UTKARSH 2025 PDF

 उत्कर्ष -2025 Pawan Singh GM- Learning & Development HO: Centre for Learning & Innovations FOREWORD Dear Aspirants, I am delighted to unveil "उत्कर्ष-2025," an i...

 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 STC, Lucknow Back to Index Page | 1  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 STC, Lucknow Back to Index Page | 2  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% STC, Lucknow Back to Index Page | 3  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% STC, Lucknow Back to Index Page | 4  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% STC, Lucknow Back to Index Page | 5  उत्कर्ष -2025 (Ref. Circular: IRMD L&A 51/2024 Dated 22.04.2024) STC, Lucknow Back to Index Page | 6  उत्कर्ष -2025 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 STC, Lucknow Back to Index Page | 7  उत्कर्ष -2025 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. STC, Lucknow Back to Index Page | 8  उत्कर्ष -2025 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; STC, Lucknow Back to Index Page | 9  उत्कर्ष -2025 ✓ 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. STC, Lucknow Back to Index Page | 10  उत्कर्ष -2025 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. STC, Lucknow Back to Index Page | 11  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.“ STC, Lucknow Back to Index Page | 12  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 STC, Lucknow Back to Index Page | 13  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. STC, Lucknow Back to Index Page | 14  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) STC, Lucknow Back to Index Page | 15  उत्कर्ष -2025 x. Bridge Loans against receivables from Government xi. Shell Companies/ Strike Off Companies STC, Lucknow Back to Index Page | 16  उत्कर्ष -2025 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 STC, Lucknow Back to Index Page | 17  उत्कर्ष -2025 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 STC, Lucknow Back to Index Page | 18  उत्कर्ष -2025 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% & 46 to =100% 139.38% STC, Lucknow Back to Index Page | 128  उत्कर्ष -2025 STC, Lucknow Back to Index Page | 129  उत्कर्ष -2025 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) STC, Lucknow Back to Index Page | 130  उत्कर्ष -2025 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 STC, Lucknow Back to Index Page | 131  उत्कर्ष -2025 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 STC, Lucknow Back to Index Page | 132  उत्कर्ष -2025 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 STC, Lucknow Back to Index Page | 133  उत्कर्ष -2025 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