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INDEX

No SUBJECT PAGE

1 SCOPE OF THE SCHEME 12 ACTIVITIES NOT COVERED UNDER THE SCHEME 13 CONSTITUTION-WISE COVERAGE OF THE SCHEME 24 ENTRY LEVEL NORMS 2

5 CEILING ON LOAN QUANTUM 26 PURPOSE & MODE OF UTILISATION OF LOAN PROCEEDS 27 PRIMARY SECURITY 48 COLLATERAL SECURITY 59 MARGIN 510 GUARANTEE STANDARD 611 REPAYMENT TERMS 712 MORATORIUM PERIOD 713 RATE OF INTEREST 814 PENAL INTEREST 815 MODE OF DISBURSE-MENT/ OPERATIONS 816 ASSIGNMENT OF RISK RATING 9

17 INSURANCE COVER ON THE SECURITY 1018 PROCESSING & OTHER CHARGES 1019 CHARGES FOR SERVICE PROVIDERS 1120 LOAN DOCUMENTATION STANDARD 1221 CLASSIFICATION OF THE LOAN 1322 BORROWER STANDARD 1423 FINANCIAL STANDARD 1524 CREDIT ASSESSMENT STANDARD 1825 DOCUMENTS TO BE FURNISHED BY THE APPLICANT 2026 PROCESS OF VERIFICATION OF DOCUMENTS OBTAINED 2227 PROCEDURE FOR SHORT REVIEW 24

28PROCEDURE FOR REGULAR REVIEW & RENEWAL

2529 POST SANCTION SUPERVISION & FOLLOW UP 2630 ENTRY LEVEL PRE SANCTION DUE DILIGENCE 2831 ROLE OF THE BRANCH AT THE PRE-SANCTION LEVEL 2932 ROLE & RESPONSIBILITIES OF REGIONAL OFFICE 3133 ROLE & RESPONSIBILITIES OF SERVICE PROVIDERS 3234 SANCTIONING POWERS 3535 POST SANCTION REPORTING SYSTEM 3536 GUIDELINES FOR TAKEOVER OF EXPOSURES 3537 GUIDELINES FOR RESTRUCTURING OF ACCOUNTS UNDER STRESS 3738 TREATMENT OF EXISTING CCM ACCOUNTS 4139 EARLIER CIRCULAR REFERENCES 41

40 PREVENTIVE VIGILANCE MEASURES 4141 QUARTERLY CREDIT MONITORING REPORTING SYSTEM 4142 AUTHORITY FOR CLARIFICATIONS & APPROVAL OF RELAXATIONS 4143 AUTHORITY FOR APPROVAL OF MODIFICATIONS IN THE SCHEME

GUIDLINES42

44 DISCONTINUANCE OF EXISTING SCHEMES 4245 CONCLUSION 42

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002.HOC 10199-Index-2.doc Page

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V-SECURED OVERDRAFT SCHEME (VSOD)

1. SCOPE OF THE

SCHEME

: To meet the working capital & capex needs of not

exceeding Rs.100.00 lakhs in respect of the followingbroad category of activities:

Business Enterprises Small Service Enterprises (SSE) Small Manufacturing Enterprises (SME) Contractors Distributors Stockists Commission Agents Service Providers Hospitals, Nursing Homes, Poly Clinics

Hotels & Restaurants Educational Institutions Schools & Colleges Service Enterprises of professionals such as

Doctors, Lawyers, Engineers, Consultancy Firms Advertising Agencies Transport Operators

2 ACTIVITIESNOT COVEREDUNDER THESCHEME

: Following activities, having direct or indirect element ofspeculation are excluded :

Real Estate Development

Real Estate Brokers Film Production, Exhibition & Distribution Stock Brokers Dealers in Stock Exchange Securities such as

Shares, Debentures & Mutual Funds Investment Advisors Security Dealers/Traders in Government Bonds,

Forex, Currency Exchanges, Commodity Exchanges& all type of Derivative Products

NBFCs Leasing, Hire Purchase & Asset FinanceCompanies

Dealers in Gold Bullion

Commodities covered under the Selective CreditControl Measures, from time to time.

Trading/Dealing in any product, activity, which arespecifically banned or placed under restrictivecategory by the Bank, RBI, GovernmentDepartments etc.

All type of activities which are speculative innature.

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3 CONSTITUT-ION- WISECOVERAGE OFTHE SCHEME

: Following category of entities engaged in any type ofactivity as listed in Sl.no.(1) above.

Individuals Proprietorship Firms Partnership Concerns

Hindu Un-divided Family (HUF) Association Of Persons (AOP) Limited Liability Partnership (LLP) Limited Company both Private and Public. Trusts & Societies

4 ENTRY LEVELNORMS

: Existing entities having satisfactory operationalhistory/record, covering a period of at least 12 monthswith one years completed Financial Statement.

5 CEILING ONLOAN

QUANTUM

: i. Working Capital (WC) component - Not exceedingRs.100.00 lakh.

ii. Term Loan (TL) component - maximum of 25% of(i) above viz. Rs 25.00 lakhs within the overallouter limit of Rs.100.00 lakhs.

iii. Working Capital Demand Loan (WCDL) - Notexceeding Rs.100.00 lakh.

Note :

a. Total of (i) & (ii) not to exceed Rs.100.00 lakhs.

b. Loans covered under CGTMSE scheme up to Rs 10.00lakhs are to be financed outside this scheme.

c. Credit delivery under WCDL can be divided into coreWCDL and WC limit at the option of the borrower. Partof loan can be for capex purpose as provided underitem ii) above.

d. For Professionals and Self employed, their need basedrequirement up to Rs 50.00 lakhs may be consideredas Term Loan at their option.

6 PURPOSE &MODE OFUTILISATIONOF LOANPROCEEDS

: i. Working Capital component:

Towards normal day to day working capital needs of theentity being financed.

ii. Term Loan component :

For financing 75% of capital cost of various fixed assetsbeing purchased towards normal operational needs (otherthan for Land & Building) such as equipment, plant &machinery, computer & communication system, vehicles,furniture, office equipment, refurbishment & remodelingof own, rented or leased business/office premises

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iii. Working Capital Demand Loan (WCDL)

Towards normal working capital needs with flexibility atthe option of the borrower to repay the principal withinmaximum period of 5 years either in monthly or quarterly

instalments, with interest being serviced separately asand when debited. Capex requirements funded, if any,shall be treated as term loan component with 25%margin for maximum amount of Rs 25 lakhs.

At the option of the borrower, a sub-limit under WCDLcan be carved out representing operative working capitallimit. In such cases, the entire operations shall be routedthrough the operative working capital account.

Note :

Only 75% of the capital cost of theassets/expenses shall be financed by the bank,

balance amount shall have to be borne by theentity by way of margin.

No. of vehicles to be financed under the Schemeshall be limited to 2 nos per year, of which vehiclefor personal use shall be limited to one only.

Capital Assets being financed under the Schemeshall be treated as Secured Loan and classifiedunder single head irrespective of the type of assetbeing financed.

Either Working Capital or WCDL limit with TermLoan component, if any can be sanctionedsimultaneously. Borrower has the option to availTerm Loan component with in a period of 12months, reckoned from the date of sanctionwithout revalidation of the same. Further, theborrower shall also have the additional option tochange the item of capital asset to be purchased,within the overall approved capital budgetfurnished to the bank at the time of creditsanction. However, release of Term Loancomponent after six months reckoned from thedate of sanction requires prior approval from thesanctioning authority.

There shall be minimum of 12 months gapbetween availment of two TLs & the second loancan be considered on merits, based on the recordof satisfactory recovery performance under thefirst/previous loans.

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Second & subsequent TLs under the Scheme canbe considered, within the outer ceiling ofpermissible TL quantum, even while the earlierloans are still outstanding & continuing underStandard HC 01 category.

Cost of refurbishment & remodeling of office spaceas estimated by the borrower's engineers shallhave to be got vetted by the panel valuer of theBank.

7 PRIMARYSECURITY

: Working Capital /WCDL Component :

First charge by way of hypothecation of entiremovable assets as are available, such as stock,book debts, receivables and other movable assets -both present & future, of the entity being financed.

Mortgage of self occupied, residential propertiesowned by the promoters of the entities being

financed, or their close relatives. In case, thevalue of such residential property offered assecurity is considered inadequate, commercialproperties - self occupied, owned by the promotersand or their close relatives may be accepted.

Note :i. Rented/ tenanted properties should not be taken as

security for the facility.

ii. A declaration shall be obtained from the borrower atthe time of every renewal, confirming and declaringthat the property offered as security continues to be

in self possession and will not be rented out duringcurrency of the Loan.

Term Loan Component (SL):

Hypothecation of the relative asset being financed.

Continuing security of land & building & all othermovable assets charged to working capital loancomponent and other unencumbered machineryand equipments owned by the entity.

Note :

i. Promoters are defined as proprietors, owners,directors, partners, trustees, Managing Committeemembers (in the case of Society), karthas or co-parceners of the entities being financed.

ii. Close relative is defined as spouse, children,parents, siblings of the borrower, of any one of thepartners, directors, Trustees of the entities,

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Managing Committee members (Society) beingfinanced as the case may be.

iii. Properties owned by the third parties i.e., otherthan the family members, owners, directors,partners, trustees, karthas, co-parceners etc., shall

not be acceptable as security.

iv. Self occupied residential property owned by eitherthe promoters or their close relatives as definedabove, shall be the first preference acceptable assecurity. However, self occupied commercialproperties, can also be taken as security

v. Properties under mortgage to the bank shall bevalued once in three years.

vi. Vacant sites shall not be acceptable as

security under the Scheme.

vii. Revenue land such as land classified asagriculture/non converted and or buildingconstructed on such land, farm house etc.,shall not be acceptable as security under thescheme.

viii. Properties being offered as security under thescheme shall be independent, un-encumberedand cannot be a subsisting security for anyother credit facility. In other words, primarysecurity offered to the facilities under thescheme, cannot be by way of continuingsecurity of the property already undermortgage to the bank.

ix. Property offered as security under thescheme cannot be taken as continuingsecurity for other credit facilities especiallyfor the specific purpose of exercise ofdelegated powers. In other words, whilethere is no bar on taking the relative propertyas continuing security for other creditfacilities, surplus/residual value of the samecannot be reckoned for exercise of delegatedpowers.

8 COLLATERALSECURITY

: Exempted for the Scheme.

9 MARGIN : Primary Security :

Working Capital/WCDL Component:

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Nil margins on the movable assets.

40% of market value of the property beingmortgaged as per the latest report by the panelvaluer covering both VSOD facility & Term Loan.

Term Loan Component :

25% of cost of the asset/capex being financed.

Note: Purchase of Land and Building cannot befinanced under Term Loan.

Collateral Security : Nil

10 GUARANTEE

STANDARD

: Following Guarantee Standard shall be followed in

the case of :

i. Individual, Proprietorship Firms:

Spouse of the applicant, in the normal course.

ii. Partnership concerns & LLPs :

All the partners individually & jointly & severally.

iii. Hindu Undivided Family (HUF) :

Kartha of HUF & other major co-parceners

iv. Private/Public Limited Company :

All the promoter directors of the company (otherthan professional directors)

v. Trusts :

Managing Trustee & other Trustees having majorstake in the Trust (other than minors).

vi. Societies :

President, Secretary and other key Office Bearersof the Society.

vii. Association Of Persons(AOP)

All the members of the AOP

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Note :

In addition to the above, personal guarantees of theowners of properties, whose property has been offered assecurity, shall have to be taken as additional guarantorsin respect of all categories of borrowers.

11 REPAYMENTTERMS

: Working Capital component :

Facility shall have to be reviewed & renewed withina period of not exceeding 24 months (2 years)from the sanction date.

However, during the intervening period, accountshall have to be Short Reviewed yearly within aperiod of 12 months, reckoned from the date ofsanction.

Monthly interest & other charges debited to theworking capital facility shall be absorbed from out

of operational credits as & when received.

WCDL Component :

Principal loan component of WCDL shall be repaidwithin maximum period of 5 years in equalmonthly/quarterly instalments. Interest on WCDLLoan account shall be paid separately as & whendebited.


Principal loan component shall be repaid inappropriate number of monthly instalments notexceeding period of 60 months. Interest on TermLoan account shall be paid separately as & whendebited.

Monthly interest charged to the Term Loan accountshall have to be recovered from the operativeaccount as and when debited.

Repayment period and number of instalments mayhowever be determined based on availability ofcash accruals from operations, repayment capacityof the borrower.

Following general stipulation form a part of loandocument :

A specific authorization letter shall be obtainedfrom the borrower covering the above aspects (thisaspect has been incorporated as a part of

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comprehensive loan document)

12 MORATORIUMPERIOD

Working Capital component :

Moratorium concept is not applicable for anoperative facility.

WCDL/Term Loan Component :

As the applicants under the Scheme are existingoperating entities having cash accruals, there is noneed for granting repayment moratorium in thenormal course.

However, if there is time lag between the actualloan drawdown & installation of theequipment/machinery, completion of refurbishment& remodeling of the office, etc., repayment

moratorium of not exceeding six months may beallowed for justifiable reasons, having regard tothe ground realities.

13 RATE OFINTEREST

: Working Capital, WCDL & Term Loan component :

12.25% p.a. (floating) i.e., 4% over Base Rate of 8.25%(presently) chargeable & compounded monthly - Providedthat the interest payable by the borrower shall be subjectto the changes in interest rates made by the ReserveBank from time to time.

14 PENALINTEREST : Penal interest at 2% shall be charged over & above theregular interest rate on the excess drawings, arrears, &overdue component covering the actual number of days,during which such features persisted.

15 MODE OFDISBURSE-MENT/OPERATIONS

: Working Capital component :

Facility shall be operated by cheques & the loanproceeds thereof shall be utilized for meeting thenormal commercial operations.

Extent of cash transactions in the operative facilityshall be determined by the branch officials basedon the nature of activity & mode of conducting thesame.

WCDL Component :

Facility shall be utilized towards working capitaland the loan proceeds shall be utilized for meetingthe normal commercial operations. The amount

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drawn shall be transferred to operative currentaccount of the entity wherein all sales and otheroperations are routed through and monitored inthe normal course as stated above under workingcapital.

.

Note: Following general stipulations form part of loandocuments. Sales realization received both in cash and by way

of cheques, shall have to be routed through theoperative account of the borrower. A specificundertaking letter may be obtained in this regard(condition forming part of the document).

Borrower shall furnish to the bank an undertakingto utilize the loan proceeds for the purpose forwhich the same is extended /availed.

Borrower shall be advised to route the transactions& confine the dealings through the operative

account with the bank. Borrower cannot borrow oropen an account with other bank during thecurrency of loan availed from us. A specificundertaking covering these aspects shall beobtained in this regard (condition forming part ofthe document).


Loan proceeds, net of margin already paid, ortogether with 25% margin, if not paid already,shall have to be remitted by DD directly to thesuppliers or crediting the loan proceeds tosuppliers account with our bank or other bank.

In case the capex work is carried out by theentities themselves under labour contract, TermLoan proceeds may be credited to the operativeaccounts for utilization for the intended purpose.Work progress shall be monitored by the branchonce at the time of loan release and second andfinal after final drawdown and completion of workundertaken. Relative Visit Reports shall be held onrecord (condition forming part of the document).

16 ASSIGNMENTOF RISKRATING

: In compliance with Basel II norms, rating of borrowalaccounts through CRISIL Software, with advancedBasel II approach at yearly intervals, shall bemandatory. This aspect shall be ensured by therespective credit originating & disbursing branches.

As a measure of abundant precaution, credit proposals

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securing/assigned with rating of above VB-7 Investment Grade i.e., VB-8 & above shall not beentertained/acceptable. Such rating based entry levelhurdle norms may be noted for compliance. In case ofnegative movement in risk rating beyond VB-7 gradesubsequent to disbursement of the loan, such matter

shall be placed before the next higher authority forfurther decision.

Rating exercise shall be carried out in Model-I forexisting borrowers and Model-II (as furnished byRMD-HO) in respect of new applicants.

17 INSURANCECOVER ON THESECURITY

: Properties & assets charged to the bank as securityshall be covered by insurance with banks clausethereon, at the cost of the borrower.

It shall be the responsibility of the borrower tokeep the insurance policy in force, by prompt

remittance of premium on due dates.

A specific undertaking from the borrower shall beobtained in this regard (condition forming part ofthe document)

18 PROCESSING& OTHERCHARGES

: a. Working Capital limit: Processing Charges will be levied as follows in

respect of borrowers above the cut of level.

Loan Amount Otherthan

indivi-duals

Individualsoutside Rural

Area

Individuals inRural area

Rs.0.25 lakh toRs.2.00 lakh

0.50%p.a.

0.25% p.a.Min.Rs.250.00

0.14% p.a.Min.Rs.100.00

Over Rs.2.00 lakhto Rs.100.00 lakh

0.25%p.a.

0.15% p.a. 0.14% p.a.Max.Rs.9000.00

Note : Applicable Service Tax to be collected separately.

Apart from the above, all other relevant applicable

charges such as annual inspection & folio chargesas per HOC 80/09 & 134/09 as modified from timeto time shall be collected.

At the time of annual review 50% of the applicableprocessing charges as above shall be collected.However, at the time of renewal normal PC shall belevied.

b. WCDL/Term Loan:

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Upfront charges @0.50% plus applicable service taxshall be collected upfront for both WCDL portion andTerm Loans.

19 CHARGES FORSERVICEPROVIDERS

: Lawyers Charges :

Indicative Lawyers fee structure shall be 0.10%of the loan amount, subject to a minimum ofRs.1500.00 & maximum of Rs.2500.00. Thesecharges are exclusive of actual out of pocketexpenses required for obtention of EC &conducting of search in the records of SubRegistrars Office etc.

Valuers Charges:

Indicative charges (exclusive of actual out ofpocket expenses) for valuation of property shallbe as follows :

(Amt.in rupees)

Charges for Due Diligence Verification Agency:

Indicative charges shall be: Rs.1200.00 perapplicant/report.

Charges for conducting in the Search in the ROC:

Charges for conducting search in the records ofROC in the case of Limited Companies & LLPs Rs.1000.00 (this may be got done throughempanelled professional Chartered Accountantsetc.)

Charges for credit information :

Actual charges payable to CIBIL as specified bythe bank.

All charges as dealt above are subject to changesat periodical intervals. Appropriate charges whichare in vogue, from time to time, shall have to becollected from the borrowers.

Loan amount FeesUpto Rs.25.00 lakhs 1500.00Over Rs.25.00 to Rs.50.00 lakhs 2000.00Over Rs.50.00 lakhs to Rs.100.00 lakhs 2500.00For subsequent valuation once in 3 years 500.00

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All charges as above towards Lawyers Fees,Valuation charges, Fees payable to serviceproviders and all other out of pocket expensesshall have to be recovered directly from operativeaccount of the applicant borrower forthwith. Aletter authorizing the bank to recover the same

directly from the operative account may beobtained (proforma enclosed).20 LOAN

DOCUMENTAT-IONSTANDARD

: Documentation process shall have to be completedbefore loan release, as per the guidelines specifiedby Credit - Legal Dept. HO.

Comprehensive single document for Loan andsecurity component being designed by Credit-LegalDept for Term Loan & Working Capital facility aswell as WCDL.

Personal Guarantee Letter as per the prescribed

format of documentation in DOC-46 SOD/WCDL &TL.

Mortgage charge on the property as suggested bythe panel advocate. Mode of creation of mortgagecharge on the property shall be as per the adviceof the panel advocate. All the supplementaryproperty documents as suggested by the advocateshall have to be obtained while creating themortgage charge in favour of the bank.

Acknowledgement of Debt (AOD) [also covering

Acknowledgement of Security (AOS)] charged tothe loan account, Supplementary Agreement fromthe borrower & confirmation balance from theguarantor at the time of every renewal.

Documents shall be duly stamped as per theprevailing Laws of the State in which thedocuments are being executed.

In case of equitable mortgage, Memorandum ofDeposit of Title Deeds shall have to be registeredwith Sub Registrars Office in such of those Stateswhere such system is in vogue. All the charges inthis regard shall be borne by the borrowers.

All the property documents as suggested by theAdvocate for creation of effective mortgage chargein favour of the bank shall have to be obtained atthe pre release stage itself.

While lending to corporates, a resolution passed inthe meeting of Board of Directors agreeing to the

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terms of sanction indicating the names of thedirectors authorized to execute the loandocuments, shall be obtained prior to release ofloan.

Similar resolution shall be obtained in the case ofTrust, Societies & LLPs.

In the case of Trust, it shall be the resolutionpassed in the meeting of Trustees & for Societies itshall be in the meeting of the office bearers incorporating the aspects dealt in the pre-para. Inthe case of LLPs, it shall be the resolution passedin the joint meeting of the partners.

Upon release of loan, charge on the entire movableassets of the borrowing company/LLP secured to

VSOD facility as also fixed assets being financed inthe case of Term Loan, shall have to be registeredin the records of Registrar of Companies within themandatory period of 30 days reckoned from thedate of release of the facility. Similar charge in therecords of ROC needs to be registered uponrelease of loan to LLPs. Such registration in ROCshall not be necessary in case immovableproperties owned by the Directors or partners (inthe case of LLP) are taken as security.

Note : Following undertaking shall be incorporated inthe loan document.

All the expenses with regard to creation ofmortgage charge, Legal opinion, documentation,search in the records of Sub Registrars Office, ECand such other measures as may be considerednecessary by the bank shall be borne by theborrowers.

21 CLASSIFI-CATION OFTHE LOAN

: Credit facilities sanctioned under the Scheme shallbe classified under Priority-Micro & SmallEnterprises (MSE) as follows -

Credit facilities sanctioned to the entities engagedin Service Sector having investment in capitalassets not exceeding Rs.10.00 lakhs in equipment(original cost excluding land & building, furniture &fittings) shall be classified as Micro Enterprise(ME).

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Similarly, credit facilities sanctioned to the entitiesengaged in Service Sector having investment incapital assets more than Rs.10.00 lakh but notexceeding Rs.2.00 crores in equipment (originalcost excluding land & building, furniture & fittings)shall be classified as Small Service Enterprise

(SSE).

Credit facilities sanctioned to the entities engagedin Manufacturing Sector having investment incapital assets not exceeding Rs.25.00 lakhs inequipment (original cost excluding land & building,furniture & fittings) shall be classified as MicroEnterprise (ME).

Similarly, credit facilities sanctioned to the entities

engaged in Manufacturing Sector havinginvestment in capital assets more than Rs.25.00lakhs but not exceeding Rs.5.00 crores in plant &machinery equipment (original cost excluding land& building, furniture & fittings) shall be classifiedas Small Manufacturing Enterprise (SME).

22 BORROWERSTANDARD

: Any of the following entry level Borrower Standard shallbe maintained in respect of Loan accounts beingentertained under the Scheme.

Existing Account holders with satisfactory dealings

& track record covering a period of six months ; or Account holders of other banks having satisfactorydealings at least for 12 months & are inclined toswitch over their dealings in full to our bankhenceforth; or

Borrowers of other banks enjoying working capitalfacilities/Term loans classified under StandardAsset category - by way of takeover of exposure,subject to compliance of takeover guidelines asdealt in the ensuing para;or

Bankable proposals from Business Enterprises &Service Providers as dealt in Col.(1) having at leastone year satisfactory commercial operations withone final financial statement;or

Upcoming business enterprises/service providers inoperation for not less than 2 years and not havingbank accounts hither to but having satisfactorymarket reputation & professional skill.

Applicants shall enjoy good market standing, reputationas assessed by the Branch Head/SBM/ABM & recorded ininspection report based on the above criteria.

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Note :

Following guidelines shall be adhered to while openingcurrent accounts of clients already having dealings withother banks.

Customer willing to open current account with ourbank with an intent to avail credit facility shallprovide a declaration stating that he does notenjoy any credit facilities from the existing bank orany other commercial bank hither to.

Credit facility for existing borrowers of other Bankscan be extended by way of take over of dues fromexisting lenders together with relative securities

subject to compliance of scheme guidelines & takeover code as dealt elsewhere.

Existing CCH / CCM accounts, as also any otheroperative secured facility classified under StandardAsset category availed from our Bank can also beabsorbed under the Scheme, subject to complianceof relative guidelines as set out herein.

23 FINANCIALSTANDARD

: Following minimum Financial Standard shall bemaintained while entertaining the proposals falling underthe Scheme.

i Current Ratio :1:1

[Current Assets (CA) Current Liabilities (CL)]

ii Net WorkingCapital (NWC)

Zero : (CA CL)

Following explanations may be noted :

As long as sum total of stock + receivables + cash& bank balance + other Current Assets (GrossWorking Capital) are equal to or higher than thesum total of sundry creditors + working capitalborrowings + current dues to others suchposition shall be acceptable.

Net positive or negative difference under theabove shall be the Net Working Capital (NWC).While any positive difference denotes extent ofsurplus margin availability in the system, negativedifference captures the extent of erosion or thedeficiency/shortfall of margin in the system.

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Current Ratio of 1:1 denotes neutral status withzero Net Working Capital in the system.

In respect of applicants seeking Working Capitalfacility of Rs.50.00 lakh & below, slippage up to

0.15 i.e., Current Ratio of 0.85:1 can be tolerableat the entry level provided that all the otherfactors such as ratio of TOL:TNW, profitabilityposition are favourable. Such applicants may beadvised to conform to the guidelines within aperiod of 2 years by plough back of at least 25%of earnings in the system. A specific undertakingas per annexure herein shall be obtained.

For the Professionals &Self employed category, alower current ratio of 0.75:1 is acceptableconsidering their low current assets position.

ii. Ratio of Total Outside Liabilities (TOL) :Tangible Net Worth (TNW) - 6:1 (TOLTNW)


Unsecured Loan contributed by relatives &family members of the promoters may bekept out of TOL while computation of theratio.

TNW would mean capital + retained profitas reduced by accumulated losses + otherintangible assets such as goodwill, patentsetc., if any accounted under the assets.

Total Outside Liabilities (TOL) would meantotal of liability side of Balance Sheet minusOwn Funds (as represented by Capital +Reserves + Share Application money +Partners funds + Subordinated unsecuredloan).

iii. Debt Service Coverage Ratio (DSCR) : 1.20:1(Average)

Net profit + Depreciation + Interest Interest &Instalment on Term Loan covering each year of TermLoan repayment period.


Debt under this concept represents repaymentobligations per year together with applicable

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interest thereon only on the Term Loan component(Total of instalment + interest on Term Loan peryear).

Servicing of the same is effected from out of grosscash accruals represented by net profit +

depreciation + interest on TL all for the relevantyear.

As long as sum total of aggregate gross cashaccruals (net profit + depreciation + interest)covering Term Loan repayment period, as persanction terms, is 1.20 times of the totalrepayment obligations under Term Loan (totalinstalments + interest on Term Loan covering therepayment period), the position is acceptable. Inother words, average DSCR of 1.20:1 can beacceptable provided that DSCR for any given year

is not less than 1.10:1.

iv. Net Profit : Entity being financed shall have history of earning

profit covering operations for the previous threeyears. In case, such entity has been in existencecovering a period of less than 3 years, it shall beacceptable if it has earned profit covering theperiod of its actual operations.

v. Level of Receivables :

In order to ascertain the quality of receivables &the average period of credit extended to thebuyers, it is necessary to compare the level ofreceivables as captured in the financial statementwith sales for the relevant year.

Accordingly, the levels of receivables aspercentage to sales reflect the average age of suchreceivables. Longer the credit period extended onsales, higher would be the percentage ofreceivables in terms of sales. Such situation beingan aspect of concern, needs proper evaluation ofthe quality of receivables by scrutiny of age wiselist of receivables & reasons for such delay inrealization of the same in order to take a final viewon the proposal.

Following aspects may be noted :

Completed Financial statements as furnished bythe applicants shall be treated as final & forms the

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basis for the evaluation of financial position &working results.

In respect of those entities whose accounts areaudited as per the provisions of Income Tax Act(Please refer Annexure), the Branches should

obtain copies of audited financial statements fordoing the needful. In respect of such entities, who fall outside the

purview of audit requirement, it shall be in order torely on the financial statements as compiled by theentities in-house duly certified by the applicantentity.

Audited financial statements would mean true copyof final financial statements as submitted toIncome Tax Department covering reports such as3-CB & 3-CD. As such, along with the audited

statements, obtention of reports in the form of3-CB & CD shall be necessary.

For computation of credit assessment, it isnecessary to obtain from the applicants, financialstatements for the last three years, together withestimated financial statements & working resultsfor the current year. In case, the applicant entityis less than three years old, it shall be in order torely upon the financial statements for the numberof years of actual operations.

24 CREDIT

ASSESSMENTSTANDARD

: Working Capital/WCDL requirement shall be

assessed under Projected Turnover Method (PTM),where total quantum of credit facility shall beminimum of 20% of target sales (estimated) forthe current year.

However, target sales as furnished by applicants,shall be compared with actual performance tilldate, by comparing the same with copies ofMonthly VAT Returns relating to actual number ofmonths of operations in the current year. If salesestimate as furnished by the applicant isconsidered ambitious, in comparison with the salesgrowth for the previous year & actual performancetill date during the current year, such targetgrowth may be pruned down to a reasonable levelsay; in the range of 25% - 30% over the previousyears actual performance.

However, in case, for justifiable & valid reasons,target sales growth is considered acceptablehaving regard to orders pending to be executedimmediately or for any other reasons sales

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growth over & above 25% can be reckoned forcredit assessment, provided that, the factors whichenable the applicant to surpass target sales,beyond 25% growth, shall have to be captured &recorded in the process note itself.

Similarly, level of individual components of CurrentAssets or Liabilities have no bearing on quantum ofcredit eligibility as assessed under the Scheme.

Based on the broad guidelines as set out in the preparas, computation of credit eligibility shall beassessed under Projected Turnover Method asdealt below.

(Rs.in lakhs)Sl.No.

Particulars Previousyears

Actuals

Currentyears

estimatesi Actual / Estimated Salesii Accepted Sales for Credit

Assessmentiii 25% of turn over (ii) above being

assumed as level of gross CurrentAssets

iv Eligible Bank Finance 20% of (ii)above

v 5% of turnover (ii) above beingpromoters margin.

vi 20% of turnover (ii) above being

Eligible Bank Finance.vii Value of the property taken assecurity net of margin as specifiedin para (9) above.

viii Eligible Loan Quantum (vi or viiwhichever is lower)

With regard to margin contribution of 5% by thepromoters, it shall be in order to accept theposition as given, as long as ratio of TOL:TNW ismaintained well within the Financial Standard asset out in para 23.

As the guidelines of the scheme provide adequateleverage & flexibility in terms of financial standard& other critical post disbursal norms, linkage ofloan quantum to the primary security coverage isnecessary.

Accordingly, the actual loan quantum may berestricted to EBF as assessed above or eligibleexposure based on security value net of stipulated

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margin as dealt in para (9) above, whichever islower. This aspect needs to be scrupulouslyadhered to.

However, in case credit needs of the applicant isfound to be higher than the eligibility as assessed

under the Scheme, need based requirement ofsuch borrowers can be taken up for considerationon merits outside the scheme guidelines undernormal working capital assessment norms as setout in the Lending Policy guidelines.

The guidelines relating to VSOD is scheme specific,whereas our existing credit products particularly tosmaller segment of Micro and Small Enterprisesrequiring credit needs up to Rs 10.00 lakh shallqualify for extending collateral free financialsupport as per the extant guidelines vide HOC

10096 dated 27.05.2010. Therefore, Branches areadvised to entertain viable proposals falling underthis category in the normal course as per theprevailing guidelines. Similarly in respect ofborrowers seeking working capital limit of morethan Rs 10.00 lakh also, such requests may also beentertained on merits in the normal course as perthe lending policy guidelines as VSOD schemecaters to specific target group.

25 DOCUMENTS &PARTICULARS

TO BEFURNISHED BYTHEAPPLICANT

: Loan application, statement of assets & liabilities togetherwith title deeds in original & other connected documents

relating to the property offered as security shall befurnished by the applicant. Following are the constitutionwise particulars which the applicant needs to furnish tothe bank inter alia along with other details.

Individuals/Proprietorship :

Letter of proprietorship (In form II-40). PAN card of the firm & individual partners. IT Assessment orders of the individuals.

Partnership concerns :

Deed of partnership & Partners LiabilityLetter (Form II-39), copy of the registrationof firm, if any.

Partners Liability Letter (Form II-39) in thecase of unregistered firms.

PAN card of the firm & individual partners. IT Assessment orders of the firm &

individual partners.

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Limited Liability Partnership (LLP) :

Partnership Agreement duly registered withRegistrar of Companies (ROC).

Names of present partners along with theirindividual PAN cards.

In case there is a change of partners due toresignation or retirement, revised list ofnames of partners along with the certificatecovering such revision issued by Registrar ofCompanies.

PAN Card of LLP. Certificate of Incorporation issued by

Registrar of Companies. IT Assessment orders of LLP & individual

partners.

Private/Public Limited Company :

Memorandum & Articles of Association dulycertified.

Certificate of Incorporation issued byRegistrar of Companies.

Name of the present Directors along withtheir individual PAN card.

PAN card of the company. IT Assessment orders of the company &

individual directors.

Association of Persons (AOP) :

Joint Liability Letter. PAN card of individual members of AOP. IT Assessment orders of AOP & individual

members.

Hindu Undivided Family (HUF):

Joint Family Letter. PAN card of HUF & individual members of

HUF. IT Assessment orders of HUF & individual

members of HUF.

Trust :

Registered Trust Deed. Names of the Trustees. PAN card of Trust & Trustees. IT Assessment orders of Trust & Trustees.

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Society :

Registered Bye-Laws of Society Names of the office bearers PAN card of Society & office bearers.

IT Assessment orders of Society & individualmembers.

Common particulars to be furnished by all categoryof applicants :

Final/Audited Financial Statements coveringBalance Sheet & Profit & Loss Account dulycertified by the applicant for atleast one year& estimated Financial Statements & workingresults for the current year.

Statement of Assets & Liabilities ofindividuals, directors, partners, trustees as

the case may be. Present borrowings & banking details of the

entities. Copies of statement of accounts maintained

with other banks for the period of sixmonths in case of entities dealing with otherbanks.

Copies of sanction letter of credit facilities ifany availed from other banks.

VAT Registration Certificate for other thanP&SE.

Tax Identification Number (TIN) issued byCommercial Tax Department.

Monthly Return of VAT covering period of atleast six months.

Trade License for other than P&SE. Service Tax Registration Certificate in case

of professionals & service provider. Statement of all the movable assets of the

applicant consisting of stock, receivables,book debts, other movable assets such asfurniture & fixtures, system support,equipments etc.

26 PROCESS OFVERIFICATIONOFDOCUMENTSOBTAINED

: Following specific verification process shall have to becarried out in respect of each category of individualapplicant as follows :

Public/Private Limited Company

Verification of borrowing powers of theentity & its authority to offer the

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companys assets as security for suchborrowings from the scrutiny ofMemorandum & Articles of Association.

In the case of Public Limited Company,Resolution passed in the Annual General

Meeting of the Shareholders underSec.293 (i) (d) of the Companies Act forborrowing in excess of the company paidup capital & free reserves and Companysstatutory auditors certificate confirmingthat the proposed loan is within theborrowing powers of the company. .

Search in the records of Registrars Officeto verify the subsisting charge on themovable & immovable assets of theapplicant entity.

Trust :

Verification of borrowing powers of theentity & its authority to offer the assets ofthe Trust as security for such borrowingsfrom the scrutiny of TrustDeed.

Applicant Trust should be engaged incommercial activities & that theborrowings should be utilized for fundingneeds of its activity.

Society:

Verification of borrowing powers of theentity & its authority to offer the assets ofthe Society as security for suchborrowings from the scrutiny of Bye-lawsof the Society.

Applicant Society should be engaged incommercial activities & that theborrowings should be utilized for fundingneeds of its activity.

Limited Liability Partnership

Verification of borrowing powers of theentity & its authority to offer thecompanys assets as security for suchborrowings from the scrutiny ofPartnership Agreement or the Resolutionpassed by all the partners fixing the

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borrowing powers/limit, including thename of the partner/partners empoweredto borrow and the maximum amount thatcan be borrowed by the LLP.

Search in the records of Registrars Office

to verify the subsisting charge on themovable & immovable assets of theapplicant entity.

Undertaking letter that, any changes inthe partnership agreement which needs tobe filed with Registrar of Companies, shallbe effected only after securing the priorapproval of the Bank.

Hindu Undivided Family (HUF):

Joint Family Letter signed by Karta andmajor co-parcenors.

Common guidelines for verification of otherdocuments :

Legal scrutiny of property title deedsthrough empanelled advocates.

Property identification & assessment of itsfair market value & acceptability of the sameas security through empanelled valuer.

Verification of genuiness of PAN card, TIN,VAT certificate, Monthly VAT Returns, ITassessment orders, Business & residentialaddress verification & verification of suchother records & documents by due diligenceagencies.

VAT Registration Certificate. Trade License Service Tax Registration certificate in the

case of professionals and service providers

27 PROCEDUREFOR SHORTREVIEW

: While the regular renewal of SOD shall be carriedout at the end of two years, the facility needs to bereviewed during the intervening period once in 12months.

At the time of short review, following particularsneeds to be submitted by the borrower :

Final-certified/audited financial statementsrelating to immediately preceding financialyear.

VAT Monthly Return covering the number of

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months of actual operations for the currentyear.

Details of changes, if any in the compositionof Directors in the case Private LimitedCompany, Partners in the case of LLPs, Co-parceners in the case of HUF, Trustees in the

case of Trusts & office bearers in the case ofSociety as borrowers. Copies of IT Returns. Statement of movable assets consisting of

stock, receivables & other movablescapturing the position as on date of theproposal.

Visit Report of the branch officials coveringthe borrowers office/business premises/unitto assess the status of movable assets.

There is no need for obtention of loan application,

statement of assets & liabilities and other basicparticulars by the borrowers other than a letter ofrequest for continuance of the facilities.

Review & renewal process essentially involvesevaluation of the quality of borrowal account interms of credit discipline, utilization of funds, totalcredits to the account in relation to annual sales,core level of credit utilization & the extent offluctuation thereon & overall financial position &working results for the previous year in comparisonwith assumptions as originally made at the time ofcredit sanction.

No separate documentation is necessary otherthan obtention of AODs (which includeacknowledgement of security) from the borrower &confirmation of balance from the guarantors.

28 PROCEDUREFOR REGULARREVIEW &RENEWAL

: SOD needs to be renewed once in two years with ashort review by 12 months.

Along with the regular renewal, it shall be in orderto take up the partys request for need basedenhancement on merits subject to compliance ofvarious parameters as covered under the Scheme.

However, regular renewal-cum-enhancement canalso be taken up earlier during the interveningperiod after the short review by 12 months.

Following documents may be taken for regularrenewal:

Final-certified/audited financial statements

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relating to immediately preceding financial year. Target/estimated financial statements for the

current year. VAT Monthly Return covering the number of

months of actual operations for the current year. Details of changes, if any in the composition of

Directors in the case Limited Companies,Partners in the case of LLPs, Co-parceners in thecase of HUF, Trustees in the case of Trusts &office bearers in the case of Society asborrowers.

Copies of IT Returns. Month wise sales/purchase covering the

actual month of operations in the currentyear.

Statement of movable assets consisting ofstock, receivables & other movables

capturing the position as on date of theproposal. Visit Report of the branch officials covering

the borrowers office/business premises/unitto assess the status of movable andimmovable assets.

Loan application in the prescribed formattogether with statement of assets &liabilities of all the concerned parties.

Renewal/Enhancement proposal needs to beapproved by the appropriate sanctioningauthorities based on proper credit appraisalas per the credit assessment format relevantto the scheme (copy enclosed).

For Term Loans and WCDL, annual review has to besubmitted as per the simplified format.

29 POSTSANCTIONSUPERVISION& FOLLOW UP

: Credits to the account, frequency & mode of suchcredits, average level of credit utilization needs tobe constantly monitored. In case, extent of creditsbecome fewer & frequency gets longer, enquirieswith the borrowers reveal the factual position.Remedial measures if required needs to beinitiated by the branch officials forthwith in orderto reactivate the account.

Further, operation in the SOD account needs to beclosely & continuously monitored at post disbursalstage particularly covering the paymentsmade/withdrawals during the initial period. Thisaspect shall be ensured by the branch officials.

Loan documents shall be subjected to Legal Audit

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with the help of junior advocates empanelled forproviding such services upon disbursal of thefacility. Wherever possible, Legal Audit shall behandled by an alternative advocate, other than theone who has furnished the opinion on the property.

Discrepancies if any, observed in documentation,during the course of Legal Audit shall have to begot rectified immediately.

All the expenses with regard to creation ofmortgage charge, Legal opinion, documentation,search in the records of Sub Registrars Office, ECand such other measures as may be considerednecessary by the bank shall be borne by theborrowers.

Encumbrance Certificate & Tax paid receipt

covering the property under mortgage to the bankshall be obtained & verified once in two years.

Search in the records of ROC shall have to beconducted immediately on post disbursal stage toensure registration of charge on the borrowerassets in our favour, in case the borrowers areCorporates/LLPs. Similar search in the records ofROC shall have to carried out once in two years tocoincide with regular renewal process.

Borrower shall submit to the bank annualstatement of movable assets consisting of stockreceivables, all other movable assets covering bothdescription & value along with the loanapplication & at the time of every subsequentreview & renewal.

Similarly, the branch officials shall visit theborrowers business/office/unit for evaluation ofthe movable assets as declared in the statement.

Branch officials should visit the property undermortgage to the bank once at pre-sanction stage &at every year thereafter to coincide with review &renewal process. Similarly, all the movable assetsoffered as security to the Bank covering Term Loanshall also be inspected at yearly intervals.

During the currency of the credit facility availedfrom our Bank, original title deeds cannot beparted with, under any circumstances. However,scrutinizing the same by the owner can be allowedonly in the presence of the branch head or his

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authorized representative within the branchpremises. Certified photo copies of the originaltitle deeds may be furnished against specificwritten request only to the owner boldlymentioning in each page of the copy as certifiedtrue copy.

30 ENTRY LEVELPRE SANCTIONDUEDILIGENCE

: i. Entry level pre-sanction due diligence compliancebroadly covers broadly involves four areas applicant due diligence, credit due diligence, legaldue diligence, property/security due diligence. Whilethe applicant due diligence is primarily the branchfunction, other aspects involving specific skills &knowledge, needs to be handled by serviceproviders as dealt in detail under sl.no. 33.

ii. Broad aspects of due diligence covers the followingissues.

Applicant due diligence - covering complianceof KYC norms, verification of antecedents,business status, VAT Registration Certificate, TaxIdentification Certificate (TIN), both issued byCommercial Tax Department, Monthly Return ofVAT, Trade License & other Certificates, ITReturns, address/telephone number proof &such other vital documents on which creditdecision is based.

Note: Copy of the IT return filed with

computation sheet should be gotverified.

Credit due diligence involving mainlyverification of financial track record, credithistory of the applicant, banking & borrowingdetails, verification of statement of accountswith the existing banks, CIBIL data & RBIDefaulters' List, enquiries with peers,neighbours, competitors, business association,or respectable known references & confidentialenquiries both oral & in writing from existingbankers/lenders.

Legal due diligence - covering mainly legalscrutiny of title deeds in original to ensuresubsistence of marketable title for theowner/mortgager over the property offered assecurity, verification of genuiness of title deedsby carrying out search in the records of SubRegistrar's Office, obtention of EncumbranceCertificate covering minimum required period,

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scrutiny of Mother Deed on which the title ofthe relevant property is derived, link documents& such other documents & papers which arenecessary for creation of effective & enforceablemortgage charge in favour of the Bank to securethe exposure.

Property/Security due diligence - the processinvolves essentially identification of the relevantproperty and its location, offered as security,assessment of its fair market value andacceptability of the same as security for the bank,comparison of construction of building with copy ofthe plan approved by the localMunicipal/Corporation authorities.

iii. While compliance of KYC norms as per RBIguidelines & credit due diligence shall essentially

fall within the functional domain of the creditoriginating & disbursing branch, some of the pre-sanction functions relating to scrutiny ofproperty/security documents its valuation &verification of other related records requirespecialised knowledge & skill.

iv. In this regard, the Scheme provides for availing theservices of empanelled Service Providers such as- Advocates, Valuers & Engineers and DueDiligence Verification Agencies for doing theneedful as dealt in detail under sl.no.33.

31 ROLE OF THEBRANCH ATTHE PRE-SANCTIONLEVEL

: Marketing of all credit products and its timely delivery tothe client fall within the primary functional domain of thebranch.

In this context, credit originating branch shall beresponsible for sourcing the bankable creditproposals, compliance of KYC norms as per RBIguidelines, applicant identification, verification offinancial credentials & the relative credit duediligence process, besides final credit delivery tothe client/borrower.

Main functions of the branch with regard to theScheme under reference:

Identification & marketing of bankable proposalsfrom creditworthy applicants.

Compliance of KYC norms as per RBI guidelines,covering applicant identification, properintroduction by the known respectablereferences etc.

Verification of credit history, financial track

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record & antecedents of the applicant throughoral enquiries and OPL reports from existingbankers/lenders, if any, statement ofaccounts/pass books and such otherdocumented sources, such as CIBIL data, RBIDefaulters List etc.

Enquiries with regard to creditworthinesswith known references, peers, neighbours,business associates & competitors & otherrespectable persons engaged in similarbusiness/activity.

Verification of CIBIL Data and RBIDefaulters' List be carried out by contactingRO through I-Net, and confirmation held onrecord at pre sanction stage.

Personal visit/inspection of the propertyoffered as security, business/office premises

at pre sanction stage itself.

To personally handover the original titledeeds and property documents as receivedfrom the applicant, to the empanelledadvocate for his opinion. Similarly,empanelled valuer may be requested toidentify the property & furnish valuationreport covering the relative property.

Note: Branches should get the details ofshort listed professionals for entrusting thejob from RO.

Evaluation of the applicants credentials,commitment to & knowledge of the businessthrough personal discussions & interactionswith the applicant borrower & summarize &capture the same in inspection report.

Once satisfied with the financial credibility of theapplicant & viability of the business operations,decision on the relative proposal may be taken bythe branch head on merits of each case, based oninputs as provided by the due diligence reports ofthe advocate, valuers & other service providers -in case relative proposal falls under the branchpowers.

In case such proposals falls beyond the powers ofthe Branch Head the same shall be forwarded toRO duly incorporating the specific views,

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observations, remarks & recommendations as thecase may be, along with the application & relativedocuments as submitted by the applicant fordecision.

32 ROLE &

RESPONSI-BILITIES OFREGIONALOFFICE

RO shall be responsible for handling proposals

relating to the Scheme falling beyond the powers(as dealt in sl.no.34) of the respective branchesunder its jurisdiction for expeditious sanction of thesame, based on merits in compliance with relativeScheme guidelines in force.

It shall function as a pro-active facilitator & aninter-face between the branches and all the serviceproviders, responsible for growth of healthy retailcredit portfolio.

RO shall be responsible for the following :

Scrutiny of all proposals under the Schemereceived from feeder branches falling beyondthe delegated powers of the respective BranchHeads for expeditious final sanction/decision onmerits of the case.

Short listing of efficient & pro-active serviceproviders from out of approved empanelledlist for legal scrutiny of title deeds offered assecurity, identification & evaluation of fairmarket value of such properties &

authentication of related documents submittedby the applicants.

For this purpose, RO shall ensure that theefficient advocates and valuer are entrustedwith the work. Names of the professionals maybe circulated amongst the branches in theRegion for handling the case falling within thepowers of the branch.

Similarly, empanelment of Due DiligenceVerification Agents specially for pre-sanctionverification of some of the vital documentssubmitted by the applicants also falls underfunctional domain of RO.

Names of such empanelled due diligenceagents shall be circulated amongst thebranches in the region for handling the casesfalling within the powers of the respectivebranches.

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Fees, charges & expenses payable to all thethree categories of service providers shall beborne by the applicants, irrespective of thefinal decision on the relevant proposal.

RO shall interact with service providers for

gathering vital inputs which they haveencountered during the course of theiroperations relating to the functioning of someof the shady characters set to defraud the bankby furnishing fraudulent/fake titledeeds/income certificates. RO shall share suchinputs with the feeder branches as an pre-emptive measure against possible recurrent offrauds.

RO shall enter into service contract with thesespecialized professionals service providers for

rendering efficient & bonafide services for safeguarding interest of the Bank. Draft copy of theagreement may be got vetted from Credit-LegalDepartment, H.O.

CID-HO shall carry out surprise check ofdocuments verified by Due Diligence Agencies(DDA) in order to ascertain the quality &authenticity of services provided by theseagencies.

RO shall avoid concentration of cases in the handsof only few service providers such as Advocates,Valuers & DDAs. In order to achieve this generalprinciple, RO shall evenly distribute the cases tovarious service providers for rendering expeditiousservice.

33 ROLE &RESPONSI-BILITIES OFSERVICEPROVIDERS

Advocates :

Advocates/Lawyers shall be entirely & solelyresponsible for legal scrutiny of title deeds ofproperties in original, offered as security to thebank. On scrutiny of the same, the advocate shallfurnish to the bank an unambiguous opinion as tothe genuineness of those title deeds, and alsoavailability or otherwise of valid, enforceable &marketable title to the owner over the relativeproperty.

Advocate shall verify title deeds/propertydocuments in original as also such otherdocuments which together, confer on theconcerned owner, valid & enforceable marketable

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title on the property.

Opinion shall be furnished in the prescribed formatas annexed herein & shall essentially incorporatethe following aspects, based on the compliance of

which he has tendered his considered opinion tothe bank as to the acceptability or otherwise of theproperty as a valid & enforceable security.

Verification of vital title deeds in original. Verification of Mother - Deed in respect of

multi unit residential flats. Verification of link documents covering the

previous ownership for scrutiny & evaluationof flow of title to different owners over theperiod.

To conduct searches in the concerned Sub

Registrars office covering mandatoryminimum period (including broken period, ifany) and to verify the subsisting charge, ifany.

To conduct searches in the concernedRevenue/ Municipality / Panchayat Officeregarding any statutory pending dues.

Verify & compare the Sale Deed/propertydocument offered as security, with that ofthe one held in the records of SubRegistrar's Office by conducting search. Withsuch comparison, acceptance of fakedocuments can be minimized at the pre-sanction stage itself.

Valuers/Engineers :

Valuers/Engineers shall have dual responsibility ofidentification of the relative property andevaluation of its fair market value at pre-sanctionstage itself.

Valuer shall furnish to the bank a report coveringlocation of the property supported by geographicalsketch of route map of the same, its identification,present fair market value & the extent of deviationoccurred in the case of pre-existed structures in the specified format as annexed herein. Inother words, he should clearly spell outacceptability or otherwise of the property inquestion as security for the bank.

Thus, his functions broadly covers the following :

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Visit the site independent of the owners for itsidentification;

Evaluation & assessment of the fair marketvalue of the property and its acceptability assecurity for the bank.

Verify the pre-existed structure with the

building plan approved by Local MunicipalBodies/Corporations for identification &reporting the extent of deviation vis--visapproved building plan. He shall also clearlyspell out whether such deviations are within thenormal tolerance level & whether such propertywith the extent of deviation thereon shall beaccepted as security.

To sum up the valuer shall advise the bank with regard toidentification of the property, its quality & fair marketvalue as a proper security for the bank.

Due Diligence Verification Agencies :

Agency shall be responsible for verification ofvarious documents & certificates as furnished bythe applicant for their veracity & genuineness.

Main documents which needs such verification are IT Returns, VAT Registration Certificate, TaxIdentification Number (TIN) issued by CommercialTax Department, Monthly Return of VAT, TradeLicense, Service Tax Registration in the case ofprofessionals, Financial Statements as furnished bythe applicant, business status, verification ofresidence, enquiries in the neighbourhood, detailsof business/services rendered by the applicant,verification of telephone numbers & such otherdetails as furnished by him for arriving at a fairjudgment.

For conducting search in the records of ROC bothat pre-sanction & post disbursal stage in the caseof Corporates & LLP borrowers, services ofprofessional Chartered Accountants shall be hiredby the branches. He shall be responsible forproviding true & fair report covering the extent ofcharge on the specific securities outstanding in therecords of ROC at the relevant point of time.

In view of availability of services of various professionalssuch as advocates, valuers & engineers and due diligenceverification agencies, the branch shall be in a position tofocus its attention to marketing & sourcing of bankableproposals aggressively.

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Scheme specific sanctioning powers of the respectivedelegatees at the Branch & RO are as follows :

Up to Rs.15.00 lakhs ScaleII Branch Head

Up to Rs.25.00 lakhs Scale III Branch HeadUp to Rs.40.00 lakhs Scale IV Branch Head/CM

at ROUp to Rs.60.00 lakhs Scale V&VI Branch HeadAbove Rs.60.00 lakhs Respective delegatees in

the RO / Regional Head*

34 SANCTIONINGPOWERS

:

* Proposals falling beyond the powers of the Branch Headshall be approved by the authority not less than the rankof an Executive i.e Scale IV and above at the RO as perthe chart indicated above. AGM and above at RO shallhave the powers to sanction the loans falling beyond thepowers of the Branch Heads/ CM at RO as indicated

above and upto Rs 1.00 crore under VSOD.35 POST

SANCTIONREPORTINGSYSTEM

: All credit sanctions as approved by the Branch Head shallhave to be reported to the immediate next higherauthority for perusal by way of Control Returns. Suchsanctions should be reported monthly in the form of MR-25 (A) along with copies of process notes for the perusalby the immediate next authority in the RO.

Separate General Ledger head shall be given for loansunder VSOD by CAD, HO. Separate scheme code underCBS shall be provided by DIT, HO. Branches shouldensure proper reporting of the sanctions/disbursementsunder the specified scheme code and capture the

advance under priority sector/MSE/Retail lending andother sub-categories.

36 GUIDELINESFOR TAKEOVEROF EXPOSURES

Takeover of exposures from other banks is one of theidentified sources for expansion of retail portfolio.Following aspects should be noted while takeover ofexposures from other banks.

Account being taken over should be classifiedunder Standard Asset category with the existinglender bank without there being any track recordof default history, as evidenced by verification ofcopies of statement of accounts with the existinglender covering minimum period of twelve months.

In this regard, copies of sanction letters from theexisting lenders shall be obtained in order toascertain the terms of sanction & security details.

Apart from this, personal enquiries with theofficials of the existing lender bank (from whomthe exposure is being taken over) would enable thebank to evaluate the track record & dealings of theapplicant entity with them. Interactions withexisting lender should also cover the aspect

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relating to present asset status of the exposurewith them.

Feedback & opinion gathered during the course ofdiscussions & interactions with the existing lenderbank shall be recorded in inspection report

Approval for takeover of exposure shall have to bepermitted by an authority one rank above the rankof sanctioning authority. Such permission shouldbe in place before takeover.

Liabilities outstanding with existing lenders shouldbe taken over along with the relative securities inour favour. No Due Certificate from existinglenders shall also be obtained and copies held onrecord on completion of takeover process.

Charge on the assets already registered in therecords of ROC on the companys/LLPs assets

offered as security shall be got vacated by filingsatisfaction of charge on our takeover of exposurein full.

Sanction of loans for takeover shall be governed bythe relevant Scheme guidelines. BorrowerStandard & Financial Standard, credit assessmentnorms as applicable under the Scheme guidelinesshall be strictly adhered to. As also, adherence toKYC & due diligence norms, entry level pre-sanction guidelines, credit assessment norms asapplicable under the Scheme shall be strictlyadhered to.

However, as title deeds relating to propertydocuments are presently held by existing lendersas security, legal scrutiny of the same shall have tobe based on the Xerox copies of propertydocuments as obtained from and certified by theexisting lender banks, wherever possible.

Loan proceeds equivalent to the outstanding in theexisting lenders shall have to be remitted to themdirectly by way of DD (in the name of existinglender bank account borrowers name) in full &final settlement of the dues of the borrower. Suchremittance should be accompanied by a letteradvising the existing lender bank, to utilize theproceeds only towards settlement of the borrowersloan account and handover the original propertydocuments only to the authorized official of ourBank. Copy of the acknowledgement furnished by

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the existing lender banks agreeing to handover thedocuments directly to our Bank Official shall beobtained and held on record. A No Due Certificatefrom the existing lender bank shall be obtained.

All other documentation guidelines applicable to

the Scheme shall be adhered to.37 GUIDELINES

FORRESTRUCTUR-ING OFACCOUNTSUNDER STRESS

Definition:

It needs to be noted that, in terms of RBI MasterCircular DBOD.No.BP.BC.21 /21.04.048/2010-11dated 01.07.2010 relating to IRAC norms,restructuring of a borrowal account would normallyinvolve modification of original sanction terms -covering security structure, repayment terms, loantenor, funding of irregularity etc with an intent toextend an element of concessions/relaxations/reliefto the borrower which the bank would not have

normally considered otherwise.

Such relaxations, covering funding of irregularities,extension of repayment terms having directbearing on the account conduct, shall becomenecessary, when income stream of the borrowercomes under stress. In such situation, servicing ofinterest & charges in the operative facility andtimely repayment of installments & interest inrespect of Term Loans become difficult resultingin deterioration of credit quality.

It needs to be noted that, irregularities in theoperative facility can either be in the form of

intrinsic deficiency as reflected by the erosion ofasset base or external symptoms, as observedfrom unpaid interest dues, excess drawings,dishonour of cheques & such other deficiencies inthe account conduct. Under such circumstances,funding of such irregularity as WCTL, by carvingout of excess/unpaid overdues in the operativefacility is considered one of the acceptable optionavailable under restructuring guidelines.

Restructured terms shall have to be communicatedin writing to the borrower/co-borrower/guarantorand their specific acceptance of the restructuredterms shall have to be held on record.

Need for restructuring :

Under these circumstances, funding ofirregularity/overdues & re-schedulement ofrepayment terms is considered one of the safe

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viable option in order to conserve the credit quality& asset status of the borrowal accounts.

Eligibility criteria to qualify for restructuring:

However, restructuring option can be exercisedonly under following circumstances

There is a specific request by the borrower torestructure the loan account.

Bank's exposure is fully secured.

Viability of restructuring option, as evidencedby the capacity of the borrower, to meet therepayment obligations under rescheduledterms, without further strain, within theavailable income stream & in accordance withthe revised repayment terms.

Restructured dues shall be repaid in full withinthe overall extended period of 7 years from thedate of restructuring. Terms of repayment shallbe determined in accordance with incomestream. In other words, only those entitieswhich have the potential & capacity togenerate adequate income to be able to meetthe repayment obligations within the outertime frame of 7 years shall be considered asviable.

Re-schedulement of repayment terms shouldbe only "for the first time" (It needs to benoted that, restructuring of an loan account forthe second & subsequent time would betermed as "repeated restructuring" & suchaccounts automatically qualify for downgradation to lower asset status.

Asset classification on restructuring:

Restructuring of a loan account, when the same isstill classified & continuing under standard assetstatus, would enable the account to be maintained& continued in the same asset category. Againstthis background, in case of stressed account, it isall the more necessary to attempt restructuringwell in time in order to conserve the credit quality& asset status & to facilitate unhindered recoveryof the dues under rescheduled terms.

Reporting :

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All restructured accounts needs to be reported inAC-8 each quarter.

Follow up :

All restructured accounts needs effective &

constant follow up in order to ensure recovery ofthe dues in accordance with rescheduled terms.Any failure thereof, or recurrence & subsistence ofoverdues beyond the period of 90 days, wouldautomatically restore the account to status quoante, whereby the account shall revert to theoriginal asset status, in which initialreschedulement was first attempted.

Delegated powers for approval:

Approval for restructuring shall be accorded by the

next higher authority i.e., one authority higherthan the authority under whose power the loanwas originally approved.

Provisioning :

Viewed purely from economic angle -reschedulement of any borrowal account wouldautomatically result in diminution in the fairmarket value of such exposure. Such diminution infair market value, is considered an economic lossfor the bank.

Extent of erosion in the fair market value of theloan account can be evaluated, as a differencebetween the fair value of the loan account prior toand after restructuring.

In other words, economic loss represents the netdifference in the present value of future cash flowsas per existing terms (pre-restructuring) and netpresent value of future cash flows underrestructured terms. Provisioning shall benecessary for such notional economic loss whichthe bank would suffer upon restructuring.

Methodology and the formula together with theExcel soft copy for computation of the sacrificehas been provided to the branches for doing theneedful.

Higher interest load :

In order to compensate the economic loss suffered

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by the bank, it is necessary to factor marginallyhigher interest rate on the borrowal account uponrestructuring. In other words, all loan accountsunder the Scheme which shall be restructuredhenceforth be loaded with additional interest of atleast 0.25%, over & above the normal applicable

interest rate. No penal interest need be chargedon restructured loan accounts, provided that theborrower meets the repayment obligations inaccordance with restructured terms.

In the event of bank being called upon to fund anyportion of economic loss arising out ofrestructuring, borrower shall have to bear upfront15% of such sacrifice, as a part of restructuringpackage by way infusion of additional funds.

Levy of restructuring charges:

Accounts under the scheme are exempted frompayment of any Restructuring Charges.

Income recognition :

Interest charged on restructured loan account canbe recognized as income, provided that,repayment obligations under restructured termsare met as per approved terms.

Restructuring of Non-performing Assets:

Restructuring option can be exercised even in thecase of accounts under non performing category(SSA & DA), provided that the activity is found tobe viable, & the inability to service the interest &or instalment is for reasons beyond the control ofthe borrower even while his intention and integrityremains unblemished.

Such accounts (i.e., restructuring of accountsunder non performing category) shall qualify forup-gradation, essentially based on satisfactoryrecovery performance for a minimum period of oneyear, reckoned from the date, when the firstpayment of interest or instalment falls due underrestructured terms & that there shall not be anyarrears beyond 90 days in respect ofinterest/instalment during the course of the year &nil arrears, as at the end of the qualifying year. Inother words, if only the borrower has serviced theinterest & or instalment for a minimum period ofone year, reckoned from the date when the first

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interest & or instalment falls due as per therestructured terms, provided that there has notbeen any arrears beyond 90 days coveringinterest/instalments & nil arrears as at the end ofthe qualifying year.

38 TREATMENT OFEXISTING CCHACCOUNTS

Existing CCH accounts, inter alia secured by immovableproperties with specified security margin, outstandingunder Standard Asset category, which conform to theguidelines as dealt herein, can be covered under theScheme forthwith.

39 EARLIERCIRCULARREFERENCES

This is a new retail product, launched by the Bankfocusing on business & service enterprises.

Comprehensive guidelines as dealt in this MasterCircular under reference capture the essence andcritical features of the Scheme.

All the guidelines laid down herein are unique &Scheme specific. As such, there is no priorreference for the Scheme.

40 PREVENTIVEVIGILANCEMEASURES

In the context of series of frauds relating to faketitle deeds, VAT & IT Returns, TAN, approved planfor builders, impersonation, Registration Certificatesetc certain precautionary measures have beensuggested by the HO from time to time in order tominimize recurrence of the same.

Guidelines issued by HO in this regard as preventive

vigilance measure, as factored under the Schemeneeds to be scrupulously adhered to.

41 QUARTERLYCREDITMONITORINGREPORTINGSYSTEM

QCMR/HCMR as presently in vogue has becomeredundant in the context of implementation CBSSystem in the Bank.

As such, in lieu of QCMR/HCMRs, branches shallhenceforth submit to RO. Annual Credit MonitoringReport (ACMR) relating to account conduct (as perthe annexure) covering the period reckoned fromsix months of short review & annual review date.

Monitoring systems as set out herein may be notedfor compliance.

42 AUTHORITYFORCLARIFICA-TIONS &

General Manager-Credit (Retail & Priority), HO shall bethe appropriate authority to furnish clarifications as alsoapproval of relaxations relating to the Scheme

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APPROVAL OFRELAXATIONS

Guidelines.

43 AUTHORITYFOR APPROVALOF

MODIFICATIONS IN THESCHEMEGUIDLINES

The Chairman and Managing Director is the appropriateAuthority for approval of modification in the Schemeguidelines

44 DIS-CONTINUANCEOF EXISTINGSCHEMES

With the introduction of VSOD Scheme, existingRetail Loan Schemes as covered in V-Tradescheme is simultaneously discontinued.

Borrowal accounts under V-Trade Scheme may bebrought under VSOD, in compliance with Schemeguidelines.

45 CONCLUSION VSOD is a newly introduced retail product in orderto cater to the credit needs of entities under MSEcategory - classified under Priority Credit.

Relative Scheme guidelines as set out herein,being comprehensive, incorporate all aspectscovering credit origination & dispensation.

Simplified application form, proforma of legalscrutiny report, valuation report, asset verificationreport & such other documents as may benecessary have also been designed and are

available as annexures for ready reference.

With these measures, the field functionaries areexpected to effectively market & popularize theproduct in order to augment our share in Retail &Priority Credit.

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ANNEXURE

List of IT assesses who have to get their accounts compulsorilyaudited under IT Act.(Sec. 44AB)

Type of Tax Payer Criteria for compulsory audit under IT Act.

Business entities If the total sales, turnover or gross receipts in businessfor the previous year relevant to the Assessment Yearexceed or exceeds Rs 40.00 lakh (Rs 60.00 lakh fromthe assessment year 2011-12).

Professionals & Selfemployed

If his gross receipts in professions for the previous yearrelevant to the assessment year exceeds Rs 10 lakh(Rs 15 lakhfrom the assessment year 2011-12).

Companies Auditing in respect corporate entities is mandatoryirrespective of turnover/gross receipts criteria asapplicable to the above categories.

LLPs As per LLP Act, auditing is compulsory when theirturnover exceeds Rs 40.00 lakh or the initial

contribution of partners is more than Rs 25.00 lakh

Note:

a. In such cases, where the borrower files compulsorily IT returns, therelevant copies of the return filed with full details of income/copy ofassessment order for the latest period to be obtained and held in record.

b. Copy of the IT return filed/IT assessment orders submitted with theapplication should be carefully scrutinized. In case the gap between filing oftwo IT returns is found to be less than 6 months, the reason for the sameshould be ascertained and due precautions should be taken while

entertaining the proposals.