthly basis and in the last Private Ltd (FBIL)
week of every month reviewed rates are published/ ▪ Government of India 6-Months Treasury Bill yield
circulated, which are applicable to all new loans and published by the FBIL
credit facilities sanctioned/renewed from the 1st of ▪ Any other benchmark market interest rate
the following month. published by the FBIL.
➢ All floating rate Retail Loans, MSME loans including
Food & Agro processing segment are linked with
external benchmark (Repo Rate) i.e. Repo Linked
Lending Rate (RLLR). Final interest rate shall be arrived
at by adding the applicable spread to RLLR.
PNB RLLR ELITE TBLR

Also linked with Repo rate as external benchmark. It is Under TBLR, interest rates are linked with T-Bill Rates. The
offered for following Target segment borrowers: rates are offered under “PNB PRIME PLUS” scheme for
▪ PSUs, Central & State Govt. Undertakings including following target segment borrowers
their NBFCs (irrespective of ERR) guaranteed by ▪ AAA rated corporate borrowers including NBFC (except
Central Govt. /State Govt. Banks)
▪ AA rated corporate borrowers (except Banks & NBFC).
▪ All India Financial Institutions (NABARD, EXIM, SIDBI & ▪ PSU’s, Central & State Govt. Undertakings including
NHB & NaBFID). their NBFCs.
▪ Entities (Corporates including NBFCs, PSUs, Central & ▪ All India Financial Institutions (NABARD, EXIM, SIDBI,
State Govt. Undertakings (including their NBFCs)) not NHB & NaBFID etc.)
▪ A rated corporate borrowers
guaranteed by Central Govt. /State Govt. having ERR
AAA & AA except Banks/ ‘A’ rated corporate borrowers.
MCLR= Marginal Cost of Funds Based Lending Rate , RLLR= REPO linked Lending Rate , RLPLR = REPO linked Prime
Lending Rate , TBLR= T-Bill Linked Lending Rate

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3. POST SANCTION FOLLOW UP, SUPERVISION & MONITORING

System of supervision and follow up can be defined as the systematic evaluation of the performance of a borrowal
account to ensure that it operates at viable level and, if problems arise, to suggest practical solutions. It helps in
keeping a watch on the conduct and operational /financial performance of the borrowal accounts. Further, it also
helps in detecting signals /symptoms of sickness and deteriorations, if any, taking place in the conduct of the
account for initiating timely corrective actions to check slippage of accounts to NPA category. The Bank has in
place comprehensive post-sanction processes aimed at enabling efficient and effective credit management. Some
of the key areas that need to be kept at sight are covered in this chapter.
The detailed guidelines regarding post-sanction follow up of loan accounts have been conveyed vide L&A Circular No. 157/2020 dated
17.08.2020 and subsequent circulars issued from time to time.

3.1 Documentation – Execution & Vetting of Loan Documents

➢ A uniform set of Standard Covenants circulated by IBA with the instructions that the Standard Covenants will
be stipulated at the time of sanction and shall form part of documentation for all credit facilities sanctioned
by the bank has been advised to the field as part of Model Terms & Conditions. These Standard Covenants
are the minimum and the sanctioning authority may consider the existing set of Model Terms & conditions or
additional stipulations on case to case basis, if necessary.
➢ Bank has in place a system of Vetting of Loan Documents from the approved advocate in case of borrowal
accounts, with sanctioned limits of ₹2 crore & above (both FB + NFB).
Ref. circular: Documentation>> IRMD L&A 111/03.07.2021, Terms & Conditions of Sanctions >> IRMD L&A Circular No. 138/10.10.2024
3.2 Pre Disbursement Compliance (PDC)

For effective implementation of compliance of Pre Disbursement Terms & Conditions of Sanction, Bank has put
in place a system of PDC. The disbursing officer shall submit a certificate as per the prescribed format to the
Compliance Officer who shall verify and satisfy himself that all pre disbursement formalities are completed as per
sanctioned proposal.
Detailed guidelines issued vide IRMD L&A Circular No. 68/30.06.2023 as updated from time to time may be referred by field functionaries.
3.3 Limit Sanctioned Statement (LSS)
Sanctioning Authorities are required to submit a statement of all limits sanctioned, whether Fresh /Renewal
/Reduction /Enhancement /Adhoc /Refund of excess charges /any other issue to be reported, etc., in the
prescribed format of Limits Sanctioned Statement as on the last day of the month to the higher authority for
monitoring.
➢ Sanctioning Authorities are required to submit all limit sanctioned whether Fresh/Renewal/Reduction/
Enhancement/ Adhoc/Refund of excess charges /any other issue to be reported etc. in the prescribed format
of Limits Sanctioned Statement as on the _______of the month to the next higher authority: Last day
➢ The statement is to be submitted by the sanctioning authority to the next higher authority, properly filled up
in all respects, within _______of the close of the month to which it relates: 7 days
➢ LSS received should be scrutinized and observations, if any to be communicated to the concerned
branches/offices within _______of receipt of the LSS.: 10 days

➢ It shall be ensured that all the LSS are monitored till its logical end and shall be closed within : 3 months
Detailed guidelines have been issued vide L&A Circular No. 107 dated 19.07.2022 in this regard.

3.4 Ensuring end-use of funds

➢ As a matter of prudence, Bank needs to ensure end-use of funds, it has lent. It is necessary to ensure that
the Bank does not depend entirely on the end-use certificates issued by the Chartered Accountants, but
strengthens its internal controls and the Credit Management System to ensure end-use of funds, which would
enhance the quality of the loan portfolio. Some of the illustrative measures that could be taken by the field
functionaries to ensure end-use of funds are:
i. Meaningful scrutiny of quarterly progress reports /operating statements, balance sheets of the
borrowers;
ii. Regular inspection of borrowers’ assets charged to the Bank as security;

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iii. Periodical scrutiny of borrowers’ books of accounts;

iv. Periodical visits to the assisted units;
v. System of periodical stock audit, in case of working capital finance
➢ Periodic visit of the borrower to be conducted as per guidelines on unit visit issued vide IRMD L&A Circular
No. 41/2022 dated 23.03.2022.
➢ RBI has advised that in case of incorrect certification by the borrowers, prompt action, as may be warranted,
may be initiated which may include withdrawal of the facilities sanctioned and legal recourse as well. In case
a specific certification regarding diversion /siphoning of funds is desired from the auditors of the borrowers, a
separate mandate may be awarded to them and appropriate covenants incorporated in the loan agreements.
➢ Based on RBI’s indicative list for ensuring end-use of funds following points may also be kept in view especially
in case of large borrowal accounts:
i. In working capital facility, stock statement submitted by the borrower may also be got verified by
Chartered Accountant/ Statutory Auditor of the borrower initially at the time of its first submission and
periodically thereafter as prescribed in the sanction. Sanctioning authority may waive the same on merits
of the case.
ii. In order to verify the debtors and creditors their GSTIN as mentioned on the invoice may be cross
checked from GST website; (https://services.gst.gov.in/services/searchtp) at regular intervals.
iii. In case sufficient information is not available about the supplier of machinery /equipment, credit report
/external rating report of supplier of machinery & equipment may be obtained to verify the credentials
of the supplier, e.g.: its activity, address, turnover, etc.
iv. In cases where loan is being sanctioned for purchase of land /property /machinery or for construction
and Lender’s engineers have not been appointed, certificate from valuer /technical experts (approved
by Bank) may be obtained for verification of end use of funds.
3.5 Agencies for Specialised Monitoring (ASMs)

➢ The services of ASMs are to be utilized for large value loan/ (may or may not be of) specialized nature by bank
under Sole/multiple/consortium banking arrangement for monitoring. In case borrowal account is having large
exposure i.e. more than ₹250 Crore from the Banking Industry under Sole /Multiple /Consortium banking,
ASMs are to be appointed.
➢ Borrowers having loan accounts of above ₹50 cr and up to ₹250 cr from Banking Industry:
Committee consisting of 3 General Managers (1 each from CCD, HO, CRMD, HO and SASTRA HO) without
intervention of ZO / ELCB / LCB shall place its views on appointment of ASM in following cases:
· In accounts with PMS rank 5 continuously for 2 months. AND
· The internal risk rating of the account is B3 or below.
➢ Borrowers having exposure upto ₹50 cr from Banking Industry:
Shall not come under the purview of ASM.
➢ Waiver of ASM in accounts having overall exposure of above ₹ 250 cr from Banking Industry:
In case of borrowers having valid External Risk Rating for Bank credit, Sanctioning Authority is empowered for
considering waiver of appointment of ASMs on merits of the case: AAA or AA.
In other cases, (including Accounts of Central / State Govt undertaking, Accounts having Govt Guarantee &
PSU (Central / State) accounts), waiver of ASM in any account may be considered in exceptional circumstances
by MC in case of MC power accounts and by HOCAC – III in all other accounts.
Policy on ASM has been circulated vide CRMD Circular No. 16/2024 Dt.19.04.2024 and subsequent modifications issued
from time to time on the subject matter.
3.6 PNB-SAJAG
PNB SAJAG 2.0 [Early Warning Signal (EWS) & Intelligent Transaction Monitoring System (ITMS)]
Fully digitized and automated Early Warning Signal (EWS) & Intelligent Transaction Monitoring System (ITMS),
which shall monitor all eligible borrowal accounts through 133 early warning signals (including 42 EWS prescribed
by RBI and 85 EWS prescribed by DFS), powered by automated continuous flow of both internal and external
data. In this application, each eligible borrower is assigned an EWS score on a scale of 0 to 100 with 0 being
Least Risky & 100 being Most Risky

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3.7 Stock Audit

➢ Annual Stock Audit should be got compulsorily done in respect of all borrowal accounts enjoying Fund Based
& Non Fund Based (NFB) working capital limits of _____from our Bank: ₹5 Crore and above
➢ All NFB limits, which are being used for Working Capital Funding like LC, SBLC, BG for purchase of goods for
sale and BGs for mobilization Advances are to be included within threshold limit of ₹5 Crore for stock audit,
but____, need not be included in NFB limits for the purpose of conducting stock audit: Capex LCs, Bid Bond
Guarantees, etc.
Further, in respect of borrowers enjoying fund based limits of less than ₹5 Crore, the extant guidelines for
getting the stock audit done in emergent cases and /or, wherever bank’s interest demands.
➢ Annual Stock Audit to be compulsorily conducted in all ‘B2’ to ‘C3’ rated accounts and NPA accounts
enjoying FB and NFB working capital limits of: ₹3 Crore and above

In exceptional circumstances where certain adverse features are observed by the branch in the operation of
account which may be like
i. Abnormal increase or decrease (30% or more on a monthly basis without due justification) in Stock
receivables /Sundry debtors /sundry creditors
ii. Decline (20% or more) in credit summation in Working Capital facility continuously for 3 months
without due justification
iii. Account remains overdrawn continuously for more than 2 months.
➢ In cases of Consortium /Multiple Financing, where the borrower is enjoying working capital limits (fund based)
of less than ₹5 Crore from our Bank and _____in aggregate from the banking system, branches should take
up with lead bank /major share-holder banks in multiple banking arrangement for getting the stock audit
conducted. The final decision regarding stock audit in the account shall, however, be based on the consensus
amongst the member banks : ₹20 Crore and above

➢ There may be certain prestigious accounts which may fall under the category ‘A1’ to ‘A4’ under the risk rating
module signifying lower risk and where conducting stock audit by an outside agency may hurt the sentiments
of borrowers. Exemption from annual stock audit, if required, in such cases based on merits and business
considerations of each case should invariably be incorporated at the time of fresh sanction /renewal /review
of the working capital limits.
Detailed guidelines on stock audit have been circulated vide IRMD L&A Circular No. 148/2020 dated 11.08.2020 and
subsequent modifications issued from time to time.
3.8 Recovery in Loans

To maintain better quality of the loan portfolio, recovery of bank’s dues in time has a crucial importance in post-
sanction monitoring process in the bank. At all levels, meticulous follow up needs to be continued to ensure that
the recovery is made in all loan accounts in terms of sanction to ensure that no overdue remain outstanding in
any loan account.

3.9 Review/Renewal of Working Capital Limits/Term Loans

➢ In terms of prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances
(IRACP Norms) “Regular and ad hoc credit limits need to be reviewed/ regularized not later than three months
from the due date /date of ad hoc sanction. In case of constraints such as non-availability of financial statements
and other data from the borrowers, the branch should furnish evidence to show that renewal/ review of credit
limits is already on and would be completed soon. In any case, delay beyond six months is not considered
desirable as a general discipline. Hence, an account where the regular/ ad hoc credit limits have not been
reviewed/ renewed within prescribed timeline, i.e., 180 days from the due date/ date of ad hoc sanction will be
treated as NPA”.
➢ It has also been advised by RBI from time to time that bank should avoid frequent and repeated ad-hoc /short
review /renewal of credit facilities without justifiable reasons.
Detailed operational guidelines for Review and Renewal of credit facilities has been issued vide IRMD L&A
circular no. 174 dated 22.11.2022 as updated from time to time.

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3.10 Change of Promoter in Standard Assets

Change in promoter shall be a situation where there is no change in entity’s name & activity however new
promoter steps in and gain financial /operational control over the firm /company.
Following indicative points shall be looked and commented in the proposal whenever there is change of promoter
in borrowal accounts;
A. Applicability
i. Partnership Firms
ii. Limited Liability Partnerships
iii. Private Limited Companies
iv. Public Limited Companies
B. Risk Posed vis-à-vis Risk Mitigants
SN Risk Posed Indicative Mitigants
i. New promoter neither possessing required Qualification nor Sanctioning authority may explore the
experience in the related field. possibility of following mitigants
ii. Operation of the firm /company is highly dependent on skills ➢ reduction in limits
/qualifications /experience of existing promoter. ➢ increasing the collateral coverage
iii. New promoter (already highly leveraged) stepping in or the ➢ increasing margins
group is highly leveraged. ➢ Obtention of Personal Guarantee of
Leverage position includes corporate guarantees /capital existing promoter and/or new promoter.
commitment given to its other subsidiaries.
iv. Change in promoter will adversely affect the business.
v. Change in promoter is primarily due to inadequacies of the ➢ Continue with the exposure while treating
existing promoters and subsequent change in ownership will be the exposure as fresh exposure and
beneficial for business. conducting due diligence as a fresh
vi. Change in promoter is due to government regulations /Law etc. exposure.
vii. Where operational control is in hands of previous promoter and ➢ Obtention of Personal Guarantee of
only equity stake is sold out to new promoter. For example in existing promoter and/or new promoter.
Road projects, to free up the capital generally Promoter sells its
equity however the Operation and maintenance activity lies with
original experienced promoter and cash flows are not hampered
by such change.
General conditions:
a) Compliance of guidelines contained in Companies Act and SEBI (in case of listed entity)
b) Assessment of key promoter risk (irrespective of loan amount).
c) Rating: - Internal Risk Rating shall be again conducted to analyse the risk posed by change in management.
d) Legal Aspect: - Legal opinion shall be sought from empanelled advocate whether fresh documentation shall
be required or mere executing of supplementary agreement will suffice the purpose.
e) Due Diligence: Change of promoter will be considered as a new connection with the Bank and the credibility
/due diligence of new promoters shall be carried out treating the exposure as a fresh exposure.

3.11 Special Mention Accounts (SMAs)

The basis for classification of SMA categories shall be as follows:

Loans other than revolving facilities Loans in the nature of revolving facilities like CC/OD
SMA Basis for classification – SMA Basis for classification – Outstanding balance
Subcategories Principal or interest payment Subcategories remains continuously in excess of the sanctioned
or any other amount wholly limit or drawing power, whichever is lower, for a
or partly overdue period of:
SMA-0 Upto 30 days
SMA-1 More than 30 days and upto SMA-1 More than 30 days and upto 60 days
60 days
SMA-2 More than 60 days and upto SMA-2 More than 60 days and upto 90 days
90 days

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➢ Credit Review & Monitoring Division, HO monitors SMAs of ______on daily basis and suggest corrective steps
to ZOs/COs/BOs: ₹5 crore and above
➢ Besides, the position of all weak accounts/ SMAs under standard category with outstanding of ₹5 crore and
above having weaknesses such as PMS Rank 4 & above, Accounts with Internal Risk Rating C1 & below
and RBI/SCAs commented accounts etc. It also monitored at corporate level. For monitoring of SMAs, the
Task Force is set up.
Level Constitution Scope (All SMA with Aggregate
Exposure (AE) of___)
HO GM (CRMD), DGM/AGM/Chief (CRMD), GM/DGM & AGM/Chief ₹5 crore and above
(RD), GM/DGM (Credit Div.)
ZO ZM, 2nd Man of ZO (AGM/DGM), AGM/CM (Credit/Recovery), ₹1 Crore and above
Desk Officer (Credit/ Recovery)
CO Circle Head, AGM/CM and/or FM (Credit), Desk Officer (Credit), ₹ 5.00 Lakh and above
FM (RD)

➢ Crop Based Advances: Asset Classification

For Crop based CC/OD
Basis for Classification (Overdue period)
Irregularities Sub-Categories
Short Term Crop Long Term crop
CBR-0 1-364 days 1-364 days
CBR-1 365-546 days 365-546 days
CBR-2 547-729 days 547-729 days

For Crop based TL/DL

Basis for Classification
Irregularities Sub-Categories (Overdue period from the date of Instalment/Interest due date)
Short Term Crop Long Term crop
CBR-0 1-364 days 1-182 days
CBR-1 365-546 days 183-364 days
CBR-2 547-729 days 365-547 days

➢ RBI has setup a Central Repository of Information on Large Credits (CRILC) to collect, store and disseminate
credit data of borrowers having Aggregate Exposure (AE) of ₹5 crore and above and the Banks are to
report classification of such borrowers to CRILC.

➢ Bank endeavors to exit from Standard accounts having total fund based and non fund based exposure of
₹1 crore & & upto ₹50 crore (except housing loan, education loan, vehicle loan) from our Bank, identified
for exit as per guidelines prescribed in IRMD L&A circular no. 148 dated 16.12.2023 and as updated from
time to time.

3.12 Market Intelligence Unit

RBI had constituted an “Expert Committee on NPAs and Frauds” under the chairmanship of Sh Y H Malegam. The
Committee’s recommendations were primarily to set up a dedicated Market Intelligence Unit/ Cell (MIU) for this
purpose. On the recommendation of Committee, IRMD has set up Market Intelligence Unit to carry out market
intelligence of large value accounts.
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4. INTERNAL RISK RATING/ SCORING- PROCESS & SYSTEMS

4.1 Credit Risk Rating Models
A. PNB Trac
Default Credit Risk Rating Models and their Applicability
Credit Risk Applicability
SN Sector
Rating Model Total Limits Turnover/Cost of project
1 Large Manufacturing/ Service Above ₹ 50 Crore (OR) Turnover Above ₹ 250 Cr
Corporate
Trading Above ₹ 100 Crore (OR) Turnover Above ₹ 500 Cr
2 Mid Corporate Manufacturing/ Service Above ₹ 10 Crore Turnover Above ₹ 50 Cr and
up to ₹ 50 Crore (OR) up to ₹ 250 Cr
Trading Above ₹ 10 Crore Turnover Above ₹ 50 Cro up
up to ₹ 100 Crore (OR) to ₹ 500 Cr
3 New Project Manufacturing/ Service Above ₹ 10 Crore (OR) Cost of Project above ₹30 Cr
Rating Model
Infra Projects – Road BOT/ Above ₹ 10 Crore (OR) Cost of Project above ₹30 Cr
HAM
4 Small Loan Manufacturing/ Service/ Above ₹ 1 Crore Turnover Up to ₹ 50 Cr
Trading up to ₹ 10 Crore (AND)
5 ENBM Manufacturing/Service Borrower setting up new Cost of Project up to ₹ 30 Cr
business and requiring
finance above ₹ 1 Crore
up to ₹ 10 Crore (AND)
Trading All new trading concerns irrespective of bank limits
New Non-Banking Financial Companies (NBFCs)/New Micro Finance Institutions (MFIs)
New borrower entities, setting up new business requiring only working capital/NFB
limits but not involving setting up of any project as such (irrespective of bank exposure).
Projects already completed with own finance, audited results for first year of operations
are not yet available and proposal is only for sanction of WC/NFB/TL facilities
(irrespective of bank exposure).
Existing borrower proposing to avail credit limits above ₹ 1.00 Crore and upto ₹ 10.00
Crore undertaking a major expansion i.e. value of block assets being added are more
than 50% of existing gross block assets value as per the latest audited accounts and
value of gross block assets being upto ₹ 30.00 Crore after expansion.
Agriculture loans above ₹ 1.00 crore for Individuals setting up new business having
projected balance sheet and financials.
6 NBFC All NBFC,FIs, SFCs, HFCs and Power Finance Corporations (PFCs) irrespective of the
limits or turnover except new NBFC/ and MFIs.
7 Counterparty All Banks and Financial Institutions
Model
8 Dynamic Mandatory Review:
Review Rating ▪ Borrowers having exposure more than ₹50.00 crores and all listed borrowers,
Model irrespective of limits, rating shall mandatorily be reviewed on expiry of 5 months
from date of last rating except:
✓ Borrower already rated as PNB-C1/C2/C3
✓ All facilities to the borrower entity are guaranteed by Centre/State Govt.
▪ Borrowers (eligible to be rated in PNB Trac) that are being reviewed/renewed based
on provisional financials of last FY and IRR in regular rating model based on ABS of
preceding to last FY is overdue.
Optional: For all other borrowers keeping in view any recent adverse developments or
invocation of any of the trigger points.
However, on expiry of 13 months from the month of confirmation of rating or 19 months from
the date of balance sheet, on which last rating was carried out, whichever is earlier, rating of all
borrowers shall mandatorily be reviewed in Dynamic Review Rating Model.

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TRANSACTION RATING MODEL

1. Facility Rating Framework Assigning rating to facility sanctioned based on default rating and securities available
2. Future Lease Rental Model Advances to property owners against future lease rentals
NPA Marking Model
1. NPA Model For marking NPA accounts in on-line PNB Trac Credit Risk Rating System
PNB Super Scorer
PNB Super Scorer shall serve as an additional tool on top of regular rating in PNB Trac in the
account to capture fine- tuned riskiness/ change in riskiness in borrowers in the previous recent
PNB SUPER rating.
1.
SCORER (To strengthen the credit risk assessment for all fresh /enhancement /additional limit proposals in standard
accounts falling within vested power of ZOCAC and above and to capture changes in risk dynamics post
regular rating more than 3 months old at the time of sanction)

B. Score Based Models (For Loans up to ₹100.00 Lakh)

Particulars PNB Score PNB Score SME PNB Farm Score
• Housing, Education and Vehicle MSME borrowers with exposure • Agriculture Loans up to ₹100
(individuals) loans, Loan up to ₹100 Lakh except PNB Lakh
against Mortgage of IP to GST Express & PNB Sampatti • Agriculture loans above ₹100.00
Applicability
individuals irrespective of Scheme lakh for those Individuals only,
amount who don’t prepare book of
• Non Individual borrowers up to accounts and credible financial
₹100 lakh statements.
Rating Models 1. Housing Loan Above ₹10 lakh to ₹100 Lakh
1. MSME Manufacturing (New 1. Model I: Direct Agriculture
2. Conveyance Loan-Individual-
Cases including takeover) with limit above ₹1 lakh.
Domestic
2. MSME Service (New Cases 2. Model II: Allied Agriculture
3. Conveyance Loan-Individual- including takeover)
with limit above ₹1 lakh.
NRI 3. MSME Manufacturing and
3. Model III: Direct Agriculture
4. Conveyance Loan-Non Service (Renewal /
Enhancement) with limit above ₹1 lakh
Individual-NTB- For personal (Renewal/ Enhancement)
use of Executives Above ₹2 Lakh and upto
₹10 lakh 4. Model IV: Allied Agriculture
(irrespective of loan amount) with limit above ₹1 lakh
4. MSME Manufacturing and
5. Education Loan Service (New Cases including (Renewal/ Enhancement)
6. Personal Loan (Pensioner) takeover)
5. MSME Manufacturing and
7. Personal Loan (Others)
Service (Renewal /
8. Future Lease Rental (FLR)* Enhancement)
9. Doctors‟ Loan* Score Card: Rating shall be done through
6. GST Express (Above ₹10 Lakh PNB TRAC under the following
10. Traders‟ Loan (New)*
and upto ₹5.00 Cr.)
cases:
11. Traders‟ Loan (Renewal)* Applicable for scheme or any
12. Loan against IP to Individual similar scheme approved by • For all Agriculture loans above
bank where financial ₹100.00 lakh other than
13. Transporter Scheme* - 4 statements are not
exceptions.
scorecards as below: required for credit sanction.
a) Scorecard I: Appraisal based on
• Agriculture loans above ₹100.00
7. SAMPATTI Scheme (Above lakh for Individuals having
PNB Form-812 (Individual/
₹10 Lakh and upto ₹5.00 Cr.)
Proprietor) audited book of accounts and
Applicable for scheme or any
b) Scorecard II: Appraisal based financial statements shall be
similar scheme approved by
on PNB Form-812 (other than
bank wherein primary rated through Small Loans
Individual/ Proprietor)
security is in the form of Rating Model.
c) Scorecard III: Appraisal based
immovable property.
on Project Report (Individual/ Agriculture loans above ₹100.00
Proprietor) 8. PNB Trade Growth
lakh for Individuals setting up new
d) Scorecard IV: Appraisal based Scheme: Scorecard is
applicable wherein customer business having projected balance
on Project Report (Other than
Individual/ Proprietor) does not need to provide sheet and financials shall be rated
financial papers (Balance through Entrepreneur New
sheet and P&L Statement) as Business Model.
the MPBF under the scheme
shall be calculated based upon
the sales in GST return (if

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available) or credit summation

in A/c in the last 12 months
Exemption/ • Advances under Retail • All accounts with • Cash Credit /Production Credit
other Banking Schemes, where sanctioned limits of ₹2 loan up to ₹3.00 lakh and
scoring models are not lakh and below. investment Credit / Term Loan
available (Loan against Gold & • Advances to Documentary up to ₹1.00 lakh.
Jewellery and PNB Baghban) Films (on themes like family • Schemes which are being
• Loan against Sovereign Gold planning, social forestry, classified in Agriculture, but to
Bonds energy conservation and be evaluated through other
*These Scorecards are part of PNB commercial advertising). scoring models
Score, though the schemes covered
under these Scorecards pertains to
MSME portfolio having exposure upto
₹100 Lakh
Scorecards for PNB Insta Loans
Bank has developed new Scorecards for four lending schemes covered under “PNB Insta Loans” (Bank’s digital lending
platform) which are as mentioned below:
1. PAPL 2. PNB e-Mudra (Shishu) 3. PABL 4. Scorecard for Digi Home Loan, Digi Car Loan, Digi Education Loan, e-GST
Express
Scorecard for Co-Lending arrangement with NBFCs
Presently 3 scorecards are available for the purpose of risk assessment under co-lending schemes as below:
1. Scorecard for Business Loan Co-lending:
a) Model 1: For Loan upto ₹ 10 lakh
b) Model 2: For Loans more than ₹10 lakh and upto ₹50 lakh.
2. Scorecard for Blended Home Loan Scheme under Co-lending arrangement.
Risk Underwriting Model for Credit card
Bank has developed Risk Underwriting Model (RUM) for assessment of credit card applicants (PNB & Non-PNB
customers) which includes GO-NOGO screening and credit card limit assessment. For credit card applicants being
covered under Pre-Qualified Credit Card (PQCC) category, modified RUM is also in place.

4.2 Reporting and Analysis of Credit Risk

A. Bank rating and vetting authority levels for PNB Trac
Loan amount Initiating Authority Vetting Authority1 Approving Authority
Above ₹1 Crore upto Officials assigned the Scale IV and above at ZRMC. ZRMC Head (not below the level
₹10 Crore2 work of rating Rating of exposure up to ₹5 Crore can of AGM)4
in PLP/ MCC3 also be vetted by Scale III at ZRMC
Above ₹10 cr upto Rater at ZRMC Scale IV and above at ZRMC ZRMC Head (not below the level
₹30 Cr of AGM)5
Corresponding ZRMC Scale IV and above at ZRMC (For ZRMC Head (not below the level
Renewal proposal except in case of of AGM) 5
Above ₹30 crore and upgradation of rating)
upto ₹50 crore Scale IV at HO (For Renewal proposal DGM IRMD-HO/ AGM IRMD-HO
in case of upgradation of rating and for in absence of DGM6
Fresh & Enhancement proposals)
Corresponding ZRMC Scale IV at HO GM, Industry Desk/ Credit Risk/
Above ₹50 crore IRMD, HO through DGM/ AGM at
HO IRMD
Irrespective of Loan Overseas Branches Scale IV at HO GM, Industry Desk/Credit
amount Risk/IRMD, HO
1Vetting authority and Approving authority shall not be the same.
2CreditRisk Ratings of exposure above ₹1 Crore and up to ₹10 Crore can also be both initiated and vetted by ZRMCs, in
case of need, subject to availability of audited/certified documents (required for conducting CRR) in public domain and/or
Bank domain
3InternalCredit Risk Ratings (Exposure above ₹1 cr and up to ₹10 cr) where MCC does not exist, the same shall be initiated
by concerned PLP and will be submitted to ZRMC for vetting.
4In the absence of ZRMC Head, the rating shall be approved by Scale-IV & above at ZRMC (as delegated by way of office
order), however it shall be ensured that vetting and approving authority shall not be the same. Such ratings, as approved
in the absence of ZRMC Head, shall be placed for sighting before ZRMC Head once he/she resumes duties.
5In the absence of AGM/DGM ZRMC, the approving authority shall be DGM IRMD-HO or AGM IRMD-HO (as delegated by

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way of office order issued by GCRO)

6As delegated by way of office order issued by GCRO.
Note: Applicability of models and Categories of Advances exempted from credit risk rating /Scoring is to be dealt accordingly
B. The vetting authority for review ratings carried out in Dynamic Review Rating Model, in applicable cases shall
be as per extant bank guidelines except:
a) For Domestic Borrowers: Vetting shall be done by vetting authority at concerned ZRMC.
b) For Overseas Branch/ Office (all rating irrespective of sanctioning authority) : Vetting shall be
done by vetting authority at concerned Branch/Office.
C. For Loans (irrespective of amount) falling under vested powers of HO committees (including MC) vetting will
be done at HO: IRMD.
D. For guidelines on criteria for selecting the IRR initiating and vetting authority for borrowers which fall under
higher Sanctioning Authority on account of group exposure, IRMD Circular No. 32 /2021 dated 30.12.2021
to be referred.
E. Initiating/ Vetting authority for Credit Scorecards
For loans upto ₹10 lakh eligible for credit scoring, an official designated by the incumbent not connected
with processing/ recommending of the concerned loan proposal at GBB need to conduct credit scoring.
For loans above ₹10 lakh eligible for credit scoring, the same shall be initiated/ vetted at PLP/MCC level only.
For example, scoring applicable in housing, car loan, farm score etc. by an officer independent of appraisal
especially designated for all rating/scoring.
For guidelines on criteria for selecting the IRR initiating and vetting authority for borrowers which fall under higher
Sanctioning Authority on account of group exposure, IRMD L&A Circular No. 44 dated 01.04.2023 may be referred.
F. Process to be followed at PLP/ MCC / ZRMC / HO: IRMD for Credit Risk Rating:
Risk Rating for Fresh Advances shall not remain pending with the Rating Desk for more than 7 days at
any given point of time after receipt of all necessary documents. Risk Rating for Renewal/Review of Advances
shall not be pending for more than 15 days at any point of time after receipt of all necessary documents.
G. Roles and Responsibility at Various Levels (Maker/Checker/ Vetter):
To ensure that credit risk ratings pertaining to Fresh Proposals and Review/Renew should not remain in
outstanding category for more than 7 and 15 days respectively after receipt of all necessary documents.
➢ VALIDITY OF CREDIT RISK RATING DONE IN PNB TRAC:
• Rating Due: Rating of a borrower shall become due for updation after the expiry of 12 months from
the month of confirmation of rating or 18 months from the date of balance sheet on the basis
of which credit risk rating was assigned, whichever is earlier.
• Rating Overdue: The rating shall be treated as ‘overdue’ after the expiry of 15 months from the
month of confirmation of rating or 21 months from the date of Balance Sheet on the basis of
which the credit risk rating was assigned, whichever is earlier.
• After the expiry of the above period, the rating should be stated as ‘Due’ or ‘Overdue’ for renewal as the
case may be and word ‘Due for renewal’ or ‘Overdue for renewal’ will be suffixed along-with the rating
wherever it is quoted.
• Fresh rating should be assigned to a borrowal account, irrespective of the validity period stated above, if
any material development/information on the borrower comes to light, which may affect the rating
adversely.
• The Branch/ZRMCs should initiate efforts for renewal of ratings, as & when they become due, so that the
same are renewed well before becoming overdue.

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5. MICRO, SMALL AND MEDIUM ENTERPRISES (MSME)

5.1 Institutional Framework for MSMEs

As the MSME Sector is an unorganized sector, after the enactment of MSMED Act 2006, there has been number
of institutionalized efforts initiated to take care of the needs and problems faced by them with regulations for
the stakeholders. Some of them where the Bank has a role to play are as under:
▪ BCSBI Code
▪ Delayed Payment to MSMEs
▪ Financial literacy and consultancy to the Micro and Small Enterprises Sector
▪ Financial Support to MSMEs in ZED Certification Scheme
▪ SLBC Sub-Committee on MSME
▪ Specialized MSME Branches
▪ Cluster Approach
a. Banking Codes and Standard Board of India (BCSBI)

BCSBI Code sets minimum standards of banking practices for banks to follow when they are dealing with Micro
and Small Enterprises (MSEs).It provides protection to MSE and explains how banks are expected to deal with
MSE for their day-to-day operations and in times of financial difficulty. The Code does not replace or supersede
regulatory or supervisory instructions issued by the Reserve Bank of India (RBI) and banks will comply with
such instructions /directions issued by the RBI from time to time. While BCSBI has initiated the process of its
dissolution, banks may continue to follow their commitments as hitherto under the Code of Bank's Commitment
to Micro and Small Enterprises.

b. Delayed Payment

In MSMED Act 2006, the provisions of the Interest on Delayed Payment Act, 1998 to Small Scale and Ancillary
Industrial Undertakings, have been strengthened as under where penal provisions have been incorporated
to take care of delayed payments to MSME units.
i. In case the buyer fails to make payment on or before the date agreed on between him and the supplier in writing
or, in case of no agreement before the appointed day, the agreement between seller and buyer shall not exceed
more than 45 days.
ii. In case the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound
interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on,
at three times of the Bank Rate notified by Reserve Bank.
iii. For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised
at (ii) above.
iv. In case of dispute with regard to any amount due, an MSME unit can approach the Micro and Small Enterprises
Facilitation Council, constituted by the respective State Government under the Ministry of Micro, Small
Enterprises.
Further, banks have been advised to fix sub‐limits within the overall working capital limits to the large borrowers
specifically for meeting the payment obligation in respect of purchases from MSMEs.

c. Financial Support to MSMEs in ZED Certification Scheme:

➢ The Ministry of MSME, Govt. of India, launched the ‘Financial Support to MSMEs in Zero Defect Zero Effect
(ZED)’ Certification Scheme on 11th July 2016.
➢ The MSME Sustainable (ZED) Certification Scheme is unit based and all the assessments are carried out on
the activities/parameters of the unit opting for ZED certification.
➢ Any number of units registered under one Udyam Registration can apply for subsidy under this scheme. Each
Unit (under one Udyam Registration) will need to apply for Certification separately to avail
subsidy/benefits/incentives.
➢ The Scheme aims to enhance global competitiveness of MSMEs by providing them financial support
in assessment, rating and handholding of their manufacturing processes on quality, environment & other
important business aspects.

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➢ Quality Council of India (QCI), an autonomous body setup by Ministry of Commerce & Industry, Govt.
of India has been appointed as the National Monitoring and Implementing Unit (NMIU) for facilitating,
implementation, co-ordination and monitoring of the Scheme.
➢ ZED Maturity Assessment Model consists of 50 parameters for projecting a holistic picture of MSMEs
(covering various aspects like Production, Quality, Design, Safety, Environmental, Energy, Natural Resource,
Human Resource, Intellectual Property, and Performance). Each parameter has 5 levels and the rating is on
a weighted average of marks obtained in each parameter. The rating is valid for 4 years and the
surveillance audit is carried out by QCI.
Based on the assessment, the MSME will be ranked as ZED Certification Level 1 (Bronze), Level 2
(Silver) and Level 3 (Gold).
As the ZED rated MSME units reflect better performance in terms of manufacturing processes and financial
discipline, Bank is providing below mentioned concessions to the ZED rated MSME units (Ref: IRMD L&A
124/2022 dated 09.09.2022).
ZED Rating achieved by Eligible Concession
the Unit
Bronze 50% Concession in Processing Charges and 10 bps (0.10%) interest concession
Silver & Gold 50% Concession in Processing Charges and 25 bps (0.25%) interest concession

d. Specialized MSME Branches

RBI has advised to open at least one specialized branch in each district. Further, banks have been
permitted to categorise their general banking branches having 60% or more of their advances to MSME
sector as specialized MSME branches in order to encourage them to open more specialized MSME branches
for providing better service to this sector as a whole. Bank has specialized loan processing centers such as PLP
/MCC for processing of MSME loans, where specialized officers are posted for loan appraisal.

e. Cluster Approach
➢ All SLBC Convenor banks are advised to incorporate in their Annual Credit Plans, the credit requirement in
the clusters identified by the Ministry of Micro, Small and Medium Enterprises, Government of India. They
are also encouraged to extend banking services in such clusters / agglomerations which have come up and
identified subsequently by SLBC / DCC members.
➢ As per Ganguly Committee recommendations (September 4, 2004), banks are advised that a full-service
approach to cater to the diverse needs of the SSI sector (now MSE sector) may be achieved through
extending banking services to recognized MSE clusters by adopting a 4-C approach namely, Customer
focus, Cost control, Cross sell and Contain risk.
➢ To remain competitive in the market and to grasp good business through these clusters, there is a need of
customized offering in cluster areas. Accordingly, for effective TAT and faster disposal of cluster related
issues, a sub-committee of CGMs has been formulated to look after the issues related to clusters and
delegation of powers for various Relaxations accorded in approved clusters.

5.2 MSME Financing

Loan Application Form

a) Simplified Loan Application has been made available as per IBA format along with provisional
acknowledgement through a perforated sheet and check list of documents. Wherever scheme specific
application form is prescribed the same should be obtained.
b) Photograph of the Borrower: For the purpose of identification of borrowers, branches themselves
should make arrangements for the photographs. Cost of photographs of borrowers falling in the
category of Weaker Sections should be borne by the Bank.
c) Issue of Acknowledgement of Loan Applications: All Branch /Credit Verticals are advised to
mandatorily acknowledge all loan applications, submitted manually or online, by their MSME borrowers and
ensure that a running serial number /lead number is recorded on the application form as well as on the
acknowledgement receipt.

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d) Register of Receipt /Sanction /Rejection of Applications: A register should be maintained at branch

wherein the date of receipt, sanction /rejection /disbursement with reasons thereof etc., should be recorded
for all the applications received by the Branches for their consideration as and when received. Rejection of
application from MSEs for fresh limit /enhancement of existing limits should not be done without the
approval of competent authority by GBB, PLP and MCC. Sanction of reduced limits should be reported to
the next higher authority immediately with full details for review and confirmation. The reason for
rejection should be communicated in writing to the borrower within the period stipulated for disposal in
line with stipulation mentioned in the Fair Practice Lenders Code.
e) Capturing of Leads through PNB LenS: Branches /Offices have to ensure that all the leads received
through various channel, i.e., online or offline shall be entered in PNB LenS invariably. After capturing of
leads, lead reference number is generated. SMS and e-mail are sent to the applicant mentioning lead
reference number for further reference. For tracking of application by the applicant, the system will send
SMS and e-mail to the customer at following stages:
• At the time of generation of Lead
• Complete documents are received at GBB
• At the time of sanctioning of the proposal
• At the time of rejection of the proposal
• At the time of opening of loan account in Finacle
Further, applicant can also on-board their proposal on PSB 59 minutes portal through Bank specific URL
https://www.psbloansin59minutes.com/pnb and Lead generated through this portal is moved to PNB
LenS for its further processing.
f) PNB Pride: Bank has introduced an Application – “PNB Pride” with a view to enhance the monitoring
mechanism and Lead Management through the field functionaries. Digital Banking Division vide its Circular
No. 12/2021 dated 09.02.2021 has communicated the guidelines on “PNB Pride” Application.
g) Further, applicant can also apply for any Government sponsored scheme through Jansamarth portal
launched by Government of India. This portal is integrated with PNB Lens for faster disposal of application.

Credit Appraisal and Due-Diligence

New Simplified Common Appraisal Memorandum for MSME were adopted by the Bank for loans Upto ₹25 Crore.
(Ref: MSME Circular No. 19/2020 dated 24.03.2020). Credit Appraisal of the application shall be done in terms of
Bank’s guidelines, circulated time to time.

Credit Rating Model

a) Internal Risk Rating (IRR)

Credit Risk rating of MSME advances upto ₹100.00 lakhs are done through PNB SME Score. Use of PNB Score
SME was made mandatory in all eligible MSME advances.
b) External Credit Rating (ERR):
➢ All borrowers of our Bank with total credit exposure (both Fund Based & Non- Fund Based) of up to ₹25
Crore from our Bank, be exempted from securing External Risk Ratings.

➢ Borrowers availing credit exposure (Both Fund Based and Non Fund Based) above ₹25 crore and upto
₹50 crore are exempted for obtention of external risk rating with the following conditions :
i. All borrowers with an internal risk rating from A1 to A4, the exemption of external risk rating shall be
allowed for credit exposure (both FB+NFB) upto ₹50 crore (Subject to the overall credit exposure from
Banking Industry is upto ₹100 crore).
ii. In case borrowers with an Internal Risk Rating of B1/B2 i.e not below the investment grade, offer
collateral (Immovable property /Liquid Security) equivalent to atleast 50% of total exposure, the

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exemption of obtaining External Risk Rating for credit exposure (both FB+NFB) up to ₹50 Crore shall be
allowed.
iii. Further, for borrowers with an Internal Risk Rating of B1/ B2 i.e. not below the investment grade, in
case the sum total of collateral (Immovable property / Liquid security) and primary security (Immovable
property/ liquid security) is equivalent to at least 100% of total exposure, the exemption of obtaining
External Risk Rating for credit exposure (both Fund Based and Non-Fund Based) up to ₹50 Crore shall
be allowed.
iv. The exemption in external rating, once provided shall continue to be allowed irrespective of down
gradation in internal rating. (only in case of renewal of credit facilities)

➢ However, in event of non-availability of ERR in case of new borrowers (eligible for requirement of external
risk rating), the sanctioning authority shall provide a suitable time of 3 to 6 months to the new
borrowers for obtaining external risk rating in terms of sanction. In case ERR comes below the Investment
grade rating i.e. below ‘BBB’ rating grade, then the rating outcome shall be placed before the next higher
authority for continuation of granted concessional rate of interest, if any and taking a call on
additional risk mitigants. However, in case of HO sanctions, the same shall be placed to respective
sanctioning authority for taking further call accordingly.
➢ In case ERR of the borrower is available, its cognizance should not be taken for reckoning loaning power
however Risk Weight & pricing shall be applied based on available valid external risk rating.
➢ In case of exposures where external risk rating is not required as per Bank’s extant guidelines, if external
risk rating of the borrower is available, Risk Weight & pricing shall be applied based on available valid external
risk rating. Detailed guidelines in this regard have been issued vide IRMD circular no. 26/2023 dated
16.12.2023 as updated from time to time.
Rate of Interest

RBI has advised that all new floating rate loans to Micro and Small Enterprises extended by banks from October
01, 2019 shall be linked to external benchmark lending rates.
Further, RBI also issued directives that all new floating rate loans to Medium Enterprises (MSMEs) shall also be
benchmarked with External Benchmark Lending rate (EBLR) w.e.f. 01.04.2020. Accordingly, Bank adopted Repo
rate, as External Benchmark Lending Rate to link all new floating rate to MSME loans w.e.f. 01.04.2020
Security Norms

a) Branches are mandated not to accept collateral security in the case of loans up to ₹10 lakh extended to
units in the MSE sector. It is also advised to extend collateral free loans up to ₹10 lakh to all units financed
under the PMEGPs.
b) CGTMSE has increased the ceiling of guarantee coverage for retail and wholesale trade from ₹200.00 lakh
to ₹500.00 lakh and also the extent of guarantee coverage and annual guarantee fee shall be at par with
other activities.
c) If the credit facility is proposed to be covered under CGTMSE coverage, respective Sanctioning Authority
is empowered to cover eligible loans under CGTMSE guarantee coverage, on merits of the case.
d) In case of MSME borrowers, which are above ₹10.00 lakh and are not secured under CGTMSE cover /Credit
Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL)/ any other guarantee coverage schemes/ where
credit guarantee cover is not available, Bank should obtain the collaterals as per the Bank’s guidelines on
collateral security policy/ Specific product Scheme guidelines.

e) CGTMSE has introduced a new “Hybrid Security” product allowing guarantee cover for the portion of credit
facility not covered by collateral security. In the partial collateral security model, the Bank is allowed to obtain

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collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a
maximum of ₹500 lakh, can be covered under Credit Guarantee Scheme of CGTMSE. CGTMSE will, however,
have pari-pasu charge on the primary security as well as on the collateral security for the credit
facility. In such partial collateral model, the collateral coverage for the uncovered credit facility shall be
obtained.
f) In case of hybrid security model, irrespective of loan amount, respective Sanctioning Authority shall
have discretion to cover credit exposure under CGTMSE, on merits of the case.

5.3 Government Initiative to promote MSMEs

Initiative Implementing Remark

Agency
PM SVANidhi Ministry of Housing Scheme targets to benefit over 50 lakh street vendors, who had
and Urban Affairs been vending on or before 24.03.2020 in urban areas. The
scheme has been launched by the Bank on 04.07.2020
MUDRA Loans Department of Launched on 08th April 2015, WC facility is sanctioned for a
Financial Services, period of 3 years. However, the account is reviewed on yearly
Ministry of Finance basis and is renewed on every 3 years
Standup India Scheme has been launched on 5th April, 2016, to facilitate bank
Scheme loans above ₹10 Lakh and upto ₹100 Lakh to at least one
Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at
least one woman borrower per bank branch for setting up a
greenfield (New) enterprise
PMEGP Khadi and Village The maximum cost of project eligible for margin money subsidy
Industries under manufacturing sector ₹ 50.00 Lakh and for
Commission (KVIC) business/service sector the limit is ₹20.00 Lakh. Nodal bank i.e.
Union Bank of India (erstwhile Corporation Bank)
PM Vishwakarma Ministry of MSME Credit support to the artisans or craftsperson
Scheme

Credit Guarantee Scheme for Subordinate Debt (CGSSD) for Stressed MSMEs

Ministry of MSME, Govt. of India through CGTMSE has introduced “Credit Guarantee Scheme for Subordinate
Debt (CGSSD) to provide personal loan to the promoters of Stressed MSMEs for infusion as equity/
quasi equity in the business, eligible for restructuring as per RBI guidelines for restructuring of stressed
MSME advances. The loans would be provided with a 90% credit guarantee by the CGTMSE. Eligible borrower
under the scheme are as under:

a) MSME Enterprises defined under MSMED Act. The MSMEs may be Individuals / Proprietorship, LLP,
Partnership, Private Limited Company or registered company etc.

b) Promoters of MSME units which are stressed viz. SMA-2, and NPA accounts as on 30.04.2020 and
are eligible for restructuring as per RBI guidelines and can become commercially viable as per the
assessment of the Bank.
c) The Scheme is applicable for those MSMEs whose accounts have been standard as on 01.01.2016 and have
been in regular operations, either as standard accounts or as NPA accounts during the financial year 2016-
17, 2017- 18, 2018-19 and 2019-20, even if they did not remain in regular operation in FY 2020-21 & FY
2021-22, provided such accounts are viable as per MLI’s assessment and expected to come out of financial
stress by availing this facility.
d) Eligible Loan Amount : Promoter(s) of the MSME unit will be given credit equal to 50% of Promoter’s
stake (equity plus debt) or ₹75.00 lakh, whichever is lower in the shape of personal loan. This personal
loan shall not exceed the original debt of the beneficiary. The Equity/ quasi equity shall be calculated on
the basis of the last available audited balance sheet of a Financial Year.
The borrowers who had earlier availed 15% of the promoters’ stake are allowed to avail additional 35% of
the promoters’ stake, provided the overall maximum benefits availed under CGSSD does not exceed ₹75
lakh.

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GECL Facility

➢ This scheme is a specific response to the unprecedented situation created by COVID-19. It seeks to provide
much needed relief to the MSME sector at low cost, thereby enabling MSMEs to meet their operational liabilities
and restart their businesses. Under the scheme, NCGTC shall provide 100% Guarantee coverage on the
outstanding amount for the credit facility as on the date of NPA.
➢ GECL scheme was implemented in 4 phases (GECL 1.0, 2.0, 3.0 and 4.0) to support the various business
activities affected by Covid-19 pandemic as under:

GECL 1.0
a) All Business Enterprises /MSME borrower /individuals who have availed loan for business purposes with
total credit outstanding loans across all Banks/ FIs of up to ₹50 Crore (fund based only) as on 29.02.2020
are eligible under the Scheme. Eligible loan amount under the scheme is upto 20% of the total outstanding
as on 29.02.2020.

b) Under GECL 1.0 (Extension), borrowers are eligible for funding up to 30% of their total fund based credit
outstanding up to ₹50 Crore (net of support received under GECL 1.0) as on 29.02.2020 or 31.03.2021,
whichever is higher.
GECL 2.0

a) All Business Enterprises /MSMEs in the 26 stressed sectors recommended by Kamath Committee and
healthcare sector with total credit outstanding (fund based only) across all lending institutions, above ₹50
Crore and upto ₹500 Crore as on 29.02.2020, are eligible under the scheme. Eligible loan amount under
the scheme is up to 20% of total credit outstanding as on 29.02.2020.
b) Under GECL 2.0 (Extension), borrowers are eligible for funding upto 30% of their total fund based credit
outstanding up to ₹500 Crore (net of support received under GECL 2.0) as on 29.02.2020 or 31.03.2021,
whichever is higher.
GECL 3.0

a) All Business Enterprises /MSMEs borrower in the Hospitality, Travel & Tourism, Leisure & Sporting and Civil
Aviation sectors without any ceiling on outstanding are eligible under the scheme. Loan amount is capped
at 40% of FB outstanding as on 29.02.2020 subject to a cap of ₹200 Crore as GECL loan amount.

b) Under ECLGS 3.0 (Extension), the amount of GECL funding to eligible borrowers in the form of additional
working capital term loan facility would be up to 50% of the total credit outstanding (fund based only, net
of ECLGS support already received, if any) as on 29.02.2020 or 31.03.2021 or 31.01.2022, whichever is
higher, subject to cap of ₹200 crore per borrower and the borrower meeting all the other eligibility criteria.

c) For airlines, the maximum eligibility shall be 100% of their total credit outstanding (both fund based and
non-fund based outstanding, net of ECLGS support already received, if any) as on 29.02.2020 or 31.03.2021
or 31.01.2022, whichever is higher, subject to a cap of Rs. 1,500 crore per borrower (of which Rs.500 crore
to be allowed only subject to proportionate equity contribution by the promoters/owners) and the borrower
meeting all the other eligibility criteria.
GECL 4.0:
Existing Hospitals /Nursing Homes /clinics /medical colleges /Units engaged in manufacturing of liquid oxygen,
oxygen Cylinders etc. are eligible for loan upto ₹2 Crore under the scheme.
Scheme would be applicable during the period from the date of issue of these guidelines by NCGTC to
31.03.2023 or till guarantees for an amount of ₹5,00,000 Crore are issued, whichever is earlier. Last date of
disbursement for fund-based facility under the scheme shall be 30.06.2023.
MSME Division Circular No. 81/2021 dated 13.10.2021, Circular no 36/2022 dated 28.04.2022 and other circulars issued
from time to time may be referred for guidelines regarding extension of GECL scheme.

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Government Subsidy

a) Technology Up-gradation Fund Scheme (TUFS) and Amended Technology Up gradation Fund Scheme
(ATUFS)
b) The CLCSS (Credit Linked Capital Subsidy Scheme)

Restructuring of MSME Advances and Framework for Revival & Rehabilitation (FRR) For MSMEs

In order to provide a simpler and faster mechanism to address the stress in MSME accounts and their revival,
the Ministry of Micro, Small and Medium Enterprises, Government of India, vide their Gazette Notification dated
May 29, 2015 notified a ‘Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises’. The
framework aims at preserving viable MSMEs that are affected by certain internal and external factors and
minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring
mechanism.

It is advised that all stressed MSME accounts with aggregate loan limits above ₹10 lacs should be invariably
referred to the FRR Committee. The Committee should convene its meeting at the earliest but not later than
five working days from the receipt of the application, to examine the account for a suitable CAP (corrective
action plan). The accounts with aggregate loan limit up to ₹10 lacs may be dealt with by the branch for a
suitable corrective action plan.
Competent Authority for CAP (corrective action plan) under FRR

IRMD L&A circular no. 175 dated 24.11.2022 as updated from time to time may be referred for detailed guidelines.
Contactless Loans (PSBLOANSIN59MINTUES.COM)
➢ Govt. of India launched a transformative initiative in MSME credit space by launching portal
www.psbloansin59minutes.com.
➢ The portal has been developed by : M/s Online PSB Loans Ltd. (Formerly known as M/s Capitaworld
Platform Pvt. Ltd).
➢ This web portal enables in principle approval for MSME loans upto ₹5.00 Crore within 59 minutes from
SIDBI and Public Sector Banks (PSBs). The bank has on-boarded this portal and MSME & Mid Corporate
Division has configured all our flagship MSME products on this portal to maximize in-principle sanctions. In
addition to this, for Mudra segment, Division has on-boarded the Mudra Portal launched by M/s Online PSB
Loans Ltd. Through this portal the borrowers can apply online and get in-principle sanctions of their Mudra
proposals.
➢ Subsequent to this in-principle approval, the loan is required to be sanctioned & disbursed in 7-8 working
days.
➢ Efforts should be made to route all fresh / enhancement / renewal Mudra applications from ₹10,000 to ₹10
Lakh under “MUDRA LOANS‟ and all other MSME fresh / enhancement / renewal applications up to ₹5 crore
preferably through this Portal.

Trade Receivables Discounting System (TReDS)

TReDS (Trade Receivable Discounting System) is an institutional mechanism set up for financing of trade
receivables of MSMEs from corporate and other buyers including Government Departments and Public Sector
Undertakings (PSUs) through multiple financiers. Eligible Participants in TReDS exchange are as under:

i. Should be an MSME enterprise as per the eligibility criteria under the definition of MSMED
MSME Sellers
Act, 2006.

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i. Corporates and other buyers including Government Departments and Public Sector
Buyers
Undertaking and such other entities as may be permitted by the Reserve Bank of India
(“RBI”) from time to time to participate on the TReDS platform as Buyers.
ii. Should be in existing business for a minimum period as decided by business rules of
individual exchanges in line with RBI directives at the time of submission of application
for registration on the TReDS platform
i. Banks, Non-banking Financial Company – Factors and such other institutions as may be
Financiers
permitted by RBI from time to time to participate on the TReDS platform as Financiers.

TReDS Exchanges
Three entities are approved by RBI presently for setting up TReDS platform which are as under:
i. Receivable Exchange of India Limited (RXIL)
ii. A. Treds and
iii. Mynd Solutions Pvt. Ltd.
Centralized dedicated Cell & approved platforms:
a) M1xchange: PNB2.0 (through PNB1.0)
Agreement adopted for amalgamated entity
b) RXIL: PNB 2.0 (through eOBC)
c) A. Treds Ltd: PNB 2.0 (through eOBC)

Centralized TReDS Cell ZO, Delhi

Buyer-wise maximum factoring limit will be fixed depending upon LT/ST Rating and audited
annual turnover in following way

External Long term

Maximum Factoring Limit for Corporates
Credit Rating of Buyer
AAA 5% of annual Turnover of latest audited financials or ₹50 Cr. which is lower
AA 5% of annual Turnover of latest audited financials or ₹35 Cr. which is lower
A includes A- 5% of annual Turnover of latest audited financials or ₹25 Cr. which is lower
External Short term
Maximum Factoring Limit for Corporates.
Rating of Buyer
A1+ 5% of annual turnover of latest audited financials or ₹50 Cr. which is lower

A1, A2 5% of annual turnover of latest audited financials or ₹25 Cr. which is lower
External Long term Maximum Factoring Limit for Existing BBB (including BBB-) Rated
Credit Rating of Buyer Corporate Borrowers.
BBB 5% of annual turnover of latest audited financials or 15% of exposure with our
(including BBB-) bank or ₹ 10 Cr. whichever is lower.
Eligibility criteria for TReDS Exposure in case of External LT BBB rated our existing Corporate
borrowers:
a) Corporates should not have fallen into SMA1 & SMA2 category during the last six Months.
b) Preventive Monitoring System (PMS): Existing Corporate borrowers having PMS Rank 1 & 2 during last 6
months only be allowed for TReDS Exposure.
c) Vintage of borrowers to be considered as minimum 12 months with our bank.
Maximum Factoring Limit for State Government Departments
Maximum exposure ceiling for factoring limit on TReDS platform to a State Government registered as buyer shall
be 5% of State exposure final ceiling with lead bank buffer fixed by IRMD from time to time or ₹50 Crore,
whichever is lower. This limit will be over and above the existing exposure to the State Government.
Maximum Factoring Limit for PSUs/Government Undertaking (Central/State)/All Government
Departments (Central).
All profit-making PSUs and Government Undertaking (Central/State)/ All Government Departments (Central)
irrespective of External Credit Rating shall have buyer wise maximum exposure ceiling at ₹ 50.00 Cr.

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✓ Corporates (other than our bank’s existing Corporate borrowers) with external Long Term (LT) credit
rating below “A-” shall not be considered for factoring exposure.
✓ Our bank’s existing Corporate borrowers with external LT credit rating below “BBB-” shall not be
considered for factoring exposure.

➢ Overall Exposure through TReDS.

There will be no exchange wise capping of outstanding as factoring limits will be provided to registered buyers
/corporates irrespective of the exchange(s). Bidders will utilize the opportunities in the factoring market to utilize
the corporate wise sanctioned factoring limits irrespective of any exchange.
Operational guidelines on TReDS are issued by MSME & Mid Corporate Division. MSME Division circular no. 22 dated
31.03.2023 as updated from time to time, may be referred for detailed guidelines on TREDs.

*****************

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(Ref. Circular: IRMD L&A 24/2024 Dated 17.02.2024)

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B2. VALUATION POLICY

1. Properties taken as primary/collateral security are valued at ____prices all the time Realizable

2. In agricultural loans up to credit limit of_______, where agricultural land is being

offered as security, valuation of such agricultural land may be assessed on the basis of
Circle Rates decided by revenue authorities. The same shall be authenticated from the ₹2.00 Crore
site/ latest data published by revenue authorities by the processing/ assessment officer
and a record of the same shall be kept in file

3. In all agricultural loans above ₹2.00 Crores, the valuation of the agricultural land Empaneled
shall be assessed on the basis of the realisable value assigned by the____ Valuer

4. Where the realizable value of immovable property to be mortgaged/ charged is

above_____, branches shall get valuation of such IPs done from minimum two valuers ₹5 crore
of category A or B on the Bank’s approved panel

5. If the difference in valuation obtained by two valuers as mentioned above is up to ___,

the average realizable value may be taken. If the difference in two valuations is more than
25%
____, 3rd valuation may be got done from a senior valuer in category A and the average
of the lower two valuation reports shall be taken.

6. In case the IPs are recently purchased then the purchase price as per sale deed and not
the realizable value shall be reckoned as value of the property. The period for recent
purchase be taken as ______from the date of sale deed. However, if the guideline value
has been revised after the date of sale deed and it is higher than the purchase value then
12 months
value of the property shall be reckoned in terms of the guideline value even if the sale
deed is recent i.e. not one year old. Further, where valuation is reckoned on the basis of
purchase price as per sale deed, Valuer’s visit report shall be obtained at pre-sanction
stage.

7. If the duration between the date of allotment and date of conveyance deed / sale deed
(executed by the development agencies/private builder) is more than_____, fresh 1 year
valuation shall be obtained

8. With respect to valuation of land in all proposals including Real Estate, if the land is
acquired / purchased beyond one year, realizable value or _____ of the market value
85%
whichever is lower assessed by the Bank’s approved valuer should be taken as value of
the land

9. Periodicity for Valuation in accounts

For borrowal accounts having aggregate limit of ______& above (above ₹2.00 Crores in
case of agricultural loans), valuation of immovable properties charged/mortgaged to the
Bank is to be got done from approved valuer once in three years. As regards borrowal ₹1 crore
accounts having aggregate limit of below _______ (In case of agricultural loans up to ₹
2.00 Crores), valuation of immovable properties charged/mortgaged to the Bank be got
done from approved valuer once in five years

10. Wherever the Branch Head feels that realizable value of IPs is significantly lower than the
one on bank’s record in accounts, he may get the property re-valued from the bank’s One year old
approved valuer provided the valuation is more than _____

11. Revaluation of immovable property under PNB Home Loan ______is not required in case Irrespective
of standard accounts. However, For NPA Accounts, the revaluation is to be got done as of limits
per extant guidelines. Further, if the borrower approaches for top-up facility or any other

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credit facility (Other than Home Loan), Valuation/Revaluation will be obtained as per
extant guidelines.

However, if the Home Loan is sanctioned for construction of house, valuation of the
property may be done after obtaining _____from competent authority viz municipal Completion
corporation, development authorities etc. and in case of individual construction, Bank’s Certificate
empanelled valuer certifying that construction is as per the approved plan.

12. Valuation of IPs mortgaged in Educational Loan to be conducted as per existing

guidelines during moratorium period.
Further, revaluation may be discontinued once the_______, till the status of account is Repayment
standard. However, if the mortgage of IP is extended to other credit facility /borrower Starts
approaches for other credit facility against security of same IP, the IP should be revalued
as per existing guidelines

13. If, at the time of revaluation, negative variance of the individual property is _____ or more
from the earlier valuation, the matter shall be referred to sanctioning authority to take 20%
appropriate safeguards

14. Branches/Offices to ensure that residual age of the immovable property should be at least
5 years
______more than the tenure of loan

15. Valuation in cases of Consortium Banking Arrangement

▪ Valuation should be obtained once in_____. Where our bank is the lead bank, first 3 years
valuation shall be obtained as per Bank’s extant guidelines. Second valuation shall be
obtained as per the decision taken by the consortium.
▪ Where our Bank is not the lead Bank, valuation shall be obtained as per the decision
taken by the consortium.

16. Periodicity for Valuation in NPA accounts

Apart from the procedure for valuation to be conducted for ascertaining Reserve price of
the immovable properties charged/mortgaged to the bank it is prescribed that the
periodicity for valuation shall be once in______. However the Circle/Zonal/HO SASTRA
shall be empowered to get the said valuation even at the lower interval than 3 years 3 years
depending upon the exigencies of the case . All other guidelines with regards to valuation
of assets/ properties pertaining to stressed assets account shall remain unchanged and
continue to be advised by SASTRA Division Circular No 09/2024 dated 14.02.2024 and
subsequent updations

17. In cases where new plant and machinery is to be financed, the ____indicated in the
quotation/ supplier’s bill shall be reckoned as its value, which should be verified by making Cost Price
enquiries through other vendors supplying such machinery

18. In borrowal accounts where credit facility is to be considered against the collateral security
of existing plant & machinery to be charged to the bank by way of hypothecation,
mortgage, etc., valuation of such plant & machinery (P&M) shall be reckoned from Written Down
_______of P&M from the latest ABS. However, if sanctioning authority feels that value of Value (WDV)
P&M is not in commensuration with______, sanctioning authority at its discretion, may
obtain valuation report from a valuer on the Bank’s approved panel

19. If the valuation is got done by the approved valuer then following shall be applicable:
▪ For borrowal accounts having aggregate limit of ₹1 crore & above, valuation of plant
and machinery charged/ mortgaged to the Bank be got done from approved valuer once
3 Years
in ____.
▪ For borrowal accounts having aggregate limit of below ₹1 crore, valuation of plant
5 Years

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and machinery charged/mortgaged to the Bank be got done from approved valuer once
in ____. WDV
▪ The valuation of P&M shall be reckoned by the sanctioning authority as the valuation
submitted by valuer on the Bank’s approved panel or ____of P&M from the latest ABS,
whichever is lower.

20. As a measure of strengthening the Due Diligence of the applicable primary/collateral

securities which are Land & Building/Land in nature/Plant & Machinery/Other tangible
assets, valuers to include photograph of owner with the property in the background, in
the report to be submitted to Branches.
During subsequent valuations (including enhancement), photograph of owner of the
security shall not be insisted upon. However, the photograph of owner of the immovable First
property held as primary/collateral security, if not taken at the time of ____valuation, be
taken during subsequent valuation

21. In remote locations or other places where suitable valuers capable of undertaking
Valuation of the class of assets are not empanelled by the Bank, services of any other Zonal
valuer empanelled with a Public Sector Bank within their vicinity may be utilized after Manager
necessary due diligence and approval from ________

22. The empanelment of valuers:

Category of Work in Undertaking Valuation Value of property for

Valuers assignment of Valuation Work
A More than 10 years No limit
B More than 5 years and less than 10 Upto ₹50 crore
years
C Upto 5 years* Upto ₹5 crore
* In case of Diploma holders eligible for empanelment to undertake valuations, work experience of 8
years in the field of valuation after completing the diploma is required and they can undertake valuation
of property/plant and machinery upto maximum value of ₹5.00 cr
23. ______, Head Office shall be the owner division for empanelment of valuers SASTRA
Division

24. Age is an important criteria while empanelling valuers. The minimum age for empanelment
25 years
shall be ______and there is no maximum age limit for a valuer to remain on the panel

25. The valuer shall be on the bank’s panel for a period of _____unless and until removed 5 Years
from the panel

26. In case of built up property, the construction is as per the plan approved by the competent
authority.
If construction is not as per the approved plan, the ______ shall be accepted in such Realizable
cases. Also, guidelines as applicable to valuation of land shall be followed. In any Value of
eventuality where construction is as per approved plan, but some portion or floor has been
Land
identified as unauthorized, and bank approved valuer confirms that in case of demolition
of unauthorized construction, the approved portion shall remain intact, the value of the
approved construction and the land as assessed by the approved valuer can be accepted.

27. In case of misconduct by any valuer, the bank shall have the prerogative to recommend the removal of the
valuer from the panel. The steps involved in this process are given hereunder:
a) Issue of show cause notice: The valuer shall be given due opportunity to explain why action
should not be initiated against him or her.
b) Hearing: The valuer shall be given an opportunity to make his/her point of view known and heard.
c) Deliberation by the committee: The matter shall be deliberated by the concerned Conflict
Resolution Committee.
If the charges are found to be serious against the valuer he/she may be removed from the panel.

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28. A valuer once dis-empaneled / de-listed from the panel of the bank shall not be re-empaneled again.

29. Renewal of Empanelment of valuers – Valuers whose empanelment is going to expire

and wish to continue empanelment with the bank shall approach the bank at least _____
3 Months
before the expiry of empanelment period. The competent authority for renewal of
empanelment shall be the same as applicable for fresh empanelment

30. A maximum of _____time shall normally be given to the valuer to carry out the valuation.
Maximum time for valuation will be mutually decided by the Valuer and Bank depending
upon the nature of the valuation job and circumstances on a case to case basis. 10 days
In case of outstation properties or in case of large property valuations, more time shall be
given, depending on the circumstances, on a case to case basis.

31. Payment to be made within ______from the date of receipt of final valuation report or
45 days
receipt of final bill for payment whichever is later

32. In case the valuation report submitted by the valuer is not in order, the bank shall bring
the same to the notice of the valuer within ______of submission for rectification and
15 days
resubmission. In case no such communication is received, it shall be presumed that the
valuation report has been accepted.

33. In exceptional circumstances, Deputy General Managers at Zonal Offices/ Zonal SASTRA
Head (in case of NPA accounts) may permit payment of fees to valuers beyond the above
ceilings subject to a maximum of______. Further, Branch Head of LCBs/ELCBs (specialized
₹25,000/-
branches, with heavy credit portfolio requiring valuation of high value primary/collateral
securities), in exceptional circumstances, shall also exercise discretionary powers for
payment of fees to valuers beyond _____subject to a maximum of ₹50,000/-

34. The valuation of all the securities is to be updated in the CBS system by menu option
HCLM
_____and linked to respective accounts through HSCLM

35. The fee structure for valuation of properties shall range from ₹2000/- to _____ ₹25000/-

36. For the purpose of calculating the valuation fees, _____________ shall be considered Realizable
Value

***********************

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(Ref. Circular: IRMD L&A 20/2024 Dated 16.02.2024)

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B3. TEV STUDY POLICY

1. _____Study provides an appraisal of technological parameters of projects and its
impact on the financial viability. There is always a risk associated in project financing, Techno
hence the analysis of technical feasibility and financial viability through a TEV Study Economic
assists the lenders to take a view on the acceptability of the degree of risk involved in Viability (TEV)
the project
2. CUT-OFF LIMITS
TYPE OF PROJECT COST OF PROJECT
a. Fresh Project Above ₹20.00 Crore
b. Existing Account–Project involving change / diversification from core activity
Expansion in existing activity Above ₹40.00 Crore
The above cut-off limits will not be applicable in the below mentioned circumstances:
a) In normal circumstances, for conventional industrial units like Dal Mills, Rice Mills, Flour Mills and units
in Micro, Small and Tiny sectors, TEV study need not be conducted. Moreover, for certain sectors like
HAM Projects, Toll Projects, TEV study or vetting of the Projects may not be asked for, as
commercial viability/debt servicing potential of such Projects can be better assessed on the basis of
their financial Models, Traffic Study (wherever applicable) by the concerned credit desk and the
credit decision can be taken by assessment of Group's net worth etc.
b) TEV study or vetting of Projects may not be insisted upon in case of industrial units operating in cluster
and such cases to be considered using Model Projects emanating from Technical Cell at Zonal Offices
as a base project report.
c) In case the project is appraised by any Govt. Agency/PSU or any AAA externally rated company, fresh
TEV study/Vetting of the TEV study of the said project may not be insisted upon.
However, for point (a), (b), & (c) above, if the sanctioning authority desires complete TEV study report or
vetting of TEV report of project, they may decide the matter on case-to-case basis
3. Authority to waive TEV study:
▪ Up to Powers of CHCAC: By ZOCAC
▪ ZOCAC: By HOCAC-I
▪ HOCAC-I & above: By Respective Sanctioning Authority
4. TEV studies/ Project appraisal carried in-house by any Reputed Companies /
Agencies such as NTPC, NHPC, IRCON & DIMTS etc., or any ______externally rated
AAA
company may be accepted for financing and no vetting of the same should be insisted
upon.
However, in case Authorities (GM, Corporate Credit) & above at Head Office desire complete
TEV study or vetting for any specific project appraised by other Bank/FI/Consultant, the same
shall be got done from HO, Technical Cell

5. Pre-requisites for enlistment as Consultant

The consultancy firm/company should have specialist staff with minimum BE / B.
Tech /CA / ICWA or equivalent qualification in the field of service offered on the rolls
of employment or available on retention basis. Such specialist staff may include senior 10
retired engineers/professors or bureaucrats. Technically qualified staff should be a
minimum of ______ and include both technical and finance professionals
The firm/company should be engaged in the activity of TEV preparation for a minimum
of ______ and the promoters/staff should have minimum _______of experience in the
5 Years; 10
field of specialization/services. Consultants already listed with other banks/financial
Years
institutions will be given due weightage, while considering empanelment. This,
however, is not a pre-condition for empanelment

The firm/company should have a good track record in providing TEV consultancy. The
actual performance of ______appraised by the company in past 3 years pertaining 3 Projects
to the industry for which the empanelment is sought would be evaluated

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Partnership firm, private/public limited company with network of offices across

Individuals,
India.___,______and Co-operative Society have been excluded from the purview of
Proprietorship
these ground rules for empanelment of outside consultants for TEV Study
The Third-Party Entity (TPE) should not have been caution listed in the list published
by______. (Caution list is updated in Knowledge Centre by FRMD. The same is IBA
updated as & when _____updates the list
Financial status/ Background - Copies of last 3 years financial statements will be
obtained in case of firms/companies, etc. Cross checking of their conduct/details
through market reports may be done. Reports from other Banks, where empaneled, ₹100.00 Lakh
may be obtained. The revenue from the activity for the last 3 years should be more
than ______per year on the average
6. Empanelment of TEV consultant
Technical Cell, Corporate Credit Division, HO will recommend for approval of the names
of some reputed appraising institutions/consultancy institutions /consultancy
organizations, etc., based on the recommendations of Zonal Office, considering the HOCAC II
past dealings. Such requests for empanelment shall be placed for approval to ______by
the CGM/GM looking after the work of Technical Cell and/or other GM of Corporate
Credit Division at Head Office
7. The empanelment will be valid for Two Years
8. Dis-empanelment
In case of misconduct by any TEV consultant, the TEV Consultant shall be removed
from the Panel at the discretion of the Bank. Offices (CBB/ MCC/ CO /LCB /ELCB)
dealing with the respective TEV Consultant shall forward the names of such consultants
to respective Zonal Offices.

In line with IBAs guidelines with regard to Third Party Entities, the following steps shall
be undertaken by the Technical Cell, Credit Division at Zonal Office level:
1. Issue of show cause notice: The consultant shall be given due opportunity to
explain why action should not be initiated against him or her.
2. Hearing: The consultant shall be given an opportunity to make his/her point of
view known and heard.
3. Deliberation by the committee: The matter shall be deliberated at the ZM level
by a ZO committee.
If the charges are found to be serious against the consultant, Zonal offices shall
recommend for removal of such consultants from the panel to Technical Cell, Credit
Division, HO.
Technical Cell, HO shall further place this recommendation for removal of TEV
consultants from Bank’s panel with due justification to HOCAC-II for approval.
Name of the consultant shall be delisted and subsequently deleted from the list of
empanelled entity available on Bank’s Site and added to the separate list of dis-
empanelled agencies and same shall also be circulated to field functionaries.
9. Committee at _____be formed for taking decision for conflict resolution, being a
sensitive and complaint prone area.
Chairman of the Committee: ZM; Convenor : Dy. ZM;
Member: Incumbent of the recommending office (MCC/ CBB /CO /LCB /E-LCB)* ZO Level
Official of rank Scale IV and above of Credit Monitoring Cell, Zonal Office
Official of rank Scale IV and above of Credit Vertical, Zonal Office
Quorum: 3 Members

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(Ref. Circular: IRMD L&A 77/2024 Dt.24.06.2024)

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B4. CO-LENDING POLICY

B4.1 Approach-I/ Co-Lending Model-I: Co-Lending arrangement wherein Master Agreement
provides for Bank to mandatorily take the share of individual loans as originated by the NBFCs
in its books
Features Description
Scope i. Bank shall co-lend with all registered NBFCs (including HFCs) in respect of advances
based on a prior agreement.
ii. The Loan shall be originated by NBFC.
iii. The Master Agreement entered into by the Banks and NBFC shall provide that Bank shall
mandatorily take the share of individual loans as originated by the NBFCs in its books as
per the terms of the Master Agreement.

Eligibility Criteria i. Only NBFCs (including HFCs) having Minimum External rating of ‘A’ and having gross
NPA (as per the latest ABS) as given below:
For Housing loans portfolio Less than 3% Gross NPA

For other than Housing loans portfolio Less than 4% Gross NPA

However, in case of co-lending for agriculture loans, NBFCs with external rating upto ‘BBB’
(by Banks approved Rating Agencies) may be considered eligible.
ii. Further, the NBFC should be at least 3 years in operation to be eligible for entering
into Co- lending agreement with banks.
iii. Wherever defined, Bank would enter into co-lending arrangement with NBFCs having
CRAR equal to RBI defined CRAR + 1%. Where the same is not defined, Bank may
accept proposals from NBFCs having CRAR of 15%.
iv. Wherever NW or NOF is defined, the position of the NBFC should be higher than the
applicable regulatory definition. However, in case where NW or NOF is not defined, it
may be decided by CGM Level Business Review Committee on a case to case basis.
v. Bank shall not enter into co-lending arrangement with an NBFC belonging to the
promoter Group.
vi. MFIs with minimum MFI Rating of up to MFR 3 will be considered eligible, subject to a
maximum limit of ₹ 500 Crores.
vii. Same customer may be financed under multiple schemes/co-lending arrangements,
subject to fulfilment of eligibility criteria, repayment capacity and performance of existing
account(s). Further, a customer who is already financed by several NBFCs will also be
eligible to be covered under CLM subject to fulfillment of eligibility criteria, repayment
capacity and performance of existing accounts
NOTE:
▪ Powers for any relaxation from the eligibility conditions on case to case basis shall be vested with
CRMC.
▪ The NBFC shall give an undertaking to the Bank that its contribution towards the loan amount is not
funded out of borrowing from the co-originating bank or any other group company of the partner
Bank.
Segments i. Housing Loan classified
Eligible ii. Personal Loan
iii. Gold Loan classified
iv. Vehicle Loan (including Car loan & Two-wheeler loan)
v. Loan against Property
vi. Business Loan including secured and unsecured MSME

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Features Description
vii. Agriculture Equipment and Agriculture Investment
NOTE: CGM Level Business Review committee shall be empowered to include any other segment.
Nature of Facility Term Loan
Applicable for Non Priority Sector advances:
Minimum
Holding Period Bank shall take the share of loans originated by the NBFCs in its books only after a minimum
(MHP) holding period (MHP), as prescribed below, which is counted from the date of registration of
the underlying security interest with Central Registry of Securitisation Asset Reconstruction
and Security Interest of India (CERSAI):
i. 3 months in case of loans with tenor of up to 2 years;
ii. 6 months in case of loans with tenor of more than 2 years.
Provided that in case of loans where security does not exist or security cannot be registered with
CERSAI, the MHP shall be calculated from the date of first repayment of the loan.
Provided further that in case of project loans, the MHP shall be calculated from the date of
commencement of commercial operations of the project being financed.
Provided further that in case of loans acquired from other entities by the NBFC, such loans cannot be
transferred before completion of 6 months from the date on which the loan was taken into the
books of the NBFC.
Provided further that the transfer of receivables, acquired as part of ‘factoring business’ as defined
under the Factoring Regulation Act, 2011, will be exempted from the above specified MHP
requirement subject to fulfilment of following conditions:
a) The residual maturity of such receivables, at the time of transfer, should not be more than 90 days, and
b) Bank shall conduct proper credit appraisal of the drawee of the bill, before acquiring such receivables as
prescribed in Bank’s extant guidelines on ‘Transfer of Loan Exposures’.

Minimum Bank will take its share of the individual loans on a back-to-back basis in their books.
Retention However, NBFCs shall be required to retain a minimum of 20% share of the individual
Requirement loans on their books. In case of priority sector advances, the NBFC share can be extended
(MRR)
upto maximum 40% of individual loan.
Max. Loan Outlay NBFC (incl. HFC)/MFI Rating Max. Outlay allowed per NBFC
Per NBFC (incl HFC)/MFI Rating
AAA/ AA Rated ₹2000.00 crore
(Incl. HFC) A Rated ₹1000.00 crore
BBB Rated (for Agriculture)* ₹500.00 Crore
Upto MFR3* ₹500.00 Crore
*shall be allowed under priority sector advances only
Ticket Size Per
Minimum No minimum limit
Loan ticket size
per loan

Maximum Housing Loan ₹ 5.00 crore*

ticket size Personal Loan ₹ 0.15 crore
per loan2 Gold Loan ₹ 0.25 crore
Vehicle Loan ₹ 0.50 crore
Loan Against Property ₹ 2.00 crore
Business loan including Secured MSME ₹ 10.00 crore
advances
Unsecured MSMEs, Agriculture & Others ₹0.50 Crores
(Segment eligible for classification under PS)
*In case of HFCs, the maximum ticket size per loan shall be as per RBI prescribed regulatory limits under priority
sector lending and classification

Valuation Valuation of the underlying individual security shall be as per valuation policy of NBFC &
methodology as adopted by NBFC shall be accepted.

2 Sanctioned limit of NBFC

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Features Description
The valuation is to be updated on periodic intervals which shall be decided by the Bank and
NBFC on mutually agreeable terms. Further, the same is to be updated in CBS also.
Loaning Powers Loaning powers shall be exercised as per Bank’s extant guidelines.
Guarantee Cover ▪ CGTMSE has introduced the Credit Guarantee Scheme for Co-Lending (CGSCL) for
by Credit extending credit guarantee coverage to Banks and NBFCs in respect of credit facilities
Guarantee extended by them to eligible MSEs under CLM.
Trust/Institution ▪ NBFC may obtain Guarantee cover from credit guarantee trust/institution in the eligible
accounts and the cost shall be borne by the NBFC/borrower.
▪ If Credit guarantee cover from CGTMSE is obtained, same shall be in accordance with
guidelines on CGTMSE-Credit Guarantee Scheme for Co-Lending issued vide MSME
Division vide Circular No. 12 dated 07.02.2024 or as updated from time to time.
Approving CRMC shall be the approving authority for on-boarding the NBFC for co-lending.
authority for on- Subsequently, a note in this regard shall be placed to the Board for information.
boarding of NBFC

B4.2 Approach-II/ CLM-II : Co-Lending arrangement Wherein Master Agreement provides for
Bank to retain the discretion to reject certain loans after its due diligence prior to taking in
its books
Features Description
Scope i. Bank shall co-lend with all registered NBFCs (including HFCs) in respect of advances
based on a prior agreement.
ii. The Loan shall be originated by NBFC.
iii. The Master Agreement provides for Bank to exercise its discretion regarding taking into
its books the loans originated by NBFC as per the Agreement. Such arrangement will be
akin to a direct assignment transaction.
iv. All the Co-Lending Arrangement with registered NBFCs (including HFCs) wherein Master
Agreement provides for Bank to retain the discretion to reject certain loans after its due
diligence prior to taking in its books
General i. Under direct assignment, a single loan or a part of such loan or a portfolio of such loans
Requirements can be acquired from NBFC (including HFCs).
ii. The loan transfer should result in transfer of economic interest 3 without being
accompanied by any change in underlying terms and conditions of the loan contract. If
there are any modifications to terms and conditions of the loan contract during and after
transfer (eg. in take-out financing), the same shall be evaluated against the definition
of ‘restructuring’ provided in Paragraph 16 of Part-B (Prudential Norms Applicable to
Restructuring) of RBI Master Circular-Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances issued vide circular RBI/2024-25/12
DOR.STR.REC.8/21.04.048/2024-25 dated April 2, 2024 or as updated from time to time.
iii. No credit enhancements or liquidity facilities in any form shall be offered in case of
loan transfers.
iv. NBFC cannot re-acquire a loan exposure, either fully or partially, that had been
transferred by the entity previously, except as a part of a resolution plan under the RBI on
Framework for Resolution of Stressed Assets stated in Master Circular-Prudential norms on
Income Recognition, Asset Classification and Provisioning pertaining to Advances April 02, 2024
or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016.
v. Loan transfer should result in immediate separation of the NBFC from the risks and
rewards associated with loans to the extent that the economic interest has been
transferred.

3
“Economic Interest” refers to the risks and rewards that may arise out of loan exposure through the life of the loan exposure

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Features Description
vi. Any rescheduling, restructuring or re-negotiation of the terms of the underlying
agreement/s attempted by Bank after the transfer of assets shall be as per RBI on
Framework for Resolution of Stressed Assets stated in Master Circular-Prudential norms on
Income Recognition, Asset Classification and Provisioning pertaining to Advances April 02, 2024
or as updated from time to time.
vii. The transfer shall be only on cash basis and the consideration shall be received not
later than at the time of transfer of loans. The transfer consideration should be arrived
at in a transparent manner on an arm's length basis.
viii. The extant instructions on outsourcing and the applicable provisions of the RBI (Know
Your Customer (KYC)) Directions, 2016 (as amended from time to time) is required to be
complied with in all cases
ix. The Loan transfer shall be in respect of loans which are not in default.
x. Further, all the requirements in terms of Guidelines on Transactions Involving Transfer
of Assets through Direct Assignment of Cash Flows and the Underlying Securities issued
vide RBI/DOR/2021-22/85 DOR.STR.REC.53/21.04.177/2021-22 and RBI/DOR/ 2021-
22/86DOR.STR.REC. 51/21.04.048/2021-22 dated September 24, 2021, as updated from
time to time, with the exception of Minimum Holding Period (MHP) which shall not be
applicable in such transactions under priority sector undertaken in terms of this CLM shall
be complied with
Eligibility Criteria i. Only NBFCs (including HFCs) having minimum external rating of ‘A’ and having gross
NPA (as per the latest ABS) as given below:
For Housing loans portfolio Less than 3% Gross NPA
For other than Housing loans Less than 4% Gross NPA
portfolio
However, in case of co-lending for agriculture loans, NBFCs with external rating upto ‘BBB’ (by Banks
approved Rating Agencies) may be considered eligible.
ii.Further, the NBFC should be at least 3 years in operation to be eligible for entering
into Co- lending agreement with banks.
iii. Wherever defined, Bank would enter into co-lending arrangement with NBFCs having
CRAR equal to RBI defined CRAR + 1%. Where the same is not defined, Bank may
accept proposals from NBFCs having CRAR of 15%.
iv. Wherever NW or NOF is defined, the position of the NBFC should be higher than the
applicable regulatory definition. However, in case where NW or NOF is not defined, it
may be decided by CGM Level Business Review Committee on a case to case basis.
v. Bank shall not enter into co-lending arrangement with an NBFC belonging to the
promoter Group.
vi. MFIs with minimum MFI Rating of up to MFR 3 will be considered eligible, subject to a
maximum limit of ₹ 500 Crore.
vii. Same customer may be financed under multiple schemes/co-lending arrangements,
subject to fulfilment of eligibility criteria, repayment capacity and performance of
existing account(s). Further, a customer who is already financed by several NBFCs will
also be eligible to be covered under CLM subject to fulfillment of eligibility criteria,
repayment capacity and performance of existing accounts.
NOTE:
▪ Powers for any relaxation from the eligibility conditions on case to case basis shall be vested with
CRMC.
▪ The NBFC shall give an undertaking to the Bank that its contribution towards the loan amount is
not funded out of borrowing from the co-originating bank or any other group company of the
partner Bank.

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Features Description
Segments Segments eligible for financing under Co-Lending Model (CLM) Arrangement:
Eligible i. Housing Loan
ii. Personal Loan
iii. Gold Loan
iv. Vehicle Loan (including Car loan & Two-wheeler loan)
v. Loan against Property
vi. Business Loan including secured and unsecured MSME
vii. Agriculture Equipment and Agriculture Investment
NOTE: CGM Level Business Review committee shall be empowered to include any other Non-Priority
Sector Segment for financing under co-lending arrangement.
Nature of Facility Term Loan
Minimum Applicable for Non Priority Sector Advances:
Holding Period Bank shall take the share of loans originated by the NBFCs in its books only after a minimum
(MHP)
holding period (MHP), as prescribed below, which is counted from the date of registration
of the underlying security interest CERSAI:
i. 3 months in case of loans with tenor of up to 2 years;
ii. 6 months in case of loans with tenor of more than 2 years.
Provided that in case of loans where security does not exist or security cannot be registered
with CERSAI, the MHP shall be calculated from the date of first repayment of the loan.
Provided further that in case of project loans, the MHP shall be calculated from the date of
commencement of commercial operations of the project being financed.
Provided further that in case of loans acquired from other entities by the NBFC, such loans
cannot be transferred before completion of 6 months from the date on which the loan was
taken into the books of the NBFC.
Provided further that the transfer of receivables, acquired as part of ‘factoring business’ as defined
under the Factoring Regulation Act, 2011, will be exempted from the above specified MHP
requirement subject to fulfilment of following conditions:
a) The residual maturity of such receivables, at the time of transfer, should not be more than 90 days, and
b) Bank shall conduct proper credit appraisal of the drawee of the bill, before acquiring such receivables as
prescribed in Bank’s extant guidelines on ‘Transfer of Loan Exposures’.

The loans will be first opened by NBFC and then Bank will open loan accounts afterwards.
The NBFC can sanction and disburse the whole amount of the loan and then approach the
bank for reimbursement.
Applicable for Priority Sector Advances:
In case of co-lending agreement with regard to priority sector advances, the MHP exemption
shall be available only in cases where the prior agreement between the bank and NBFCs
contains a back-to-back basis clause and complies with all other conditions stipulated in the
guidelines for direct assignment.
Minimum Bank will take its share of the individual loans on a back-to-back basis in their books.
Retention However, NBFCs shall be required to retain a minimum of 20% share of the individual
Requirement loans on their books. In case of priority sector advances, the NBFC share can be extended
(MRR) upto maximum 40% of individual loan
Max. Loan Outlay NBFC (incl. HFC) Rating Max. Outlay allowed per NBFC
Per NBFC (Incl. (incl HFC)
HFC) AAA/ AA Rated ₹2000.00 crore
A Rated ₹1000.00 crore
BBB Rated (for Agriculture)* ₹500.00 Crore
Upto MFR3* ₹500.00 Crore
*shall be allowed under priority sector advances only

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Features Description
Ticket Size Per
Loan Minimum No minimum limit
ticket size
per loan

Maximum Housing Loan ₹ 5.00 crore*

ticket size Personal Loan ₹ 0.15 crore
per loan4 Gold Loan ₹ 0.25 crore
Vehicle Loan ₹ 0.50 crore
Loan Against Property ₹ 2.00 crore
Business loan including Secured MSME ₹ 10.00 crore
advances
Unsecured MSMEs, Agriculture & Others ₹0.50 Crores
(Segment eligible for classification under PS)
*In case of HFCs, the maximum ticket size per loan shall be as per RBI prescribed regulatory limits under priority
sector lending and classification
Valuation Valuation of the underlying individual security shall be as per valuation policy of NBFC &
methodology as adopted by NBFC shall be accepted.
The valuation is to be updated on periodic intervals which shall be decided by the Bank and
NBFC on mutually agreeable terms. Further, the same is to be updated in CBS also.
Loaning Powers Loaning powers shall be exercised as per Bank’s extant guidelines.
Guarantee Cover ▪ CGTMSE has introduced the Credit Guarantee Scheme for Co-Lending (CGSCL) for
by Credit extending credit guarantee coverage to Banks and NBFCs in respect of credit facilities
Guarantee extended by them to eligible MSEs under CLM.
Trust/Institution ▪ NBFC may obtain Guarantee cover from credit guarantee trust/institution in the eligible
accounts and the cost shall be borne by the NBFC/borrower.
▪ If Credit guarantee cover from CGTMSE is obtained, same shall be in accordance with
guidelines on CGTMSE-Credit Guarantee Scheme for Co-Lending issued vide MSME
Division vide Circular No. 12 dated 07.02.2024 or as updated from time to time.
Approving CRMC shall be the approving authority for on-boarding the NBFC for co-lending.
authority for on- Subsequently, a note in this regard shall be placed to the Board for information.
boarding of NBFC

4 Sanctioned limit of NBFC

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B5. FACTORING POLICY

The Factoring Regulation Act, 2011 defines, “Factoring Business as the business of acquisition by way of assignment
of receivables of assignor for a consideration for the purpose of collection of such receivables or financing, whether by
way of making loans or advances or otherwise against such assignment but does not include:
▪ credit facilities provided by a Bank or a NBFC in its ordinary course of business against security of receivables.
▪ any activity as commission agent or otherwise for sale of agricultural produce or goods of any kind whatsoever or any activity relating
to the production, storage, supply, distribution, acquisition or control of such produce or goods or provision of any services.”
Ref. Circular: IRMD L&A Cir. No.76/2024 Dated 19.06.2024
Parameter Description
Scope and Undertaking of Receivable/Invoice financing business on “With/Without Recourse”
Applicability basis for domestic trade transactions.
Facility Domestic Factoring: Domestic Factoring is a financial service, whereby the
borrower(seller) raises invoice to a domestic buyer located within India, assigns the
invoice to the Bank and receives pre-payment upto maximum 100% (as approved
by the sanctioning authority) of the invoice value immediately. Tenor of the invoice
up to 6 months shall be accepted.
Factoring Limit shall be set up as part of sanctioned exposure limit of the borrower.
Security Factoring on “with recourse” basis shall be treated as secured exposure to the
extent of receivables coverage available. Factoring on “without recourse” basis shall
be treated as unsecured exposure.
Authorised Branches LCBs/ELCBs. However, CGM, Corporate Credit Division shall be empowered to
authorize branches other than LCBs/ELCBs.
HOCAC- I and above. In cases of related party factoring transactions, sanctioning
Sanctioning Authority authority shall be HOCAC-II and above within their vested loaning powers.

In case of factoring ‘without recourse’, powers as prescribed in Loaning Power for unsecured
loans shall be applicable.
a) The exposure shall be reckoned as under:
Exposure Norms In case of factoring on:
i. “with-recourse” basis, the exposure would be reckoned on the assignor/seller.
ii. “without-recourse” basis, the exposure would be reckoned on the debtor
b) The Bank’s Credit Management & Risk Policy inter-alia prescribes that Bank’s
exposure to factoring activities should not exceed 10% of total advances
(Regulatory). Within the same, the factoring on without recourse basis shall not
exceed 3% of the Bank’s total advances.
Note: Factoring exposure through TReDS shall be covered in the ceiling prescribed above.
Nil. Financing of receivables/invoices under Factoring can be upto 100% of the Invoice Value
Margin
less Discount (Interest and charges).
The Sanctioning Authority may decide on the extent of financing/margin based on risk
perspective arrived at on the basis of its assessment of credit worthiness of seller/buyer, due
diligence carried out and other commercial considerations.
Interest Interest rate as applicable on working capital facility, i.e., CC/WCDL.
Service Charges a) “With Recourse” Factoring: 0.20% of invoice amount.
b) “Without Recourse” Factoring: 0.30% of invoice amount.
Creation of Charge Every transaction of assignment is to be registered with CERSAI within 30 days of
date of assignment or within timelines stipulated by RBI from time to time.
Once the proceeds are realized, satisfaction of charge shall be entered in CERSAI.
Relaxations/ MC shall be empowered to approve relaxations which otherwise do not fit in the laid
Deviations down policy but is within overall statutory and regulatory framework

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Ref. Circular: IRMD L&A Cir. No.76/2024 Dated 19.06.2024

Parameter Description
Factoring would be treated on par with loans and advances and accordingly extant
Classification –
prudential norms on loans and advances would be applicable to this activity. Thus, a
Prudential Norms
receivable acquired under factoring which is not paid within 90 days from the due
date will be treated as non-performing asset (NPA) irrespective of when the
receivable was acquired or whether the factoring was carried out on “with recourse”
basis or “without recourse” basis. The entity on which the exposure was booked will
be shown as NPA and provisions to be made accordingly.
Exchange of a) For the purpose of exchange of information, the assignor shall be deemed to be
Information the borrower. Bank shall share information about common borrowers with other
lending banks. (Regulatory)
b) Periodical certificates at quarterly intervals regarding factored receivables shall be
obtained from the borrowers to avoid double financing. (Regulatory)
c) Bank shall intimate the limits sanctioned to the borrower to the concerned banks
and details of debts factored taking responsibility to avoid double financing.
(Regulatory) This could be cross checked with the certificate obtained by Bank
from borrowers.
Under no circumstance, the receivables which are financed under Factoring should
be available as Drawing Power under Regular Limits.
a) Factoring Limit sanctioned is to be duly entered in CBS.
i. In case of factoring on ‘With Recourse’ basis, Customer ID should be in the
Monitoring and
name of “Seller” for correct exposure computation and reporting in various
Reporting
returns including CRILC.
ii. In case of factoring on ‘Without Recourse’ basis, Customer ID should be in the
name of “Buyer” for correct exposure computation and reporting in various
returns including CRILC.
b) CRMD shall be the concerned division for monitoring and reporting of exposure
under this facility as per Bank’s extant guidelines.
Other:
▪ The instructions/guidelines on KYC/AML/CFT applicable to banks, issued by RBI from time to time, shall be complied
with, in respect of all factoring services.
▪ The guidelines on Customer rights issued by Customer Care Centre (Operations Division) circular no. 17 dated
18.04.2024 & subsequent amendment therein from time to time, shall be complied with, in respect of all factoring
services.
▪ Concessions, if any in ROI/Service Charges may be permitted by Sanctioning Authority not below the level of HOCAC-
II and shall be governed by Policy on Loaning Powers and Exercising Such Powers at Various Levels.
▪ Receivables acquired under factoring should be treated as part of loans and advances. A separate disclosure shall be
made in the ‘Notes’ forming part of the Accounts with regard to factoring exposures. (Regulatory)

Process Flow under Factoring

“With Recourse” “Without Recourse”

Parameter Factoring

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 उत्कर्ष -2025

“With Recourse” “Without Recourse”

Eligibility Borrowers shall avail factoring services within the Factoring Limit sanctioned by the bank. No
factoring service shall be extended by the Bank to non-constituent borrowers.
Rating of Borrowers (Sellers) : ERR of A and above and IRR of A4 and above only. Further, the
requirement of external risk rating shall be governed by Bank’s extant guidelines.
Rating of Buyer:
Buyer (Borrower) Buyer (Non-Borrower)
ERR: AA and above ERR: AA & above.
-----------N.A.---------- IRR: A3 and above However, in respect of buyers, which
Further, the requirement are Maharatna/Navratna /Miniratna
of external risk rating CPSEs and Central Government/State
shall be governed by Government Guaranteed entity, external
Bank’s extant guidelines. rating shall not be mandatory.
CRILC of the buyer (debtor) shall be scrutinized. Account should not have slipped to SMA-1 category
in the last one year
Due Diligence a) In cases where Buyer is a non-borrower, branches shall carry out due diligence of the Buyer
(debtors) through publicly available information. In this regard, Credit information from external
agency may be obtained and held on record.
b) Factoring services shall be extended only in respect of invoices which represent genuine trade
transactions.
c) The buyer should not have defaulted in payments to the seller during last 3 years or tenor of
relationship whichever is lower. A certificate to this effect shall be obtained from the seller.
d) The list of acceptable buyers along with tentative limits to be captured in the credit appraisal
format. Any further addition/deletion to the list of buyers, shall be authorised by respective
sanctioning authority.
In case of buyers who are our borrowers, it should be
----- ensured that the internal and regulatory exposure
ceilings as well as overall approved limit of the borrower
is complied with.
Assessment For both cases ( i.e. “With Recourse” and “Without Recourse”)
a) Assessment of Factoring Limit shall be based on the annual turnover of the seller (borrower) as
per the latest audited financials. Maximum factoring limit assessed shall not be more than 10%
of the annual turnover of the borrower as per the latest audited financials.
b) Branches shall ensure that the borrower is not over-financed. Accordingly, they shall determine
the working capital requirement of the borrower taking into account the value of the invoices
purchased for factoring.
For “Without Recourse” cases only:
c) Assessment of factoring limits shall, as far as possible, coincide with the sanction/renewal of
working capital facilities and the Factoring Limit shall be part of regular sanctioned limits.
d) Whenever these limits are required to be fixed or enhanced subsequent to the sanction of working
capital limits, the assumptions in regard to the level of receivables made at the time of sanction
of limits should be reviewed and if required, assessment of working capital shall be reassessed
to ensure that there is no over financing.
Documentation For both cases ( i.e. “With Recourse” and “Without Recourse”)
a) The seller (assignor) by agreement in writing, assigns any receivables due and payable to him by
any buyer (debtor), to the Bank, for a consideration as may be agreed between the assignor and
the Bank (assignee). Corporate Credit Division in consultation with Law Division to devise a
Standard Agreement format to be executed in this regard.
b) Invoice-wise letter of assignment along with acknowledgment from Buyer shall also be obtained.
For “Without Recourse” cases only:
c) Tripartite agreement (subject to vetting by Law Division) shall be required to be executed between
the Bank, Borrower (Seller) and its Debtor (Buyer) covering details of rights, liabilities and
responsibilities of each party and should contain the following clauses:
i. Fixing of Debtor Limits
ii. Recourse to seller (borrower) till Invoices are accepted by the Buyer.
iii. Undertaking by Debtor to Pay the Bills on Due Date and discount at contracted rate from due date till date
of payment, if payment made after due date.
iv. Consent to open Customer ID/Operative Accounts on account of Factoring and collection of KYC/other
documents required for the same.
v. Defences and right of set off of debtor
d) In cases where tripartite agreement cannot be executed, acknowledgement from the buyer
accepting to pay the invoice amount on due date (duly vetted from Law Division) shall be obtained.
However, sanctioning authority in such cases shall be HOCAC-II and above within their vested
loaning powers

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B6. EXIT POLICY

Parameter Description
Objective To timely exit from the standard accounts showing stress signals as reduction in stress
portfolio can result in improving asset quality and capital conservation which could be
deployed for taking fresh exposure in better credit quality accounts
Eligibility All standard borrowal accounts with total FB+NFB limits above ₹ 1.00 Crore and up to
₹50.00 Crores (except Housing loan, education loan, vehicle loans) from our Bank
Identification of Exit Triggers: All borrowal accounts having PMS SAJAG Rank:
Accounts for Exit (i) 5 (likely NPA) as per the latest available data as on end of half year.
(ii) 4 (Warning) and/or 5 (likely NPA) continuously during last 3 months.
(iii) 3 (Early warning), 4 (Warning) and/or 5 (likely NPA) continuously during last 6 months.
(iv) For NBFC borrowers, in addition to the above-mentioned triggers, wherever ‘PCA
framework for NBFCs’ has been imposed by RBI, shall also be considered as trigger for
the exit.
ROLE OF PORTFOLIO MANAGEMENT CELL (PMC) HEADED BY GM/DGM AT CRMD AND PROCESS FLOW &
MONITORING MECHANISM
i. CRMD in consultation with Analytics Center of Excellence (ACoE) division shall develop a single consolidated utility for
list of Exit Identified accounts (EIA) based on the exit triggers.
ii. The task of identification of accounts for ‘exit’ on the basis of triggers shall be done half yearly, centrally by CRMD,
HO. Till such time the utility report is developed, CRMD, HO shall manually identify the list of accounts for exit.
iii. After identification of accounts for exit, CRMD, HO shall provide the list of identified accounts to the respective Zonal
offices for accounts falling upto the vested loaning power of Zonal Office and Corporate Credit Division, HO for
accounts falling under the vested loaning power of Head Office.
iv. ZO/Corporate Credit Division shall communicate exit identified accounts to respective dealing offices.
v. Further, the dealing offices shall place the note to respective sanctioning authority in respect of exit identified accounts
with their comments/views/recommendations and the respective Sanctioning Authority may take the decision to exit.
vi. Respective Zonal Offices and Corporate Credit Division shall communicate the decision of exit, if any, to CRMD, HO.
vii. The indicative steps to be initiated for exiting the identified accounts are as under:
a) No further exposure by way of adhoc/ enhancement/ TOD/ casual cheque purchase, etc.
b) Explore additional collateral security to improve security coverage ratio.
c) Endeavour to induct more banks/FIs
d) Takeover of account by other bank/FI, without any sacrifice except for waiver of penal interest/charge
e) Appointment of Stock auditor
The Sanctioning Authority may suggest the above measures & also others as per the case in order to compel the
borrower to liquidate our credit facilities without any sacrifice at our end.
viii. After approval of account for exit, if there is improvement in the exit triggers parameters, the respective sanctioning
authority may re-consider the decision of exit from account.
i. Borrowal accounts once identified & approved for exit and further exited from the bank, subsequently may be re-
considered for takeover, subject to compliance of bank’s extant guidelines on takeover of accounts conveyed vide
IRMD L&A Cir. no. 185/2022 dated 16.12.2022 as amended from time to time.
ii. CRMD, HO shall place a half yearly consolidated status note for information to CRMC on following:
a. Total no. of such accounts identified & approved for exit by the competent authority and current status of the accounts till
such account is exited within stipulated timeframe by bank.
b. Total no. of such accounts identified but not approved for exit and present status of such account till it moves out from
ambit of exit triggers.
TIME FRAME FOR VARIOUS STEPS IN THE EXIT PROCESS
SN Steps to be taken Time Frame
1 Identification of accounts for ‘exit’ by CRMD, HO and communication of Within 2 weeks from the end of the half year
the same to ZO/Corporate Credit Division, HO
2 Communication of exit identified accounts to respective dealing office Within 3 weeks from the end of the half year
by ZO/Corporate Credit Division, HO
3 Forwarding of the proposal by the respective dealing office to the Within 3 months from the end of the half year or next
respective sanctioning authority and approval of the Exit Proposal review/renewal/regular proposal whichever is earlier
4 Implementation of the Exit Proposal As per terms of approval

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Parameter Description
COURSE OF ACTION WHERE EXIT IS NOT COMPLETED WITHIN TIMEFRAME AS DECIDED BY
SANCTIONING AUTHORITY:
The suggestive/indicative remedial /corrective measures are as under:

(a) Change in Management, induction of strategic partners/ investors, appointment of nominee directors in
the Board of the company,
(b) Induction of new lenders/ formation of Consortium/MBA resulting in reduction in our exposure,

(c) Enhancing in collateral coverage by obtaining additional collateral security, Corporate guarantee of a group
company which is a financially strong and/or better rated/ personal guarantee/ pledge of shares,

(d) Any other measures contemplated by the approving authority depending upon the exposure, nature of
industry, etc.

(e) Infusion of fresh capital preferably with reduction in exposure. Reduction in exposure to be more than the
funds infused. Withdrawal of the allocated limit, if any.
▪ In case the exit does not take place in terms of adherence to the above suggestive remedial/corrective
measures, the respective sanctioning authority shall review/analyze and suggest measures/steps, if
any, which it may deem fit and feasible.
▪ Renewal/review of the exit approved accounts shall continue to be done by the respective sanctioning
authority till exit of the account.

▪ At the time of renewal/review of existing credit facilities, comments should be incorporated in the
appraisal format about the identification of account for exit, if any, since last sanction/renewal/review.
▪ No enhancement shall be allowed in exit approved accounts. However, in special circumstances,
enhancement on case to case basis may be considered by next higher sanctioning authority
Ref. Circular IRMD L&A 148/2023 Dt.16.12.2023

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B7. POLICY FOR FINANCING AGAINST FUTURE RECEIVABLES “PNB

CASH FLOW DISCOUNTING”
Particulars Policy Guidelines
Purpose The policy shall be applicable for financing the future receivables which are due from
reputed5 firms/companies under an agreement and which can be assigned in favour
of the Bank after obtaining tripartite agreement for making payment directly to the
Bank.
Illustrative list of organizations/business entities which can be financed on the
basis of underlying agreement/ Tripartite agreement against future receivables are as
under:
a) Educational institutions and Coaching centers
b) Organizations such as BPOs, Telecom & communication services,
c) Vocational Training Institutes
d) Other similar entities where future receivables are backed by an agreement

Eligibility Individuals, Firms, Companies, HUF and Registered Societies/Trusts doing business
for minimum 2 years and having a regular stream of assured future receivables,
subject to credit risk rating of ‘B1’ & and above.
However, HOCAC II/III may sanction loan proposals of borrowers having minimum of
‘B2’ & ‘B3’ ratings on merits of the case, within its vested secured fund based loaning
powers.

Nature of Finance Term Loan

Loan Amount Need based, with a minimum of ₹10.00 Lacs

Margin 20% on the discounted present value of the net future receivables

Method of i) While making appraisal besides other aspects, following should also be kept in
Assessment view: -
The person(s) behind the project is very important. Their
qualification/experience/market reputation/ goodwill is to be taken into account.
Operating statement giving last two years actual, current year estimates and
projections for the number of years as per the repayment period shall be
obtained as per Appendix I.
ii) Period of receivables to be financed - Future receivables backed by an
agreement6 where receivables shall be assigned in favor of the bank after
execution of a tripartite7 agreement – Future Receivables of maximum period
of 7 years or unexpired agreement period, whichever is lower may be considered
for financing.
i) Quantum of Finance - The amount of loan shall be 80% of the Present Value of
cumulative net future receivables (i.e. net cash flow / Cash Profit) calculated by
way of discounting the same at applicable rate of interest, as per the formula given
below:
Present Value = Net Future Receivables
(1+Annual Interest rate/12)No. of Months

5
Consideration of ‘Reputed’ shall be as per the Judgment of Recommending / Sanctioning Authority.
6 Agreement/Contract executed between the borrower and payee of the receivables for a specific tenor and activity.
7 Tripartite agreement is to be executed between the borrower, payee to the borrower and the Bank

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Particulars Policy Guidelines

An example to illustrate the calculation for a period of less than three years is given in
Appendix II and that for a period of three years and above is given in Appendix
III.
ii) While determining the present value of net future receivables, the money required
for meeting day-to-day expenses as well as TDS (wherever applicable) shall also to
be taken into account. For this purpose, calculation should be done on the Net
Cash Flow / Cash Profit as per details given in Appendix I.

Repayment Future receivables backed by an agreement where receivables shall be

assigned in favor of the bank after execution of a tripartite agreement: Term
Loan shall be repayable within a maximum period of 7 years depending upon the
repaying capacity of the borrower or unexpired agreement period, whichever is lower

Security i) Primary Security

a) An Escrow account shall be maintained at the branch, to which the future
receivables will be credited on collection.
b) No cheque book facility shall be allowed in Escrow account.
c) Operation of the Escrow account will be as per arrangement. The arrangement
should be such that only surplus over the amount required for servicing of loan
(i.e. two monthly instalments including interest) shall be allowed to be transferred
to the operative account of the borrower or in the manner required by the
borrower.
d) In case of the borrower being a Company, particulars of charge be filed with the
Registrar of Companies within the stipulated period of 30 days of creation of
charge.

ii) Collateral Security

The advances will be collaterally secured by mortgage of immovable properties having
realizable value of at least 125% of the loan amount. However, vacant plot of land
should not be accepted as collateral security
Following authorities may relax collateral requirement within their vested loaning
power:

S.N. Permitting authority Minimum collateral prescribed

1. CHCAC 100% of Total exposure
2. ZOCAC 75% of Total exposure
3. HOCAC-I 50% of Total exposure
4. HOCAC-II & above Less than 50% of Total exposure

While financing to educational institutes 8 it is to be ensured that the collateral security

should not be in the shape of Land & Building of the same or any other Educational
Institutions. However HOCAC-II & above may relax this criteria for proposals falling
within their respective loaning powers.

8Educational Institution for this purpose shall mean places of imparting qualification (degree/qualifications for which
institute needs affiliation) like schools, colleges and other alike institutes and shall not include viable MSME units which
include coaching institutes, tuition centers and other similar entities. (This definition is prescribed vide para no. (7.3),
point no. (a) of IRMD L&A Circular No. 173 dated 19.11.2022).

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Particulars Policy Guidelines

Loaning Powers
Fresh/ Enhancement/ Additional/ TOD/ Adhoc Facility

Authority Powers

Below CHCAC No Powers

CHCAC (Headed by AGM) 50% of their secured fund based powers

CHCAC (Headed by DGM) and above Secured Fund Based Powers

Other Conditions a) If the term loan sanctioned under this policy is utilized to repay any of the existing
debt, it is to be ensured that same shall not fall under the ambit of restructuring 9.
b) While considering the proposal, it should be ensured that Bank finance is not
utilized for speculative purposes.
c) Extant guidelines for collection of future receivables in CBS shall be adhered to.
d) Financing against Future Lease Rental and Securitization of Future Toll Collection/
Discounting of Annuity Receivables in BOT Road Projects & HAM Projects shall be
governed as per respective policy guidelines.

Other Guidelines a) Following items shall be as per guidelines issued vide IRMD L&A Circulars issued
from time to time :
▪ Service Charges & Rate of Interest alongwith relaxations
▪ Benchmark Ratio
b) Review of existing facilities shall be considered by sanctioning authority under whose
power the exposure otherwise falls, within its vested loaning powers provided T&C
of last sanction (sanctioned by higher authorities) is complied with and there is no
dilution in security coverage.

Ref. Circular: IRMD L&A 05/2023 Dt.09/01.2023

9
Restructuring and an indicative list of signs of financial difficulty has been defined in IRMD L&A Circular No 93/2019
dated 17.08.2019 and other circulars issued from time to time.

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B8. POLICY FOR RENEWAL/ REVIEW OF CREDIT FACILITIES

A. Policy Guidelines

In terms of prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances
(IRAC Norms) “Regular and ad hoc credit limits need to be reviewed/ regularized not later than 3 months from the due
date /date of ad hoc sanction. In case of constraints such as non-availability of financial statements and other data from the
borrowers, the branch should furnish evidence to show that renewal/review of credit limits is already on and would be
completed soon. In any case, delay beyond 6 months is not considered desirable as a general discipline. Hence, an account
where the regular/ ad hoc credit limits have not been reviewed/ renewed within prescribed timeline i.e., 180
days from the due date/ date of ad hoc sanction will be treated as NPA”.

▪ All working capital limits are to be renewed/ reviewed at least once in _____from last date 12 Months
of sanction/renewal.
▪ In order to have constant monitoring of the portfolio of the bank in the lower rating
categories of “C1 to C3”, review of borrowal accounts (where IRR is C1 to C3), having limits ₹10.00 Cr
above ____should be done on half-yearly basis
In cases where regular renewal is due in less than ____ period, then instead of aforesaid 6 Months
review, regular renewal be done as per the due date.

▪ All standalone term loans, other than retail loans, with sanctioned limit of _____needs to be ₹2 Cr & Above
reviewed annually.
The Annual review of Standalone Term Loan shall continue till such time the balance outstanding
of the Term loan account is ₹2 Crore & above
▪ The review of Term Loans will have no bearing on asset classification and income recognition
of the accounts

The OD facility to housing loan borrowers for personal needs should be reviewed once in___ 3 Years
and loans extended in shape of OD facility on monthly reducing DP basis under “PNB
myProperty Loan scheme” shall be renewed once in _______.

All Kisan Credit Cards/Kisan Gold Cards are sanctioned for ____ and are reviewed 5 Years
annually. The CC limit shall be reviewed annually to ensure that crop and other sales proceeds
are routed through limit account

In case of CC / OD limits under Schematic Lending (Eg: PNB myProperty Loan, OD-HL, etc.,)
having validity of sanction more than ____as prescribed in such schemes, the same shall remain 12 Months
in vogue. However, the extension of validity in accounts (other than KCC/KGS) shall be
permitted as per guidelines i.e. for a period not exceeding ____from the regular due date of 180 Days
such limits.

B. Operational Guidelines

Procedure for timely follow up with the borrowers through Digital Channel:
The SMS alert/Whatsapp/e-mail shall be sent prior to limit expiry for renewal of Limit indicating charging of Penal
Interest due to non-submission of renewal papers. Frequency shall be as under:
SMS alert/ e-mail/ whatsapp Frequency
1st 3 Months prior to expiry of limit
2nd 2 Months prior to expiry of limit
3rd
1 Month prior to expiry of limit
4th 15 Days prior to expiry of limit
5 th
On expiry of limit

All renewal cases including Consortium Advances should be diarized at least _____in advance 4 Months
and followed up by Branch/Controlling Offices as the case may be so that all the sanctions are
renewed in time

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The proposal is to be processed by Branch/ Vertical/ZO/HO in such a way that it is put upto the 2 Months
Sanctioning Authority at least ______ before the expiry of the limit

Follow up for timely renewal/review of credit facilities:

All credit facilities falling within vested loaning powers of various Sanctioning Authorities that are due for
renewal/review in the next 3 months shall be monitored for timely review/renewal as under:
Sanctioning Monitoring Authority Periodicity of Status Review
Authority
Weekly
GBB/CBB/PLP/MCC Circle Head
(Every Wednesday)
Dy. Zonal Head/ Fortnightly (Every 1st & 3rd Friday)
CHCAC
GM CRMD, HO
Zonal Head/ Fortnightly (Every 1st & 3rd Friday)
ZOCAC
CGM/GM CRMD, HO
HOCAC-I & above CGM/GM CRMD, HO Fortnightly (Every 1st & 3rd Friday)

Reporting of position of accounts overdue for renewal/review: Limits up to ₹10 Cr

The position of such accounts overdue shall be submitted by the dealing branch
(GBB/CBB/PLP/MCC/LCB/ELCB), as the case may be, on monthly basis by ___ of succeeding
10th
month to Circle Office which shall monitor overdue position of accounts. Reasons/present
status/proposed action plan should invariably be mentioned in accounts that are overdue for
review/renewal beyond _______ 3 Months

Reporting of position of accounts overdue for renewal/review: Limits above ₹10 Cr

The position of such accounts shall be submitted by the dealing branch (GBB/Hybrid
CRMD at
PLP/MCC/CBB/LCB/E-LCB), as the case may be, on monthly basis by 10th of succeeding
Zonal Office
month to _____which shall monitor overdue position of accounts. Reasons/present and CRMD HO
status/proposed action plan should invariably be mentioned in accounts overdue for
review/renewal beyond 3 months

A statement of overdue renewal proposals that fall within the vested powers of MC shall be put
Annual Basis
up to MC on _____by CRMD, HO

Concept of ____was implemented in the bank to increase efficiency of appraisal process, to

improve TAT and screen good accounts at the time of renewal Green Renewal

(Detail guideline prescribed below at para-C)

It should be ensured that comprehensive (i.e. regular) renewal/ review of Working Capital/Term 180 Days
Loan must be completed within ____from the due date /date of ad hoc sanction

If the reasons for delay are genuine & beyond the control of the borrower, on request of the
borrower competent authorities as prescribed in policy, can permit extension in validity of
3 Months
sanction upto ____ from the due date of renewal of limits subject to following conditions:
a) Validity is extended at existing level of exposure as per terms of last regular sanction
b) No change in existing terms and conditions of last regular sanction
c) No security dilution
In case of constraints such as non-availability of financial statements and other data from the
borrowers, the branch should furnish evidence to show that renewal/ review of credit limits is
already on and would be completed soon. The authorities as prescribed in policy, may permit 1st Validity
extension in validity of sanction for further three months form the due date of _____subject extension
to conditions mentioned above

Ref. Circular: IRMD L&A 174/2022 Dt.22.11.2022;190/2022 Dt.31.12.2022;18/2024 Dt.09.02.2024

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C. Green Renewal
S.N. Particular
OBJECTIVE: Faster renewal of accounts through simplified procedure and at the same time to ensure that
all crucial tenets of credit appraisal such as security creation / non-dilution of security, insurance / guarantee
1.
cover, conduct of account, position of inspection irregularities pertaining to the account are assessed at the
time of Renewal.
APPLICABILITY:
i. No dilution in security/margin
ii. No security creation is pending
2.
iii. No change in management.
iv. No IR observation identified as ZTL / FSI item pertaining to the account is pending for rectification
v. As per latest valid credit risk rating / credit score, the IRR is B2 and above (or equivalent to PNB Score)
LIMITS: Credit Facilities up to ₹25.00 Cr subject to the following:
LIMITS CONDITION
Upto ₹10.00 Lakh All the loans which could not be renewed under Easy Renewal/E-Renewal1
scheme or all other business loans up to ₹10 lakh, shall be renewed under green
renewal

3. Above ₹10 Lakh upto ₹ 1 Cr. Subject to applicability conditions mentioned at S. No. (2) above
Subject to applicability conditions mentioned at S.No. (2) above along with 11
Above ₹ 1 Cr. and upto ₹25 Cr.
triggers (prescribed at S.No.4)
1“For Working Capital limits up to ₹ 10 lakhs, Easy Renewal scheme is in place based on pre-defined business rules and
the same is governed by MSME & Mid Corporate Credit Division Circular No. 74/2023 dated 04.10.2023. Further, the
scheme of Digital Renewal and E-Renewal of KCC Accounts up to ₹1.60 Lakhs is also in place and the same is governed
by Agriculture Division Circular No. 85/2023 dated 30.11.2023”
TRIGGER: For Limits above ₹1.00 cr. and upto ₹25.00 Cr
i. All the terms and conditions of last sanction have been complied with.
ii. Timely submission of renewal paper like Audited Balance Sheet, ITR / GST returns/Stock Statements etc as per
bank policy.
iii. LSS observation of last sanction/ renewal has been closed (as applicable).
iv. CIRs (Consumer/Commercial) are acceptable as per bank's policy and there are no adverse remarks in the report.
v. Unit/Business is running satisfactory as per latest visit not older than 3 months from date of green renewal and is
held on record.
vi. Latest audited financials of the company is downloaded from MCA website is checked with financials submitted by
4. the company and no variation observed (if applicable)
vii. Sales/Receipts reported in the Audited/Provisional financials are tallied with credit summation in account for last 12
Months or in a last financial year. Sales & purchase figures shall be compared with GST returns wherever applicable.
(Minor variation i.e. upto 15% with justifiable reasons may be considered).
viii. Projected and/or Estimated Last year's turnover has been achieved (Maximum Variation allowed up to 20%)
Turnover should be compared with latest Audited/Actual balance sheet. Limit assessed should be in line with last
sanction/renewal.
ix. PMS rank is not 4 / 5 during any of the last 6 months.
x. Accounts should be Standard/ SMA-0/ SMA-1 during last 12 months
xi. COD / Completion of Project should have been achieved on stipulated time (in case of Term Loan facility)
Treatment of Concessions (if any) granted to the borrower shall continue as per existing terms
5.
Concessions and conditions of sanction
i. Green Renewal can be done for a maximum of two times in continuation,
however, the third renewal should be a regular renewal.
ii. Status cum Net worth (SNW) report need not be compiled again at the time
of green renewal. However, at the time of regular renewal, SNW report shall
6. Other Conditions be compiled as per extant guidelines (wherever applicable).
iii. Visit report as per visit guidelines shall be prepared and held on record.
iv. In cases where the prescribed applicability conditions are not fulfilled, such
accounts shall be renewed under normal renewal process.

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B.9 POLICY ON OBTENTION OF FINANCIALS

A. THE REQUIREMENT OF AUDITED FINANCIAL STATEMENT

Category Financial Paper Requirement Exposure Criteria

Borrowers governed by Companies Act Audited Financial Statement Irrespective of Exposure

Borrowers not falling under exempted category for Audited Financial Statement Irrespective of Exposure
Tax Audit as per Income Tax Act

Borrowers falling under exempted category for Audited Financial Statement Above ₹1.00 Crore
Tax Audit as per Income Tax Act
Unaudited Self-Certified Up to ₹1.00 Crore
Financial Statement

B. Obtention of Financials in case of Fresh Sanction, Enhancement, Additional (except Adhoc) and Takeover

TIMELINE Financials to be Obtained Calculation of Benchmark Ratio

(for financial year T)
a. FOR EXISTING FIRMS
i.Proposal is appraised up 1. Annual Audited financials for immediately Annual Audited financials/ Provisional
to 30st September preceding last FY (i.e. T-2), financials for last FY (i.e. T-1)
2. Annual Audited financials for last FY (i.e. T-1) Benchmark ratios shall be calculated
OR provisional financial statement for last FY on provisional financials only where
i.e. (T-1), and
borrower comes under the purview of
GST regime & is liable to file GST
3. Provisional financials* up to last quarter (As returns. Otherwise, the calculation of
per prescribed format). benchmark ratios shall be done on the
Example: basis of last available audited
15th July 2023 financials.
1. ABS as at 31.03.2022 (T-2) Example
2. ABS as at 31.03.2023 OR provisional financials 15th July 2023
as on 31.03.2023 (T-1), and ABS as at 31.03.2023/ provisional
3. Provisional financials as on 30.06.2023 financials as on 31.03.2023
However, for listed companies, the last
quarterly financial results as submitted to the
stock exchange (i.e., 30.06.2023 if available,
or 31.03.2023)
ii.Proposal is appraised on 1. Annual Audited financials for last FY (i.e. T- Annual Audited financials for last FY
or after 1st October 1), and (i.e. T-1)
2. Provisional financial statements up to last
quarter (As per prescribed format)

Example:
Example:
10th November 2023
20th November 2023
1. ABS as at 31.03.2023, and
ABS as at 31.03.2023
2. Provisional financials as on 30.09.2023
However, for listed companies, the last
quarterly financial results as submitted to the
stock exchange (i.e., 30.09.2023 if available,
or 30.06.2023)

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b. FOR NEWLY INCORPORATED FIRMS

iii. Newly incorporated Financials to be Obtained Calculation of Benchmark Ratio
firms
In case of newly In case of newly incorporated business
incorporated business entity entity where no audited financials are
where no audited financials Projected financials shall be used available
are available Or,
Or, For businesses: For businesses:
❖ under implementation, ▪ under implementation, or
or ▪ where the project is completed but
audited financials are available for a
❖ where the project is period of less than 6 months
completed but audited
financials are available Projected financials shall be used.
for a period of less than
6 months In other cases, the guidelines as
In other cases, the placed at para i. and ii. shall be
guidelines as placed at para followed.
i. and ii shall be followed.

C. OBTENTION OF FINANCIALS IN CASE OF RENEWAL/ REVIEW OF LIMITS

TIMELINE Financials to be Obtained Calculation of

(for financial year T) Benchmark Ratio
(b)
(a) (c)
1. Annual Audited financials for immediately preceding last
FY (i.e. T-2)
2. Annual Audited financials for last FY (i.e. T-1) or
Provisional financials for last FY (i.e. T-1), and
Irrespective of time of the 3. Provisional financials up to the last quarter Calculation of
financial year (i.e. April to Example: benchmark ratios shall
March) be done as per the
10th February 2024 financials mentioned at
1. ABS as at 31.03.2022 (T-2) para (b).
2. ABS as at 31.03.2023 or provisional financials as on
31.03.2023 (T-1), and
3. Provisional financials as on 31.12.2023
However, for listed companies, the last quarterly
financial results as submitted to the stock exchange
(i.e., 31.12.2023 if available, or 30.09.2023)

Note: 1. Provisional financials shall be duly signed by the proprietor / partner (s) / authorized signatory
2.*In case of listed companies, the last quarterly financial results submitted2 by the company to the stock
exchange to be obtained.
3. As per SEBI Regulations, listed companies are required to submit their quarterly financial results to the stock
exchange within 45 days of end of each quarter, other than the last quarter. Further, the Listed Companies are
required to submit their annual audited standalone financial results for the financial year, within 60 days from
the end of the financial year. Accordingly, for each quarter in a FY the financial results are to be submitted to
the stock exchange by 14th August, 14th November, 14th February and 30th May.
C. PRESCRIBED FORMAT FOR PROVISIONAL FINANCIALS UP TO THE LAST QUARTER

Period ended Accepted for the current year % age achievement Remarks
up to latest quarter
Sales
Other Income
PBT
PAT
NWC
Current Ratio

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D. OTHER GUIDELINES
i. In case of Listed companies, no proposals of renewal, enhancement, new connection & takeover in
WC/TL limits shall be permitted based on Annual Audited Financial statements which are older than 15
months.

ii. In respect of exposures to unlisted PSUs/ Government undertakings assessment/ calculation may
be carried out based on the provisional financial statements certified by Internal Auditors/ Head-Finance/
Director-Finance/ Authorised Signatory even after 30th September. There is no need to wait for the
completion of Comptroller & Auditor General Audit, wherever applicable. However, non obtention of
Audited financials should be discussed as a part of the assessment with proper justification along with
the timeline for its obtention. No specific approval from Competent Authority is required to be obtained.

iii. In respect of Companies/LLPs, before accepting the Audited Financial Statements for further
processing/records, it is mandatory to compare the Balance Sheet, P&L account submitted by the
Company/LLP with Balance Sheet, P&L account filed in MCA portal and confirm the authenticity of the
documents submitted.
iv. All financial statements should be duly authenticated to be true copies by the borrower /authorized
representative.

v. Wherever Audited Financials are required to be submitted as per extant guidelines, the documents shall
invariably bear UDIN so that essential figures can be cross verified

vi. In case where provisional financial statements are submitted, the following shall be ensured:

1. The sales figures are comparable with GST returns (i.e. variations, if any, may be within the range of
upto 10%).
2. In case adverse variance exceeds 10% as mentioned above, the respective sanctioning authority may
prescribe appropriate measures as deemed fit.
3. Further, an undertaking shall be obtained from the borrower regarding the following:

a) To submit the Audited Balance Sheet within one month of the due date for submission of audited
financial statements as prescribed by the MCA/SEBI/Income Tax Department etc.,

b) That the adverse variance between provisional financials and Audited figures shall not be more
than 5% in respect of Sales, Adjusted Net worth, Current ratio, and TOL/Adj. TNW.

vii. Wherever the statutory body extends the timeline for filing the Annual financial statements, the
sanctioning authority shall have the discretion to permit the use of provisional financials, as deemed
fit.
viii. For operational convenience, 45 days’ cooling period for obtention of provisional financials of the
previous quarter be provided. For example, if the loan is appraised between 01.10.2023 to
14.11.2023, then provisional financials as on 30.06.2023 may be accepted.

Ref. Circular IRMD L&A 115/2023 Dt. 18.10.2023;144/2023 Dt.16.12.23

*******************

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B.10 POLICY ON PENAL CHARGES ON ADVANCES

The Reserve Bank of India, vide circular dated 18.08.2023 has issued guidelines on Fair Lending Practice - Penal
Charges in Loan Accounts.
Accordingly, Penal interest levied on the borrowal accounts shall be rechristened as “Penal Charges” and its
application shall be as per the charges levied in the loan accounts. Penal charges shall not be added over and
above the applicable rate of interest.
Circumstances under Which Penal Charges are to be Levied:
Broadly, the trigger events where levying of penal charges may be justified are as under:
a) Default in repayment of loans;
b) Irregularities in cash credit / Overdraft accounts.
c) Non-payment of demand bills on presentation and non- acceptance/nonpayment of usance bills on due dates;
d) Overdue bills either not debited in case of ODD or where Drawing Power is not reduced in case of Advance
against Bills for Collection bills (ABC bills);
e) Non-submission of stock statements;
f) Non-Submission of documents for review/renewal; (Earlier it was Non-Submission of other financial data)
g) Excess borrowings arising out of excess current assets;
h) Non-submission of information under the Quarterly Monitoring System (QMS) as per the terms & conditions
of sanction;
i) Non creation/perfection of Security as per Terms and conditions of sanction; (New Addition)
j) Non Compliance of Terms & Conditions of sanctions (other than specified above); and
k) Non submission of external rating by eligible borrowers.
Note: Penal Charges on account of Extension in validity of sanction has been deleted.
➢ Penal charges for the period of default is to be levied as under:

I. On the amount of default/irregularity

(i) For any one of trigger events stated at point no. (a) to (d) above: 2.00% p.a.
(ii) For two or more trigger events stated at point no. (a) to (d) above: 3.00% p.a.
II. On the total outstanding
(i) For one or more trigger events stated at point no. (e) to (j) above: 2.00% p.a.
Note for I and II: If the trigger events are a combination of point (a) to (d) and point (e) to (j) then penal
charges shall be capped at 4% p.a., i.e., 2% on the default/irregularity and 2% on the outstanding amount.
III. For trigger event stated at point (k):
1.00% p.a. on the Limit sanctioned (FB+NFB) or actual outstanding (for term loans/EMI based facility) as the
case may be.
Points to remember:
✓ Pre-payment charges shall be applicable @2% of the pre-paid outstanding amount in case of Term Loans
only & not to other facilities such as Non Fund based, Working Capital Limits, Overdrafts etc.
✓ In case of irregularities in CC/OD accounts due to levy of monthly/quarterly/half yearly interest or service
charges or/and the outstanding balance in the CC/OD account is excess of the sanctioned limit/drawing
power, time period of 7 days may be given for regularisation of account.
If account is not regularised, penal charges is to be levied from first date of default. The clause of levying

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penal charges in case interest/service charges are not paid on time is also to be included in the loan
documents.
✓ In the case of non-submission of stock statements and non-submission of documents for review/renewal
and non-compliance of terms and conditions of sanction by the borrower, it should be ensured that the
customer has been given adequate time to compile and submit the required information.
✓ In the case of non-submission of stock statement within 10 days from the end of the period for which it
relates, penal charges is to be levied on the outstanding amount after 10 days till the day of submission
of next statement.

POWERS FOR RELAXATION IN PENAL CHARGES

S.N. Competent Authority Discretionary Power
i. CHCAC In own sanctions: 25% of Card Rate
In sanctions of GBB/PLP/MCC: 50% of Card Rate
ii. ZOCAC In own sanctions: 50% of Card Rate
In sanctions of GBB/PLP/MCC & CHCAC: Full Powers
iii. HACAC-I In own sanctions: 50% of Card Rate
In sanctions up to the level of ZOCAC: Full Powers
iv. HACAC-II Proposals within vested loaning powers -Full Powers
In Higher Sanctions: Upto 50% of Card Rate
v. HACAC-III Full powers, also in case of MC sanctions

CBS REPORTS FOR PENAL CHARGES COLLECTED ON ADVANCES

➢ Based on the following triggers events, system automatically assesses and collects the penal
charges in the existing loan accounts, through batch jobs executed centrally by ITD, Head Office.

a) Default in repayment of loans; b) Irregularities in cash credit / Overdraft accounts; c) Non-

submission of stock statements

➢ Reports displaying the details of penal charges collected in accounts, are available in CBS:
a) DAYRPT 10/184 - Penal Charges for CC/OD accounts
b) DAYRPT 10/185 - Penal Charges for LAA accounts

Ref. Circular IRMD L&A 40/2024 Dt. 30.03.2024; 115/2024 Dt.18.09.2024

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(Ref. IRMD L&A Circular No.133/2024 Dt.08.10.2024)

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B.11 DIGITAL LENDING POLICY

DEFINITIONS

➢ Cooling off/look-up period: Time window as determined by the Board of the Bank which shall be given
to borrowers for exiting digital loans, in case a borrower decides not to continue with the loan.
➢ Digital Lending: A remote and automated lending process, largely by use of seamless digital technologies
for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated
customer service.
➢ Digital Lending Apps/Platforms (DLAs): Mobile and web-based applications with user interface that
facilitate digital lending services. DLAs will include apps of the Bank as well as those operated by Lending
Service Providers (LSPs) engaged by the Bank for extending any credit facilitation services in conformity
with extant outsourcing guidelines issued by the Reserve Bank.
➢ Lending Service Provider (LSP): An agent of the Bank who carries out one or more of Bank’s functions
or part thereof in customer acquisition, underwriting support, pricing support, servicing, monitoring,
recovery of specific loan or loan portfolio on behalf of REs in conformity with extant outsourcing guidelines
issued by the Reserve Bank.

GRIEVANCE REDRESSAL

➢ Nodal grievance redressal officer – Bank and the LSPs engaged should appoint a nodal grievance redressal
officer to deal with FinTech/ digital lending related complaints/ issues raised by the borrowers.

➢ Dedicated helpline number of grievance redressal officers to be provided by Customer Care Division.
➢ Such grievance redressal officer shall also deal with complaints against their respective DLAs. Contact
details of grievance redressal officers should be prominently displayed on our websites, and website of the
LSPs and DLAs and also in the KFS provided to the borrower by respective owner division.

➢ Further, the facility of lodging complaint should also be made available on the DLA and on the Bank’s &
LSP’s website. Customer grievances received by the Bank shall also be marked to the respective Lending
Service Provider (LSP) and a clause in this regard shall be made a part of Digital Lending arrangement with
LSP. It is reiterated that responsibility of grievance redressal shall continue to remain with the Bank.

➢ If any complaint lodged by the borrower against the Bank or the LSP engaged is not resolved by the Bank
within the stipulated period (currently 30 days), the Borrower can lodge a complaint over the Complaint
Management System (CMS) portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS). For
entities currently not covered under RB-IOS, complaint may be lodged as per the grievance redressal
mechanism prescribed by the Reserve Bank.

Maximum quantum of single asset under Digital Lending

Category Max. loan quantum of single asset

Unsecured Loan ₹50.00 Lakh
Secured Loan ₹5.00 Crore

Cooling off/look-up period

➢ Cooling off/ look period provided to the borrowers shall be minimum 3 days and can go up to maximum
of 15 days depending upon the tenure of the loan.
➢ A borrower shall be given an explicit option to exit digital loan by paying the principal and the proportionate
APR without any penalty during this period.
➢ For borrowers continuing with the loan even after look-up period, pre-payment shall continue to be allowed
as per extant RBI guidelines

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➢ Respective business divisions to clearly specify cooling off/look period allowed in the loan scheme within the
above prescribed range

Others

➢ Owner Division shall be Digital Banking Transformation Division (DBTD)

➢ Respective business divisions to frame schemes within the ambit of this policy for rolling out products
under Digital Lending
Default Loss Guarantee (DLG)

A contractual arrangement, called by whatever name, between the Bank and an entity meeting the criteria laid
down in guidelines, under which the latter guarantees to compensate the Bank, loss due to default up to a
certain percentage of the loan portfolio of the Bank, specified upfront. Any other implicit guarantee of similar
nature linked to the performance of the loan portfolio of the Bank and specified upfront, shall also be covered
under the definition of DLG.
Eligibility as DLG Provider: Bank shall enter into DLG arrangements only with a Lending Service Provider
(LSP) with which it has entered into an outsourcing (LSP) arrangement. Further, the LSP providing DLG must
be incorporated as a company under the Companies Act, 2013.

Owner Division: shall be RAD.

Structure of DLG Arrangements: DLG arrangements must be backed by an explicit legally enforceable
contract between the Bank and the DLG provider. Such contract, among other things, must contain the
following details:
a) Extent of DLG cover
b) Form in which DLG cover is to be maintained with our Bank

c) Timeline for DLG invocation

d) Disclosure requirements.
Forms of DLG: Bank shall accept DLG only in one or more of the following forms:

a) Fixed Deposits maintained with our Bank with a lien marked in favour of our Bank
b) Bank Guarantee issued by any Scheduled Commercial Bank (except our Bank) in favour of our Bank.
Option for partial invocation of the BG shall be available. Validity period of the BG shall be minimum 120 days
above the longest tenor of the loan in the underlying portfolio.
Note: Owner Division while entering into DLG arrangement shall designate a branch for maintaining the DLG
in any of the forms prescribed above.
Cap on DLG: The total amount of DLG cover on any outstanding portfolio which is specified upfront shall not
exceed five per cent of the amount of that loan portfolio. In case of implicit guarantee arrangements, the
DLG Provider shall not bear performance risk of more than the equivalent amount of five per cent of the
underlying loan portfolio.
Recognition of NPA

a) Bank will be responsible for recognition of individual loan assets in the portfolio as NPA and consequent
provisioning as per the extant asset classification and provisioning norms irrespective of any DLG cover
available at the portfolio level. The amount of DLG invoked shall not be set off against the underlying
individual loans. Recovery, if any, from the loans on which DLG has been invoked and realized, will be shared
with the DLG provider in terms of the contractual arrangement.

b) Owner Division in consultation with Finance Division to ensure appropriate accounting entry for DLG invoked
and realized.

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Treatment of DLG for regulatory capital

Capital computation, i.e., computation of exposure and application of Credit Risk Mitigation benefits on
individual loan assets in the portfolio shall continue to be governed by the extant RBI norms10.
Invocation of DLG
a) DLG shall be invoked after the account slips into NPA category.

b) It is to be ensured that DLG is invoked within a maximum overdue period of 120 days, unless made good
by the borrower before that.
c) CRMD shall monitor the invocation of DLG in eligible accounts.
d) Further, CRMD to place a note in this regard to CRMC on quarterly basis. The note shall capture the
delinquency status of the portfolio, no. & amount outstanding of delinquent loans against which DLG is
invoked, amount of DLG cover invoked and the remaining amount of DLG cover available.

Tenor of DLG
Shall be 120 days more than the longest tenor of the loan in the underlying loan portfolio.
Disclosure Requirements

DBTD shall ensure that LSPs with whom Bank has a DLG arrangement shall publish on their website the total
number of portfolios and the respective amount of each portfolio on which DLG has been offered.
1) DLG arrangement – Approving authority: DLG arrangement shall be a part of outsourcing arrangement
with the LSP and approval of the same shall be governed by the Policy for Outsourcing of Financial Services
of the Bank conveyed vide IRMD Circular no. 12 dated 19.03.2024 as updated from time to time.
2) Monitoring and Review of the DLG Arrangement: Monitoring and review of the DLG arrangement with
LSPs shall be governed by the Policy for Outsourcing of Financial Services of the Bank conveyed vide IRMD
Circular no. 12 dated 19.03.2024 as updated from time to time.
3) Fees payable for Default Loss Guarantee Arrangement
The fees payable for DLG arrangement shall be governed by the following parameters:
a) Historical default rate of the loan portfolio
b) Extent of guarantee coverage provided by the LSP
c) Tenor of the guarantee arrangement
d) Underlying loan pricing – higher loan pricing shall translate into higher guarantee pricing.
CGM Level Business Review Committee shall be entrusted with the task of negotiating the pricing of the DLG
arrangement with the LSP. The same shall be made a part of DLG arrangement with the LSP.

Exceptions: Guarantees covered under the following schemes/ entities shall not be covered within the
definition of DLG:

a) Guarantee schemes of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Credit Risk
Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and individual schemes under National Credit
Guarantee Trustee Company Ltd (NCGTC).

b) Credit guarantee provided by Bank for International Settlements (BIS), International Monetary Fund (IMF)
as well as Multilateral Development Banks as referred to in Paragraph 5.5 of RBI Master Circular on Basel
III Capital Regulation dated April 01, 2024.

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(Ref. RBI Master Circular dated 01.04.2024)

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C. BBASEL GUIDELINES
BASEL ACCORD
The G-10 countries, Spain and Luxembourg formed a standing committee in 1974 under the auspices of the
Bank for International Settlements (BIS), called the Basel Committee on Banking Supervision, Headquartered in
Basel-Switzerland. It is a comprehensive set of reform measures, developed by the Basel Committee on Banking
Supervision to strengthen the regulation, supervision and risk management of the banking sector:
Basel-I Basel-II Basel-III
• Issued: July 1988 • Issued: June 2004 • Issued: Dec. 2010 (Consultative Document
Dec. 2009)
• Implemented: Dec 1992 • Implemented: Dec 2006 • Implemented:01.04.2013
Objective
• India adopted: 1999 a) To improve ability to absorb shocks
• 3 Pillars Approach
• Discontinued: w.e.f. from financial & economic stress
• Enhanced risk coverage:
01.07.2013 b) To reduce risk of spillover from
Credit Risk, Market Risk,
• Covers only: Credit Risk, financial sector to real economy.
Operation Risk
Market Risk Origin of Basel-III: Sub Prime Crises
Market Risk Amendment Advance Approaches: Dec. Implementation: started w.e.f. 01.04.2013
Issued: Dec 1996 2007 and fully implemented as on 01.10.2021
Implemented: Dec. 1997
Minimum Capital Minimum Capital Comprehensive reform package “Basel-III” a
requirement: 8% of RWA requirement: 9% of RWA global regulatory framework for more
(Part of Pillar-I, Tier 1 resilient banks and banking systems and
minimum 6% of RWA) Basel III : International framework for
liquidity risk measurement, standard and
monitoring”
1. OBJECTIVES OF BASEL-III
Basel III aims to strengthen the stability of the Banking system by introducing: -
➢ New Capital Structure with more emphasis on quality of capital.
➢ Introducing New Global Liquidity standard.
➢ Introduction of a leverage ratio.
➢ Promoting capital conservation and counter cyclical buffer.
➢ A Counter Cyclical Buffer (CCCB) has been introduced to counter the effect of impact on capital during
economic downturns.
Salient point of the RBI guidelines on BASEL-III
▪ Revaluation reserves arising out of change in the carrying amount of a bank’s property consequent upon its
revaluation may be reckoned as CET-1 capital at a discount of 55% subject to certain conditions.
Revaluation reserves which do not qualify as CET1 capital shall also not qualify as Tier 2 capital. The bank may choose
to reckon revaluation reserves in CET1 capital or Tier 2 capital at its discretion, subject to fulfilment of certain conditions.
▪ Banks may, at their discretion, reckon foreign currency translation reserve arising due to translation of
financial statements of their foreign operations in terms of Accounting Standard (AS) 11 as CET-1 capital at
a discount of 25% provided the same is being shown as an item under schedule -2, Reserves and surplus
and auditors have not expressed a qualified opinion on FCTR.
▪ DTAs which relate to timing differences (other than those related to accumulate losses) may, instead of full
deduction from CET-1 capital, be recognized in the CET-1 capital up to 10% of a bank’s CET-1 capital, at the
discretion of banks.
▪ The final guidelines for NSFR have been released by RBI vide circular dated 17.05.2018. The same has come
into effect from April 1, 2021.
• The capital requirement prescribed has to be maintained on an ongoing basis.

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2. BASEL-III: CAPITAL REGULATION IN INDIA

Basel I & Basel II are the earlier versions of the Basel Accords, which are recommendations on banking laws and
regulations issued by the Basel Committee on Banking Supervision (BSBS). While Basel I had a ‘one-size-fits-
all’ approach, Basel II introduced risk sensitive capital regulation. The main blame against Basel II is its
risk sensitivity that made it pro-cyclical. In good times, when banks are doing well, and the market is willing to
invest capital in them, Basel II does not impose additional capital requirement on banks. On the other hand, in
stressed times, when banks require additional capital and markets are wary of supplying that capital, Basel II
requires banks to bring in more of it.
Basel III represents an effort to fix the gaps and lacunae in Basel II that came to light during the crisis as also to
reflect other lessons of the crisis. What is important though is that Basel III does not jettison Basel II; on the
contrary, it builds on the essence of Basel II - the link between the risk profiles and capital requirements
of individual banks.

The Basel III capital regulations continue to be based on three-mutually reinforcing Pillars of the Basel II
capital adequacy framework: -
1. Minimum capital requirements,
2. Supervisory review of capital adequacy, and,
3. Market discipline

Under Pillar 1, the Basel III framework will continue to offer the three distinct options for computing capital
requirement for credit risk and three other options for computing capital requirement for operational
risk, albeit with certain modifications / enhancements. These options for credit and operational risks are based
on increasing risk sensitivity and allow banks to select an approach that is most appropriate to the stage of
development of bank's operations.
The options available for computing capital for credit risk are:
1. Standardized Approach,
2. Foundation Internal Rating Based (FIRB) Approach, and
3. Advanced Internal Rating Based (AIRB) Approach.
Our bank has migrated to Standardized Approach w.e.f 31.03.2008 and applied for Foundation Internal Rating
Based approach (FIRB) of computation of Credit Risk Capital Charge. RBI has allowed our bank to participate in
parallel run process w.e.f 31.03.2013 for the regulatory capital reporting as per FIRB. Moving forward our bank
has also applied for Advance Internal rating Based (AIRB) approach.
Reserve Bank issued Guidelines on the Basel III capital regulation on May 2, 2012, and Basel III guidelines
are being implemented in India w.e.f. April 1st, 2013 in a phased manner and have been fully
implemented as on October 1, 2021.
Composition of Regulatory Capital:
Total regulatory capital will consist of the sum of the following categories:
I. Tier 1 Capital (Going-concern Capital)
a. Common Equity Tier 1
b. Additional Tier 1
II. Tier 2 Capital (Gone-concern Capital)

➢ Going-Concern capital is the capital, which can absorb losses without triggering bankruptcy of the bank.
➢ Gone-Concern capital is the capital which will absorb losses only in a situation of liquidation of the bank.
Limits and Minima
i. The Bank shall maintain a minimum total capital (MTC) of 9% of total risk weighted assets (RWAs), i.e., capital
to risk weighted assets (CRAR).
ii. CET1 capital must be at least 5.5% of risk-weighted assets (RWAs) i.e., for CR+OR+MR on an ongoing basis.
iii. Tier 1 capital must be at least 7% of RWAs on an ongoing basis. Thus, within the minimum Tier 1 capital,
Additional Tier 1 capital can be admitted maximum at 1.5% of RWAs.

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iv. Total Capital (Tier1+Tier 2) must be at least 9% of RWAs on an ongoing basis. Thus, within the minimum
CRAR of 9%, Tier 2 capital can be admitted maximum up to 2%.
v. If a bank has complied with the minimum Common Equity Tier-1 (CET-1) and Tier 1 capital ratios, then the
excess Additional Tier 1 capital can be admitted for compliance with the minimum CRAR of 9% of RWAs.
vi. In addition to the minimum CET1 capital of 5.5% of RWAs, bank is also required to maintain a Capital
Conservation Buffer (CCB) of 2.5% of RWAs in the form of CET-1 capital. The capital requirements are
summarised as follows:
SN Regulatory Capital As % to RWAs
(i) Minimum Common Equity Tier 1 Ratio 5.5
(ii) Capital Conservation Buffer (comprised of Common Equity) 2.5
(iii) Minimum Common Equity Tier 1 Ratio plus Capital Conservation Buffer [(i)+(ii)] 8.0
(iv) Additional Tier 1 Capital 1.5#
(v) Minimum Tier 1 Capital Ratio [(i) +(iv)] 7.0
(vi) Tier 2 Capital 2.0#
(vii) Minimum Total Capital Ratio (MTC) [(v)+(vi)] 9.0
(viii) Minimum Total Capital Ratio plus Capital Conservation Buffer [(vii)+(ii)] 11.5
# However, if the Common Equity Tier I Capital is above 5.5%, then the maximum permissible AT 1 and Tier 2
capitals may be increased on a proportionate basis.
Components of Regulatory Capital (CAPITAL = Tier-I + Tier-II)
Tier-I (Going concern capital) Tier-II (Gone Concern Capital)
A. Common Equity Tier I (CET-1) In addition, the banks will also have to build Capital
B. Additional Tier I (AT-1) Conservative Buffer (CCB), comprised of common equity.
A. Elements of CET-1 Elements of Tier-II capital
i. Common shares (Paid up equity capital) issued i. General Provisions and Loss Reserves: These items
by the bank; as given below (a to g) together will be admitted as
ii. Stock surplus (share premium) resulting from Tier-II capital up to a maximum of 1.25% of the
the issue of common shares; Total Credit Risk Weighted Assets under
iii. Statutory Reserves; Standardized Approach*.
iv. Capital Reserves representing surplus arising a) General Provision on standard Assets
out of sale proceeds of assets b) Floating provisions
v. AFS Reserve c) Incremental provisions in respect of unhedged
vi. Revaluation reserves at a discount of 55% foreign currency exposures
vii. Forex translation reserves @ discount of 25% d) Provision held for country exposures
viii. Other disclosed free reserves, if any; e) Investment Reserve Account
ix. Balance in Profit & Loss Account at the end of f) Excess Provision on account of sale of NPAs
the previous financial year; g) Countercyclical provisioning Buffer
x. Quarterly Profits (Provided the incremental *Under Internal Ratings Based (IRB) approach, where the total
provisions made for NPAs at the end of any of the expected loss amount is less than total eligible provisions, bank
4 quarters of the previous financial year have not may recognize the difference as Tier 2 capital up to a max of 0.6
% of credit RWAs calculated under IRB approach.
deviated more than 25% from the average of the
4 quarters), ii. Debt capital instruments issued by the banks;
xi. Minority Interest (common shares issued by iii. Preference Share Capital instruments;
consolidated subsidiaries of the bank and held by ▪ Perpetual Cumulative preference Shares (PCPS);
third parties). ▪ Redeemable Non-Cumulative Preference Shares
B. Elements of Additional Tier 1 Capital: (RNCPS);
i. Perpetual Non-Cumulative Preference Shares ▪ Redeemable Cumulative Preference Shares (RCPS);
(PNCPS);
iv. Stock surplus (share premium) resulting from the
ii. Stock Surplus (share premium) resulting from issue
of instruments included in Additional Tier-I capital; issue of instruments included in Tier- II capital
iii. Debt capital instruments eligible for inclusion in v. While calculating capital adequacy at the
Additional Tier-I capital consolidated level, Tier 2 capital instruments issued
iv. Any other type of instrument generally notified by by consolidated subsidiaries of the bank and held
RBI from time to time for inclusion
by third parties
v. Additional Tier 1 instruments issued by
consolidated subsidiaries of the bank and held by vi. Any other type of instrument generally notified by
third parties RBI from time to time for inclusion

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3. PRESCRIBED RISK WEIGHTS AS PER RBI GUIDELINES

Refer Credit Management & Risk Policy- Part-I>> S.No.10 Capital Charge for Credit Risk
4. POSITION OF BANK’S CRAR UNDER BASEL-III
SN Particulars 31.03.2024 30.06.2024
1 Tier – I 13.17% 13.04%
1.a Common Equity (CET-I) 11.04% 10.95%
1.b Additional Tier -I 2.13% 2.09%
2 Tier -II 2.80% 2.75%
3 Total CRAR 15.97% 15.79%
A. Pillar -1 Minimum Capital Standards
Capital for Credit Risk: (Standardized Approach)
Shall be calculated based on external rating and applicable risk weight.
Capital for Market Risk: (Standardized Measurement Approach)
a. Specific Risk for a specific security. "Specific Risk" charge for each security, which is designed to
protect against an adverse movement in the price of an individual security owing to factors related to
the individual issuer, both for short (short position is not allowed in India except in derivatives) and
long positions( risk weight ranges from 0.28% to 56.25%)
b. General market risk, which is interest rate risk in the portfolio.
Capital for Operational Risk: (Basic Indicator Approach)
Under Basic Indicator approach used presently banks must hold capital equal to average of positive annual
gross income (AGI) for previous 3 years multiplied by alpha, which is currently 15% set by BCBS. If AGI is
negative or zero for any year, it is excluded from numerator & denominator.
• Capital charge = Average of (Gross income* alpha) for each of the last 3 financial years, excluding years
of negative or zero gross income.
• Gross income means net interest income + net non-interest income or
• Gross income = Net profit + Provisions & contingencies +operating expenses
B. Pillar-2: Supervisory Review Process (SRP)
It has two components namely Internal Capital Adequacy Assessment Process (ICAAP) and Supervisory
Review & Evaluation Process (SREP). ICAAP comprises a bank’s procedures and measures. SREP consists
of review and evaluation process adopted by RBI, to review and evaluate ICAAP. SREP is conducted by RBI
annually along with Annual financial Inspection.
C. Pillar-3: Market Discipline or Disclosure
Purpose: To complement Pillar 1 & Pillar 2 and encourage market discipline by developing a set of
disclosure requirements which will allow market participants to assess key pieces of information about
capital adequacy and risk exposures.
Implementation: became effective from 01.07.2013.
• Scope/Frequency
1. At least on a half yearly basis.
2. For (i) Capital Adequacy; (ii) Credit risk: General Disclosures for all banks and (iii) Disclosures for
Portfolios subject to standardized approach.
3. Disclosures must either be included in a bank’s published financial results/ statements or at a minimum
must be disclosed on bank’s website.
• Type of Pillar-2 Risk
Illustratively, some of the risks that the banks are generally exposed to but which are not captured or not
fully captured in the regulatory CRAR would include:
(a) Interest rate risk in the banking book; (b) Credit concentration risk; (c) Liquidity risk; (d) Settlement risk; (e)
Reputational risk; (f) Strategic risk; (g) Risk of under-estimation of credit risk under the Standardised approach; (h)
Model risk i.e., the risk of under-estimation of credit risk under the IRB approaches; (i) Risk of weakness in the credit-
risk mitigants; (j) Residual risk of securitisation; (k) Cyber security/IT infrastructure risk; (l) Human capital risk; (m)
Group risk; (n) Outsourcing / vendor management risk; (o) Collateral risk
•
•

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• Capital Conservation Buffer (CCB): The Capital Conservation Buffer (CCB) has been introduced in the
form of Common Equity of 2.5% of RWAs in addition to the minimum total of 9%. CCB is designed to ensure
that banks build up capital buffers during normal times (i.e. outside periods of stress) which can be drawn
down as losses are incurred during a stressed period.
Minimum capital conservation standards for individual bank
Common Equity Tier 1 Ratio after including Minimum Capital Conservation Ratios
the current periods retained earnings (expressed as a percentage of earnings)
5.5% - 6.125% 100%
>6.125% - 6.75% 80%
>6.75% - 7.375% 60%
>7.375% - 8.0% 40%
>8.0% 0%
For example, a bank with a Common Equity Tier 1 capital ratio in the range of 6.125% to 6.75% is required to conserve
80% of its earnings in the subsequent financial year (i.e., payout no more than 20% in terms of dividends, share
buybacks and discretionary bonus payments is allowed).

• Countercyclical Capital Buffer (CCCB):

The aim of the Countercyclical Capital Buffer (CCCB) regime is twofold. Firstly, it requires banks to build up
a buffer of capital in good times which may be used to maintain flow of credit to the real sector in difficult
times. Secondly, it achieves the broader macro-prudential goal of restricting the banking sector from
indiscriminate lending in the periods of excess credit growth that have often been associated with the
building up of system-wide risk.
CCCB may be maintained in the form of CET 1 capital only, and the amount of the CCCB may vary from 0
to 2.5% of total risk weighted assets (RWA) of the banks
The credit-to-GDP gap shall be the main indicator in the CCCB framework in India. However, it shall not be
the only reference point and shall be used in conjunction with GNPA growth.
CCCB shall have 2 thresholds (a) Lower threshold (L) of the credit-to-GDP gap where the CCCB is
activated shall be set at 3% points and (b) Upper threshold (H) where the CCCB reaches its maximum
shall be kept at 15% point of the credit-to-GDP gap with respect to credit to GDP Gap. In between 3 and
15% points of credit-to-GDP gap, the CCCB shall increase gradually from 0 to 2.5 per cent of the RWA. If
the credit-to-GDP gap is below 3% points then there will not be any CCCB requirement
Presently RBI has not prescribed any time limit for CCCB.
• D-SIB Capital Buffer: The banks identified as D-SIBs* would be plotted in five different buckets
depending upon their systemic importance scores in ascending order and they would be required to maintain
additional capital (in the form of CET1 capital) in the range of 0.20% to 1.00% of their risk weighted assets
and became fully implemented w.e.f. 01.04.2019. The names of the banks classified as D-SIBs will be
disclosed in the month of November every year.
*List of Domestic Systemically Important Banks (D-SIBs)-2023

*While ICICI Bank continues to be in the same bucketing structure as last year, SBI and HDFC Bank move to higher buckets
– SBI shifts from bucket 3 to bucket 4 and HDFC Bank shifts from bucket 1 to bucket 2. For SBI and HDFC Bank. The higher
D-SIB surcharge for SBI and HDFC Bank will be applicable from April 1, 2025. Hence, up to March 31, 2025, the D-SIB
surcharge applicable to SBI and HDFC Bank will be 0.60% and 0.20% respectively. The additional Common Equity Tier 1
(CET1) requirement will be in addition to the capital conservation buffer.

5. LEVERAGE RATIO UNDER BASEL-III

Particulars Remarks
Definition of Leverage Ratio Leverage Ratio is the ratio of Tier-1 Capital of the Bank to On & Off
balance sheet exposure of the Bank.
Leverage Ratio prescribed by RBI Tier-1 Capital
Bank’s On & Off balance sheet exposure
Minimum Leverage Ratio prescribed by RBI D-SIB 4% & Other Banks 3.50%
Bank’s Position As on 31.03.2024: 5.96 % As on 30.06.2024: 5.88%

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6. LIQUIDITY RATIOS UNDER BASEL-III

• The Liquidity Coverage Ratio (LCR) is short term measurement of Bank’s liquidity position to ensure
that the cash outflow during next 30 days are adequate to covered by high liquid assets of the Bank.

The stock of high quality liquid assets comprises of :-

✓ Level 1 Liquid Assets: Excess CRR, Excess SLR, Cash
✓ Level 2 Liquid Asset: Investment in Bonds/ Shares of Non-Financial PSU or Corporate Bonds with external
rating AA- or above and Multilateral Development Banks (ADB, NABARD etc).
• LCR is to be computed with respect to the position at the end of the month for next 30 days.
Position of Liquidity Coverage Ratio (LCR):**
RBI Prescribed Position 31.03.2024 30.06.2024
100% 134.09% 123.26%
**Based on final LCR Guidelines issued dated 09 June 2014 which is as follow:-
➢ High quality Liquid Assets (HQLA): Earlier, RBI divided HQLA into Level 1 & Level 2 assets depending
upon the liquidity and credit quality. In the final guidelines RBI has kept Level 1 assets same as in draft
circular, but has introduced another layer of liquid assets under Level 2 assets. Hence, level 2 assets are
further divided into Level 2A & Level 2B.
➢ Definition of Level 1 assets: Level 1 asset include cash including excess CRR, excess SLR within
mandatory SLR requirement Government securities allowed up to the extent of MSF (presently 2% of
NDTL as notified by RBI) + 16% of NDTL (as notified by RBI - Facility for Availing Liquidity for LCR-
FALLCR), and marketable securities issued or guaranteed by foreign sovereigns.

➢ Definition of Level 2 assets: RBI has widened the scope of Level 2 assets. The Level 2 assets have
further been bifurcated into Level 2A & Level 2B.
At present the assets allowed as Level 1 High Quality Liquid Assets (HQLAs), inter alia, includes among
others within the mandatory SLR requirement, Government securities to the extent allowed by RBI under
(i) Marginal Standing Facility (MSF) and (ii) Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR)
[16 per cent of the bank's NDTL with effect from April 1, 2020]. The total HQLA carve out from the
mandatory SLR, which can be reckoned for meeting LCR requirement will be 18% of NDTL (2% MSF
plus 16% FALLCR).
Net Stable Funding Ratio (NSFR) :
The NSFR promotes resilience over longer-term time horizon by creating additional incentives for banks to fund
their activities with more stable sources of funding on an ongoing structural basis.
Available Stable Funding (ASF):
•ASF includes Capital, Borrowings, Deposits (Retail, SBS, PSU & others) and excludes deposits from Financial
Institutions. Bank strategy should be to maximizing the ASF.
• RBI has prescribed higher conversion factors for ASF depending upon the nature and maturity i.e. Capital and other
liabilities having 1 year or more effective maturity.
• All the Deposits having effective maturity more than 1 year, eligible Capital instruments and other liabilities with
maturity 1 year or less doesn’t contributed to the Available stable funding of the Bank.
Required Stable Funding (RSF):
• RSF includes Advances & Investments with maturity of one year or more and Bank’s strategy should be to
minimizing the RSF.
• Cash available with the Bank & CRR attract 0% conversion factor (CF) as also the SLR attracts 5% conversion factor
and Level 2 A assets also attracts 15% CF.
• Short term loans (1 year or less residual maturity) to non-financial entities/ Retail attracts 50% CF.
• Residential mortgages loans and other performing Loans with Risk Weight of 35% or less in Standardised approach
for credit risk attracts 65% Conversion factor.
• Other performing loans to non-financial entities will attract 85% CF.
• All other assets will attract 100% conversion factor for evaluating Required Stable funding.
Position of Net Stable Funding Ratio (NSFR) :
SN Ratio RBI Prescribed Position Bank’s Position as on 30.06.2024
1 Net Stable Funding Ratio (NSFR) >=100% 139.38%

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D. IRMD Schemes & Guidelines

D1: FINANCING AGAINST FUTURE LEASE RENTALS (FLRs)
SN Particular Guidelines
Property owners of Freehold/ Leasehold properties who have let out such
properties to PSU/Govt./Semi Govt./State Govt. & reputed corporate, Banks, FIs,
Insurance Companies, MNCs, reputed private schools/colleges (approved
1. ELIGIBILITY
by/affiliated to State Board/University/AICTE/any other Govt. body) and reputed
private hospitals/nursing homes and franchisee/ dealers/distributors of reputed
corporates
• Term loan
2. FACILITY
• Overdraft on reducing DP basis
• On the basis of lease rental receivables, applicable/proposed rate of interest
and unexpired initial & renewal period of lease.
3. EXTENT OF LOAN • An indicative list showing the quantum of loan at various interest rates (6.00%
to 15.00%) and period of lease (3 years to 15 years) is given in Appendix-B
of the circular.
Maximum 15 Years or total lease period considered for arriving at the loan
amount whichever is earlier subject to the following:
Category of lessee Maximum repayment period
1.For sanctions upto level of ZOCAC
a. Govt. departments / PSUs 15 years
b. Other cases 12 years
2. For sanctions at the level of HOCAC-I / HOCAC-II
a. Govt. departments /PSUs/ reputed corporates 15 years
4. REPAYMENT
b. Other cases 12 years
3. For sanctions at the level of HOCAC-III & above
a. Irrespective of the category of lessee 15 years

• Term Loan: shall not exceed 15 years

• Overdraft Limit : shall be adjusted within a maximum period of 180 months
(as prescribed for Term Loan option) or total lease period considered for
arriving at the loan amount, whichever is earlier, by reducing Drawing Power
• Assignment of lease rental;
• Equitable Mortgage of leased IP of which rental is assigned
PRIMARY • In case of loans having repayment period upto 5 years: the amount of loan
5.
SECURITY should not exceed the realizable value of the property mortgaged.
• In case of loans having repayment period beyond 5 years: the amount of
loan should not exceed 75% of the realizable value of the property mortgaged
• Wherever the leased property cannot be mortgaged for any reason
whatsoever, of the required value, the loan to be secured by EM of any other
IP i.e. other than that of which rental is assigned, having minimum value of
133% of loan amount
COLLATERAL • CHCAC & above may waive obtention of Equitable Mortgage of property in
6.
SECURITY case the property is rented to our Bank
• In case of company, waivement of personal guarantee of promoter Directors
may be considered on case-to-case basis by authority one step higher to the
sanctioning authority up to Zonal level and at Head Office level by the
respective sanctioning authority after recording proper justification.
ROI for Non CRE Borrower: Spread (0.10% to 3.45 based on internal rating)
INTEREST & over applicable benchmark*
7. ROI for CRE Borrower: Spread (0.35% to 3.95 based on internal rating) over
SERVICE CHARGES
applicable benchmark*
(*Applicable Benchmark: (i) For MSME : RLLR +BSP, (ii) For other than MSME: 1 Year MCLR)

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• Upfront Fee: L&A Circular on Credit related service charges issued from time
to time
• Annual review fee is to be levied in both the cases i.e., term loan / Overdraft
on DP reducing basis sanctioned against FLR.
• Collateral linked concession shall not be applicable under the scheme
8. LOANING POWER • PLP/MCC & above within their vested loaning powers

• While considering financing under the scheme sensitivity analysis on below

mentioned factors should be carried out:
SENSITIVITY a) Change in Lease Rentals - Decreased by 10%
9. b) Change in Occupancy Levels - Decreased by 10%
ANALYSIS
c) Change in Rate of Interest - Increased by 2%.
• After conducting sensitivity analysis adverse impact may be examined and if
needed, loan amount may be reviewed on case to case basis.
DEBT SERVICE • DSRA equivalent to the instalment plus interest of some specified period (i.e.1
10. RESERVE to 3 months) may be maintained as a cushion. Sanctioning Authority may
ACCOUNT prescribe for creation of DSRA in terms of sanction on case to case basis

• Let out property to allied concerns is not permitted even if it otherwise falls in
aforesaid permitted categories.
However, in cases where there are multiple offices / units in the same building
of which few units are leased out to their allied concerns and remaining other
units to other eligible lessees, financing under the scheme shall be permitted
11. 5 RESTRICTIONS for reputed corporates.
Proposals shall be considered by the Sanctioning Authority as permitted in the
scheme by excluding the rentals from such allied concerns while arriving the
eligible loan amount. In exceptional cases, HOCAC-II & above may consider
such cases of property owner letting the property to allied concerns on merits.
Consideration of ‘Reputed’ shall be as per the Judgment of Recommending / Sanctioning Authority
• The visit to the rented premises shall be undertaken once in a year at the
time of annual review or more often if deemed necessary.

12. INSPECTION • In case the account has slipped into SMA-1, inspection is to be done on half
yearly basis and in case of SMA-2, inspection is to be done on quarterly basis.
The periodicity (half yearly / quarterly, as the case may be) shall continue till
the account is regularised
Proposals referred to higher authorities for sanctions under circumstances as
mentioned in point no. 11 of annexure, subsequently Review / Renewal of
the facility shall be considered by the respective sanctioning authority under
RENEWAL/REVIEW whose vested loaning power the exposure otherwise falls, subject to
13.
of ACCOUNTS fulfilment of the conditions as mentioned below:
i. There is no change in T&C of sanction ii. All Terms & Conditions of sanction are
complied with iii. There is no deterioration in internal or external rating (wherever
applicable)
• Financials of the lessor be also obtained at the time of considering the proposal
from the borrower/public domain/published financial statements or other
14. OTHERS sources.
• At the time of annual review, the revaluation may not be insisted upon if the
account has not slipped to SMA-2 on any occasion during the last 3 years.

For detailed guidelines refer: IRMD L&A Circular No.100/23 dt. 18.09.2023

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D2: SCHEME FOR OPEN TERM LOAN

SN Particular Guidelines
a. Existing borrowers enjoying fund based credit facility and the account has
not slipped to category SMA-2 and below in previous 12 months.
b. The borrower shall have internal credit risk rating of ‘B1’ & above. External
ELIGIBILE rating of the borrower should be BBB and above wherever applicable.
1.
BORROWER c. This facility may be considered at the time of Sanction of Additional Credit
Facility or at the time of Renewal /Enhancement of Existing facilities.
d. Existing borrowers enjoying credit facilities under MSME schemes are also
eligible for open term loan.
Any genuine commercial purposes in the same line of activity, with regular
business of the borrower. These would include:
a. Expansion / modernization and ongoing capex requirement.
b. Repayment of high cost debts/ high cost term debts of other banks/FIs.
c. Implementation of VRS scheme in the Company.
2. PURPOSE
d. Any other purpose, which may help in growth/ expansion /operation of
business.
e. Construction contractors who need to purchase / acquire machineries on an
ongoing basis depending on their orders to be executed and cannot estimate
their requirements at the beginning of the year.
pre-approved term loan facility with an option of multiple disbursements for
3. FACILITY multiple purposes which can be disbursed over a period of 12 months depending
upon requirement of the borrower
ASSESSMENT OF Upto 20% of the total limit sanctioned, minimum above ₹10 lakh and
4.
LOAN maximum upto ₹10 Crore
5. MARGIN Minimum 25%
6. VALIDITY 12 months from date of sanction
REPAYMENT PERIOD Maximum 3-5 years in monthly / quarterly installments. Sanctioning HOCAC-II
7. and above may consider repayment period upto 7 years wherever necessary on
case-to-case basis.
Hypothecation / mortgage of the assets proposed to be purchased out of the
8. PRIMARY SECURITY term loan. In case no tangible security is being created, extension of charge on
fixed asset/ 1st charge on fixed asset be created.
CHCAC and above. However, accounts classified as SMA-1 can be considered by
9. LOANING POWERS
HOCAC-I and above.
• Separate loan account shall be opened for each purpose as requested by the
borrower
• The borrower shall be free to avail the facility at their convenience within the
10. OTHERS validity of the sanction. Disbursement of the facility would be done on the
request of the borrower within the currency of the sanction subject to
verification / scrutiny of the basic financial information and satisfaction of
branch heads regarding purpose and end-use of funds.
Ref. : IRMD L&A Circular No.170/2020 dated 05.09.2020

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D3: GUIDELINES FOR CORPORATE LOAN

SN Particular Guidelines

a. To be allowed to public limited companies only

b. The company must have commenced business, having at least previous three
1. ELIGIBILITY year’s audited balance sheets
c. The company shall have credit risk rating (internal as well as external) in the
investment grade as defined in the extant Credit Management & Risk Policy

a. Building up of Net Working Capital (NWC)

b. Repayment of existing high cost debts
c. Leveraging specific cash streams, that accrue into company
2. PURPOSE
d. Implementation of VRS scheme in the Company.
e. For meeting research & development expenditure.
f. Any other purpose, which may help in growth/ expansion/operation of business.

3. EXTENT OF LOAN Need based

4. RAPEYMNET Maximum 5 years by way of bullet repayment OR in instalments

5. SECURITY These loans may be secured or unsecured depending upon the credit worthiness
and financial strength of the company

As advised through L&A Circulars issued from time to time based on rates linked
with external benchmark or 1-year MCLR, as applicable.
INTEREST RATE
6.
HOCAC-III shall be empowered to allow MCLR of lower maturity in case of sanctions
up to its vested powers and MC sanctions. Further, HOCAC-II shall be empowered
to allow MCLR of lower maturity in case of sanctions up to its vested powers
UPFRONT FEE & As applicable for term loans as per extant guidelines
7.
OTHER CHARGES

HOCAC-II/III may exercise their vested loaning powers to sanction such loans.
8. LOANING POWER However, MC shall exercise full powers in this regard. Annual review of the
Corporate Loan shall be considered by the original sanctioning authority

Standard Loan documents shall be obtained. In cases where some special clauses
9. DOCUMENTATION are to be incorporated, the documents shall be got drafted from Law Manager,
ZO/HO/Legal Retainer

a. The end-use of funds shall be in accordance with the purpose permitted in the
sanction.
b. While determining the loan amount and repayment period, the cash generation
capacity and total indebtedness of the borrowing company shall be kept in view.
It must be ensured that the borrowing company is in a position to generate
10. GENERAL sufficient cash for serving its obligations.
c. The loan shall not be provided for speculative purposes or for capital
expenditure for replacement of existing plant/machinery and/or on its
upgradation/renovation.
d. HOCAC-II/III may permit relaxations upto their vested loaning powers.
However, MC shall have full powers for permitting relaxations.

10. SCHEME CODE EI Type: TLCLE, NON EI Type: TLCLN

Ref. : IRMD L&A Circular No.91/2024 dated 06.07.2024

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D4: GUIDELINES FOR SHORT TERM LOAN

SN Particular Guidelines
a. To be allowed in respect of bank’s existing customers. However, in case of
meritorious proposals of non-customers, the STLs may be considered subject to
IRR ‘A4’ & above
b. Short Term Loans of secured nature be allowed to corporate borrowers as
under:
i. For loans upto ₹500 crore with minimum internal credit risk rating of ‘B2’.
However, in case STL is to be considered in the sensitive sectors such as Capital
Market/CRE then for rating should be “A4” and above
ii. For loans above ₹500 crore with minimum risk rating of ‘A4’.
iii. PSUs of repute, showing profits in the latest period as per ABS or duly certified
ELIGIBILE by CA and/or having a positive fund flow/Escrow arrangement, without
1.
BORROWER reference to their rating.
iv. The details of STLs raised by the PSUs during last two years from our
bank/other lending institutions should be obtained to ascertain whether the
same have been repaid on time or not. The adequacy of cash flows and track
record should be the prime criteria for considering STLs to PSUs.
The amount of STLs to PSUs be decided based on the genuine needs as well as
the repaying capacity but should be restricted to 10% of average gross
revenue for the last three years. It should be within the internal exposure
ceiling fixed for advances to State Govt. Undertakings/PSUs with sub-ceiling to
State Govt. Undertakings / PSUs running in losses or where financials are not
available, as per extant guidelines.
Minimum: ₹25.00 crore, Maximum: should be considered within the overall ceiling
2. EXTENT OF LOAN
for prescribed for individual and group borrowers
3. TENOR Maximum 1 Year
INTEREST RATE Fixed interest rates / rates linked with market benchmark upto 1 year
HOCAC-II and above within their vested loaning powers.
LOANING Proposals of State Govt. Undertakings/PSUs running in losses or where
4.
POWERS financials are not available shall be placed to Management Committee for
consideration
EXPOSURE 18% of the exposure of the bank as at close of previous quarter
5.
CEILING
a. In case the aggregate limit by single borrower from more than one PSB is ₹ 150
crores & above, Joint Lending Arrangement (JLA) shall be formed.
b. In case STL is being considered under project financing for meeting the
temporary mismatch of funds, it should be ensured that the financial closure of
project is duly achieved. The STLs may also be considered for preoperative
expenses
c. STLs of secured nature may be considered where bank has first/second and
subservient charge (with adequate residual value to cover the advances) on
6. OTHER
assets (current/fixed). In case of WC limits, adhoc limits/WCDL may be preferred
over STLs facilitating generation of more interest income.
d. Fresh STLs of unsecured nature are not to be considered. However,
exceptional cases of unsecured STL may be considered by MC under information
to Board with the proviso that such sanctions are not done through circular
resolution
e. No rollover of STLs should be allowed. The repayment should be clearly defined
in the sanction with servicing of interest regularly
7. SCHEME CODE EI Type: TLSTE, NON EI Type: TLSTN
Ref. : IRMD L&A Circular No.85/2021 dated 10.05.2021

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D5: GUIDELINES FOR LINE OF CREDIT

Line of credit is an arrangement between the bank and the borrower wherein a maximum amount of a loan
limit fixed in favour of the borrower with the option to draw the amount at any time as per the requirement of
the business in shape of Working Capital Facilities, LC/LG, Bills Financing, etc. within the overall sanctioned line
of credit. It is a solution to most of the credit needs of a business concern as it represents a commitment by
the bank to lend the firm up-to a specific amount for variety of business purposes.
SN Particular Guidelines

▪ PSUs irrespective of the rating and all existing/fresh borrowers with External Risk
Rating BBB & above where the bank’s exposure by way of working capital
finance (funded and non funded) is above ₹100 crore and
(i) the limits are not overdue for review/renewal; (ii) the conduct of account is
satisfactory; (iii) there is no major IR irregularity/adverse features in the account.

▪ Unless desired specifically by the borrower, the borrower’s working capital limits
shall be the single assessment in the form of line of credit where instead of
considering/sanctioning separate limits for Cash Credit (Stocks/Book Debts) and
DA (LC) facilities, a combined limit for Cash Credit (Stocks & Book Debts)-cum-
DA (LC) limit is to be sanctioned, with a sub-limit for DA (LC) facility.
▪ To facilitate operational convenience, credit facility may be permitted by way of
ELIGIBILITY, line of credit facility in shape of OD/WCDL to be availed for maximum period of
1.
AMOUNT OF LOAN 12 months subject to the following:
✓ The outstanding balance should be made as NIL at the end of 12 months or
the period of sanction whichever is earlier. In other words, credit facility given
in the shape of line of credit should not be extended/renewed without the
adjustment of the limit.
✓ A notice of at least 48 hours is to be given before availing/ repaying the
amount under line of credit.
▪ Under line of credit the following facilities are not to be considered:
i) LC (DA/DP) for procurement of capital goods
ii) Performance guarantees and guarantees issued for fulfillment of export
obligations
iii) Loans to meet capital expenditure/long term need, which are to be met
through term loans only.
▪ Having arrived at an outer limit/cap assessed by way of second method of
lending/Cash Budget Method, the credit delivery shall be done through the
NATURE OF modes of credit facilities viz. CC (Stock/Book debts), WCDL, LC (DA), Bank
2.
FACILITY guarantee for procurement of current assets.
▪ It can also be used as OD/WCDL subject to compliance of laid down guidelines
in the matter

Margin against stocks/book debts and LC (DA) shall be prescribed by the

Sanctioning Authority on case-to-case basis. While allowing CC (Stock/book debt)
3. MARGIN facility prescribed margin shall be deducted from the security to arrive at the drawing power
as per the extant system by obtaining stock and book debt statements on the prescribed
format. Similarly, LC (DA) shall be opened after obtaining the stipulated cash margin.

4. LOANING POWERS HOCAC-III & above

For availing the line of credit, the borrower has to give notice of minimum 48
hours clearly specifying the period for which the availment shall be made. In case
5. NOTICE PERIOD
no availment period is specified by the borrower, it shall be presumed that the
same is for the entire validity period of the line of credit. Accordingly, in case of

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adjustment of limit before the due date of the validity period, the bank may consider
levying commitment charges in such cases.

▪ Corporate Credit Division (CCD) shall convey the sanction details to CRMD,
HO for post sanction monitoring which shall make available the information to
other divisions upon request.
▪ CCD shall ensure Sanctioning Line of Credit strictly as per extant guidelines &
convey the sanction to Branch clearly mentioning that the facility is Line of
Credit for facilitation of the Branch to open the account accordingly
▪ On receiving the sanction letter, the details of Line of Credit shall be captured
MONITORING & in Limit Node by Branch. In order to capture details of Line of Credit a New
6.
REPORTING Suffix for Limit Node “LOC” (Line of Credit) has been created. Branches
should ensure creation of separate Limit ID for Line of Credit, in addition to
Fund & Non fund exposure under Party Total Exposure Limit ID.
▪ On availment of facility by borrower, the account (CC/DO) or limit (LC/LG) etc.
shall link with limit ID for created for LOC to facilitate MIS generation for
monitoring by CRMD.
▪ CRMD, HO shall provide information on the position of Line of Credit as on
close of the month to ALM, IRMD and CCD on prescribed format.

▪ The line of credit facility should not be utilized for purchase of real estate,
investment in capital market or other unrelated activities/speculations. An
undertaking to this effect should be obtained.
▪ In order to avoid levying of capital charge on the unavailed portion, an
undertaking for unconditional cancellation of the credit limit should be obtained.
▪ The line of credit should be considered in line with length of the working capital
cycle but not exceeding period of 12 months.
▪ The processing fee as applicable to fund based working capital limits should be
recovered for the entire limit sanctioned as line of credit.
▪ The sanctioning authority should prescribe minimum level of usage of limit for
levying of commitment charges on merits of the case.
▪ Disbursement:
a) Line of Credit sanctioned in form of WCDL may be disbursed in form of
7. OTHER tranches.
b) The sanctioning authority shall stipulate in the sanction, the period under
which such Tranches shall be availed i.e. the number of days in which
sanctioned line of credit shall be availed in tranches and ROI applicable at the
time of each disbursement.
c) The extant guidelines shall be amended to stipulate that Line of Credit if
availed in form of WCDL may be disbursed in tranches & should be adjusted
within the respective tenor of the tranche from the date of respective
disbursement. The maximum tenor of the tranche shall be 12 months from the
date of disbursement.
d) Where Line of Credit is disbursed in tranches and expiry of tranches is going
beyond the expiry of sanction, in such cases review of credit facilities
should be conducted immediately on completion of 9 months from
date of sanction to maintain the credit discipline.

Respective Sanctioning Authority (HOCACIII and above) within their vested loaning
8. Relaxation/Waiver powers shall be empowered to approve relaxation/waiver in these guidelines on
case to case basis but within overall statutory and regulatory framework

Ref.: IRMD L&A Circular No.21/2024 dated 16.02.2024

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D6: FINANCING SECURITIZATION OF FUTURE TOLL COLLECTION / DISCOUNTING OF

ANNUITY RECEIVABLES

SN Particular Guidelines

a. Public/Private Limited Companies may be considered for financing.

b. The advance shall be made to the borrowers (under consortium or otherwise) who
have availed the credit facilities for project implementation in BOT Road
projects/HAM Models.
c. Before financing such projects, the traffic volume study conducted by the reputed
agencies should be obtained to ensure the accuracy of projections relating to
1. ELIGIBILITY increase in future toll collection. In any case, the projections should be based on
the actual figures/toll collections of at least 9-12 months in case of toll based road
projects.
d. In case of annuity based road projects, it should be ensured that the
concessionaire has completed the project as per terms of the concession
agreement and is eligible for getting the payment of the annuity and atleast
payment of the first annuity has been received in its account.

The credit facilities should be used first for adjusting the existing secured and
2. PURPOSE unsecured debts in full. Thereafter for repayment of creditors, further expansion of
business, operation & maintenance cost etc.
3. NATURE Term Loan

4. LOAN AMOUNT Need based but within the prudential ceilings prescribed by RBI/Bank for
individual/group borrowers
Project Minimum Margin
HAM Nil
5. MARGIN
Other annuity Receivable 10%
Toll Receivable 40%
▪ HAM Project: Present value (PV) of net assured future receivables in the shape of
annuities for the unexpired period of concessionaire agreement (excluding final year
of annuity period) determined on the net cash flow basis
▪ Other Annuities/Recievables: PV of net assured future receivables in the shape
of annuities for the 85% of the unexpired period of concessionaire agreement
determined on the net cash flow basis.
For the purpose, PV of cumulative Annuities shall be calculated by way of
discounting the same at proposed rate of interest plus 100 bps. While determining
the PV of Net Assured Future Receivables/Annuities, the money required for
meeting day-to-day expenses as well as TDS (wherever applicable) shall also to be
METHOD OF taken into account. For this purpose, calculation should be done on the Net Cash Flow.
6.
ASSESMENT In such proposals, the amount of loan should be calculated by way of securitisation of
project revenues consisting of annuities only. The advertisement revenues and DSRA
income, if any, should not be reckoned for computing the loan amount and repayment
schedule.
The PV formula:
Net Assured Future Receivables/Annuities
Present Value = ----------------------------------------------------------
(1+ Interest rate per month)n (No. of months)
The discounting factor should be taken at proposed interest rate plus 100 bps to cover
the future upward revision in the rate of interest, if any, as in the present scenario the
interest rates have become volatile and any abnormal increase in rate of interest may
affect the repayment obligation.

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 उत्कर्ष -2025

The sensitivity analysis in respect of following three variables, as may be applicable,

be carried out:
a. Increase in interest rate by: 100 bps
SENSITIVITY
7. b. Increase in operation & maintenance cost by: 5%;
ANALYSIS
c. Reduction* in revenue by: 5%
*In case the Sanctioning authority is of the opinion that the key variable factors are
highly volatile for some particular case/period, the Sensitivity analysis may be carried
out at 10% instead of 5%.
HAM Projects: ROI shall be in the range of 3-month MCLR to 3-month
MCLR+40% based on external rating. However, ROI for All PSUs shall be 3-month
8. ROI MCLR irrespective of rating.

Other Projects: As applicable to other category of borrowers in terms of interest

rate guidelines issued from time to time

The repayment should be worked out in such a manner that the periodic instalment
of principal & interest are aligned with the future cash flows.
Further, TL shall be repayable within the period for which the future toll collection is
9. RAPEYMNET reckoned for computing the loan amount i.e. within the concession period as
envisaged in the concessionaire agreement.

The instalments may be equated or by way of ballooning depending upon the future
cash flows

The possibility should be explored to obtain charge on moveable/immovable assets of

COLLATERAL the company/equitable mortgage of other IPs. Corporate Guarantee of other promoter
10.
SECURITY companies/personal guarantee of promoters may be accepted. Particulars of charge
be filed with the Registrar of Companies within the stipulated period

LOANING HOCAC Level-II and above within their vested loaning powers
11.
POWER

▪ Debt Service Reserve Account (DSRA)

In order to ensure regular payment of interest plus instalment, DSRA equivalent to
the instalment plus interest of minimum two quarters may be maintained as a cushion.
In case of unequated instalments, the average instalment plus interest may be
reckoned for maintenance of amount in DSRA
12. OTHER ▪ Escrow account
To be maintained with the Lead bank/our bank and the funds for the project are to
be routed through this account. After the commencement of commercial operation,
annuities/other income by way of advertising etc. are to be deposited in this account
and withdrawals are permitted for operation & maintenance as per the terms of
agreement after earmarking the amount required for the servicing of debt.

Project Scheme Code MIS Code

SCHEME CODE/
EI Type Non EI Purpose of Advance – 41 -
13. MIS CODE Type “Financing Future Receivables –
HAM THAEI TBOEI BOT/ HAM/ Toll Projects”
Other Road Project THANE TBONE
For detailed guidelines refer: IRMD L&A Circular No.146/2021 dated 27.09.2021

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D7: GUIDELINES FOR EXTENDING FINANCIAL ASSISTANCE TO: (1) Sugar Mills for
Enhancement and Augmentation of Ethanol Production Capacity, AND (2) Projects
Proponents for Enhancement of Ethanol Distillation Capacity or to set up Distilleries for
Producing 1st Generation (1G) Ethanol from Feed stocks
1. Financial Assistance to Sugar Mills for Enhancement and Augmentation of Ethanol
Production Capacity
SN Particular Guidelines
i. Existing distilleries attached with the sugar mills
ii. All the Sugar mills are eligible for assistance to set up new distilleries including
expansion of capacity of existing distilleries attached with sugar mills,
1 ELIGIBILITY iii. As the assistance is credit linked, the concerned sugar mill should be eligible to
receive bank loan for installing the project at (i) and (ii).
iv. Assistance shall not be available to sugar mills which have availed benefits
under any other scheme of Central Government for the same project.
▪ Augmentation of ethanol production capacity by setting up of new distilleries
2 OBJECTIVE attached with sugar mills
▪ Expansion of the capacity of the existing distilleries attached with sugar mills
i. Interest subvention @ 6% per annum or 50% of rate of interest charged
ASSISTENCE
by banks, whichever is lower, which shall be borne by the Central Government
UNDER THE
for 5 years (including one-year moratorium)
SCHEME
3 ii. Interest subvention under the scheme shall be provided on loan amount
(as per GoI sanctioned and disbursed in respect of each project based on the proposed
guidelines Interest capacity, limited to the in principle approval by Department of Food and Public
Subvention) Distribution (DFPD)
i. The applicant should get the loan disbursed from the bank within 2 years or
as stipulated by the nodal agency from the date of in principle approval by
DFPD.
MODALITIES OF
4 ii. The project should be completed within 2 years from the date of
THE SCHEME
disbursement of 1st instalment of loan from bank.
iii. Disbursement of loan under the scheme shall be in a separate loan account so
that the utilization of the money for the said purpose is easily monitored.
5 FACILITY Term Loan
Door to Door Tenor shall not exceed 8 Years. HOCAC-I & above may permit door
6 TENOR to door tenor upto 10 years on case to case basis. However, payment of interest
subvention on loan amount under the scheme will be limited to only 5 years
including one year moratorium period
5% for term loan is brought upfront and remaining margin to be brought on pro-
7 MARGIN rata basis (if margin prescribed by sanctioning authority is more than 5%) and
source of margin be ensured
Primary Security First exclusive charge / first pari passu charge on its Fixed
Assets, as primary security purchased out of bank finance.
Collateral Security:
8 SECURITY ▪ 5% of the loan amount
▪ Extension of 1st / 2nd (pari passu) charge
▪ Personal guarantees of Promoters / Directors (excluding Nominee/ Professional/
Independent Director). Waiver may be permitted by the Sanctioning Authority

As per guidelines on benchmark ratios i.e. Average >=1.50:1 however it should

not be below 1.10:1 in any year.
9 DSCR
Competent Authority may relax the ratio as per L&A circular no. 04/2023 dt.
09.01.2023 subject to condition that DSCR should not be below 1.10:1 in any year

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 उत्कर्ष -2025

10 LOANING POWERS ZOCAC and above as per their vested Loaning Powers

The tripartite agreement shall ensure that the payment from the Oil Marketing
Companies (OMC) is routed through a dedicated escrow mechanism whereby it is
ESCROW to be ensured to deduct the amount of instalment for repayment of loan and the
11
MECHANISM interest (after deducting the interest subvention amount to be paid by the
Government) after which the balance is to be released to the concerned sugar mill’s
account for its other uses. The exercise will be carried out every month

DSRA to the extent of three months repayment (of Principal + Interest) is to be

12 DSRA
built up within one year of commencement of commercial production

13 TAT Within 30 days of receipt of all documents / papers

▪ A tri-partite agreement (TPA) among the producers of ethanol sugar mills, OMCs
and the lending bank is to be signed before disbursement
▪ NABARD has been appointed as the “Nodal Agency” for interacting with the
14 OTHER Department of Food and Public Distribution (DFPD) and managing the subsidy
funded for onward reimbursement to respective Bank
▪ Corporate Credit Division (Technical Cell), HO shall act as a Nodal Office
and shall collect the claims from all the branches and lodge the same with Nodal
Agency
For detailed guidelines refer: IRMD L&A Circular No.37/2023 dated 24.03.2023

2. Financial Assistance to Projects Proponents for Enhancement of Ethanol Distillation Capacity

or to set up Distilleries for Producing 1st Generation (1G) Ethanol from Feed stocks
SN Particular Guidelines
i. For setting up grain based distilleries / expansion of existing grain based
distilleries to produce ethanol.
ii. For setting up new molasses-based distilleries / expansion of existing distilleries
(whether attached to sugar mills or standalone distilleries) to produce ethanol
and for installing any method approved by Central Pollution Control Board for
achieving Zero Liquid Discharge (ZLD)
iii. To set up new dual feed distilleries or to expand existing capacities of dual feed
distilleries.
1 ELIGIBILITY iv. To convert existing molasses-based distilleries (whether attached to sugar mills
or standalone distilleries) to dual feed (molasses and grain / or any other feed
stock producing 1G Ethanol) and also to convert grain based distilleries to dual
feed.
v. To set up new distilleries / expansion of existing distilleries to produce ethanol
from other feed stocks producing 1G ethanol such as sugar beet, sorghum,
cereals etc.
vi. To install Molecular Sieve Dehydration (MSDH) column to convert rectified spirit
to ethanol in the existing distilleries.

i. Interest subvention @ 6% per annum or 50% of rate of interest charged

by banks, whichever is lower, which shall be borne by the Central Government
ASSISTENCE
for 5 years (including one-year moratorium)
UNDER THE
ii. Interest subvention under the scheme shall be provided on loan amount
SCHEME
2 sanctioned and disbursed in respect of each project based on the proposed
(as per GoI capacity, limited to the in principle approval by Department of Food and Public
guidelines Interest Distribution (DFPD)
Subvention) iii. Interest subvention would be available to only those distilleries which will supply
at least 75% of ethanol produced from the added distillation capacity to OMCs
for blending with petrol

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 उत्कर्ष -2025

iv. Assistance shall not be available to units:

▪ which have availed benefits under any other scheme of Central Government
for the same project.
▪ If Account is NPA, Loan accounts settled by borrowers under One Time
Settlement scheme/ compromise etc.

i. Loan to be disbursed which are eligible for re-finance from NABARD, within 1
year from the date of in principle approval by DFPD, failing which the in-
principle approval for the project will stand cancelled.
MODALITIES OF ii. The project should be completed within 2 years from the date of
3 disbursement of first instalment.
THE SCHEME
iii. The applicant should adhere to the time line as specified by DFPD for various
activities viz. arrangement of land for the project, submission of application for
seeking approval of environmental clearance in Parivesh Portal of Ministry of
Environment, Forest & Climate Change (http://parivesh.nic.in/)
4 FACILITY Term Loan
▪ Project proponents has DFPD’s in principle approval and having Tri-partite
agreement
Door to Door Tenor shall not exceed 8 Years. HOCAC-I & above may permit door
to door tenor upto 10 years on case to case basis. However, payment of interest
subvention on loan amount under the scheme will be limited to only 5 years
including one year moratorium period
5 TENOR ▪ Project proponents has DFPD’s in principle approval but not having Tri-partite
agreement
Door to Door Tenor shall not exceed 7 Years. Sanctioning authority may permit
term loan tenor of more than 7 years as conveyed vide (Chapter 8.1) of IRMD
L&A Cir. No. 173/2022 dated 19.11.2022 and changes therein from time to time.
However, payment of interest subvention on loan amount under the scheme will
be limited to only 5 years including one year moratorium period.
▪ Project proponents has DFPD’s in principle approval and having Tri-partite
agreement
5% for term loan is brought upfront and remaining margin to be brought on pro-
rata basis (if margin prescribed by sanctioning authority is more than 5%) and
6 MARGIN source of margin be ensured
▪ Project proponents has DFPD’s in principle approval but not having Tri-partite
agreement
As per guidelines on Margin requirement conveyed vide L&A circular no. 81/2022
dated 07.06.22 & subsequent amendment there after shall be adhered to
Primary Security First exclusive charge / first pari passu charge on its Fixed
Assets, as primary security purchased out of bank finance.
Collateral Security:
Project proponents has DFPD’s in principle approval
7 SECURITY And Having Tri-partite agreement But Not having Tri-partite agreement
5% of the loan amount As per discretion of the sanctioning
authority
Extension of 1st / 2nd (pari passu) charge
Personal guarantees of Promoters / Directors (excluding Nominee/ Professional/
Independent Director). Waiver may be permitted by the Sanctioning Authority
Project proponents has DFPD’s in principle approval
And Having Tri-partite agreement But Not having Tri-partite agreement
8 DSCR As per guidelines on benchmark As per guidelines on Benchmark ratios
ratios i.e. Average >=1.50:1 (L&A circular no. 04/2023 dated
however it should not be below 09.01.2023 and subsequent amendment
1.10:1 in any year made therein if any)

Project proponents has DFPD’s in principle approval

9 LOANING POWERS And Having Tri-partite agreement But Not having Tri-partite agreement
ZOCAC and above HOCAC-I and above

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 उत्कर्ष -2025

Project proponents has DFPD’s in principle approval

And Having Tri-partite agreement But Not having Tri-partite
agreement
The tripartite agreement shall ensure The payment shall be routed
that the payment from the Oil through a dedicated escrow
Marketing Companies (OMC) is routed mechanism whereby it is to be
through a dedicated escrow mechanism ensured to deduct the amount of
ESCROW
10 whereby it is to be ensured to deduct instalment for repayment of loan
MECHANISM the amount of instalment for repayment and the interest (after deducting the
of loan and the interest (after deducting interest subvention amount to be
the interest subvention amount to be paid by the Government) after which
paid by the Government) after which the balance is to be released to the
the balance is to be released to the concerned Project Proponent’s
concerned sugar mill’s account for its account for its other uses. The
other uses. The exercise will be carried exercise will be carried out every
out every month month.
To the extent of 3 months repayment (of Principal + Interest) is to be built up
11 DSRA
within 1 year of commencement of commercial production

12 TAT Within 30 days of receipt of all documents / papers

▪ A tri-partite agreement (TPA) among the producers of ethanol sugar mills, OMCs
and the lending bank is to be signed before disbursement
▪ NABARD has been appointed as the “Nodal Agency” for interacting with the
Department of Food and Public Distribution (DFPD) and managing the subsidy
funded for onward reimbursement to respective Bank
13 OTHER ▪ Corporate Credit Division (Technical Cell), HO shall act as a Nodal Office
and shall collect the claims from all the branches and lodge the same with Nodal
Agency
▪ Any change in the guidelines/modifications by the Government/Nodal Agency will
be applicable to the scheme after due communication by CGM-Corporate
Credit Division, H.O.

For detailed guidelines refer: IRMD L&A Circular No.37/2023 dated 24.03.2023

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D8: ADVANCE AGAINST BANK DEPOSITS

SN Particular Guidelines
• Term Deposit/ Recurring Deposit, NRE/ FCNR Deposits
Type of
1. • Balance lying in Current/Savings Account
Deposit
• Balances held in Exchange Earners Foreign Currency (EEFC) accounts
ADVANCE AGAINST SELF DEPOSITS
Maturity period remaining at the time of granting advances Margin% (min.)
Upto 2 years 5.00
Above 2 years and upto 3 years 7.50
Above 3 years and upto 4 years 10.00
Above 4 years and upto 5 years 12.00
Above 5 years 20.00
2. Margin
ADVANCE AGAINST THIRD PARTY DEPOSITS 25.00
Advances Against Balance Lying in Current/Savings Account/ NRO Term 25.00
Deposit
ADVANCE TO MEMBERS OF STAFF/ HONOURABLY RETIRED/ VOLUNTARILY
RETIRED/ WIDOW OF STAFF
Advance upto ₹10 lakh 5.00%
Advance above ₹10 lakh As applicable for public

As advised vide L&A Circulars issued from time to time. Presently as under
Self 1.00%*
Rate of Third Party Deposit 2.00%* subject to Min. RLLR / MCLR
3. *Over the applicable rates of interest on deposits
Interest
Note: In case there is more than one deposit in the name of the depositor(s) with varied rate of
interest, 1% or 2% higher on the weighted average of rate of interest paid on deposits should be
taken for calculating interest rate on loan.
Loaning GBBs/CBB Headed by scale Heads/Incumbents of
4. Powers II III IV V PLP Head IV PLP/MCC Head- V LCB ELCB
(₹ In Lakh) 50 160 800 800 800 2000 5000 10000
• Form PNB-308 be used for fresh advances
• Third party advance under automated scheme (DLDEP/ODDEP) shall be permitted at
base branch only
• Advance (i.e. Demand Loan/Overdraft) against fixed deposits shall not be allowed on
the same day of deposit. In case of unavoidable exigencies of customers, permission
will be granted by Zonal Office
• Demand Loan/Overdraft sanctioned against self FDRs should be credited only to the
account with same Customer Id duly verifying that the account is in same name.
Proceeds after adjustment of DL/OD should be credited in the account with the same
Cust-Id with same name from which proceeds have been originated.
• Advances at other than base branch to individual against his/her own deposit shall
5. Others
be permitted where deposit value is up to ₹2.00 crore only.
• To avoid instances of fraud, sudden spurt in business mix of any branch in a single
day or in a quarter shall be monitored. Monitoring of change in deposit or advance figure
of any branch shall be done based on below threshold levels:
✓ 5% of total deposit or advance of the branch or ₹ 50.00 Cr, whichever is lower in a
single day.
✓ 10% of the total deposit or advance of the branch or ₹ 100.00 cr, whichever is lower
in the last quarter.
✓ Advance shall not be granted against Government Deposits to 3rd Parties.
✓ Advance against 3rd party deposit shall be allowed at base branch only. No advance
shall be granted against 3rd party deposit in branches other than base branch.

For detailed guidelines refer: L&A Cir. Letter 07/2021 dt. 05.03.2021, Cir No.39/2021 dt. 19.02.2021, 192/2020
dt. 14.10.2020

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D9: CREDIT GUARANTEE SCHEME FOR MFIs (CGSMFI)

SN Particular Guidelines
All NBFC-MFIs / MFIs registered with one of the Self Regulatory Organisations
1. ELIGIBILITY recognized by RBI (presently MFIN & Sa-Dhan) are eligible for support under the
scheme

The Scheme is a specific response to provide funding to the NBFC-MFIs / MFIs at

2. OBJECTIVE competitive rates to enable them to extend need based financial assistance to their
existing micro enterprises and to support new micro enterprises at reasonable rates

DATE OF The Scheme came into force from the date of issue of these guidelines by NCGTC
COMMENCEMENT (i.e., 15.07.2021) and shall cover funding provided by the Bank to MFIs / NBFC-
3.
AND DURATION MFIs till 31.03.2022 or till guarantees for an amount of ₹7500 Crore are issued,
OF THE SCHEME whichever is earlier
5. FACILITY Term Loan
Upto 3 years including moratorium.
Moratorium may be allowed based on repayment terms of onward lending done by
6. TENOR
the borrower subject to maximum 6 months. However, interest shall be serviced as
and when levied.
Unconditional and irrevocable Credit Guarantee from NCGTC upto 75% of amount
classified as NPA.
In cases where FD is taken as collateral security, NCGTC guarantee shall be
available only on the uncovered portion of the loan (FD margin also to be netted
off).
8. SECURITY In addition NCGTC guarantee, the facility shall be secured by following securities:
Primary Security: Hypothecation of book debts and receivables from assets
created out of loan raised from us valued atleast 110% of loan amount. However,
ZOCAC may reduce primary security coverage upto 100%.
Collateral Security: EM of any other collaterals offered if any by the MFI. Further,
personal guarantee of Promoter Director be explored
75% of amount in default for a maximum period of 3 years. The loan extended to
GUARANTEE the NBFC-MFIs / MFIs could be for longer period. However, tenor of NCGTC’s
9. COVERAGE BY guarantee would be for a maximum period of 3 years
NCGTC Upon submission of the claim as per guidelines, NCGTC shall pay the eligible
amount to the Bank within 30 days
10. GUARANTEE FEES Nil
Internal Risk Rating – Minimum B2 and above / Score above 46 (in case of
CREDIT RISK scoring model).
11.
RATING External Risk Rating – The borrower should be rated under MFI rating grade by
authorised external rating agency irrespective of exposure of the borrower.
Rate of interest as applicable to NBFC-MFI which was last circulated vide IRMD L&A
RATE OF Circular No. 42/2020 dated 26.03.2020 shall be applicable subject to maximum 1
12.
INTEREST year MCLR + 2% p.a. Concession in RoI may be permitted by competent authorities
as per extant guidelines.
CONCESSION IN 50% of applicable charges
13.
SERVICE CHARGES
For borrowers rated MFR-4 or better, the proposals shall be considered by CHCAC
14. LOANING POWERS
and above within their vested loaning powers. For borrowers rated below MFR-4 /

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Unrated, the proposal shall be considered by HOCAC- I and above within their
vested loaning powers.
Dealing branches for the scheme are as under:
Zone Branch
Delhi Greater Kailash, New Delhi (099300)
Mumbai Foreshore Road (123200)
Kolkata Old Court House Branch (038920)
Chennai Mount Road (016510)
DEALING Hyderabad MG Road, Bangalore (104610)
15.
BRANCHES i. All the LCBs/ ELCBs will be eligible to handle proposals above ₹ 50 crore. In cases where
the overall group exposure is above ₹50 crore then the proposals upto ₹50 crore will
also be handled by the respective LCBs/ ELCBs
ii. Proposals upto ₹50 crore in Delhi, Mumbai, Kolkata, Chennai and Bangalore will be
handled by the above mentioned branches.
Zonal Offices shall identify suitable branches in consultation with HO: PSFID for handling
proposals irrespective of amount in centers other than (i) and (ii) above
SCHEME & Scheme Code: For EI: TLEMF For Non-EI: TLNMF
16. GUARANTEE Guarantee Coverage Code: CGMFI
COVERAGE CODE
17. OWNER DIVISION PSFID, HO
▪ Approval From NBG waived
▪ At least 50% of the funding made and covered under the scheme should go to
NBFC-MFIs / MFIs rated / graded MFR 2 or below
▪ Lock in period for the first claim against each tranche of loan sanctioned by the
Bank shall be 1 year from the date of issue of guarantee or last date of
disbursement out of the sanctioned amount, whichever is later. The second and
third claim shall be made in subsequent years. Only 1 claim per year shall be
entertained
▪ PSFID, HO shall be the Nodal Division for submitting claims to NCGTC. Upon the
borrower getting classified as NPA in the books of the Bank, the Bank shall submit
claims on an annual basis in respect of amount in default and claim payment of
75% against the amount in default.
▪ The borrower shall ensure that 80% of the finance obtained under the
18. OTHER scheme is utilized for creation of fresh loan assets. These assets should
be created within a period of 4 months from the date of disbursement of each
tranche of loans
▪ Interest rate charged on these loans is at least 2% below the maximum rate
prescribed by RBI on such loans. To illustrate, if the maximum interest rate
that an NBFC-MFI can charge to its eligible small borrowers works out to 22%
p.a. as per the formula prescribed by RBI on such lending, then the said NBFC-
MFI shall charge 20% p.a. from its eligible small borrowers under the scheme

▪ Assistance extended to the borrowers is as per extant guidelines of RBI. Existing

or new small borrowers within the regulatory definition of micro finance as
prescribed by RBI from time to time shall be the eligible borrowers under the
scheme. Such borrowers should not be in default for more than 90 days as on
the date of sanction / disbursement by the NBFC-MFI/MFI
For detailed guidelines refer: IRMD L&A Circular No.127/2021 dated 09.08.2021

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D10: GUIDELINES FOR FINANCING SECOND HAND ASSETS

SN Particular Guidelines

▪ The customer should be dealing with the Bank for at least five years by way
of current account or credit facilities.
1. ELIGIBILITY ▪ HOCAC-I may consider relaxation upto 3 years in respect of all cases falling
upto their vested loaning power and proposals under ZOCAC power.
▪ HOCAC-II and above may consider cases without stipulating any minimum
dealing period with us.
Atleast 5 years. The repayment period shall be fixed within the residual life.
2. RESIDUAL LIFE

Age of Assets Minimum Margin

Upto 3 Years 40%
3. MARGIN
Above 3 Years 50%

HOCAC-II and above may consider reduced margin subject to minimum 25%

Primary Security: Hypothecation / mortgage of the assets proposed to be

purchased out of bank finance.

4. SECURITY Collateral Security: Minimum 50% coverage shall be obtained. HOCAC-I may
relaxe collateral security upto 25% in respect of all cases falling upto their vested
loaning power and proposals under ZOCAC power.
HOCAC-II and above may consider cases with Nil collateral security.
5. ROI 1% more than the normal interest rate linked with internal / external rating

CHCAC & above within their vested loaning powers.

LOANINNG
6.
POWER However, in case of such financing to NBFCs proposals shall be exercised by
HOCAC-I and above within their vested loaning powers.

No bank finance shall be given for purchase of second hand plant & machinery
/assets of certain industries like Chemicals, IT & Computer Hardware and other
7. RESTRICTIONS
industries where incidence of depreciation is high and there are rapid technological
changes / upgradation

▪ The imported asset / plant & machinery should be valued by Bank’s approved
Valuers/ Chartered Engineers within 6 months of arrival. In cases where, the
valuation of the asset / plant & machinery shows 10% or more downward
variation from the valuation accepted at the time of sanction after arrival in
India, the matter may be referred to sanctioning authority and possibilities be
explored to obtain additional eligible collateral security to cover the variation.
Further, the borrower shall make good the shortfall in margin due to downward
variation in valuation.
8. GENERAL
▪ In general, the machinery being purchased / imported should have been
manufactured / assembled in the same country to avoid any legal issues on
account of repair / return etc. However, in cases where country of manufacture
/ assembly of the machinery is different from the country from where the
machinery is purchased / imported, the sanctioning authority may permit the
same subject to stipulations mentioned in the said circular.
▪ The guidelines shall not be applicable on composite buyout of companies through
NCLT.

For detailed guidelines refer: IRMD L&A Circular No.157/2022 dated 02.11.2022

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D11: GUIDELINES FOR FINANCING ASSOCIATION OF PERSONS

SN Particular Guidelines

EXPOSURE SUB- Exposure to a single AOP borrower by way of Fund Based and Non Fund Based
1.
CEILING facilities shall be restricted to ₹50 Crore

2. LOANING POWER CHCAC and above within their vested loaning powers

▪ In addition to primary security, Bank’s exposure should be secured by way of

atleast 100% coverage of eligible collateral securities.
3. SECURITY
▪ HOCAC-II and above may consider proposals where collateral coverage is less
than 100%.

The following illustrative list of safeguards may be kept in mind while financing
AOPs.
▪ In absence of any specific act passed by the Parliament, the provisions of AOPs
and other regulatory guidelines in this respect are depending upon the legal
judgments passed from time to time and provisions available in the Income Tax
Act, 1961, only. As such, the care must be taken by Bank, while financing to
AOPs which may have legal ramifications also.
▪ It must be ensured that in no case, members of AOP should exceed 50.
▪ Credit facilities be sanctioned to only those AOPs which are formed in writing
and duly registered with appropriate authority. The said AOP should have good
reputation in the area / field where they are operating.
4. SAFEGUARDS ▪ All precautions as Bank takes in accepting properties as security in its favour,
be applied in case of AOPs properties.
▪ AOP should be formed in writing between the members by executing inter-se
Agreement / Memorandum of Understanding wherein the rights and liabilities
of the members are clearly defined including ratio of their profit and loss sharing
and way to run the common management.
▪ All the documents have been prescribed for each and every facility by the Bank
and the same will also apply to AOP, as well.
▪ The meticulous compliance of Bank’s guidelines w.r.t. extension of credit
facilities to different categories of borrowers issued from time to time be mutatis
mutandis apply to AOPs, as well.

For detailed guidelines refer: IRMD L&A Circular No.154/2021 dated 11.10.2021

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D12: Credit Information Reports (CIRs) of the Borrowers provided by CICs

S.N. Particular Guidelines
1. APPLICABILITY For Fresh /Enhancement/Additional /Renewal/Review/Adhoc Credit Facility

A. Consumer CIRs
Loan Amount Consumer CIRs
Upto ₹20.00 Lakh One CIR with Score from any of the CICs viz.
TU CIBIL or Experian or CRIF Highmark or
Equifax
Above ₹20.00 Lakh Two CIRs with score from any CICs viz TU CIBIL
In case of customers having credit risk rating or Experian or CRIF Highmark or Equifax
of B2 and below or having Risk Score >46
to<=52 and below irrespective of loan
amount
Note: In case credit score from one CIC comes to -1 or NO HIT (Insufficient History/ Data), report
from second CIC to be extracted and analyzed for any default/ overdue as per the Score mapping
matrix.
Further, in cases, where two CIC reports are extracted as mentioned above and credit score from
both CIC are -1 or no HIT (Insufficient history/ data), it is advised that field functionaries to avoid
drawing more than two CIRs. However branches to conduct additional due diligence in such cases.
THRESHOLD Mapping Matrix of CICs Scores:
2. TU CIBIL CRIF HM Experian Equifax
LIMIT
801-900 756-900 800-900 835-900
700-800 703-755 731-799 783-834
680-699 621-702 649-730 682-782
601-679 555-620 614-648 603-681
551-600 381-554 318-613 363-602
300-550 300-380 300-317 300-362
B. Commercial CIRs
Loan Amount Commercial CIRs
One CIR from any of the CICs
Upto ₹1.00 Crore
Note: In case no report found from a bureau,
report from second bureau to be extracted and
analyzed for any default/overdue
Above ₹1.00 Crore
In case of customers having credit risk rating of Two CIRs from any CICs
B2 and below or having Score >46 to<=52 and
below irrespective of loan amount.
Consumer CIR:
▪ The acceptable CV Score for Consumer CIR that can be considered safe/less risk prone with respect
to the sanction of credit facilities is as under:
CIC Score Range Acceptable Score
TU CIBIL 300-900 680 & above
CRIF HM 300-900 621 & above
Experian 300-900 649 & above
Equifax 300-900 682 & above
Note: In cases where more than one CIR is generated, the score must be above or equal to the
acceptable score in all CIRs.
▪ In case CIC score is less than the Acceptable Score:
ACCEPTABLE For considering loans to individuals (including Proprietorship Accounts) whose CIR score is less than
3. the acceptable score, the sanctioning authority at field level (i.e. Branch/PLP/MCC) may consider
SCORE
the credit facility (fresh/ enhancement /additional) subject to fulfilment of all the conditions
mentioned below:
• The aggregate amount of default except credit card default in regard to all the credit facilities
provided by the other banks/NBFCs should be less than ₹25,000/-.
• Default/irregularity should be at least 1 year prior to the date of current application for fresh
credit facilities.
• Current CIC score of the borrower shall not be below minimum score as per table below:
CIC TU CIBIL CRIF HM Experian Equifax
Mappable Score 600 554 613 602
Wherever borrowers are not able to fulfil the above conditions, the proposals shall be considered by
CHCAC and above. However, CIC score shall not be below the minimum score as per table of Minimum
score.

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Commercial CIR
In cases where commercial CIR is drawn and rank is available:
i. Acceptable Rank:
CIC Rank Range Acceptable Rank
TU CIBIL 1-10 CMR 1 - 6
CRIF HM A-M CIMR A- I
Experian 1-10 EBR 10-5
Equifax 1-10 ECR 1 - 5
ii. In case Commercial CIR rank is less than acceptable rank:
Commercial Rank Sanctioning Authority
CMR: 7 / CIMR: J / EBR: 4 / ECR: 6 CHCAC and above
CMR: 8 / CIMR: K / EBR: 3 / ECR: 7 & 8 ZOCAC and above
CMR: 9 & 10 / CIMR: L & M / EBR: 1 & 2 / ECR: 9 & 10 HOCAC-I and above
Note: In case of Renewal/ Review, if the commercial CIR rank of the borrower is less than acceptable
level, the proposal shall be renewed/ reviewed by the Respective Sanctioning Authority.
• Advance against Bank’s own Deposits, Govt. Securities/Bonds, PSU Bonds, Postal Securities,
LIC Policies, Shares and Debentures & Mutual Funds.
• Advances against 100% Cash Margin.
• All Staff Loans / Advance against gold jewellery/ornaments
4. EXEMPTIONS Note: 1. CIR and it’s scrutiny shall be undertaken where the credit facilities are secured by Bank’s Deposit and
Liquid Securities as collateral security/margin (less than 100%) 2. In case NFB facilities sanctioned to
Non-constituent borrowers (borrowers that have not availed any credit facility from our Bank), scrutiny of the
CIRs shall be done invariably in order to ensure that the borrower has not availed any fund based facility from
any bank operating in India.
For Credit Card Defaults
The sanctioning authority shall take their credit decisions within their Delegated Loaning Powers
after due diligence and on merits of the case after verifying the reasons for default.
For Defaults other than Credit Card
i. Fresh/Additional/Enhancement
a. Facility may be considered by the respective sanctioning authorities after ensuring that the
irregularity/default (if any) is removed from CIC report or the applicant submits the sufficient
proof (i.e. No-dues certificate/Statement of account/ Deposit receipts etc) for having removed
such irregularity/ default.
b. In case of non-fulfilment of the above conditions, the facility may be considered by the
sanctioning authority not below the level of CHCAC and above. In such cases, the reasons for
default/irregularity during past 12 months should be critically examined and based on
justification/ mitigations provided, a view may be taken on a case to case basis.
DEFAULT(S) IN
5. ii. Restrictions mentioned at S.N. i) above, shall not be applicable subject to fulfilment
CIC REPORT
of all the conditions mentioned below:
• Such instance of default/irregularity should be at least 5 years prior to the date of current
application for fresh credit facilities.
• The aggregate amount of default in regard to all the credit facilities provided by the other
banks/NBFCs was less than ₹1.00 lakh.
• CIR score of the borrower must be above or equal to minimum score as per table below:
CIC TU CIBIL CRIF HM Experian Equifax
Mappable Score 700 703 731 783
Note: In cases where more than one CIR is generated, the score must be above or equal to the score in
all CIRs as per the table above
iii. The restrictions mentioned at S.No.i) shall not be applicable in case of debt waiver by Central
Government/ State Government.
iv. Renewal/Review shall be considered by the respective sanctioning authorities based on
proper Justification/ further course of action as deemed appropriate.
VALIDITY OF Should not be older than 90 days at the time of Fresh Sanction/ Enhancement/ Renewal/
6.
CIR Review/ Adhoc/Additional credit facility
Segment Charges
CIR CHARGES Consumer @ ₹100/- per CIC (w.e.f. 25.01.2023)
7.
Commercial @ ₹500/- per CIC (w.e.f. 01.04.2020)
Priority Sector Loans up to ₹25000/-: No Charges shall be recovered
For detailed guidelines refer: IRMD L&A Circular No.130/2024 dated 01.10.2024

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D13: TAKEOVER OF BORROWAL ACCOUNTS

S.N. Particular Guidelines
• Should have a rating of ‘B1 & above’
• The accounts should be in the Standard Asset' category of the existing Bank
• Should have earned net profit after tax in the immediately preceding 3 years and have
1. ELIGIBILITY sound financial position
• Credit information Report (Appendix III) as per RBI guidelines should be obtained.
• Account should be standard and should not have been classified under SMA-1/SMA-2
during last 24 months
• Borrower was availing credit facilities from another Bank/ FIs within the period of 3
months prior to submitting loan proposal shall be treated as ‘Deemed takeover’.
• In case where such credit facility has been repaid by the applicant borrower as per
the terms & conditions of the original sanction, shall not fall under the purview of
DEEMED
2. Deemed Takeover. In case of Revolving Credit Facility, the date of expiry of last
TAKEOVER
sanction as availed from other bank/ FIs shall be treated as date of maturity.
• In case of crop loans/KCC, the prior approval from next higher authority is not
necessary even if the accounts have been adjusted within 3 months subject to the
compliance of other takeover norms.
• Respective Sanctioning Authority except GBB.
SANCTIONING
3. • GBB may consider the proposal after obtaining prior approval from the next higher
AUTHORITY
authority.
• Small Loan accounts (aggregate exposure upto ₹5 crore) with credit risk rating
‘B2 & below’ are not to be considered for takeover.
• Enhancement above 25% in WC limit ,proposals shall be sanctioned by HOCAC-I &
above on merits
Takeover of borrowal accounts from the banks where our present EDs and MD & CEO
have worked earlier need not to be considered. However in all loans (including retail/
agriculture) having limits upto ₹7.50 Crore, the above restriction shall not apply and
4. RESTRICTIONS shall be considered by respective sanctioning authority. These sanctions shall continue
to be reported as per Bank’s extant guidelines and shall not require administrative
approval from the Board.
For borrowal accounts above ₹7.50 Crore, in exceptional cases where takeover is
considered from the aforesaid banks, the credit proposal, shall be sanctioned by
sanctioning authority as per existing delegation of power after obtaining prior
administrative approval from the Board and such takeover proposal shall invariably
contain the specific reasons justifying the need for takeover.
• Data capturing in the System, a separate menu option ‘TOACM’ has been
customized for capturing additional data related to previous bank.
• Credit Audit: To be conducted for accounts with exposure of ₹1 cr. and above
• Stock Audit: Audit is to be conducted prior to disbursement of WC limits (FB+NFB) of
₹5.00 Crore and above. However, the same may be exempted for units:
a. Having external rating of “A” and better (wherever applicable) or
b. Having Internal rating “A3” & better or
c. Accounts with collateral coverage of 75% or more.
5. OTHERS
• Monitoring: System generated MIS report (Appendix IV), submission of cumulative
position having exposure above ₹10.00 crore and upto ₹50.00 crore shall be placed to
ACE and above ₹50.00 crore shall be place to Board on Half Yearly basis by CRMD.
• The formalities, such as, fresh documentation, transfer of securities should be created
and perfected preferably within 90 days of disbursement. Specific timeline in this
regard is to be incorporated as part of the proposal. However in case of enhancement/
additional credit facility to be considered (if any), shall be released after ensuring
security perfection.

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• The term loan should always be taken over at existing level and with residual tenor as
per original sanction terms i.e. the remaining repayment period shall not be extended
beyond the original repayment period permitted by transferor Bank/FI.
• In case of schematic lending such as Financing Against Future Lease Rental,
Discounting of Cash Flows, Financing securitization of future toll collection/discounting
of annuity receivables in BOT road projects & HAM projects, PNB Sampatti, PNB My
Property, PNB Home Loan etc, the loan may be sanctioned for longer period as well,
provided the total repayment period including the period for which the loan has already
been availed from previous Bank/FI is within the total repayment period permitted in
the scheme. While assessing such term loan, it is to be ensured that the repayment
period extended does not fall in the ambit of restructuring of existing exposure
• Fresh term loan for expansion of projects/for purchase of P&M etc, shall not fall under
the purview of enhancement ceiling.
• All cases of take-over having limits upto ₹7.50 Crores from any bank where our ED
/ MD & CEO have worked earlier, be reported to Board for information by CRMD
• Borrowers should have a rating of “B1 & above”
• Account should be standard and should not have been classified under SMA-1/SMA-2
during last 24 months. The sanctioning authority shall obtain statement of account
TAKE OVER OF maintained with existing Banks/FIs for last 24 months so as to ensure that account
6. RETAIL LOANS have not been classified under SMA-1/SMA-2 and are standard regular at the time of
takeover. Alternatively, the same may be ensured by analysing CRILC report
(wherever available).
• Non individual borrower shall not be allowed to be a co-borrower in take-over of a
housing loan even if it was a borrower in the transferor institution (NBFC/HFC).
Relaxations in takeover guidelines (Except directives from RBI {i.e. for obtaining Credit
Information}, Department of Financial Services, MOF {i.e. Restriction for taking over
RELAXATION proposal form the bank where any of its ED or MD & CEO have worked earlier} shall be
7.
AUTHORITY considered by HOCAC-II and above within their vested loaning powers.
In cases where the HOCAC-II / HOCAC-III has exercised relaxation in extant guidelines,
the same shall be put up to MC of the Board for Information
TAKEOVER OF GECL EXPOSURE
1. Takeover of GECL shall be considered where exposure including GECL is above ₹1.00 Crore
2. Loaning Powers
GECL exposure is exclusively secured by 100% and above collateral
A. security or where the total exposure comprising takeover of GECL Respective Sanctioning Authority
exposure is secured by 100% and above collateral security
Cases not falling in the above category i.e. A:
ZOCAC and HOCAC-I, in respect of cases falling up to their vested loaning powers where Internal risk rating
B.
of the borrower is B1 and above. HOCAC-II and III, in respect of cases falling up to their vested loaning
powers where Internal Risk Rating of the borrower is B3 and above
However, MC shall have full powers in this regard
The collateral securities charged to the existing bankers shall not be released. However, guidelines with
3. regard to release of collateral security shall remain unchanged and the same shall be governed by para 12.5
of IRMD L&A Circular No. 185/2022 dated 16.12.2022
Assessment of the borrower shall be carried out on the total exposure after taking into account the GECL
4.
exposure also
Reference: IRMD L&A Cir. No.185/22 dated 16.12.2022; 143/2023 Dt.16.12.2023; 41/2024 Dt.04.04.2024
*RSA= Respective Sanctioning Authority

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D14 GUIDELINES FOR FINANCING TO LAB GROWN DIAMOND INDUSTRY

SN Particular Guidelines
a) Existing as well as New Borrowers.
b) Internal risk rating of A3 & above or external risk rating of minimum A.
1. Eligibility
c) Borrower with minimum experience of 2 years in the line of activity shall only
be financed.
Purpose a) To meet the working capital requirement.
b) Term Loan for the following purposes:

2. i) Purchase/Construction/Renovation of business premises, factory,

laboratory.
ii) Purchase/Import of Plant & machinery / Equipment etc. for business
activities.
Type of Facility a) Fund based (CC/OD, Pre & Post shipment credit, BD, Term Loan etc.)
3.
b) Non-Fund based (BG, LC, DPG, SBLC etc.)
Quantum of Need based (within the exposure ceiling prescribed).
4.
Exposure
Particulars Margin
For Working capital Facility
Stock 25%
Sundry Debtors 30%
5. Margin Bills discounting facility 10%
Term Loan facility
For new entities 30%
For existing entities availing term loan for expansion 25%
Others
Letter of Credit/ BG/SBLC/DPG etc. 25%
Tenor Term Loan: Depending upon the productive life of machinery, subject to
maximum of 7 years.
6.
Tenor of Term Loan more than 7 years shall be permitted by sanctioning authority as conveyed vide
IRMD L&A Cir. No. 50/2024 dated 19.04.2024 and changes therein from time to time.

Primary Security Hypothecation of Assets i.e. Stock, Book Debts, P&M, Equipment, etc. created
7.
out of Bank finance (present and future).
a) PG of the Promoters / Partners / Promoter Directors of the borrowing
concern shall be obtained.
b) Minimum 100% of the total credit exposure in shape of the Land &
Building/Liquid securities.
Relaxation Authority in minimum collateral security requirement :
8. Collateral Security
Proposals falling within vested Min. collateral security requirement
loaning powers of authority after relaxation
HOCAC-I & above NIL (Full powers)
Respective sanctioning authority may prescribe higher collateral cover based on
risk assessment of the individual proposals.
9. Loaning Powers ZOCAC & Above
As per guidelines on Benchmark ratios for Gems and Jewellary sector conveyed
Benchmark
10. vide L&A circular no. 04/2023 dated 09.01.2023 and amendment made therein
Financial ratios
from time to time shall be adhered to.
ECGC Cover ECGC’s Export Credit Insurance for Banks -Whole Turnover Packing Credit
11. Insurance cover (ECIB WT-PC) / Export Credit Insurance for Banks -Whole
Turnover Post Shipment Insurance cover (ECIB WT-PS) to be governed vide

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IBD: Foreign Exchange circular no 06/2024 & 07/2024 dated 10.01.2024 and
changes therein time to time.
Authorized Initially, financing has been restricted to Zonal offices Mumbai &
Branches Ahmedabad only. Further, LCB/ELCB of the above zones have been authorized
for financing to Lab grown diamond industry.

12. Further, ZOCAC Mumbai & Ahmedabad have been empowered to authorise
any other branches in their zone for financing to Lab Grown Diamond industry.
Owner division (Corporate Credit Division) has been empowered to
authorize any other zones/branches/LCB/ELCB for financing to Lab Grown
Diamond industry.
ASM guidelines i) ASM (Agencies for Specialized Monitoring) shall be appointed for overall
exposures above ₹ 100 Cr. from the banking industry.
ii) Loan accounts of above ₹ 50 cr. and up to ₹ 100 cr.
The Committee consisting of 2 General Managers (1 from Corporate Credit
Division, HO and 1 from CRMD, HO) without intervention of ZO / ELCB /
LCB shall decide whether ASM to be appointed or not in following cases.
13.
▪ In accounts with PMS rank 5 continuously for 2 months. AND
▪ The internal risk rating of the account is B3 or below
Besides above, the Sanctioning Authority may recommend the appointment of
ASM in case close / specialized monitoring is required.
(all other ASM guidelines shall be followed as per CRMD circular no. 16/2024 dated
19.04.2024 & subsequent amendment issued from time to time).
For WC Limit: Monthly
In case of multiple locations, all locations will have to be covered once in a
Inspection
14. financial year.

(all other Inspection/Visit guidelines shall be followed as per IRMD L&A circular no.
41/2022 dated 23.03.2022 & subsequent amendment issued from time to time).
Monitoring Industry shall be closely monitored and a review note shall be placed to Board
15.
on half yearly basis by Credit Review & Monitoring Division (CRMD).
Other a) Stock & Receivable Audit-
➢ If the Borrower has more than one location, stock audit is to be conducted
on the same day for physical verification.
➢ All Other guidelines in respect of Stock Audit of Large borrowal accounts
conveyed vide IRMD L&A circular no. 80/2024 dated 26.06.2024 &
changes therein from time to time to be complied with.

16. b) Branches to refer to ECGC’s Buyers Specific Approval List (BSAL) in every
case as part of due diligence on buyers.
c) A part of Cut & Polished (C&P) lab grown diamond stocks are certified (for
cut, clarity, colour and carat) by agencies such as Gemological Institute of
America (GIA). Hence, in the stock statements, cut and polished lab grown
diamonds are to be shown as two categories as below:
➢ C&P Diamonds – Certified
➢ C&P Diamonds – Non-certified
Relaxation HOCAC-II and above
17.
Authority
For detailed guidelines refer: IRMD L&A Circular No.19/2023 dt.16.02.2023

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D15: GUIDELINES ON INFRASTRUCTURE FINANCING

D15.1: FINANCING RENEWABLE SOURCE OF ENERGY

▪ in view the advisory of Ministry of New & Renewable Energy (MNRE) and the renewed focus of the government
on the renewable sources of energy, an exposure limit of 1.5% for lending to renewable energy was carved
by our Bank within the overall limit of 10% fixed for Infra-Power.

▪ Permanent and imperishable sources of energy like wind power, solar power, Bio mass, small hydropower
projects etc. are called renewable sources of energy. Bank has already in place guidelines for financing
windmills/solar projects circulated to the field from time to time, which take care of all the prescribed norms
and requisite safeguards.

▪ Retail Assets Division has also issued guidelines for installation of solar water heating and Solar Lighting
Equipments in Homes. Similarly, PS&FID has also issued guidelines pertaining to solar based power generators,
Biomass based power generators, Wind mills, Micro Hydel plants etc. in Priority Sector, in terms of RBI
guidelines. Further, guidelines for financing of Grid Connected Rooftop Photovoltaic (PV) Solar Power Projects
for Commercial, Industrial, MSME, and Profit Making Institutions have also been issued by Corporate Credit
Division.

▪ It is pertinent to mention that wind power is the cheapest source of energy with low operation and maintenance
costs. It is a real fast track power project with the shortest gestation period and the fastest payback period.
Wind Energy conversion is now a proven technology and the system can be operated in an economically/
technically viable manner. Further, the incentives for development of wind power are highly attractive to the
wind farm developers/investors and a favourable policy from Central Govt. as well as from state governments
exists in India

▪ Solar power, a renewable source of energy, is considered an alternate and clean source for generation of
power just like wind energy and its use for generation of power is becoming increasingly popular. Since in
India significant amount of land areas get good sunshine during the major part of the year, financing to solar
power projects has immense scope for financing. It may be added that Govt. is providing support by way of
subsidy etc. to give boost to power generation through solar energy.

▪ Further, small hydropower projects, which are normally economically viable can play a critical role in improving
the overall energy scenario of the country and in particular for remote and inaccessible areas. The MNRE is
encouraging development of small hydro projects both in the public as well as private sector.

For detailed guidelines refer: IRMD L&A Circular No.77/2021 dated 26.04.2021

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D15.2: GUIDELIENS FOR FINANCING WIND MILLS

SN Particular Guidelines

For setting up wind mills at high wind potential sites by the industry and other
1. PURPOSE sectors either for their captive use or on standalone basis for power needs, income
generation and tax savings

2. FACILITY Term Loan

Need based but within the prudential ceilings prescribed by RBI/Bank for
3. LOAN AMOUNT
individual/group borrowers

Captive Units - Min 25% Standalone units/ As allied activity – Min. 30%*

*Sanctioning authorities may consider sanction of Term Loan at a lower margin of

25%, in case of borrowers with credit risk rating of ‘A4 & above’ or external rating
4. MARGIN
grade of ‘A & above’ within their vested loaning powers on case to case basis.
However, MC/HOCAC-III is empowered to consider sanction of Term Loan at a
lower margin of 25% irrespective of rating, within their vested loaning powers on
merits of the case.
The sensitivity analysis in respect of following three variables, may be carried out:

a. Increase in interest rate by: 100 bps

b. Increase in plant load factor (PLF) by: 5%;
SENSITIVITY
5. c. Reduction in in tariff collection by: 5%
ANALYSIS
In case the Sanctioning authority is of the opinion that the key variable factors are
highly volatile for some particular case/period, the Sensitivity analysis may be
carried out at 10% instead of 5%.

▪ 10 to 15 years including moratorium of 6 to 9 months, depending upon the cash

generation capacity and the obsolescence of technology.
▪ Sanctioning authorities may consider sanction of Term Loan beyond 15 years, in
6. REPAYMENT case of borrowers with credit risk rating of ‘A4 & above’ or external rating grade
of ‘A & above’ within their vested loaning powers on case to case basis.
▪ However, MC/HOCAC-III is empowered to consider sanction of Term Loan
beyond 15 years irrespective of rating, within their vested loaning powers on
merits of the case

▪ The possibility should be explored to obtain charge on moveable/immovable

assets of the company/equitable mortgage of immovable properties belonging to
promoters/family members and guarantors etc. Similarly, Pledge of fixed deposits
receipts, third-party deposits and/or assignment of LIC policy of the
COLLATERAL individual/promoters, pledge of promoters’ share etc. may be considered.
7.
SECURITY Corporate guarantee of other promoter companies/personal guarantee of
promoters may be accepted. Particulars of charge be filed with the Registrar of
Companies within the stipulated period.
▪ Escrowing of money lying to the credit of TRA
▪ Assignment of the Alternate Risk Transfer Policy

▪ The PLF studies for windmills are not as elaborate as hydro projects. In most of
PLANT LOAD the cases studies are carried out for 1 or 2 seasons only before the sites are
8. offered for investment.
FACTOR (PLF)

▪ EPC (Engineering, Procurement and Construction) contractors, at times, quote a

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higher PLF at offered sites without any absolute guarantee of project

performance. The existing operational sites are showcased which is not a true
reflection.
▪ In comparison the State Electricity Regulatory Commissions (SERC’s) while
fixing/revising tariffs generally take up elaborate performance review of
operational projects in their jurisdiction and thus have a holistic approach while
fixation of tariff. The SERC PLF analysis as such be taken as benchmark PLF while
considering projected cash flows / revenue. However, the PLF over 25% may
only be accepted under exceptional circumstances and after detailed evaluation
as to the reasonability.
▪ Plant Load Factor (system efficiency) of the existing wind power plants is typically
about 18% to 20% depending upon the location (availability of high wind
potential sites). Plant load factor (PLF) may be carefully assessed and SERC PLF
analysis normally be accepted as benchmark for PLF consideration and accepted
for projected cash flows / revenue. However, PLF above 25% may only be
accepted after thorough appraisal and placing on record the reasons for
acceptance.

9. LOANING POWERS As per Loaning Power guidelines

Indicative list of risks and risk mitigants are given below:

a) Equipment / Plant Under performance risk/ lower wind availability -
The borrower/ original manufacturer supplier may be persuaded to give an
unconditional guarantee for a fixed number of units per machine.

b) Off-take Risk/ Tariff risk/ Regulatory risk - Power off-take to be committed

under Power Purchase Agreement (PPA) and the tariff for the project would be
predetermined in the PPA as per the respective policies duly issued by government/
regulator. Also a standby PPA can be had so that in case of default for
RISKS & IT’S payment/evacuation of power, the power can be sold alternately.
10.
MITIGANTS
c) Payment risk from Power Purchaser - Payment track record of the Power
Purchaser be satisfactory and the terms of PPA including tariff be approved by the
state governments. The party be persuaded to obtain Alternate Risk Transfer (ART)
policy for the repayment period. ART partly mitigates the risk of default by the State
Utilities by reducing the exposure of the lenders to the extent of insured amount.
d) Repayment risk – All the money received from sale of power / other sources
be deposited in TRA (Trust & Retention Account). Borrower may additionally
maintain a minimum Debt Service Reserve Account (DSRA) wherein one/two
quarter principal plus interest shall be maintained as a DSRA.

The National Institute of Wind Energy (NWE) is established by the Ministry of New
and Renewable Energy (MNRE) to act as Technical Consultants to establish the
11. OTHERS Certification expertise in India for Wind Energy Turbine (WET). While financing
windmills, bank may accept Wind Turbine Generators (WTG) to be installed
/purchased from the MNRE approved Manufacturers as circulated by NWE

For detailed guidelines refer: IRMD L&A Circular No.77/2021 dated 26.04.2021

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D15.3: GUIDELIENS FOR FINANCING SOLAR POWER PROJECTS

SN Particular Guidelines
▪ The plants installed/to be installed in India having adequate sunlight may be
considered for financing by way of Term Loan, Working Capital and non-fund
based requirement for generation of electricity using solar energy by using either
of following:
i) Photovoltaic Technology (PV)
ii) Concentrated Solar Power (CSP)
iii) Thin Film technology

▪ A detailed project report clearly indicating the entire cost estimates and the
means of financing the same be obtained from the promoters clearly describing
1. ELIGIBILITY the strategies and technologies to be adopted. Strategies must clearly spell out
the terms and conditions of power purchase agreement (PPA) and available
subsidies.
▪ Subsidy plays a major role in growth of production of solar power. At present,
these projects are not viable without subsidy. Hence, till the time cost of
producing solar energy matches with that the cost of conventional energy
sources, subsidies available shall be major source of revenue in pre sanction
appraisal. Cash flow statement must clearly specify the amount and timing of
subsidies.
▪ Bank may finance such projects if unconditional Power Purchase Agreement
(PPA) has been executed for the period the bank exposure is likely to run.

▪ Need based facility for setting up of solar power plant/procuring necessary

gadgets which are the main cost involved may be considered. However,
PURPOSE & preference shall be given to the hybrid plants or plants having PPA.
2. ▪ The amount of loan should be within the prudential/internal ceiling prescribed
EXTENT OF
FINANCE by RBI/bank for individual and group exposure.
▪ Nature of finance shall mainly be by way of term loan. However, working capital
facility and non fund based facility may be considered depending upon the
genuine credit requirement of the borrower
Captive Units : Min 25%,
Standalone units/allied activity: Min. 30%*.
*Sanctioning authorities may consider sanction of Term Loan at a lower margin
of 25%, in case of borrowers with credit risk rating of ‘A4 & above’ or External
3. MARGIN Rating Grade of ‘A & above’ within their vested loaning powers on case to case
basis.
However, MC/HOCAC-III is empowered to consider sanction of Term Loan at a
lower margin of 25% irrespective of rating, within their vested loaning powers on
merits of the case

The sensitivity analysis in respect of following three variables, may be carried out:

a. Increase in interest rate by: 100 bps

SENSITIVITY b. Increase in plant load factor (PLF) by: 5%;
4. c. Reduction in tariff collection by: 5%
ANALYSIS
However, if the sanctioning authority feels that the variable factors are highly
volatile in some cases, the sensitivity analysis may be carried out at 10% instead
of 5%
▪ Solar projects, once installed, provide a secure, reliable return on investment.
5. PERIOD OF LOAN
This is due to the fact that the life of implements typically lasts for 25 to 40

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years whereas payback ranges between 8 to 12 years. Moreover, once the

plant is set up, direct cost of production comes down as there is no raw
material (fuel) related cost and the major cost component is managing the
mirrors.
▪ Repayment period of 10 to 15 years including moratorium of 6 to 9 months,
depending upon the cash generation capacity and the obsolescence of
technology.
▪ Sanctioning authorities may consider sanction of Term Loan beyond 15
years, in case of borrowers with credit risk rating of ‘A4 & above’ or External
Rating Grade of ‘A & above’ within their vested loaning powers on case to
case basis. However, MC/HOCAC-III is empowered to consider sanction of
Term Loan beyond 15 years irrespective of rating, within their vested loaning
powers on merits of the case.
▪ While considering the repaying capacity/cash flows/revenue generation, the
Plant Load Factor (PLF) analysis undertaken by State Electricity Regulatory
Commission (SERC) be taken as bench mark PLF. Deviation beyond 25%
may be accepted under exceptional circumstances and after detailed
evaluation.
Primary:
▪ Hypothecation of assets including book debts.
▪ Unconditional power purchase agreement should be in place.
▪ An undertaking may be obtained from the agency which releases subsidies, to
the effect that the amount of subsidy shall be directly sent to Bank.
Collateral:
▪ The possibility should be explored to obtain charge on moveable/immovable
assets of the company/equitable mortgage of IP belonging to promoters/family
6. SECURITY members and guarantors etc. Similarly, Pledge of fixed deposits receipts, third-
party deposits and/or assignment of LIC policy of the individual/promoters,
pledge of promoters’ share etc. may be considered.
▪ Corporate guarantee of other promoter companies/personal guarantee of
promoters may be accepted.
▪ In order to mitigate off-take risk/tariff risk/regulatory risk the power off-take
and tariff for the project should be committed and pre-determined in the PPA
respectively. Obtention of a standby PPA can also be prescribed by the
sanctioning authority as an additional measure.
7. LOANING POWERS As per Loaning Power guidelines issued from time to time.
Tariff received from sale of power/other sources be deposited in TRA (Trust &
Retention Account). Borrower may be advised to additionally maintain a minimum
8. TRA/DSRA
Debt Service Reserve Account (DSRA) wherein one/two quarter principal plus
interest shall be maintained as a DSRA
For detailed guidelines refer: IRMD L&A Circular No.77/2021 dated 26.04.2021

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D15.4: FINANCING TO INFRASTRUCTURE INVESTMENT TRUST (InvITs)

SN Particular Guidelines
▪ An InvIT must be registered with SEBI
▪ The InvITs with structure/asset-mix strictly in compliance with SEBI (InvITs)
Regulations,2014 will be eligible. However, assessment of limits will be based on
income/cash flow from completed and revenue generating projects only, at the time of
assessment and not on future estimated /projected income/cash flows.
▪ For power projects, PPA (Power Purchase Agreement)/FSA (Fuel Supply
Agreement) should be in place.
1. Eligibility
▪ Valid External Risk Rating of AAA & Internal risk rating of A4 & above
▪ Banks shall lend to only those InvITs where none of the underlying SPVs, which have
existing bank loans, and is facing ‘financial difficulty’ as defined in L&A Cir. No.175/2022
dated 24.11.2022 and other circulars issued from time to time
▪ The aggregate net consolidated borrowings and deferred payments of the InvIT,
Holding Company and SPV(s) net of cash and cash equivalents not to exceed
49% of the value of InvIT assets
▪ For acquisition of new infrastructure projects /SPVs.
▪ For refinance/repayment of standard debt in InvIT / underlying SPVs considered
2. Purpose
for financing. Further, top up loan can also be considered in standard InvIT
accounts for business expansion
3. Facility Term Loan / Need Based Working Capital facilities (only NFB – BG/LC)
Tenor of the loan to be aligned with the projected cash flow/life of the Projects of
4. Tenor
the InvIT considered from the day of first drawdown
5. Margin HAM – Nil, Toll Receivable – 30%, Other annuity Receivable – 10%
First Charge on all the immovable assets and movable assets, if any including bank
account (inclusive reserve account), Cash Flow, Bills receivable, annuity payments,
6. Security
Toll Tax, contract rights, leasehold rights, receivables of InvIT
(Refer detailed circular for charges on various securities)
All ELCB’s and LCBs
Authorized Further, CBBs shall be authorised to deal with such projects only if existing SPV of the InvIT
7.
Branches is dealing with the respective CBB.
CRMC shall be empowered to authorize other branches on the case-to-case basis
8. Loaning Powers HOCAC-II & above within their vested loaning powers.

Lending to InvITs of a particular Infra segment will be considered as lending to that

9. Exposure Ceiling particular industry and ceiling of respective industry/sector will also be applicable
to InvITs. However, in case of exposure to single InvIT shall be ₹5000.00 Cr
▪ Cash Inflow of SPVs after meeting O&M, taxes, statutory payments and debt
servicing (at SPV level) would be transferred from SPV escrow account to InvIT
Waterfall Master Escrow account.
10.
Mechanism ▪ Payment from InvIT Master Escrow Account would be made in following order:
Debt Servicing // DSRA maintenance
Major Maintenance/SPV shortfall // Surplus for unit holders
Cash trap mechanism will be invoked when the actual Gross DSCR (as per annual audited
figures) falls below the minimum DSCR stipulated at the time of sanction. In case of
Cash Trap
11. invocation, the surplus in the escrow account after meeting all statutory expenses and debt
Mechanism
servicing will be retained and not released to the borrower till achievement of the minimum
stipulated DSCR
Debt service reserve account in the form of TDRs / BG equivalent to interest and
12. DSRA
instalment obligation of one quarter or one installment whichever is higher
Relaxation Management Committee of the Board
13.
Authority
For detailed guidelines refer: IRMD L&A Circular No.118/2023 dated 19.10.2023

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D15.5: FINANCING TO EDUCATIONAL INSTITUTIONS

SN Particular Guidelines
• For the purpose of Financing under this Scheme, Educational Institutions shall
mean places of imparting qualification like schools, colleges and other alike
1. ELIGIBILITY institutes and shall not include viable small MSME units which include
Coaching Centres and other similar entities.
• New as well as existing customers of the Bank shall be eligible for Overdraft
facility subject to satisfactory operation of the institute for past two years
• Fund Based: Term loan, Working Capital in the form of Overdraft
2. FACILITY • Non Fund Based: After proper analysis & TEV study quantified Non Fund
Based facility (Where ever applicable)
• Term Loan & Overdraft: 25%
• Wherever land is also financed as part of cost of project then minimum
prescribed margin against cost of the land shall be 50% of the cost of the
3. MARGIN
land.
• The quantum of finance against cost of the land shall be restricted to 50% of
the sanctioned loan amount
• Term Loan: Maximum 120 months (including maximum moratorium up to
36 months) subject to annual review
4. REPAYMENT
• Overdraft Limit : Upto 1 year & interest to be serviced as & when due
subject to Review on Annual basis
Term Loan:
• Hypothecation of all movable assets.
• Equitable/ Registered mortgage of Land & Building of the Educational
Institution.
• Wherever EM is not possible, alternate collateral security in the name of the
PRIMARY
5. institution or promoters of the institution equivalent to a minimum of 30%
SECURITY (in terms of RV) of the Loan Amount shall be obtained as collateral security.
Overdraft:
• All the cash flows shall be routed through Trust and Retention account opened
with the Bank.
• Hypothecation of all movable assets.
• Equitable/ Registered mortgage of Land & Building other than agricultural
land.
• In case of partial constructed property, the realizable value of land is to be
considered for collateral coverage only.
• In case of OD, Asset Coverage Ratio of at least 2 times to be maintained
including Term loan outstanding, if any.
• Personal Guarantee: In cases of all fresh/enhancement/additional
exposure obtaining of personal guarantees of all trustees should be insisted
COLLATERAL upon.
6. • The collateral security other than Land & Building of the same or any other
SECURITY
Educational Institutions shall be obtained as under:
Sanctioning Authority Minimum collateral
(for Fresh /Enhancement/ prescribed
additional exposure)
CHCAC 100% of Total exposure
ZOCAC 75% of Total exposure
HOCAC-I 50% of Total exposure
HOCAC-II & above NIL

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• No fresh exposure should be taken up to field level for financing to

Educational Institutions.
• CHCAC & above may consider fresh exposure up to their vested loaning power
subject to obtainment of minimum collateral as prescribed at para (6) above.
• Additional/enhanced facility shall be sanctioned by the next higher authority
not below the level of ZOCAC subject to obtaining of minimum prescribed
7. LOANING POWERS
collateral security for additional/ enhanced facility.
• However, in existing accounts having satisfactory conduct and enjoying credit
facilities with our bank for a minimum period of four years,
additional/enhanced facility may be considered on merits by CHCAC & above
within their vested loaning powers subject to obtainment of minimum
collateral prescribed at para (6) above
Half Yearly visits in the account shall be done by the branch officials. Undertaking
END USE
8. of stock verification by independent chartered accountant should not be insisted
VERIFICATION
upon
• Overdraft facility not to exceed 50% of the realizable value of the
property taken as collateral security.
• In case OD limit to Educational institutions already availing Term loan from
our Bank, the primary security (land & building only) and collateral security,
already mortgaged with our Bank against Term Loan can be treated as
collateral security for OD limit.
CEILING/ • In such cases, the residual realizable value of the immovable property (primary
9.
RESTRICTIONS and collateral) after netting of 100% term loan exposure should be reckoned
for computing collateral coverage for OD limit.
• Finance for purchase of land alone is not permissible. However, the land
proposed to be purchased forming part of project shall be considered for
finance (subject to minimum margin as stipulated in the policy). In case where
purchase of land forms part of project cost, margin for purchase of land shall
be brought upfront by the borrower.
• TEV study shall be carried out in all cases involving Project cost of over ₹20
Cr.
• The Financial ratios shall be as per IRMD L&A Circular No 10/2021 and
10. OTHERS subsequent modifications therein
• Audited Balance Sheet and Profit & Loss or income - expenditure statement
for the last 3 years shall be obtained in case of an existing Institution.
Project report shall be obtained in case of a new Project.
For detailed guidelines refer: IRMD L&A Circular No.77/2021 dated 26.04.2021

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D15.6: VIABILITY GAP FUNDING (VGF) SCHEME

▪ Infrastructure is an input to a wide range of industries and as such, an important driver of long-term
growth. However, due to long gestation periods and limited financial returns, these projects usually fall
short of financial viability.
▪ As such, Government of India, has notified scheme for Viability Gap Funding (VGF) to
infrastructure projects, under which grant support one-time or deferred is made available for certain
Public Private Partnerships (PPPs) Projects by Govt. of India, with the objective of making the project
commercially viable.
▪ The Scheme is mainly related to introduction of following two sub-schemes for mainstreaming private
participation in social infrastructure:

Sub scheme -1 :

This would cater to Social Sectors such as Waste Water Treatment, Water Supply, Solid Waste
Management, Health and Education sectors etc. These projects face bankability issues and poor revenue
streams to cater fully to capital costs. The projects eligible under this category should have at least 100%
Operational Cost recovery. The Central Government will provide maximum of 30% of Total Project Cost
(TPC) of the project as VGF and State Government/Sponsoring Central Ministry/Statutory Entity may
provide additional support up to 30% of TPC.

Sub scheme-2 :

This Sub scheme will support demonstration/pilot social sectors projects. The projects may be from Health
and Education sectors where there is at least 50% Operational Cost recovery. In such projects, the Central
Government and the State Governments together will provide up to 80% of capital expenditure and upto
50% of Operation & Maintenance (O&M) costs for the first five years. The Central Government will provide
a maximum of 40% of the TPC of the Project. In addition, it may provide a maximum of 25% of
Operational Costs of the project in first five years of commercial operations.

▪ Benefits: The aim of the scheme is to promote PPPs in social and Economic Infrastructure leading to
efficient creation of assets and ensuring their proper Operation and Maintenance and make the
economically/socially essential projects commercially viable. The scheme would be beneficial to public at
large as it would help in creation of the Infrastructure for the country.

▪ Impact: Revamping of the proposed VGF Scheme will attract more PPP projects and facilitate the private
investment in the social sectors (Health, Education, Waste Water, Solid Waste Management, Water Supply
etc.). Creation of new hospitals, schools will create many opportunities to boost employment generation.
▪ The detailed scheme for financial support to PPPs in infrastructure and operational guidelines for
implementing the scheme has been issued by Department of Economic Affairs, Ministry of Finance, Govt.
of India vide notification dated 07.12.2020 and the same is available on https://www.dea.gov.in/guideline.

For detailed guidelines refer: IRMD L&A Circular No.77/2021 dated 26.04.2021

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D16: GUIDELINES ON TRANSFER OF LOAN EXPOSURES

SN Particular Guidelines
For the transferee:
a) To manage excess liquidity available with the bank and for deployment of
such excess liquidity in more profitable sources.
b) To meet Priority Sectors targets.
c) To diversify existing portfolio to reduce the concentration risk.
d) To churn the existing portfolio to reduce asset liability mismatch.
1. Objective For the transferor:
a) To manage short liquidity position in bank.
b) To reduce concentration to a particular segment.
c) To free up capital from low-yield portfolio to high-yield portfolio and to
liquidate loans which do not meet targeted IRR or RAROC.
d) Accounts identified for exit as per the Exit policy of the bank.
e) To churn the existing portfolio to reduce asset liability mismatch.
• The extant instructions on outsourcing and the applicable provisions of the
Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 (as
amended from time to time) should be complied with in all cases
Due Diligence – • Internal risk rating is waived for underlying individual accounts in the pool.
2.
Borrowers • The Transferor shall have a minimum operating history of 5 years
• Loss Estimation Report shall not indicate loss rate of more than 3%. However,
in exceptional circumstances or for pools consisting of used vehicle loans it
can go maximum up to 4%.

The valid rating of transferor

Transferor External Rating Internal Rating
Due Diligence - NBFC/FI AA A2
3.
Transferor Private/ Foreign Bank A A3
• Minimum CRAR for public sector banks should be at least 9%, for private
sector banks should be at least 10.85% & for NBFC should be at least 15%.
• In case of loans with tenor of up to 2 years: 3 Months
• In case of loans with tenor of more than 2 years: 6 Months
Provided that in case of loans where security does not exist or security cannot
be registered with CERSAI, the MHP shall be calculated from the date of first
repayment of the loan.
Provided further that in case of transfer of project loans, the MHP shall be
calculated from the date of commencement of commercial operations of the
project being financed.
Provided further that in case of loans acquired from other entities by a
Minimum Holding transferor, such loans cannot be transferred before completion of 6 months from
4.
Period (MHP) the date on which the loan was taken into the books of the transferor.

Provided further that the transfer of receivables, acquired as part of ‘factoring

business’ as defined under the Factoring Regulation Act, 2011, will be
exempted from the above specified MHP requirement subject to fulfilment of
following conditions:(Regulatory)
a) The residual maturity of such receivables, at the time of transfer, should not
be more than 90 days, and
b) Bank shall conduct proper credit appraisal of the drawee of the bill, before
acquiring such receivables as prescribed in Bank’s extant guidelines on
‘Transfer of Loan Exposures’.

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In case of loans acquired as a portfolio, in case a transferee is unable to

perform due diligence at the individual loan level for the entire portfolio but
Minimum Retention can perform due diligence at the individual loan level for not less than one-
5. Requirement (MRR) third of the portfolio by value and number of loans in the portfolio,
the due diligence may be performed at the portfolio level for the remaining, in
which case, the transferor has to retain at least 10% of economic
interest in the transferred loans
External rating of Exposure ceiling as %age of Capital Fund
Transferor
NBFC HFC Others
Private/ Foreign Bank 15% 7%
AAA 10% 6%
6. Ceilings AA 8% 5%
A 2% 2%
BBB 15% 7%
Unrated/BB & Below Nil
MFI (Irrespective of Nil
External Rating)
7. Loaning Powers HOCAC III & above

Category Value* (Max. loan quantum of single asset)

Housing Loan ₹5.00 Cr
Loans Against Property ₹5.00 Cr
Other Retail Loans ₹5.00 Cr
Maximum Value of MSME Loans As per RBI guideline classification should be MSME
Single Asset under with no maximum value.
Pool Transfer, with Agriculture Loans As per RBI guideline classification should be
9. the bank as Agriculture Loans with no maximum value.
transferee **Value shall mean outstanding amount in the books of transferor on due-diligence date
(Loans in the name of as mutually agreed between transferee and transferor.
individual borrower) ▪ Further, aggregate exposure as transferee from all transferor excluding
portfolio purchased under Partial Credit Guarantee scheme of GOI, shall not
be more than 3.50% of gross advances as on previous quarter or ₹35,000
crores, whichever is lower.
▪ However, MC can permit purchase of portfolio beyond the aforesaid limit in
exceptional circumstances.

Asset Class Maximum Door to Door Maturity

Housing Loan (Priority/ Non Priority) 300 months
Door to Door
10. Mortgaged backed assets 180 months
Maturity
(Other than HL)
Any other Assets 84 Months

LCBs & LCBs, other than LCBs & E-LCBs identified branches as under:
1. Mount Road, Chennai
Authorized 2. Bhikaji Cama Place, Delhi
11.
Branches 3. Rajendra Place, Delhi
4. Foreshore Road, Mumbai
5. BKC, Mumbai
For detailed guidelines refer: IRMD L&A Circular No.57/2024 dt.03.05.2024

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D17: FRAMEWORK FOR MICRO FINANCE LOANS

SN Particular Guidelines
▪ A microfinance loan is defined as a collateral-free loan given to a household having annual
household income (actual as well as projected) up to ₹3,00,000. For this purpose, the
household shall mean an individual family unit, i.e., husband, wife and their unmarried
children.
▪ All collateral-free loans, irrespective of end use and mode of application/ processing/
disbursal (either through physical or digital channels), provided to low-income households,
1. Definition
i.e., households having annual income (actual as well as projected) up to ₹3,00,000, shall
be considered as microfinance loans.
▪ To ensure collateral-free nature of the microfinance loan, the loan shall not be linked with
a lien on the deposit account of the borrower.
▪ Repayment period of credit facilities provided to Microfinance borrowers shall be as per
bank’s extant guidelines.

▪ Household income shall be assessed based on actual income earned over a period of
Assessment minimum one year
of ▪ Bank’s guidelines on generation of Credit Information Reports (CIRs) are applicable on
2.
Household Microfinance Loans. Acceptable CIBIL score shall be 680 and above (or equivalent) or-1
Income ▪ Reasons for any divergence between the already reported household income as per CIR
and assessed household income shall be specifically ascertained from the borrower/s.
▪ Deductions on account of repayment of monthly loan obligations of a household as a
percentage of the net monthly household income shall be subject to a limit of maximum 50%
of the net monthly household income.
▪ The computation of loan repayment obligations shall take into account all outstanding loans
(collateral-free microfinance loans as well as any other type of collateralized loans) of the
Limit on
household. The outflows capped at 50% of the monthly household income shall include
Loan
repayments (including both principal as well as interest component) towards all existing loans
Repayment
3. as well as the loan under consideration.
Obligations
▪ Existing loans, for which outflows on account of repayment of monthly loan obligations of a
of a
household as a percentage of the monthly household income exceed the limit of 50%, shall
Household
be allowed to mature. However, in such cases, no new loans shall be provided to these
households till the prescribed limit of 50% is complied with.
▪ Branch shall use the data available with CICs to ensure compliance with the level of
indebtedness. Besides, Branch shall also ascertain the same from other sources such as
declaration from the borrowers, their bank account statements and local enquiries.
▪ Bank shall mandatorily submit information regarding household income to the Credit
Submission
Information Companies (CICs) for all Microfinance borrowers.
of
4. ▪ Necessary system configurations for capturing and reporting household income to CICs shall
information
be provided by MISD/ Agriculture Division to ensure accuracy and timeliness of the
to CICs
information submitted to the CICs
• Loans classified under retail and MSME shall be benchmarked to RLLR
• Loans classified under Agriculture shall be benchmarked to MCLR.
• However, advance to MSME food & agro processing units shall be benchmarked to RLLR
• Rate of interest of dedicated schemes /products framed for microfinance borrowers by RAD, MSME
Division and Agriculture Division shall be capped at maximum spreads as under:
Pricing of Nature of Loan Maximum Spread
Loans Retail (Personal loan) RLLR+ BSP+ 5.00%
5.
Retail (Others) RLLR+ BSP+ 3.25%
Agriculture (Loan to MSME food & agro processing units) RLLR+ BSP+ 1.20%1
Agriculture (Others) MCLR+ 2.70%2
MSME RLLR+ BSP+ 1.40%3
1
Spread applicable for advance upto ₹20 lakh to MSME Food & Agro processing units
2
Spread applicable for NRLM/ SRLM Scheme repayable in more than 3 years.
3
Spread applicable for Advances above ₹50000/- to ₹20 Lakh to MSMEs

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Nature of Loan Maximum Fee

Retail (Personal loan) Unified fee- 1.00% of loan amount
Retail (Others) Unified fee- 0.35% of loan amount*
* NEC & Valuation charges and out of pocket expenses should be recovered as actual.
Agriculture (upto ₹3 lakh) Nil
Agriculture (Others) • Processing fee- 0.30%
• Upfront fee- 0.625%
• Documentation charges- ₹2500/-
Inspection / Supervision charges- 0.10%; (min. ₹1000/-)
Service MSME • Processing fee (For working capital advances)
Charges NIL.
6. from Expenses other than Processing Fees
Microfinance Up to ₹5/- Lakh
(i.e. CIC /CERSAI etc.) shall be borne by
Borrowers the borrower
Above ₹5/-Lakh Unified Processing Fee @0.50%*
*Unified Processing Fee includes all type of charges (i.e. CERSAI
/Inspection/ Documentation/ NEC/ Valuation etc.). However,
CGTMSE/ Insurance /State specific Stamp Duty charges on
actual basis shall be borne by the borrower.
• Upfront fee (for fresh term loans / review of term loans)
Up to ₹5/- Lakh NIL *
Above ₹5/-Lakh 1.25%
*Expenses other than Upfront fee (i.e. CERSAI/ Insurance etc.) shall
be borne by the borrower.

▪ Branches shall engage with the borrowers facing repayment related difficulties i.e.,
borrowers classified as SMA, and provide them necessary guidance about the recourse
available.
▪ Recovery shall be made at a designated/ central designated place decided mutually by the
borrower and the Bank. However, Branch Officials shall make recovery by visiting the place
of residence or work of the borrower if the borrower fails to appear at the designated/
Guidelines central designated place on two or more successive occasions. The mutually decided place
related to of recovery should be mentioned in terms and conditions of sanction.
6.
Recovery of ▪ Bank or its agent shall not engage in any harsh methods towards recovery. Without
Loans limiting the general application of the foregoing, following practices shall be deemed as
harsh: a) Use of threatening or abusive language b) Persistently calling the borrower and/
or calling the borrower before 9:00 a.m. and after 6:00 p.m c) Harassing relatives, friends,
or co-workers of the borrower d) Publishing the name of borrowers e) Use or threat of
use of violence or other similar means to harm the borrower or borrower’s family/ assets/
reputation f) Misleading the borrower about the extent of the debt or the consequences
of non-repayment.
Owner Agriculture Division
7.
Division

▪ Owner Division for issuance of guidelines for NBFC-MFIs is IRMD and implementation of
the same shall be ensured by respective business Divisions
▪ CRMC is authorised to approve operational matters of the policy.
9. Other ▪ RAD, MSME Division and Agriculture Division may provide credit facilities to Microfinance
borrowers under existing schemes or frame dedicated schemes under the ambit of these
guidelines for Microfinance borrowers.
▪ Competent authority for approving new schemes is CRMC.

Ref.: IRMD L&A Circular No.134/2024 dated 08.10.2024

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D18. STOCK & RECEIVABLE AUDIT

1. Annual Stock & Receivable Audit (SRA) should be got compulsorily done in respect of
all borrowal accounts enjoying FB + NFB (NFB limits which are being used for WC Funding ₹5 Cr & above
like LC, SBLC, BG for purchase of goods for sale and BGs for Mobilization Advances, but excluding from our bank
Capex LCs, Bid Bond etc.)

2. In respect of borrowers enjoying FB and NFB Working Capital limits _____, audit Less than ₹5
may be got done in exceptional cases and/or, wherever bank’s interest demands Crore
3. Annual Stock & Receivable Audit to be compulsorily conducted in all ‘B2’ to ‘C3’ rated
₹3 Crore and
accounts and NPA accounts (where operations in NPA accounts are
above
permitted) enjoying fund based and non- fund based working capital limits of __
4. In exceptional circumstances where certain adverse features are observed in the operation of account
which may be like:
▪ Abnormal increase or decrease (30% or more on a monthly basis without due justification) in Stock
receivables/Sundry debtors / sundry creditors
▪ Decline (20% or more) in credit summation in Working Capital facility continuously for 3 months without
due justification
▪ Account remains overdrawn continuously for more than 2 months.
5. In cases of Consortium/Multiple Financing, where the borrower is enjoying WC limits
(Fund based) of less than ₹ 5 Crore from our Bank and _____in aggregate from the ₹ 20 Crore and
banking system, branches should take up with lead bank/major share-holder banks in above
multiple banking arrangement forgetting the stock audit conducted.
6. There may be certain prestigious accounts which may fall under the category
______under the risk rating module signifying lower risk and where conducting stock
audit by an outside agency may hurt the sentiments of borrowers. Exemption from
‘A1’ to ‘A4’
annual stock audit, if required, in such cases based on merits and business
considerations of each case should invariably be incorporated at the time of fresh
sanction/renewal/ review of the working capital limits.
7. In case of borrowers where the services ______ is being utilized, and the scope of
work inter alia includes Stock & Receivable Audit in entirety. In such specific cases, ASM
engagement of Stock & Receivables auditor shall not be required.
8. Frequency of conducting Audit in NPA Accounts
Immediately after an account gets classified as NPA and normal cooling period of
3 months
______for up-gradation/rectification of default is over, Stock Audit be made mandatory
within next _______
9. Maximum time taken for such audit varies from ______except in case of non-
cooperation by borrowers where it may take some more time. Time frame for
completion of such audit should be clearly spelt out. It should be ensured that the 2-4 weeks
agency conducting Stock Audit submits its report on the prescribed format immediately
after completion of audit but in no case later than two weeks of completion of audit.
10. Scrutiny: Stock & Receivable audit Reports be scrutinized/put up to:
Accounts sanctioned upto ZOCAC AGM/CM of ZO: CRMD
HO Sanctioned cases DGM/AGM: Credit Review and Monitoring Division, HO
NPA accounts falling under HO power DGM/AGM HO: SASTRA

▪ The observations/deficiencies pointed out by the auditors should normally be removed/rectified within
30 days of the receipt of the report, however, maximum of 90 days time shall be available in
necessary cases. In order to have effective monitoring, the reasons for non-closure of audit reports, if
outstanding for more than 90 days, should be reported under remarks column of ‘Stock & receivable
audit Report’ which is provided at Appendix-II. The periodicity of submission of the same to Credit
Review & Monitoring Division, HO is quarterly.

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11. Closure of Audit reports:

Sanctioning Authority Closure reports to be placed to
Management Committee CGM: CRMD
HOCAC I/II/III GM: CRMD
Upto ZOCAC Dy. Zonal Head
For NPAs
Management Committee CGM: SASTRA
HOCAC I/II/III GM: SASTRA
Upto ZOCAC ZO SASTRA Head
▪ ZOs to submit status of closure of the stock & receivable audit reports to Credit Review & Monitoring
Division, HO within 15/30 days from the close of quarter/financial year.
12. Time schedule for completion of stock audit every year:
31st August
Completion of the process of appointment of stock auditors
13. Completion of stock audit and submission of the report 30th November
14. Compliance of the observations of the stock audit report and its closure 31st December

15. The overall time limit for closure of stock audit shall be_____. Further, closure of stock
& receivable audit report shall be done within one month from the date of submission
4 Months
of report. However, in cases where stock/receivables audit is conducted more than one
time in a year, the time limit for closure of stock audit shall be 2 months.

16. Authority for permitting relaxation / waiver on matters pertaining to undertaking stock/receivables
verification by independent chartered accountants in eligible accounts unless otherwise permitted in the
guidelines shall be as under:
Sanctioning Authority Closure reports to be placed to
Upto ZOCAC HOCAC-I
HOCAC-I HOCAC-II
HOCAC II/III & Management Committee Respective Sanctioning Authority

17. ____at HO shall invite applications for empanelment from Chartered Accountants for
the purpose of stock/receivables verification from various centres where branch of the
bank is present through detailed advertisement on website of the Bank and short notice CRMD
in newspaper (one national & one vernacular language). Application shall also be
invited through ICAI web portal (till it is free of cost)

18. Application shall be called in every_____. The duration of empanelment shall be for a 3 years
period of ______. If required, Bank can call for application annually. Already
empanelled Chartered Accountants are required to apply for the empanelment again
after ______and shall be treated as fresh applicants. Application along with format of
undertaking have to be submitted by the Chartered Account firm/stock auditors for
empanelment to the respective Zonal Offices

19. Application received at Zonal Offices shall be processed by a committee headed

by_________. The committee shall make an assessment of the required numbers of
Chartered Accountants for the purpose of stock/receivables verification for all Zonal
branches, recommend and send the list of Chartered Accountants for the purpose of Manager
Stock audit to CRMD, HO which shall act as the nodal division for empanelment of
Chartered Accountants

20. Allotment of stock audit for all branches (except E-LCBs/ LCBs) shall be carried out by Branch Head
Zonal Office. Allotment of stock audit for LCB branches shall be done by ________ (E-LCB/ LCBs)

21. Panel of Stock auditors shall consist of reputed firms of Chartered Accountants/
Individual CAs/Cost Accountants/firm of Cost Accountants, who have at least_____
5 Years
standing and at least one of the partners should be a Fellow of the Institute of
Chartered Accountants of India (FCA).

22. The duration of empanelment shall be for a period of ______ 3 Years

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23. Empanelled chartered accountant’s performance shall be reviewed (Appendix-X) by the

2 Years
Committee at Zonal office every _________

24. The Stock & Receivable Auditors (firm/individual) once dis-empanelled/ de-listed/ removed from panel of
the bank shall NOT be re-empanelled again. The list of dis-empanelled Stock & Receivable Auditors
shall be uploaded on Knowledge Centre by CRMD and updated from time to time. However, the older
records shall also remain available on Knowledge Centre for reference.

25. The entire fee inclusive of all expenses to be incurred by Auditors for stock audit of
₹2 Lakh
one borrower including travelling, boarding, lodging etc. will not exceed _____

26. ______at Head Office, on recommendation of the Committee at Zonal Office shall The CGM/GM
depanel / blacklist delinquent Chartered Accountants for the purpose of stock audit.
level
Committee

27. The stock & receivable auditor must be empanelled through respective _____of PNB,
where Registered Office/Head Office of the stock & receivable audit firm is situated.
The aforesaid Office is also empowered to consider request of stock & receivable audit Zonal Office
firm for engagement in other Zones where branch offices of stock & receivable auditor
are situated
28. Maximum cap for allotment of accounts to Stock & Receivable Auditors in a
financial year:
▪ Maximum ____ assignments (including NPA) can be allotted to any Auditor

▪ Wherever the stock & receivable audit firm is empanelled with multiple Zones of
the Bank, SRA assignments shall be allocated to its offices in the following manner: Four
Zone Maximum No. of Assignment
Zone where firm’s Regd./Head Office is situated 4
Other Zones 2 per Zone
However, there shall be an overall cap of 8 nos. of assignments for audit firms empanelled
with multiple Zones of the Bank. The same shall be monitored by CRMD

▪ A Stock & Receivable Auditor may be allocated more no. of assignments under HOCAC-II
exceptional circumstances such as unavailability of Stock & Receivable Auditors in
any given Zone etc., only after obtaining necessary approval from_____, after due
assessment of its size, manpower, past performance (if any), etc. on case-to-case
basis. The proposal for the same shall be routed through HO CRMD for Standard
Accounts and HO SASTRA (for NPA).
Ref.: IRMD L&A Circular No.80/2024 dated 06.06.2024

*******************

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E1 Policy for Approval of New Product for FY 2024-25

Scope and Applicability
Development of New products/activities/processes/systems and changes to the existing ones, which result in material
changes in Bank’s operational risk profile, appetite and tolerance. These situations include amongst others as
following:-
i. New products, activities, processes and systems.
ii. Significant changes in products, activities, processes and systems.

New products, activities, processes and systems is that, which has not been performed earlier by the Bank and
can be performed for the first time. It includes variants of the original product to be offered.
Significant changes are understood as previous products, activities, processes and systems that have been
expanded or modified, containing different risk and/or involving different process, compared to the existing one results
in change in features/change in risk profile of the existing products, activities, processes and systems

Products are schemes and its variants, under any business activity and service, that the Bank provide its
customers through its own resources or outsourced such as,
i. Loan Schemes
ii. Deposit Schemes
iii. Ancillary Services
iv. Alternative Delivery Channels
v. Agency Services
vi. Payment & Settlement Services
vii. Treasury Products, Investment Services including wealth management, etc.

Third Party Products / Schemes, where Bank is acting as agent / JV only, need not go through the approval
process as mentioned in this policy and approval of third-party products shall be governed by Board approved policy
for third party products. However, whenever Bank is proposing any agency arrangements like Insurance Agency,
Mutual Fund agency, etc., the said agency arrangement shall be routed through the proper approval process, as per
this policy, to identify the risk related to the agency arrangement and related mitigants.
Non-Business Activities/Processes /Systems involves any activity or function which is not directly associated
with revenue generation but provides support and/or control to any Business Activity, which may or may not involve
outsourcing. Remaining Non-Business Activities, Processes and Systems doesn’t fall under the purview of this policy
(such as HRMS/eTHIC application, etc.)

Any new IT application proposed to be introduced as a business product shall be subject to product approval and
quality assurance process.
Further, if only API Integration is proposed for automation in any existing Product/ Processes/ Activities without any
change, or API Integration in new product/ process, it shall be dealt as per APPLICATION PROGRAMMING INTERFACE
(API) POLICY of the Bank updated from time to time.
Business Owner Divisions shall be responsible for identifying and managing the risks inherent in the products,
activities, processes and systems for which it is accountable.
▪ After the products are listed, the various operational risk events associated with these products are recorded. An
operational risk event (ORE) is an incident/experience that has caused or has the potential to cause material
loss to the Bank either directly or indirectly with other incidents. Risk events are associated with the people, process
and technology involved with the product. They can be recognized by:
i. Experience - The event has occurred in the past;
ii. Judgment - Business logic suggests that the Bank is exposed to a risk event;
iii. Intuition - Events where appropriate measures saved the institution in the nick of time;
iv. Linked Events -This event resulted in a loss resulting from other risk type (credit, market etc.);
v. Regulatory requirement – regulator requires recognition of specified events.

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▪ ORE shall be incorporated in Risk Description Chart (RDC) while conceptualisation of the product by owner
divisions.
▪ The Compliance Division at the Head Office shall play the central role in the area of identifying the level of
compliance risk in each business line, products and processes and issue instructions to operational functionaries
/ formulate proposals for mitigation of such risk. It shall periodically circulate the instances of compliance failures
among staff along with preventive instructions.
▪ The Compliance Division shall on a proactive basis identify, document, assess the compliance risks associated
with Bank’s business activities and products. The compliance risks in all new products and processes shall be
thoroughly analysed and appropriate risk mitigants by way of necessary checks and balances shall be put in place
before launching.

All new products shall be subjected to intensive monitoring for _____of introduction to
First 6 Months
ensure that the indicative parameters of compliance risk are adequately monitored
Approving Authority and Modification/ Discontinuation
Approval shall be done by following functional committees through SPACE
1. Approval for New Products, Activities, Processes and Systems
2. Modification in Existing Products, Activities, Processes and Systems in case of significant change
Approving Authority

CRMC ORMC MRMC

Credit related products Non-Credit related products Treasury / Investment related products
3. Modification in Existing Products, Activities, Processes and Systems other than significant change
Approving Authority
SPACE SPACE SPACE
However, SPACE may also recommend the same to the respective Functional Committees on case to case basis depending
upon the gravity/significance of the change
4. Discontinuation of Existing Products, Activities, Processes and Systems

Discontinuation shall be approved by original approving authority (CRMC /ORMC /MRMC /RMC / BOARD) through
SPACE
5. In case outsourcing is involved
The new products, activities, processes and systems or their significant change shall be placed to RMC for final
approval through Functional Committees (ORMC/CRMC/MRMC), in terms of Bank’s “Policy for Outsourcing of
Financial Services.”
However, provisions for outsourcing of information technology shall be guided as per Policy for Information
Technology in the Bank Circular No.13/2024 dated 17.04.2024
Constitution of SPACE
SN Member
1 Group Chief Risk Officer – (Chairperson)
2 Group Chief Compliance Officer (and in his absence General Manager Compliance Division)
3 Principal Nodal Officer (Presently, General Manager-Customer Care Centre)
4 Chief General Manager (and in his absence, concerned General Manager) of following divisions:
i. Inspection & Audit Division
ii. Information Technology Division
iii. Strategic Management & Economic Advisory Division (SMEAD)
iv. Operations Division
v. Mission Parivartan Division
vi. Human Resource Development Division
vii. Corporate Communication Division
viii. Digital Banking Transformation Division (DBTD)
ix. Finance Division
x. Credit Review and Monitoring Division (CRMD)
5 General Manager (Operational Risk)
6 Divisional Head (Law Division)

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7 CISO (Chief Information Security Officer), CISD

8 Principal Officer (DGM-CAML)
Invitee Members
10 CGM (and in his absence, General Manager) of the owner divisions proposing the products)
11 General Manager (and in his absence, Divisional Head) of FRMD
Quorum
Minimum 5 permanent members. Out of 5 GCCO and GCRO shall be mandatory members in the committee.
GCRO shall be the chairperson of committee. The convener of the committee shall be AGM / CM (ORMD),
Integrated Risk Management Division (IRMD).
1. HO: IRMD shall place the minutes of SPACE to___on quarterly intervals for information ORMC
2. Periodicity of the Meeting of SPACE shall be at least on ____basis or more frequently,
Monthly
as and when required
3. ORMC shall recommend “Policy for Approval of New product” to Board through Customer Service
___and RMC Committee of
BOARD (CSCB)
4. The validity of the approval of any new product/modification in the product will be
_____ from the date of approval from last approving authority
(SPACE/ORMC/CRMC/MRMC/RMC) with the stipulation that the division shall place the
proposal for approval to the next authority immediately after approval from previous 3 Months
authority.
In case of lapsed validity, division to seek extension of validity from SPACE /ORMC
/CRMC /MRMC, if there is no change in the product
5. All new products shall be subject to intensive monitoring for first ____of introduction
6 Months
so that the indicative parameters of compliance risk are adequately monitored
6. Owner Divisions shall place review note after completion of 6 months from the launch
Board level
date of new product on its performance to _____through CGM level Business
Business Review
Review and Development Committee and ED level Business Review and
Committee
Development Committee.
7.
Owner Division shall place review note in succeeding quarter for any new product
developed/ launched during the FY for any new business area or new variant of any
product for existing business area to BOARD through SPACE & functional
committee (ORMC/CRMC/MRMC) and_____, for information, on its RMC
performance incorporating its business performance, viability, delinquency, viability,
decision on continuing/discontinuation, risk profile, cost benefit of the product, market
competitiveness, suitability and appropriateness, etc.
12 Months
Further, in case there is any adverse development, deterioration or breach in
performance standards of the product launched, division shall place note before
completion of ______ from date of launch, for information.

8.
Owner Divisions shall place the review notes on performance of all its products
(scheme/variants), Activities, Processes and Systems at least on ______ or as required
Annual Basis
to ED Level Business Development and Review Committee through CGM Level
Business Development and Review Committee

9.
____shall maintain a central record of products and their variants/scheme codes
(including the outsourced ones). The list of the product shall be made available at SMEAD
LKMC knowledge portal and updated from time to time

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E2 Risk Management Philosophy and Policy for FY- 2024-25

1. Risk Philosophy of PNB is to ensure sustained and diversified growth of business with healthy net returns
commensurate with risk taken in a controlled risk environment
2. Risk Management – Guiding Principles

The policy at the top is the guiding document through which rest of the principles are steered
3. ____is a set of practices and processes supported by a risk- aware culture and
Integrated Risk
enabling technologies, that improves decision making and performance through an
Management
integrated view of the bank to manage its unique set of risks
4. ___is defined as a continuous and structured process of identifying all external and
internal risk-factors; assessing their impact on the achievement of the organization’s
ERM
business and financial targets; prioritizing the risk-factors; exploring alternatives for
mitigating the risks; and controlling and monitoring such risks
5. Integrated Risk Management Process:
A Sound Risk Management Process has the following basic components:
• A Comprehensive Risk Management approach.
• Issuance of Guidelines and establishment of other parameters to govern Risk taking.
• A strong Management Information System for measuring, monitoring, and controlling risk.
• Fixation of Appropriate Limits for controlling Exposures, pre-determination of tolerance levels for placing
before Risk Management Committee of the Board/Board of Directors for approval, along with adequate
stress tests.
• Identification of Human Resource within or outside the organization and training to continuously upgrade
its skill.
6. Risk Management in PNB : Governance Structure

Board

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The Board of Directors is the Bank's apex decision-making body. The Board of Directors, either directly or through
its committees ensures that decision-making is aligned with the Bank’s strategies and risk appetite.
The Board of Directors decides the overall risk management policies and approves various policies containing the
direction and strategies for integrated management of the various risk exposures of the Bank.
These policies shall be assessed & reviewed annually by the Audit Committee of Executives (ACE), the Audit
Committee of the Board (ACB) and the Risk Management Committee (sub-committee of the Board)
before being put up to the Board for effective management of the various risks. The bank recognizes that the
management of risk is integral to the effective and efficient management of the organization.

The overall responsibility of managing risk in the bank lies with Board of Directors. The responsibility of day to day
implementation of Risk Management policy shall lie with Integrated Risk Management Division (IRMD).
Risk Management Committee (RMC) (Board Sub-Committee)
RMC is a Board level Sub-committee including MD & CEO and ED’s, overseeing the risk management through its
executing committees i.e. CRMC, GRMC, ALCO, MRMC, ORMC, SARC and Steering Committee on Information
Security. The Board, in its meeting held on 23.06.2004 has approved the formation of the RMC.
Structure of the Committee
Board & Coordination Division shall communicate the composition of members of RMC, as and when it changes.
Presently, members of RMC are as follows:
➢ Chairperson
➢ Non-Executive Chairman
➢ Managing Director & CEO
➢ Executive Directors
➢ Directors – as decided by Board
➢ Special Invitees from the field of risk management
GCRO shall be the convener of the RMC meeting. Further, as per minutes of 49th meeting of RMC held on 24.09.2015,
the committee desired that the Chief General Managers* of following business/ control Divisions be also invited in
the RMC meeting.
a) Credit Division,
b) Treasury Division,
c) IAD,
d) SASTRA,
e) CRMD,
f) Compliance Division and
g) CISD
Other CGMs may be invited to the RMC meetings depending on the agenda to be discussed. IRMD shall act as
secretariat for conducting RMC meetings.
* In absence of a CGM, concerned GM will be the member of Committee.
Periodicity of the meeting: At least on quarterly basis or frequently (if required)
Quorum of the meeting: 4
Functional Committees (FC)
Name of the FC Particular
Group Risk ▪ Responsible for management of group risk in PNB group.
Management ▪ To ensure that the individual risk of different group entities does not have a contagion
Committee (GRMC) effect on PNB, it is essential to monitor the group risk on an ongoing basis.
w.e.f. 28.06.2013 ▪ The structure and scope of the committee is defined in Group Risk Management Philosophy
and Policy.
▪ Group Risk Management Division (GRMD) has been formed to monitor risk prevalent in
group entities including overseas branches and convene the meeting of GRMC
Credit Risk ▪ Entrusted with the work of taking all policy decisions related to credit risk.
Management ▪ It is a top executive level Committee headed by the MD & CEO and comprises of EDs besides
Committee (CRMC) CGMs (in absence of the concerned CGM Senior Most GM / Alternate to CGM)) of Credit
w.e.f. 11.01.2000 Department, Treasury, Integrated Risk Management division, etc
▪ The committee is responsible for implementation of credit risk policy/strategy approved by
the Board/ RMC.

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▪ The structure and scope of the committee is defined in Credit management and Risk Policy.
Assets Liabilities ▪ Entrusted with the work of taking all policy decisions related to market and Liquidity and
Management Funding risk.
Committee (ALCO) ▪ It is a top executive level Committee headed by the MD & CEO and comprises of EDs and
w.e.f. 07.10.1998 Group Chief Risk Officer besides CGMs. In absence of CGMs, respective GM’s will attend as
per the directives from RBI in this regard.
▪ The committee is responsible for implementation of ALM and strategy approved by the
board/ RMC.
▪ The structure and scope of the committee is defined in Asset Liability Management (ALM)
Policy.
Market Risk ▪ Entrusted with the work of Market risk measurement, monitoring and control related to
Management Treasury operations including decision related to Investment policy.
Committee (MRMC) ▪ It is a top executive level Committee headed by the MD & CEO and comprises of EDs
w.e.f. 15.12.2020 besides CGMs. In absence of CGMs, respective GM’s will attend the meetings.
▪ The committee is responsible for implementation of Investment Policy and strategy
approved by the board/ RMC.
▪ The structure and scope of the committee is defined in Investment Policy.
Operational Risk ▪ Entrusted with the work of implementing policies/strategies for operational risk
Management management and monitoring compliance of various policies.
Committee (ORMC) ▪ The committee is headed by ED looking after Integrated Risk Management Division
w.e.f. 30.05.2003 ▪ The structure and scope of the committee is defined in Operational Risk Management
Policy.

Sustainability and ▪ Entrusted with the responsibilities regarding policies and frameworks for activities related
Resilience Committee to sustainability, monitoring of targets in line with mandated goals, climate risk stress
(SARC) testing, sustainability and environmental disclosures, etc.
W.e.f. 29.11.2023 ▪ Detailed responsibilities of SARC are provided in the Bank’s ‘Financing Framework for
First Meeting 26.12.2023 Green, Social and Sustainability Linked Activities/ Projects’.

Steering committee on ▪ Entrusted with the tasks relating to:

Information Security i. Developing and facilitating the implementation of Information Security policies,
w.e.f.14.08.2012 standards and procedures to ensure that all identified risks are managed within a Bank’s
risk appetite.
ii. Approving and monitoring major information security projects and the status of
information security plans and budgets, establishing priorities, approving standards and
procedures.
iii. Supporting the development and implementation of a Bank-wide information security
management program.
iv. Reviewing the position of security incidents and various information security assessments
and monitoring activities across the Bank.
v. Reviewing the status of security awareness program.
vi. Assessing new developments or issues relating to information security.
vii) Reporting to the Board of Directors on information security activities.

▪ It is a functional level Committee headed by the MD & CEO and comprises of ED (Risk
Domain) as Alternate Chairperson besides CGMs / GMs (in case CGM is not available) of the
following Divisions:
i) Finance ii) Information Technology iii) Digital Banking Division iv) Compliance v) Human
Resources vi) Law vii) IRMD viii) IAD ix) Corporate Communication Division x) IBD
▪ CISO is the Member- Conveyor and the meeting of the committee is conducted on quarterly
basis and the minutes are placed to RMC for information.

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7. Risk Management Approach: A bank’s risk management approach shall be based on three pillars for the risks.
The three pillars being:
1. Policy and Tools 2. Organization and Process 3. Skills and Capabilities
Segment Policy & Tools
Credit Risk Management
The objective of Credit Risk Management shall continue to bring a ▪ Rating / Scoring Models
balanced growth of Credit portfolio at low to moderate level of risk and ▪ Industry Risk Scores
ensuring sustained growth of healthy loan portfolio while dispensing
▪ Market Intelligence Unit:
the credit and managing the risk. This would entail reducing exposures
in high risk areas, emphasizing more on the promising industries/ ▪ PNB SAJAG 2.0
productive sectors/ segments of the economy, optimizing the return ▪ RAROC
by striking balance between the risk and the return on assets and
▪ Loaning Process and Powers
striving towards maintaining/improving market share.
Liquidity & Market Risk Management
The objective of Liquidity & Market Risk Management will continue to ▪ ALM Policy
strive to optimize return on surplus funds invested, to keep cost of ▪ Investment Policy
funds borrowed to the minimum and keep investment portfolio healthy
and liquid.
Operational Risk Management ▪ Operational Risk Management Policy
The objective of the Bank is to develop policy, procedures, strategy, ▪ Policy for Outsourcing of Financial Services
framework, and risk culture for minimizing operational risk & Policy for Approval of New Product
strengthen internal controls. To achieve the above objectives and goals ▪ Policy on Business Continuity Plan
set by the Bank adoption of best practices are advocated. ▪ Internal Loss Data Collection framework
▪ Key Risk Indicators framework
▪ framework for Mapping Business
Lines/Activities,
▪ Scenario Analysis framework,
▪ Risk & Control Self-Assessment framework
▪ Risk Based Assessment for Money
Laundering & Terrorist Financing Risk
Information Technology (IT) & Cyber Risk Management ▪ Information Security Policy
The objective of the Bank is to develop policy, procedures, strategy, ▪ IT Risk assessment scorecard which is
framework, and risk culture for minimizing information technology risk incorporated in Bank’s ICAAP
& strengthen controls. To achieve this objective and aligning the ▪ Cyber Security Policy
technology initiatives with business, adoption of best practices and ▪ Cyber Crisis Management Plan (CCMP)
standards are advocated. ▪ Cloud Security Policy

Other Pillar II Risks in the Bank ▪ Credit Concentration Risk framework

The objective of the Bank is to develop policies, procedures, ▪ Reputation Risk Policy
▪ Model Risk Policy
framework, for management of various pillar II risks faced by the Bank
▪ Model Validation Policy
▪ Group Risk Management Philosophy & Policy
▪ Group Stress Testing framework for
managing various Pillar II Risks

8. Role of Group Chief Risk Officer

▪ GCRO shall have minimum ______of experience in risk functions 5 Years

▪ The appointment of the GCRO shall be made with the approval of ____ Board

▪ The appointment of GCRO shall be preferably for a minimum period of ___ Year 3 Years
▪ The GCRO may be transferred / removed from his post before completion of the tenure
only with the approval of the Board and such premature transfer/removal shall be DBS, RBI
reported to the _____
▪ GCRO shall report to______, through the domain ED MD & CEO

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The governance structure adopted by bank for strengthening Risk culture of the Bank
Three lines
relies on ____of defence
9. First line of defence is primarily responsible for ______associated with the related
activities, products and services including compliance risk. Managing the
Business Units/ Operating Units/ Supporting Units involving field, Circle Offices, Various risk
Verticals, Zonal Offices and Head Offices falls under this category
10. Second line of defence has______. Compliance Function together with Risk Functions Supervisory/
performs monitoring of risks including of Compliance Risk.
Oversight
IRMD, FRMD, Compliance Division, Cyber and Information Security Division (CISD) and
Responsibility
KYC AML Cell falls under this category
11. Third line of defence refers to______, which reviews first line as well as second line
and provides feedback to the Management. Its main roles are to check and ensure that
Audit Function
the first two lines are operating effectively and advise how they could be improved. Zonal
Audit Offices, MARD & IAD HO fall under this category
12. In order to ensure completeness and correctness of loss data and also to inculcate risk
culture deep down the ladder in the Bank, a committee named as ____ has been formed
‘Checks on
at Circle level to identify and evaluate the internal and external factors that could adversely
Threats to
affect the achievement of Bank’s performance, corporate goals, information system, and
compliance objective in the HO guidelines. Reduce Op-risk
Losses
The committee shall have members from the Risk Management Department, IAD,GSAD, Planning & (CONTROL)
Development Department, Recovery Department, HR Department along with Security Officer and
Circle Compliance Officer posted in circle.
13. In order to ensure completeness and correctness of loss data and also to inculcate risk
culture deep down the ladder in the Bank, a joint committee of ZO and ZAO officials named
as _______ has been formed to identify and evaluate the internal and external factors Joint Action
that could adversely affect the achievement of Bank’s performance, corporate goals, Group on Op-
information system, and compliance objective in the HO guidelines. risk Control
This committee shall have members from Risk Management cell, IAD, GSAD, Security Department, (JAGROC)
Recovery Department, HR Department of ZO and at least 1 senior official from concerned ZAO (not
below the rank of Scale IV) as its members.

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E2 Risk Appetite Framework of the Bank for FY 2024-25

1. The aggregate type and level of risk it is willing to assume within its risk capacity to
achieve its strategic objectives and business plan.
This is consistent with how the Basel Committee on Banking Supervision defines Risk Appetite: Risk Appetite
“A high level risk determination of how much risk a firm is willing to accept taking into account
the risk/return attributes. It is often taken as a forward-looking view of risk acceptance.”
2. The maximum level of risk the Bank can assume before breaching constraints Risk Capacity
determined by regulatory capital and liquidity requirements set by the RBI, and its
obligations from a conduct perspective to its customers and other stakeholders
3. Risk Appetite Framework (RAF)
The entire framework of embedding risk appetite across the Bank includes:
i) Maintain robust risk profile and capital adequacy.
ii) Setting Risk Appetite Statement (RAS) by the Board to clearly articulate a consistent understanding of
risk appetite and strengthen the risk culture in the organization.
iii) Communicating to the staff at all levels, a clear and relevant risk appetite culture so that they can
understand and apply the same in their daily roles.
iv) Bank endeavors to adhere to the Risk Appetite Framework (RAF) as a culture of the organization.
v) Monitoring the alignment of risk profile against risk appetite and establishing an escalation matrix, as
part of risk governance framework.
vi) Integrate Risk appetite as an integral element in Bank’s business planning processes and Capital
Raising Plan, and to promote the appropriate alignment of risk, capital and performance targets, while
at the same time considering risk capacity and appetite constraints.
4. Risk Appetite Statement (RAS)
RAS is a sub-set of the risk appetite framework of the Bank. The objective of RAS is to summarize the risk
appetite framework into certain quantifiable parameters, against which Board/ RMC will monitor the actual
positions and suggest actions in case of deviations. Hence, the Bank shall set the RAS as guide to develop
business strategies, so that following the Board approved business strategies helps the Bank to operate
within its risk appetite. RAS is structured as under:
Item Definition
Risk Capacity (RC) Regulatory limits (wherever applicable) are to be considered as risk capacity of the
Bank.
Risk Threshold Limit This is the minimum level that shall be maintained in all conditions, to ensure Bank
(RTL) does not breach regulatory limits in low stress events.
Risk Appetite (RA) Risk the Bank is willing to accept taking into account various factors like, risk/ return
attributes, current macroeconomic scenario and market dynamics.
Risk Monitoring Limit Certain buffer region above the risk appetite, to warn that the parameter is moving
(RML) closer to risk appetite and probability of breach has increased.
5. If a bank is operating within its risk limits, this indicates comfortable position of the bank Green Colour
in those risk parameters. This zone is depicted by___

6. If Bank crosses risk monitoring limit for a parameter, it indicates that the parameter is Amber Colour
moving closer to risk appetite and probability of breach has increased. This zone is
depicted by___
7. If level of risk in a particular risk parameter crosses risk appetite it is said to have breached Red Colour
the Risk Appetite level of that particular risk parameter. This zone is depicted by___

8. These zones can be presented as follows:

GREEN Within Risk Monitoring Limits
AMBER Between Risk Monitoring Limits & Risk Appetite
RED Breach in Risk Appetite

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E3 Group Risk Management Philosophy & Policy for FY2024-25

1. PNB as a group has no risk appetite for regulatory noncompliance and wants to protect
itself from regulatory breaches in capital at all times. As such risk appetite has been
linked to both ICAAP and Stress testing frameworks. PNB Group endeavours to hold a
1.50%
buffer over & above minimum capital requirement. Risk appetite in terms of sufficiency
of capital in normal business scenario is set at _____above the regulatory minimum. As
such, group’s targeted CRAR for 13.00% for the financial year 2024-25
2. For the FY 2024-25, PNB group shall maintain Leverage Ratio above floor level of _____ 3.75%
3. PNB Group has no appetite for failing to deliver on its payment obligations and holds a 105%
sufficient buffer at group levels to survive liquidity crisis. PNB shall maintain LCR and
NSFR of at-least ____ at consolidated level (PNB and its subsidiaries). The entities on
individual basis may have LCR and NSFR less than _____ if there are no such
requirements of host regulator but shall meet regulatory requirements by host regulator,
if any
4. GRMC is a functional level sub-committee of Risk Management Committee (RMC), MD & CEO
headed by ____
5. The meetings of the committee shall be conducted atleast on _____ basis or more Quarterly
frequently, as and when required.

6. Quorum of the GRMC shall be completed when at-least ____members are present Four
including MD & CEO or Domain ED

7. Business performance of subsidiaries & associates (including RRBs) shall be placed in ED level
_____Business Review Committee (BRC) on quarterly basis

E4 Disclosure Policy for FY2024-25

1. As per the Basel III capital regulations, Pillar 3 disclosures shall be made at least on a
Half Yearly
__________with the exception of following disclosures (which shall be made at least on
Basis
a quarterly basis: i. Capital Adequacy (DF-2) ii. Credit Risk: General Disclosures (DF-3);
and iii. Credit Risk: Disclosures for Portfolio Subject to Standardised Approach (DF-4).
2. Bank is required to make the ____Pillar3 disclosures under Basel-III norms out of which 17
3 to be made on a quarterly basis and rest at least on a half yearly basis, both
qualitative and quantitative.
(Note : There are total 18 disclosure out of which DF-15 i.e. Disclosures on Remuneration is Not
applicable for PSBs)
3. A Disclosure Committee (DC) shall be constituted at the apex level and its members Finance Division
will be appointed by the Board of Directors to look after the entire disclosure issues of
the bank. Convener to this Committee shall be from ______. The committee may be
chaired either by MD & CEO or any of the EDs.
4. The Disclosure Committee shall meet at least on ______or before, if the circumstances Quarterly Basis
require so, preferably after close of each financial year.
5. Disclosures formats prepared and compiled by the respective owner division (except the Chief General
disclosures made by Share Department pursuant to Regulatory guidelines) shall be validated Managers
by a committee of ____. (CGMs)
✓ The meeting shall be attended by at least 5 officials to form the necessary quorum.
✓ The committee may be chaired by CFO.
✓ The convener of the committee shall be any officer not below the level of scale-IV from
Finance Division.

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E5 Policy for Risk & Compliance Culture of the Bank for FY 2024-25
1. “Risk Culture” means bank’s norms, attitudes, behaviour of employees towards risk awareness, risk-taking,
risk management and controls that shape decisions on risks. Risk culture influences the decisions of
management/employees during the day-to-day activities and has an impact on the risks they assume.
2. A strong Compliance Culture shall ensure adherence to fair practice codes, bank’s laid internal guidelines,
risk appetite framework, manage conflicts of interests, and treat customers fairly, with the larger objective of
delivering efficient customer service. Thus, compliance shall go beyond what is legally binding and embrace
broader standards of integrity and ethical conduct.
3. Strategies to achieve Prudent Risk & Compliance Culture:
a. Effective Corporate Governance
Sound governance creates conducive environment for the values of risk & compliance, integrity, trust
and respect for the law, to thrive in Bank’s culture.
b. Inventory of Regulatory guidelines-
Compliance Division maintains a repository of regulatory/ statutory guidelines, wherein all the
prescriptions issued till recent date by various regulatory/statutory authorities are updated. The
repository “Knowledge Management Tool” is available on intranet and accessible to all the employees
through Knowledge Centre website/non-CBS page. Similarly, Integrated Risk Management Division
regularly uploads latest guidelines including ‘Risk Management Philosophy & Policy and Risk Appetite
Framework’ on the knowledge center to apprise the employees at the grass root level of the latest
development in the risk management area.
c. Policy/operating guidelines/job cards to be in place {clarity about what to do, how to do &
who will do}-
Head Office Divisions disseminates regulatory/statutory directions & Job Cards pertaining to various
banking activities through internal circulars, policies, Documented SOPs, brief details of extant Guidelines
(PNB Saransh), Topic wise consolidation of Guidelines (PNB Knowledge Park), Graphic Based information
on various Banking Activities (Chapters in PNB UNIV) etc.
d. Efficient Control Systems-
In order to mitigate Compliance Infractions in initial stages, the obligations are identified & possibility of
Non- Compliances is eliminated through system level controls and after that whatever remained left out
comes in purview of Control Functions to monitor.
e. Documentation of due-diligence and easy retrieval {record keeping}- Bank has a record
keeping policy and Documentation of due-diligence is done as per Bank’s established guidelines.
f. Knowledge updation, training etc.
A planned training framework is required to make employees aware of Bank’s practices, rules &
standards. LKMC, HO is a separate vertical in Bank, which handles all the trainings & knowledge updation
activities in Bank.
g. Risk & Compliance Culture Surveys- To, achieve prudent risk & compliance culture permeating all
employees across business lines, bank shall adopt three-pillar strategy to promote sound risk &
compliance culture within the organization.
Pillar 1-Assessment of Risk & Compliance Culture: To determine the maturity level of risk &
compliance culture in the bank, surveys shall be used as one of the methods. The survey on risk &
compliance culture shall be conducted at least on an Annual Basis.
Pillar 2- Building Action Plan: Based on the results of the survey, an action plan shall be built up to
enhance skill sets and awareness level of employees in relation to risk and compliance.
Pillar 3-Review of Action Plan: Bank shall periodically update action plan by recalibrating existing
methodologies and realigning various steps to achieve the desired objectives of prudent risk &
compliance culture permeating all employees across business lines.

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4. The sound risk culture is exhibited by certain foundational elements defined as under:
“Effective Risk Governance, Risk Appetite Framework, Compensation Practices”
5. Governance Structure for Risk Appetite: The governance structure adopted by bank for Risk Appetite
relies on three lines of defence:
(i) Business Line Management: It includes all the owners for different ratios defined under risk appetite
framework;
(ii) Independent Risk Monitoring: It includes Integrated Risk Management Division, RMC and Board;
(iii) Independent Verification and Validation: This would include Inspection & Audit Division
6. Indicators of Sound Risk and Compliance Culture:
In order to build a sound risk and compliance culture, Bank focuses on four key indicators which are to be
considered collectively and as mutually reinforcing.
Tone from the Top
Accountability
Effective Communication and Challenge
Incentive / Disincentive Structure
7. Expectations from employees to achieve desired Risk and Compliance Culture
i. Understanding of Roles and Responsibilities ii. Adherence to policies and procedures
iii. Customer-Centric Approach iv. Proactive risk identification and Compliance measures
iv. Ethical Conduct v. Timely Closure of Audit Reports
vi. Alignment with Risk Appetite vii. Third Party Risk Management
viii. Reporting of Emerging Risks and Non-Compliances/breaches/failures
ix. Capacity Building x. Effective Leadership and Tone from the Top
xi. Demonstrate a Risk & Compliant Mindset
xii. Maintaining Effective Communication
8. Assessment of Risk and Compliance Culture
The expectations defined for the employees shall be assessed through risk and compliance culture survey
wherein the questionnaire shall be based on four Indicators of a sound Risk and Compliance Culture, as
defined in the policy viz. Tone from the Top, Accountability, Effective Communication and Challenge and
Incentives / Disincentive Structure.
All of these four indicators play a crucial role in risk and compliance culture assessment and collectively
contributes to building a robust risk and compliance culture. Therefore, Equal weightage of 25% shall be given
to these indicators. These 4 indicators have been further segregated into twelve parameters as mentioned in
table below. Each parameter within a particular indicator shall be allotted equal weightage. Within each
parameter, there shall be one (or multiple) questions for assessment purpose. Broadly, the indicator and
parameter wise weightage is as follows:
SN Indicators Parameters Weightage of Parameter
1 Tone from the Top Leading by Example 25%
Assessing Espoused values 25%
(Indicator Weightage – Ensuring Common Understanding and 25%
25%) Awareness of Risk
Learning from Past Experiences 25%
2 Accountability Ownership of Risk 33%
(Indicator Weightage – Escalation Process 33%
25%) Consequences of Poor Culture 33%
3 Effective Communication Open to Alternate Views 50%
and Challenge 50%
(Indicator Weightage – Stature of Control Function
25%)
4 Incentive / Disincentive Performance Incentive 33%
Structure
Succession Planning 33%
(Indicator Weightage –
25%) Talent Development 33%

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E6 Reputational Risk Management Policy 2024-25

1. Identification of _____(Risks other than Credit, Market & Operational Risk are referred as
______) comes under the purview of Internal Capital Adequacy Assessment Process Pillar II risks
(ICAAP). Bank, among other _____, has identified Reputational Risk as one of the
significant _____ in its latest ICAAP
2. Reputational risk is a key consideration in assessing any business Business
relationship/transaction/activity. _______shall conduct reputational risk assessments for all Divisions
business arrangements with material reputational risk and the same shall be reassessed
throughout the life of the relationship/ transaction so that adequate focus is maintained on
the preventive measures that need to be taken for the risks involved
3. IRMD shall assess the level of reputational risk on ________for PNB solo and half-yearly Quarterly
basis for PNB Group, based on scorecard approach Intervals
4. In the normal course of events, the authority to determine whether the level of risk as ORMC /
indicated by reputational risk scorecard of PNB Solo / PNB Group is symptomatic of a crisis GRMC
situation and warrants immediate action shall be______, as the case maybe, which shall
recommend to place the matter to Board through RMC for information and seeking necessary
direction
5. ORMC/GRMC shall decide whether situation warrants initiation of crisis management or MD & CEO
not and the Committee may direct IRMD or CCD/DBTD (Social Media Cell) to place
the matter before_____, who on the merit of the case, may give final approval for
initiation of the crisis management. Further MD & CEO may call the meeting of RMC for
deliberation on action plan for crisis management and issuance of necessary direction to
Crisis Management Committee
6. Indicative Triggers for initiation of crisis and corresponding Divisions who shall be monitoring such triggers
on a continuous basis for containing risk to reputation of PNB are:

➢ IRMD, Compliance Division and CISD shall be monitoring the above triggers on a continuous basis
➢ In case of occurrence of any of the above-mentioned events, the root cause analysis of the triggers event shall be
carried out and placed to GCRO/ GCCO/ CISO, as the case maybe. The triggers are indicative and not exhaustive
and in case of any trigger, other than the ones mentioned as indicative triggers, if needed, the matter may be placed
to the CGM of corresponding division. Further as per the direction of the concerned CGM, the matter may be placed
to domain ED or MD&CEO, as the case may be, for information and seeking necessary direction.
In addition to this root cause analysis be placed to Domain ED mandatorily in the events of :
▪ decrease in stock price by more than 8% (daily) for more than 2 trading days,
▪ decrease in stock price by more than 15% on any given trading days and
▪ decrease in stock price for 7 consecutive trading days, etc.
7. Under Reputational Risk Assessment Framework, Peer group for the Bank has been defined ₹10.00 Lakh
based on Business and Balance sheet size i.e total business size in excess of___. crore

Peer banks considered for PNB are:

i) State Bank of India ii) Bank of Baroda iii) Canara Bank iv) Union Bank of India
v) Bank of India vi) Indian Bank vii) HDFC Bank viii) ICICI Bank ix) Axis Bank

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E7 Operational Risk Management (ORM) Policy 2024-25

1. TOOLS FOR MANAGEMENT OF OPERATIONAL RISK
a. Risk Identification
b. Risk Assessment: Risk & Control Self-Assessment (RCSA) / Risk Indicator (RI)/ Key Risk Indicators (KRI)
c. Risk Measurement: Scenario Analysis
d. Risk Monitoring : Tools for Risk Monitoring:
Internal Loss Data // External Loss Data
Near Miss Events // Operational Risk Appetite and Tolerance
Operational Risk Index // RI/KRI Limits
Self-Assessment Survey // Management Information System (MIS)
e. Risk Control/ Mitigation
f. Risk Culture
2. ➢ For Effective Management of Operational Risk, Bank shall have various Committees as described below:
i. Operational Risk Management Committee- ORMC at H.O. Level
ii. System and Product Approval Committee of Executives (SPACE)
iii. Risk Assessment Committee -RAC at Divisional/ Department level
iv. Joint Action Group on Op-risk Control Committee – JAGROC at Zonal office Level
v. Checks on Threats to Reduce Op-risk losses- CONTROL at Circle office level
3. Constitution of ORMC:
SN Member
1 Executive Director looking after IRMD– Chairperson
(In his absence: Senior most ED shall be Chairperson)
2 All other Executive Directors
3 Group Chief Risk Officer
4 Group Chief Compliance Officer
5 CGM (and in absence, concerned GM) of the following divisions:
a. Inspection & Audit Division
b. Operations Division
c. General Services & Administration Division
d. International Banking Division
e. Information Technology Division
f. Mission Parivartan Division
g. Digital Banking Transformation Division
h. Analytics Centre of Excellence (ACoE)
i. Credit Review & Monitoring Division
j. Human Resource Development Division / Human Resource Management Division
k. Business Acquisition & Relationship Management (BA&RM) Division
l. Corporate Communication Division
6 General Manager – Operational Risk
7 Chief Information Security Officer (CISO)
Invitees
i. All other General Managers of Integrated Risk Management Division
ii. General Manager – Fraud Risk Management Division
iii. Divisional Head – KYC
iv. DGM – Law Division
v. Principal Officer (Presently, DGM – Centralized AML Cell)
Convener: Vertical Head-ORMD
Quorum shall be completed when at least 8 members are present including Chairperson of the committee
4. Events related to Fraud / attempted fraud are captured in _____ Fraud Risk
Management
Information
System (FRMIS)

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5. Joint Action Group on Op-risk Control (JAGROC) at ZO Level

In order to ensure completeness and correctness of loss data and also to inculcate risk culture deep down the
ladder in the Bank, a joint committee at zonal level be formed named as Joint Action Group on Op-risk
Control (JAGROC) to identify and evaluate the internal and external factors that could adversely affect the
achievement of Bank’s performance, corporate goals, information system, and compliance objective in the HO
guidelines. The constitution of the committee will be as under:
(i) Zonal Manager (in absence of ZM, Deputy ZM) – Chairman
(ii) ZRMC Head
(iii) Senior Official (not below the rank of Scale IV) – ZO
(iv) Senior Official (not below the rank of Scale IV) – ZAO
(v) Functional Managers from following department: a. Inspection & Audit Department b. General
Services Administration Department c. Security Department d. SASTRA Department e. HR Department
f. IT Department
(vi) Zonal Compliance Officer
(vii) Head of Operational Risk sub cell Convener .
The meeting of this committee shall be convened at least once in a quarter within 3 weeks from the close
of previous quarter.
6. Checks on Threats to Reduce Op-risk Losses (CONTROL) at C.O. Level
In order to ensure completeness and correctness of loss data and also to inculcate risk culture deep down the
ladder in the Bank, a committee named as ‘Checks on Threats to Reduce Op-risk Losses (CONTROL) shall be
formed at Circle level to identify and evaluate the internal and external factors that could adversely affect the
achievement of Bank’s performance, corporate goals, information system, and compliance objective in the HO
guidelines. The constitution of the committee shall be as under:
(i) Circle Head – Chairman
(ii) Dy. Circle Head
(iii) Chief Manager / Functional Manager of following departments: a. Inspection & Audit Department b.
General Services Administration Department c. Planning & Development Department d. Recovery
Department e. HR Department f. IT Department g. Security Department
(iv) Circle Compliance Officer
The meeting of this committee shall be convened at least once in a quarter within two weeks from the
close of previous quarter.
7. _____is an operational risk incident, which could have resulted in a loss, had it not been Near Miss Event
discovered and corrected in time. As such, a near miss event can be defined as one,
where the maker & checker of a transaction have made a mistake, but subsequently
detected and rectified without loss. Undercharges created out of conscious commercial
decision taken by field functionaries and ultimately waived by the competent authority,
will not be treated as Operational Risk. However, such undercharges, which have arisen
not out of commercial decision but due to operational lapses/mistakes and could not
be recovered and ultimately waived, shall be treated as Near miss events and would
form the part of Centralized Op-Risk Loss Data Repository. Apart from these the
amounts lost and recovered before the close of business the same day may not be
included in the operational loss data base; they may be treated as near misses
8. Bank is currently using the Basic Indicator Approach (BIA) for calculation of Operational
Risk Regulatory Capital. RBI on 26.06.2023 has released “Master Direction on Minimum
Capital Requirements for Operational Risk”. As per the circular, All existing approaches
New Standardised
viz. Basic Indicator Approach (BIA), The Standardised Approach (TSA)/ Alternative
Approach
Standardised Approach (ASA) and Advanced Measurement Approach (AMA) for
measuring minimum operational risk capital (ORC) requirements shall be replaced
by_______. The effective date of implementation of these Directions shall be
communicated separately.

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9. As per the new standardised approach of Operational Risk (Basel III Standardised Business Indicator
Approach). ________ shall be calculated by multiplying the BI with the marginal Component (BIC)
coefficients (αi), which increase with the size of the BI as shown in Table below:
Bucket BI Range (in ₹ Crore) BI Marginal Coefficients
(αi)
1 ≤8000 12%
2 8000<BI≤240000 15%
3 >240000 18%
10. As per the new standardised approach of Operational Risk:
▪ (i) For banks in bucket 1, and (ii) For banks in buckets 2 & 3 that do not have 5 BIC
years of high-quality operational risk annual loss data, The ORC requirement
shall be equal to _______
▪ For banks in buckets 2 & 3 having 5 years and above of high-quality operational BIC*ILM
risk annual loss data, The ORC requirement shall be ________
ILM=Internal Loss Multiplier
11. The risk-weighted assets (RWA) for operational risk shall be calculated by multiplying 12.5
the ORC by ____
12. ________ is the amount and type of risk that an organization is prepared to seek, Risk Appetite
accept or tolerate. BCBS Document describes Risk appetite as ‘a high level
determination of how much risk a firm is willing to accept taking into account the
risk/return attributes; it is often taken as a forward looking view of risk acceptance
13. _________ is a more specific determination of the level of variation a bank is willing to Risk Tolerance
accept around business objectives that is often considered to be the amount of risk a
bank is prepared to accept.
14. ________ of the Bank is defined as the amount and type of risk that the bank is able Risk Capacity
to support keeping in view the capital base, liquidity, borrowing constrains and
regulatory constraints
15. ______is shifting of risk to third parties. Bank is already having a system of _____ by Risk Transfer
way of insurance and other hedging instruments like outsourcing etc
16. IBA has floated the company ________ with the objective to collect data on operational PSB Alliance Pvt.
loss events and credit risk loss events of member banks for the purpose of consolidation Limited
and analysis. (Formerly known as CORDex India Pvt. Ltd.)
17. The first line of defence for Operational Risk is the _______and Operational Risk Business Line
Management Specialist at various HO Divisions Operational Risk
(Business Line management) Managers
18. Second Line of defence is______, Group Chief Risk Officer, ORMD,ZRMC, JAGROC RMC, ORMC
and CONTROL which are collectively responsible for framing the Operational Risk
Framework/Policy and ensuring implementation thereof
(Independent corporate operational risk function)
19. The Third line of defence is ______which are responsible for independent IAD
verification and validation.
(Independent verification and validation)
20. Concept of Business Continuity Plan was floated by ________ in its report of the G.
Working Group on information security, electronic banking, technology risk Gopalakrishna
management, and tackling cyber frauds
21. Risk which is excluded from the Basel Committee’s definition of operational risk Reputation Risk &
Strategic Risk

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22. What term is normally used to describe the possibility that people behave differently Moral hazard
when protected from the effects of the risks they take
23. Principle of Sound Practice for management & supervision of operational risk, Banks Products,
should identify and assess the operational risk inherent in all material Activities,
Processes and
system
24. _______is defined as the forecast of operational losses and events that cause them, Scenario Analysis
based on the knowledge of business experts. Scenario enables one to assess the impact
of very rare and possibly large events without having to actually experience those
events.
25. Bank uses scenario analysis for three different purposes: Stress testing the
a. Supplementing insufficient loss data b.Providing a forward-looking element in the Capital
capital assessment, third one is_______ Assessment
26. Risk Assessment
For management of operational risks at HO division level, each business line/division
Committee (RAC)
shall constitute a _______
27. The loss data along with causal factor analysis and corrective/preventive action taken Half Yearly Basis
shall also be placed to RMC on_______
28. The Governance structure adopted by bank for management of operational risk relies
on three lines of defence: Independent
i. Business line management verification and
ii. Independent corporate operational risk function, and validation
iii.________________
29. ‘Op-Risk Aware’ e-magazine is also being issued ………..on basis to create awareness Quarterly
about the Operational Risk Management, bank wide basis.
30. RCSA is one of the important tools to identify and assess the Operational Risk in various Risk Control &
activities & products. Self-Assessment
31. KRI(s) are one of the important tools for monitoring controls, risk drivers, and Key Risk
exposures as they can provide insights into potential risk events. Indicators
32. The number of Business line and Loss event type is the ________ BL-8: LE-7
33. Interest rates on Deposits and Advances are reviewed and approved by ______ ALCO
34. _____ is a Web-based application for management of operational risk. The solution Op-Risk Solution
facilitates entry, collection, transfer, storage, analysis, tracking, and reporting of
operational losses/gains, recoveries, key risk-performance-scale indicators, risk
assessment results, and control assessment scores that are drawn from multiple
locations across an organization
35. Events related to Fraud / attempted fraud shall be captured in Fraud Risk Management ₹1 Lakh
Information System (FRMIS), an application established at HO: FRMD, wherein all the
fraud / attempted fraud related data shall be entered by branches; reviewed by the
controlling offices (CO/ZO) and approved by ZAO / HO: FRMD (up to _____ approved
by ZAO and above _____approved by FRMD)
36. JAGROC Committee will discuss Operational Loss entries of ______, of ZO, ZAO, COs, ₹10,000 & above
all verticals reporting to ZO and LCBs under its command area, reported during previous
quarter shall be discussed and the modus operandi / learnings shall be shared with the
ZO / ZAO / COs / LCBs / different verticals through digital modes.
37. ____Committee Operational Loss entries of ₹10,000 & above , of CO & branches/other CONTROL
offices/verticals under its control, reported during previous quarter shall be discussed
and the modus operandi / learnings shall be shared with the branches through digital
modes

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E8 Credit Risk Mitigation & Collateral Management Policy 2024-25

1. ______refers to the process through which credit risk is reduced or is transferred to Credit Risk
counterparty. Mitigation (CRM)
2. Strategies for risk reduction at the transaction level differ from that at the portfolio Collateralization
level. At transaction level, the most common technique used by the bank is the
_____of the exposures, by first priority claims or obtaining a third party guarantee.
Other techniques include buying a credit derivative or an insurance to offset
credit risk at transaction level.
3. At portfolio level, _______& Credit Derivates etc are used to mitigate the risk. Asset
Securitization
4. ______has been defined as the one in which Bank has a credit exposure and that
credit exposure is hedged in whole or in part by collateral posted by a counter-party Collateralized
Transaction
or by a third party on behalf of the counter-party. The counter-party is used to denote
a party to whom bank has an on or off balance sheet credit exposure.
5. The BASEL II/III guidelines prescribe minimum conditions for use of the CRM
(Credit Risk Mitigation) techniques, which relate to the ______and its legal review to Documentation
verify & ensure continuing enforceability and prescribes the procedures for taking
possession and timely liquidation of the collateral in the event of default of the
counterparty
6. Under_______, the banks use a risk-weighting schedule for measuring the credit risk Standardised
of its assets by assigning risk weights based on the rating assigned by the external Approach (SA)
credit rating agencies
7. ______, allows banks to use their own internal ratings of counterparties and
exposures, which permit a finer differentiation of risk for various exposures and hence IRB Approach
delivers capital requirements that are better aligned to the degree of risks.
8. The IRB approaches are of two types. First one is _______and other one Advanced Foundation IRB
IRB (FIRB)
9. Under FIRB, the bank estimates the______associated with each borrower, and the Probability of
supervisor supplies other inputs such as Loss Given Default (LGD) and Exposure At Default (PD)
Default (EAD)
10. Under AIRB, in addition to Probability of Default (PD), the bank estimates other inputs
such as EAD and LGD. The adoption of advanced approaches would require the banks
to meet minimum requirements relating to internal ratings at the outset and on an
ongoing basis such as those relating to the design of the rating system, operations, Five ; Seven
controls, corporate governance, and estimation and validation of credit risk
components, viz., PD for both FIRB and AIRB and LGD and EAD for AIRB. The banks
should have, at the minimum, PD data for ___years and LGD and EAD data for__
years.
11. The collaterals commonly used by the Bank as the risk mitigants comprise of the Financial
_______(i.e. bank deposits, Government/Postal securities, Equity shares, Life Policies, Collateral
Gold/silver jewellery, Units of mutual funds etc.), various categories of movable and
immovable assets/landed properties etc
12. It is prescribed by RBI that Banks in India will use only the _____haircuts for collateral Standard
Supervisory
13. Bank has traditionally been using number of techniques to mitigate credit risk e.g.
obtaining collateral securities by way of mortgages of residential and commercial
properties, guarantees and pledge of securities. The bank needs to calculate adjusted
value of collateral to take account of possible future fluctuations occasioned by market
movements. These adjustments are referred to as Haircuts. The application of haircuts Haircuts
gives the volatility-adjusted amount for both exposure and collateral. As prescribed
by RBI, Bank shall use only the standard supervisory haircuts for collateral.

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E9 Conduct Risk Management Policy

Conduct risk is primarily driven by conduct of the people and organisational culture. It is mostly overlapping and
considered as a subset of Operational Risk (i.e., risks arising from failure in people, process and systems), for which
Bank already maintains capital under pillar I. Hence, any additional capital requirement envisaged under pillar II shall
be compared with total operational risk capital charge, and higher of the two shall be considered.

i.Identification and Assessment of Conduct Risk

a. Definition
Risk that an individual or a group of employees of the Bank, conduct themselves in such a way, that it negatively
impacts the interest of the customers, other employees and all other stakeholders of the Bank. It shall also
encompass conduct of the Bank in the financial markets it participates in.
b. Drivers of Conduct Risk
Conduct risk exists in the day to day activities of the Bank across branches or any other processing units, treasury,
control and admin offices. The reasons for risk of misconduct can be broadly classified into some major risk drivers
as under:
▪ Lack of Clarity in Roles & Responsibilities
▪ Normalisation of Deviance
▪ Lack of Challenges in Decision Making Process
▪ Ineffective Reporting and Transparency of Information
▪ People mis-management and Poor Escalation Mechanisms
ii.Measurement of Conduct Risk
▪ Predict & Prevent: The Bank shall shift from a ‘detect and correct’ mindset and work towards a ‘predict and
prevent’ approach to managing conduct risk. Large amount of data on the underlying indicators shall be analysed
for the same
▪ Scope: As per the definition above, conduct risk exists across Branches, Treasury, Processing Centers, Circle
Offices, Zonal Offices including Head Office of the Bank, i.e., irrespective of whether it is a customer facing role
or not. Hence, while assessing conduct risk, it shall be ensured that activities of all such offices are covered under
the assessment framework
Measurement Methodology
(i) Top-down model, where centrally defined key risks are mapped to staffs, business activities, products and
processes and
(ii) Bottom-up model, where individuals and individual business units analyse their own business and processes
end-to-end and identify risks which are then aggregated.

The Bank has adopted a top down approach while formulation of the measurement methodology, where centrally
defined key risks have been mapped to staffs, business activities, products and processes.
The assessment of conduct risk shall be done as under:
1. Assess Conduct Risk of Individual Officers. Based on individual Assessment, assess conduct risk of
CO/ZO/Division.
2. In addition, take into account the conduct issues which are not applicable at individual level, however, are
applicable for assessing conduct risk of Bank as a whole.

Scope:
a. Assess conduct risk level of officers (in the form of Score/ Index/ or, Likert scale).
b. Aggregate the individual scores to estimate the conduct risk level of Branch, Circle, Zone and Bank level.
c. Separate assessment of conduct risk using Bank level indicators shall also be conducted for incorporation of
indicators that cannot be attributed at individual levels.
d. Present a unified view of top conduct risks in the Bank.
e. Risk factors to be decided with a focus on leading indicators.
f. Effectiveness of the internal controls of conduct risk by looking at the trends in the scores of key risk indicators.

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Other Aspects of Measurement

a. Qualitative Aspect
b. Behavioural Patterns
c. Organisational Culture
d. Risk Culture
e. Overlap with Operational risk and reputational risk
iii.Monitoring and Management
a. Board & RMC: Board (through RMC) shall monitor the conduct risk level of the Bank and suggest corrective
actions, if necessary. However, as part of ICAAP process, the same shall be reported to Board at least on half
yearly basis.
b. SQM: In addition, the analysis of the conduct risk level of individuals including the root cause analysis of
employee misconduct shall be placed in Special Quarterly Meeting (SQM) / Board on half yearly basis by HRD.
c. ORMC: Analysis of the conduct risk at combined bank level shall be placed to ORMC on half yearly basis. The
committee shall guide respective owner divisions for corrective actions on areas found to be more prone to
conduct risk from time to time. For operational aspects related to management of conduct risk of different
areas, operational guidelines shall be referred to for further details on the same.
d. Conduct Risk MIS: It shall provide the Board and senior management in a clear and concise manner with
timely and relevant information concerning the Bank’s conduct risk profile. It shall be readily available and shall
have necessary slicing and dicing capabilities to enable identification of conduct risk at a granular level.
Management of Conduct Risk
To implement a sound conduct risk management system, it shall have the following key features:
a. Active Board and Senior Management oversight – expected to be achieved through close monitoring as
stated above.
b. Chief Ethics Officer - Bank shall designate a Chief Ethics Officer, who shall be responsible for overall
management of conduct risk at individual level, which shall include handling conduct issues, analyzing and
creating a conduct culture in the Bank.
c. Appropriate policies, procedures and limits and Comprehensive Internal Controls – expected to be
achieved through this policy in addition to all other policies/ circulars in place which deals with conduct related
issues.
An indicative list of such policies of the Bank is provided as under:
1. Statement of Code of Conduct and Ethics 2. Policy for Prevention of Insider Trading
3. Whistle Blower policy for all branches/offices including branch at Gift City Gujarat and PNB Cards & Services Ltd. 4.
Staff accountability policy 5. Revised code of conduct for mutual fund distributors
6. Conduct of Metlife insurance business in branches
7. Conduct of employees – maintaining of integrity and honesty 8. Disclosure Policy
9. Policy for prevention, prohibition and redressal of sexual harassment of women at workplace - reconstituting internal
complaints committee (ICC) at head office level
10. Strict action against officials involved in misconduct/misreporting, etc.
11. Transfer policy 12. Promotion policy
13. Additions to conduct of business (COB) directions of IFSCA banking handbook
14. Nominee directors code of conduct and guidelines 15. Workplace dress code for employees
16. Policy for risk and compliance culture 17. Group compliance policy 18. Policy on diversity at work place
19. Rotation of duties and compulsory availment of leave 20. Policy for mandatory leave
21. RBIA Policy 22.Policy for fraud risk management and investigation functions (FRMIF)
23. PNB (officers') service regulations, 1979 24.PNB officer employees' (conduct) regulations, 1977
25. PNB officer employees' (discipline & appeal) regulations, 1977
26. Vigilance Manual
27. Fair Practice Code
28. Social Media Policy of the Bank

Reporting: The conduct risk assessment results shall be placed as part of ICAAP at least on half yearly basis.

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Conduct Risk Assessment – Individual Level

The conduct risk of the officers of the bank is to be assessed on the basis of following 16 parameters on respective
weightages:
S.N. Key Risk Indicator
1. Punctuality, Discipline and Attendance (Biometric Attendance)
2. Unauthorised Absence from Office
3. Suspicious Transactions by Staff
4. Transactions in Betting Websites
5. List of Doubtful Integrity Officers (LODI) and Agreed List
6. Staff Perpetrated Frauds
7. Penalty and Punishments against Staff
8. Customer Complaints
9. Asset Liability Disclosure
10. Insider Trading by Staff
11. Internal Complaints against Staff Conduct through Whistle blower mechanism or any other channel
12. Inconsistency in TA Bill Claims
13. APAR – marks separately assigned for Integrity aspect
14. Complaint under POSH Mechanism
15. Compliance Self-certification by the Staff
16. Mandatory Courses in PNB Univ
Total
Total individual score and corresponding risk levels after converting to out of 100, shall be as under:
Total Score (out of 100) Risk Level
0 No Risk
Upto 5 Negligible risk
Upto 10 Low Risk
Upto 15 Medium Risk
Upto 20 High Risk
More than 20 Very High Risk
Trigger Point: If under any of the following Risk Indicators, risk level is assessed as 5, the overall individual
score of the staff shall be marked as ‘Very High Risk’:
S.N. Key Risk Indicator
1. List of Doubtful Integrity Officers (LODI) and Agreed List
2. Staff Perpetrated Frauds
3. Penalty and Punishments against Staff
4. Complaint under POSH Mechanism
5. Insider Trading by Staff

In case the Individual Conduct Risk Score is less than 20, but one or more of the above mentioned trigger is
invoked, the conduct risk score shall be scaled to 21 (Very High), for reporting purposes.
Aggregate Conduct Risk Assessment:
The methodology of aggregating individual conduct risk scores is as under:
i.Aggregate Conduct Risk Score at Zone / Circle/ Division Level shall be of simple average of Individual Conduct
Risk Scores of all staffs of the corresponding zone/ circle/ division, posted as on date of generating scores.
ii.Tone from the top is critical for deciding conduct level of the zone/ circle/ division, and conduct risk of the
zone/ circle/ division depends more on the conduct of the leadership of the corresponding zone/ circle/ division.
Hence, to account for tone from the top, aggregate conduct risk score of the zone/ circle/ division (calculated
in the previous step) shall be multiplied with scalars (as per the below table), if individual conduct risk score
of the zonal head/ circle head/ divisional head is on the higher side.
Designation/ Scale Medium Risk High Risk Very High Risk
Zonal Head or, officer Scale VII / VIII 1.05 1.10 1.15
Circle Head or officer Scale V / VI 1.05 1.10 1.15
Officer Scale IV 1.02 1.07 1.12
For example, aggregate conduct risk score of a circle is assessed to be 10 (low risk), and the circle head’s individual conduct
risk score is assessed to be 20 (high risk), then final aggregate conduct risk score of the circle will be 10 * 1.10 = 11.

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Management of Individual Conduct Risk:

i. Individual conduct risk scores shall be calculated on half-yearly basis.
ii. A repository/ database of Individual Conduct score shall be maintained historically along with its underlying
parameters, to provide an objective tool to the senior management to decide during future occurrence of
similar nature.
iii. Zonal/ Circle/ Divisional Heads shall also be responsible for improving staff conduct. Hence, individual conduct
risk scores shall be accessible to Zonal Heads/ AGM/CM handling HR matters at Zonal Office, Circle Heads/
AGM/CM handling HR matters at Circle Office and Divisional Head only.
iv. Individual conduct risk level (e.g. low, medium, high, etc.) shall be made visible to individual staff in HRMS
for self-correction purposes.
v. HR section at Zonal Office shall be responsible for analyzing the aggregate conduct risk score of corresponding
Zones and Circles and placing the same in JAGROC meetings to bring into attention of zonal heads.
Conduct Risk Assessment – Bank Level
The conduct risk of the Bank is to be assessed on the basis of following 18 parameters on respective
weightages:
S.N. Key Risk Indicator
1. Customer Complaints
2. Banking Ombudsman Penalties
3. Understaffing of Branches
4. Third Party Conduct
5. Regulatory Penalties
6. Regulatory Limit Breaches
7. Restriction from Regulator
8. Letter of Caution/ Displeasure/ Show cause notices received
9. Pendency of Regulatory Observations
10. Timely Submission of Regulatory Returns
11. Market Conduct / Divergence in Disclosures
12. Treasury Activities
13. ZTL/ FSI Position
14. Duty Rotation and Mandatory Leaves
15. Staff Trainings
16. Exit Interview Feedbacks
17. Missed Inspection of High Risk Branches
18. MARD Audit Findings
Total

Conduct Risk Measurement at Combined Bank Level

Conduct risk at Combined Bank level =

(70% * Aggregate Individual Staff Score) + (30% * Bank Specific Score)

Fixation of Risk level and its Interpretation:

The scorecard will provide a conduct risk score. A high score will indicate high conduct risk whereas a low
score will indicate low conduct risk. In order to make the conduct risk framework more effective, there is a
need to divide the total score into different score bands representing different levels of risk for the purpose of
monitoring and initiating management action.
Score bands for Combined bank level scores are defined as under:
Level of Conduct Risk Total Score (out of 100)
No Risk 0
Negligible risk 0 to10
Low Risk >10 to 20
Medium Risk >20 to 30
High Risk >30 to 40
Very High Risk >40

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E10 Financing Framework for Green, Social and Sustainability Linked

Activities/ Projects
➢ Component of Framework
GREEN (ENVIRONMENTAL) SOCIAL SUSTAINABILITY LINKED
Projects with identified benefits to Projects with identified benefits to Projects where Issuers/
climate and/or environment through affordable basic Infrastructure, Borrowers commit to specific
Energy, buildings, transport, urban access to essential services, improvements in sustainability
and industrial energy efficiency, waste, employment generation, affordable outcomes, which may be
water, land use, pollution, housing, and socioeconomic environmental, social, and/or
infrastructure, and biodiversity advancement and empowerment governance related.

➢ HO: SMEAD will be tasked with leveraging opportunities related to Green Financing by assigning targets related
to Green Assets and Liabilities.
➢ Bank’s existing schemes with environmental benefits: Bank already has a number of retail and other schemes
wherein the use of funds aligns with the 9 use of proceeds. For example, PNB Green Car Scheme, PNB SATAT
(Bio gas) Scheme, PNB Saur Urja Yojana, etc. Such schemes will be periodically reviewed and a catalog of the
same along with outstanding will be maintained within Bank’s green finance portfolio.
➢ the existing Screening Committee (for Go/ NoGo) shall carry out the exercise to identify eligible green loans
(Green/ Social/ Sustainability linked activities/ projects) for credit proposals at HO and ZO levels. For other
proposals (such as MCC proposals), respective sanctioning authorities will carry out the screening of Green/
Social/ Sustainability linked activities/ projects.
➢ For sustainability linked loans, scrutiny of sustainability strategy aligning with Key Performance Indicators (KPIs)
and Sustainability Performance Targets (SPTs) will be additionally carried out during appraisal.
➢ Additional Details in Sanction Letter:
Suitable terms and conditions related to the requirements for Green/ Social/ Sustainability Linked Loans will be
incorporated along-with the following conditions:
i. “The borrower will ensure compliance to all the principles related to Green/ Social Finance as listed in Bank’s
latest Financing Framework for Green/ Social/ Sustainability Linked Activities”
ii. “The borrower will provide additional details to determine impact and to facilitate assurance of the financing
activity”
➢ Eligible Categories
Type of Instrument Use of Proceeds
Green Eligible Green Finance categories :
i. Renewable Energy
ii. Energy Efficiency
iii. Clean Transportation
iv. Climate Change Adaptation
v. Sustainable Water and Waste Management
vi. Pollution Prevention and Control
vii. Green Buildings
viii. Sustainable Management of Living Natural Resources and Land Use
Terrestrial and Aquatic Biodiversity Conservation
Bank’s existing schemes with environmental benefits
Bank already has a number of retail and other schemes wherein the use of funds aligns with the above 9 use
of proceeds.
For Example PNB Green Car Scheme, PNB SATAT (Bio gas) Scheme, PNB Saur Urja Yojana, etc. Such schemes
will be periodically reviewed and a catalog of the same along with outstanding will be maintained within Bank’s
green finance portfolio
Social i. Affordable basic infrastructure
ii. Access to essential services
iii. Affordable housing
iv. Food security and sustainable food systems
v. Socioeconomic advancement and empowerment

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vi. Employment Generation

vii. Priority Sector Lending
Reserve Bank of India has identified various activities as Priority Sector. Those activities within Priority Sector
which aligns with social outcomes listed above will be considered in Bank’s social portfolio along with being
treated under Priority Sector Lending.
Sustainability i. Reducing Greenhouse Gas Emissions
Linked ii. Increasing Renewable Energy Usage
iii. Improving Energy Efficiency
iv. Enhancing Diversity and Inclusion
v. Health and Safety Performance
➢ GOVERNANCE OF SUSTAINABILITY
A. The governance requirements of the following identified activities related directly or indirectly to Sustainable Finance:
i. Identification and Labelling of Green/ Social/ Sustainability Linked Proposals
ii. Project Appraisal and Sanctioning Governance
Bank’s existing governance framework (through Screening Committees, Credit Approval Committees and Investment
Committees) will be leveraged for Activities as mentioned above at point no. i and ii.
iii. Sustainability Disclosures -Nodal Division SMEAD
iv.Climate Risk related Scenario Analysis and Stress Test Results IRMD
Governance: To facilitate governance of other sustainability related activities identified apart from i and ii above, a new
Sustainability and Resilience Committee (SARC) has been formed. SARC will be the competent authority to approve or
recommend for further approval, activities listed above at point no. iii and iv.
v.Monitoring of Progress Nodal Division
Green Deposit BARM
Green Bond Raised, Investment in Green Bond, Residual Green Deposit invested in short term securities Treasury
Green Finance, Social Finance and Sustainability Linked Finance CRMD
Portfolio of Bank’s schemes with environmental benefits Other Credit
vi.Sustainability related Frameworks, Policies, Strategies and Models IRMD
vii.Setting Targets for Green Assets/ Deposits SMEAD

B. Sustainability and Resilience Committee (SARC)

SN Member Invitee
1 Managing Director & CEO The committee can invite CGMs/ GMs of other Divisions as
2 All Executive Directors special invitees
3 Group Chief Risk Officer
4 CGM (and in his/her absence, concerned GM) of the following divisions:
i. Analytics Center of Excellence (ACoE)
ii. Business Acquisition and Relationship Management Division (BARM)
iii. Credit Review and Monitoring Division (CRMD)
iv. Compliance Division
v. Corporate Credit Division (CCD)
vi. General Services Administration Division (GSAD)
vii. Human Resource Development Division (HRD)
viii. Information Technology Division (ITD)
ix. Inspection & Audit Division
x. Mission Parivartan Division (MPD)
xi. Other Credit Division (Retail Asset Division, MSME, Agriculture Division)
xii. Strategic Management and Economic Advisory Division (SMEAD),
xiii. Treasury Division
xiv. General Manager (IRMD) – Convenor
5 Mandatory Members Quorum
MD & CEO/ Domain ED (Risk Management) The MD & CEO will be the Chairman of committee and in his/
GCRO and in his absence GM (IRMD) her absence, Domain ED (Risk Management) would Chair the
CGM and in his absence GM of: committee.
▪ Treasury Division The quorum will be 6 members including mandatory presence
▪ Credit Review and Monitoring Division (CRMD) of the members as detailed above.
▪ Corporate Credit Division (CCD) ▪ SARC will, preferably meet Quarterly

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E11 Climate Risk Management Policy

➢ Climate Risk:
Potential risks that may arise from climate change or from efforts to mitigate climate change, their related impact
and the economic and financial consequences. It can impact the financial sector through two broad channels, i.e.,
physical risks and transition risk.
➢ Objective of the Policy:
▪ To establish a comprehensive framework for climate risk management in the Bank.
▪ To manage and mitigate the risks associated with climate change that could impact the Bank’s operations,
customers, and financial performance.
▪ To ensure the integration of climate considerations into Bank's overall risk management framework and to
establish appropriate strategies and actions to address these risks and opportunities.

➢ Components of Climate Risk Management Policy:

The policy on Climate Risk Management has been organized into following four sections in line with Task Force
on Climate-Related Financial Disclosures (TCFD) recommendations:
a. Governance
b. Strategy
c. Risk Management
d. Metrics and Targets

➢ Coverage under Governance Pillar:

To ensure that climate risk oversight is embedded at all levels of the organization, promoting a culture of proactive
management of climate-related risks and opportunities is essential.

Structure: Organizational structure of the Bank for management of Climate Risk is as under:

The section in the policy covers:

i. Description of Governance structure for effective oversight and management of climate-related financial
risks.
ii. Description of the roles of the Board and senior management in assessing and managing climate risks
and opportunities.
iii. Broad roles and responsibilities of the Board of Directors and the RMC are guided by Board approved “Risk
Management Philosophy & Policy and Risk Appetite Framework of the Bank”. Certain additional roles and
responsibilities will be delivered by these Committees related to sustainability.
iv. Functional committee for climate risk and sustainability related matter is Sustainability and Resilience
Committee (SARC) which was constituted by Board in its meeting dated 29.11.2023. Roles and responsibility
related to SARC has been enumerated in the Policy.
v. Further, roles and responsibility of IRMD and other divisions are described.
vi. A permanent Cross Functional Team - Sustainability (CFT-S) shall be formed to discuss matters related
to sustainability.
vii. Capacity building on ESG/ Climate Risk / Sustainable finance shall be carried out.

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➢ Coverage under Strategy Pillar

Developing a strategy to navigate the societal and economic change towards low carbon and more climate friendly
future can not only meet regulatory requirements but also become a springboard for a sustainable and resilient
future for the organization. Having recognized that climate change entails both risks and opportunities and it is
desirable to transition to a greener and safer environment, the section describes the following:
i. Detailed Bank’s strategy for addressing climate risks over the short, medium, and long term.
ii. Time periods taken for:
Short term - upto 10 years,
Medium term - more than 10 years & upto 25 years
long term - more than 25 years.
iii. Explained how the Bank plans to mitigate potential climate-related risks.

Bank shall form specialized dedicated cell(s) for promoting and managing environmentally sustainable
practices and exclusively focusing on developing green banking products. The cell may also oversee Bank’s efforts
to reduce its own carbon footprint, implement environmentally responsible policies, and engage in corporate social
responsibility activities that emphasize sustainability.

➢ Coverage under Risk Management Pillar:

This section covers the following:
i. Assessing climate-related financial risks, including credit, market, liquidity, and operational risks.
ii. Qualitatively assessing the impact of climate risk drivers on credit risk management systems, market risk
positions, liquidity profiles, and operational risk.
iii. There are two approaches towards sustainability related financing, i.e., Screening based approach and
Integrated approach.
a. Screening based approach will involve identification of activities/ sector/ industries based on their impact
on climate and/ or environment.
b. In integrated approach all the loans and investment decisions irrespective of use of proceeds are
examined through the lens of climate risk and environmental sustainability.
iv. Raising Funds: Green Deposits and Green Bonds are the instruments by which Bank will raise funds which
will be earmarked for being allocated towards green finance/ refinance.
v. Deploying Funds: Financing Instruments (Loan/ Bond) could be categorized into three categories viz Green,
Social and Sustainability linked.
vi. Incorporating following into the Due Diligence process of appraisal and sanctioning:
a Requirements for corporate loans with limits above ₹25 Cr.: Bank’s standard credit appraisal format for
limits above Rs. 25.00 crore captures information with regard to ESG parameters.
b Requirements for Green/ Social and Sustainability linked loans:
c Requirement of Sustainability related information for all corporate loans above Rs.500 Crore:
a.1 Environmental, social and governance related information shall be obtained.
a.2 For top 1000 listed companies, obtaining BRSR will be mandatory as part of document for credit
proposal. For top 150 listed companies, BRSR core will be mandatory too.
a.3 For some of the identified hard to abate sectors {Cement, Iron & Steel, Construction, Chemicals,
Heavy-Duty Transportation (Shipping, Heavy Trucks, Aviation)}, responses on following set of
questions shall be obtained:
i Company’s Net Zero Goals
ii Company’s Transition/ Sustainability Plan including following details:
ii.a Company’s overall Sustainability Objectives.
ii.b Key Sustainability Performance Indicators.
ii.c Sustainability Performance Targets (SPTs) set by the company.
ii.d Recent changes in production process and/ or technology deployed to meet Sustainability
Objectives.
ii.e Impact on overall viability of the above process and technology related changes.

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➢ Coverage under Metrics and Targets Pillar:

Identification and measurement of metrics, which aids in understanding, measuring and managing climate
related risks and opportunities, shall be carried out. These metrics will also be used to provide quantitative
information to support decision-making, risk management, and strategic planning in the face of climate
change.
The Bank shall monitor and report climate-related metrics such as GHG emissions, energy consumption, waste
generation & recycling and water management as part of the larger sustainability programme. This section covers:
i. Metrics to measure climate-related risks and opportunities.
ii. Measuring Scope 1, Scope 2 and Scope 3 greenhouse gas (GHG) emissions, and the related risks.
iii. Setting of targets for reducing the bank’s exposure to climate risks.
➢ Important Terms:
Physical Risk means the economic costs and financial losses resulting from the increasing severity and
frequency of:
i) Extreme climate change-related weather events such as floods, heatwaves,
landslides, storms and wildfires known as acute physical risks;
ii) Longer-term gradual shift of the climate such as changes in precipitation, extreme
weather variability, ocean acidification, and rising sea levels and average
temperatures known as chronic physical risks; and
iii) Indirect effects of climate change such as loss of ecosystem services (e.g., water
shortage, degradation of soil quality, or marine ecology).

Transition Risk The risks related to the process of adjustment towards a low-carbon economy, viz.

i) Changes in climate-related policies and regulations,

ii) Emergence of newer technologies
iii) Shift in customers’ preferences and behavior.

Potential risks that may arise from climate change or from efforts to mitigate climate
Climate-related
change, their related impacts and economic and financial consequences
Financial Risks
The capacity of a Bank to adjust to climate related changes, developments or
Climate Resilience
uncertainties. It involves the capacity to manage climate-related risks and benefits from
climate-related opportunities, including the ability to respond and adapt to climate
related physical and transition risks. It includes both strategic and operational resilience
of Bank to climate-related changes, developments or uncertainties

The activities/projects meeting the requirements given in RBI’s Framework for

Green Activities/
Acceptance of Green Deposits;
Projects
An interest-bearing deposit, received by the Bank for a fixed period and the proceeds of
Green Deposit
which are earmarked for being allocated towards green finance

Greenwashing The practice of marketing products/services as green, when in fact they do not meet
requirements to be defined as green activities/ projects.

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F1 Revenue Audit Policy 2024-25

1.
The Revenue Audit of eligible Concurrent Audit Branches is conducted through Concurrent Auditors on
quarterly basis and that of Non-concurrent branches is done through Internal Auditors / CA Firms on
annual basis, covering a period of one calendar year, i.e., from 1st January to 31st December every year,
so that all transactions pertaining to the period under audit are scrutinized and the recovery or rectification, if
any, is vouched

2.
OBJECTIVE:
a) To detect revenue leakage in all types of customer accounts.
b) Recovery of revenue leakage detected during the course of inspection/revenue Audit, preferably on the
spot.
c) To examine, whether the cases involve malafide intention, gross negligence or dereliction of duty on part
of the staff and if so, to identify the name of the erring officials, so that appropriate action may be taken to
avoid recurrence of such irregularities.
d) In case of repetitive nature of undercharges in same account, examination of staff accountability aspect
after analysing the reasons.
e) Conduct of 100% verification of all Income/Expenditure heads by the Auditors/Inspecting officials.

3.
COVERAGE OF UNITS
Type of Audit Units Covered Period of Audit
All concurrent audit branches/Offices At the end of every quarter
Revenue Audit All non-concurrent audit branches/offices
Special Revenue Audit All concurrent audit branches/offices At the end of calendar year

Revenue Audit of Overseas Branches:

shall be conducted annually by the internal auditor deputed to conduct the annual audit of the branch at the
end of financial year.

4. Conduct of Audit
Type of Audit Type of Unit Audit to be conducted by Competent Authority for
Allotment of Audit
Revenue Audit Branches/Offices which External Concurrent Auditors Zonal Audit Office in
are not under Concurrent (CA Firms) / Internal auditors consultation with HO: IAD
Audit (Revenue Audit to be
done once in a Calendar
Year)
Branches/Offices which Concurrent Auditor Revenue Audit shall be
are under Concurrent conducted along with
Audit concurrent audit of the
branch
Special Branches which are under External Concurrent Auditors Zonal Audit Office
Revenue Audit Concurrent Audit CA Firms (other than base
branch) / internal auditors
(other than base branch)
Note: In case of non-concurrent branches, annual revenue audit shall be conducted by an internal concurrent auditor
posted at same centre. However, for centres where internal concurrent auditors are not available, the annual revenue audit
of nonconcurrent branches may be assigned to CA firms selected from the list of Bank’s external auditors’ panel of CA firms
5. EMPANELMENT OF EXTERNAL AUDITORS (CA FIRMS)
There will be no separate panel of Concurrent or Revenue Auditors. Bank will maintain only one external
auditors’ panel of CA firms which will be utilized for concurrent audit as well as revenue audit. Empanelment
and qualification guidelines shall be covered under concurrent audit policy.

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6. FEE STRUCTURE OF EXTERNAL AUDITORS (CA FIRMS)

a) Travelling Expenses in addition to the above shall also be admissible for outstation assignments:
b) Travelling Expenses will be admissible from the nearest branch office of the firm e.g., if an auditor based
in Delhi has a branch in Jalandhar and he has been allotted branches at Jalandhar, no travelling expenses
shall be admissible as it will be treated as local audit. It is immaterial whether the audit team has been
deputed from Delhi or any other station.
c) Second AC to and fro railway fare by the shortest route will be paid. The ticket Nos., Name of train,
date of travel, time, etc., must be mentioned in the T. A. Bill. The actual fare or 2nd AC train fare, whichever
is less will be payable to maximum two persons. In case ticket number is not given, ordinary bus fare
will be reimbursed.
d) Wherever journey is undertaken by any other mode of transport, i.e., other than rail, the documentary
evidence like bus tickets, taxi bills, stamped receipts, petrol bills in case journey is undertaken by own car,
etc., are to be enclosed. Prior permission from ZAO of respective branches is necessary for
undertaking journey by own car/taxi. In all such cases the entitlement of journey expenses, will be
restricted to 2nd AC or actual fare, whichever is lower.
e) The branches allotted are to be audited at a stretch, i.e., auditors are not expected to discontinue or return
to their HQ/Branch Office till the entire assignment allotted to them is completed.
f) The TA Bill must accompany statistical form duly certified by the Branch Manager. In case of non-
submission of the same, the payment may be withheld.
g) Supplementary claim, if any, must be lodged with ZAO within 1 time after receipt of their payment.
No claim will be accepted after the expiry of 1 month.

All payments will be made by the concerned ZAO. All claims for Fees are to be prepared in the prescribed format
and one bill is to be raised for all the branches audited. No part/advance payments will be made. Stamped
receipt should be sent on receipt of payment.

7. DISEMPANELMENT OF EXTERNAL AUDITORS (CA FIRMS):

If the CA firm is found indulged/indulging in any activity contravening the interests of the Bank such as data
stealing, data sharing or any irregularity, negligence or deficiency in services as per the terms of appointment
and scope of work as per Revenue Audit Policy is observed, the allotment is liable to be cancelled and the CA
firm may be disempaneled after giving an opportunity to be heard.

In case a CA Firm demits an audit assignment as it does not want to continue or chooses to resign voluntarily,
the name of such CA Firm may be struck off from the Bank’s Panel of CA Firms. Head of internal audit will
be the competent authority for disempanelment / delisting / striking off of a CA Firm from Bank’s panel on
recommendations of Zonal Audit Office.

8.
Efforts should be made to recover the undercharges, if any, during the course of revenue 30 days
audit itself. Undercharges otherwise must be recovered within ____from the date of
receiving the revenue audit report at the branch

9.
Efforts should be made to refund any excess recoveries from / short payments made to 30 days
the customers during the course of revenue audit itself. Refund of excess recoveries from
/ short payments made to the customers otherwise must be made within ____from the
date of receiving the revenue audit report at the branch

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10. TIME-FRAME FOR CONDUCTION OF REVENUE AUDIT:

Type of Branch No. of Working Days
Small Branch/ RCCs/CDPCs/CPPCs/CASA Back Offices/RAM/ISB/ TFCs/ 1
Circle SASTRA/ Zonal SASTRA
Medium Branch/ CBBs/Hybrid RAM/ MCCs 2

Large Branch /LCBs/ELCBs/PNB Gift City 3

▪ Further, ZAO Head may extend the no. of days allowed for revenue audit on case to case basis.
▪ The audit reports on the prescribed formats shall be submitted in triplicate by the auditors as under: 1.
Branch 2. Circle Office / Zonal Office 3. Zonal Audit Office
11. Timeline for closure of Revenue Audit Reports
Type of Branch Within
Small/Medium/Large branches/ offices/ISBs/PNB Gift City/DIFC Dubai 45 Days

LCBs/eLCBs/CBBs/MCCs/IBBs/AD Branches/ PLP/HPLP 3 Months

After recovery of the entire undercharges detected or its waiver by the competent authority, respective
controlling office (Circle office/ Zonal Office/IBD HO) shall recommend for closure of reports to the authorities
responsible for closure (Zonal Audit Office) as applicable to the branch. In some cases, controlling offices
(CO/ZO) may disagree with the undercharges, detected / reported by the auditors in their Revenue Audit
Reports. Such ‘Wrongly Reported Undercharges’ may be waived by the Head of Zonal Audit Office concerned,
if he/she is satisfied that the reported undercharges are not in compliance with the Bank’s extant rules /
guidelines.

12.
In case the file is not closed within the stipulated period, the concerned ____shall examine Controlling
the staff accountability of the erring officials Office

13.
In cases where malafide, gross negligence, dereliction of duty and repetitive nature of Irrespective of
undercharges (even in single account) is pointed out by the auditor, staff accountability amount
action is required to be initiated at Circle Office level/Zonal Office level (in case of involved
LCBs/eLCBs/CBBs/MCCs/IBBs/AD Branches)

14.
While submitting Revenue Audit Report, auditor is also required to indicate the name of ₹25000/- &
erring officials in individual incidences of undercharges of _____besides comments on staff above
accountability

15.
In cases where continuous leakage of revenue in a branch in any particular account(s) is
pointed out by auditor(s), or observed otherwise, staff side accountability be initiated.
Such staff accountability action will be initiated. Multiple instances of concessions in all Continuous
type of charges which are not approved by the competent authority will be considered Leakage
as_______

16.
The report for the quarterly revenue audit of branches shall be submitted by ___ of the 10th
succeeding month after completion of every quarter

17.
The report for annual revenue audit shall be submitted by ____every year 28th of
February

18.
In case the Report is not submitted within 15 days from the date of completion of Audit 10%
of the unit, a penalty of ____ of the audit fees will be imposed on External Concurrent
Auditors (CA Firms).
19.
Allotment of Branches for conducting Revenue Audit from CA Firm shall be done by the respective Zonal Audit
Offices from the panel of concurrent auditors as provided by IAD-HO.

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20. A CA firm may be allotted maximum of ______

5 Branches
The endeavour shall be to allot the branches which are in proximity to each other to enable
the audit firm to do the work timely and conveniently. It is desired that for conducting
revenue audit of branches, the person from the CA firm conducting audit must have the
minimum qualification of CA inter (IPCC) and the audit report shall be signed by a CA
on behalf of the firm.
21. SELF REVENUE AUDIT BY BRANCHES:
In order to avoid unpleasant situations arising out of late detection of undercharges, if any, all branch
Incumbents will do self-revenue audit of their respective branches as at the end of every month. The branch
Incumbents may make use of various R-Audit reports available in MIS as well as reports available in EDW under
PNBEDW>IAD Folder.
Details of various R-Audit Reports are available at Knowledge Centre > Knowledge Repository > Manuals
> IAD > Revenue Audit Manual.

The branch Incumbents will submit a certificate to this effect to their respective controlling offices, confirming
as under –
Certified that self-revenue audit of BO ……………….. (D.No. ………) has been done as at the end of (month)………
/ … (year). It is further certified that no undercharges were detected during the revenue audit done at the
branch level.
OR
Certified that self-revenue audit of BO ……………….. (D.No. ………) has been done as at the end of (month)………
/ … (year). It is further certified that undercharges to the tune of ₹ ………… were detected during the revenue
audit done at the branch level. It is further certified that these undercharges have been recovered by the
branch.
The branches are required to submit the above certificate to their respective controlling offices latest by 5th of
the following month.

22. _____will be the competent authority for approval of new Revenue Audit Templates
ACE
whereas HIA will be the competent authority for approval of any changes /modifications
/amendments in the templates.

Ref. Circular: IAD Cir No.4/2024 Dt. 16.02.2024

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F2 Whistle Blower Policy 2024-25

(For All Branches/Offices including Branch at GIFT City Gujarat and PNB Cards and Services Ltd.)

1. OBJECTIVE
To establish a mechanism to receive protected disclosure relating to any allegation of corruption or wilful
misuse of power or wilful misuse of discretion against any employee of the bank and to inquire or cause an
inquiry into such disclosure and to provide adequate safeguards against victimization of the person making
such protected disclosure and for matters connected therewith and incidental thereto.
2. Acts that may be reported under this Policy:
i.Criminal offence (e.g. frauds, corruption or theft) committed/ likely to be committed.
ii.Failure to comply with legal / regulatory provision
iii.KYC/AML violations to provide some undue advantage to anyone.
iv. Breach of client promises by the Bank
v. Bank funds used in an unauthorised manner
vi. Sexual or physical abuse of a member of staff, service recipient or service provider.
vii. Any other form of improper action or conduct
viii.Information relating to any of the above deliberately concealed or attempts being made to conceal the
same.
ix. Fraudulent activity in an account.

3. Chairman of
Competent Authority to deal with the protected disclosure
Audit Committee
of Board
4. ELIGIBILITY:
Various stake holders of the bank are eligible to make Protected Disclosures under this policy. These
stakeholders may fall into any of the following broad categories:

i. Directors of the Bank

ii. Employee of the bank
iii. Employees of other agencies deployed for the bank activities, whether working from any of the bank’s
offices or any other location.
iv. Contractors, vendors, suppliers or agencies (or any of their employee) providing any material or service
to the Bank
v. Any other stakeholder

5.
Every disclosure made as per the provisions of this Policy shall be treated as ____before Public Interest
the Competent Authority Disclosure

6.
Every protected disclosure shall be made in writing or ______in accordance with the
By electronic
prescribed procedure, containing full particulars and be accompanied by supporting
mail
documents, or other materials, if any

7.
No action shall be taken on public interest disclosure by the Competent Authority, if the
disclosure does not indicate the _____of the complainant or the _______of the Identity
complainant is found incorrect
8.
Whistle Blower can make a disclosure against any employee of the bank upto level of CGM
_______
9. CVC or
Disclosure against any Director, ED, MD&CEO and Chairman etc. it can be lodged under
Govt. of India PIDPI regulations to Designated Authority like__ Secretary, DFS

10. 45 days
The competent authority shall make discreet inquiry within maximum period of ____to
ascertain whether there is any basis for proceeding further to investigate the disclosure

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11.
Competent authority shall not take notice of the disclosure to the extent that the
disclosure seeks to reopen such issue- if the protected disclosure is made after the expiry
7 years
of ____from the date on which the action complained against is alleged to have taken
place
12.
All reports received in writing or documented along with the result of investigation 7 years
relating thereto, shall be retained by the bank for period of ___from the date of disclosure
13. CVO
Any disclosure relating to Fraud and subject matters having vigilance implications will be
brought to the notice of the

14. Chairman, ACB

The Whistle Blower shall lodge the disclosure to the ___in a closed/ secured envelope
marked as “Disclosure under the provisions of Whistle Blower Policy”

15. Chairman of ACB

Whistle Blower can disclose through email at [email protected] which will be
owned by

16. Board &

All the disclosure received under this Policy will be opened in the presence of Chairman
Coordination
of the ACB, by an authorized official of_______, designated in this regard by Chairman,
Division
ACB

17.
Once, the Chairman, ACB decides that disclosure can be considered under the Whistle
Unique
Blower Policy, the authorized official will enter it in a Corporate Register containing brief
Reference
particular of the disclosure received under this Policy. He / she shall assign a ______to
Number (URN)
each disclosure. All interoffice correspondence in respect of disclosures received under
Whistle Blower Policy will be done citing only _______ and not the name of Whistle
Blower.

18.
For disclosure received through email at [email protected], password shall be
Chairman, ACB
allotted to the_____. After examining the email, if he decides that this disclosure can be
considered under the Whistle Blower Policy, he will forward mail to the authorised official
for entering in the Corporate Register and assigning a Unique Reference Number

19.
The authorised official of Board & Coordination Division will furnish a brief note covering
all details about the matter that Whistle Blower wishes to report. Authorised Official
should not mention in this note the name or any other particulars that may identify the
Whistle Blower.
Fraud Risk
The aforesaid note along with instruction of Chairman of ACB should be sent along with Management
a forwarding letter / email message to _____for further investigation in the matter and Division (FRMD)
to take appropriate action

20. HO: FRMD/ Vigilance (for matters referred to CVO) may investigate the disclosure at its Quarterly Basis
own / may assign the investigation to any official in the field or may request HO: IAD to
get the investigation done from any Auditor/ Senior Official. FRMD will put-up status to
the ACB on ________
21. If there is any serious issue involved in any type of disclosure, the matter shall be brought
to the notice of _____ MD & CEO
22. Employment related concerns of routine nature, i.e., salary, perquisites, promotion, Postings, Transfers,
performance appraisal, incentives, LFC, etc., should be reported through normal channel meant for the purpose
and not under Whistle Blower Policy
(Ref. IAD Circular No.12/2024 Dt.26.03.2024)

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F3 Policy for Engagement of Retired Senior Officers of PSBs for

conducting Credit Audit 2024-25
1. Scope and Applicability

▪ The Policy is for Engagement of Retired Senior Officers of ____having specialization in Scale IV &
Above
Credit & Forex of Public Sector Banks for conducting Credit Audit of selected high value risk
rated loan accounts.
▪ External Credit Auditors (ECAs) as above will be allotted Mid Corporate and Large Corporate
Borrowal Accounts for Credit Audit which is as under:

▪ The eligibility criteria for engagement of Retired Senior Officers Honorably Retired Senior
Officers Scale-IV & above (who have not resigned, have not been
suspended/dismissed/removed/compulsorily retired from bank’s service), as per cut-off
date in the circular inviting application for selection, having satisfactory past service record
15 Years or
in Public Sector Banks and experience of minimum ____as an officer in the bank, provided
more
there is no vigilance related penalty or no major penalty imposed by the bank during entire
service period.
▪ The Retired Senior Officers must have experience of handling mid/large corporate borrowal
accounts as under:
Category Accounts with aggregate credit Experience required
exposure from our bank
Group A Accounts Not exceeding ₹250.00 crores Minimum 3 years’ experience of
handling mid/large corporate
borrowal accounts
Group B Accounts Exceeding ₹250.00 crores Minimum 5 years’ experience of
handling mid/large corporate
borrowal accounts
However for accounts of AD branches/specific accounts having foreign exchange
transactions/dealings, the retired senior officers, in addition to aforesaid experience, should
have a) Intensive Foreign Exchange training or b) Diploma/Degree in Foreign Trade/Foreign
Exchange Business or c) one year experience in Foreign Exchange Business.
▪ The applicant shall be allowed to serve as External Credit Auditor for period of ____ or till
attaining the age of 65 years, whichever is earlier, subject to his /her medical fitness to 5 Years
perform the required job of Credit Audit. The retired senior officers will be required to
submit a medical fitness certificate issued by qualified Registered Medical Practitioner at the
time of submission of Non-Disclosure/Confidentiality Agreement for engagement as Credit
Auditor.
2. Remuneration:
Consolidated remuneration per account audited by External Credit Auditor would be paid as under:
Category Accounts with aggregate credit Consolidated Remuneration
exposure from our bank
Group A Accounts Not exceeding ₹250.00 Crores ₹ 10000/-
Group B Accounts Exceeding ₹250.00 Crores ₹ 12500/-

Bank will cover all the locations by Engagement of Credit Auditors. Where External Credit Auditors are not
available at a location, our Internal Auditors will be deputed for credit audit function

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3. Time Frame for Credit Audit

Category Accounts with aggregate credit Time frame for completion
exposure from our bank of Credit Audit
Group A Accounts Not exceeding ₹250.00 Crores 2 days
Group B Accounts Exceeding ₹250.00 Crores 3 days
4. Review of Performance:
i) The performance of the Retired Senior Officers engaged as External Credit Auditors shall be reviewed
annually in first quarter of the financial year.
ii) The performance of the External Credit Auditors will be scrutinized according to the following criteria and
will be placed to Committee of four GMs:
a) Average number of days taken for audit.
b) Whether all aspects of Credit Audit are covered in the reports submitted, i.e. reports are not sketchy
and are complete in all respects.
c) Ability for continuing further audit, i.e. age is below 65 years, ECAs has not remained on long vacation
due to health or other reasons and not employed full-time in our Bank/other Public Sector Banks or
any other occupation, like Empanelled Retired Officers (ERO’s), etc.
d) Any violation of terms and conditions of Engagement as External Credit Auditor or Non-disclosure
Agreement by the External Credit Auditor.
e) Any other factor which may have an impact on completion of audit plan of the Credit Audit & Review
Department.
iii) A committee comprising of 4 GMs from Inspection & Audit Division, Credit Review & Monitoring Division,
Integrated Risk Management Division and Corporate Credit Division will recommend the names of the
External Credit Auditors with satisfactory performance who will be allowed to continue and those who are
to be removed from the panel, for approval by domain ED of IAD.
Inspection & Audit Division will be convenor of meeting of the committee and any 3 GMs out of aforesaid
4 Divisions will make a Quorum.

iv) The record of disempanelment of such External Credit Auditors shall be maintained at Credit Audit &
Review Department, HO so that such External Credit Auditors are not engaged again.
5. Criteria for Allotment of Accounts for Credit Audit
i) Allotment of accounts shall be made subject to availability of eligible accounts for Credit
Audit vis-à-vis available pool of External Credit Auditors so as to ensure equitable allotment
of accounts to the extent possible. An External Credit Auditor shall be allotted a maximum
7
of 7 Accounts of Group A or maximum 5 accounts of Group B, total accounts not
exceeding _____ in any combination of Group A & Group B during a month.
ii) Accounts for Credit Audit shall be allotted to the External Credit Auditors as far as possible
from their chosen preferred zone(s).
6. Process for Identification & Selection:
▪ A committee comprising of 4 GMs from IAD, CRMD, IRMD and Corporate Credit Division
will recommend the names of such shortlisted Retired Senior Officers to the Domain 3 GMs
Executive Director of IAD for approval. Inspection & Audit Division will be convenor of
meeting of the committee and any ____out of aforesaid 4 Divisions will make a Quorum Domain ED
▪ _____will approve the names of Retired Senior Officers for conducting Credit Audit as per of IAD
existing policy.
Departmenta
▪ ______, Credit Audit & Review Department, shall review the allotment of eligible accounts l Head
to External Credit Auditors as per their preference.
Ref. Circular: IAD Cir No.13/2024 Dt. 26.03.2024

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F4 Policy For Legal Audit of Title Documents in Respect of Large Value

Loan Accounts 2024-25
Background
▪ RBI vide its Circular No. DBS.FRMC.BC.No.7/23.04.001/2012-13 dated 07.06.2013 & Para 9.1 of Circular No.
DBS.CO.CFMC. BC.No.1/23.04.001 /2016-17 dated 01.07.2016 has directed as under: -

“Bank should subject the title deeds and other documents in respect of all credit exposures of ₹5 Crore and above to
periodic legal audit and re-verification of title deeds with relevant authorities as part of regular audit exercise till the
loan stands fully repaid.”
▪ In view of the above, Bank has introduced guidelines, vide IAD circular No. 33/2021 dated 20.12.2021 on conducting
Legal Audit of title deeds and other documents in respect of large value loan accounts with credit exposure of ₹5
Crore (Fund Based & Non-Fund Based) & above

Scope and Applicability

i. Examination of genuineness of title deeds and other documents by re-verification of title deeds with relevant
authorities and enforceability of same in an appropriate court of law.

ii. All mortgage related documents, title deeds in respect of standard accounts with aggregate credit exposure of ₹5
Crore (FB & NFB) & above, that are mortgaged with the Bank.
iii. Consortium Arrangement : Legal Audit shall be done by our Bank, where we are the lead bank and the original
documents (Loan & Mortgage) are held by us. In accounts where another Bank is the lead bank, our bank shall
take up the matter with the lead bank / the bank holding original mortgage documents for conducting legal audit
and obtain a copy of their legal audit report / certificate and keep on bank record.

iv. Multiple Banking Arrangement (MBA) accounts, if mortgage documents have been obtained individually by
our Bank for the credit facilities granted to the borrower, periodical legal audit has to be conducted by our Bank.
In accounts where original property documents are held with other bank/ security trustee, our bank shall take up
the matter with that bank for conducting legal audit and obtain a copy of their legal audit report / certificate from
that bank and keep on bank record.

v. In respect of accounts where bank has filed recovery suit, no legal audit is required to be conducted.

vi. ZAO Head will be empowered to allocate borrowal accounts for conducting legal audit, irrespective of amount of
credit exposure & periodicity, as deemed fit by him, on case to case basis with proper justification

1.
In case of non-availability of empanelled Advocate, ZAO Head, in consultation with HO, Law
Division/Zonal Manager of respective Zone, may assign Legal Audit to ______posted in
Law Officer
Circle/Zone, who is not involved in such account in any manner
(in any scale)

2. Periodicity:
▪ In case of fresh sanction (including take over) /Enhancement/ change in security (IP), i.e.,
3 years
offering Fresh securities or substitution of existing IP, every _______from the date of first
mortgage
▪ Subsequent Legal Audit will be conducted in eligible standard accounts after every 3 years Last Legal
Audit
from the ____

▪ In case the Legal audit is not being completed within the quarter of due date of Legal Audit, Overdue
it will be treated as_____
(e.g.- The Legal Audit was due on 30.11.2026 & it will be treated as overdue on 01.01.2027)

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3.
CLOSURE OF LEGAL AUDIT

▪ The deficiencies/irregularities observed by an empaneled Advocate / Law Officer in the Legal Audit report
will be processed, listed and communicated by the Zonal Audit Office to the concerned Branch under copy to
Circle Office, Overseas Branch under copy to IBD, HO & LCB/ELCB for necessary rectification on priority basis.

▪ Branch, Overseas Branch/LCB/ELCB will rectify the deficiencies/irregularities within maximum 3 months
from the date of receiving such communication and submit the confirmation to ZAOs for closure
of the legal audit report. In case of Branches/CBB/MCC/HPLP, the confirmation will be submitted through
Circle Office.

▪ The concurrence of the Bank’s Internal Law Officials be obtained before accepting the compliance to the
discrepancies flagged during Legal Audit.

▪ Competent authority for dropping of irregularities & closure of audit reports of :

✓ HO Power sanctioned accounts: ZAO Head
✓ Other Accounts: Second-man at ZAO
▪ Competent authority for dropping of irregularities & closure of audit reports of :
✓ DIFC Dubai: ZAO Head Delhi
✓ PNB GIFT City: ZAO Head Ahmedabad
▪ If the branch is under the purview of Concurrent Audit, the Concurrent Auditor of the Branch will vet the
reply and monitor the progress of rectification of the deficiencies /irregularities.

▪ If the deficiencies/irregularities are not rectified within the (3 months) stipulated time, the same will be
carried over to next Risk Based Concurrent Audit (RBCA) Report or Risk Based Internal Audit
(RBIA) Report, as the case may be. Such outstanding deficiencies/irregularities of legal audit in a loan
account, incorporated in the RBIA Report, will be monitored and followed-up till the logical end. Further, such
irregularities will be dealt as per the RBIA policy and further action be taken in accordance with Staff
Accountability policy of the bank.

4.
Audit Committee of Executives (ACE) will be the competent authority for approval of audit CGM-IAD
templates. Further, _____, in consultation with Law Division, HO, will be the competent
authority for subsequent modification in audit templates

5. ▪ Consortium/Multiple Banking Arrangement advances, where original title deeds of IPs and other
related documents creating mortgage are held with the lead bank / security trustee, a certificate from the lead
bank/security trustee will be obtained and to be recorded in IAMS by respective branch/ office. In case our
Bank is lead Bank, the Legal Audit is to be conducted by our Bank / as per decision of consortium and expenses
to be borne as per decision of consortium.

▪ If multiple properties are mortgaged/charged in any account & the same are located at different centres,
the legal audit in that case will be got conducted by the concerned ZAOs where the property is physically
located. However, the responsibility to conduct such audit shall remain with the ZAO under whose jurisdiction
the account is being maintained, e.g., if an account is opened at LCB Delhi wherein 2 properties are mortgaged
at Delhi & Mumbai then the legal audit in that case will be got conducted by ZAO Delhi & ZAO Mumbai,
respectively. Since LCB Delhi will send the information regarding the account to ZAO Delhi only, it will be the
responsibility of ZAO Delhi to conduct the legal audit of the property situated at Mumbai conducted through
ZAO Mumbai, i.e., the responsibility to conduct legal audit will remain with ZAO Delhi only. In such cases, it
will be the responsibility of the owner ZAO to monitor and drop the irregularities and to close the legal audit
report

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6.
REMUNERATION TO PANEL ADVOCATES
(Ref.: Law Division Circular No 03/2023 dated 01.04.2023)

Further, the above fee shall be subject to a maximum ceiling of ₹15000/- per borrower + GST. In case IPs are
located at different centers, maximum fee payable will be ₹15000/- per Centre + GST.

For Example: - If an account having multiple properties located at different centers, i.e., Delhi (Metro), Mumbai
(Metro), Chennai (Metro), and Rohtak (Semi Urban), then maximum celling is applicable for a particular Centre
only.
Centre No. of IP Professional Eligible Max professional fee Payable
mortgaged Fee per IP Professional Fee to Advocate (Negotiable)*
Delhi (Metro) 5 ₹4000/- ₹20000/- ₹15000/-
Mumbai (Metro) 2 ₹4000/- ₹8000/- ₹8000/-
Chennai (Metro) 1 ₹4000/- ₹4000/- ₹4000/-
Rohtak (Semi Uran) 1 ₹2500/- ₹2500/- ₹2500/-
Total 9 ₹34500/- ₹29500/-

*In case non availability of Advocates for conducting legal audit within the prescribed fee/ expenses Limit, the
matter shall be referred to HO IAD by ZAO’s with justification. The same will be dealt at HO: IAD as per Law
Division Cir No.03/2022 dated 31.03.2022, amended time to time, in respect of “Financial Powers relating to Law
Matters”.
Besides the said professional fee, actual expenses like search fee paid to Sub Registrar Office / revenue authority,
supported by receipts/bill, may also be paid. However, no conveyance expenses will be payable.

7.
ROLE OF EMPANELLED ADVOCATE/LAW OFFICER

a. Verification of Title deeds & chain of Title deeds and its genuineness.
b. Verification of other documents.
c. Verification of entries in CERSAI (Proper marking of lien in favour of the bank to be checked in CERSAI portal)
d. Verification of Charge with ROC, if the title deeds are in the name of company.
e. To examine the enforceability of the Title Documents deposited with the Bank for Creation of
Mortgage/Security Interest in an appropriate court of law.
f. To certify the securities available in the account are enforceable under SARFAESI Act.
g. Mutation done in favour of the Bank (If applicable).
h. Permission of the Lessor/NOC to mortgage obtained

8.
The empaneled advocate / law officer will submit the legal audit report in the prescribed format 10 days
within ______of allotment of legal audit as under

9.
CLOSURE OF LEGAL AUDIT:

All the deficiencies/irregularities should be rectified within maximum _____from the date of 3 Months
receiving such communication.
The flow of compliance to the discrepancies shall be as under: -
▪ Branch/CBB/MCC/HPLP -> Concurrent Auditor (if posted in Branch) -> Law Officer (posted
at Circle/Zone) -> Circle Office -> ZAO
▪ LCB/ELCB -> Concurrent Auditor -> Law Officer (posted at LCB/ELCB) -> ZAO.
▪ Overseas Branch -> Concurrent Auditor -> Law Officer (posted at HO, Law Division) ->
ZAO

Ref. Circular: IAD Cir No.14/2024 Dt. 01.04.2024

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F5 Concurrent Audit Policy 2024-25

(For Domestic and Overseas Branch/Offices)
1.
The Concurrent Audit System is a part of Bank's early-warning system to ensure timely detection of irregularities
and lapses, which helps in checking of repeated / recurring violations of the internal and regulatory guidelines,
controlling risks and in preventing fraudulent transactions at the branches.

2.
Coverage
As per RBI guidelines, the scope of work to be entrusted to concurrent auditors, coverage of business/branches,
etc., is left to the discretion of the head of internal audit of banks, with the due prior approval of the Audit
Committee of the Board of Directors (ACB) of the bank. (The earlier stipulation of coverage of minimum 50% of
deposits and of advances has been removed).

Minimum areas of coverage are as below:

i. Cash transactions including physical verification of cash, etc.
ii. Loans & Advances including physical verification of securities, delegation of Powers for sanction, Security
Charge Creation, end use verification of funds, monitoring of accounts with excess drawings, monitoring
of projects, etc.
iii. Adherence to KYC / AML guidelines including monitoring of transactions in accounts, compliance with
Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS), monitoring of
transactions in new accounts/staff accounts, reporting of CTR/STR, etc.
iv. Remittances/ Bills for Collection including SWIFT transactions, monitoring of overdue statements (bills
purchased / discounted / negotiated, etc.).
v. House Keeping including reconciliation of accounts, monitoring of General Ledger/Subsidiary General
Ledger/Parking Accounts, opening of internal accounts, etc.
vi. Treasury operations.
vii. Non fund based business.
viii. Foreign Exchange transactions.
ix. Clearing transactions.
x. Verification of Merchant Banking Business.
xi. Verification of Credit Card / Debit card business.
xii. Conduct of employees, mis-selling of products, etc.
xiii. Compliance to RBI guidelines and internal Policy guidelines issued from time to time.

All Centralized Processing Centres (business origination and monitoring) are covered under concurrent audit.
3.
Bank may utilize the services of an Internal Auditor or an External Auditor (empanelled CA Firms / empanelled
Retired Officials) for concurrent audit of an identified branch / office solely at its own discretion.
However, in case of following branches, only Internal Auditors will be assigned for such Audit:

i. MCC*/ RAM/ Hybrid RAM/ LCB/ ELCB/ CBB/ CIRCLE SASTRA/ ZONAL SASTRA/ TFC/ ISB/ PNB GIFT City,
ii. Branches with business above ₹2500 Cr as per last financial year,
iii. Back offices and HO Divisions,
iv. Any other branches or departments where, in the opinion of the bank, concurrent audit by an internal
auditor is desirable. (Head of the Internal Audit shall be the competent authority for such assignment).

*In case of shortage of internal auditors, Head of Internal Audit may appoint EROs of scale V & above in the MCCs.
4.
More than one concurrent auditor may be appointed at aforementioned branches and
any other branch or department, where in the opinion of the bank, such additional
posting is desirable with reference to the scale of business and Head of internal audit
shall be the competent authority for such assignment. In case of PLP / HPLP, more
than one concurrent auditor may be appointed if the No of sanctions is above ____ 1000
during the last FY.

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5.
Selection of the Branches and other offices for Concurrent Audit will be done by Audit Committee
____Audit Committee of Board of Directors (ACB) shall be kept informed of the of Executives
developments / progress on half yearly basis by _____ (ACE)

6. Framework of the Policy:

1. Risk Assessment 2. Direction of Risk
Risk Assessment Methodology covers:
a) Business Risk:
Credit Risk, Operational Risk & Earning Risk
b) Control Risk:
Operations Mgmt., Compliance & Branch Mgmt.
c) Overall Risk:
Business Risk & Control Risk Variation of percentage marks in the same level up to +3%
3. Audit Plan or –3% will be considered as STABLE. Variation of marks in
the same level more than +3% or –3% will be considered
Annual audit plan for such Audit shall be based on as INCREASING/DECREASING as the case may be
following criteria: Based on the level and direction of risk, the Risk
a) Coverage of Bank’s business as a whole assessment ratings could be any of the 15:

b) All High risk branches

RBI vide Circular dated 18.09.2019 has left the
coverage of business/ branches, etc., to the discretion
of the head of Internal Audit with due prior approval
of ACB. However, Bank shall cover more than 70%
of total advances and 35% of total deposits of
the Bank.

All branches rated as High risk during last RBIA / RBCA

shall invariably be covered in the concurrent audit
plan.

Apart from the above, parameters like volume of SMA

accounts, percentage of fresh slippage accounts to
total NPA accounts, volume of EWS alerts, etc., shall
be taken into consideration while preparing audit plan
for concurrent audit.

4. Audit Methodology
The audit methodology covers level of transaction testing, prioritizing audit areas, compliance audit, etc.
i. Level of transaction testing :
▪ 100% transaction testing is to be done in respect of manual transactions, irrespective of ‘risk
category’ and ‘risk direction’ of the branch
▪ Concurrent Auditor to check all transactions entered / posted by the branch staff, irrespective of the
amount.
▪ Testing in respect of system driven transactions is to be done on sample basis, i.e., at least upto
10 to 20% of the total system driven transactions.
ii. Compliance Testing: 100% compliance testing is to be done

7. Concurrent Audit of Overseas Branches

The concurrent audit of overseas branch, i.e., PNB DIFC Dubai, is to be done through its back office by an
Internal Chief Auditor stationed.
However, audit of front office, i.e., PNB DIFC Dubai, shall be conducted on quarterly basis. Quarterly audit,
i.e., June, September, December shall be conducted off site and quarterly audit for March quarter shall
be conducted onsite along with annual audit by the same auditor conducting annual audit.

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8.
Type of reports submitted by Concurrent Auditors 3
(Daily/Monthly/Quarterly)

9. ▪ Time for submission of Monthly Report by in case of 1 branch 3rd

▪ Time for submission of Monthly Report by in case of 2 branches 5th
▪ Authority to whom Report to be submitted Branch Head
10. ▪ Time for submission of Quarterly Report by ______ of following month in case of 7th
1 branch
▪ Time for submission of Quarterly Report by ______ of following month in case of 2 15th

branches
ZAO
▪ Authority to whom Report to be submitted_____

11. Prescribed Period for Closure of Audit Reports:

Monthly: ___including period allowed for its submission 15 days
Quarterly: One month from date of release of report. One Month

12.
Daily and monthly reports shall be closed by Concurrent
Auditor

13.
Quarterly report of branches with Incumbents upto Scale IV under Concurrent Audit Second Man of
shall be closed by the_____ Respective ZAO

▪ The observations shall be dropped online by CM at ZAO

14.
Quarterly report of branches with Incumbents Scale V and above under Concurrent ZAO Head
Audit shall be closed by the_____

The observations shall be dropped online by AGM at ZAO.

15. DGM/ designated
Quarterly report of Circle SASTRA/ Zonal SASTRA/ RAM / Hybrid RAM / PLP/CPLP/ CAML
DGM at ZAO
MCC/CPLP/ CAML / SWIFT/ CPPC/ Depositories/ Back offices/ /IBB/ AD Branches etc
shall be closed by the____

The observations shall be dropped by CM/AGM at ZAO

16.
▪ Quarterly Audit Report of HO Divisions /TFC/ Back office of Overseas branch i.e. Head of Internal
PNB DIFC Dubai, PNB GIFT CITY shall be closed by Audit

▪ Prescribed Period for Closure of Audit Reports : ___ from date of release of report 1 Month
Sample checking to check the quality of closure of audits reports of TFCs by the ZAOs
shall be done by the compliance section at IAD: HO.
17.
The Irregularities/observations pointed out in RBIA/RBCA that carry high risk to the Significant Audit
bank, resulting/may result in loss to the bank of ₹1 Crore and above per account, findings
leads to non-adherence of regulatory/statutory guidelines and can adversely affect
bank’s reputation.

18.
List of indicative audit findings that may be treated as Significant are mentioned as under:

i. BGs invoked/Devolvement of LCs but not regularized within 3 months.

ii. Unit Closed/Not working for more than 3 months.
iii. Key Management Personnel Changed without informing the Bank.
iv. Disbursement without PDC/Non Creation of Asset after Disbursement.

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v. Frauds Detected.
vi. Impersonation.
vii. Genuineness/non encumbrance of title deeds of the IPs to be mortgaged not ensured.
19. ZAOs will submit the Significant Audit Findings to IAD: HO within ____of completion of 10 Days
the quarter. ZAOs will also share the Significant Audit Findings with concerned Zonal
Offices (ZOs) for follow-up, monitoring & compliance.
The above findings will be ranked by IAD: HO on the criteria given below :

20. Significant audit findings of RBCA report of Trade Finance Centres (TFCs), Foreign
Treasury: HO &
Branch i.e. DIFC Dubai & Gift City shall be submitted by IAD: HO to______, within 10
IBD: HO
days of receipt of the report.
21.
______of the branch shall act as the coordinator of the concurrent audit The second in
command
22.
The Branch head shall proactively interact with the concurrent auditor of the branch at Once a week
least _____and discuss the irregularities reported
23.
Outsourcing of Concurrent Audit

▪ Retired Officers and Chartered Accountant Firms are being empanelled for concurrent audit of the eligible
branches of the Bank after approval by the Executive Director.

▪ A committee of 3 CGMs (IAD, Corporate Credit and HRDD) (in absence of CGM, senior most GM of the
division) along with DGM-IAD as convener is constituted for shortlisting of the applications so received.
▪ The names of such short-listed Retired Officers and Chartered Accountant Firms are recommended to the
Executive Director for approval. Further, Executive Director may relax the eligibility criteria in deserving
cases.
24.
Criteria for empanelment of Retired Staff of our own Bank

Eligibility
i. Retired honorably from our bank, in Scale III to VI. The officers voluntarily retired/ resigned/ suspended/
dismissed/ removed from Bank’s services shall not be eligible for the purpose.
ii. An experience of minimum of 20 years’ service in our bank and a satisfactory track record

iii. Experience of 10 years as an officer in - GBB/RAPC/ RAB/ Retail Hub/ RAG Cluster/ MCC/ RAM/ MSME
Cluster/ CLPC, MCB, LCB, CBB, CCBO, RCC, Zonal RC, ICPC, CASA Back Office, RC, ARM, CPPC, TFC, Service
Branch, DCO, Currency Chest. However, experience as Internal Concurrent Auditor (maximum upto 3 years)
at Branches will be considered as Branch experience
iv. Worked either as an Incumbent Incharge for a period of minimum 2 years
&/or

Handled credit portfolio of a branch as an officer for a period of 2 years.

&/or
Handled credit at CO / ZO/ HO level as an officer for a period of 2 years

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v. No vigilance (major/ minor) related penalty or non-vigilance (major) penalty imposed by the Bank during
the entire service period (subject to verification from available HRMS record & self-certification by the
concerned retired officer).
vi. A sound health, i.e., he/she must be medically fit to carry out the assignment of concurrent audit (a
certificate from a MBBS Doctor be submitted).

vii. An ERO on Bank’s panel for concurrent audit will not be eligible to be considered for any other panel of HO:
IAD and vice versa, viz. Panel of CARD Auditors.
Terms & Conditions for Retired Staff :
i. The tenure of the concurrent audit would be initially for one year and would be extended for a further period
of one year, based on the performance of the auditor in the first year, i.e., an ERO may have a tenure of
two years or till the completion of last quarterly audit assignment, whichever is later, based on “Satisfactory
Performance‟ of the auditor in every year (followed by a cooling period of minimum six months). Only in
case the panel of EROs is exhausted for an area, reassignment to an ERO post cooling but before 65 years
of his / her age would be considered at sole discretion of the Bank. Also, at the sole discretion of the Bank,
Concurrent Audit assignment of an external auditor (CA Firm / ERO) may be terminated even before expiry
of the term of assignment by giving one-month notice in advance.
ii. Assignment will be subject to review on Quarterly basis on the prescribed score sheet (Annexure – II B) as
on the last day of March, June, Sept., & December by the Incumbents of ZAOs. The consolidated feedback
report of external concurrent auditors shall be submitted to HO: IAD by 20th of the following month of
respective quarter.

iii. In case of unsatisfactory performance for 1 Quarter, a notice of explanation shall be served on the concerned
ERO, immediately after evaluation of performance, giving 15 days’ time to furnish reply. If the ZAO finds
the reply unsatisfactory or in case the reply is not received within the stipulated time period, a show cause
notice be issued to the ERO giving 7 days’ time to furnish reply. In case, the reply to show cause notice is
not satisfactory or not received, ZAO may recommend for dis-empanelment of such ERO in the subsequent
month and Executive Director will be the competent authority for such dis-empanelment.

iv. Branch assigned to Retired Staff of own bank appointed as auditor shall be within a maximum distance of
50 KMs from his / her place of residence
v. The eligible retired staff of own bank appointed as auditor will be given audit assignment of only one branch.
However, an ERO must not have worked in the Branch of Concurrent Audit assignment during the period of
five years immediately preceding the date of his / her retirement. Further, his / her scale at the time of
retirement must either be equivalent to or one step higher or one step lower than that of the present Head
of the Branch, which has been assigned to him as Concurrent Auditor. However, EROs retired as officers in
scale VI may be appointed in Scale IV branches

vi. An ERO must attend the Branch daily. He / she must not abstain without prior information to / approval of
the competent authority, viz. DGM, ZAO. However, a request of an ERO for an absence from the Branch, in
case of any exigencies & / or genuine grounds such as health, etc., may be allowed by the competent
authority, viz. DGM, ZAO. The competent authority may permit absence for a maximum period of two days
(separately or continuously) in a month, for which proportionate remuneration may not be deducted.
However, in case of absence of more than two days in a month by the ERO, proportionate remuneration
will be deducted for the total days of absence including the two days mentioned above.
Example – if an ERO remains on leave for two days – No deduction of remuneration; if an ERO remains on
leave for 3 more days – deduction of remuneration will be for 5 days {2 days + 3 days}. If the remuneration
is ₹25,000/- p.m., the ERO will be entitled to proportionate remuneration as under :

25000 X 25 / 30 = ₹20,833.
vii. IF an ERO applies to/remains on leave for more than 15 days, he/she shall have to submit resignation,
Further, ZAO shall ensure that in any case the branch does not remain unattended beyond 7 days

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viii. The ERO will be required to mark attendance in the branch through Bio-metric mechanism.

25.
Criteria for empanelment of CA Firms

Eligibility
i. It should be a partnership firm (including LLP) of Chartered Accountants having at least one partner as FCA
and the firm should have concurrent audit experience of minimum three years. Further, such CA firms with
any one of the partners having experience of concurrent audit of minimum three years may be considered
for empanelment even if experience of the CA firm in concurrent audit is less than three years

ii. The firm should be selected from the RBI panel as per gradation suggested for Branch Statutory Auditor
appointment

iii. a) CA firms which carry Statutory Audit Assignments for a year will not be considered for internal audit
assignment during that year and the next year. These instructions would even apply to firms of which a
partner or proprietor is engaged or to be engaged in internal assignment of the bank.
b) Associate concerns of CA Firms should not have conducted Statutory Audit of our Bank or its subsidiary
/ sister concern during the preceding year.
c) An audit firm in which a partner is also a partner / proprietor of firm entrusted with Statutory Audit
(central or branch) of the Bank is not eligible for appointment as concurrent auditor.
d) If any of the Directors of our Bank is a Director/Partner in a firm, such firm shall not be considered for
appointment as Concurrent Auditor.
e) Panel for concurrent auditors may be utilized for revenue audit purpose. However, CA firm assigned
concurrent audit, during a FY, shall not be assigned revenue audit during that particular FY and vice
versa.

f) The group of CA firms having any common partner, only one CA firm will be eligible for empanelment as
concurrent auditor.

iv. A dis-empaneled / debarred CA Firm will not be able to apply again for any audit assignment and will not
be considered for a fresh empanelment / re-empanelment.
v. Any CA firm which has been delisted by ICAI will not be considered for empanelment/ assignment/ re-
assignment

Terms & Conditions for CA Firms :

i. The firm should not sub-contract the audit work assigned to any outside firm or other persons even though
such persons are qualified chartered accountants

ii. A declaration to be furnished by the firm that credit facilities availed by the firm or partners or firms in which
they are partners or directors including any facility availed by a third party for which the firm or its partners
are guarantor/s have not turned or are existing as non-performing assets as per the prudential norms of
RBI. In case the declaration is found incorrect, the assignment would get terminated besides the firm being
liable for any action under ICAI / RBI guidelines.

iii. Tenure of a CA firm shall not be more than three years on continuous basis. Further, the CA firm will be
required to submit its credentials to the ZAO every year. The CA firm will need to reapply for concurrent
audit empanelment, after completion of tenure.
iv. The assignment of the External Auditor (CA Firms) would be initially for one year and extendable for a
further period of one year (maximum twice), i.e., a CA Firm may have a tenure of maximum three years or
till the completion of last quarterly audit assignment, whichever is later, based on “Satisfactory Performance‟
of the auditor in every year, followed by a cooling period of minimum one year. At the sole discretion of the
Bank, Concurrent Audit assignment of an external auditor (CA Firm / ERO) may be terminated even before
expiry of the term of assignment by giving one-month notice in advance.

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v. At any one point of time, not more than one audit assignment would be awarded to any single CA Firm
vi. No out of pocket expenses or travelling allowance / halting allowance would be paid to the concurrent audit
firm for carrying out the assignment. However, the service tax, education cess, etc., would be paid as
applicable from time to time. Further, a CA Firm may often be called upon by ZAO / HO for the purpose of
counselling, training, etc., for which, the Firm would not be entitled to claim any reimbursement for
travelling, halting, etc.

vii. The CA Firm must ensure that the Branch assigned to it must be attended by its authorised person as an
auditor on behalf of the Firm daily & timely without any excuse or exception whatsoever. One of the partners
(Chartered Accountant) of the CA Firm must also visit the branch at least once a week and have discussions
with the Branch Manager on audit related issues
However, a request of the CA Firm for an absence from the Branch, in case of any exigencies and / or
genuine grounds such as health, etc., may be allowed by the competent authority, viz. DGM, ZAO. The
competent authority may permit absence for a maximum period of two days in a month (separately or
continuously), for which proportionate remuneration shall not be deducted. However, in case of absence of
more than two days in a month by the representative of the CA Firm, proportionate remuneration will be
deducted for the total days of absence including the two days mentioned above.
viii.The representatives of the CA Firm will be required to mark attendance in the branch through Bio-metric
mechanism. A maximum number of three representatives of the CA Firm will be enabled to mark bio-metric
attendance
ix. Assignment will be subject to review on Quarterly basis on the prescribed score sheet (Annexure II A) as
on the last day of March, June, Sept., & December by the Incumbents of ZAOs. The consolidated feedback
report of external concurrent auditors shall be submitted to HO: IAD by 20th of the following month of
respective quarter

x. In case of unsatisfactory performance for 1 Quarter, a notice of explanation shall be served on the concerned
CA firm, immediately after evaluation of performance, giving 15 days’ time to furnish reply. If the ZAO finds
the reply unsatisfactory or in case the reply is not received within the stipulated time period, a show cause
notice be issued to the CA firm giving 7 days’ time to furnish reply. In case, the reply to show cause notice
is not satisfactory or not received, ZAO may recommend for dis-empanelment of such CA firm in the
subsequent month and Executive Director will be the competent authority for such dis-empanelment.

xi. In order to maintain the quality of Concurrent Audit of the Branch, the CA Firm must depute / post a person,
who must have ample experience and exposure of such kind of audits, preferably in a Public Sector bank’s
branch, and he / she must fulfil the following two conditions:

a. Minimum qualification should be CA Inter (IPCC)

b. Minimum 1 year experience of Bank audit
26.
The external auditor shall be allotted only ______of its office/residence, initially for a 1 Branch within 50
period of 1 year, further extendable based on satisfactory performance up to 2 years km
in case of EROs and 3 years in case of CA firms

27.
Cooling period of for EROs and CA Firms 6 Months and 1
Year respectively
However this cooling period for EROs be relaxed to 3 months. Head of internal audit
shall be the competent authority for such relaxation

28. ▪ Assignment of external auditors will be subject to review on quarterly basis and in
15 days’ time
case of unsatisfactory performance for 1 Quarter, a notice of explanation shall be
served on the concerned external auditor immediately after evaluation of
performance, giving _____to furnish reply.

▪ If the ZAO finds the reply unsatisfactory or in case the reply is not received within 7 day’s time
the stipulated time period, a show cause notice be issued to the ERO giving _____to
furnish reply. In case, the reply to show cause notice is not satisfactory or not

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received, ZAO may recommend for dis-empanelment of such ERO in the subsequent
month and Executive Director will be the competent authority for such dis-
empanelment.
29.
The external concurrent auditor must attend branch daily and mark biometric 2 Days Leave
attendance. A maximum of _______is permissible in a month on genuine grounds.
(with pay)
Thereafter proportionate remuneration shall be deducted. In case an ERO avails a leave
of more than 15 days, he/she shall have to resign. In any case, ZAO shall ensure that
no branch remains unattended beyond 7 days

30.
Dis-empanelment / Debar / Delisting of Retired Officers and CA Firms

i. The ERO will be immediately debarred if found indulged in other activities, financial / intermediary
activities with the Bank during their period of audit assignment. (IAD: HO shall maintain the data-base of
such debarred/dis-empanelled concurrent auditors)
ii. Further, a CA firm / ERO shall be dis-empanelled / debarred / delisted from the bank in case of:
a. Refusal to take up the allotted assignment & non-commencement / non- completion / non-
submission of audit report within prescribed period.
b. Dissolution / reconstitution of the firm under different name and style.
c. Performance of CA firm / ERO is not found satisfactory
d. CA firm fails to fulfill any of the laid down terms & conditions at any time.
e. Serious lapses detrimental to bank’s interests, if noticed.
f. Any other reason that Bank may deem fit and failing to act in a professional manner as laid down in
guidelines related to 'Code of Ethics for CA firms' by Institute of Chartered Accountants of
India(ICAI).
iii. When a CA firm or ERO refuses to take up the allotted assignment due to flimsy reasons, they may be
delisted from the Bank’s panel of concurrent auditors. However, the ZAO Head may decide whether the
reasons for refusal are genuine or not.

iv. CA Firms will be dis-empanelled by Executive Director as per review of “unsatisfactory performance” and
recommendations of a Committee of three CGM (IAD, Corporate Credit and HRDD) (in absence of CGM,
senior most GM of the division can recommend the same).
v. In case a CA Firm demits an audit assignment as it does not want to continue or chooses to resign
voluntarily, and so on, the name of such CA Firm may be struck off from the Bank’s Panel of CA Firms.
CGM (IAD) (in absence of CGM, senior most GM of the division) will be the competent authority for such
delisting of a CA Firm.

31.
Whenever fraudulent transactions are detected, they should immediately be reported to Inspection and Audit
Division (Head Office) as also to the Chief Vigilance Officer as well as Branch Managers concerned (unless the
branch manager is involved)

32.
Tenure: ACB shall decide the maximum tenure of external concurrent auditors with 5 Years
the bank. Generally, tenure of external concurrent auditors with a bank shall not be
more than _____ on continuous basis.

33.
As per RBI guidelines, the age limit for retired staff engaged as concurrent auditors 70 Years
may be capped at ______, however, the age limit for retired staff engaged as
concurrent auditors is capped at 65 years in our Bank

34.
Allotment of Audit Assignment to Retired Officers and CA Firms:
▪ _____ shall recommend for posting of external concurrent auditors at branches. ZAO
The competent authority for approval of concurrent audit assignments will be CGM
(GM-in absence of CGM).

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▪ No fresh assignment will be given to EROs during the last _____ preceding his 6 Months
completion of 65 years of age.

▪ In case, any ERO wants for re-allocation of ZAO, the ZAO shall recommend the CGM
(GM-in absence of
same and authority for approval will be_______.
CGM)
35.
No concurrent auditor, whether internal or external, shall be allowed to continue with More than 3 years
a branch/business unit for a period of_____

36.
Tenure of the External Auditor (CA Firms) would be initially for ____and extendable for 1 Year
a further period of ____(maximum twice), i.e. a CA Firm may have a tenure of
maximum 3 years or till the completion of last quarterly audit assignment, whichever
is later

37.
In Risk Based Concurrent Audit, 100% transaction testing is to be done in respect Manual
of______ irrespective of ‘risk category’ and ‘risk direction’ of the branch Transactions

38.
Concurrent Auditor to check all transactions entered / posted by the branch staff, 10% to 20%
irrespective of the amount. However, testing in respect of system driven transactions
is to be done on sample basis i.e. at least ______of the total system driven transactions
upto ____

39.
In Risk Based Concurrent Audit System, ____compliance testing is to be done 100%

40.
At any one point of time, not more than ___audit assignment would be awarded to any One
single CA Firm

41.
The CA Firm must ensure that the Branch assigned to it must be attended by its Once a week
authorised person as an auditor on behalf of the Firm daily & timely without any excuse
or exception whatsoever. One of the partners (CA) of the CA Firm must also visit the
branch at least _____and have discussions with the Branch Manager on audit related
issues

42.
Remuneration to the External Auditors

Fee payable w.e.f. 01.04.2024 (Amount in Rupees)

Figure of Advances (excluding advances with MCC) in Fee Payable (p.m.)
Branches as on 31st March of previous Financial Year (excluding GST)
₹500 Cr & Above ₹55,000/-
₹200 Cr & below ₹500 Cr ₹45,000/-
₹100 Cr & below ₹200 Cr ₹35,000/-
Below ₹100 Cr ₹30,000/-
Note:
▪ The remuneration to external auditors for conducting the concurrent audit of non-advance linked offices like Depository
Back Office, etc., shall be paid as per slab figures of advances above ₹200 Cr & below ₹500 Cr.
▪ There will be no additional fee for report submission.
▪ The new fee structure shall be applicable for new appointment and at the time of renewal / extension of the existing
assignment
43.
In case of RAM / Hybrid RAM / PLP, more than one concurrent auditor may be appointed 1000
if the No of sanctions is above ____ during the last FY.

44.
Bank shall cover more than 70% of total advances and 35% of total deposits of the High risk
Bank under Concurrent Audit Plan. All branches rated as ____during last RBIA / RBCA
shall invariably be covered in the concurrent audit plan.

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45. Accountability
If external firms are appointed and any serious acts of omission or commission are
ICAI
noticed in their working, their appointments may be cancelled after giving them
reasonable opportunity to be heard and the fact shall be reported to ACB of the bank,
RBI and _____
In cases of serious acts of omission or commission noticed in the working of bank's
own staff or retired staff, working as concurrent auditors, Staff Accountability shall be
examined as per Staff Accountability policy of the Bank.

46.
Performance Evaluation of Internal Concurrent Auditors
i. The performance evaluation of Internal Concurrent Auditors is to be done by ZAO on annual basis
ii. If any internal auditor is rated unsatisfactory in Annual Performance Appraisal (PAF), he can appeal to the
next higher authority, GM-IAD
iii. In case of unsatisfactory appraisal of auditor, the concerned auditor may be transferred to other office or
different assignment under domain of concerned ZAO
iv. Annual Performance will be assessed on the basis of annual feedback report by the concerned ZAO

Ref. Circular: IAD Cir No.15/2024 Dt. 16.04.2024

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F6 Risk Based Internal Audit Policy 2024-25

A. RBIA of Branches & Specialized Verticals

1. ▪ The Risk Based Internal Audit (RBIA) is an off-shoot of Pillar-II “Supervisory Review Process” of
Basel-II Accord.
▪ The Reserve Bank of India had adopted the Risk Based Supervision (RBS) on the basis of the guidance notes
issued by the BCBS and had issued guidelines to the banks in August, 2001 for moving towards the RBS.
The Risk Based Internal Audit is an important component of the RBS. The detailed guidelines for the RBIA
were issued by the RBI vide its Circular dated 27.12.2002, directing the banks to initiate the RBIA and
formulate their own policy on the outlines given by the RBI.

The Key objectives of Risk Based Internal Audit are as mentioned below:
i. Provide an independent assurance to the management about the efficiency and efficacy of risk control
measures to mitigate the inherent risks in business activities.
ii. Evaluation of risk management systems and control procedures.
iii. Identification of potential risks and suggesting measures for mitigation of risks.
iv. An independent risk assessment for prioritizing the audit areas and allocation of audit resources.
v. Facilitate drawing up of the annual audit plan.
vi. Creating risk sensitivity amongst field staff.
vii. The Risk Based Internal Auditors will be independent and will carry out their work freely and objectively.
Independence permits the auditor to render impartial and unbiased judgment essential to the proper
conduct of audit
2.
The primary focus of Risk Based Internal Audit is to provide reasonable assurance to the Board and
Top Management about the adequacy and effectiveness of the Risk Management and Control
framework in the Bank’s operations. While examining the effectiveness of control framework, the Risk
Based Internal Audit report shall also provide comments on proper recording and reporting of major
exceptions and excesses.

Scope:
i. process by which risks are identified and managed in various areas;
ii. the control environment in various areas;
iii. gaps, if any, in control mechanism which might lead to frauds, identification of fraud prone areas;
iv. data integrity, reliability and integrity of MIS;
v. internal, regulatory and statutory compliance;
vi. budgetary control and performance reviews;
vii. transaction testing/verification of assets to the extent considered necessary;
viii. monitoring compliance with the risk-based internal audit report;
ix. Variation, if any, in the assessment of risks under the audit plan vis-a-vis the risk-based internal audit.
3.
____will be the competent authority for approval of new Risk based Internal Audit ACE
templates

4.
The Policy related to audit of Currency chests is issued by _______Division being the Government
owner division for matters relating to currency chests. However, the audit of Currency Business
Chests will be conducted by IAD through ZAOs strictly in terms of provisions contained
in the policy
5. ▪ The Risk Assessment is to be done based on business risk of an activity/location and Control Risk , i.e.,
effectiveness of control systems for monitoring the inherent business risks.
▪ The Inherent business risks indicate the intrinsic risk in a particular area/activity of the bank and is classified
into Low, Medium & High depending on the severity of risk while Control risks arise out of inadequate
control systems, deficiencies/gaps, likely failures in the existing control processes & are also classified into
Low, Medium & High.

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▪ The Overall Risk shall be arrived at as a combination of Business Risk and Control Risk by way of risk
matrix as given below:
Risk Matrix
Inherent Business
High High Risk Very High Risk Extremely High Risk
Medium Medium Risk High Risk Very High Risk
Risks

Low Low Risk Medium Risk High Risk

Low Medium High
Control Risks
Thus, there shall be 5 categories of Overall Risk as under:
SN Business Risk Control Risk Overall Risk
1. Low + Low = Low
Low + Medium =
2. Medium
Medium + Low =
Low + High =
3. Medium + Medium = High
High + Low =
Medium + High =
4. Very High
High + Medium =
5. High + High = Extremely High
OVERALL RISK:
Variation of percentage marks in the same level up to +3% or –3% will be considered as STABLE, whereas
variation of marks in the same level more than +3% or –3% will be considered as
INCREASING/DECREASING as the case may be.

6. Annual Audit Plan :

The Annual Audit Plan shall be based on the overall risk profile of the branch and not merely on the volume
of business & shall be submitted to ACB through ACE at the beginning of the financial year for approval

The maximum Interval between Audits shall be determined on the basis of “Overall Risk Category” &
“Direction of Risk” of branch/office as per schedule given below:
Maximum Interval Between
Overall Risk Category Direction of Risk
Audits (Months)*
‘Extremely High’ / ‘Very High’ Any direction 6
‘High’ Any direction 6–9
‘Medium’ Increasing 9 -12
‘Medium’ Stable/Decreasing 12-15
‘Low’ Increasing 12-15
‘Low’ Stable/Decreasing 15-18
‘*’ The prescribed time interval between two audits will be reckoned from the date of the previous RBIA Report.
7. Business Risk:
Weightage Range
Type of Branch/Office Credit Risk Operational Risk Earning Risk
45% 15% 10%
Non Specialized Branches, i.e., General to to to
Banking Branches (GBBs) 60% 30% 25%
LCBs/ELCBs/CBBs
Mid Corporate Centers (MCCs) 15%
60% 10%
PLPs (PLP/Hybrid PLP)/C-PLP to
to to
Foreign Branch, i.e., DIFC Dubai & 30%
75% 25%
PNB Gift City
Business Risk Category:
Low Risk Medium Risk High Risk
Upto 30% >30% to 60% >60%

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8. Control Risk:
Type of Branch /Office Operations Management Branch
Compliance Management
Functions Functions
Credit Non-Credit/ IT Function General Security
Functions other Functions
The Operations Management range for GBB
Non-Specialized Branches, i.e., will be 50%-70% with respective weightage
General Banking Branches for above three functions as under:
(GBBs) 25% 15% 5% 20% 5% 5%
to to to to to to
40% 30% 10% 30% 10% 10%
Foreign Branch, i.e., DIFC
Dubai & PNB Gift City 50% 3% 2% 3% 3% 2%
to to to to to to
80% 15% 5% 15% 10% 5%
LCBs/ELCBs/CBB 50% 3% 2% 3% 3% 2%
Mid Corporate Centers (MCCs) to to to to to to
PLPs (PLP/Hybrid PLP)/C-PLP 80% 15% 5% 15% 10% 5%
SASTRA 60% 5% 5%
(Circle/ Zonal) to to to
70% 10% 10%
Trade Finance Centers (TFCs) 60% 5% 5% 10% 5% 2%
to to to to to to
70% 10% 10% 15% 10% 5%
International Service Branch 0% 10%
(ISB) - to to
Back offices (RCCs, CDPCs, 70% 15%
CPPCs)

Control Risk Category:

Low Risk Medium Risk High Risk
Upto 30% >30% to 50% >50%

9.
Risk weightage range of any type of risk in any of the RBIA templates, shall strictly be in
accordance with the provisions of RBIA guidelines. The authority to change/ modify risk
Board
weightage range in any of the RBIA template shall rest with_____. However, HIA, i.e., CGM:
IAD (in absence of CGM, senior most GM of the division) can permit changes in the audit
templates within the range/limits defined in the policy

10. Exceptions to Overall Risk :

▪ In case, Quick Mortality cases reported in a Branch are above ____of the total number of
10%
loans and advances sanctioned between the last two RBIAs, the Branch shall be
straightaway categorized as Minimum “High Risk”, with direction of risk as “Stable”,
irrespective of the Overall risk calculated as per 3x3 matrix.
▪ Any Branch reporting incident of Fraud originating from Branch, involving staff posted at
“High Risk”
Branch during the review period shall be categorized as Minimum _____with direction
of risk as “Stable” irrespective of the Overall risk calculated as per 3x3 matrix.

11. Audit Methodology:

The methodology of audit shall include the following:

a. Identification of high risk areas and suggestions for mitigating risks in these areas.
b. Identification of potential risk areas and suggestions for pro-active preventive measures.
c. Reasons for upward increase in direction of risk in various areas.
d. An action plan for mitigation of identified risks.
e. Comments on sample testing methodology adopted by the auditor wherever there is a waiver of 100%
transaction testing.

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f. Strength, Weaknesses, Opportunities, Threats (SWOT) Analysis & Risk Awareness on Potential Risk Areas
& suggestions for Pro-Active Preventive Measures.

12. Level of Transaction Testing:

Overall Risk Category Direction of Risk Minimum Level of
transaction testing
Extremely High / Very High Increasing/Stable/Decreasing 100%
High Increasing/Stable 80%
High Decreasing 70%
Medium Increasing/ Stable/ Decreasing 50%/40%/30%
Low Increasing/ Stable/ Decreasing 40%/30%/20%
In case sample testing for Low/Medium/High risk areas reveals unsatisfactory features, 100% transaction
testing is to be done.
13. Flowchart of Risk Based Internal Audit:

14.
Organisational Chart & Reporting Structure of Internal Audit Function:

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15.
The Governance framework for the RBIA:
▪ The Head of Internal Audit (HIA) shall be appointed for a reasonably long period, 3 Years
preferably for a minimum period of____. Audit committee of Board shall be kept informed
of any change in HIA & also the reason for the change in HIA.
▪ The HIA shall directly report to Whole Time Director (WTD), i.e., _____with reviewing
and accepting authority of HIA as ‘ACB’ & ‘Board’ respectively in matters of performance Domain ED
appraisal of the HIA. Further, the ACB will meet the HIA at least once in a quarter, without
the presence of the senior management, including the MD & CEO/WTD.

16.
The officers posted in Zonal Audit Offices shall be transferred to mainstream banking on 3 Years
completion of _____in ZAO as on 31st March of the respective year. Accordingly, the tenure
of internal auditors is ensured for a period of _____.

17. ▪ In case of DIFC Dubai & PNB Gift City, the risk based internal audit will be done by
officers of ______to be shortlisted /identified by IAD: HO taking into consideration Scale IV and
audit/administrative assignment on the basis of last 3 years PAF. The officers shall above
preferably have a background of Credit with exposure on Large Borrowal accounts and
Foreign Exchange.
▪ In case of DIFC Dubai, the nomination will be approved by _____duly recommended MD & CEO
by HIA through Domain ED while in case of PNB Gift City, the nomination will be
approved by HIA.

18.
Audit application used for RBIA eTHIC

19.
As per RBIA policy Maximum Interval between Audits shall be determined on the basis of Direction of
Overall Risk Category & _____ Risk

20. Offsite Audit

▪ The Off-site audit shall be done in case of Non-Concurrent audit branches only since in case of Concurrent
Audit branches, On-site audit is being conducted continuously by Concurrent Auditors. The Off-site audits
shall solely be used for determining the direction of the risk. For all other purposes (like risk rating of the
branch, follow up and removal of irregularities, etc.) the last annual risk assessment, i.e., RBIA shall be
used.
▪ The Off-site audit will be conducted at the following periodicity based on the “Branch Details & Data” and
“Self -Assessment Parameters (SAP)” contained in “Off-site Audit Format”
SN Type of Branch Periodicity
1. Extremely High, Very High- and High-Risk branches Quarterly
2. Low/Medium Risk branches with credit portfolio of ₹25 Crore & above Quarterly
3. Other Low/ Medium Risk branches Half Yearly
21. Snap Audit

▪ Snap Audit can be conducted if an off-site audit shows the risk direction increasing by Two Notches
_____compared to the previous risk assessment
Note: Head of Zonal Audit Office may take a view on conducting of Snap Audit in the
following circumstances:-
a) Two consecutive off-site audits showing the direction of risk as increasing;
b) An off-site audit showing the risk direction increasing by two notches compared to the
previous risk assessment;
c) Any major deviation/incident as reported in special report which could seriously affect
the working of the branch;
d) On receipt/observation/notice of any alarming information/report or any abrupt

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spurt/increase or decline in Branch Profile viz Deposits/ Advances /NPAs etc

e) Occurrence of frauds/suspicious transactions.

The above examples are illustrative and not exhaustive.

▪ Further, Snap Audit shall invariably be conducted in the following cases:

a) On directives of ____ Divisions on the basis of irregularities brought to their notice. Head Office

b) At the behest of____, where an official posted in a branch, exercising loan sanctioning Circle Head
powers, tenders resignation/ opt for VRS. The Snap audit shall cover entire tenure of such
official after the last RBIA of the branch. In case the next RBIA of the branch is falling due
in the next 3 months from the date of tendering resignation of the official, the competent
authority may take a decision to prepone the RBIA of the branch instead of conducting snap
audit.

(iii) In case of DIFC Dubai, ____will be the competent authority to take a view on conducting MD & CEO
of Snap audit with the recommendations of HIA.

(iv) Duration of on-site snap audit shall be _____depending upon the size of the branch, 1 to 3 days
category of risk, direction of the risk and areas to be covered in snap audit.

(v) Only those areas shall be covered in snap audit which show direction towards ____in High Risk
off-site audit.

22. Compliance Audit

▪ At least 20% of Non-Concurrent Audit Branches shall be identified by respective ZAOs every year for
conducting compliance audit to ascertain the actual status of compliance.
▪ The branches shall be identified from all the risk categories viz. Low, Medium, High, Very High and
Extremely High.
▪ Procedure to be followed to identify branches, from all the risk categories viz. Low, Medium, High, Very
High and Extremely High, for conducting compliance audit:
i. Out of total number of branches identified for conducting compliance audit. Compliance audit shall be
conducted in all the branches rated as ‘High Risk’, ‘Very High Risk’ and ‘Extremely High Risk’ during the
previous financial year.
ii. 80% of the remaining branches {after (i) above} should be identified from branches rated as ‘Medium
Risk’ during the previous financial year.
iii. Remaining branches {after (ii) above} should be identified from branches rated as ‘Low Risk’ during the
previous financial year.

Note: The duration of compliance audit shall be as under:

Type of Branch/Office No. of days Maximum Extension of days
allowed allowed by ZAO Head
(A) (B) (C)
Low Risk Branches 1 day 1 day
Medium Risk Branches 1 day 1 day
High Risk Branches 2 days 2 days
Very High & Extremely High Risk Branches 3 days 3 days

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23.
Audit Preponement
▪ The maximum Interval between Audits at any branch/office may be revised and the RBIA may be preponed
by ZAO Head. Few indicative examples of such triggers are:
i. Instance of internal/external frauds at Branch/Office.
ii. Sudden changes in the business profile/performance of the branch/office.
iii. Abrupt Increase in alerts generated from OSS.
iv. Submission of false compliance observed during Compliance Audit.
v. Adverse findings in regulatory/Internal audit examinations (during RBI Inspection/Special observation
letter/Offsite Surveillance Unit Studies, etc.)
vi. Any emerging risks identified through large number of similar observations/findings being reported
under Concurrent Audit/RBIA.
vii. 2 consecutive off-site audits showing the direction of risk as increasing.
viii. An off-site audit showing the risk direction increasing by two notches compared to the previous risk
assessment
▪ All such branches/offices where files are transferred from any other branches/offices to be audited within
6 months
▪ If any branch/office is merged with any other branch/office, then the worst risk rating amongst the merged
branches will be considered as risk rating of amalgamated branch & RBIA will be carried out on the basis of
audit schedule as mentioned in the policy. For e.g. If a ‘High Risk’ branch is merged with ‘Low Risk’ branch
or vice-versa then the risk rating of amalgamated branch will be considered as ‘High Risk
▪ DIFC Dubai is to be audited, off-site, on ‘Quarterly’ basis, with the annual/last quarter’s audit to be done
onsite since no Concurrent Auditor is posted at Front office of DIFC Dubai while PNB Gift City will be audited
as per the schedule mentioned in the policy since Concurrent Auditor is already posted at PNB Gift City.

24.
Audit conducted by ZAO on the instruction of HO/ZM/CH on receipt of any alarming Segment
information i.e high concentration /sudden spurt in loans in a branch Audit

25.
Man Days Allowed for conducting Risk Based Internal Audit (RBIA)
A. Branches other than those covered under Concurrent Audit:

Category Average Aggregate Business/Advances Figures Maximum No.

of Branch of Man Days
Small Business upto ₹30 cr. 06
Business above ₹30 cr. 08
Medium Advances upto ₹ 30 cr. 10
Advances above ₹ 30 cr. & upto ₹100 Cr. 12
Large Business above ₹ 300 cr. & advances portfolio of less than ₹100 Cr. 15
Business less than ₹300 Cr. but advances portfolio of more than ₹100 20
Cr.
Business above ₹ 300 cr. & advances portfolio of more than ₹100 Cr. 25

B. Branches/offices covered under Concurrent Audit:

Category of Branch Maximum No. of Man Days

Small 10
Medium 15
RCCs/CDPCs/CPPCs/CASA Back Offices/Currency Chests 15
Large/ISB/RAM 20
CBBs/Hybrid RAM/C-PLP/ MCCs/ TFCs/ Circle SASTRA 25
LCBs/ELCBs/PNB Gift City/ Zonal SASTRA 30

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C. Foreign Branch, i.e., DIFC Dubai:

Business (in Mio USD)
Risk Rating of Branch Upto 2000.00 More than 2000.00 Above 5000.00
 and upto 5000.00
Low & Medium 2 Man days 3 Man days 4 Man days
High & Very High 3 Man days 4 Man days 5 Man days
Extremely High 4 Man days 5 Man days 6 Man days
In addition to above, 5 man days shall be allowed for audit at Back office of Foreign Branch which is
presently located in New Delhi.

26. Closure of Audit Reports

A RBIA report shall be treated as closed, on 100% dropping/ rectification of irregularities reported in the audit
report. (which also includes those irregularities wherein extension has been allowed)

SN Branch Prescribed Period for Competent Authority for Closure of

Closure of Audit Reports Audit Reports
(from the date of finalization of
the report)
1. Small and Medium Within one & half month Zonal Audit Office
i) Closure of Audit Reports of all LCBs/ ELCBs
2. Large branches and other Within 2 months /CBBs/ MCCs / RAM / Hybrid RAM/C-PLP/
Specialized Offices e.g. RCCs, Zonal SASTRA by Incumbents of ZAO.
CDPCs, CPPCs, Circle ii) Branches /offices other than as mentioned
SASTRA, CASA Back Offices above, i.e., Small/ Medium /Large Branches,
RCCs, CDPCs, CPPCs, Circle SASTRA, CASA
Back offices, ISBs, by Second Man, i.e.,
3. LCBs/ELCBs / CBBs/MCCs Within 3 months senior-most AGM.
/RAM / Hybrid RAM/ C-
PLP/Zonal SASTRA/ ISB/
4. Foreign Branch, i.e., DIFC Within 3 months CGM:IAD (in absence of CGM, senior-most
Dubai including its Back GM of the division) However, replies
Office & PNB Gift City submitted by the branch will be vetted by
IBD: HO.

IBD: HO will forward the vetted replies to

IAD:HO along with their recommendations
for taking a final view on dropping of
irregularities and closure of inspection
reports
5. Trade Finance Centers Within 3 months ZAO Head of concerned ZAO
(TFCs) (For RBIA)
Within 1 month
(For QCAR)
6. Currency Chests Within one month Circle Head under whose jurisdiction the
currency chest is functioning, shall be the
competent authority to take a view on
dropping of irregularities and closure of
inspection reports of currency chest

Note:

To check the quality of closure of audit reports by ZAOs; the Compliance section at IAD: HO will conduct a sample
check for at least 50 reports (covering all ZAOs) closed by ZAOs on half-yearly basis as per the SOP &
the outcomes of sample checking will be placed before ACE for information & further action in the matter, if
required. (including examination of Staff Accountability against the erring officials).

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27.
Fraud Sensitive Index (FSI) System & Zero Tolerance Level (ZTL) Items

i.
Most of the frauds that occur are due to violations in the system & procedures. Though
violation of any system/procedure is neither permitted nor desirable, yet there are some
critical systems & procedures which require extraordinary care in order to avoid occurrence
of frauds.
Accordingly, to check the level of compliance of systems & procedures by the FSI
branches/offices and identifying the branches/offices vulnerable to frauds, a ______ was (Fraud Sensitive
developed and implemented w.e.f. 1st April 2005 in our bank. Index)

ii.
Those areas in systems & procedures which were identified as being very critical in ZTL
prevention of frauds such as “Adherence of KYC Norms”, “Verification of CIBIL/RBI (Zero Tolerance
defaulter list etc.” and in which deviations could not be tolerated were termed as Level)
_____areas/items. The items other than ZTL in the Fraud Sensitive Index have been termed
as ______ ‘Other FSI’.

iii.
FSI items must be rectified within a period of _____from the date of submission of report 20 Days
& Non-adherence to the prescribed time schedule or repetition of FSI items in future will
attract disciplinary action

iv.
ZTL items must be rectified within a period of ____from the date of submission of report & 10 Days
Non-adherence to the prescribed time schedule or repetition of ZTL items in future will
attract disciplinary action

v.
Risk Indicator are statistics and/or metrics, often financial, which can provide insight into a KRI (Key
bank’s risk position. Risk Indicators that may have greater impact on bank’s operational risk Risk
profile is classified & termed as ___ Indicator)
Few Examples of KRI Items are mentioned as under:
i. All the terms & conditions of sanction have not been complied with.
ii. Sales proceeds are not being routed through the accounts by the borrowers.
iii. Insurance is not available, valid policy is not held for all the securities
mortgaged/hypothecated to the bank.
iv. Limitation is not available and Balance confirmation (BC) letters are not obtained at
given periodicity.
v. Prompt action is not taken in case of persisting irregular accounts/potential NPAs
vi.
The FSI/ZTL items has been marked in audit templates & the overall FSI Category of the Final Risk
branch can be extracted from _____in audit application eTHIC Rating
Report

vii.
On the basis of the FSI report, the FSI score & category of branch/office arrived as mentioned under, which
indicates the level of the fraud risk to which they are prone:

% age Score Upto 30 % > 30 % - 50 % > 50%

FSI Category of Branch/Office Low Medium High
viii.
ZAOs should review the status of rectification of FSI/ZTL items Zone wise/ Circle wise on quarterly basis,
in respect of branches where ‘Overall FSI category’ is ‘High’ and forward the same to FRMD: HO for their
information, root cause analysis & adoption of mitigating steps to ensure prevention of frauds with a copy to
Compliance Section, IAD:HO

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28.
Significant Audit findings
The Irregularities/observations pointed out in RBIA/RBCA that carry high risk to the bank, ₹1 Crore &
resulting/may result in loss to the bank of _______per account, leads to non-adherence of above
regulatory/statutory guidelines and can adversely affect bank’s reputation.

29.
Significant Audit findings: Indicative List
i. BGs invoked/Devolvement of LCs but not regularized within 3 months.
ii. Unit Closed/Not working for more than 3 months.
iii. Key Management Personnel Changed without informing the Bank.
iv. Disbursement without PDC/Non Creation of Asset after Disbursement.
v. Frauds Detected.
vi. Impersonation.
vii. Genuineness/non encumbrance of title deeds of the IPs to be mortgaged not ensured.

The list is illustrative and not exhaustive

30.
ZAOs will submit the Significant Audit Findings to IAD: HO within _____ of completion of 10 Days
the quarter. ZAOs will also share the Significant Audit Findings with concerned Zonal Offices
(ZOs) for follow-up, monitoring & compliance
Note: findings will be ranked by IAD: HO on the criteria given below:

31.
Significant audit findings of RBIA report of Trade Finance Centers (TFCs), Foreign Branch, 10 Days
i.e., DIFC Dubai & Gift City shall be submitted by IAD:HO to Treasury: HO & IBD:HO, within
_______ of receipt of the report

32.
The data in respect to following shall continue to be placed before ACB on quarterly basis:
a. Insurance not available, valid policy not held on record.
b. KYC norms not adhered to / spot verification of borrower’s / guarantor’s place of business/ residence not
done
c. Working Capital limits not renewed/ reviewed within due date.
d. Genuineness/non encumbrance of title deeds of the IPs to be mortgaged not ensured.
e. Equitable mortgage created has not been registered with Central Registry within stipulated time.
f. CIBIL/ Credit Information Companies (CICs) records not verified.
g. Bank’s charge not registered with the Registrar of Companies within stipulated time.
h. Branch does not tally / reconcile Clearing Imprest/office accounts/ internal accounts as prescribed.

33.
Roles and Responsibilities:
The role of auditors shall continue to be identification of potential risks and suggesting measures for mitigation
thereof. The brief role & responsibility of internal auditors is as under:
a. To have high standard of integrity and professional competence through objective and unbiased
reporting.
b. To ensure rectification of audit findings observed during Internal audit to the extent possible to
safeguard bank’s interest.
c. To familiarize themselves with the Bank’s Policies, processes, systems, Book of Instructions, circulars,
SOPs, Guidelines, regulatory guidelines, etc. They should be able to guide and interpret the instructions
in the manner identical with the objectives of issuing authority.

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d. Ensure compliance with audit coverage as per the checklist and timely submission of the audit reports
within the defined timelines.
e. Detect and report instances of suspected frauds/major irregularities to IAD through respective ZAOs.
f. Though the primary responsibility of compliance and rectification shall lie with the Branch Incumbent,
the Controlling Offices shall also be responsible for persistent high risk rating of the branches under
their jurisdiction.
g. The performance of the auditing officials shall be adjudged on the basis of quality of the audit report
and achievement of objectives of the audit.
h. The risk ratings of the branches shall also be taken into account while finalizing the risk rating of the
concerned controlling office.

34.
Rectification of Irregularities:
In case, RBIA reports are not closed within the prescribed time frame as mentioned in the policy due to non-
rectification of irregularities, staff accountability shall be examined in accordance with the provisions of extant
Staff Accountability policy of the bank. (except in those cases where extension has been allowed by
the respective competent authority maximum upto the commencement of next RBIA for
rectification of irregularities).
The irregularities where extension has been allowed by the respective competent authority for rectification,
such irregularities shall be monitored by the concerned ZAO till initiation of Staff Accountability. Thereafter,
CO/ZO to ensure the rectification of these irregularities.
Note: For Credit related items, the Competent Authority in above para shall mean respective Sanctioning
Authority while for Non-Credit items, the Competent Authority in above para shall mean respective Circle
Head/Zonal Head.

B. RBIA of Administrative Offices

▪ Department of Banking Supervision, RBI vide its letter No. DBS.CO.PP.BC No.17/11.01.005/1999-2000 dated
27.10.2000 desired that the banks should put in place a policy document on audit policy, duly approved by the
Board of Directors
▪ In 2003, the nomenclature of Inspection of Administrative Offices was changed to Management Audit of
Administrative Offices and was being carried out by Inspection & Audit Division. However, Management Audit
was identified as a separate function and the Executive Committee approved the setting up of an independent
Management Audit & Review Division (MARD) with effect from 08.07.2004. As per Mission Parivartan Division
directions, Division was merged as a department with Inspection & Audit Division on 06.07.22.
▪ As per directions of ACB, in view of the RBI regulations Circular dated 27.12.2002, which do not envisage
Management Audit but only RBIA of every activity/location of the bank, the nomenclature of Risk Based
Management Audit (RBMA) was changed to ‘Risk Based Internal Audit of HO Divisions (HODs) & Administrative
offices (Aos)’ for the purpose of convenience and better monitoring vide IAD Circular No 32/2022 dated
19.08.22.
▪ Further, as per directions of ACB in its meeting dated 14.02.2023, the nomenclature of ‘Risk Based Internal
Audit of HO Divisions (HODs) & Administrative offices (Aos)’ has been changed to ‘Risk Based Internal Audit
of Administrative Offices (Aos)’.
▪ Though, RBI had not issued any specific guidelines for conducting RBIA of Administrative offices (Aos) nor
prescribed any time frame for its implementation, IAD took steps to switch over from the existing Management
Audit System of Administrative Offices to Risk Based Internal Audit for full implementation of the roles /
responsibilities enjoined on it in a phased manner.

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Audit of other Activities

SN Audit Unit Nature of Annual Audit
1 Concerned HO Divisions Activities of Outsourcing
2 HO Divisions Verification of loss data
3 HO Divisions Review of bank’s established policies and procedures, compliance of RMC / ORMC
directives, validation of identification of Division / Circle level KRIs
4 IRMD Review & Validation of Internal Capital Adequacy Assessment Process.
5 CISD Level of Compliance of Information Security policy in the Circles
6 GSAD Evaluation audit for assessing extent of implementation of Green Initiative in Cos
, ZOs, ZAOs, RRBs and Training Centres
Framework of the Policy:
The framework of the policy provides identification, assessment and measurement of Business Risks, Control Risks and Overall Risks:
Business Risk Comprises Control Risk Comprises
Capital Risk Internal Control Risk
Credit Risk Operations Management Risk
Market Risk Follow up & Monitoring Risk
Earning Risk Compliance Risk
Liquidity Risk
Business Strategy & Environment Risk
Operational Risk
35. INDICATORS OF RISK FOR COS, RRBS:
BUSINESS RISK CONTROL RISK
▪ Phenomenal growth or decline of deposits /
▪ Increase in NPAs
advances
▪ Phenomenal growth or decline of any other ▪ Number of frauds detected
business ▪ Number of complaints received
▪ Non-achievements of budgets
▪ Declining profits due to increase in expenditure ▪ Status of compliance of last audit or other
or decrease in income regulatory reports
▪ Marketing and promotion of new business / ▪ Control Returns
products / services
▪ Delay in sanction of loan proposals
▪ Decline in recovery percentage
INDICATORS OF RISK FOR HEAD OFFICE DIVISIONS, SUBSIDIARIES, TRAINING
ESTABLISHMENTS AND ZONAL OFFICES
BUSINESS RISK CONTROL RISK
These parameters shall be auditee unit ▪ Change in the work processes and operational
specific having regard to the risk procedures
templates / profile of each unit. ▪ Change in or introduction of new MIS and other
monitoring tools including their periodicity.
▪ Status of compliance of last audit or other regulatory
reports
▪ Status of compliance of Govt./ Statutory guidelines.
36. Frequency of Audit
▪ All HO Divisions, Domestic & Overseas subsidiaries to be audited on annual basis.
▪ All other administrative offices will be audited on annual basis except Low risk rated offices, which will
be subject to audit once in 2 years
▪ Audit will be conducted within the financial year and risk assessment shall be ascertained with
reference to the date of Bank's annual balance sheet.
▪ All efforts be made to get the audit of High risk rated offices in first quarter of the succeeding
financial year.

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37. ➢ On analysing the audit reports critical and high risk observations are identified for COs & ZOs. The
identified critical and high risk observations are mentioned hereunder:
CRITICAL OBSERVATIONS IDENTIFIED FOR CO & ZO
SN Component
1. Whether all eligible accounts have been scored under Scoring Models (Retail, MSME, Agri) and
Score ID has been fed in CBS?
2. Whether valuation reports in all eligible cases be obtained well before 3 years.
3. Whether reporting of EMs to CERSAI (Central Registry) in line with bank’s guidelines is ensured.
4. Whether guidelines relating to DMS –Daily Monitoring System Physical/ Online checking of System
Generated Control Reports are being followed in terms of extant guidelines?
5. Whether Off-Site surveillance system (OSS) is fully implemented in the CO & ZO and monitor,
analyzed and attend various exceptions on regular basis.
HIGH RISK OBSERVATIONS IDENTIFIED FOR CO & ZO
SN Component
1. Whether CIBIL / Equifax / Experian/ CRIF Highmark reports of all concerned (Individual/ corporate)
are being extracted & scrutinized invariably and held on record of sanctioning authority.
2. Whether monitoring of wrong reporting and action taken on wrong reporting observed during
compliance audit of branches.
3. Whether it is ensuring that all payments towards penalty, awards, advisory, orders etc. are timely
booked under defined revenue heads and not through any impersonal account?
4. Whether CGTMSE claim has been lodged in all eligible cases?
5. Implementation of E-duty sheet, job rotation and succession planning in critical posts / jobs.

➢ Administrative offices COs & ZOs must rectify all the identified critical observations within a period of
30 days and high risk observations within a period of 45 days after sharing the observations to
auditee offices.
➢ After receiving the compliance from the concerned administrative office, a note along with Division
comments will be put up to the GM- IAD for closure of identified critical and high risk observations.
➢ The CGM: IAD (In absence of CGM, senior most GM of the Division) can permit any
addition/modification or deletion in the audit templates upto 15% risk weightage of defined
Business & Control risk.

➢ Any addition/deletion/modification in Risk templates of Administrative offices beyond 15% risk

weightage of defined Business & Control risk, be approved by ACE.
➢ All new Risk templates, shall be placed to ACE for approval
➢ Risk Based Internal Audit shall be conducted by an individual officer of not less than SMG scale IV,
detailed as under:
SN Administrative Offices/ Controlling Level of officers deputing for RBIA of
offices Headed by- Administrative offices
1 CGM/GM/DGM Scale V and above
2 AGM Scale IV and above
38. RISK BASED INTERNAL AUDIT OF SUBSIDIARIES/JVs:
Our Bank has the following Subsidiaries/Joint Venture (JV) banks (where we have majority stake) in
overseas centres:

a) PNB (International) Ltd, UK b) Druk PNB Bank Ltd, Bhutan

➢ The above entities are managed by officials deputed from PNB in addition to senior officials nominated
on the Board. The business progress is monitored by GBMD and quarterly progress report is placed to
the Board and GRMC. RBIA of these 2 entities will continue.
➢ The Risk Based Internal Audit of the subsidiaries/JVs would be conducted on annual basis. Risk
Assessment methodology of audit would be adopted for these entities as is being done in case of
Bank’s domestic subsidiaries. The audit shall broadly cover following areas –

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a) Financial system
b) Operational processes
c) Systems & procedures
d) Regulatory Compliances
e) Human Resources Development systems
f) Internal Control Mechanism

➢ AUDIT TEAM:

Such audit shall be done by a team from IAD, consisting of one senior officer not below the rank of Scale
V and one senior officer not below the rank of Scale IV for assistance and it shall be concluded by
DGM/GM, IAD as nominated by MD & CEO.

The note for nomination of officials shall be placed by IAD: HO before MD & CEO through Domain ED.
➢ DURATION OF AUDIT: 3 Days
➢ Conclusion of RBIA of Administrative Offices:
Division on receipt of the Audit Reports from the auditor will segregate those with High / Very High risk
assessment. Accordingly, GM-IAD/ GM–IAD (Designate) will depute DGM for conclusion / discussion on
parameters in which risk has been rated High / Very High. A time frame of 1 – 3 days depending upon
the number of parameters showing adverse risk assessment will be allowed by GM-IAD/ GM–IAD
(Designate). The conclusion shall be preferably conducted through Web-ex wherever possible and submit
the discussion certificate
➢ Compliance, Follow Up & Closure:
The report, containing compliance by administrative offices will be placed to CGM (IAD) /GM(IAD) /
GM (Designate) (IAD) for final closure.

After completion of Audit & Conclusion, RBIA reports will be processed at the Division, i.e.,
Processing/Vetting and placing the Major observations to CGM/GM/GM (Designate) IAD. The
observations/final rating will be shared with concerned administrative office with the advice to submit
first reply within 15 days, second reply within 30 days & final reply within 45 days.

Outcome of Audit of CO shall be shared with ZO and that of HO will be shared with concerned
controlling HO Divisions. Further, the findings of any serious deficiency reported by auditor will be
immediately flagged to the concerned controlling HO Division and a note in this regard will also be
placed by CGM/GM (IAD)/GM (IAD)-Designate to domain ED also.
After receiving the complete reply/compliance from the concerned administrative office, a Closure note
along with Division comments will be put up to Domain ED for Zonal Offices and CGM/
/GM/GM(Designate) for all other Administrative offices. After approval by the Domain ED/ CGM/
/GM/GM(Designate), closure note will be shared with the concerned administrative office.
RBIA reports to be closed within 60 days after sharing the observations

Ref. Circular: IAD Cir No.16/2024 Dt. 16.04.2024

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F7 Credit Audit & Review Policy 2024-25

Background
▪ RBI vide notification dated 21.10.1999 on the “Risk Management System in Banks” advised a Loan Review
Mechanism as an effective tool for constant evaluation of Credit Portfolio and to bring qualitative improvement in
credit administration of the Bank. RBI also advised banks to formulate a Loan Review Policy which shall be reviewed
annually by the Board. The guidance given vide notification dated 21.10.1999 was further elaborated by RBI vide
“Guidance Note on Credit Risk Management” on 12.10.2002. Accordingly bank formed Credit Audit & Review Policy
which is reviewed every year.

Scope and Applicability

➢ Coverage of LRM/Credit Audit

A. Domestic Borrowal Account
Eligible Accounts Aggregate Credit
Exposure (ACE)
▪ All Standard Risk Rated Accounts
(Fresh proposals within 3 months from the end of quarter, during which loan was sanctioned/ ₹10.00 Crore &
first disbursed) above
▪ All Standard Restructured Accounts

▪ All NPA Restructured Accounts

Note: Accounts of sister concerns/group /associate concerns of above accounts, even if
credit exposure is less than the cut off limit of ₹10 crore shall be subjected to credit audit

Minimum_____randomly selected sanctions from the rest of the rated portfolio 5%

Taken over Borrowal Accounts ₹1 Crore and

above
Note: The first such audit is to be got done within 3 months from the end of quarter, during which
loan was sanctioned/first disbursed and the next audit is to be carried out within 3 months after
completion of one year from end of the quarter in which first credit audit was conducted. In case of
takeover accounts having aggregate exposure of ₹10.00 Crore and above, next audit will be conducted
at frequency based on its Internal Risk Rating
Frequency of Audit:
▪ All eligible Accounts shall be subjected to credit audit annually.
▪ The frequency of review should vary depending on the magnitude of risk (say, for the high risk accounts - 6
months, for the Medium risk & low risk accounts- 1 year).
Frequency of Audit as per Internal Risk Rating of the borrowal account:
Low Risk Medium Risk High Risk
Yearly Half-Yearly Quarterly
A1 to A4 B1 to B3 C1 to C3

▪ Credit Audit of all eligible accounts will be got conducted by Credit Auditors (Scale-III & above) of CA&RD, HO
/Auditors of ZAO’s/Engaged Credit Auditor of CA&RD, HO. A pool of 45-50 officers having exposure of handling
Large Credit/Forex) for conducting Credit Audit of Eligible Accounts will be created at CA&RD, HO

Time Frame for LRM/ Credit Audit

Group-A: Exposure upto ₹250.00 Cr. Group-B: Exposure above ₹250.00 Cr.
2 working days for completion of Audit 3 working days for completion of Audit

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Exempted Category:
(a) Retail Banking segments (i) Schematic Lending (housing, vehicles & personal loan) (ii) Advances against consumer
durables,
(b) Advances against Bank Deposits, LIC policies, Govt. securities, Gold/silver Jewellery & ornaments, advance against
shares, Debentures & Mutual Fund
(c) Accounts which are exempted from Internal Rating.

B. Loan Review Mechanism Policy for Overseas Credit Accounts

Type of Accounts eligible for LRM ACE

▪ All risk rated standard accounts with exposure of_______.

(In case of accounts with aggregate group credit exposure of USD 3 Mio and above all the USD 3 Mio &
account irrespective of individual limits shall be subjected to credit audit) above
▪ All NPA Restructured Accounts having aggregate credit exposure of USD ______

5% of risk rated standard accounts selected on random basis with exposure of _____ but less
than USD 3 Mio
Taken over Borrowal Accounts either on Standalone basis or Secondary Market deals USD 1 Mio
(under Syndication or Bilateral arrangement), Credit Audit will be conducted for accounts having and above
exposure of_______.

The first such audit shall be done within 3 months from end of the quarter in which
account was purchased/taken over and the next audit is to be carried out within 3 months after
completion of one year from end of the quarter in which first credit audit was conducted .
First and next audit of taken over accounts at Overseas Branches shall be done offsite at
concerned back office in Delhi after obtaining relevant information/documents from Overseas
Branches (If permitted by rules and regulation of that particular country). After that the vetting
of aforesaid offsite audit of the particular account will be conducted during the course of Annual
Audit/Credit Audit of the account by the auditor.

Time Frame for Credit Audit:

▪ A period of maximum _____ will be allowed to Credit Auditors, for conducting Credit Audit 1 Day
of an overseas account
▪ However, for Syndicated Term loans of Scheduled Commercial Banks of India/ Sovereigns
where documentation is already complete which has been drafted by reputed law firms and
participation is by way of execution of transfer certificate as per the prescribed mechanism
of transferability by novation with in the terms of facility agreement, the audit of such
documentation and the vetting report by Credit Auditors may be completed within maximum Half Day
period of _______

Frequency of Credit Audit:

▪ All eligible Accounts shall be subjected to onsite Credit Audit_____. The onsite audit of such Annually
overseas accounts will be done in the third quarter of financial year.
▪ keeping in view the magnitude of risk, Half Yearly and Quarterly Credit Audit of eligible Delhi
accounts at Overseas Branches shall be done offsite at concerned back office in ____
▪ The offsite audit will be done after obtaining relevant information/documents from Overseas
Branches (If permitted by rules and regulation of that particular country).
▪ The offsite audit will be vetted by concurrent auditor/credit auditor at the time of conducting
onsite audit of Overseas Branches

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Exempted Category:

Domestic Borrowal Accounts Overseas Borrowal Accounts

d) Retail Banking segments (i) Schematic f) Those secured by 100% cash security.
Lending (housing, vehicles & personal loan) (ii) g) Buyer’s credit secured by BG / SBLC of approved bank.
Advances against consumer durables
h) Bills discounted under LC issued by approved banks after
e) Advances against Bank Deposits, LIC policies, receiving acceptance from the LC issuing bank.
Govt. securities, Gold/Silver jewelry &
i) Term loan secured by SBLC of approved bank.
ornaments, shares, debentures & Mutual Fund
j) The Secondary Market Purchase/Taken over accounts of
f) Accounts which are exempted from Internal
Banks and Foreign Sovereigns will be excluded from the
Risk Rating, e.g. Loans and Advances - against
purview of Credit Audit. The reason for excluding the
Bank Deposits, Government securities, shares and
debentures, Mutual funds and Life insurance Accounts of Banks and Foreign Sovereigns is as under:
policies, Loans and advances to Central/state i) In loans involving Banks, the exposure is taken within
Government Departments/undertakings/ the counterparty limits allocated keeping in view the risk
establishments not running on commercial basis, rating of the Banks.
staff and under Retail segment, etc., as per ii) In loans involving Secondary Market Purchase/Taken
prevailing IRMD guidelines over accounts of Foreign Sovereigns, the facility is
prefunded and Credit/Risk assessment is already done by
the primary lenders and in Secondary Market transfer is
done through novation. Further, as per RBI guidelines on
Country Risk Management, ECGC also circulates Country
Risk Classification for Sovereign which is also taken into
account while taking credit exposure.
Identification/Selection of Officers for Credit Audit
A. Domestic Borrowal Accounts
▪ Conducted by Internal Auditors (Scale-III & above) posted at CA&RD, IAD, HO /ZAOs and External Credit
Auditors (ECAs) (Scale IV and above).
▪ A pool of 45-50 officers (having exposure of handling Large Credit/Forex) for conducting Credit Audit of
Eligible Accounts will be created at CA&RD, IAD, HO, for their further posting as per requirement for the
smooth conduct of Credit Audit at prescribed frequency
▪ External Credit Auditors (ECAs), Retired Bank Officers (Scale IV and above) will be selected as per separate
policy on Engagement of ECAs
B. Overseas Borrowal Accounts
▪ CA&RD, IAD, HO in consultation with IBD, HO will depute Internal Auditor (Scale-IV & above) for conducting
Credit Audit of accounts at overseas branches. The Internal Auditor should acquaint themselves with local
rules/ regulations of Host country and policies of respective branches before proceeding for conducting Credit
Audits. As the rules/ regulations prevailing therein will be country specific, the concerned person will be
deputed to IBD, HO for collecting the details before proceeding to overseas branches. It is expected that
such identified Internal Auditor, who is deputed to overseas branches is well versed with Credit & Forex
functions being performed at these centers.
▪ In case of Credit Audit of accounts maintained at Overseas Branch Office, nomination for deputation of
Internal Auditor shall be approved by MD & CEO at recommendation of GM/CGM (IAD) through Domain ED.
In case of Credit Audit of accounts maintained at IBUs located in India, nomination for deputation of Internal
Auditor shall be approved by CGM (IAD) or concerned GM (IAD) in absence of CGM (IAD).

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Compliance and Closure of Credit Audit Reports

10. A. Domestic Borrowal Accounts

▪ After release of report, GBB/MCC/CBB/LCB/ELCB/Zonal Sastra Centre should take immediate remedial
measures and submit Compliance to the concerned Zonal Office (in case of GBB/MCC/CBB//Zonal Sastra
Centre) and to Concurrent Auditor (in case of LCB/ELCB) within 6 weeks from the date of release of such
Credit Audit Report.

▪ On receipt of reply, Zonal Office (In case of GBB/MCC/CBB/Zonal Sastra Centre) and Concurrent
Auditor (In case of LCB/ELCB), after ensuring compliance, should send their views/recommendations and
vetting respectively on the same, within 10 working days to CA&RD IAD HO for closure of the Credit Audit
Report.

▪ In case Zonal Office and Concurrent Auditor does not respond within the stipulated time of 10 working
days, GM-IAD to vigorously follow up with the concerned ZO and ZAO for their recommendations
and vetting by concurrent auditor respectively for closure of Credit Audit Report.

▪ Details of pending Credit Audit Reports will be provided Bi-monthly to Zonal Audit Offices (ZAOs) for their
information and discussions as agenda item in Circle Level Audit Committees (CLAC) meetings and Zonal Audit
Committee of Executives (ZACE) meetings so that compliance of audit observation of any particular account,
whether as part of Credit Audit Report or Inspection Report of a particular branch, becomes an integrated
process

▪ The Competent Authority for marking off / dropping “Early Warning Signals” of the
observation(s) and closure of the report

Competent Authority Criteria Process Flow for closure of Credit Audit Reports
for closure of Report
(with exposure of)

AGM (CA&RD) All reports up to ₹ 20 crore The closure note will be placed to AGM (CA&RD) for final
closure

DGM/DGM(Designate) All reports above ₹20 crore The closure note will be placed directly to DGM/DGM
(CA&RD) upto ₹50 crore (Designate) (CA&RD) without routing through AGM
(CA&RD) for final closure

GM/ GM (Designate) All reports above ₹50 crore The closure note will be placed to GM/GM (Designate)
through DGM/ DGM (Designate) for final closure

▪ All Early Warning Signal Observations of Credit Audit Reports should be closed within a period of three months
after the end of the quarter of Credit Audit report
B. Overseas Borrowal Accounts
Upon receipt of Credit Audit Reports, the branch should submit compliance directly to IBD, HO within six
weeks from the date of receipt of such Credit Audit Report.

On receipt of reply from the branch, IBD, HO, (after monitoring compliance), will send its views on the same
within 10 working days to CA&RD, IAD, HO which will then be processed at the CA&RD, IAD, HO for closure
of the Credit Audit Report
The Competent Authority for marking off/dropping of the observation(s) and closure of the report will be as
under

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▪ The Competent Authority for marking off / dropping of the observation(s) and closure of the
report

Competent Authority Criteria Process Flow for closure of Credit Audit

for closure of Report Reports
(with exposure of)

DGM (CA&RD) All reports up to USD 7 Mio The closure note will be placed to DGM (CA&RD)
through AGM (CA&RD) for final closure

GM (IAD) Above USD 7 Mio The closure note will be placed to GM (IAD) through
DGM (CA&RD) for final closure

▪ All Credit Audit Reports should be closed within a period of three months from the end of the quarter of Credit
Audit.

▪ Additionally, Compliance Officers at overseas branches shall independently perform their role of Internal
Control & Risk Identification in terms of Compliance Policy. Role & job profile of compliance officer at overseas
branches are defined in Compliance Policy of respective branch

Carry Over of Observations and Re-Audit

A. Domestic Borrowal Accounts

▪ When audit report is pending for compliance in an account and the account is re-audited, instead of follow-up
for two separate Audit Reports for the same account, the previous Audit Report will be closed by carrying over
the pending observations in the new Audit Report. It will help in making the follow up process for compliance
of Audit Report more focused and effective. Further these un-rectified/marked off items of Early Warning
Signals will be incorporated in Monthly/Quarterly/Annual Audit report by Concurrent Auditors/ Regular Auditors
for compliance. Compliance of these items will be done by branch/MCC, vetting of same will be done by
concerned Concurrent Auditor and observations will be dropped by concerned ZAOs.
In case of non-concurrent audit branches, the monitoring of these un-rectified/marked off items of Early
Warning Signals shall be ensured by concerned ZAOs manually till carrying out annual inspection of Branch. In
case any item/s remain un-complied at the time of Annual inspection of concerned branch, the same shall be
carried over to Annual RBIA for further monitoring and compliance by concerned ZAOs.

▪ All un-rectified/Marked off items for Audit purpose (MAP items) shall be carried over in next Credit Audit Report
maximum twice and not for an indefinite period

B. Overseas Borrowal Accounts:

i) When audit report is pending for compliance in an account and the account is re-audited, instead of follow-up
for two separate Audit Reports for the same account, the previous Audit Report will be closed by carrying over the
pending observations in the new Audit Report. It will help in making the follow up process for compliance of Audit
Report more focused and effective. Further these un-rectified/marked off items will be monitored by IBD, HO for
compliance.

ii) However these un-rectified/ marked off items shall be carried over in next Credit Audit Report maximum twice
and not for an indefinite period.

Ref. Circular: IAD Cir No.18/2024 Dt. 18.04.2024

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F8 Staff Accountability Policy 2024-25

1.
OBJECTIVE:

▪ To protect actions of the officials, taken as per the rules, guidelines and policies of the Bank and to
determine the accountability of the staff who indulge in motivated/ reckless decision making and/or
flagrantly violate the rules and regulations of the Bank.
▪ The staff accountability policy rests on the basic premise that loss on account of genuine business decisions
will not attract staff accountability. While the losses caused due to acts perpetrated by staff members or
where involvement of staff is perceived to have acted in collusion/ connivance with an outsider or flagrant
violation of systems and procedures is observed, it will certainly attract accountability. The members of
staff, found prima facie responsible for such acts, are liable to be sternly dealt with

2.
APPROACH:
▪ What exactly caused loss/ NPA slippages, with specific causes for the loss to the Bank, needs to be
ascertained. This vital step needs to be handled with utmost care as it forms the foundation of entire
exercise.
▪ Critically examine whether NPA/Loss arose due to any negligence/ commission/ omission on the part of
the staff members who handled the account/ transaction or was beyond their control
▪ Critically examine whether the NPA/ loss in the account could have been avoided in the absence of specific
commissions/omissions mentioned. This is a crucial step in linking the specific commission/ omission to the
occurrence of NPA/ loss
▪ If the cause of account turning NPA is essentially external and beyond the control of the Bank, for instance
change in Government Policy, revised environmental norms, natural calamities, non-release of government
subsidy/grant, takeover of land or securities by the government agencies and such similar cases (which
are beyond the control of the Bank), it should not attract staff accountability.
▪ The authority for examination of staff accountability will ensure that the examination process will look into
the following:
“Whether a person of common prudence, working within the ambit of prescribed rules, regulations and
instructions, would have taken the decision in the prevailing circumstances in commercial / operational interest
of the bank, is one possible criterion for determining bonafides of the case. A positive response to this question
may indicate the existence of bonafides, a negative reply on the other hand might indicate absence of bonafides.”

3.
Staff Accountability should not necessarily imply that each and every act will be subject to scrutiny for the
sole purpose of punishment. Extant guidelines do not mandate assessment of Staff Accountability for each
and every NPA. RBI circulars do, however, require Assessment of Staff Accountability in the following
cases/accounts

Frame work for Compromise Settlement and Technical Write Offs RBI Circular dt.08.06.2023
Guidelines on purchase /sale of non-performing assets RBI Circular dt.13.07.2005,
26.02.2014
Master Circular Loans and Advances-Statutory and other Restrictions RBI Circular dt.01.07.2015
Report of the Working Group to Review the Internal Control and RBI Circular dt.01.11.1996
Inspection/Audit System in Banks- Implementation of the
Recommendations, advised the Banks that with a view to keep the
incidence of corruption and malpractice under check, there is a need for
fixing staff accountability aspect of irregularities malpractices, etc., at all
levels, at the appropriate time
Deviations of any guideline in terms of RBI Master Directions on Frauds RBI Circular dt.01.07.2016
(Updated as on July 03, 2017)

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4.
Banks rely on reports of certain third parties while processing/ sanctioning loan proposals or while handling
the loan accounts. These third parties are service providers who are either empanelled by the Bank/ IBA based
on their qualifications and credentials such as Advocates, Valuers or hold professional qualifications such as
CAs, etc.
The reports which are generated externally, Bank officials use such reports while processing the approvals/
sanctions in various fields. The Bank specifies the roles of the service providers, for Instance UDIN verification
from the ICAI portal may be mandatory, etc.

5.
SCOPE OF THE POLICY: The Policy will broadly cover following aspects: -
a) Non performing Borrowal accounts.
b) Other operational Matters including lapses in Standard borrowal accounts.
c) Non Borrowal matters and Non-credit transactions

6. A. Non-Performing Borrowal Accounts

on the basis of Department of Financial Services, Govt. of India letter, F.No. 14/18/2019-Vig dated, 29.10.2021
the four-tier structure for staff accountability is as follows.
i) NPA accounts with Aggregate Exposure upto ₹10.00 lac
ii) NPA accounts with Aggregate Exposure above ₹10.00 lac and upto ₹1.00 crore
iii) NPA accounts with Aggregate Exposure above 11.00 crore and upto ₹50.00 crore
iv) NPA accounts with Aggregate Exposure above ₹50.00 crore

7.
Category-I: NPA accounts with Aggregate Exposure (AE) upto ₹10.00 lakh

▪ In general, staff accountability will not be required to be examined.

▪ Staff accountability would be examined wherever an account has been reported as fraud or facts
indicating malfeasance intention of staff have come to fore or reckless financing.
▪ Where incidence of NPAs in this category of loans crosses 10% of the credit outstanding of the
Branch, within aggregate exposure up to ₹10.00 lac, in such instances, staff accountability exercise would
have to be mandatorily initiated.
▪ Further in case of evidence of intentional negligence, recklessness in financing and deliberate malfeasance
shall also be investigated by the Circle Head immediately when the matter comes in to notice.

8.
Category-II: NPA A/Cs with ae more than ₹10.00 lakh and upto ₹1.00 crore

▪ Staff accountability shall be examined on the basis of information provided (Annexure I - Status
Note) by the branches/MCCs (other than LCBs) through Circle Office and LCBs through Zonal Office, with
specific comments on staff accountability aspect, covering a summary profile of the account, reasons for
account turning NPA, observations in the previous all reports of any type of audit conducted internally or
externally in the Bank, which are Risk Based Internal Audit( RBIA), Risk Based Concurrent Audit(RBCA),
Credit Audit/CARD/LRM, Revenue Audit, Stock Audit, ASM Reports, Information Security Audit, Any RBI
Report, Visit Reports, Special Reports, Snap/Segment Audit Reports, Control Returns viz. LSS etc. and any
other Audits/ Reports for a period of 4 years as on date of NPA including compliance thereof and also the
chart of compliance of terms of sanction in terms of Department of Financial Services Govt. of India letter
F. No. 14/18/2019-Vig dated 29.10.2021.

▪ Staff accountability need not be examined in respect of accounts where there has been no adverse
remarks/comments in any type of reports for the audit conducted internally/externally in the
Bank of the preceding 4 years from the date of NPA
This provision is not applicable in case of fraud reported accounts)

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9.
Category-III: NPA A/Cs with AE more than ₹1.00 crore and upto ₹50.00 crore

▪ A detailed report (Status Note) shall be submitted to the committee, through CO/ZO/HOIAD as the
case may be, covering the profile of the account, reasons for account turning NPA, observations in the
previous all reports of any type of audit conducted internally or externally in the Bank, for a period of 4
years as on date of NPA including compliance thereof, a chart of compliance of terms of sanction or
disbursement, monitoring and reviews and possibilities of recovery/upgrade.

▪ Preliminary examination by the Committees shall be based on audit reports and other internal
reports, viz. Inspection, monitoring and available reports pertaining to the account/ sanctioning level,
etc. When an account turns NPA, the deficiency could be attributable to the Sanction process,
Documentation, Disbursement or in Monitoring. If the Committee finds material lapses in any of the above
process, the case may be referred for detailed examination of staff accountability.

10.
Category-IV: NPA A/Cs with Aggregate Exposure more than ₹50.00 crore

Investigation in these accounts is mandatory.

11.
Quick Mortality Accounts

Investigation will invariably be conducted in Quick Mortality Accounts with Aggregate

Exposure of _____as on the date of NPA and the procedure for examining/ determining Above ₹25.00
staff accountability in QMC accounts, remains the same as in NPA accounts. lakh

12.
Renewal/ Review of Credit limits

▪ Where the limit is renewed/ reviewed without enhancement, accountability shall not be attributed to the
recommending official/ sanctioning authority only for having renewed/ reviewed the facility, provided the
same has been done with proper justification.

▪ If the limit is renewed with enhancement in an account which was standard at the time of renewal,
subsequent deviations/ irregularities if noted in the account, shall not be attributed to the officials who had
originally appraised/ sanctioned the limit. IO should take proper care while identifying the lapses of the
officials who have sanctioned the limit prior to the enhancement made by subsequent officials. However,
the clause shall not apply to those officials who had sanctioned/ recommended initially as well as
renewed/enhanced the limit subsequently.

13. Consortium Advances

In case of consortium advances, the pre-sanction appraisal/disbursement is being done jointly by all
consortium member banks. In such cases if the account turns to NPA, the Competent Authority shall take a
view regarding staff accountability keeping in mind the resolution passed in different consortium meetings. If
the leader/ majority of the members of the consortium is of the view that the account had gone bad for the
reasons beyond the control of the bank officials and no malfeasance are suspected on the part of the bank
officials, the examination of Staff Accountability shall consider these facts before reaching any decision

14.
Restructured Accounts

No staff accountability shall be fixed for the following:

▪ If in the interest of the Bank, restructuring of the account has been done as per Bank’s guidelines, without
increasing bank’s exposure and/ or without diluting the available securities and such restructuring fails,
provided there are no major irregularities persisting at the time restructuring is done, which continued till
the account slipped to NPA and such restructuring was done with proper justification.
▪ If operation is allowed by the appropriate authority, after tagging a part of the credits/ sale proceeds,
deposited for regularization of irregular or NPA A/c, if bank’s guidelines in this regard were adhered to.

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▪ Where the limits are renewed with enhancement as part of restructuring– Even if there are some deficiencies
in the operation of the account and if the enhancement of limit was intended for the revival of the viable
unit, if restructuring has been done as per extant guidelines.

15.
Restructured Accounts due to COVID 19

16.
In such cases, no accountability shall be attributed to the recommending official’s/ sanctioning authority only
for having restructured the account, provided the same has been done with proper justification and in
accordance with Bank’s resolution framework(s) for Covid-19 related stress.

17.
Fraud Reported Accounts

Investigation in frauds cases will be carried out irrespective of amount in following cases:

▪ All cases wherein staff accountability was examined & subsequently a fraud (Borrowal or Non-Borrowal) has
been reported, the matter shall be placed before ZOSAC for amount Below ₹3.00 Crore and HOSAC
II for amount ₹3.00 crore and above to peruse the reasons/ causative factors of fraud based on Forensic
Audit/ Fraud Monitoring Report (FMR) or any investigation report(s).

▪ ZOSAC / HOSAC II may order for further fact finding in emergent cases limited to specific scope and
terms of reference which shall be broadly based on:
❖ Cases where investigation done in the past:
Only new facts which were not covered in the earlier investigation report.
❖ Cases where investigation not done in the past:
All the facts which are reported in the Forensic Audit/ Fraud Monitoring Report (FMR) or any
investigation report(s).

18.
Operational Matters

▪ Staff accountability shall be initiated immediately (not later than 1 month) when such incident is
reported/ detected at the branch or other Offices.

▪ An illustrative list of such irregularities is given as per Appendix A (provided below)

▪ In matters (not involving any financial aspect) such as complaints relating to misbehaviour, man handling,
late attendance, unauthorized absence, etc., Circle Head/ DZM at Zonal Office/ Divisional Head at
HO/ZAO Head/ Reporting authority in case of other offices shall be competent authority to call
comments of the concerned officials.
After calling the comments of the concerned official, the case shall be placed before ZOSAC/ CoGM/
HOSAC-I/ HOSAC-II as the case may be for taking decision (Actionable, Dropped or any Administrative
action including Note of Caution). Such cases need not to be placed before IAC and shall be forwarded to
concerned DA directly in case decided as actionable
▪ In cases where fraud is perpetrated by staff member or involvement of staff is perceived and has acted in
collusion/ connivance with an outsider, the staff accountability will be examined by competent Committee
at Head Office, irrespective of amount involved or cadre/scale of staff and irrespective of whether
FMR1 submitted or not .
▪ No accountability will be examined in operational matters for any lapse which has not been pointed out in
any of the audit reports of the immediately succeeding 4 years from the date of event or occurrence of
lapse except where there has been a collusion of staff with the customer or fraud is perpetrated on the
Bank by staff members.
▪ In non-borrowal fraud, wherever involvement of staff is evident, accountability of the concerned official who
fails to initiate action in time will also be fixed by the competent Authority.

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▪ For overseas branches (Dubai and GIFT City Gujarat)/ TFC, CoGMs at HO will be the competent authority
to decide initiation/non-initiation of accountability in respect of non-rectified Inspection irregularities. IBD
HO will refer such matters along with recommendations to HO-IAD for placing the same before CoGMs to
take final decision on initiation/Non-initiation on staff accountability.

19.
Irregularities Rectified during process of Staff Accountability Examination

If any irregularity is rectified in accordance with prevalent Bank guidelines and compliance of the same is
accepted by the competent authority, then the process of examination of Staff Accountability will be
discontinued at whatever stage the case is pending at, in line with clause relating to Upgradation/
closure of Account. (Competent authority in this regard shall mean ZOSAC/CoGMs at HO.)

20.
COMPETENT AUTHORITIES FOR STAFF ACCOUNTABILITY PROCESS

The determination of staff accountability shall rest with an authority at least one scale higher than the level
of official(s) whose actions are being subjected to scrutiny. In case, multiple numbers of persons are identified
as erring officials (EOs), composite case shall be placed before the authority applicable in respect of highest
level of EO(s). Further the cases where CGM is involved, the composite case will be placed before HOSAC II
for recommending the case to ED domain (IAD) for final decision.

A. Authority for taking view on conducting investigation

Aggregate Exposure Competent Authority

NPA A/c’s (except quick mortality accounts)
Up to ₹10.00 crore Zonal Office Staff Accountability Committee (ZOSAC)
Above ₹10.00 crore and up to ₹50.00 crore Committee of General Managers (CoGMs)
Mandatory Investigation:
▪ Accounts with Aggregate Exposure above ₹50.00 crore

▪ Quick Mortality Accounts with Aggregate Exposure of above ₹25 lacs as on the date of NPA. For Quick
Mortality Accounts up to ₹25.00 lac, ZOSAC will take decision on conducting Special Investigation.
Aggregate exposure will include outstanding balance along-with undisbursed portion, if any, of the Term Loan
and Sanctioned limits in Fund based and Non-Fund based working capital limits.
Authority for examination of staff accountability (Excluding cases emanating from Administrative
B.
Offices)

SN Particular Competent Authority

1 NPA Accounts (Excluding Fraud)
1.1 Aggregate Exposure up to ₹10.00 crore ZOSAC
1.2 Aggregate Exposure above ₹10.00 crore HOSAC-II
2 OPERATIONAL MATTERS, (Excluding Fraud) Inspection reports ZOSAC
basis irregularities, complaints or any other source
(irrespective of amount involved)
3 FRAUD Cases (borrowal)
3.1 Below ₹3.00 crore ZOSAC
3.2 ₹3.00 crore and above HOSAC-II
4 Non-Borrowal fraud cases where fraud is perpetrated by staff member or involvement of staff is
perceived and has acted in collusion/connivance with an outsider irrespective of whether FMR 1
has been submitted or not
4.1 Amount involved below ₹3.00 Crore CoGMs at Head Office
4.2 Amount involved ₹3.00 crore and above HOSAC II

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C. Authority for examination of staff accountability in matters relating to Borrowal /Non Borrowal
cases emanating from Administrative Offices including matters (not involving any financial
aspect) such as complaint relating to misbehaviour, man handling, late attendance, unauthorized
absence
Officials whom accountability to be examined Competent Authority
Officials (Scale I to V) working at Circle Office/ Other ZOSAC
Administrative Offices under Circle Office/ Zonal Office
Scale VI and VII working at Circle Office/ Other Administrative HOSAC-II
Offices under Circle Office/ Zonal Office
Officials working at Zonal Audit Office GM (Staff Accountability) IAD-HO
Head of Zonal Audit Office ED ( IAD)
For officials working at HO Divisions and Divisional Head at Head Office
Up to Scale-III officers working at HO Divisions HOSAC-I
Scale- IV/ V/ VI and VII officials working at HO Divisions HOSAC-II
CGMs ED(IAD)
In case other officials are also involved the composite case will
be placed before HOSAC II who will recommend and the case
will be placed before ED (IAD) for decision.
Number of officers of our Bank are on deputation to outside HOSAC-II (for Borrowal and other
Organisations/agencies, viz. Regional Rural Bank, DRT, matters), SCN will be submitted by
PNBHFL, PNBIL, PNBISL, PNB Gilts, PNB Credit cards services, concerned Division, RAM & FI/ IBD/HRD
etc. On receipt of any complaint, reference or issue against any to IAD HO for placing the same before
officer who has been deputed by us to any such organisations, Committee.
staff accountability will be examined by.

D Formation / changes in the composition / constitution of the Committees

SN Name of Committee Authority for Formation / changes in the

composition / constitution of the Committees
1 HOSAC-II, CoGMs and IAC Audit Committee of Executives (ACE)
2 HOSAC I Domain ED of Inspection and Audit Division
3 ZOSAC Zonal Manager
21.
TIME SCHEDULE EXAMINATION OF STAFF ACCOUNTABILITY

▪ The process of examination of staff accountability shall be completed within ____from the 180 Days
date of NPA including cooling period wherever applicable. The detailed time schedule is
placed as part of operational guidelines
▪ In respect of any matter related to operational lapses other than borrowal accounts,
Accountability shall be initiated within _____from the date it came to the notice/ knowledge 1 Month
of competent authority or it is observed through any report or complaint. The process shall
be completed as per existing provisions regarding borrowal cases.
▪ Cooling period and Submission of Status Note:
❖ A cooling period for____, from the date of NPA, will be provided for the purpose of up- 30 Days
gradation of account. If the account gets adjusted without any compromise or gets
upgraded during cooling period, there is no need of submitting Annexure I (Status
Note). In case the account is not upgraded within the cooling period, the incumbent of
Branch/MCC/LCB, etc., will submit Annexure I (status note).

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❖ Cooling period, however, will not be applicable in cases of borrowal accounts slipping
from Standard to _________/ quick mortality cases / or where fraud has been Doubtful/Loss
committed. In such cases, Status Note on prescribed proforma shall be submitted category
immediately when incidence came to the notice.
22.
GENERAL PROVISIONS

i. Upgradation/ closure of accounts

▪ In case account is upgraded or closed even after cooling period with normal recovery and without
enhancement in existing exposure or without sanctioning any other credit facility; except sanctioning other
credit facility while implementing the restructuring proposal sanctioned by competent authority; the
process of examination of accountability will be discontinued (except where it is fraud) as under (All IR
irregularities shall be dealt separately).
▪ The discontinuation of process of examination of accountability will not be applicable in case where there
is collusion of staff with the borrower or fraud is perpetrated on bank by the staff members.
▪ In case staff accountability was discontinued after upgradation of account and subsequently the account
is classified as fraud, staff accountability will be examined incorporating previous process which was
discontinued and taking cognizance of previous investigation report
a. Before decision by HOSAC II or ZOSAC
The matter be discontinued except where it is fraud. A note be placed before Zonal Head for information
b. After decision by HOSAC II or ZOSAC but before decision of DA regarding initiation of
disciplinary action
The respective disciplinary authority shall take decision for discontinuation of staff accountability process.
Composite case shall be placed before the authority applicable in respect of highest level of Erring Official
(s).

ii. Lapses observed against Retired Officials:

In terms of PNB (Employees) Pension Regulations 1995, Point 48 (2), “No departmental proceedings, if
not instituted while the employee was in service, shall be instituted in respect of an event which took place
more than 4 years before such institutions Provided that the disciplinary proceedings so instituted shall be
in accordance with the procedure applicable to disciplinary proceedings in relation to the employee during
the period of his service”. Before proceeding against retired employees, matter has to be referred to HRDD
HO first.
IO will incorporate lapses relating to Retired Officials in the investigating report. Event date in the matter
shall be specified by IO separately for each retired official as per their respective lapses. Thereafter,
concerned ZAO shall submit the case to IAD: HO (in cases where vetting of report is conducted at ZAO)
and IAD: HO shall refer the matter to HRD: HO for taking a view on initiation of staff side action against
officials or otherwise (in case where vetting of report is conducted at ZAO as well as where vetting of
report is conducted at IAD: HO).

iii. Staff Accountability in respect of officials /employees posted at the Representative offices/
Branches in Foreign countries
Shall be as per this Staff Accountability Policy in addition to the country specific Policy in operation.
Wherever amounts are specified in Rupees, the same may be considered in equivalent applicable foreign
currency.
iv. Staff Accountability against Audit Officials
Auditor/Inspecting Official is responsible for auditing & flagging the irregularities as per Concurrent Audit
Policy/ Risk Based Internal Audit Policy/Audit Template issued/revised from time to time. In case of non-
flagging of irregularities causing any loss to the bank, staff accountability will be examined against
concerned Auditor/Inspecting official. The determination of staff accountability on the part of the Auditor
(internal/external)/Inspecting official shall rest with GM, IAD, HO. For actionable lapses, HOIAD will place
IAC note for examination of vigilance overtone. However, for non-actionable lapses, ZAO Head will issue
‘Note of Caution’ to the concerned officials

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v. Reports of Advocates/Chartered Accountants / Valuers/ etc

▪ In all those cases where the Bank Employees had relied upon the opinion/Certificates of the
empanelled/approved technical experts, i.e., Advocates/Chartered Accountants / Valuers/Auditors, etc.,
and did not deviate from opinion of those technical experts given on Bank’s prescribed formats
(wherever applicable), the Bank Employees shall not be held accountable for the lapses on the
part of those experts. These guidelines of not holding Bank Employee accountable for the lapses on
the part of technical experts shall supersede all related provisions/stipulations/restrictions, etc.
mentioned in other earlier circulars/guidelines.
▪ This Provision will also be applicable for reports / opinions obtained in operational matters at Various
Divisions at Head office and other offices
▪ However, as per guidelines, in cases of mortgage of property as security, Officials are required to visit
the property being mortgaged and the appraising office, should conduct pre-sanction visit of borrower’s
factory/business premises/IP offered as security in the loan account/borrower’s place of work/residence
as part of appraisal and annex the copy of visit report with the proposal. Comments in brief, regarding
pre sanction visit, should be invariably mentioned in the appraisal note at appropriate place. The report
should contain date of visit, name of official who visited the site, important nearby landmarks, name
of the neighbours or any relevant information regarding the IP. The visiting official shall enclose the
tangible proof of his visit with the visit report. He will be held accountable if any major/abnormal
deviation is detected on the above issues later on and no such tangible proofs, (viz. Photograph, etc.)
are on record.
vi. Examination by Chief Vigilance Officer
For NPA accounts with Aggregate Exposure above ₹30.00 crore, where staff accountability aspect has
been examined by the designated committee, a copy of Investigation report along with enclosures, Tabular
and Minutes of the meeting will be furnished to Vigilance Department. In exceptional cases, the CVO may
appropriately refer the matter to the concerned Staff Accountability Committee with specific inputs/reasons
for any clarification. In case the Staff Accountability Committee does not perceive any accountability, the
matter be treated as final. The Committee will convey the decision to respective Circle Office/Zonal Office
for onward communication to the concerned officials.
23. CONSTITUTION OF VARIOUS COMMITTEES
SN Committee Purpose Members
1 HOSAC I: Committee of 5 DGMs/AGMs to be nominated by Executive
To decide the accountability regarding matters Director (Domain ED of Inspection and Audit Division). Quorum
emanating from Administrative Offices against will be any three. (DGM/AGM of concerned Division,
the officials working therein accountability of whose officials is being examined will be
included. If he/she is not already in five members committee,
he/she will be included as an additional member).Convenor
will be AGM of IAD.
2 HOSAC II: i. CGM IAD
To decide the matters of staff accountability for ii. CGM Corporate Credit /CGM RAM & FI
cases above ₹10.00 crore and cases beyond (Senior of the two shall be the member)
powers of ZOSAC iii. CGM IRMD/GCRO iv. CGM Recovery
v. CGM Compliance/GCCO
Convener GM/DGM IAD HO
3 CoGM: i. Senior Most GM Credit Division
▪ To examine the matter and take decision in ii. GM Retail Assets Division
respect of need for special investigation in iii. Senior Most GM SASTRA Division HO
NPA cases above ₹10.00 crore. iv. GM IBD
▪ To examine staff accountability in cases v. GM MSME Division
(other than borrowal) where fraud is
perpetrated by staff member or involvement
Convener GM/DGM IAD HO
of staff is perceived and has acted in
collusion/ connivance with an outsider.
4 IAC i. CGM Operations Divisions
To recommend to CVO regarding existence of ii. CGM CRMD
Vigilance angle in a case iii. CGM Finance Division/CFO

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iv. CGM DBTD

v. CGM SMEAD/Marketing/ Business Acquisition
Convener GM/DGM IAD HO
If CGM is not posted in any of the concerned Division, Senior
Most GM from the said Division shall attend the meeting
5 ZOSAC: i. (a) 2nd in command at Zonal office headed by GM
i. To examine the matter and take decision in (b) In case of CGM Headed Zones, GM, not nominated as
respect of need for special investigation in Disciplinary Authority, shall form part of ZOSAC. In case
cases upto ₹10.00 crore and decide staff single GM is posted in ZO, any DGM not nominated as
accountability thereof Disciplinary Authority shall form part of ZOSAC. No
official ₹dealing with Disciplinary proceedings shall part
ii. Operational Matters, (Excluding Fraud)
of ZOSAC.
Inspection reports basis irregularities,
complaints or any other. ii. DGM of any office nominated by ZM under his jurisdiction.
In case second DGM is not available in the Zone, GM IAD
iii. Fraud Cases Below ₹3.00 Crore
will nominate DGM from other Zone or authorize any AGM
iv.Matters (not involving any financial aspect) of the Zone other than already a member of ZOSAC.
such as complaint relating to misbehaviour, iii. AGM of any office nominated by ZM under his jurisdiction.
man handling, late attendance, unauthorized
Senior-most officer will chair the committee. Further, while
absence, etc
nominating members, the aspect of conflict of interest will be
(Convener, CM Zonal Office) taken care of.
Note:

i. The quorum of Committees shall be completed by any 3 members.

ii. In case of difference of opinion among Committee Members, decision of majority Committee Members will prevail.
iii. The meeting of ZOSAC/HOSAC-II/COGMs should be conducted frequently as and when required but at least once
in a month. In case of HOSAC I it will be as and when required.
iv. Member of any Committee constituted as above, will not function as a member of such Committee, if he/she had
ever been associated with that particular borrowal account as appraising /recommending /sanctioning /disbursing
/ post disbursement monitoring authority etc. In such case, the quorum of the Committee shall be completed by
taking another member in his/her place, as nominated by designated authority.

24. TIME SCHEDULE FOR EXAMINATION OF STAFF ACCOUNTABILITY

Finalization of staff accountability: (Zero date*: after cooling period)
S.N. Particulars Role Days
1. Submission of Status Note by concerned branch to Circle Office Branch 10
2. Submission of Status Note (Annexure I & II) by Circle Office to Zonal ZOSAC/ 20
Office or to HOIAD as per authority, Placing the same before Competent CoGM at HO
Authority for taking view on conducting / not conducting of investigation
3. Order for investigation by ZAO/IAD ZAO/IAD 05
4. Conducting investigation by I.O. ZAO/IAD 20
5. Vetting of Investigation Report ZAO/IAD 05
6. Taking view of concerned officials on the reported irregularities IO/ZAO/I AD 15
7. Views of I.O. on reply of concerned officials on reported lapse and IO 03
submission of Final Investigation Report to concerned CO/ZO
8. Submission of Self-Contained Note (SCN) to Competent Authority CO/ZO 15
9. Placing SCN before Competent Authority for examination of SA HOSAC/ZOSAC 15
10. Submission of IAC Note to IAD HO CO/ZO/ZAO 7
11. Examination of vigilance overtone by IAC and referring the case to CVO IAD, HO 10
Total 125
*Zero Date: 30 days (Cooling Period) after the date of account classified as NPA. For any inordinate delay observed in
examination of staff accountability at the level of ZOSAC, IAD (HO) will seek the explanation of official(s) concerned.

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25. ASSIGNMENT OF INVESTIGATIONS

Where ZOSAC/COGMs has taken a view for conducting investigation, in such cases the convener of Staff
Accountability Committee will provide the copies of Status Note and additional information, if any, to ZAO (in
cases of ZOSAC) for conducting investigation. ZAO/IAD HO shall get the cases investigated by deputing
Investigating Officials (IOs) as under:
SN Account with Aggregate Exposure as on date of NPA Level of officer as IO
1 Up to ₹10.00 cr (In case of frauds it shall be below ₹3.00 cr Scale III/IV
2 Above ₹10.00 crore and up to ₹30.00 Crore and in case of fraud it Not below Scale V having experience/
expertise befitting to the amount involved
shall be ₹3.00 crore and above and up to ₹30.00 crore
3 Above ₹30.00 crore Not below Scale VI having experience /
expertise befitting to the amount involved
26. VETTING OF INVESTIGATION REPORTS
Formation of Committees and Authority to issue questionnaire:
Name of the committee & Members
Vetting committee at ZAO level
i. GM/DGM/AGM Head (including officiating) at ZAO)
ii. DGM/AGM at ZAO level other than the convener
iii. AGM/CM at ZAO level other than the convener
iv. AGM/CM at ZO not a committee member of ZOSAC
v. AGM/CM at ZO IAD/CRMD not a committee member of ZOSAC
Convener AGM/CM at ZAO level
ZAO Head /Officiating ZAO Head (not below the rank of AGM, through an office order where permanent ZAO Head is
not present at least for a fortnight) is the compulsory member.
Quorum will be any three members (excluding convener). However, at least one member from ZO is compulsory.
Issuance of questionnaires:
Authority to issue Questionnaire shall be at least one scale higher than the concerned official accordingly:
GM ZAO Head will issue the questionnaire (as per format) to the concerned official(s) upto the level of Scale VI.
DGM ZAO Head will issue the questionnaire as per format) to the concerned official(s) upto the level of Scale V.
AGM ZAO Head will issue the questionnaire (as per format) to the concerned official(s) upto the level of Scale IV.
For remaining cases in scale VIII/VII/VI/V the matter shall be forwarded to GM (IAD-HO) with complete details and
recommendations and draft questionnaire
Vetting committee at HO- IAD level:
i. GM-IAD, HO
ii. DGM/ AGM at Staff Accountability Cell
iii. DGM/AGM at CARD Division at IAD HO
iv. AGM at any other Cell at IAD HO
v. CM at Staff Accountability Cell other than convener
Convener CM / SM allocated the said Zone at HO-IAD level GM-IAD, HO is the compulsory member and Quorum will be
any three members at Sr. No ii to v
CGM IAD will nominate the members with names
Issuance of questionnaires:
Authority to issue Questionnaire shall be at least one scale higher than the concerned official accordingly:
GM-IAD, HO will issue the Questionnaire (as per format) to the officials in scale VI of ZAO level Committee where ZAO is
headed by DGM and to the officials in scale V and VI of ZAO level committee where ZAO is headed by AGM
Further, GM-IAD, HO will issue Questionnaire (as per format) upto the level of Scale VI for cases falling under Vetting
committee at HO-IAD level.
CGM-IAD, HO will issue the Questionnaire (as per format) to the officials in Scale VII in all cases
ED (Domain IAD) will issue the Questionnaire to the officials in Scale VIII in all cases
Note:

▪ The Questionnaires will be sent to the identified concerned official directly with a copy to the reporting
authority under whom the official is working presently. Concerned officials will be advised to submit reply

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within 7 working days from receipt of letter. On request of identified officials, maximum time of 7
more working days may be granted to him
▪ Official under investigation shall submit his/her reply to IO under copy to questionnaire issuing authority.
The concerned official will submit reply along with documentary evidence in his/her support. If he/she
wants to visit the branch for verification of records, he/she may be permitted to visit the branch within the
knowledge of his/her reporting authority.

27. PARAMETERS FOR VETTING OF LAPSES

Essentially, lapses fall into 3 broad categories:
a. Procedural lapses or casual negligence in the ordinary discharge of one's duties and not involving financial
/ legal liabilities/implications for the Bank
b. Gross negligence, detection of reckless lending and
c. Lapses with malfeasance intentions
(Ref. IAD Circular No.24/2024 Dt.15.06.2024)

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G1 Group Compliance Policy

Part A: Policy Guidelines

Background
▪ Basel Committee on Banking Supervision (BCBS) in April 2005 came out with guidelines on Compliance and
Compliance function in Banks, inter-alia, defining compliance, roles and responsibilities of the Board, Senior
Management and Compliance Function through its 10 Principles.

▪ Subsequently, the RBI vide Circular dated 20.04.2007 issued guidelines on Compliance and Compliance function in
Banks, which were further enhanced vide Circular dated 04.03.2015, 20.01.2016,11.09.2020.
▪ Accordingly, first Compliance Policy was put in place with the approval of Board dated 12.09.2007. The Compliance
Policy is reviewed on annual basis and enhanced as per Major Areas of Non-Compliance (MANC), Risk Mitigation
Plan (RMP) and Inspection & Risk Assessment Report (IRAR), also incorporating industry best practices covering
areas of compliance.

Objective

To ensure that compliance risks are identified and adequately managed and /or mitigated and to inculcate Compliance
Culture across the Bank/Group

Compliance Philosophy
Compliance is most effective in a corporate culture that emphasizes standards of honesty and integrity. Bank has
defined its Compliance Philosophy using key guiding principles that together constitutes Compliance Risk
Management Framework of the Bank.

Compliance Risk
The BCBS paper on Compliance and the Compliance Function in Banks (April 2005) defines Compliance risk as “the
risk of legal or regulatory sanctions, material financial loss, or loss to reputation a bank may suffer as a result of its
failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct
applicable to its banking activities” (together, “compliance laws, rules and standards”).

Scope
A. Classification
Regulatory Compliance Statutory Compliance Other Compliances
The Bank has to ensure strict adherence to:
All regulatory guidelines issued All statutory provisions contained In addition to the Regulatory and Statutory
from time to time by the sectoral in various banking related Compliance, the Bank has also to comply with
Regulators such as the RBI, legislations such as BR Act, RBI standards and codes prescribed by the Industry
SEBI, IRDAI,PFRDA wherever Act, FEMA, PMLA, etc. The Bank Bodies as well as self-Regulatory Organisations
applicable and other regulators has also to comply with all other such as IBA, FEDAI, FIMMDA, etc., and other
for overseas entities and such Central and State Government external regulations, Banks’ internal policies,
compliances shall be termed as and local laws including Tax laws procedures, fair practices codes including matters
Regulatory Compliance to the extent applicable to the such as observing proper standards of market
Business conduct, managing conflicts of interest, treating
customers fairly and ensuring the suitability of
customers’ advice

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B. Inspection for Supervisory Evaluation (ISE):

▪ RBI has adopted a Risk Based Supervisory (RBS) approach, based on the recommendations of the High-Level
Steering Committee (HLSC) for Review of Supervisory Processes of Commercial Banks. RBI’s revised supervisory
approach is called Supervisory Program for Assessment of Risk and Capital – SPARC
▪ RBI conducts Inspection for Supervisory Evaluation (ISE) of the Bank under Section 35 of BR Act, 1949 and
shares Inspection & Risk Assessment Report (IRAR) as part of SPARC.
▪ Compliance Division acts as nodal point to ensure timely availability of the data/information sought by the RBI
under ISE. Along with IRAR, RBI shares Risk Mitigation Plan (RMP) based on the key supervisory concerns to be
attended by the Bank in a time bound manner. As part of IRAR, RBI also shares its observations on Major Area
of Non-Compliance (MANC) of regulatory guidelines

C. Compliance Risk Identification:

The Compliance Division shall monitor and evaluate the compliance risk at periodical intervals using following
mechanism:
i. Compliance Risk Assessment (Group): Group wide Compliance Risk as indicated by RBI will be managed
through this policy and Group Compliance Risk Framework to ensure the identification and effective management
or mitigation of compliance risk, as well as to inculcate Compliance Culture across the Bank/Group.
ii. Compliance Risk Assessment (Bank): Compliance Division will assess Compliance Risk level of the Bank
through Compliance Risk Assessment Model (CRAM) on quarterly basis. The GCCO will ensure that parameters
of the CRAM be updated regularly. CRAM will identify compliance risk faced by the Bank on the basis of 16
Compliance Parameters under 03 Compliance Segments (CS) as mentioned hereunder:
a. Regulatory Concerns {05 Parameters};
b. Internal Evaluation {08 Parameters};
c. Compliance Culture {03 Parameters}
iii. Compliance Risk Assessment (Business Lines): In order to evaluate the compliance risk across all business
lines at periodic intervals, compliance function shall undertake Independent Compliance Assessment of all the
areas of the Bank at periodic intervals. The risk assessments activities shall be governed by the provisions of
Compliance Testing Framework (CTF) and results shall be shared with concerned owner divisions for corrective
actions followed by placing of details before Audit Committee of Executives (ACE)/Audit Committee of Board
(ACB) on as and when basis
D. Classification of Non-Compliances:
Major Non-Compliance Compliance Breaches Compliance Failures
Any enforcement action, i.e., Explanation Breaches to predefined Non-compliance of
call, Letter of Displeasure/Caution, Show Statutory Obligations/ regulatory/statutory/ Bank’s
Cause Notice, Monetary Penalty, and Regulatory Limits to be treated internal policies/ guidelines, etc.
Regulatory Sanction initiated/ taken as Compliance Breaches (other than categories
against the Bank by Statutory Bodies / mentioned at i & ii above) shall
RBI / any other Regulator / Autonomous be classified as Compliance
Bodies to be treated as Major Non- Failure
Compliance

E. Mitigation of Compliance Risk:

All major non-compliances shall be dealt as under:
i. These non-compliances shall be mandatorily investigated. Compliance/ Owner Division shall advise Inspection
& Audit Division (IAD), HO to investigate such incidents to identify the gaps/ lapses as the case may be.
Identified lapses shall be dealt with in terms of staff accountability policy. Identified gaps shall be shared with
concerned HO divisions to mitigate and correct the deficiency through enhancements in systems, processes
and policies to prevent recurrence of such incidents in future for sustained compliance.
ii. Compliance Division shall also perform independent compliance testing, wherever required, in these cases in
terms of compliance testing framework.

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iii. Compliance Division shall prepare case studies on instances of major non- compliances and share it with
concerned including HO divisions, CLI/Training Centres, etc., for creating awareness. These may also be
incorporated in Quarterly Compliance bulletin to spread awareness among field staff to prevent recurrences.
F. Spreading Compliance Culture
Owner divisions to ensure that, “the need to comply with instructions meticulously” is emphasized amongst all the
staff in the Bank through continuous and mandatory training on compliance aspects, appropriate disciplinary
measures through staff accountability framework/ policies for non-compliance, etc. Compliance should not be seen
as an activity of the Compliance Division alone but as a culture that pervades across the Bank.
The Bank has put in place the policy on ‘Risk and Compliance Culture’, which is to be referred in this regard

G. Reporting
To give an appropriate oversight of the compliance risk to ACB/Board, following reporting mechanism is put in place:

i) Escalation of Major Non-Compliances to be done to the ACB on monthly basis; however, the GCCO may decide
to escalate it to the ACB/Board by way of immediate circulation depending upon the severity of the issue.

ii) Regarding monetary penalty, ACB in its meeting held on 18.06.2019 has directed to place position regarding
penalties of ₹1.00 Lakh and above imposed on Bank as regular agenda item to ACB. This reporting will be
placed to the Board on quarterly basis.

Compliance Structure of the Bank/Group

Compliance Function

As per BCBS Principle 10 on Compliance function in the banks and also RBI directive, the Compliance Function should
not be outsourced. Accordingly, Bank is having an in-house Compliance Function. Broadly, Compliance Function team
consists of not only officials posted at Compliance Division, HO but also Zonal Compliance Officers (team), Circle
Compliance Officers (team) in the field. It also includes designated officials looking after compliances with respect to
SEBI (LODR), Principle Officer for AML related compliances and Compliance Officers on overseas locations. The
compliance function will be further supported by Compliance Champions at Units/Branches who will act as nodal point
of contact for various compliance activities while performing other job roles already assigned to them.

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A. Group Chief Compliance Officer (GCCO):

Guidelines for the appointment of the GCCO along with broader roles and responsibilities have been prescribed by
the RBI vide its notification on Compliance functions in banks and role of Chief Compliance Officer (Circular dated
11.09.2020).

Appointment of GCCO:
1. Appointment Shall be appointed for a minimum fixed tenure of not less than 3 years. The Audit
Committee of the Board (ACB) / MD&CEO should factor this requirement while
appointing GCCO
2. Transfer / May be transferred / removed before completion of the tenure only in exceptional
Removal circumstances with the explicit prior approval of the Board after following a well-
defined and transparent internal administrative procedure
3. Eligibility Criteria Shall be a senior executive of the bank, preferably in the rank of a CGM or an equivalent
position (not below two levels from the CEO)
i. The GCCO could also be recruited from market;
ii. Age-Not more than 55 years;
iii. Experience-The GCCO shall have an overall experience of at least 15 years in the
banking or financial services, out of which minimum 5 years shall be in the Audit
/ Finance / Compliance / Legal / Risk Management functions;
iv. Skills-The GCCO shall have good understanding of industry and risk management,
knowledge of regulations, legal framework and sensitivity to supervisors’
expectations
v. Stature-The GCCO shall have the ability to independently exercise judgement. He
should have the freedom and sufficient authority to interact with
regulators/supervisors directly and ensure compliance;
vi. Others - No vigilance case or adverse observation from RBI, shall be pending
against the candidate identified for appointment as the GCCO
4. Selection Process Shall be done on the basis of a well-defined selection process and recommendations
made by the senior executive level selection committee constituted by the Board for
the purpose. The selection committee shall recommend the names of candidates
suitable for the post of the GCCO as per the rank in order of merit and Board shall take
final decision in the appointment of GCCO
5. Reporting A prior intimation to the Department of Supervision, RBI, Central Office, Mumbai, shall
Requirements be provided before appointment, premature transfer/removal of the GCCO. Such
information should be supported by a detailed profile of the candidate along with the
fit and proper certification by the MD & CEO of the bank, confirming that the person
meets the above supervisory requirements, and detailed rationale for changes, if any.
Further, the Board, ACB shall be kept informed of any change in the GCCO as also the
reason for the change in the incumbent.

Responsibilities of GCCO:

Committee membership:
The GCCO shall not be member of any committee which brings his/her role in conflict with responsibility as member
of the committee, including any committee dealing with purchases / sanctions. In case the GCCO is member of such
committee, he/she may have only advisory role. However, the GCCO may be a member of:
‘System & Product Approval to ensure that all new products/ new processes have clearance from all
Committee of Executives [SPACE]’ perspectives including Compliance
CGM Committee on Control & to enable him to be part of the deliberations on various issues pertaining
Support functions to 2nd and 3rd line functions
Invitee in CGM Committee on to enable him to head start on emerging business considerations and
Business Review new product plans, apart from products and channels

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▪ Member of any other Committees as may be approved by the Board including Operational Risk Management
Committee (Managed by IRMD), Credit Risk Management Committee (Managed by IRMD), Market Risk
Management Committee (Managed by IRMD), Asset liability committee (Managed by IRMD), IT steering committee
(Managed by ITD).
▪ Further, he/she will necessarily be a participant in the Quarterly Informal Discussions (QID) held with RBI and may
be invited to other committee meetings involving compliance areas
▪ In the absence of the GCCO, the Divisional Head (Compliance) may participate in the all the Committee meetings,
where presence of compliance function is required
Other responsibilities of the GCCO
▪ GCCO shall be the administrative Head of Zonal Compliance Officers (ZCOs) and Circle Compliance Officers (CCOs),
defining their roles and responsibilities, performance monitoring, also responsible for their annual appraisal;
▪ GCCO shall ensure that Overseas Branches and Subsidiaries have put in place their Compliance Policies as per Host
Country requirements.

▪ GCCO will have quarterly meetings with the Head of Law Division, HO and Divisional Head (Finance)/CFO to take
stock of the latest developments on the matters of law and taxations.

▪ GGCO shall ensure that Conflict between business and control function should be set right at an early stage as
overlaps create issues. Wherever, it is observed that there is a conflict between business and control functions
and/or conflicts related to ownership of any activity at HO divisions, in order to have clarity, a Committee of
CGMs/GMs heading MPD, HR, Audit & Compliance may deliberate and decide on the issue. The decision of the
Committee shall be on majority basis and the quorum shall be three. In the absence of CGM, head of the respective
division shall be the member. AGM, MPD, HO shall be convenor of the meeting. Any subsequent changes in the
approach shall require approval of the Managing Director

B. Nodal Point of Contact:

The GCCO will be the Nodal Point of contact between the Bank and the Regulator (RBI).
Following Nodal Officers will be appointed under different Statutory Laws/Legislations/ Notifications by the Bank:
i. Principal Officer under Prevention of Money Laundering Act;
ii. Principal Information Officer under RTI Act;
iii. Nodal Officer under Ombudsman Scheme;
iv. Nodal Officer under Minorities/SC/ST;
v. Compliance Officer for SEBI, etc.

Nodal Officers, as above, will ensure compliance in regard to the respective Statutory Laws/ Legislations/ Notifications
on an ongoing basis.
C. Dual Hatting & Conflict of Interest:

i. There shall not be any ‘dual hatting’, i.e., the GCCO shall not be given any responsibility which brings elements
of conflict of interest, especially the role relating to business.

ii. The GCCO shall not have any reporting relationship with the business verticals of the bank and shall not be given
any business targets. The performance appraisal of the GCCO shall be reviewed by the Board/ACB.
iii. Further, under no circumstances, the compliance officials should be assigned role related to business,
audit/inspection and credit monitoring related tasks as it gives rise to serious conflict of interest

D. Independence:
As per regulatory requirements, the Bank has set up an independent Compliance Function headed by the GCCO with
overall responsibility for coordinating the management of the bank’s compliance risk. The GCCO and the Compliance
Function is entrusted with the second line (oversight) responsibilities only. They are not to be assigned any first line
responsibility related to business and operations to avoid any conflict of interest in the role they are performing.

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The GCCO heading the Compliance Function shall have direct line reporting to the MD & CEO of the Bank. However,
he/she also have the dotted line reporting to the Board/ Audit Committee of the Board (ACB). The ACB shall
meet the GCCO quarterly on one-to-one basis, without the presence of the senior management including MD &
CEO to discuss various compliance issues Bank might be facing and remedial actions taken including any support
required from the ACB or the Board. Presently, the GCCO reports to the MD & CEO through domain ED. A suitable
reference has been made to the SSM-PNB for clarification. Pending receipt of the response from RBI and finalization
of the issue existing arrangements of reporting of GCCO to MD & CEO through domain ED shall continue.

The Compliance Function set up at each Group Entity shall be an independent function that has the ability to
objectively assess and express its views on the policies and practices of other functions/ business in relation to
compliance.

It is also emphasized that the Compliance Division has the right:

i) on its own initiative to communicate with any staff member and obtain access to any records or files necessary
to enable it to carry out its responsibilities.
ii) to carry out its responsibilities on its own initiative in all departments of the bank in which compliance risk exists
and also to conduct investigations of possible breaches of the compliance policy and to request assistance from
specialists within/outside the bank (e.g. legal or internal audit) as may be appropriate. The authority to use
external experts for the purpose of investigations, if required, shall be the MD & CEO.

iii) to be able freely to express and disclose its findings to senior management, and as may be appropriate to the
ACB or the Board.

E. Compliance as shared responsibility

Compliance should be part of the culture of the organization; it is not just the responsibility of specialist compliance
staff but primarily the ownership of being compliant rests with the Business Units/ Operating Units/ Supporting Units.

Thus, Compliance Governance Framework for better management of the compliance risk involves three Lines of
Defense (3LoD) as illustrated below:

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Roles & Responsibilities

▪ The Board of directors is responsible for overseeing the management of the Bank’s Compliance Risk.
▪ Board of Directors have delegated the responsibility to oversee implementation of Compliance Policy within the
Bank/Group to the Audit Committee of the Board (ACB). The ACB shall review compliance function through
various reporting as per reporting structure.
▪ The Bank’s Senior Management is responsible for establishing the Compliance Policy, implementing it and
managing the Compliance Risk. Similarly, in case of group entities, the top management of the entities will be
ultimately responsible for ensuring compliance.

Activities to be performed by Compliance Division:

Activities related to

RBI’s Risk Based Dissemination of Monitoring Activities Management of

Supervision Regulatory Daksh Portal
Guidelines

▪ Liaison with the Regulator To disseminate Monitor compliance of the A web based end-to-
for submissions under guidelines issued by following at Bank level: end workflow
various indents, audits & the Regulatory application at RBI,
i) Guidelines issued by RBI and
reporting Authorities to which enables the
other Regulatory / Statutory
concerned HO regulator to monitor
Bodies;
▪ Collect and submit Data divisions on daily compliance
and Information basis for ii) Directions issued by Regulator requirements in a more
Requirements under SPARC compliance. through confidential letters; focused manner with
– TRANCHE – I/II/III or iii) RBI Inspection Reports the objective of further
otherwise IR/RMP/RAR/MANC; enhancing the
▪ Handles ISE reports compliance culture
(RAR/RMP/MANC/IR) for its iv) Timely submission of
compliance Regulatory Returns by
different HO Divisions

Other activities:

Compliance Division shall study emerging, as well as low probability and high impact scenarios and share the
information with respect to its impact on compliance and possible mitigations across the business lines and hierarchy.

Disclosure of penalties imposed by the RBI

➢ In terms of RBI Master Direction on Financial Statements - Presentation and Disclosures issued vide
reference number DOR.ACC.REC.No.45/21.04.018/2021- 22 dated August 30, 2021 (updated from time to time,
Penalties imposed by the RBI under the provisions of the Banking Regulation Act, 1949, Payment and Settlement
Systems Act, 2007 and Government Securities Act, 2006 (for bouncing of SGL) shall be disclosed in the ‘Notes to
Accounts’ to the balance sheet in the bank’s next Annual Report. Bank shall make appropriate disclosures on the
nature of the breach, number of instances of default and the quantum of penalty imposed.

➢ Any operative instructions to achieve policy objectives and to promote Compliance Culture shall be issued with
the approval of the Audit Committee of Executives (ACE).

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Part B: Operational Guidelines

Compliance Culture

Culture of compliance starts with an organization that is true to its mission and core values, where senior managers
lead the way by expressing their commitment to compliance policies and encourage open communication and honest
feedback. It is a set of values & behaviors in sync with the regulatory requirements, which is displayed across the
organization by all units. Compliance is inseparable from the organization’s structure, processes and management
style, ethics and values
Board is responsible for putting in place an effective compliance framework in line with BCBS principles and
supervisory expectations. Minimum supervisory expectations for robust compliance culture across the group involves
4 key principles as given below:
i. Tone from the Top
ii. Accountability
iii. Communication
iv. Training & Education
Further, in order to strengthen, Compliance culture in the bank and to dis- incentivise non-compliances following
provisions have been made:
i) Compliance Monitoring Tool (CMT) has been developed in HRMS, meeting EASE 4.0 requirements for officer
employees to inculcate compliance culture and to incentivize & dis-incentivize their respective Compliance
behaviour. This tool provides a checklist of Key Compliance Obligations with respect to the specific roles individual
officer is performing and upon verification and compliance testing, generate a compliance score, which will be
linked to the individual officers’ Annual Performance Appraisal (APAR) from FY 2023-24 onwards.

ii) Performance appraisal of ZCO (including team)/ CCO will be done by Compliance Division (GCCO). Competent
authority to appraise, review and accept performance of Compliance Officers will be as per extant HR guidelines.

Dissemination of Regulatory Guidelines

Compliance Division disseminates guidelines issued by the Regulatory Authorities to concerned HO divisions on daily
basis for compliance. In order to have a structured mechanism for deciding time bound action plan for compliance
of new guidelines received from regulator(s)/other authorities, a Cross Functional Team (CFT) shall function on
following lines:
A. Permanent Members
S.N. Division Official(s)
1 Compliance Division DGM/AGM
2 IRMD AGM (Policy)
3 Concerned HO Division ▪ Nodal Officer for Compliance and
▪ AGM/CM responsible for implementation of guideline under consideration
B. Invitee Members: Officials from other Divisions may be invited on case to case basis depending on the guideline
under consideration
1 Liability side Nodal Officer for Compliance - Operations Division
2 Asset side Nodal Officer for Compliance - Credit Review and Monitoring Division
3 IT Customization AGM- ITD
4 Cyber Security AGM- CISD
Convener: Compliance Division
Purpose & Frequency CFT shall meet minimum on weekly basis to decide:
of meeting a) Obligation(s)/actionable(s) relating to implementation of the guideline(s);
b) Responsibilities of concerned divisions in the implementation of guideline(s); and
c) Stage wise timelines for execution of obligation(s).

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Zonal Compliance Officer (ZCO)

Each Zonal Office will have a dedicated ZCO in the rank of Assistant General Manager (AGM); however, in small
zones depending upon the size of the business and in exceptional circumstances, Scale IV officers may also be
placed as ZCOs on selective basis with prior concurrence of the GCCO. He will be assisted by 1-2 Scale I/II/III
officer(s). Functional reporting, i.e., Performance Appraisal of ZCO will be with GCCO. Role of ZCO is to spread
Compliance Awareness, inculcate Compliance Culture and identify compliance risks by way of conducting various
regular Compliance Risk Assessments (CRA) besides independent compliance activities/thematic studies through
sample testing as per the directions of Group Chief Compliance Officer (GCCO)/ Compliance Division. Detailed job
profile of ZCO shall be advised by the GCCO.

Circle Compliance Officer (CCO)

Each Circle Office will have a dedicated Compliance Officer (CM in case of DGM headed circles & SM in AGM headed
circles). Role of CCO shall also be to spread Compliance Awareness, inculcate Compliance Culture and identify
compliance risks by way of conducting various regular Compliance Risk Assessments (CRA) besides independent
compliance activities through sample testing as per the directions of Group Chief Compliance Officer (GCCO)/
Compliance Division. Detailed job profile of CCO shall be advised by the GCCO

➢ Company Secretary of the Bank is entrusted with the duties of Compliance Officer – SEBI

Communication with the RBI:

i) Clarification/References on Regulatory Guidelines/Directions: Any reference to RBI or clarification

sought shall mandatorily be sent to RBI through compliance division. Concerned HO Divisions shall prepare
the reference addressed to appropriate Authority at RBI and share the letter, duly signed by the concerned
CGM/direct reporting GM, with compliance division for taking it up with RBI.

ii) Submission of periodic information/returns: Concerned HO divisions shall submit all periodic
returns/information and response to any subsequent queries directly to concerned department/section of
RBI.

iii) Response to communications received directly at HO divisions:

Response to various communications received directly at HO divisions shall be directly submitted to RBI under copy
to compliance division. This will include correspondence w.r.t. any meetings (viz. with RBI’s Ombudsman Cell,
Govt. Business Division, etc.) attended by the officials at the concerned HO divisions, follow up response on any
ATR, etc.

iv) Correspondence by field functionaries: Any communication to RBI other than operational issues like
currency chest operations, ATM cash out penalties, etc. shall be invariably routed through concerned HO
Division. The communication w.r.t. the operational issues shall be routed through Designated Offices/Zonal
Offices/HO Divisions

Compliance Testing Framework

Compliance testing is a process of checking for adherence to a policy, a rule or a regulation by way of sample testing
various controls related to regulatory risk. It assists in finding deviations from the prescribed standards and is
performed for checking and confirming standards and protocols that are to be followed by Bank for various products
and activities during usual course of business

Compliance Risk Assessment Model (CRAM)

Compliance Division will monitor Compliance Risk level of the Bank through CRAM on regular basis. The GCCO will
ensure that parameters of the CRAM be updated regularly. CRAM will identify compliance risk faced by the Bank on
the basis of 16 Compliance Parameters under three Compliance Segments (CS) :

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S. No. Compliance Parameter {CP} Attributes

CS_1_Regulatory Concerns
CP_1 Show Cause Notice(s) Receipt of any Show Cause Notice by Bank during any particular period would be
(SCN) assessed under this parameter.
CP_2 Risk Mitigation Plan (RMP) Compliance under RMP items would be assessed under this parameter.
CP_3 Major Areas of Non- Under Supervisory Program for Assessment of Risk and capital (SPARC), RBI conducts
compliances (MANC) Inspection for Supervisory Evaluation (ISE) of Banks under Section 35 of BR Act,
1949 every year and submit its findings in the form of:
1) Risk Mitigation Plan (RMP)
2) Major Areas of Non-Compliances (MANCs)
3) Risk Assessment Report (RAR) and Inspection Report (IR).
Compliance under MANC items would be assessed under this parameter.
CP_4 Risk Assessment Report (RAR) & Compliance under RAR & IR items would be assessed under this parameter.
Inspection Report (IR)
CP_5 Letter of Caution/ Number of letters of displeasure/caution received during review period shall be
Displeasure from Regulator evaluated under this parameter.

CS_2_Internal Evaluation
CP_6 Regulatory Breaches Regulatory breaches reported by Divisions through monthly compliance certificates
would be assessed.
CP_7 Tranche-III Guidelines Compliance position through testing of TRANCHE-III guidelines would be assessed
under this parameter.
CP_8 Other Regulatory Guidelines Compliance position under Regulatory guidelines (Other than Tranche-III guidelines)
would be assessed under this parameter.
CP_9 Exceeding of Internal Limits Exceeding of Internal Limits reported by Divisions
through monthly compliance certificates would be assessed.
CP_10 CSITE Advisories Action taken for ensuring compliance to CSITE advisories received during a particular
period would be considered.
CP_11 KYC Updation Position of updation of KYC documents (ID/address/ PAN, etc.) in system would be
assessed.
CP_12 Regulatory Returns Timely submission/filing of regulatory returns would be assessed.
CP_13 Compliance Assessment – ACP & Compliance position under various testing activities undertaken in terms of Annual
Others Compliance Plan or otherwise would be assessed under this parameter.
CS_3_Compliance Culture
CP_14 Customer Complaints No. of complaints received during a period and resolved within prescribed
TAT would be assessed.
CP_15 Audit Findings (Regular Audit The parameter shall be assessed on the basis of risk categorization of branches/units
& Concurrent Audit) covered along with status of rectification of audit findings of regular & Concurrent
Audit branches during period under review.
CP_16 Learning & Training This parameter shall be assessed on the basis of
%age of compliance in Mandatory courses in PNB Univ portal.

Monitoring and Escalation Mechanism

In order to have better monitoring of compliance position under various parameters of Compliance Risk Assessment
Model, different monitoring actions along with monitoring & oversight levels have been defined on the basis of Risk
Zone of any parameter as under:
SN Compliance Risk Zone Monitoring Action Monitoring Level Oversight Level
1 Green Risk Zone Baseline Monitoring Divisional Head
2 Yellow Zone Risk Close Monitoring CGM (Divisional Group)
3 Orange Zone Risk Active Oversight Concerned Owner Domain ED
Division
4 Amber Risk Zone Enhanced Oversight Audit Committee of Executives
5 Red Risk Zone Corrective Action Audit Committee of Board

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G2 Policy for Implementation and Management of DAKSH

Background

➢ On October 6, 2022, RBI Governor formally launched a new SupTech initiative named “दक्ष (DAKSH) - Reserve
Bank’s Advanced Supervisory Monitoring System”. This initiative aims to make the supervisory process
more robust and was communicated through Press Release: 2022-2023/1005 dated 06.10.2022.
➢ Subsequently, the RBI issued guidelines vide its letter Ref. No.CO.DOS.RSD. No. S438/31-01-105/2023-2024
dated April 24, 2023 on DAKSH - Reserve Bank’s Advanced Supervisory Monitoring System – Usage by Supervised
Entities (SEs) along with directions to be complied with for the seamless adaptation of DAKSH.

➢ Accordingly, first Policy for Implementation and Management of DAKSH was put in place with the approval of
Board dated 25.07.2023

➢ The term ‘दक्ष (DAKSH)’ signifies ‘efficient’ & ‘competent’, reflecting the inherent capabilities of the application.
It is a web-based end-to-end workflow application that will enable RBI to monitor compliance requirements in a
more focused manner with the objective of further enhancing the compliance culture in Supervised Entities.

Scope

➢ DAKSH provides a web-based interface for interaction between the RBI and the SEs in matters relating to
regulatory compliance, complaints against the SEs and filing of regulatory returns.

➢ DAKSH application has been conceptualised to strengthen the compliance by Supervised Entities (SEs). It is
designed to facilitate the timely and continuous monitoring of the time-bound compliance with the circulars
/instructions /advisories issued by various departments such as DoS (Department of Supervision), DoR
(Department of Regulation), among others.
➢ RBI has put in place manuals which sets forth the guiding principles for the operation of DAKSH. At present, the
manuals encompass the procedures for compliance submission & monitoring, complaint handling & processing
cyber incident reporting, payment fraud incidents reporting and return submission.

Applicability

➢ DAKSH has been envisaged to streamline the process of raising compliancesby RBI to the Supervised Entities
and subsequently track their responses, marking them as either Complied or Not Complied

➢ The application provides interface to RBI Users, SSM Users and Bank’s DAKSH Users for managing complaints
through Complaint review phase, Draft Letter review phase and Fair Letter review phase

➢ DAKSH also provides platform to RBI for efficient management of returns responses from SEs. It facilitates RBI
users to customize returns form and access responses submitted by SEs and in turn enables SE users to respond
to the return forms created by RBI

➢ The application includes a reporting interface for Cyber incidents, allowing SEs to report incidents occurred to
the CSITE (Cyber Security and InformationTechnology Risk) Group of DoS (Department of Supervision), RBI

➢ Further, the Payments Fraud incident Module in DAKSH application empowers SE users to report Payment Fraud
Incidents to RBI Payment FraudReview users.

Nodal Officer

GM – Compliance Division, who will be responsible for overseeing the implementation & usage of DAKSH. In the
absence of GM – Compliance, the DGM – Compliance will look after the responsibilities of “DAKSH Nodal Officer”

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DAKSHA Cell

➢ DAKSH Cell is operational at Compliance Division under the supervision of a designated Nodal Officer in the rank
of General Manager supported by 1 Assistant General Manager, 1 Chief Manager and 2-3 Senior
Managers/Managers. In the absence of General Manager, Deputy General Manager will look after the
responsibilities of DAKSH Nodal Officer (DNO)”.
➢ The following points outline the primary objectives of DAKSH Cell:
i) To ensure the efficient and expeditious implementation of DAKSH.
ii) User Creation & Maintenance.
iii) Monitoring of DAKSH application
iv) Periodic review of Daksh Users
v) Communication with the RBI on all matters pertaining to DAKSH
The DAKSH cell structure of the Bank/Group

Furthermore, the cell shall be suitably strengthened as and when RBI moves all compliances including submission of
various data, Tranche returns, all regulatory returns and all type of communication and correspondences

➢ Authority for Approving Operational Guidelines

Any operative instructions to achieve policy objectives and to ensure smooth functioning of DAKSH shall be issued
with the approval of the Audit Committee of Executives (ACE).

➢ DAKSH can be accessed by users by entering their valid credentials. A Two Factor Authentication (2FA) algorithm
controls the login to the application wherein once the user enters the Username and Password, the user then
needs to enter the displayedCAPTCHA followed by an OTP sent to the users’ registered mobile number.
➢ Compliance Role
In accordance with the directions communicated by the RBI, through Circular Ref. No. DoS. CO. PPG./
SEC.02/11.01.005/ 2020-21, it has been mandated that the bank should have one Chief Compliance Officer. However,
the DAKSH application operates on the concept of Maker and Checker. In order to align with the aforementioned
directions, the Compliance roles for the Bank’s DAKSH user will be assigned as below:
DAKSH User type Role to be assigned
Chief Compliance Officer Maker RBS Cell (Senior Manager orabove)
Chief Compliance Officer Checker RBS Cell (AGM or above)
Higher Authority User Group Chief Compliance Officer/GM – Compliance Division

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H. PRIORITY SECTOR GUIDELINES

1. For the purpose of priority sector lending, Computation of Adjusted Net Bank Credit (ANBC)
Bank Credit in India I
Bills Rediscounted with RBI and other approved Financial Institutions II
Net Bank Credit (NBC)* III (I-II)
Outstanding Deposits under RIDF and other eligible funds with NABARD, NHB, SIDBI and MUDRA Ltd
IV
in lieu of non-achievement of priority sector lending targets/sub-targets + outstanding PSLCs
Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable
V
housing
Advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption
VI
from CRR/SLR requirements
Investments made by public sector banks in the Recapitalization Bonds floated by Government of
VII
India
Other investments eligible to be treated as priority sector (e.g. investments in securitised notes) VIII
Face Value of securities acquired and kept under HTM category under the TLTRO 2.0 IX
Bonds/debentures in Non-SLR categories under HTM category X
For UCBs: investments made after August 30, 2007 in permitted non SLR bonds held under ‘Held to
XI
Maturity’ (HTM) category
ANBC (Other than UCBs) III + IV- (V+VI+VII) +VIII - IX + X
ANBC for UCBs III + IV - VI - IX + XI
* For the purpose of priority sector computation only. Banks should not deduct / net any amount like provisions, accrued interest,
etc. from NBC

The categories under Priority Sector:

Agriculture MSME Export Credit Education Housing Social Infrastructure Renewable Energy Other

Targets /Sub-targets for Priority sector: (of ANBC or CROBE whichever is higher)
Categories Domestic Commercial Foreign Banks Regional Rural Banks Small Finance
Banks with less than 20 Banks
(excl. RRBs & SFBs) & branches
Foreign banks with 20
branches and above
40% 75%
Out of which up to However, lending to
32% can be in the Medium Enterprises,
Total PS 40% form of lending to Social Infrastructure and 75%
Exports and not less Renewable Energy shall
than 8% can be to be reckoned for priority
any other priority sector achievement only
sector up to 15% of ANBC
Agriculture 18% 18% 18%
Out of which a target Out of which a target of 10%# is
of 10%# is prescribed prescribed for Small and Marginal Farmers
for SMFs N.A. (SMFs)
Micro Enterprises 7.5% 7.5% 7.5%
Advance to 12% 15% 12%
Weaker Sections
# Revised targets for Agriculture and SMFs will be implemented in a phased manner:

The targets for lending to SMFs and for Weaker Sections are as under:
Financial Year Small and Marginal Farmers target Weaker Sections target
2023-24 10% 12%

2. Total Priority Sector target for Urban Co-Operative Bank increased in total priority sector target from
40 % to ____ of ANBC or CEOBE whichever is higher:
Existing Target 31.03.2025 31.03.2026
60% 65% 75%

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3. All domestic banks (other than UCBs) and foreign banks with more than 20 branches are directed
to ensure that the overall lending to Non-Corporate Farmers (NCFs) does not fall below the
system-wide average of the last three years’ achievement which will be separately notified every
year. The applicable target for lending to the non-corporate farmers for FY 2022-23 will be _____ 13.78%
of ANBC or CEOBE whichever is higher
All efforts should be made by banks to increase the Farm Credit higher than the NCF target
4. Adjustment of Weights in PSL Achievement
To address regional disparities in the flow of priority sector credit at the district level, it was
decided to rank districts on the basis of per capita credit flow to priority sector and build an 2024-
incentive framework for districts with comparatively lower flow of credit and a dis-incentive 2025
framework for districts with comparatively higher flow of priority sector credit. From financial
year ______onwards weights would be assigned to incremental priority sector credit as follows:
• Higher weight (125%) shall be assigned to the districts where credit flow is comparatively
lower, that is per capita PSL less than ₹9,000.
• Lower weight (90%) shall be assigned to the districts where credit flow is comparatively
higher, that is per capita PSL is greater than ₹42,000.
▪ These additional weightages will be valid for a period up to ________.

RRBs, Urban Co-operative Banks and Local Area Banks and Foreign Banks have been kept out
2026-27
for the purpose of calculation of PSL weights, due to their limited presence.

5. AGRICULTURE
5.1 Farm Credit: Individual farmers
i. Crop loans ii. Medium and long-term loans for agriculture and allied activities
iii. Loans for/to –
▪ Pre and Post-harvest activities
▪ Distressed farmers indebted to non-institutional lenders
▪ Kisan Credit Card Scheme (KCC)
▪ Small and Marginal Farmers for purchase of land for agricultural purposes
iv. Loans to farmers for installation of stand-alone Solar Agriculture Pumps and for solarisation of grid connected
Agriculture Pumps.
v. Loans to farmers for installation of solar power plants on barren/fallow land or in stilt fashion on agriculture land
owned by farmer
vi. Loans against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not
exceeding 12 months subject to a limit :
▪ Up to ₹75 lakh against NWRs/eNWRs and
▪ Up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs

5.2 Farm Credit: Corporate farmers, Farmer Producer Organisations (FPOs)/(FPC) Companies of
Individual Farmers, Partnership firms and Co-operatives of farmers engaged in Agriculture and
Allied Activities
a. Loans for the followings subject to an aggregate limit of ₹2 crore per borrowing entity:
▪ Crop loans to farmers
▪ Medium and long-term loans for agriculture and allied activities
▪ Loans for pre and post-harvest activities
b. Loans against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not
exceeding 12 months subject to a limit :
▪ Up to ₹75 lakh against NWRs/eNWRs and
▪ Up to ₹50 lakh against warehouse receipts other than NWRs/eNWRs
c. Loans up to ₹5 crore per borrowing entity to FPOs/FPCs undertaking farming with assured marketing of
their produce at a pre-determined price

5.3 Agriculture Infrastructure

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Loans for agriculture infrastructure will be subject to an aggregate sanctioned limit of ₹100 Crore per
_____from the banking system borrower

5.4 Ancillary Services

a. Loans up to ____to co-operative societies of farmers for purchase of the ₹5 crore
produce of members (Not applicable to UCBs)
Loans up to _____to Start-ups, as per definition of Ministry of Commerce and ₹50 crore
Industry, Govt. of India that are engaged in agriculture and allied services
Loans for Food and Agro-Processing up to an aggregate sanctioned limit of ₹100 crore
____per borrower from the banking system
b. Outstanding deposits under RIDF and other eligible funds with NABARD on account of priority sector
shortfall.
5.5 Small and Marginal Farmers (SMFs)
For the purpose of computation of achievement of the sub-target, Small and Marginal Farmers will include the
following:
▪ Farmers with landholding of :
• Up to 1 hectare (Marginal Farmers)
• More than 1 hectare and up to 2 hectares (Small Farmers)
▪ Landless agricultural labourers, tenant farmers, oral lessees and sharecroppers whose share of landholding
is within the limits prescribed for SMFs.
▪ Loans to Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups of individual SMFs directly engaged
in Agriculture and Allied Activities, provided banks maintain disaggregated data of such loans.
▪ Loans up to ₹2 lakh to individuals solely engaged in Allied activities without any accompanying land holding
criteria.
▪ Loans to FPOs/FPC of individual farmers and co-operatives of farmers directly engaged in Agriculture and Allied
Activities where the land-holding share of SMFs is not less than 75%.
UCBs are not permitted to lend to co-operatives of farmers.
5.6 Lending by banks to NBFCs and MFIs for on-lending in agriculture
a. Credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of
RBI recognised SRO for the sector, for on-lending to individuals and also to members of SHGs /
JLGs will be eligible for categorisation as priority sector advance under respective categories of
agriculture subject to conditions specified in guidelines (not applicable to RRBs, UCBs, SFBs and LABs)
b. Credit to registered NBFCs (other than MFIs) towards on-lending for ‘Term lending’ component
under agriculture will be allowed up to ₹ 10 lakh per borrower subject to conditions specified in
guidelines (not applicable to RRBs, UCBs, SFBs and LABs).

6. Micro, Small and Medium Enterprises (MSMEs)

6.1 Factoring Transactions (not applicable to RRBs and UCBs)
a. ‘With Recourse’ Factoring transactions by banks which carry out the business of factoring departmentally
wherever the ‘assignor’ is a Micro, Small or Medium Enterprise
b. Factoring transactions pertaining to MSMEs taking place through the Trade Receivables Discounting
System (TReDS)
6.2 Khadi and Village Industries Sector (KVI)
All loans to units in the KVI sector will be eligible for classification under the subtarget of 7.5% percent
prescribed for Micro Enterprises under priority sector
6.3 Other Finance to MSMEs
a. Loans to:
▪ Entities involved in assisting the decentralized sector in the supply of inputs and marketing of output of
artisans, village and cottage industries.
▪ Co-Operatives of producers in the decentralized sector viz. artisans, village and cottage industries

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▪ NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector
for on-lending to MSME sector as per the conditions specified RBI Master Directions
▪ Registered NBFCs (other than MFIs) for on-lending to Micro & Small Enterprises upto ₹ 20.00 Lakh per
borrower

b. Loans up to ₹50 crore to Start-ups that conform to the definition of MSME

c. Credit outstanding under General Credit Cards (including Artisan Credit Card, Laghu Udyami Card, Swarojgar
Credit Card and Weaver’s Card etc. in existence and catering to the non-farm entrepreneurial credit needs of individuals).

d. Overdraft to PMJDY account holders as per limits and conditions prescribed by DFS, Ministry of Finance
from time to time, will qualify as achievement of the target for lending to Micro Enterprises

e. Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority sector shortfall.

6. Export Credit (not applicable to RRBs and LABs)

Export credit under agriculture and MSME sectors are allowed to be classified as PSL in the respective categories
viz. agriculture and MSME. Export Credit (other than in agriculture and MSME) will be allowed to be classified as
priority sector as per the following table:
Domestic banks / WoS of Foreign Foreign banks with 20 Foreign banks with less
banks/ SFBs/ UCBs branches and above than 20 branches
Incremental export credit over corresponding Incremental export credit over Export credit up to 32% of
date of the preceding year, up to 2% of corresponding date of the ANBC or CEOBE whichever is
ANBC or CEOBE whichever is higher, subject preceding year, up to 2% of higher
to a sanctioned limit of up to ₹ 40 crore per ANBC or CEOBE whichever is higher
borrower

7. Education
Loans to individuals for educational purposes, including vocational courses, not exceeding ₹20 lakh
8. Housing
Loans to individuals for purchase/construction of a dwelling unit per family
Up to _____in metropolitan centres (with population of 10 lakh and above), provided the overall ₹35 Lakh
cost of the dwelling unit does not exceed ₹45 lakh
Up to _____in other centres provided the overall cost of the dwelling unit does not exceed ₹30 ₹25 Lakh
lakh
Loan for repairs to damaged dwelling units conforming to the overall cost of the dwelling unit
as prescribed above
Up to _____in metropolitan Centres ₹10 Lakh
Up to _____in other Centres ₹6 Lakh
Other
▪ Housing loans which are backed by long term bonds are exempted from ANBC, banks should not classify
such loans under priority sector
▪ Housing loans to banks’ own employees will not be eligible for classification under the priority sector
▪ Bank loans to any governmental agency for construction of dwelling units or for slum clearance and
rehabilitation of slum dwellers subject to dwelling units with carpet area of not more than 60 sq. mtr.
▪ Bank loans for affordable housing projects using at least 50% of FAR/FSI for dwelling units with
carpet area of not more than 60 sq. mtr.
▪ Bank loans to HFCs (approved by NHB for their refinance) for on-lending, up to ₹20 lakh for individual
borrowers, for purchase/construction/ reconstruction of individual dwelling units or for slum clearance and
rehabilitation of slum dwellers
▪ Outstanding deposits with NHB on account of priority sector shortfall

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9. Social Infrastructure
▪ Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and
sanitation facilities including construction/ refurbishment of household toilets and water improvements
at household level, etc.
▪ loans up to a limit of ₹10 crore per borrower for building health care facilities including under
‘Ayushman Bharat’ in Tier II to Tier VI centres
In case of UCBs, the above limits are applicable only in centres having a population of less than 1 lakh
▪ #Bank loans to MFIs extended for on-lending to individuals and also to members of SHGs/JLGs for water
and sanitation facilities subject to the criteria laid down in Bank Loans to MFIs (Para 21) of Master
Directions.
#not applicable to RRBs, UCBs and SFBs
10. Renewable Energy
▪ Bank loans up to a limit of ₹30 crore to borrowers for purposes like solar based power generators,
biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based
public utilities, viz., street lighting systems and remote village electrification etc., will be eligible for Priority Sector
classification.
▪ For individual households, the loan limit will be ₹10 lakh per borrower
11. Others
Loans not exceeding ___to SHG/JLG for activities other than agriculture or MSME, viz., loans ₹2.00 lakh
for meeting social needs, construction or repair of house, construction of toilets or any viable
common activity started by SHGs
Loans to distressed persons [other than distressed farmers indebted to noninstitutional lenders] ₹1.00 lakh
not exceeding ____per borrower to prepay their debt to non-institutional lenders
Loans up to ____to Start-ups, that are engaged in activities other than Agriculture or MSME ₹50 crore

Loans provided directly by banks to individuals and individual members of SHG/JLG satisfying the criteria as
prescribed in Master Direction on Regulatory Framework for Microfinance Loans Directions, dated March 14,
2022
Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific
purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these
organisations
12. Weaker Sections:

▪ Overdraft availed by PMJDY account holders

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13. Investments by Banks in Securitized Notes

Investments by banks in ‘securitised assets’, representing loans to various categories of priority sector,
except 'others' category, are eligible for classification under respective categories of priority sector
depending on the underlying assets provided:
i. The assets are originated by banks and financial institutions and are eligible to be classified as priority
sector advances prior to securitisation and fulfil the Reserve Bank of India guidelines on securitisation.
ii. The all-inclusive interest charged to the ultimate borrower by the originating entity should not exceed
the investing bank’s MCLR + 10% or EBLR + 14%.
The investments in securitisation notes originated by MFIs, which comply with the guidelines mentioned
under Bank Loans to MFIs (Para 21) in Master Directions are exempted from this interest cap as there
are separate caps on margin and interest rate for MFIs
iii. Investment by banks in securitisation notes with loans against gold jewellery originated by NBFCs as
underlying, are not eligible for priority sector status
14. Agriculture Infrastructure Indicative list of eligible activities
i. Loans for construction of storage facilities (warehouses, market yards, godowns and silos) including cold
storage units/ cold storage chains designed to store agriculture produce/products, irrespective of their
location.
ii. Soil conservation and watershed development.
iii. Plant tissue culture and agri-biotechnology, seed production, production of bio-pesticides, bio-fertilizer,
and vermi composting.
iv. Loans for construction of oil extraction/ processing units for production of bio-fuels, their storage and
distribution infrastructure along with loans to entrepreneurs for setting up Compressed Bio Gas (CBG) plants.
Ancillary activities Indicative list of eligible activities
i. Loans for setting up of Agri-clinics and Agri-business centers
ii. Loans to Custom Service Units managed by individuals, institutions or organizations who maintain a fleet
of tractors, bulldozers, well-boring equipment, threshers, combines, etc., and undertake farm work for
farmers on contract basis
iii. Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-
sized Adivasi Multi-Purpose Societies (LAMPS) for on-lending to agriculture
iv.Loans sanctioned by banks to MFIs for on-lending to agriculture sector as per the conditions specified in
Master Directions
v.Loans sanctioned by banks to registered NBFCs (other than MFIs) subject conditions specified in these
Master Directions
15. MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs)
Composite Criteria: Investment in Plant & Machinery/equipment & Annual Turnover w.e.f. 01.07.2021
Category Investment Turnover
Micro Enterprises Not exceeding ₹1.00 crore
Small Enterprises Not exceeding ₹10.00 crore 5 times of Investment in respective category
Medium Enterprises Not exceeding ₹50.00 crore
▪ All the above enterprises are required to register online on the Udyam Registration portal and obtain ‘Udyam
Registration Certificate’. For PSL purposes banks shall be guided by the classification recorded in the Udyam
Registration Certificate (URC).
▪ Retail and Wholesale trade are included as MSMEs for the limited purpose of priority sector lending and are
allowed to be registered on Udyam Registration Portal
▪ The certificate issued on Udyam Assist Portal (UAP) to Informal Micro Enterprises (IMEs) shall be treated at
par with Udyam Registration Certificate for the purpose of availing Priority Sector Lending benefits. IMEs with
an Udyam Assist Certificate shall be treated as micro enterprises for the purpose of PSL classification
16. Manufacturing Enterprises: The Micro, Small and Medium Enterprises engaged in the First
manufacture or production of goods to any industry specified in _____________ to the schedule
Industries (Development & Regulation) Act, 1951

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17. Service Enterprises engaged in providing or rendering of services and defined in terms MSMED Act,
of investment in equipment under 2006
18. Banks are mandated not to accept collateral security in the case of loans up to ____ ₹10 Lakh
extended to units in the MSE sector
19. Banks are also advised to extend collateral-free loans up to ₹10 lakh to all units financed
under the PMEGP. Banks may, on the basis of good track record and financial position of
the MSE units, increase the limit to dispense with the collateral requirement for ₹25 lakh
loans up to _____(with the approval of the appropriate authority).
Banks are advised to strongly encourage their branch level functionaries to avail of the Credit
Guarantee Scheme cover, including making performance in this regard a criterion in the evaluation
of their field staff.
20. Streamlining flow of credit to Micro and Small Enterprises (MSEs) for facilitating timely and
adequate credit flow during their ‘Life Cycle’:
In order to provide timely financial support to Micro and Small enterprises facing financial difficulties during
their ‘Life Cycle’, detailed guidelines were issued to banks vide circular FIDD.MSME &
NFS.BC.No.60/06.02.31/2015-16 dated August 27, 2015 on the captioned subject.
In accordance with the guidelines, banks shall review and tune their lending policies to the MSE sector by
incorporating therein the following provisions so as to facilitate timely and adequate availability of credit to
viable MSE borrowers especially during the need of funds in unforeseen circumstances:
i. To extend standby credit facility in case of term loans.
ii. Additional working capital to meet with emergent needs of MSE units.
iii. Mid-term review of the regular working capital limits, where banks are convinced that changes in the
demand pattern of MSE borrowers require increasing the existing credit limits of the MSEs, every year
based on the actual sales of the previous year.
iv. Timeline for credit decisions for loans up to ₹25 lakh to units in the MSE borrowers shall not be
more than 14 working days. For loans above the aforementioned limit, timelines shall be as per the
Board approved sanction time norms. All credit related information pertaining to MSMEs including
timelines for credit decisions, indicative document checklist etc., shall be displayed under a separate tab
prominently on the bank's website.
21. Structured Mechanism for monitoring the credit growth to the MSE sector
Banks shall put in place a structured mechanism to monitor the entire gamut of credit related issues
pertaining to the MSE sector. Accordingly, banks shall implement the following:
i. Credit Proposal Tracking System (CPTS): Banks shall put in place a CPTS/ equivalent tracking
mechanism to facilitate central registration and a system of e-tracking of all MSME loan applications.
This mechanism shall automatically generate an acknowledgement of the application, having a unique
application serial number for both physical and online applications. Further, it shall also be ensured that
the acknowledgement and status of the application is sent automatically to the applicants.
ii. Indicative check list of documents: Banks shall furnish the MSME borrowers with an indicative
checklist of documents required for processing the loan application at the time of applying for the loan.
iii. Monitoring the loan application disposal process: Banks shall monitor the loan application
disposal process and pendency beyond sanction time norms at appropriate levels on a quarterly basis.
The position in this regard shall be displayed by banks on their websites in the format specified in (Annex
I) within one month from the end of the preceding quarter.
iv. Reasons for rejection of loan applications: Banks shall, within the Board approved sanction time
norms, convey to the MSME borrowers in writing the main reason/reasons which, in the opinion of the
bank after due consideration, have led to rejection of the loan applications.
v. Comprehensive Performance MIS: Banks shall implement a system-driven comprehensive
performance management information system (MIS) at branches and supervisory levels (region, zone,
head office). The Performance should be critically evaluated on a regular basis. The credit flow to the
sector shall also be reviewed by the Board of the banks at periodic intervals.

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22. Cluster Approach

A cluster shall mean a cluster identified by the Ministry of MSME or the respective State /UT Governments.
SLBC/UTLBC Convenor banks shall display the list of these clusters on their portals and update them semi-
annually as at end-March and end-September.
The updated list of clusters identified by Ministry of MSME may be accessed from Ministry's official website,
while information on clusters recognized by State Governments/Union Territories shall be obtained directly
from the respective authorities.
i) The lead bank of a district shall promote 'credit-linkage' in all clusters located within the district. The
initiatives under promotion of the credit-linkage, shall include but not be restricted to the following
measures:
• Assessing the credit requirements of the MSE units in the clusters and addressing their credit needs
directly or facilitating their linkage with other banks operating in the area for credit proposals.
• Creating awareness among the MSE units in the clusters regarding the importance of formal credit
linkage through various forums including financial literacy camps.
• Enabling coverage under various skill development initiatives in the district.
• Focused attention and proactive measures to improve financial services in the underbanked clusters.
ii) The banks shall ensure that the credit needs of clusters are appropriately included in the exercise of
preparation of branch/block level plans so that the same can be aggregated by lead banks to form the
District Credit Plan (DCP) and subsequently by SLBC /UTLBC Convenor banks to prepare the Annual Credit
Plan (ACP).
23. Priority Sector Lending Certificates (PSLC)
Eligible categories of PSLCs: Four
1. PSLC General 2. PSLC Small and Marginal Farmer 3. PSLC Agriculture 4. PSLC Micro Enterprises
All PSLCs will expire by ____and will not be valid beyond the reporting date (March 31st), March 31st
irrespective of the date it was first sold.
Normally PSLCs will be issued against the underlying assets. However, with the objective
of developing a strong and vibrant market for PSLCs, a bank is permitted to issue PSLCs 50%
upto _____of previous year’s PSL achievement without having the underlying in its books
The PSLCs would have a standard lot size of____ and multiples thereof ₹ 25 lakh
The trade summary of PSLC market is available to the participants through the “e-Kuber”
24. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending
(not applicable to RRBs, UCBs and LABs)
With effect from May 5, 2021, Small Finance Banks (SFBs) are allowed to extend fresh
credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are
members of RBI recognised ‘Self-Regulatory Organisation’ of the sector, and which have
a ‘gross loan portfolio’ (GLP) of up to _______ as on March 31 of the previous year, for ₹500 crore
the purpose of on-lending to individuals.
In case the GLP of the NBFC-MFIs/other MFIs exceeds the stipulated limit at a later date,
all priority sector loans created prior to exceeding the GLP limit will continue to be
classified by the SFBs as PSL till repayment/maturity, whichever is earlier. Bank credit as
above will be allowed up to an overall limit of 10% of an individual bank’s total
priority sector lending. These limits shall be computed by averaging across four
quarters of the financial year, to determine adherence to the prescribed cap.
25. For selection of SHGs for linkage: The group should have satisfactory internal savings
6 Months
and credit activity for atleast _________ months.
26. As per operational guidelines issued by NABARD,SHGs may be sanctioned savings linked
1:1 to 1:4
loans by banks (varying from a saving to loan ratio of . However, in case of matured
(i.e. 4 times
SHGs, loans may be given beyond the limit of four times the savings as per the discretion
of corpus)
of the bank.
27. Under PMEGP, Projects without ______ are not eligible for financing under the Scheme. Capital
Expenditure

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28. For Up gradation Under PMEGP:

▪ The maximum cost of the project/unit admissible under manufacturing sectors ₹ ₹1.00 crore
______. Maximum subsidy would be ₹15 lakh (₹20 lakh for NER and Hill States)
₹25 Lakh
▪ The maximum cost of the project/unit admissible under Trade/service sectors ₹____lakh.
Subsidy@ (of Project Cost) for upgradation of existing units : Normally = 15% , NER& Hill states = 20%
29. For manufacturing units, working capital component should not be more than % of 40%
the project cost.*
*However, for manufacturing units, the project cost may include maximum capital expenditure up to ₹25
lakhs. In such cases, the working capital over and above ₹25 lakh will not covered under subsidy.”
30. For service/trading sector, the working capital shall not be more than % of the
60%
project Cost
31. Working Capital component should be utilized in such a way that at one point of stage it
Within 3 Years
touches 100% limit of CC within three years of lock in period of Margin Money
32. Minimum utilization of the sanctioned working capital limit is stipulated at ______ 75%
33. PMEGP: Loan repayment period is years excluding Moratorium period. 3 to 7 Years
34. Under “Village Industries” concept, Per-capita ceiling has been enhanced from ₹1.00 lakh to
₹___lakhs as a special case for activities under PMEGP in respect of A&N Islands and ₹4.50 Lakh
Lakshadweep.
35. In case the Bank’s advance goes “bad” before the year period, due to reasons,
Before 3 Year
beyond the control of the beneficiary, the Margin Money (subsidy) will be returned to the KVIC
period
along with the interest.
36. Beneficiary will submit ________about production, sales, employment; wages paid etc. to the Quarterly
State/Regional Director of the KVIC/KVIB/State DIC, and KVIC will in turn analyze and submit report & six
a consolidated report to the Ministry of MSME, every _______. months
37. Master Direction: Regulatory Framework for Microfinance Loans
▪ A microfinance loan is defined as a collateral-free loan (either through physical or digital ₹3,00,000
channels) given to a household having annual household income up to______. For this purpose,
the household shall mean an individual family unit, i.e., husband, wife and their unmarried children.
▪ Limit on the outflows on account of repayment of monthly loan obligations of a household
as a percentage of the monthly household income shall be subject to a limit of maximum 50%
___of the monthly household income.
▪ The computation of loan repayment obligations shall take into account all outstanding loans
(collateral-free microfinance loans as well as any other type of collateralized loans) of the 50%
household. The outflows capped at ____ of the monthly household income shall include
repayments (including both principal as well as interest component) towards all existing
loans as well as the loan under consideration.
▪ NBFC-MFI is required to have minimum 75% of its net assets as ‘qualifying assets’. An NBFC
25%
that does not qualify as an NBFC-MFI, cannot extend microfinance loans exceeding ___ of
its total assets.
Net Owned Fund (NOF) Requirement for NBFC-MFI:
Current NOF By March 31, 2025 By March 31, 2027
₹5 crore (₹2 crore in NE Region) ₹7 crore (₹5 crore in NE Region) ₹10 crore

38. Priority Sector Lending – Lending by banks to NBFCs for On-Lending:

Agriculture: On-lending by NBFCs for ‘Term lending’ component under Agriculture will be
₹10 lakh
allowed upto per borrower.
MSE: On-lending by NBFC will be allowed up to ______ per borrower ₹ 20 lakh
Housing: Bank loans to HFCs approved by NHB for their refinance, for on-lending for the
purpose of purchase / construction / reconstruction of individual dwelling units or for slum ₹ 20 lakh
clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹___per
borrower.

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I. CURRENT BENCHMARK RATE

Benchmark Rate W.e.f.

RLLR* 9.25% 09.02.2023
1 Year MCLR 8.95%
3 Year MCLR 9.25% 01.09.2024
1 Month MCLR 8.40%
3 Month MCLR 8.60%
6 Month MCLR 8.80%
Overnight MCLR 8.30%
Base Rate 9.50% 01.10.2022
BPLR 14.00% 01.05.2012
*Calculation of RLLR
Repo Rate+Markup+BSP
• Repo Rate :6.50% w.e.f. 09.02.2023 RLLR=9.15%
• Mark up : 2.65% w.e.f. 09.07.2024
• Business Strategic Premium (BSP): 0.10% w.e.f. 09.07.2024

RLLR (Repo Linked Lending Rate)

▪ Introduced in August 2019
Applicability:
▪ All new Floating Rate Personal or Retail Loans
▪ Floating Rate Loans to Micro, Small & Medium Enterprises (MSMEs) including Food & Agro processing units.
Component of RLLR:
▪ Repo Rate+ Mark up
W.e.f. 17.09.2021, one more component “Business Strategic Premium” (BSP) has been added, to calculate
RLLR , BSP to be added while calculating RLLR (L&A 139/2021)
Accordingly, Component of RLLR is as under:
Repo Rate + Markup + BSP
Markup:
▪ Initially mark up was set 2.65%
▪ From 1st September 2020 it was changed to 2.80%
▪ From 17th September 2021 it was changed to 2.55%+ 0.25% BSP
▪ From 8th November 2021 it was changed to 2.50% + 0.25% BSP
▪ From 9th July 2024 it was changed to 2.65% + 0.10% BSP
BSP: 0.25 %
Reset of RLLR:
▪ In case of change in repo rate by the RBI, the repo rate linked rate (RLLR) will be changed from the first
day of the following month. (L&A 139/2020)

▪ For all loans linked with RLLR sanctioned on or after 07.05.2022, in case of change in Repo Rate by
RBI, the RLLR will be changed from the next working day. (L&A 66/2022)

Reset of Spread:
▪ The Spread component (excluding Credit Risk Premium- CRP) referred as Markup + BSP, linked with RLLR
for all floating rate personal or Retail loans (housing, auto etc.) and floating rate loans to Micro Small and
Medium Enterprise shall be reset every 3 years from the date of opening of the account.
Spread over RLLR:
▪ This component belongs to Credit Risk Premium.
▪ Actual lending rates on floating rate advances will be determined by adding the components of spread to
the RLLR.
▪ The final rate of interest charged to a customer should include RLLR and spread over it.

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Example: Minimum ROI on Personal Loan is -

RLLR+BSP+2.15
Here 2.15 % is Spread.
▪ Spread percentage is based on Risk Profile
▪ Few factors which determined Risk Profile of Customer are as under:
➢ Government Employee/Private Employee
➢ Individual/Corporate/Women
➢ Salaried/Non Salaried
➢ Customer/Non Customer
➢ CIC Score
➢ Repayment mode(Check of Facility/ Standing Instruction) .
Following Credit Facilities are not covered under RLLR Benchmark :
• Loans covered by schemes specially formulated by Government of India wherein bank has to charge
interest rates as per scheme.

• Working Capital Term Loan (WCTL), Funded Interest Term Loan (FITL) etc. granted as part of the
rectification /restructuring package.

• Loans granted under various refinance schemes formulated by Government of India or any Government
Undertakings wherein bank charges interest at the rates prescribed under the schemes to the extent
refinance is available, interest rate charged on the part not covered under refinance shall adhere to RBLR
guidelines.

• Advances to banks’ depositors against their own deposits.

• Advances to staff members under staff scheme.

• Advances to Chief Executive Officer / Whole Time Directors.

• Loans linked to other market determined external benchmark.

• Loan sanctioned on Fixed rate of Interest of tenor above three years.

Marginal Cost of Funds Based Lending Rate (MCLR)

• All rupee loans (other than linked with RLLR) are priced with reference to the MCLR.

• MCLR is reviewed on monthly basis and in the last week of every month reviewed rates are
published/circulated, which are applicable to all new loans and credit facilities sanctioned/renewed from
the 1st of the following month.

• The periodicity of the reset under MCLR shall correspond to the tenor/maturity of the MCLR to which the
loan is linked.

• There are 6 types of tenor based MCLR.

• Pegging frequency is to be entered for revision (Frequency) for Rate of Interest.

• Fixed rate loan tenor up to 3 year cannot be less than corresponding MCLR for the respective period

• Fixed rate is a loan where interest rates are fixed for entire tenure of the loan.

• Loan under fixed option at MCLR, shall be sanctioned with repayment period of above 3 years only.

• Spread is applicable on MCLR also.

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J. Various Cut Off Limits

S. Particulars Amount (Exposure)
N.
1. Agencies For Specialized Monitoring (ASMs) > ₹250.00 Crore
2. NBG-II (headed by MD & CEO) : Total exposure of above ____ >₹200.00 Crore
NBG-I (Headed by ED-Corporate Credit): Total exposure of above ______ >₹75 crore & upto
3.
(For CGM Headed Zone) ₹200 crore
NBG-I (Headed by ED-Corporate Credit): Total exposure of above ______ >₹50 crore & upto
4.
(For GM Headed Zone) ₹200 crore
5. Dynamic Risk Review (DRR) (For Listed Companies: irrespective of limits)
>₹50.00 Crore
6. PERT Chart alongwith QMS (In case of standalone NFB/Term loan)
7. Central Economic Intelligence Bureau (CEIB)
8. Red Flagged Account (from Banking System) ₹50.00 Crore & above
9. Forensic Audit (from Banking System)
10. Request for issuance of LOCs (Look Out Circulars) (from Banking System)
11. ▪ TEV Study for Expansion in existing activity (Cost of Project)
▪ >₹40.00 Crore
▪ TEV Study (Fresh Project/ Existing Account – Project involving change / diversification
▪ >₹20.00 Crore
from existing core activity)
12. Quarterly Monitoring System (QMS) Submission
>₹30.00 Crore
13. Super Scorer
14. External Risk Rating Exemption
Note: ERR is also exempted for cases above ₹25.00 Crore and upto ₹50.00 Crore subject to certain
Upto ₹25.00 Crore
conditions mentioned in Operational Guidelines of CMRP>>Chapter-5 MSME
15. Green Renewal
16. Due Diligence Report by Professionals for Corporate Borrowers under Sole Banking
₹20.00 Crore & above
(Under consortium / multiple banking arrangements: Irrespective of Limits)
17. TEV Study (Fresh Project/ Existing Account – Project involving change / diversification
from existing core activity)
18. Conducting LRM/Credit Audit for Standard Account ₹10.00 Crore & above
19. Regulatory Retail Portfolio (In terms of Basel)- Small Business means:
✓ Total average annual turnover is < ₹50.00 crore
✓ The maximum aggregated retail exposure to one counterpart Upto ₹7.50 crore
20. MPBF / 2nd Method of Lending/ Tondon Committee Method- WC limit
21. Second Valuation of Property, if realizable value of immovable property is
>₹5.00 Crore
22. RAROC (FB & NFB Limit)
(For those corporate where rate of interest / commission is linked to risk rating of the borrower
and borrower is requesting concessions on card rate of the bank)
23. Legal Audit of Title Documents in Large Value of Account
24. Stock Audit (FB & NFB WC Limit)
₹5.00 Crore & above
25. Legal Entity Identifier (LEI)
26. CRILC (Exposure from the concerned bank)
27. Turnover Method/Nayak Committee Method - WC limit Upto ₹5.00 Crore
28. ▪ Accepting OTS under Special OTS (Outstanding as on 31.03.2024 ▪ Upto ₹5.00 crore
▪ Accepting OTS under Special OTS for Agriculture NPA under DB-I
▪ Upto ₹10.00 Lakh
(Outstanding as on 31.03.2024)
29. Vetting of Loan Documents
₹2.00 Crore & above
30. Review of Standalone term Loan (Except Retail)

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31. Commitment Charges

32. Rating under PNB Trac
33. PNB SAJAG2.0
>₹ 1.00 Crore
34. Submission of Annual Accounts audited by Chartered Accountants
35. Benchmark Ratio- Applicability (where facilities availed from our Bank)
36. Two CIR: Commercial
37. Conducting LRM/ Credit Audit in case of Takeover account
₹1.00 Crore & above
38. Two Legal Opinion/NEC
39. Credit Scoring Model Upto ₹1.00 Crore
40. Obtaintion of Passport Detail >₹50.00 Lakh
41. Identification of Wilful Defaulter (Amount outstanding) ₹25.00 Lakh and above
42. Two CIR: Consumer i.e. Individual Above ₹20.00 Lakh
43. Easy Renewal
Upto ₹10.00 Lakh
44. Mandatory Coverage under CGTMSE/CGFMU
45. Mandatory Coverage under CGFSEL (Credit Guarantee Fund Scheme for Education Loans) Upto ₹7.50 lakh
46. Reporting under CFR (Central Fraud Registry) ₹1.00 Lakh and above
47. InterSol Cash txn against Self drawn cheque in SB Account /Current Account Upto ₹5.00 Lakh
48. InterSol 3rd Party Cash withdrawal txn in SB Account Upto ₹50,000/-
49. InterSol 3rd Party Cash withdrawal txn in Current Account
Upto ₹1.00 Lakh
50. Debit Transfer at remote SOL in SB Account
51. Debit Transfer at remote SOL in Current Account Upto ₹2.00 Lakh
52. E-way Bill for Inter-State movement of Goods >₹50,000/-
53. Submission of Stock Statement:
❖ Limits upto ₹50.00 Lakh: Quarterly basis Limits above ₹50.00 Lakh: Monthly basis
54. Submission of CA certified Book Debts:
In case the limit is sanctioned against hypothecation of Debtors/Book Debt only, verification of Book Debts statement
by a Chartered Accountant should be obtained mandatorily as under:
❖ Limits upto ₹2.00 Cr: Half–Yearly basis Limits above ₹2..00 Cr-Quarterly basis

Contactless Loans through online portal (www.psbloansin59minutes.com)

MUDRA Upto ₹10.00 lac in less than an hour
MSME From ₹ 10 lac to ₹ 5 crores
Retail: Home Loan Upto ₹10 crores within 15 minutes
Personal Loan Up to ₹20 lac within 15 minutes
Auto Loan Up to ₹1 crore within 15 minutes

TAT for Retail Loan Proposals

Scheme TAT for PLPs TAT for GBBs
Mortgage based loans (Housing Loan, OD/TL to
5 Days
Housing Loan borrowers for personal needs,
My Property Loan, Reverse Mortgage)
Education Loan ▪ 4 days for loans where mortgage is not required.
▪ 1 week for loans where mortgage is required
▪ 2 weeks for loans falling under powers of CHCAC & above
Non Mortgage based loan viz. Vehicle, Gold,
3 Days
Personal, Pension Loans

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K. List of Important Circulars: Area wise Expected Questions

Division Important Policies/ Schemes/ Guidelines Reference Circular
Benchmark Ratios 04/2023
MPBF 227/2020; 64/2022;
72/2023;19/2024
Opening of Current Accounts and CC/OD Accounts by Banks 39/2023
IRMD L&A* Guidelines on Bank Guarantee 122/2024
Policy & Framework for Resolution of Stressed Assets 175/2022; 78/2024
Terms & Conditions of Sanction 138/2024
Policy for ‘Hedging of foreign currency loans (FCL/FCTL) and on managing 129/2024
Foreign Currency Rate Movement Risk in Non-fund-based exposures
Key Facts Statement 121/2024
Loan System for Delivery of Bank Credit 125/2024
Agri & FI Krishak Unnatti Yojana 67/2022
PNB Swarnim (AGRI GOLD LOAN SCHEME) 49/2022;84/2024
PNB SAKHI 47/2022
PM FME Scheme; Farm Mechanization Scheme 43/2022;50/2022
PNB Kisan Gold Scheme 108/2024
PNB Bhandaran Scheme 106/2024
MSME PNB PRIME PLUS 55/2023
Export Express Scheme under Prime Plus Scheme 92/2023
PNB Weaver MUDRA Scheme 59/2022;48/2023;26/2024
PM Vishwakarma Scheme 32/2024
PNB GST Express Loan Scheme 67/2023
PNB Sampatti Scheme 68/2023;66/2024
PNB Corporate Residential Accommodation Finance Scheme 29/2024
PNB Transport Scheme 46/2024
Easy Renewal 74/2023
Issuance of Electronic Bank Guarantee (e-BG) 55/2024
PNB Solar Energy Finance Scheme 14/2024
PNB Compressed Bio Gas (CBG) under ‘SATAT’ Scheme 69/2021
Retail Asset PNB Smart Home Loan 40/2023;176/2023
Division e-OD against FD 103/2023;63/2024
PNB Green Car (e-Vehicle) Loan 118/2021
PNB Car Loan: In built facility to existing MSME/Corporate Borrower 106/2022
PNB Gold Loan Scheme 100/2022;33/2023
Pre-Approved Personal Loan 29/2023;77/23;05/24
PNB Aabhar Rin - Personal Loan Scheme for Pensioners 80/2023
my Property Loan 87/22;128/23;15/2024
PNB Kaushal 91/2022
PNB Aarambh: Lead Generation through New App Based Solution 113/2023;143/2023
PNB Digi Home Loan 144/2023
PNB Digi Education Loan 52/2024
PNB Digi Car Loan 31/2024;41/2024
PNB SWAGAT: End to End Online Personal Loan for NTB Customers 146/2023
Financing of Rooftop Solar Power Systems 37/2024
PNB Matritva 08/2024

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FRMD Policy on Fraud Risk Management & Investigation Functions (FRMIF) 54/2024
Concurrent Audit Policy 15/2024
RBIA Revenue Audit Policy 16/2024
IAD Staff Accountability Policy 24/2024
Whistle Blower Policy 12/2024
Revenue Audit Policy 4/2024
Credit Audit & Review Policy 18/2024
Policy for Legal Audit 14/2024
Policy for Engagement of Retired Senior Officers of Public Sector Banks for 13/2024
conducting Credit Audit
SASTRA Policy on Quick Mortality 28/2024
NDND Special OTS Scheme FY 2024-25 - For NPA accounts upto ₹5.00 Crores 21/2024
Recovery Policy 9/2024;32/2024;44/2024;
63/2024;65/2024
Policy for ASM 16/2024
Policy on Engaging Corporate BCs/BC Agents for Recovery in NPA and SMA-II 26/2024
Accounts & Crop based Agriculture loans sub-classified as CBR-2
Policy for Engagement of (i) Recovery Agencies/ Resolution Agents (ii) 27/2024;60/2024
Supporting Agencies (iii) Detective Agencies
Policy for IRAC Norms 43/2024
Policy for transfer of Stressed Loans to Asset Reconstruction Companies (ARCs)/53/2024
Permitted Transferees including Portfolio Transfer
OPERATIONS Policy on Dishonour of Cheques & NACH on Account of Insufficient Funds 16/2024
Record Maintenance Policy 17/2024
Customer Compensation Policy 35/2024
Grievance Redressal Policy 20/2024
Customer Rights Policy 17/2024
Policy of Government Business Division 95/2024
KYC Policy 05/2024
DMS 25/2023
BA & RM Master Circular Credit Card 08/2024
Debit Card & Prepaid card 11/2024
*Other then mentioned in this booklet (IRMD L&A)

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