Global Credit Exposure Management Policy 2024 PDF

GLOBAL CREDIT EXPOSURE MANAGEMENT POLICY 2024  GCEMP Introduction Aim’s to maintain the different types of credit risk exposures of the Bank within the respective risk tolerance limits / levels specified in this regard and maximize the risk-adjusted rate...

GLOBAL CREDIT EXPOSURE MANAGEMENT POLICY 2024  GCEMP Introduction Aim’s to maintain the different types of credit risk exposures of the Bank within the respective risk tolerance limits / levels specified in this regard and maximize the risk-adjusted rate of return for such exposures. Credit risk or default risk involves the inability or unwillingness of a customer or a counterparty to meet contractual commitment(s) in relation to lending, trading, hedging, settlement and other financial transactions There are certain external and internal factors that can cause deterioration of the credit risk assumed by a bank The external factors are the state of the economy, wide swings in commodity/equity prices, foreign exchange rates and interest rates, trade restrictions, economic sanctions, government policies, etc. The internal factors are deficiencies in loan policies/administration, absence of prudential credit risk concentration limits, inadequately defined decision rules and authority/limits for approving credit exposures by Loan Officers/Credit Committees, deficiencies in the appraisal of borrowers’ business and financial position, excessive dependence on collateral, faulty risk pricing, defective loan documentation, absence of proper loan review mechanism and post-sanction surveillance, etc  OBJECTIVES OF THE POLICY  The Policy is devised for prudent, safe and profitable deployment of the Bank’s financial resources for lending and related purposes and also for achieving uniformity in the lending framework, approach and practices throughout the Bank To provide an enterprise-wide framework and guidance for all concerned in respect of the principles and processes to be adhered to for credit risk decisions. To optimize the Economic Value Addition (EVA) to the shareholders by setting ex ante benchmarks for risk- adjusted return (RAROC) for different types of credit risk exposures and compare the same with actual risk-adjusted returns periodically for the purpose of ex post evaluation of credit risk decisions for making adjustments and alterations in the credit risk exposures, if needed To ensure growth in credit risk exposure-related business and income in line with the annual and the medium-term plans adopted in this regard. To build and maintain a well-diversified credit portfolio yielding adequate risk-adjusted return by way of interest and commensurate non-interest income and entailing low credit cost.  OBJECTIVES OF THE POLICY Cont.. To provide need-based and timely credit to various borrower segments, and especially to the target market customers To strengthen the credit delivery system and to inculcate credit risk culture enterprise- wide To strengthen the credit risk management system and procedure in the Bank by way of risk identification, measurement, monitoring and mitigation. To set up prudential exposure norms and to avoid credit risk concentration. To establish risk-based pricing framework for all credit products and facilities. To comply with various regulatory requirements, more particularly the exposure norms, Priority Sector norms, Credit Risk Management guidelines etc. of RBI / other authorities  Governance Structure Board  The Board of Directors will be responsible for the overall credit risk exposure management of the Bank by ensuring that all credit risk decisions are taken following the Policy and that the benchmark risk- adjusted returns on credit risk exposures are achieved. Risk Management Committee of the Board (RMCB)  To approve the Policy and set all the major credit risk appetite and monitoring limits  To provide support and advice to the Board in all matters relating to credit risk exposure management, including the formulation of the Policy and its periodic review. Credit Policy Committee  The Credit Policy Committee (CPC) is a senior management committee headed by Managing Director & CEO and responsible for effective and continued implementation of the Bank’s credit risk management policy and guidelines issued in this regard by the Board.  Formulation of standards, practices and procedure for underwriting/appraisal of credit proposals, including financial covenants, credit rating thresholds and risk-adjusted return benchmarks to be used for this purpose.  Governance Structure contd… Product & Process Approval Committee  Is a Board approved committee for vetting of new products or modification in existing products. PPAC is also approving authority for new processes and / or modifications of the existing processes. Risk Management Department  To measure, monitor and control credit risk on a Bank-wide basis as per the Policy  To enforce compliance with the credit risk parameters and prudential limits set by the Board  To prescribe and implement credit risk measurement and monitoring tools, systems and procedure to be followed for this purpose, develop MIS for credit risk, monitor the overall quality of the Bank’s credit portfolio, identify problem exposures and formulate corrective measures  To undertake risk-return evaluation of the various segments of the Bank’s loan portfolio from time to time for providing insight and feedback for policy formulation and marketing efforts  General Guidelines COCC-CGM, for the proposals falling upto the powers of COCC-CGM, will have the power for considering deviation, modification, concession, and waiver from the guidelines detailed in this Policy, if not specified elsewhere. COCC-ED and above authorities may consider the deviation, modification, concession, and waiver as per their respective DLPs. However, for scheme specific deviation, modification, concession, and waiver which is not mentioned in the scheme or scheme related guidelines or not specified in the Policy, COCC-GM and above authorities may approve the deviation, modification, concession, and waiver as per their respective DLPs, but within the regulatory prescriptions on a case-to-case basis with due justification recorded in writing. CACB may approve deviation, modification, concession, and waiver falling under the power of MCB. If any credit proposal encompasses multiple aspects that require approval from different authorities, such as deviations, modifications, concessions, and waivers, the authority with the highest Discretionary Lending Powers among them will have the authority to evaluate and grant approval for all of them collectively. Nonetheless, the sanction/review of such credit facility/ies will be carried out by the respective competent authorities according to their Discretionary Lending Powers  Classification of customers for the purpose of credit risk exposures Corporate & Institutional Credit (C & IC)  Borrower entities having a gross annual turnover (Sales including export sales) of over Rs. 250 crore as per the Audited Balance Sheet of the Previous Financial year and not classified under Regulatory/ Non- Regulatory MSME will be classified as C&IC borrowers  Borrowers with initial project cost above Rs. 100 crore till the achievement of DCCO will be classified under C&IC borrower.  In the case of real estate projects, where the project cost exceeds Rs. 50 crore, will be considered as C&IC borrower MSME  Regulatory MSME -having investment in Plant & Machineries/ Equipment not exceeding Rs. 50 crore and gross annual turnover of up to Rs. 250 crore (excluding export sales) as per the Audited Balance Sheet of the Previous Financial Year  Non-Regulatory MSME/ MSME Expanded - outside the purview of MSMED Act 2006 (in terms of investment in Plant & Machineries/ Equipment) and having a gross annual turnover of up to Rs. 250 crore (including export sales) as per the Audited Balance Sheet of the Previous Financial Year  Borrowers who are not classified as regulatory MSME with initial project cost up to Rs. 100 crore till the achievement of DCCO. Post achievement of DCCO, the classification will be based on the above- mentioned Corporate/ MSME guidelines  In the case of real estate, where the project cost is up to Rs. 50 crore  Classification of customers for the purpose of credit risk exposures contd.. Rural & Agricultural Banking Business  All agriculture and allied activities accounts irrespective of their priority sector status will be classified under Rural & Agriculture Banking Business Segment  Food & Agro Processing Units each with aggregate credit facilities from the banking system up to Rs.100 crore, irrespective of their annual turnover Retail Lending  Lending for purposes related to personal consumption / meeting personal financial life cycle needs, loans and advances not covered under C&IC, MSME, Rural & Agri segments and for the purposes other than business are covered under the Retail Lending Segment  CREDIT RISK EVALUATION PROCESS (CREP): CREP is the process of evaluating the proposal from risk angel prior to sanction of credit facility. The Bank has put in place CREP at different level for comprehensively assessing the risks of credit proposals The following types of proposals will be subjected to Credit Risk Evaluation Process  In case of fresh exposure of above Rs. 7.50 crore to a single counterparty.  In case of increase / additional exposure to a single counterparty by any amount leading to the aggregate exposure to that counterparty reaching above Rs. 7.50 crore.  Decline in rating by two notches in BOB-1 rated accounts & one notch in BOB-2 & below rated accounts, with exposure of above Rs. 7.50 crore at the time of review. AND / OR  Decline in CMR rating (wherever applicable) by two notches in CMR-1, CMR-2 & CMR-3 rated accounts & one notch in CMR-4 & below rated accounts, with exposure of above Rs. 7.50 crore at the time of review.  In the case of modification proposals of above Rs. 7.50 crore, wherein modification pertains to dilution in tangible security coverage and/or extension of timelines for security creation/perfection for morethan 6 months  In case of Review/Review with decrease proposals of above Rs. 7.50 crore, it is subject to CREP if there is  deviations in any two key financial ratios (as mentioned in the section of Indicative financial ratios/ sector specific ratios) from the acceptable level of the ratios as per the Bank’s guidelines, except for the borrower rated BOB 1 and BOB 2  Extension of Date of Commencement of Commercial Operation (DCCO) for more than six months is proposed. In the case of consortium/multiple banking arrangement, there is no requirement of CREP for the extension of DCCO if it is as per agreed terms of consortium/multiple member banks  The following types of exposures will not be subjected to Credit Risk Evaluation Process  Loans / Overdrafts against the Bank’s own deposits/ fully secured by cash margin / financial collateral recognised under Basel guidelines  Write off/Compromise proposals, NPA and restructuring accounts (including where incremental exposure is proposed in the form of FITL and no other additional exposure is proposed).  Staff Loan, Schematic Lending pertaining to Corporate / MSME / Rural & Agriculture and Retail Loans, such as Supply Chain Finance, Value Chain Finance, Construction & Mining Equipment, Commercial Vehicle Finance, Baroda Loan against future rent receivables etc., where no deviation is proposed vis- à- vis the approved product guidelines / GCEMP guidelines (wherever guidelines of GCEMP are applicable).  Inter-Bank Participation Certificate (IBPC) with risk sharing  Bill Discounting under LC/SBLC  Investment Proposals of Treasury covering SLR, Equity, Secondary market Investments and investments acquired as a part of restructuring.  Review/ Review with decrease proposals having only Term loan facilities where conduct of the account is satisfactory i.e., it has not been classified as SMA-1 or SMA-2 during the review period and where there is no degradation in internal rating by two notches in BOB-1 rated accounts & one notch in BOB- 2 & below rated accounts at the time of review  Ad hoc proposals as well as sanction of short term credit proposals for sanction of single facility with tenor not exceeding 6 months, even if the total exposure (funded and non-funded) including the ad hoc / specific limit is above Rs. 7.50 crore.  HR Capacity for Credit Risk Management The Bank will adopt appropriate HR policies for developing and retaining high quality HR capacity to enhance the appraisal, sanction and monitoring standards of its credit business. Officers engaged in appraisal, inspection, documentation and post-disbursement supervision and monitoring will be required to possess at least any one of the following qualifications / certification to qualify for the role:  Chartered Financial Analyst  Chartered Accountant / ICWA / CMA  MBA with specialization in finance  Certification in Small Business Banking and Commercial Credit from Moody’s Analytics  Any other certification approved by RBI / IBA / Bank from time to time Proposals with exposure of Rs. 50 crore and above (or equivalent in other currencies) will be processed by officers having any of the qualifications mentioned in (a), (b), and (c) above or having minimum experience of 3 years in credit function, including sector-specific expertise and certification mentioned in (d) & (e) above  Credit Risk Strategy Target Sectors and Target Markets In addition to laying stress in meeting specific commitments in terms of RBI and Government of India directives, the focus areas and target markets for the domestic operations of the Bank will be:  Digital Lending (Lending through digital platform/s that will encompass the full life-cycle - origination, credit appraisal, documentation, disbursement as well as repayment and recovery etc.) especially in Retail, MSME & Agri segments will be a priority  Micro, Small and Medium Enterprises (MSMEs): Likely to grow faster in view of high priority being accorded to this segment by the Government.  Retail Finance: To grow further with specific thrust on housing loans Looking into the market dynamics and the economic scenario, all the sectors / industries will be categorized in terms of their future outlook: positive, neutral or negative.  Credit Risk Strategy  Positive outlook sectors / industries –Will be the primary target sector.  Neutral outlook sectors – Exposure will be moderate  Negative outlook sectors –  Exposure will be limited to the borrowers with external rating of ‘A’ and above for C&IC  Exposure will be limited to borrowers with external rating of ‘BBB’ and above for Regulatory and Non-Regulatory MSME and Rural and Agri borrowers having exposure above Rs 50 crores (from banking industry) » Deviation Upto COCC-CGM sanction – COCC-CGM, then As DLP Exemptions from the above Rating Threshold for Negative Outlook Sectors:  Regulatory and Non-regulatory MSME borrowers with exposures of upto Rs. 50 crore (from banking industry)  Rural & Agriculture borrowers with exposures of upto Rs. 50 crore (from banking industry)  Food & agro processing units irrespective of quantum qualifying for priority sector classification Priority Sector Lending Certificate (PSLC)  To enable banks to achieve the priority sector lending targets / sub-targets, in the event of shortfall, banks can purchase / surplus banks may sell ‘Priority Sector Lending Certificates (PSLC)’ from / to the Scheduled Commercial Banks, Regional Rural Banks, Local Area Banks, Small Finance Banks and Urban Co-operative Banks traded through RBI’s CBS portal (e-Kuber).  PSLCs are of 4 types counting for achievement towards Agriculture, Small/ Medium Farmer, Micro Enterprise and General (overall PS targets).  PSLC can be issued up to 50% of previous year’s PSL achievement without having underlying in its Books. However, as on the reporting date, the Bank must have met the priority sector target by way of the sum of outstanding priority sector lending portfolio, net of PSLC purchased / issued. The lot size is Rs. 25 lakh and multiples thereof.  There will be no transfer of credit risk on the underlying as the tangible assets are not transferred.  The validity of PSLC will be March 31st every year and will not be valid beyond the reporting date (31st March)  The fee payable / receivable is market determined.  The Bank may issue PSLC subject to meeting respective sector / sub sector targets and having minimum surplus of 2%.  Activity Clearance Category A: In case of following activities/ industries, increase / additional exposure to a single counterparty by any amount leading to the aggregate exposure to that counterparty exceeding Rs. 1.00 crore, will be subject to Activity Clearance from COCC- CGM for proposals falling within the DLP up to and including COCC- GM /CLCC-MCGM. For proposals falling within the DLP of COCC- CGM and above (COCC- CGM/COCC-ED/ CACB/ MCB), no such activity clearance is required  Leasing, Hire-Purchase, Non-Banking Finance Companies (other than Central/ State Government- owned NBFCs),  Capital Market (other than advances against shares to individuals),  Financing of Film-making – (Sanctioning authority rests with COCC-ED and above (COCC- ED/ CACB/ MCB) only within their delegated powers)  Bridge Loan.  Financing of Educational Institute (Above Rs.5.00 crore)  Aviation  Infrastructure-Power (Other than for own captive power consumption)  Infrastructure-Roads (Other than Hybrid Annuity Model (HAM) project)  Securitization / Through Deed of Assignment.  Gems & Jewellery and Diamond Industry (Above Rs. 5 crore)  Commercial Real Estate for construction of Malls  Advances to co-operative banks  Category B: In respect of following activities, increase / additional exposure to a single counterparty by any amount leading to the aggregate exposure to that counterparty exceeding Rs. 1.00 crore, the activity clearance may be accorded by ZOCC- GM for proposals falling up to the power of ZOCC-GM.  Plantation (excluding tea, coffee and rubber plantations, common horticulture crops, Jatropha, spices, medicinal plants, essential oils/ Aromatic plants),  Manufacturing & Trading of Liquor  Vegetable Oil, Vanaspati  Cinema Halls, Theatres/ Auditoriums/ Amusement Parks, Marriage Halls/ Kalyanamandapams).  Educational Institutions (for proposal up to Rs.5.00 Crs)  IT  Advances to Hotels/ Resorts  Real Estate (other than construction of malls) for Commercial Activities but excluding Retail Loans, Priority Sector Advances Note:  Activity Clearance is required only at the time of sanction and not at the time of Review / RWI  In case of Retail Loans, activity clearance is not required to be obtained from the respective authorities even though prospective borrower is engaged in the activities, requiring Activity Clearance as mentioned above. However, in the case of Mortgage Loan to non- individuals, activity clearance needs to be obtained where the Borrower is engaged in those activities, requiring Activity Clearance as mentioned Above  No activity clearance is required for MSME loans, where the proposal falls within a specific scheme designed for the above mentioned activities.  Financing against 100% cash collateral will not require Activity Clearance. In the case of lending to cooperative banks against their deposits, operating units to obtain a certificate from the statutory auditor of the borrowing institution that the deposit (Cash Collateral) is not part of its statutory requirements  With respect to any ad hoc request related to activities in which activity clearance is required from Corporate Office, Sanctioning Authority may take a view on such request under the respective DLP strictly on the basis of merit.  Agreement in Principle (AIP) Applicability: AIP is required in the case of fresh proposals of Corporate with external credit rating below “A” and falling beyond the ZOCC-GM powers. AIP is required in the case of fresh proposals of MSME and Agriculture with external credit rating below “BBB” and falling beyond the ZOCC-GM powers. AIP is required in the case of takeover proposals of eligible MSME and Agriculture with external credit rating below “BBB” and falling beyond the power of ZOCC-GM with following relaxations Rating Parameters for AIP AIP will not be required in case of takeover if below mentioned criteria is fulfilled  No dilution in security coverage. BB  No release of existing security.  Additional exposure less than or equal to 20% of the existing exposure.  AIP is required in the case of fresh proposals falling beyond the power of ZOCC-GM and valid external credit rating is not available or the borrower is unrated.  AIP shall be exempted in the case of fresh proposals of Corporate, MSME and Agriculture falling beyond the power of ZOCC-GM (CLCC-MCGM/ COCC-GM/ COCC-CGM/ COCC-ED/ CACB/ MCB) subject to the following conditions:  - External credit rating is A & above for Corporate borrowers.  - External credit rating is BBB & above for MSME and Agriculture borrowers.  - Sector should not be in negative list.  - Project should not be a Greenfield project.  The authority matrix for according AIP is as follows: Proposals within the Power of Authority CLCC-MCGM CLCC-MCGM COCC-GM COCC-GM COCC-CGM COCC-CGM COCC-ED COCC-ED CACB and MCB CACB  Exposure Norms Single/ Group exposure limits Large Exposure’ (LE) is defined as the sum of all exposure values of the Bank to a counterparty or a group of connected counterparties if it is equal to or above 10% of the Bank’s Eligible Capital Base (ECB) Large Exposure limits as % of the Tier 1 Capital Exposure Type Regulatory Limit Internal Limit^ Exposure Limit as % of Tier 1 Exposure Limit as % of Capital Tier 1 Capital Single Counterparty 20 (#) 19(*) Group of Connected Counterparties 25 24(*) Single-NBFC (excluding Gold Loan Companies) 20 19(*) Single NBFC- Predominantly engaged in lending against Gold 7.50 7.50 Interbank Exposure 25 24(*) QCCP (Other than clearing exposures) 25 25 CCP (all exposures) 25 25 Exposure of Non-G-SIB in India to a G-SIB and to a non-Bank- 20 19(*) SIFI  Exposure Norms Exemptions: The exposures that will be exempted from the LE limits are listed below:  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 Reserve Bank of India. Further in case two different borrowers have been provided State Government guarantee, however, they are otherwise not connected by definition of Control relationship or Economic Interdependence as defined by RBI, then they will not be treated as a single group of connected counterparties, for the purpose of testing of group exposure caps.  Exposures to Reserve Bank of India;  Exposures where the principal and interest are fully guaranteed by the Government of India;  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.  Intra-day interbank exposures; Intra-group exposures;  Food credit to borrowers, the limits in respect of which are authorised by the Reserve Bank of India;  The Banks’ exposure to QCCPs arising out of clearing and settlement activities  Rural Infrastructure Development Fund (RIDF) deposits placed with NABARD.  Substantial Exposure Cap “Substantial Exposure Limits” i.e., the sum total of exposures assumed in respect of those single borrowers enjoying credit facilities in excess of a threshold limit say, 10% or 15% of the Bank’s capital funds As per the norms prescribed by RBI, the aggregate Substantial Exposure Limit may be fixed at 600% to 800% of capital funds depending upon degree of concentration risk a particular bank is exposed to  The Aggregate SEL shall be 300% of the Bank’s capital funds as per the latest audited annual Balance Sheet. For the purpose of aggregating single borrower exposure for SEL, the thresholds will be 5% of Capital Funds.  The Bank may exceed the aforesaid 5% (Single Borrower SEL) up to the ceiling of 15% prescribed by RBI but shall not exceed the overall SEL of 300%.  Individual, Non-Corporate & Private Limited Co Type of borrower Maximum aggregate exposure (FB+NFB)@ Individual / Proprietor as Borrower Rs. 30 crore Non-Corporates (#) Rs. 100 crore (Partnerships®, Trusts, Associations) Private Limited Company Ceiling as % of Bank’s Tier 1 capital BOB 1 to BOB 4 10 BOB 5 to BOB 6 5 BOB 7 & below, including Un-rated 4  Other Limits Exposure as per type of activity/ nature of exposure Exposure ceiling Leasing, Hire Purchase & Factoring Services 10 (as % of total outstanding global advances as on 31st March ofprevious year) Unsecured Advances & Guarantees 30 (as % of total outstanding global advances as on 31st March ofprevious year) Term Loans in terms of residual maturity of more than –3-years (as % of total 35 (last quarter) outstanding global advances) Internal Rating wise exposure cap: Investment Grade & above Minimum 80% Below investment grade Maximum 20% Indian Joint Ventures / Wholly-owned Subsidiaries Abroad andOverseas Step- 20% of the Bank’sunimpaired capital down Subsidiaries of Indian Corporates (#) funds (Tier I and Tier II capital) Aggregate assets outside India Not to exceed 25% of theBank’s demand and time liabilities in India  Capital Market Exposure S No Exposure type Limit as % of TNW (#) RBI ceiling Bank’s internal cap 1 Total Capital Market (TCM) Exposure – Solo basis & 40.00 40.00 Consolidated Basis 1.1) Advances for PSU Disinvestment -- 5.00% 1.2) 1.2) Advances to Stock Brokers, Market Makers (*) -- 2.00% 1.3) Others (Individual) -- 2.00% 1.4) Adv. for acquisition of Equity in Overseas JV -- 2.00% 1.5) Direct investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and 20.00 20.00 all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] 1.6) Other exposure to capital markets (exposure to mutualfund trustees/ companies for the purpose of -- 33.00 funding their redemption requirements 2 The Bank’s shareholding in any company, whether as pledgee, 30.00 30.00 mortgagee or absolute owner. (@) (*) Subject to maximum ceiling of Rs. 5000 Crores  Financing of equities and investments in shares Exposure Ceiling Rs. In lakhs Loans against security of shares, convertible bonds, convertible debentures and units of 20.00 equity oriented mutual funds in Demat to individuals provided there is no credit facility obtained from the rest of the banking system in this regard Loans/advances to any individual against security of shares, convertible bonds, 10.00 convertible debentures, units of equity oriented mutual funds and PSU bonds for subscribing to IPOs provided there is no credit facility obtained from the rest of the banking system in this regard Loan to employees of companies for purchasing shares of their own companies, under Lower of : ESOP/ reserved by way of employee’s quota under IPO a) 90% of the purchaseprice of the shares or b) Rs. 20 lakhs. No Loans would be granted against security of shares, convertible bonds, convertible debentures and units of equity oriented mutual funds in physical form to individuals/non- individual  Restricted Exposures WilfulDefaulters/Fraud Accounts /Promoters / Partners/ Directors of such companies/ Firms Loans settled under compromise / write-off  Security of own shares: The Bank does not grant any loan and advance on the security of its own shares Buy back of own shares: The Bank will not provide loans to companies for buy-back of its own shares/securities Staff /Relatives of Officers up to Scale III:Retail as per DLP, others ZOCC GM and above Grant of loans & advances to the relatives of Senior Officers Scale IV & Above– Retail as per DLP, others ZOCC GM and above Staff (Senior Officers) Scale IV and above availing under schemes applicable to the General Public :Upto Scale VI: ZOCC- GM above COCC ED Staff (Senior Officers) Scale IV and above availing under Staff Home Loan Scheme:Upto Scale VI: Zonal Head in the rank of GM - Full powers, above ED  Advances against sensitive commodities under Selective Credit Control (SCC) Reserve Bank of India issues, from time to time, directives stipulating specific restrictions on advances against specified sensitive commodities. Generally, the following commodities are treated as sensitive commodities – Food grains i.e. cereals and pulses, Selected major oil seeds indigenously grown, viz. groundnut, rapeseed / mustard, cotton seed, linseed and castor seed, oils thereof, vanaspati and all imported oils and vegetable oils, raw cotton and kapas, sugar/ gur / khandsari, cotton textiles which include cotton yarn, man-made fibers and yarn and fabrics made out of man-made fibers and partly out of cotton yarn and partly out of man-made fibers Ozone Depleting Substances Advances against Fixed Deposits Receipts issued by other Banks Advances against Bullion / Primary gold  Credit rating matrix – other than retail the Bank’s desired mix of corporate loan book (individual exposures of Rs. 7.50 crore and above) in terms of credit ratings for the current financial year will be as under Internal Rating range Target share in External Rating Range # Target share in incremental incremental business business BOB 1, BOB 2 10% AAA / CMR 1 10% BOB 3 15% AA / CMR 2 15% BOB 4 20% A / CMR 3 25% BOB 5 35% BBB & Unrated / CMR 4 30% & unrated under CMR BOB 6 and below including un- 20%* Non- Investment Grade (BB 20% * rated obligors and below) / CMR 5 and Within the above, Cap for BOB 7 & 4% below below rated obligors  Credit rating matrix – other than retail contd.. For MSME exposure of above Rs:7.50 crore to Rs:50.00 crore CMR-CIBIL MSME eatings will only be applicable. Fresh / incremental business may be undertaken in CMR – 6 rated accounts based on the decision rules of credit vision algorithm of CIBIL No fresh / incremental business will be allowed in CMR 7 or below rated accounts.  Credit rating matrix – other than retail For MSME exposure of above Rs. 50 crores, the following rating criteria will be applicable Internal Rating range Target share in External Rating Range Target share in incremental incremental business business BOB 1 & BOB 2 5% AAA to A 5% BOB 3 & BOB 4 20% BBB including un-rated 45% exposures BOB 5 50% BB 45% BOB 6 & below, including un- rated 25% B and below 5% exposures Within the above, Cap for BOB 7 & below rated obligors 4%  Credit Risk Matrix – Retail CIBIL Score range (Credit Vision Score) % share in incremental business 771 and above 30% 726-770 20% 701-725 10% Below 701) 10% # Borrowers with limited / no credit history (-1) 30%  Risk Adjusted Return on Capital (RAROC) It is a risk-based profitability measurement framework that helps financial institutions evaluate the expected returns from an investment or business unit in relation to the level of risk involved. RAROC is to be computed for each credit exposure (other than exempted categories) and the same is required to be compared with the Cost of Equity (COE). Proposals where RAROC equals / exceeds the COE (presently 15%) shall be considered as indicative benchmark for domestic exposures. During any financial year, RAROC for at least 75% of the C & IC customers with exposure of Rs. 50 crore and above (excluding exempted categories) must meet the prescribed COE mentioned above or as revised from time to time For fresh/review proposals, RAROC will be calculated on the basis of the estimated income over the next 12 months adjusted for expected loss (based on the data on actual loss incurred in the loan accounts with similar external/internal credit ratings). RAROC = {Expected revenue – (Operating cost + Interest charges) + Return on capital – Expected losses}/Economic capital  Exemptions to RAROC Framework: Regulatory retail portfolio as per Basel guidelines (Exposure not exceeding Rs. 7.50 crore and annual average sales turnover not exceeding Rs. 50 crore) Pre-settlement and settlement counterparty limits for taking derivatives exposures. Loans to individuals, irrespective of the ticket size, under schematic lending. However, RAROC requirement will be applicable at scheme level when any scheme is conceived and when the performance of the scheme is evaluated post facto. Further, any deviation in respect of processing charges / interest rate in a specific proposal with exposure of Rs. 7.50 crore and above must be justified by way of computation of RAROC of that specific proposal. This stipulation will also apply to the regulatory retail portfolio. Credit Risk in respect of exposure under regulatory instance e.g., RIDF funds to NABARD etc. Staff Loans Credit exposure on counterparty banks, Exposures having 0% risk weighted assets (against Central Govt. Guarantee/ Direct exposures to Central / State Governments etc.) Restructuring Proposals Loans / Overdrafts against the Bank’s own deposits/ fully secured by cash margin/ financial collateral recognised under Basel guidelines Direct exposure on Central / State Government and exposures fully guaranteed by Central Government. T-bill linked Loans  Internal Credit Rating: For robust credit risk management, the Bank assesses credit risk in exposures at each obligor and facility level by rating them under BOBICON Domestic Exposure : BOBICON Rating Models - aggregate credit exposures equal to or greater than Rs 25 lacs are required to be rated by following 19 separate BOBRAM/BOBICON models, namely- Large Corporate Model, SME (Manufacturing), SME (Services),Traders, Banks, NBFCs, Broker, Real Estate, Infrastructure- Road, Infrastructure- Telecom, Infrastructure- Ports, Infrastructure- Power, Lease Rental Discounting (LRD), Contractor Model, Sovereign Model (irrespective of amount of exposure), Agri- Crop Loans, Agri Term, International model- UK and UAE (Customized Credit Model for United Kingdom and UAE operations) Score Card Model for MSME rating - aggregate credit exposures between Rs.2 lakhs and upto Rs. 2 crore are to be rated under this model. Exposures exceeding Rs. 2 crore and above under this category are required to be rated as per the BOBRAM/BOBICON Model for corporate entities.  MSME Score Card I – with exposure Inr 2.00 lakhs to 10 lakhs  MSME Score Card II – with exposure above Inr 10.00 lakhs to 50 lakhs  MSME Score Card III – with exposure above Inr 50.00 lakhs to 200 lakhs Models for Retail Loans - Score Card Models for Housing Loans, Clean Loans, Secured Loans, Education Loans and Mortgage Loans (with aggregate credit exposures up to Rs 2 crores. For aggregate credit exposures exceeding Rs. 2 crores, appropriate BOBRAM/ BOBICON Model is to be used for Mortgage Loans to non- individuals). Overseas Exposure : Corporate Portfolio i.e., those with aggregate credit exposures greater than or equal to US$ 1 million or equivalent are rated as per BOBRAM/BOBICON  Internal Credit rating Acceptance Criteria Minimum Investment Grade Rating is BOB 6. Accounts rated BOB 7 and below are considered as Non-Investment Grades The following will be the respective authorities for considering sanction/review of different types of proposals under Non-Investment Grade (i.e. rated BOB 7 and below): Type of proposal Authority for considering the proposal Respective reviewing authority (Based on Review/ Review with decrease in limits (RWD) their DLP) Fresh sanction / Review with Increase in limits (RWI) falling within the DLP of all credit committees upto COCC-CGM as COCC-CGM well as the DLP of all individual sanctioning authorities Fresh / RWI Proposal falling within the DLP of COCC-ED and Respective sanctioning authority (Based above sanctioning authorities on their DLP)  Exempted categories for Credit Rating: The following types of exposures are exempted from credit rating:  Exposures backed by 100% cash margin, including Loan / Overdraft against Bank’s Own Deposits  Exposures fully guaranteed by Central or State Governments  Advances against clearing instruments/ bills/ clean overdrafts, purchase of cheques drawn by Central & State Govts and drafts issued public sector banks, issuance of LCs/ Bank Guarantees fully secured by cash margin/ deposit etc. permitted within the delegated lending powers at various levels where the client is not availing any other credit facility for which risk rating is applicable as per guidelines. Such facilities should be for a short period and for a specific transaction.  Advances to Central/ State Govt. Departments/ Undertaking/ Establishments, which are not running on commercial basis (e.g. Industrial/ Agricultural/ Rural Development Boards of various State Govts.). An organization may be treated as not running on commercial basis if the borrower is not required to draw Profit & Loss A/c (including income & expenditure) and Balance sheet (statement of affairs) under the law  Accounts turned NPA, after the date of NPA, if no fresh exposure is considered. However, in case the account upgrades to standard category, rating is to be carried out again as usual.  Bill Discounting under Letter of Credit / SBLC/ BG on standalone basis, where the rating of the respective banks may be used;  Portfolio acquired under Interbank Participation Certificate (IBPC) on risk sharing basis; and Purchase of Pooled accounts  External Credit Rating Credit exposures to Public Sector Entities (PSE), Primary Dealers (PDs), Corporates and NBFCs are governed by the external credit rating under the Standardized approach of capital computation under Basel III guidelines of RBI. In the Overseas portfolio of the bank it may not feasible to obtain external credit rating of the loans of Non Indian Borrower / its parent company from any of the approved credit rating agencies. Hence this requirement may not be mandatory. However in order to maintain the quality of portfolio it should be ensured that in case of syndicated loans an externally unrated borrower has internal rating of BOB 5 or better. In case of accounts having exposure of Rs 100 crores and above that have degraded to BOB 6 or below at the time of subsequent review of the account, International Department to present a strategy for accounts to the sanctioning authority. Exemption from the requirement of External Credit Rating in the case of eligible overseas exposures may be considered in exceptional circumstances with reasons recorded in writing by the sanctioning authority only if both the following conditions are satisfied: – Internal credit rating of the customer is BOB 4 or better. – Expected RAROC is above the COE/ Hurdle rate  For Indian borrowers, the approved credit rating agencies are:  ICRA Limited,  CRISIL Limited,  Credit Analysis and Research Limited (CARE),  India Ratings and Research Private Limited (India Ratings),  Acuite Rating & Research Limited  Infomerics Valuation and Rating Pvt Ltd. (INFOMERICS) or any other rating agencies approved by Regulators, For Non- Indian Corporate Borrowers,  Moody’s,  Standard & Poor's  Fitch  External Credit Rating contd… Minimum credit rating: Minimum external credit rating for undertaking fresh/ enhancement in credit facilities is as under:  Corporate: BBB  Regulatory & Non regulatory MSME exposures of Rs. 50 crore and above from the banking system: BB.  For overseas exposure (including overseas Banks) eligible for External Rating: B However, in respect of existing credit facilities for review / review with decrease/ NPA/ Restructure, the aforementioned minimum external rating guidelines will not be applicable. Time period upto 60 days from date of acceptance of sanction to be allowed in case of Greenfield projects / SPVs and New Accounts. In case of non-compliance within 60 days penal interest to be charged suitably as per Bank’s guidelines for the defaulted period.  Exemptions from External Credit Rating The following types of exposures are exempted from the external credit rating criteria:  Domestic Sovereign  Direct Housing Loan to Individuals  Commercial Real Estate  Capital Market Exposure  Staff Loans  Regulatory Retail as defined by the regulators from time to time  (i) the borrower’s average annual turnover does not exceed Rs. 50 crore, and  (ii) the aggregate credit exposure of the Bank to the borrower does not exceed Rs.7.5 crore.  Regulatory, non-regulatory MSME Exposures and Agriculture not exceeding Rs. 50 crore from the banking system.  Non-Performing Assets  The credit exposure is covered by a credit risk mitigant (CRM) to a reasonable extent and even if it is not 100% (examples of CRM are the Bank's fixed deposit, National Savings Certificate, Kisan Vikas Patra, Indira Vikas Patra, Government securities, gold etc). Equity shares, whether under the approved list or not, are not to be treated as CRM.  Guarantee of CGTMSE, ECGC or any other bank is available to cover at least 50 per cent of the exposure.  Margin / LTV Ratio In case it is not mentioned anywhere else in the Bank’s extant guidelines, a minimum margin of 25% is to be maintained Priority Sector Particulars Margin (%) Loan Limit up to Rs. 1,00,000 Nil Crop Loans (irrespective of limit) Nil Loans for purchase of Tractor and Heavy Agril. Machinery 25 (*@) Other Agriculture Loans 15 Agri-Clinics & Agri- Business: Not exceeding Rs.5.00 Lacs Nil Above Rs.5.00 Lacs 15 NBFC-MFI under Agriculture- margin on book debts created out of the funds 10 borrowed from the Bank Stipulated Margin on advances to Food & Agro Based units and advances for construction of storage facilities viz: warehouse, market yard, godown, silos, cold storage etc. under “Regulatory Agriculture Facility Particulars Margin (%) Land & Building 30 Term Loan Plant & Machinery and Equipment (New) 25 Working Capital Stocks and receivables 25 Export credit 10  C &IC, EC / MSME Loans Facility Type of security Minimum Margin Term Loan Factory Land & Building 30% Plant, Machinery, Equipment 25% Second hand machinery (domestic/ imported) 40% Working Capital Stocks & Receivables 25% Pre- Shipment 10% Export Credit Post Shipment Nil  Retail Lending: Margin for various retail loan products under the relevant schemes are stipulated to ensure that Loan to Value (LTV) Ratio remains below a safe threshold. However, certain powers have been delegated to various authorities to consider deviation in LTV Ratio within the limits permitted under the regulations issued by Reserve Bank of India. Capital Market Exposure & Commodities under Selective Credit Control Exposure Min. Margin On the funds lent for margin trading 50% On all advances / financing of IPOs / issue of guarantees for capital market operations, 50% including guarantees issued by the Bank on behalf of commodity brokers in favour of the national level commodity exchanges viz. National Commodity & Derivatives Exchange (NCDEX), Multi- Commodity Exchange of India Ltd. (MCX) and National Multi-Commodity Exchange of India Ltd. (NMCEIL) in lieu of margin requirements as per the commodity exchange regulations Minimum Cash Margin (within the above-mentioned margin of 50%) to be maintained in 25% respect of guarantees issued by the Bank for capital market operations and on behalf of commodity brokers. Advance against Levy Sugar 10%  Real Estate Exposures: Description Margin Overall Margin for Real Estate Projects 35% of project cost (other than land cost@) Out of above overall margin, minimum contribution by way of own funds and 25% of project cost quasi capital should be. (For this purpose, quasi capital should not be more than 50% of net worth / net owned funds) Remaining 10% margin can be from customer advance, security deposit, cash flow or any other sources. Land cost should not be treated for margin contribution Other Exposures All functionaries concerned will strictly comply with extant RBI’s / Bank’s internal guidelines and ensure availability of 100% cash margin upfront, before issuance of Bank Guarantees (BG) / Standby Letter of Credit (LC) while exercising the discretionary lending powers for issuing BG or LC backed by 100% cash margin. For Loan/ Overdraft against the Bank’s own Deposits, minimum margin of 10% on value of the deposit shall be ensured. However, the sanctioning authorities can reduce margin up to 5 percentage points on case-to-case basis, subject to separate servicing of interest, as and when charged. Under exceptional circumstances, further reduction down to Nil can be allowed by Regional Heads for exposures up to Rs. 50 crore, Zonal Heads up to Rs. 100 crore and Executive Director for all other cases, subject to servicing of interest on the Loan/ OD separately as and when charged.  Assessment criteria Working Capital Borrower Type Method of lending for Fund Based Working Capital requirement Up to Rs. 5 crores Above Rs. 5 crores Micro & Small Enterprises, Higher of First Method (or) Higher of First Method (or) Turnover Method [Min 25% (@)] Turnover Method (Min 20%) Medium Enterprise Higher of Turnover method, Min 20% or first Method All other borrowers requiring Working Second Method Capital finance up to Rs. 10.00 crore Above Rs 10.00 crore Cash flow method. However, if cash flow projections etc. are not available, then Second Method may be applied after satisfying that Working Capital Requirements are based on the Operating Cycle (@) In case digital sales turnover exceeds 25% of the total/ assessed turnover, additional 5% of the digital sales turnover will be added to the total assessment of working capital. I.e. 30% of turnover for Digital sales and 25% of non-digital sales added together will be the working capital limit.  Financial Ratios The indicative benchmarks for key financial ratios for industries / sectors/ products, not specified elsewhere are as under General Benchmark Micro & Small Medium Acceptable Ratio incl. expandedSME Enterprise Enterprise Level Current Ratio (minimum) 1.33 1.17 1.20 1.00 Debt- Equity Ratio TTL/ ATNW 3.00 3.00 3.00 4.50 (maximum) Debt- Equity Ratio TOL/ ATNW 4.50 4.50 4.50 5.00 (maximum) Fixed Assets Coverage Ratio 1.25 1.25 1.25 1.25 (minimum) Average Debt Service Coverage 1.75 1.75 1.75 1.20 Ratio Minimum DSCR in any year 1.25 1.00 1.25 1.00 Interest Coverage Ratio 2.60 2.25 2.50 2.00 Total Debt / EBIDTA 5.00 6.00 5.50 6.00  Financial Ratios Contd… Debt-Equity Ratio: Sub-ordinated debt (viz. long-term unsecured loans from friends and relatives etc.), will be added to ATNW (up to 100% of ATNW for non-corporate borrowers and up to 50% for corporate borrowers) for the purpose of computing Debt-Equity Ratios, provided the borrower retains the same at the existing level/projected level during the currency of the credit facilities provided by the Bank. Current Ratio: FDR kept as margin for LC maturing within next 12 months should be treated as current assets. The indicative current ratio shall not be applicable for accounts having standalone term loan facility only. For MSME (Regulatory & expanded definition) accounts, while calculating current ratio, TL installments falling due in next 12 months should be excluded, provided the projected cash flows generation is more than the projected installments of Term loans. For Export oriented MSME Units (having more than 50% turnover from export activities), the indicative benchmark current ratio is 1.10.  Loan System for Delivery of Bank Credit With a view to enhancing credit discipline among the larger borrowers enjoying working capital facility from the banking system, RBI has issued guidelines on Loan System for Delivery of Bank Credit Minimum level of Loan Component 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 percent was effective from July 1, 2019. Accordingly, for such borrowers, the outstanding ‘loan component’ (Working Capital Loan) must be equal to at least 60 percent of the sanctioned fund based working capital limit, including ad hoc limits and TODs. Hence, for such borrowers, drawings up to 60 percent of the total fund based working capital limits shall be allowed from the ‘loan component’. Drawings in excess of the minimum ‘loan component’ threshold may be allowed in the form of cash credit facility  Techno Economic Viability (TEV) Study Broad guidelines for TEV Study are as under:  No TEV study may be insisted upon for project cost up to Rs. 25 crore. In case, the authority, at least in the category of Regional Head, feels that the project needs Techno- economic Viability study, the same may be referred to Bank’s technical officer posted in the Zone or empanelled consultant for carrying out TEV study.  For projects above Rs. 25 crore and upto Rs. 250 crore, the TEV Study should be carried out by the Bank’s Technical Officer posted in the Zone concerned or by an empanelled consultant.  For projects above Rs. 250.00 crore, the TEV Study should be carried out by the Bank’s Technical Officer/s posted in Project Finance Division at BCC  TEV study of the project costing up to Rs.250.00 crore carried out by other banks can be accepted, if-  1) the bank is one of the State Bank of India, Canara Bank, Punjab National Bank, Union Bank of India, Bank of India, Indian Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Axis Bank.,  2) it is taking exposure for at least 10% of term loan component ,  3) In the project under reference, the Bank’s exposure shall be less than or equal to the exposure of the other bank. If project cost is above Rs. 250.00 crore, it can be accepted, subject to vetting by the Bank’s Technical Officer/s posted in Project Finance Division at BCC.  Techno Economic Viability (TEV) Study  In case, the TEV study of the project with cost of above Rs.250.00 crores has been done by agencies of repute, such as Tata Consultants, Engineers India Limited, KPMG, Deloitte, E&Y, PWC, BDO, Grant Thornton etc. it can be accepted by the Bank, subject to vetting of the TEV study by the Bank’s Technical Officer/s posted in Project Finance Team at BCC. In case of big ticket projects, when DPR (Detailed Project Report) is prepared by one of the agencies, as above, namely Tata Consultants, Engineers India Limited, KPMG, Deloitte, E&Y, PWC, BDO, Grant Thornton etc. and the same is vetted by another professional agency of repute, confirming technical and financial viability of the project , the same can be accepted by the Bank for appraisal  For Residential projects under real estate, TEV study carried out by the empanelled consultants may be accepted (irrespective of project cost).  In case same borrower is implementing two separate projects at two different locations, the project cost of these two projects to be clubbed to decide the project cost for referring the matter to the Bank’s technical officer /empanelled consultant /Project Finance Division, BCC Waiver of TEV Study Project cost up to Competent authority Rs. 100 crore COCC-GM Rs. 200 crore COCC-CGM Rs. 400 crore COCC-ED Above Rs. 400 crore CACB  Export Credit Export finance is broadly classified into two categories- a) Pre-shipment finance and b) Post- shipment finance. Export credit limit in Foreign Currency will be sanctioned in one of the convertible currencies viz US dollars, Pound Sterling, Japanese Yen, Euro. The FC component of export credit outstanding will be maintained and monitored in FC. Pre-shipment credit to exporters is normally provided on lodgement of LCs or firm export orders The period for which the Bank gives packing credit depends upon the manufacturing / trade cycle or specific requirements of the individual export, normally not exceeding 180 days. Post-shipment finance can be extended up to 100 % of the invoice value of goods. The maximum period usually allowed for realization of export proceeds is 180 days from the date of shipment, with certain exceptions.  FCNR (B) Loans & FCTL: The Bank grants foreign currency denominated loans in India against foreign currency funds, which the bank is having on account of FCNR (B) deposits in 6 currencies viz. US dollar, Pound sterling, Euro, Japanese yen, Australian dollar and Canadian dollar These loans are disbursed at branch level and parked with B-Category branch.. The minimum amount considered for FCNR (B) loan generally is USD 0.5 million or its equivalent The rate of interest on FCNR (B) loans is linked to Alternate Reference Rate (SOFR, SONIA, ESTER etc.) and the spread is decided based on the credit rating of the corporate. The Bank sanctions Foreign Currency Demand Loans (FCDL) for working capital by earmarking the working capital facilities within the Permissible Bank Finance (MPBF). The Bank permits Foreign Currency Term Loans (FCTL) for a period not exceeding 3 years  Financing against Book Debts Generally, book debts outstanding for more than 90 days are not to be considered for the purpose of Drawing Power. In case drawings are to be allowed for book debts for more than 90 days, authorities not below the level of ZOCC-GM may allow the same within their respective DLP. In case drawings are to be allowed for book debts for more than 180 days period, authorities not below the level of COCC-CGM may allow the same within their respective DLP  Takeover of Loan Accounts Takeover of high-quality loans and advances from other banks/FIs/ NBFCs, in compliance with RBI and MoF guidelines for this purpose is one of the ways for the Bank to grow its credit portfolio. The following set of norms / guidelines shall be followed in this regard: Definition of Takeover of Borrowal Accounts: In the case of sole banking, where the Bank takes over an account from another bank or financial institution/s and replaces it. In the case of multiple banking, where the Bank takes over the share of another bank and replaces the said bank. In the case of consortium accounts, where the Bank replaces an existing member of a consortium by taking over its share. General guidelines for takeover of Loan accounts. Accounts with existing lenders should be under the category of “Standard Assets” and should not have been classified under SMA-1 / SMA-2 during the last one year as per the latest CRILC report. Securities to be revalued at the time of takeover of account as per the extant guidelines. There should not have been any rescheduling / restructuring in the account during last two years. No credit facility should be taken over by the Bank from any other bank where any of the Bank's Executive Director or Managing Director & CEO had worked earlier.  In case any such account is proposed to be taken over under the Retail Loans, ZOCC- GM will have the authority to sanction such exposure upto an amount of Rs 10 crores. The processing of loans will be at Branch/SMS/CPC as per Bank’s existing guidelines. For takeover of cases beyond Rs.10.00 crs AND UPTO 25 CR , COCC-GM will have the authority to sanction, and above 25 cr COCC CGM with specific reasons justifying the need for taking over the account. A consolidated note by the Retail department to be put up to the Management Committee of the Board for all such sanctions for noting.  In case of any other account, the proposal will be required to be put up to the Management Committee of the Board (MCB) with specific reasons justifying the need for taking over the account and then put up to the Board for noting.  In the above cases, the Bank's Executive Director or Managing Director & CEO (who has worked earlier in the Bank whose proposal is being considered for Takeover) should abstain themselves from the quorum of the meeting in which such proposal is being put up for consideration Takeover of Corporate & MSME (Regulatory & Expanded definition) Accounts External Rating in respect of credit proposal with exposure above Rs.50 crores by approved credit rating agencies should not be below BBB & equivalent As per the BOBRAM/BOBICON credit rating model, minimum “BOB6” obligor rating grade for all exposures of Rs. 25 lakh and above, other than MSME exposures. For MSME exposures, this rating model is applicable for accounts having exposure of above Rs. 2 crore.  As per MSME Credit Rating Model for MSME accounts of exposure Rs.2 lakh and above up to Rs. 2.00 crore subject to minimum “MSMEBOB6” rating Proposal for takeover under the powers of Chief Manager and above: -For proposals under the powers of Chief Manager and above, no prior clearance from next higher authority is required for takeover. Delegated authorities under the Bank’s discretionary lending powers may consider takeover cases within their powers. Proposal for takeover under the powers of below Chief Manager: Prior approval of next higher authority i.e. Regional Manager is required for takeover. After obtaining prior clearance as above, delegated authorities may consider the proposals as per their discretionary lending powers. Takeover of Retail Loan Accounts The valuation norms that in case of Property purchased within last 1 years, the amount of Registered Sale Deed is to be taken as value of the Property is not applicable for takeover Home Loans The amount of loan may include the outstanding balance, foreclosure fee payable, if any, to the current lender bank, and stamp duty for creation of equitable mortgage in the Bank’s favour subject to margin, income and repaying capacity criteria, Loan to Value (LTV) ratio etc. Incase of takeover of retail loans including home loans accounts realizable value of the property is to be considered.  Takeover of Agriculture Finance: In case of takeover of agriculture finance to individual farmers with aggregate limit up to Rs. 10.00 lacs, no prior approval is required subject to compliance of the Non-Financial norms as mentioned below There should not have been any rescheduling/ restructuring in the account during last two years. Satisfactory report from the existing bank/FI and/or satisfactory conduct of account as per latest statement of accounts to be ensured. In addition, account should not be reported as SMA 1 / SMA 2 during last 12 months Accounts with existing lenders should be under the category of “Standard Assets” For authorities below the rank of Chief Manager, prior approval of next higher authority is required for taking over of Agriculture Accounts For takeover proposal falling in the DLP of Chief Manager and above, no prior approval is required, provided takeover norms are complied with and decision is taken by the Competent Authority.  CREDIT PROCESS Credit Approval process The Bank has designed the credit approval process to ensure that no individual, irrespective of seniority, has the authority to originate and sanction credit. The credit approval process of the Bank is as unde Facility Structure All credit facilities should contain meaningful and practical covenants. Facilities are to be structured based on identifiable sources of repayment / discharge Unsecured credit facilities (excluding schematic lending and exposure to banks) should be granted only to customers whose financials are beyond question and who have a risk rating of not lower than BOB 5 for domestic operations and overseas operations. Further, Unsecured Loans (excluding Syndicated Loans and exposure to banks) are to be considered in respect of those customers maintaining satisfactorily conducted transactional accounts with the Bank for at least 6 months Personal guarantee of promoters to be obtained for all the credit facilities to Private Limited Company/ Public Limited Company / other types of corporate borrowers, except Govt. / PSUs/ Public Limited Companies (in which the public are substantially interested as defined in the Section 2(18) of Income Tax act.) with consecutive two years external credit rating of AA- and above In case there is degradation in external credit rating to A+ and below at the time of review, personal guarantee of the promoters to be obtained. Suitable conditions may be stipulated in the sanction terms to inform borrower for providing personal guarantee of the promoters on degradation of external credit rating  CREDIT PROCESS Application: Standard application forms for different types of loans (Retail, SME, Agriculture etc.) are available at operating units as well as on the Bank’s website. Loan applications are to be made available to the applicants on request, free of cost, along with the schedule of fees and charges. Application forms along with detailed form No. 135 containing details of assets and liabilities of each individual applicants / Guarantors are to be obtained Rejection of Educational Loan applications and SC / ST Borrower’s applications should be done at the next higher level instead of at the branch level and reasons of rejection should be clearly indicated.  Application Disposal Type of Credit Facility Time frame for disposal PRIORITY SECTOR Up to Rs.25,000/- Within -1- week Above Rs.25,000/- Branch Level Within -10 working days RO/ZO level Within -15- working days BCC Level Within -30- days RETAIL LOANS As prescribed at product level but not beyond: Branch level Within -10 working days RO/ZO level Within -15- working days BCC Level Within -30- days MSME LOANS For credit limits up to Rs.5/- lakh Within 1 week For credit limits above Rs.5/- lakh and up to Rs.25.00 Within 10 working days lakh For credit limits above Rs.25/- lacs Within 15 working days  Application Disposal OTHER LOANS INCLUDING EXPORT CREDIT, OVERSEAS TERRITORIES, (other than Priority Sector, MSME and Retails Loans) Branch Within 10 working days DRMCC/ RMCC /DNCC/ ZOCC / Territorial CreditCommittee/ Within 5 working days from the date of receipt of proposal/ clarificationfrom the branch Cluster Head Committee At Baroda Corporate Centre- Corporate Office LevelCredit j) Within 7 working days from the date of receipt of Committees headed by proposal/ clarifications i) General Manager / CGM / Executive Director ii) Within 10 working days from the date of receipt of ii) Managing Director & CEO proposal/ clarifications iii) Management Committee of the Board iii) Within 15 working days fromthe date of receipt of proposal/ clarifications  Processing Clear demarcation is followed between Business and Credit Proposal Processing/Appraisal units. Proposal processing Officer and the sanctioning authority will not be same. Proposal processing officers should be having sufficient experience and well trained in credit sanction process before undertaking process of credit proposals. Specialised projects are to be processed by personnel having specific knowledge and skills in respective field. The proposals for Syndicated/Club Deal/ Bilateral loans of Indian corporates will generally be processed by IMBC, and submitted to the competent authority for consideration/approval. In case of need, the proposals for Indian corporates may also be submitted by GSC, London/ RSCs. The proposal for Bilateral Loan can be prepared by the Indian branches/ Credit Operations Department at BCC. The proposals/offers for participation, arranging or secondary market purchases in respect of non-Indian corporates will be processed by GSC/ RSCs and submitted to IMBC for obtaining necessary approval Processing involves the following activities: Due diligence, Security Valuation, Pre-sanction Inspection, Legal Opinion from empanelled Advocate, Internal Credit Rating, Techno- economic viability study, Financial data analysis, evaluation of credit proposal, including all types of risks, assessment of required limits, RAROC computation For retail loans, with exposure of R.s 5 lakhs and above (Home Loans- Rs. 10 lakhs and above) and commercial loans with exposure of Rs. 25 lakhs and above, credit report from at least two recognized credit information bureaus is mandatory  Valuation of Immovable Property Obtained As Security In case of properties acquired within last -12 months , amount of Registered Sale Deed or the realisable Value whichever is lower should be taken as value of property and the same be taken for the purpose of calculation of FACR/Security Coverage Ratio / Loan to Value Ratio Second Valuation Report from other empanelled valuers approved by the Bank shall be obtained (for all type of proposals C&lC, MSME, Retail and Rural & Agri) in case the Realisable Value of the first Valuation Report exceeds the threshold mentioned below Value of the properties For properties situated at Metro Cities Type of Properties including Bangalore, Hyderabad, For properties situated Ahmedabad, Chandigarh Tri-city, at Other centres Gurgaon and Noida Residential Properties Above Rs. 5 crore Above Rs. 2 crore Commercial Properties Above Rs. 5 crore Above Rs. 2 crore Industrial Properties Above Rs. 10 crore Above Rs. 5 crore Agriculture Land Above Rs. 2 crore Above Rs. 1 crore  Valuation of Sugar Stocks The unreleased stocks of the levy sugar charged to Banks as security by the Sugar Mills shall be valued at levy price fixed by Government The unreleased stocks of free sale sugar including buffer stocks of sugar charged to the Bank as security by the Sugar Mills shall be valued at the average of the price realised in the preceding three months (moving average) or the current market price, whichever is lower; the prices for this purpose shall be exclusive of applicable GST Valuation of Gold For the purpose of valuation of gold, the Bank uses the historical spot gold price data publicly disseminated by a commodity exchange regulated by the SEBI Valuation at overseas territories: In case of advances secured by way of mortgage of landed property/ fixed assets (as primary or collateral security), overseas branches shall stipulate for independent valuation report from Bank’s approved valuers and Solicitor/ Advocate’s report on title to the property and encumbrances. The subsequent valuation are to be carried out at least once in every 3 years (unless otherwise specific relaxation allowed as per local regulatory guidelines) from the Bank’s empaneled valuers (other than the previous valuer) Valuation of Financial Securities – Periodicity Govt. Debt LIC / NSC / Frequency of valuation of Gold Units of MF securities Securities KVP Financial Security Daily Daily Daily Annually Daily  Securities Verification / Inspection Primary Securities Security Frequency of Inspection Latest Credit Rating for BOB1, BOB2 & BOB3 /, Quarterly. MSME BOB1, MSME BOB2, MSME BOB3 For working capital as per Latest Credit Rating of BOB4 and BOB5 , MSME BOBICON rating (@) Once in two months BOB4 , MSME BOB5 Latest Credit Rating BOB6/ MSME BOB6 Below Monthly Others Half Yearly Fixed Assets Half-yearly i.e. as of (Charged against Demand/Term Loan/DPG) January and July Under consortium arrangement As per periodicity fixed by (Exchange of inspection reports / information – with other banks to be ensured.) the consortium. Collateral Securities The inspection of collateral securities to be carried out preferably on annual basis for all types of facilities i.e. Funded as well as Non-Funded  Unit visits / Visit to the Borrower’s Office premises by Authorities S No Sanctioning authority Periodicity of field visits For advance accounts falling up to the powers a) By the Branch Manager preferably twice a year. of Branch Manager. For advance accounts falling up to the powers By An executive or an officer at respective RO, preferably once in a b) of RMCC. year. For advance accounts falling beyond the powers By an executive or an officer at respective ZO preferably once in a c) of RMCC. year. Periodicity of field visit will be accelerated on case-to- case basis as For advance accounts where obligor (borrower) d) warranted, to be decided by Regional / Zonal Authorities for taking credit rating has slipped by two notches timely corrective actions.  Post Sanction Reporting Branches in Sanction Threshold Retail Area (FB+NFB) Other than Retail A. Fresh- Above Rs.5 lakhs B. Review-: Metro &  Home Loan- above Rs.25.00 lakhs* Above Rs.25 lakhs Urban  Auto Loan- above 10.00 lakhs* *if terms & conditions of sanction are complied with. A. Fresh- Above Rs.5 lakhs B. Review-: Semi Urban&  Home Loan- above Rs.25.00 lakhs* Above Rs.10 lakhs Rural  Auto Loan- above 10.00 lakhs* *if terms & conditions of sanction are complied with.  Credit Decision Corporate Office Level Credit Committees: Management Committee of the Board (MCB). Credit Approval Committee of the Board (CACB) – Headed by the MD&CEO Corporate Office Level Credit Committee headed by respective EDs, in-charge of respective Corporate Credit Function (COCC–ED). COCC- CGM for Sanction of Credit Limits beyond delegated lending powers of the ZOCC- GM/ COCC-GM COCC-GM for sanction of credit proposals falling beyond delegated powers of ZOCC- GM. Zonal Office Level Credit Committee: Zonal Office level Credit Committee headed by Zonal Head i.e. ZOCC-GM. Dy. General Manager – Business Development Credit Committee i.e. DBDCC Regional Office Level - credit committee: Regional Office Level Credit Committee headed by Regional Manager (RMCC) Regional Office level Credit Committee headed by Dy. Regional Manager (DRMCC)  Validity of Sanction Any sanction, if not availed of, within three months in case of Working Capital (Funded & Non- Funded) Facility and six months in case of Term Loans, and Consortium Loans including working capital facilities from the date of sanction, will lapse and will require revalidation by the sanctioning authority In case both the Working Capital Facilities and Term Loan are sanctioned in a single account, the validity for Term Loan shall be adhered to In case, if sanction is accepted unconditionally by the borrowers & guarantors, documents have been executed within the permissible period (i.e. 3 months in case of working capital and 6 months in case of term loan/ Consortium Loans (incl. working capital)), and 50% processing charges have been recovered, in such cases, sanction will remain valid for a period of 9 months from the date of sanction. The revalidation of the sanction can be done maximum -3- times consecutively, subject to the total period of 1 year from the date of initial sanction. Respective sanctioning authority only is authorized to accord revalidation. If the revalidation period exceeds one year from the initial sanction date, fresh appraisal / assessment is to be carried out.  Levy of Commitment Charges working capital facilities (excluding retail loans other than Baroda Mortgage Loan) and for effective deployment of lendable resources, commitment charges will be levied in case of non-utilization / under- utilization of working capital limits for advances accounts with fund- based & non fund based working capital limits of Rs. 1 crore and above. COCC- CGM/ Territorial Credit Committee is authorized to waive up to 25% of commitment charges for proposals falling up to their respective delegated powers COCC- ED, CACB and MCB may consider waiver up to 100% of commitment charges for proposals falling up to their delegated lending powers.  Verification of Documents Advances accounts with aggregate limit of above Rs. 2 crore (Funded plus Non- Funded) would be verified by the Bank’s Law Officer posted in the respective Zone / Region / CFS Branches the documents relating to Advance Accounts with aggregate exposure of Rs. 10 lacs and above but up to and inclusive of Rs. 2 crore shall be verified by the Bank’s identified Advocate / Lawyer other than the one who has given the Title Opinion / Non-Encumbrance Certificate (NEC) / Report in respect of mortgage(s) in the account Further, in respect of following Zones, documents verification in respect of credit limits between Rs.2 crore and Rs.5 crore can be got done from empanelled advocate/s of the bank, provided original documents at some stage have been vetted by Zonal Legal Dept./Law officer of the bank 1)New Delhi Zone 2) Greater Mumbai Zone 3) Chennai Zone 4) Kolkata Zone 5) Ahmedabad Zone 6) Pune Zone and 7) Jaipur Zone.  Disbursement Stipulated terms and conditions of the sanction are to be conveyed to the borrower in writing and on acceptance; the disbursement should take place after due execution of necessary documents, its vetting and compliance of various terms and conditions of sanction. Disbursement on Reimbursement Basis- CAPEX should have been incurred within - 18- months prior to sanction or application till the date of 1st disbursement Powers of reimbursement for Term Loans, subject to compliance of guidelines shall be as under: For proposals upto DLP of ZOCC-GM: Respective sanctioning authorities up to DNCC subject to max of 20% of loan amount. ZOCC-GM may allow 100% disbursement on reimbursement basis up to the DLP of ZOCC GM.  Further, ZOCC-GM may allow 100% disbursement on reimbursement basis, if it is proposed as modification post sanction subject to two additional conditions as under: 1) Security Perfection already done in the account. 2) Account should not feature under SMA1/2 category. For Proposal sanctioned at Cluster Level: CLCC-MCGM may allow reimbursements upto 50% of Loan amounts. COCC-CGM may allow reimbursements upto 100% of Loan amounts. For other proposals sanctioned at Corporate Office: ZOCC – GM may allow reimbursements upto 20% of Loan amounts COCC – CGM for cases beyond 20% and upto 50% of Term Loan For all other cases of reimbursement, necessary powers shall remain vested with the COCC – ED and above.  Review Process Credit facilities sanctioned to borrowers are subjected to regular review (except Loan/ Overdraft Against Bank’s Own Deposits (LABOD/ ODBOD), staff loans). Such regular reviews can be done for a period of 12 months or less. However in case of borrowal accounts enjoying credit facilities of Rs.10 crore and above, where the credit rating is BOB-7 or below, review of such borrowal account should be on half-yearly basis. Branches have been authorized to review advances accounts with limit up to Rs. 25 lacs for facilities enjoyed by borrowers in trading activities, Micro & Small Enterprises, borrowers in rural area, borrowers having only term loan accounts, financed under government sponsored programme, borrowers enjoying only guarantee facility, etc, pending receipt of audited financial statements, provided the conduct of the account is satisfactory  Review of existing facilities with no change in terms and conditions: The sanctioning authority or sanctioning committee upto COCC-CGM shall exercise the delegated powers of next higher Scale or Committee (COCC- GM will exercise powers of COCC-CGM). For review of existing credit facilities where compliance of existing terms and conditions is ensured. However exercise of next higher authority for such review shall be subject to the following conditions There is no downgrading in internal credit rating (Obligor) (by two or more notches upto BOB 5 rating grade and 1 notch thereafter) during the review period, and Latest rating is minimum BOB-6/MSME BOB6 as per BOBRAM/BOBICON / MSME credit rating system In case any facility of the borrower has remained in SMA1/ SMA 2 category beyond 90 days during the review period, the facility should be reviewed by the respective sanctioning authority Short Review review for a short period can be undertaken for a period of 3 months with proper justifiable reasons and in any case the comprehensive regular review must be completed within 180 days from the due date of regular review  Periodic Valuation In case of General advances valuation of property is to be carried out once in 3 years by the Bank’s empanelled valuer, irrespective of classification of account Advances granted under Baroda Property Pride, Baroda Loan to Doctors & Baroda Mortgage Loan, valuation of the property charged to the Bank need to be got done once in 3 years In case of Home Loans and other Home Loan variants, if the account is regular and classified as standard asset, the condition of valuation of the properties once in three years will not be applicable  Loan Review Mechanism/ Credit Audit Credit Audit is to be carried out within a period of 6 months from the date of sanction / review in respect of following All fresh Sanctions/ Existing accounts including Retail Loans and Restructured Accounts with aggregate exposure of Rs.10/- crore and above (Fund based + Non fund based) – 5% of borrowal accounts randomly selected from the rest of the portfolio as under Fresh Accounts sanctioned with exposure of Rs. Rs.1/- crore above but below Rs.10/- crore (Fund based + Non fund based). Accounts reviewed with increase with aggregate exposure of Rs.1/- crore above but below Rs.10/- crore (Fund based + Non fund based). Fresh sanction and reviewed with increase account of Sister Concerns / Group/ Associates concerns of above accounts, with threshold limit of Rs. 1/- crore & above (Fund based + Non fund based). Exclusions All the self- liquidating advances granted against the security of Bank’s own deposits, 100% cash margin, Govt. Securities like NSC/KVP/IVP etc. either granted to the main eligible account and or its associates All short-term clean loans, all short reviews and all Non Performing Advances  Verification/Audit of hypothecated/pledged Stocks / Book Debts Stock / Book Debts Audit is to be carried out mandatorily in all accounts having fund- based and non- fund based working capital facilities of Rs. 1.00 crore and above with our Bank. The frequency will be as under: – Borrowers consistently rated A and above for the latest two years (where external rating is available): Annually or as decided by consortium. – Borrowers having working capital exposures of above Rs. 5.00 crore which is not covered under the above criteria: Bi-annually or as decided by consortium. – Borrowers having working capital exposures of Rs. 1.00 crore & above and upto Rs.5.00 crore: Annually OR as decided by consortium. Stock / Book Debts Audit will not be applicable where no working capital facilities are sanctioned / or working capital limits are below Rs. 1.00 crore  Real Estate It should be ensured that the borrowers have obtained prior permission / approval from government / local governments / other statutory authorities for the project, wherever required, including compliance of RERA provisions The Bank’s exposure per project is restricted to a ceiling of Rs. 1000.00 crore irrespective of size of the project. If the funding requirement from banking system is more than Rs. 1000 crore, the Bank’s exposure will be restricted to Rs. 1000 crore or 50% of project cost, whichever is less. The Bank’s Exposure per project can exceed the limit of Rs.1000.00 crore in case of builders/developers who are externally rated AAA by approved rating agency Tenure of Loan shall not normally be more than 5 years in respect of builders / contractors / developers.