advances : general information - isbioabhopal.org/el_book2019/el_pdf/advances_general.pdf ·...
TRANSCRIPT
1
Adv - 1
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
A D V A N C E S
ADVANCES : GENERAL INFORMATION - I
Good Acceptable Security : Characteristics Thereof : MAST :
1) Marketability (it should be readily saleable).
2) Easy ascertainability of value.
3) Stability of value.
4) Transferability/transportability.
Tangible (Impersonal) security : It is a security which can be realised by sale or transfer
easily. It is also known as a realisable security. Advances sanctioned against pledge/
hypothecation/mortgage, etc. of tangible securities are known as ‘Secured’ advances.
Gilt-edged securities : Government securities. These are issued or guaranteed by the
central government or a state govt. They are safest securities :
IBA Bull June 1992.
Blue chip securities : Shares of first class public limited companies (efficiently run).
Specified securities : Defined under SBI General Regulation No. 61. These were earlier
known as Authorised Securities. All trustee securities are
specified securities : C&I/80/1978.
Primary security : It is the principal security for an advance. It is acquired with
bank finance (or, bank extends credit facility against it).
Collateral securities : These are the additional securities. These serve the purpose
of cushion to fall back upon in case of need.
Personal security of : Only third-party guarantee (i.e., no charge on guarantor’s
guarantor tangible movable/ immovable properties). In such cases, a
personal right of action against the guarantor is available. This
can be enforced only through intervention of the court of law
having competent jurisdiction (territorial as well as pecuniary).
Primary Collateral Security : Earlier, referred to a primary security (i.e., the assets created out
of the bank loan).
Secondary Collateral Security : Earlier, referred to a collateral security.
Adv. : Collateral Security : Obtaining Gold, NSCs & KVPs as financial collaterals enables the
Bank to reduce the exposure by the amount of the collateral while calculating capital require-
ments. Therefore, operating units should endeavour to obtain Gold, NSCs and KVPs as collaterals,
wherever feasible, while processing Advances proposals : e-Cir/787/2011-12.
2
Adv - 2
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
General Principles of Good Lendings : The following principles are common throughout
the banking system :
1) Safety 2) Liquidity 3) Purpose 4) Profitability
5) Security 6) Diversification (spread) of risk 7) National interests/policies/priorities.
Deposit-Linked Adv. : It should be ensured that no advances are granted without proper
scrutiny/ appraisal merely because deposits are placed by borrowers with the bank (either
by the borrowers or through them by third-parties) : C&I/33/1987; C&I/27/1990-91; IBA Bull
April 1990, C&I/CL/2/1996-97.
It should be ensured that the credit is not only adequate but also that the credit is made
available in time.
(The stipulation of requiring the constituents to keep a part of the loan amount as deposit no
doubt adversely affects the scheme of financing, production and trading schedules of relative
constituents) : C&I/27/1990-91.
Priority Sec. Adv. : Cash Deposits : Insistence on deposits while considering loan
applications under government-sponsored schemes/self-employment programmes from all
borrowers, whether belonging to SCs/STs or any other categories, is not in order : CPP/
SIB/AGR/34/1996-97.
The loan applications of SCs/STs should be considered sympathetically and expeditiously.
They should be rendered all assistance in filling forms and completing other formalities.
RBI’s Caution : The RBI has again cautioned the branches not to indulge in practices like
mobilising resources (deposits) from agents/third-parties like friends and relatives to meet
the credit needs of the existing/prospective borrowers, or to grant loans to the intermediaries
based on the consideration of deposit mobilisation who may not require the funds for their
genuine business requirements : C&I/CL/2/1996-97.
LCs, BGs : First Class Banks : Domestic Review of Current List : New list enclosed to e-Cir. 458/
2012-13.
The identification of First Class (Domestic) Banks (FCBs) is carried out from time to time for
defining the scope of financial powers to be exercised by the branches for negotiation of bills
drawn under LCs opened by FCBs and issuance of guarantees and LCs against the counter-
guarantee of FCBs : CCFO/ADV/CL/261/2005-06.
The First Class Banks in India, advised from time to time by the CRMD at Corporate Centre, are
now referred to as First Class Banks (Domestic Banks). Similarly, the List of Correspondent
Banks abroad advised from time to time by GMU, Kolkata are now referred to as Correspondent
Banks (Foreign Banks) : e-Cir/975/2013-14.
Debenture Trustee Business : Aspects to be kept in mind when sanctioning of new debenture
trustee business proposals : CCFO/ADV/CL/268/2006-07.
Advances to MNCs, etc. : Compliance : Scrupulous compliance of systems and procedures
must be adhered to in all proposals, including those of big MNCs/Transnationals/Corporates.
Operating units must not get carried away by the big names/reputations of the projects or the
3
Adv - 3
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
promoters and consequently adopt a soft approach to adherence to usual time-tested systems
and procedures : CCFO/ADV/CL/22/2006-07.
Financing Banned Articles : Precautions : Branches should exercise care and to ensureagainst sanction of any loans for activities covering manufacture, trading, etc. in respect of articles
made from the body parts of species protected by the Wild Life (Protection) Act, 1972. CCFO/
ADV/CL/332/2006-07.
SFMS : Structured Financial Messaging System : Use for Domestic Trade : W.e.f. 20.02.2007,
banks, including our Bank, use SFMS messages to issue / advise / confirm / amend / cancel LCs
and BGs in domestic trade : CCFO/ADV/CL/411/2006-07.
The roles and responsibilities of officials for creating, verifying and authorizing messages, and
procedures for sending messages through SFMS for domestic trade are as existing for using
SFMS in international transactions.
SFMS : Use of Structured Financial Messaging System for Domestic Trade : Data Required :
CCFO/ADV/CL/131/2007-08.
SFMS : Use : The IBA recently advised all banks to totally shift to SFMS platform for trade
finance transactions. The Bank has decided to implement the same for all domestic trade trans-
actions with effect from 01 January, 2010 : e-Cir/511/2009-10.
Credit Issues : Approval for Credit issues by other than Sanctioning Authority : Only under
circumstances, where a decision needs to be taken between sanction / renewal or, in exceptionalcircumstances where it is not feasible due to operational / business reasons to do so at the time
of regular sanction / renewal, that approval for such matters may be obtained from the delegated
lower authority, on a stand-alone basis : CCFO/ADV/CL/16/2007-08.
FFR-1, FFR-2 : Financial Follow-up Reports : (To have focused attention on follow-up of high-
value accounts through FFRs and consequent proactive approach to credit management,) the
threshold limit for submission of FFRs has been raised (from the earlier Rs. 1 crore) to aboveRs. 5 crore : CCFO/ADV/CL/172/2005-06.
The withdrawal of FFRs (for accounts with limits up to Rs. 5 crore) casts increased responsibility
on the part of operating officials in the area of credit management, as additional focus has to be
laid on monthly inspections, periodical scrutiny of the books of the borrowers, monitoring of
transactions in the account, etc. to verify proper end-use of bank finance as well as the achievement
of estimated performance. Monitoring of sales level/cash flows of the unit at regular intervals
must be done meticulously to ascertain that these are as per the projections.
S.C.C. : Exemption W.e.f. 21.10.1996, bank advances against the following commodities are
exempt from all the stipulations of selective credit controls :
pulses, other foodgrains (i.e., coarse grains), oilseeds (viz. groundnut, rapeseed/mustard,
cottonseed, linseed, castorseed), oils thereof, including vanaspati, all imported oilseeds and
oils, sugar except buffer stock and unreleased stock of sugar to sugar mills, gur and khandsari
and cotton & kapas: CCO/CPP/CL/121/1996-97.
Banks are now free to fix prudential margin on advances against these sensitive commodities.
Further, the earlier prohibition against opening of usance LCs and financing against receivables
covering these sensitive commodities stands withdrawn; such transactions should now be
handled by banks as part of their normal commercial decisions.
4
Adv - 4
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Loans to Local Board Members : Members of the Bank's Board include members on the
Bank's Local Board : CCFO/ADV/CL/109/2005-06.
No proposal for loans and advances received from Bank's Directors / Local Board Members or
from companies/firms in which they are interested should be sanctioned. The Branches should
refer any such proposal received to their controlling authority.
Buyback Law : The buyback law allows companies to buyback up to 25% of their shares, make
inter-corporate investment freely, issue sweat equity and provide nomination facility to the holders
of shares and debentures. Companies Act has been amended accordingly.
In terms of Section 77A (1) introduced in the Companies Act, 1956 [vide Section 4 of the Companies
(Amendment) Act 1999], companies have now been permitted to purchase their own shares or
other specified securities out of their :
i) free reserves, or
ii) securities premium a/c, or
iii) the proceeds of any shares or other specified securities.
RBI has advised that banks should not provide loans to companies for buyback of shares/
securities (as this amounts to misutilisation of bank funds) : CIRCO/CPPC/C&I/CL/04/1999-
2000.
Revised Loan Policy Document of SBI : Enclosed to CCFO/ADV/CL/185/2007-08 - being
modified from time to time.
Maturity of Advances : The tenor of the loan should be reckoned from the day of first draw down :CCFO/ADV/CL/160/2007-08.
Basel-II : Credit Risk Mitigation and Collateral Management Policy : The Bank approved a Credit
Risk Mitigation and Collateral Management Policy, addressing the Bank’s approach towards the
Credit Mitigates used for capital calculation. The Policy outlines the procedure to be followed in
respect of Documentation and Legal Process requirement, Valuation of Collateral, Haircut
requirements, Custody of Collateral and Insurance. Annexure-II of CCFO/ADV/CL/204/2007-08
enables branches and operating units staff to familiarize themselves with the provisions of the
Policy, and ensure compliance therewith. The modifications effected in the earlier policy have
been listed at Annexure-I of CCFO/ADV/CL/204/2007-08.
RBI Audit : u/s 35 of B.R. Act : Area-wise deficiencies pointed out : CCFO/BO/CL/251/2007-08.
List of Common Irregularities pointed out : CCFO/BO/CL/276/2007-08.
RBI Insp. : Financial Inspection by RBI u/s 35 of B.R. Act, 1949 : Observations made by RBI and
the extant instructions/circular references in regard to each of the observations : detailed in e-
Circular/376/2008-09.
Advances : RBI Inspection : Extant Instructions : Reiterated vide e-Circular/675/2008-09.
Circle L.F.A.R. : Common Irregularities in Advances : CCFO/ADV/CL/274/2006-07.
Advances : Irregularities Pointed out by Statutory Auditors : e-Cir/257/2010-11.
In respect of quoted companies, consolidated financial statements, which are mandatory, have
not been made available.
5
Adv - 5
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Adv. : Deviations : Administrative approval for permitting deviations : In respect advances-related
terms & conditions : Delegation of powers : CCFO/ADV/CL/117/2007-08.
Structured Derivative Products : Monitoring of Deals : Such deals are being done with customers
based on the derivatives limits sanctioned by the appropriate authorities. Extant instructions
reiterated : CCFO/ADV/CL/195/2007-08.
ECRAs : External Credit Rating Agencies : The Bank has signed Memorandum of Understanding
(MOU) with each of the following ECRAs to facilitate acceptance of the rating accorded to specific
Exposures/Borrowers by them for purposes of Capital Adequacy calculation : CCFO/ADV/CL/
187/2007-08 :
a) Credit Analysis and Research Limited (CARE)
b) CRISIL
c) FITCH Ratings India Pvt. Limited (FITCH)
d) CRA Limited (ICRA).
All corporate customers with exposures above Rs. 5 Crore (FB + NFB), who have not already
been rated by any one of the approved ECRAs, should be advised of the arrangement made :
CCFO/ADV/CL/187/2007-08.
Credit Ratings : Revision of Rating symbols and definitions of credit rating agencies : e-Cir/808/
2011-12.
Adv. : Performance & Credit Rating : The NSIC has empanelled six rating agencies, i.e.,
CARE, CRISIL, Dun & Bradstreet (D&B), FITCH, ICRA, ONICRA and SMERA to carry out the
rating of SME units under the Scheme : e-Cir/16/2012-13.
The Bank’s extant in-house Credit Risk Rating System for MSME advances continues for pricing,
monitoring and risk evaluation.
NPA Management in C.B.S. : AGL Advances : e-Circular/357/2008-09.
Copy of the Report on Issues in Core Banking Solutions with regard to Agricultural Banking
prepared by SBIRD, Hyderabad and ‘User Document : change IRAC status’ prepared by IT Dept.,
Belapur enclosed to e-Circular 357/2008-09.
These can be used as a handy tool to reduce system-related technical NPAs.
Sanc. of Adv. : Highest Authority : In respect of proposals which require sanction separately
of different facilities (e.g. fund-based & non-fund-based) by authorities at different levels, the
authority to sanction the highest facility in the proposal (other than the local board/ECCB)
is required to sanction all facilities recommended in the proposal : CCO/CL/2/1995-96.
Advances : All Segments : Administrative Clearance : Project Exports : Modifications : In
Authority Structure : Detailed in e-Cir/1018/2012-13.
6
Adv - 6
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Adv. : Repayment Schedules : RBI has instructed that banks should fix realistic repayment
schedules on the basis of cash flows with borrowers, while granting loans and advances : e-Cir/
296/ 2008-09.
COCC : Renaming : The Corporate Credit Committee (COCC) has been renamed as Corporate
Centre Credit Committee (CCCC) : CIRDO/OP&SP/CL/5/2008-09.
CCCC-II : Renaming : It has been renamed as Wholesale Banking Credit Committee (WBCC) :
CIRDO/OP&SP/CL/5/2008-09.
C.O. Credit Committees : Observations : Circles should ensure that committee views are
correctly documented which would not only result in proper compliance but would also result in
enforcement of the effective credit discipline : e-Circular/356/2009-10.
Constitution of RCC : Regional Credit Committee : The Bank has created Regional Credit
Committees in all Regions across the country, including Regions at those centres where DGM
(B&O) Offices are located, for faster credit dispensation by bringing credit decision nearer to
business centres and customers, to meet the competition from other banks, to ease pressure on
the Zonal Credit Committee and to enhance its efficiency and diligence on higher-value proposals :
e-Cir/1244/2012-13.
CM (ZCC), Manager (RCC) : The Bank has recently created a position of Chief Manager (ZCC) at
each Zone and Manager (RCC) at each RBO for facilitating secretarial assistance to ZCCs and
RCCs.
Role Sheets of Chief Manager (ZCC) and Manager (RCC) : enclosed to e-Cir/278/2013-14.
Further Clarifications : e-Cir/287/2013-14.
Lending Discipline : Half-Yearly Review : The compliance status of various lending discipline
such as Status of review/renewals, Age-wise classification of Non-Renewed Accounts and Status
of submission of Financial Follow-up Reports (FFRs), etc. is placed before the ECCB for view at
half-yearly intervals : e-Cir/421/2008-09.
Comments should be furnished on initiatives taken for improving the compliance level and the
success/outcome thereof.
Nominee Director : Appointment of Nominee Director on the Board of Companies Assisted by
the Bank : Review of Policy and Authority Structure : e-Cir/683/2009-10.
Bank’s Right of Appropriation : Rule in Clayton’s Case : Devaynes v/s Noble (1816) 1 Meg
529, 572 : The first item on debit side (including time-barred debt) is discharged/reduced/cancelled
by first item on the credit side. (The first sum paid out is repaid by the first sum paid in). In other
words, the credit entries in the account adjust our set off the debit entries therein in the chronological
order.*
* All subsequent deposits reduce the liability of the deceased [whereas all subsequent debits (including
the cheques drawn by himself even before the death) in the account form a new advance, for which the
estate of the deceased is not liable].
7
Adv - 7
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
It is applicable to running accounts like cash credits (debit balances), overdrafts, etc. (and notto demand loans and term loans which are granted for fixed amounts). It also applies in the case
of death, retirement or insolvency of a partnership firm.
In the case of overdrafts and cash credits, the Bank obtains a continuing guarantee (covering a
series of transactions) from the guarantor in order to avoid the application of the Rule in Clayton’s
Case against the Bank.
Caution Advices : Issuance : Caution Advices (CAs) are being issued regularly to Circles and
Business Units through e-mail system advising therein the frauds/irregularities perpetrated by the
borrowers against various banks : e-Cir/62/2010-11.
Circles should send information urgently to the respective Business Units in the prescribed format
for all pending CAs and note to send the same on regular basis : e-Cir/62/2010-11.
Credit Information Companies : CICs : Optimal use of multiple CICs : e-Cir/656/2011-12.
Adv. : RMD Guidance of Industries : Detailed in e-Cir/884/2011-12.
Adv. : Risk Management : Credit Risk Management Policy & Credit Risk Mitigation and Collateral
Policy : With a view to having an integrated policy, the above two policies have been merged as
Credit Risk Management, Credit Risk Mitigation & Collateral Management Policy : e-Cir/71/
2011-12.
Revised policy enclosed to e-Cir/71/2011-12.
Interchangeability in Limits : Fund-based and Investment in Short-term CPs & NCD : Review of
extant instructions : e-Cir/923/2010-11.
Advances : Pre-sanction and Post-sanction Inspections : At non-BPR Centers : e-Cir/441/
2010-11.
At branches of non-BPR centre located and not linked to any CPCs manned by more than one
officer, pre-sanction survey should be done by the officials processing the proposal. The post-
sanction in such branches should be done by Branch Manager or any other official of the Branch
identified by the controller other than the officer who conducted the pre-sanction survey. However,
in case such branches (of non-BPR centre) are manned by single officer, i.e., the Branch Manager,
pre-sanction survey should be conducted by Branch Manager and post-sanction by an official in
the Rural CPC identified by the controllers or nearby Rural CPC, if feasible, or by the Branch
Manager of a nearby branch identified by the controllers of the Branch.
Fin. Promotor’s Contribution : Re-structuring of Adv. : RBI Guidelines : The RBI has advised
that Promoter’s contribution towards the equity capital of a company should come from their own
resources, and Banks should not normally grant advances to take up shares of other companies
subject to the exceptions detailed in e-Cir/566/2010-11.
These restrictions on grant of Bank extend to Bank Finance to activities related to such acquisitions
like payment of non-compete fees, etc. These restrictions are also applicable to Bank finance to
8
Adv - 8
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
such activities by Overseas branches/subsidiaries of Indian Banks.
Further clarifications : e-Cir/615/2010-11.
Contribution by the promoter need not necessarily be brought in cash, and can be brought in the
form of de-rating of equity, conversion of unsecured loan brought by the promoter into equity and
interest-free loans.
Loan Statements to Borrowers : Issuance : The operating units/branches/CPCs should issue
statement of accounts in respect of all Term Loan Borrowers once a year, i.e., as on 31.03. The
statement furnished annually should indicate rate of interest and also changes made in the interest
rates during the year with effective dates of change : e-Cir/275/2010-11.
Allocation of Limits : Revised Authority Structure : e-Cir/304/2010-11.
Operation Sampark : Contact Updation on Loan Profile Campaign : e-Cir/351/2010-11.
Adv. : Payment of Statutory Dues : It is of paramount importance for the operating function-
aries to ensure that the Statutory dues are paid in time by the borrowing entities, in strict compli-
ance with the provisions of the relevant Statutes. In order to safeguard the interests of the Bank,
the operating units should obtain a certificate from the auditors of the borrowing entities on an
annual basis to the effect that all Statutory dues, including EPF dues, have been paid by the
borrowers : e-Cir/130/2012-13.
Loan Rejection/Slippages : Of Rs. 50 Crore & above : While submitting any loan proposal for
sanction to appropriate authority, the operating units have to compulsorily access the Site/Page
titled “Loan Rejections/Slippage” and suitably certify about the verification in their proposal : e-Cir/
691/2012-13.
“D” Rated (External) Corporates : The Bank has decided that the branches should explore the
options to try and exit from the “D” Rated accounts as the possibility of such accounts turning
into NPAs is high : e-Cir/813/2012-13.
NOC from Existing Lenders : Guidelines : e-Cir/1210/2012-13 :
a) No-objection certificate from the existing lenders, if any, for ceding pari-passucharge, should
be stipulated as a pre-disbursement condition at the time of sanction of Corporate Loans. However,
for new connections is the case of Corporates rated investment grade and above (i.e. BBB &
above), sanctioning authority may consider waiving this condition on case to case basis.
b) Time to obtain NOC from existing lenders and to create pari-passu charge should be
considered by the sanctioning authority in respect of existing connections on a case-to-case
basis. However, in respect of new connections, such request should be considered only where
the customer is externally rated as Investment Grade.
9
Adv - 9
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Opinion Reports on Suppliers : of Equipment : Status reports on machinery suppliers are
obtained and comments on the status of the machinery suppliers and obtained and comments on
the status of the machinery suppliers and their reputation for proven quality of the machinery
supplied are to be incorporated in the proposal : e-Cir/1212/2012-13.
Opinion reports on suppliers should be taken for at least 75% of the cost of the proposed equipment
being procured under Bank’s finance.
10
Adv - 10
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
IMP. CHECK-POINTS REGARDING ADVANCES
Pledge Advances :
• Proper control should be exercised over the custody of godown keys.
• All doors of the godowns except the main entrance must be effectively closed from within.
• The commodities proposed to be pledged should not be of inferior/spurious quality. These
should not be subject to wide price fluctuations.
• It should be ensured that the borrowers do not create hollow space (empty square) in the
middle of stocks/packages to mislead the inspecting official and to defraud/ cheat the
lending bank. (The unscrupulous borrowers sometimes resort to such unhealthy/unethical
practices.)
• The proceeds of goods released on the strength of trust letter must be routed through the
cash credit account.
• Huge cash withdrawals from cash credit accounts must be discouraged. The purpose
thereof should be critically enquired into and recorded on the reverse of the cheque.
Hypothecation Advances :
• Our (the lending bank’s) name-boards (bilingual/trilingual, with emblem) should not be
allowed to be hanged on a nail with threads/wires. These should be nailed permanently
(not screwed) on the wall.
• The borrowers should not be allowed to store the goods in an unaccountable/haphazard
manner (with the ulterior motive of defrauding the lending banker).
• It must be ensured that obsolete/stagnant/slow-moving/non-moving/deteriorated/ Inferior
quality inventories, scrap, rejected items, etc. are not dumped/stored in between the good
quality inventories.
• It should be ensured that the borrowers dealing in oils/chemicals do not mix water or
inferior quality liquid with good quality liquid (otherwise their petrol pumps, etc. may be
sealed by the government authorities on charges of adulteration).
• It should be ensured that the invoices produced by the borrowers for inspection/verification
are genuine (and are not fake/fictitious/forged/over-valued).
• No drawings should be allowed on the cash credit accounts if the stock-statements are not
received within the stipulated time period.
• Meaningful inspections (surprise checks) should be conducted at irregular intervals; these
should not be arranged beforehand. These should be properly recorded, put up to next
higher authority, and remedial actions taken promptly.
• The inspecting officials should not be indifferent and tardy.
• No credit facilities should be granted to the companies against the security of goods which
are not included in their memorandum/articles of association.
• No clean loans or clean cash credits should be granted to borrowers to meet the margin
money requirements prescribed for cash credit advances.
11
Adv - 11
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
• No drawings should be allowed against the goods/items received for processing/ finishing,
etc. from other parties (for example, chasis received for body-building).
• The borrowers should not be allowed to open current accounts with other banks/branches
in a ruotine manner. A proper watch in this regard should be maintained.
Advances Against Bills :
• It must be ensured that the bills are promptly despatched by the negotiating branch. Simi-
larly, the B.M /Manager (Accounts & Admin.), etc. at the receiving branches should ensure
that these are promptly entered in the respective registers. The despatch work/ receipt/
disposal of inward mail must not be left at the mercy of the Assistants/other officials.
• It must be ensured that the goods coverd under the bills purchased/discounted facilities
are not shown as security for cash credit facilities also.
• Drawing of bills in round sums/figures on a regular basis (or, on sister/associate/allied
concerns) must be viewed with suspicion/circumspection.
• Cross-remittances made/received by the boorower must be watched with suspicion.
• No drawing power must be allowed against receivabies shown by the borrowers as bad/
doubtful of recovery.
• It should be ensured by sending COS-329, etc. to the railways/transport companies that
the borrowers do not get delivery of the consignment covered by RR/MTR on the strength
of indemnities.
• The RRs/MTRs bearing other banks’ stamps/marks must not be accepted.
• The lending banker should maintain a complete/up-to-date record of all the associate/
allied/sister concerns of the borrowers. It should be ensured that there is no inter-locking of
funds.
Miscellaneous :
• It must be ensured that the invoices and the receipt for payment issued by the dealers/
suppliers are not fake/fictitious/forged.
• The accepted quotation should be reasonably comparable.
• The borrower must not be allowed to leave/change the place of business/activity without
the prior/express permission of the lending bank in writing.
• In the case of Govt.-sponsored schemes, the family income (and not the income of the
individual beneficiary) should be taken into consideration.
• The inspections should be meaningful in nature (and should not degenerate into informal
chats only with the borrowers).
• It should be ensured by the B.M./Manager of the Division that the officials dealing with
advances do not throw the cautions/prescribed safeguards to winds.
• The title deeds of the immovable properties mortgaged to the Bank must not be released to
the borrower/mortgagor, during the currency of credit facilities (even against the mortgagor’s
acknowledgement). The possibilities of the borrowers raising loan from some other bank
against the same title deeds cannot be ruled out.
• The opinion reports compiled on the borrowers/guarantors should be reviewed/renewed
periodically with a view to depicting a fair picture of their current financial position. These
should not be sketchy (based on cursorily compiled information) or evasive.
12
Adv - 12
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
OPINION REPORTS
G e n e r a l :
i) 5 Cs, 3 Ps : A comprehensive study of the borrower’s character, capacity to repay,
capital, conditions of the venture and collateral (five C’s), or person, project and purpose
(three P’s) should be made in advance.
ii) Integrity : The integrity of the borrower is a paramount consideration. No advance
should be granted if the borrower lacks integrity even if the other factors are favourable.
iii) Capacity : The capacity of the borrower relates to his qualifications, experience in the
line of activity and his ability to run the venture on profitable lines.
iv) Valuation of Immovable Properties : As per extant instructions.
v) Importance : Compilation of detailed and objective opinion reports on borrowers and
guarantors is an essential component of documentation to secure the Bank’s interests.
The opinion reports so compiled at the time of sanction/renewal/enhancement of loans
require periodic (annual) reviewing and updation to keep the Bank’s interest secure
on an ongoing basis : CIRCO/CPPC/MISC/CL/52/2001-02.
Operating functionaries must follow them meticulously.
MODE OF REPORTING CONFIDENTIAL OPINIONS
Party’s Estimated Means Reporting as
Rs. 10,000/- or less Very small means
Rs. 10,000/- to Rs. 25,000/- Small means
Rs. 25,000/- to Rs. 50,000/- Moderate means
Rs. 50,000/- to Rs. 1 lac Moderate to fair means
Rs. 1 lac to Rs. 2 lac Fair means
Rs. 2 lac to Rs. 3 lac Fairly good means
Rs. 3 lac to Rs. 5 lac Fairly good to good means
Rs. 5 lac to Rs. 10 lac Good means
Rs. 10 lac to Rs. 25 lac Very good means
Rs. 25 lac to Rs. 50 lac Large means
Over Rs. 50 lac Very large means.
Formats : The exchange of the credit information henceforth should be done on the above-
mentioned lines only. The IBA have drawn an appropriate format (enclosed to Cir. No. 7/
1987) for furnishing certain minimum information regarding the borrowing concern.
Precautions : Branch Managers should ensure that opinion reports issued by them to other
banks depict true state of affairs (i.e., without bias or prejudice).
Any deviation in this regard is viewed seriously and appropriate action taken against the official(s)
responsible : Cir. No. 91/1984.
C&I Trade Advances : Credit Report on the format enclosed to C&I/1/1985.
In the case of other C&I advances, in BD-144.
13
Adv - 13
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Group Companies : Opinion Reports : While carrying out the appraisal of the borrowing unit,
the operating functionaries should ensure that opinion reports on Group Companies must be
taken for at least 50% of the number of Group Companies, or should cover 75% of the amount of
Group asset/liabilities : e-Cir/1211/2012-13.
Guarantor’s worth should be assessed periodically and documentary evidence there of held
on branch records : C&I/55/1989, GEN/CL/181/1989, 51/1990.
Agricultural Segment : In the case of AGL advances to individuals and J.H.Fs. whose
aggregate credit requirements do not exceed Rs. 1 Lac, brief opinion reports are compiled in
the format enclosed to the revised application form. In other cases, in BD-144 : AGR/27/
1980.
S.S.I. : It is not necessary to compile brief/detailed opinions on S.S.I. borrowers and their
guarantors. Instead, particulars about their properties/liabilities are recorded on Supplementary
Form to Application for Working Capital (old form; though the application and appraisal
forms for SSI have been revised as per the recommendations of Puri Committee). The
Supplementary form forms part and parcel of the new revised form (SIB/10/1981) : since
revised.
Small Business Finance (SIB/43/1979) :
i) Brief Reports : Brief opinion reports on SBF borrowers and their guarantors are compiled
where the amount of individual advances does not exceed Rs. 10,000/-.
ii) Format : For SBF advances over Rs. 10,000/-, the opinion reports are compiled on the
simplified format enclosed so SIB/43/1979 (irrespective of the amount involved).
iii) Revision : These reports should be revised once in two years in consonance with the
latest financial position of the borrower/guarantor : DM/AGR/5/1989.
iv) ‘P’ Advances : As ‘P’ Segment Advances involve large number, obtention of detailed
Assets and Liabilities Statement and compilation of detailed Opinion Report tend to be
cumbersome. Accordingly, to reduce Turnaround Time (TAT) of ‘P’ Segment Loan
applications, the Bank has recently introduced abridged formats of Personal Assets
and Liabilities Statement and Opinion Report as in Annexure-‘A’ of CCFO/ADV/168/
2005-06.
Miscellaneous :
i) Partnership Firms : While computing the net worth of a partnership firm, the minor’sshare in the assets/property is deducted (as he is not liable for firms’s debts/liabilities/
losses/obligations).
ii) Certificate : For advances sanctioned under the branch officials’ discretionary powers,
the copies of the opinion reports (irrespective of the amount of advance) need not be
sent to respective controlling authority. But a certificate regarding compilation of the
same should be incorporated in the relevant control return (SIB/10/1981).
iii) Disbursement : No disbursement should be made unless an opinion (in the revised
format) is recorded at the branch.
iv) Updation : The opinion reports on borrowers/guarantors should be updated annuallybased on their latest financial statements/I.T./wealth tax returns, in all case of all borrowal
accounts : CCO/CPP/C&I/CL/150/1996-97. (Lack of information on this point comes in
14
Adv - 14
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
the way of taking further decision on the compromise/write-off proposals submitted by
the branches.)
Branches should take necessary steps for updation of the opinion report on the borrowers/
guarantors as per the periodicity specified by the Bank : e-Cir/232/2008-09.
Further, whenever personal/corporate guarantees are obtained, while submitting the
compromise/write-off proposals, net worth of the borrowers/guarantors based on the
financials/I.- T./wealth tax returns of the immediate previous year, should be incorporated
in the proposal.
PERSONAL GUARANTEES
All Segments : To impart more reality to details of personal assets furnished and thereby to
improveeffectiveness/realisability of personal guarantees, it has been decided to prescribe
obtention of statements of assets and liabilities as a notarised affidavit from certain categories
of borrowers/guarantors whose personal guarantees are part of terms of sanction : CIRCO/
CPPC/MISC/CL/49/2001-02
Format of affidavit enclosed to CIRCO/CPPC/MISC/CL/49/2001-02.
After filling in all particulars and after duly stamping at the rate in force in the State for
affidavit as well as for an agreement and with additional stamp duty for notarial act, the
affidavit may be got sworn before a Notary Public. At places where Notary Public is not
available, the affidavit may be sworn before a Magistrate duly authorised for the purpose.
Notarised Affidavit : The statement of Assets & Liabilities as above is to be taken prospectively
in the following cases : CIRCO/CPPC/MISC/CL/49/2001-02.
Statement of assets and liabilities to be obtained as a notarised affidavit from :
New Loans : Borrowers/guarantors of loans rated SB-4 and below (under old CRA; new
rating : SB-8, SB-9).
Existing loans : Renewals/enhancements Borrowers/guarantors of all loans rated SB-4 and
below (under old CRA; new rating : SB-8, SB-9).
Existing loans : rehabilitation/restructuring Borrowers/guarantors in all cases.
15
Adv - 15
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
THIRD-PARTY GUARANTORS : K.Y.C.
Due Diligence Exercise : Branches should conduct thorough due diligence in matters like
investigation of title to the properties / verification of identity of borrower and/or the guarantor and
more so, where the guarantor is not related to the business / family of the borrower : CCFO/
ADV/CL/148/2005-06.
K.Y.C. Guidelines : While accepting the guarantee of an individual, his/her identity and address
should be verified as per KYC guidelines; his/her photograph should be obtained and pasted on
the relevant guarantee agreement, so that cases of impersonation by the guarantors can be
avoided : CCFO/ADV/CL/259/2005-06.
Procedure to be adopted for obtaining photographs of guarantors, in the case of advances
guaranteed by individual(s) : CCFO/ADV/CL/259/2005-06.
It should be ensured that necessary due diligence has been made to establish the identity of the
guarantor : CCFO/ADV/CL/353/2005-06.
Guarantors / Sureties : KYC Compliance : The Bank has decided to introduce and implement
the KYC procedure similar to the one followed for opening accounts, with immediate effect for
guarantors/sureties while accepting their guarantee/surety. The Branches should, therefore,
invariably obtain KYC documents (mentioned in the annexure of e-Cir/69/2011-12) both for proving
identity and the residence of the guarantors/sureties and a Customer Identification File (CIF) be
opened in the CBS to facilitate recording the documents taken for such acceptance and
identification : e-Cir/69/2011-12.
16
Adv - 16
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
SOLVENCY CERTIFICATES
I) Format : The Systems & Procedures Committee of the IBA has recommend the following
format of solvency certificate (Cir. 17/1984) :
“This is to state that to the best of our knowledge and informations, .........................,
a customer of our Bank, is respectable and can be treated as good up to a sum of
Rs. ....................... (Rupees in words).
It is clarified that this information is furnished without any risk and responsibility on our
part in any respect whatsoever, more particularly either as guarantor or otherwise . This
certificate is issued at the specific request of the customer.”
ii) Service Charges : The Bank has prescribed the charges (commission) - for the solvency
certificates.
iii) Validity Period : The I.B.A. have decided against mentioning any validity period for the
solvency certificates : Cir. 17/1984.
iv) Valuation of Immovable Property : As per the extant instructions.
17
Adv - 17
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
CONSORTIUM ADV.,
MULTIPLE BANKING ARRANGEMENT (CAs & MBA),
LOAN SYNDICATION
Consortium Adv. : Recent Relaxations : CPP/C&I/6/1997-98 :
a) Withdrawal : The earlier mandatory requirement of forming a consortium in all cases
where the borrowers enjoy credit limits of Rs. 50 crore and above (from more than one
bank) has been withdrawn in April 1997.
b) Mechanism : Banks may now evolve appropriate mechanism for adoption of sole
bank/multiple bank/consortium or syndication approach, as the case warrants, by
framing necessary ground rules on the operational aspects.
c) Syndication Route : Banks can now adopt the syndication route, irrespective of the
quantum of credit involved, if the arrangement suits the borrower and the financing
banks.
Options : At the request of the borrowers, the earlier consortium arrangements of Rs. 50
crore and above may be converted to multiple-banking or syndication.
Consortium Adv. : & Multiple Banking Arrangement : Recent RBI Guidelines : To strengthen
banks information back-up about the borrowers enjoying credit facilities from multiple banks : e-
Cir/443/2008-09.
The formats for declaration of information by the borrower at the time of applying for credit facility
to a bank (Annexure-I) and the format for exchange of information among the banks in respect of
borrowers enjoying credit facilities from more than one bank (Annexure-II) have been revised by
the RBI as per e-Cir/564/2008-09.
Consortium Adv. : Banks are required to obtain regular certification by a professional, preferably
a Company Secretary, regarding the borrowers’ compliance with various statutory prescriptions,
as per specimen given in Annexure-III : e-Circular/699/2008-09.
In addition to Company Secretaries, banks can also accept certification by Chartered Accountants
and Cost Accountants.
Take-over of Advances : in a Consortium/Multiple Banking Arrangement : Clarification : CCFO/
ADV/CL/249/2007-08.
Issues related to CAs & MBAs : CCFO/ADV/CL/236/2007-08.
Consortium Adv. : & Multiple Banking Adv. : Operating units should share/disseminate information
among the member banks about the status of the borrowers enjoying credit facilities from more
than one bank.
Measures Suggested by RBI : e-Cir/528/2010-11.
Consortium Arrangement, Multiple Banking Arrangement : Operating units should ensure that
the information in the format (designed by IBA) enclosed to e-Cir/1195/2012-13 should be duly
exchanged among the member banks in respect of Consortium/Multiple Banking Arrangements
at monthly intervals.
CAs & MBAs : Frauds : RBI have now advised that apart from exchanging information at regular
intervals among the banks which have financed the borrower, in the specified formats, banks are
also required to exchange information on multi-lateral basis regarding incidents of fraud, legal
18
Adv - 18
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
actions taken and covert activities/operations of the borrower after the fraud, etc. : e-Cir/218/
2009-10.
Multiple Financing : In the case of multiple financing, the borrower gets loans from different
banks/agencies against different/independent securities charged to them separately
(difference from consortium finance).
Loan Syndication : Modus Operandi : The borrower approaches several banks which might
be willing to syndicate a loan, specifying the amount and tenor for which the loan is to be
syndicated. On receiving a query, the syndicator scouts for banks who may be willing to
participate in the syndicate. Based on an informal survey, it communicates its desire to
syndicate the loan at an attractive price to the corporate borrower; all in a matter of days.
After reviewing the bids from various banks, the borrower awards the mandate to the bank
that offers him the best returns.
Syndication is a convenient mode of raising long-team funds by borrowers of high credit
standing only.
The syndicated credit market is one of the largest sources of capital in the international
market.
19
Adv - 19
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
LOAN SYSTEM :
FOR DELIVERY OF BANK CREDIT
Codified Cir. : CPP/C&I/CL/48/1997-98 :
Objective : As an initial step to move away from the traditional cash credit system of
financing, the R.B.I. introduced in 1995 a ‘Loan System’ for delivery of Bank Credit vide the
Slack Season Credit Policy 1995 : C&I/9/1995-96, S&P/8/1995-96.
(To bring about discipline in the utilisation of bank credit and gain better control over its flow.)
Applicability : The ‘loan system’ was initially made applicable to all borrowers with assessed
M.P.B.F. (maximum permissible bank finance) of Rs. 20 crore and above from the aggregate
banking system.
The earlier guidelines on Q.I.S. (quarterly information system) and minimum current ratio,
which was 1.33 : 1 under the 2nd Method of Lending, continued to be in force.
Current Cut-Off Limit : Busy Season Credit Policy (1997-98) :
As a measure of imparting an element of discipline in the utilisation of bank credit, the % of
‘loan component’ in the working capital limit is being enhanced in stages.
In the Busy Season Credit Policy (1997-98), a uniform level of ‘loan component’ has been
prescribed.
Now, for all borrowers with working capital limits from the banking system of Rs. 10 crore or
above, the minimum ‘loan component’ is 80% : CPP/C&I/NSN/23/1997-98.
If, however, a borrower desires to avail of a higher percentage of loan component, this can be
agreed to by the Bank.
The RBI has further advised that there is no intention to raise the % of ‘loan component’ any
further.
WCDL-III : Opened for borrowers with assessed M.P.B.F. of Rs. 10 crore or above (80% _
75% = 5%).
WCDL : Option : The option to avail of the W.C.D.L. component first (i.e., before disbursal
of C.C.) is available to the borrower : C&I/14/1995-96.
Also, the option to avail of more than 80% of the assessed M.P.B.F. by way of W.C.D.L. is
available to the borrower. The cash credit limits should be reduced correspondingly.
Accounting of W.C.D.L. : W.C.D.L. accounts should be opened in a separate ledger.
The outstandings of W.C.D.Ls. should be reported in the new G.L. (general ledger) account -
“Working Capital Demand Loan” Account (S&P/8/1995-96).
Minimum lending under the scheme is Rs. 10 Crore with no upper cap. Authority structure for
approving the facility and revised interest rates thereon are detailed in e-Cir/1144/2012-13.
Minimum tenor : for which the WCDLs could be sanctioned was reduced to 3 days : e-Cir/1154/
2012-13.
The Bank has recently increased the minimum tenor for sanction of WCDL to 15 (fifteen) days
from the earlier level of 2 days : e-Cir/489/2013-14.
20
Adv - 20
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
TAKE-OVER OF ACCOUNTS
Take-over of Borrowal A/cs. : Review of Norms : Detailed in e-Cir/710/2011-12.
These norms are not applicable to AGL and Per segments.
Take-over Norms : Review : Details furnished in e-Cir/582/2013-14.
Improvements : Detailed in e-Cir/375/2012-13.
Additional Safeguards : e-Cir/375/2012-13.
Take-over Norms : Earlier Instructions : Reiterated : e-Cir/25/2009-10.
From Banks in State Bank Group : It has been decided that (CIRCO/ADV/CL/31/2004-05) :
a) Henceforth an existing loan of a bank in the State Bank Group shall not be allowed to be
refinanced/taken over by another bank of the Group by quoting finer pricing.
b) All loan proposals of corporates put up for sanction (either existing or new connections)
should include details of credit facilities by SBI/Associate Banks, along with their pricing.
(The system of co-ordination among the Group Banks has been developed to avoid undercutting
in price and consequent loss of income to the Group and also to prevent unhealthy competition
among the Group Banks).
Deviations : Deviations in minimum CRA rating may also be permitted by the prescribed authority,
albeit highly selectively : CIRCO/ADV/CL/118/2004-05.
W.C., T.L. : The extant guidelines regarding administrative clearance are applicable only to C&I/
SSI Segments. These are not applicable for credit proposals handled by RACPC : CCFO/ADV/
CL/304/2005-06.
P.S. Banks : No take-over of advances from any Public Sector Bank should be resorted to by
quoting finer rates : CCFO/ADV/CL/369/2005-06.
Interest Rate : When such proposals are received, the reasons for higher pricing should be
gone into and more than normal due diligence on the various aspects of the proposal and switchover
should be undertaken. At the end of the exercise, if the proposal merits favourable consideration,
then there is no restriction on charging interest at the rate as applicable to credit rating assessed
as per the Bank’s CRA system : CCFO/ADV/CL/42/2006-07.
KYC Norms : Borrowers, Guarantors : KYC norms are equally applicable to advance accounts
as well. They need to be applied equally to individual and to non-individual customers such as
Companies, Partnership firms, Societies/Associations/Clubs, Hindu Undivided Family (HUF),
Trusts, etc. : CCFO/ADV/CL/69/2006-07.
Due diligence exercise in respect of third-party guarantors : CCFO/ADV/CL/148, 353/2005-06.
Pre-Sanc. Survey : Format : A Pre-sanction Survey Report Format has been introduced for
different types of market segments (i.e., Agriculture, SME and Personal Segment) specimens of
which are enclosed to CIRDO/OP&SP/CL/09/2006-07.
The sanctioning authority should not sanction loan unless the Pre-sanction Survey report in the
appropriate format is enclosed to the loan appraisal note.
Monitoring of Adv. : Certificate : Henceforth, along with the declaration that is being presently
obtained from the borrowers at half-yearly intervals on the details of accounts opened by them
21
Adv - 21
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
with other banks, a certificate from them certifying that the funds have been used for the purpose
for which they were obtained, should also be called for as per the format enclosed to CirCO/ADV/
CL/233/2004-05. Further, the details of investments in stock markets, mutual funds, NBFCs,
ICDs, associate companies, subsidiaries, real estate, etc. made by the company should also be
obtained : CCFO/ADV/CL/38/2006-07.
Sanctions / Pricing Concessions : Validity : The Bank has restricted the validity period for
working capital sanctions and term loans as well as pricing concessions as detailed in CCFO/
ADV/CL/140/2006-07.
22
Adv - 22
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
CREDIT INFORMATION SYSTEM
Credit Information System (CIS) : All the staff concerned working at branches/offices should
make maximum utilization of the information available in CIS database for informed, objective
and speedier credit decisions, and for other credit related functions : CIRCO/ADV/CL/120/
2004-05.
C.I.S. : Credit Information System : Data Quality Issues : CCFO/BO/CL/64/2006-07.
CIS : Change NPA Dates : Any change in NPA date of an account in CIS data should only be with
the due and recorded approval of the Controller. The approval should be kept on record in the
Branch Document Register for review by Inspecting Officials also : CCFO/ADV/CL/202/2006-07.
CIS Codes : New Codes given to various schemes : CCFO/ADV/CL/220/2006-07.
CIS Codes : Comprehensive list of all the schemes related to SME along with the CIS codes :
CCFO/ADV/CL/254/2006-07.
23
Adv - 23
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
IRAC NORMS
(INCOME RECOGNITION & ASSET CLASSIFICATION)
IRAC Norms : Master Circular : Updated up to 30.06.2013 : Enclosed to e-Cir/543/2013-14.
ASSET CLASSIFICATION
Standard Assets
It is not an NPA (non-performing asset). It does not disclose any problem and does not carry more
than normal risks attached to the business.
Non-performing Assets
An asset, including a leased asset, becomes non-performing when it ceases to generate in come
for the bank.
A non-performing asset (NPA) is a loan or an advance where :
i) interest and/or instalment of principal remain overdue for a period of more than 90 days in
respect of a term loan,
ii) the account remains ‘our of order’, in respect of an Overdraft/Cash Credit (OD/CC),
iii) the bill remains overdue for a period of more tan 90 days in the case of bills purchased and
discounted,
iv) the instalment of principal or interest thereon remains overdue for two crop seasons for short-
duration crops,
v) the instalment of principal or interest thereon remains overdue for one crop season for long-
duration crops.
Categories of NPAs
Banks are required to classify non-performing assets further into the following three categories
based on the period for which the asset has remained non-performing and the realisability of the
dues :
a) Sub-standard Assets
b) Doubtful Assets
c) Loss Assets.
Sub-standard Assets
With effect from 31 March 2005, a sub-standard asset is one, which has remained NPA for a
period less than or equal to 12 months. In such cases, the current net worth of the borrower/
guarantor or the current market value of the security charged is not enough to ensure recovery of
the dues to the banks in full. In other words, such an asset will have well-defined credit weaknessesthat jeopardise the liquidation of the debt, and are characterised by the distinct possibility that the
banks will sustain some loss, if deficiencies are not corrected.
24
Adv - 24
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Doubtful Assets
With effect from March 31, 2005, an asset is classified as doubtful if it has remained in the
sub-standard category for a period of 12 months.
A loan classified as doubtful has all the weaknesses inherent in assets that were classified as
sub-standard, with the added characteristic that the weaknesses make collection or liquidation in
full - on the basis of currently known facts, conditions and values - highly questionable and
improbable.
Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external auditors or
the RBI inspection but the amount has not been written off wholly. In other words, such an asset
is considered uncollectable and of such little value that its continuance as a bankable asset is
not warranted although there may be some salvage or recovery value.
PROVISIONING NORMS
General
The primary responsibility for making adequate provisions for any diminution in the value of loan
assets, investment or other assets is that of the bank managements and the statutory auditors.
The assessment made by the inspecting officer of the RBI is furnished to the bank to assist the
bank management and the statutory auditors in taking a decision in regard to making adequate
and necessary provisions in terms of prudential guidelines.
In conformity with the prudential norms, provisions should be made on the non-performing assets
on the basis of classification of assets into prescribed categories as detailed above. Taking into
account the time lag between an account becoming doubtful of recovery, its recognition as such,
the realisation of the security and the erosion over time in the value of security charged to the
bank, the banks should make provision against sub-standard assets, doubtful assets and loss
assets as below :
Standard Assets
i) Banks should make general provision for standard assets at the following rates for the funded
outstanding on global loan portfolio basis :
a) direct advances to agricultural and SME sectors at 0.25%;
b) residential housing loans beyond Rs. 20 Lakh at 0.40% (reduced from the earlier 1%).
c) advances to specific sectors, i.e., personal loans (including credit card receivables),
loans and advances qualifying as capital market exposures commercial real estate
loans at 0.40% (reduced from the earlier 2%).
d) all other advances not included in (a) (b) and (c) above at 0.40%.
ii) The provisions on standard assets should not be reckoned for arriving at net NPAs.
iii) The provisions towards Standard Assets need not be netted from gross advances but shown
separately as ‘Contingent Provisions against Standard Assets’ under ‘Other Liabilities and
Provisions - Others’ in Schedule 5 of the balance sheet.
25
Adv - 25
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Sub-standard Assets
A general privision of 15% on total outstanding should be made without making any allowance
for ECGC guarantee cover and securities available.
The ‘unsecured exposures’ which are identified as ‘sub-standard’ attract additional provision of
10%, i.e., a total of 25% on th outstanding balance. However, in view of certain safeguards
such as escrow accounts available in respect of infrastructure lending, infrastructure loan
accounts which are classified as sub-standard attract a provisioning of 20% instead of the
aforesaid prescription of 25%.
Unsecured exposure is defined as an exposure where the realisable value of the security, as
assessed by the bank/approved valuers/Reserve Bank’s inspecting officers, is not more than
10%, ab initio, of the outstanding exposure.
‘Exposure’ includes all funded and non-funded exposures (including underwriting and similar
commitments). ‘Security’ means tangible security properly discharged to the bank and does notinclude intangible securities like guarantees (including state Govt. guarantees), comfort letters,
etc.
Doubtful Assets(w.e.f. 2011-12)
i) 100% of the extent to which the advance is not covered by the realisable value of the security
to which the bank has a valid recourse and the realisable value is estimated on a realistic
basis.
ii) In regard to the secured portion, provision may be made on the following basis, @ ranging
from 25% to 100% of the secured portion, depending upon the period for which the asset
has remained doubtful :
Period for which the advances has Provision Requirement
remained in doubful category
Up to 1 year : 25%
1 to 3 years : 40%
More than 3 years : 100%
Note : Valuation of Security for provisioning purposes
With a view to bringing down divergence arising out of difference in assessment of the value
of security, in cases of NPAs with balance of Rs. 5 crore and above, stock audit at annual
intervals by external agencies appointed as per the guidelines approved by the Board is
mandatory in order to enhance the reliability on stock valuation. Collaterals such as
immovable properties charged in favour of the bank should be got valued once in three
years by valuers appointed as per the guidelines approved by the Board of Directors.
Loss Assets
Loss assets should be written off. If loss assets are permitted to remain in the books for any
reason, 100% of the outstanding should be provided for.
26
Adv - 26
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
RISK GRADES & CLASSIFICATIONOF NPAs IN C.B.S.
Non-Performing Assets in B@ncs24 have been classified into 7 categories, which are called
RISK GRADES as per details furnished below :
Risk Grade Description
00 : Standard Asset
01 : Standard But Temporarily Irregular Asset
02 : Standard But Irregular for Over 60 Days
04 : Sub-Standard Asset
05 : Doubtful Asset - Less than 1 Year
06 : Doubtful Asset = > 1 Year but < 3 Years
07 : Doubtful Asset = > 3 Years
08 : Loss Asset
(Risk grade numbers 03 and 09 are not used at present.)
27
Adv - 27
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
I.R.A.C. NORMS : CLARIFICATIONS, ETC.
I.R.A.C. Norms : Restructured A/cs : The relevant date for classification of restructured accounts
is the date of approval of the restructured package by the competent authority, i.e., the asset
would remain in the category which was prevailing as on the date of approval of restructuring :
CIRFO/BO/CL/58/ 2004-05.
Restructuring of Advances : Review of Norms by RBI : Detailed in e-Cir/269/2013-14.
Standard Assets : Exit Policy : The Bank has recently laid down an exit policy in respect of
'Standard Assets' so as to facilitate a timely exit with no loss or minimal loss of value. This can
also be one of the tools for improving the quality of credit portfolio : CCFO/ADV/CL/116/2005-06.
Standard Assets : Policy For Monitoring : The Bank has recently introduced a check-list - enclosed
to CCFO/ADV/CL/335/2006-07 - for standard accounts, which facilitates early identification of the
quality of accounts.
The above check-list should be prepared monthly for all standard accounts with total indebtedness
exceeding Rs. 1 crore.
State Govt. Guar. : RBI has now delinked the requirement of invocation of State Government
guarantee for deciding the asset classification and provisioning requirements : CCFO/BO/CL/
371/2006-07.
Home Loans : As long as the stipulated EMIs are being paid promptly, the account would
continue to be treated as regular : CCFO/ADV/CL/20/2007-08.
IRAC Norms : Agri Advances : NPAs : Consolidated Guidelines : e-Cir/617/2013-14 :
a) Limit expiry date in CBS is the repayment due date of the annual limit and NOT after the 3
year period in old KCC Scheme and 5 year period in the revised KCC scheme, for which the KCC
limit (i.e., Maximum Permissible Limit) is sanctioned.
b) All the Branches should use the ‘crop season period for IRAC’ functionality and NOT the
holiday period functionality for fixing crop season in agri advances in CBS.
c) In case of agriculture gold loans, the repayment due date should be fixed based on the
purpose of the loan.
Branches should correctly fix ‘crop season period’ in respect of all agriculture advances, existing
as well as new accounts (ACC/KCC, ATL and Agri DL), where crop season period determines the
repayment date, to ensure correct asset classification in agri advances.
IRAC Norms : AGL Advances : Two crop seasons is perceived as under : e-Cir/296/2008-09 :
a) If a farmer is growing crops only in Kharif season (land remaining fallow during the rest of the
year), two crop seasons will spread over two years. Similar is the case if crops are grown
only in Rabi season by a farmer. In this case, repayment date will be fixed once in a year.
b) If the farmer is growing Kharif as well as Rabi crops, two crop seasons will spread over one
year period’. There will be two repayment dates during one-year period.
c) If the farmer is growing one (mostly the same) cash crop (Kharif or Rabi) over major area
owned by him and small area is used for growing cereals/pulses for domestic requirement
and meeting exigencies (not resulting into sizeable marketable surplus), in such an event
the entire repayment of loan will logically come once a year on harvesting and marketing of
28
Adv - 28
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
cash crop only. Since repayment is fixed once a year (synchronising with harvesting and
marketing of cash crop) and other crop grown over smaller area is incidental, in such cases,
two crop seasons will speared over two years.
Agl. Loans : NPA Classifi. : In both the States of M.P. and Chhattisgarh, all branches have been
allowed to fix yearly instalment. (In Rabi predominant area, the date should be 31st May, and in
Kharif pre-dominant area, it should be 31st January) : CCFO/ADV/CL/185/2006-07.
Example given in CCFO/ADV/CL/185/2006-07.
AGL Advances : Detailed examples for calculation of NPA dates for mono-cropping/double-cropping
and Rabi and Kharif crops are given in CCFO/ADV/CL/194/2007-08.
IRAC Norms : Agri Adv. : Indicative Agri NPAs : Incorporation of ‘NPA Holiday Period’ : The non-
incorporation may result into creeping in of technical NPAs : e-Cir/600/2009-10.
Extant Instructions reiterated : e-Cir/254/2010-11.
IRAC Norms : Infrastructure Projects : Change in the Prudential Norms on Asset Classification
in respect of Infrastructure Projects under implementation and involving time overrun : e-Cir/228/
2008-09.
Clarifications Issued by RBI : e-Cir/524/2008-09.
The RBI’s recent notification basically envisages increase in the grace period in respect of
infrastructure projects from the earlier 2 years to 3 years, and in respect of infrastructure projects
involving court cases/arbitration proceedings to 4 years. Similarly, in respect of non-infrastructure
projects, the grace period has been increased to 12 months from the earlier 6months : e-Cir/12/
2010-11.
IRAC Norms : Prudential norms for off-balance sheet exposure of banks : Revised Instructions :
e-Circular/464/2008-09.
IRAC Norms : Agricultural Debt Waiver and Debt Relief Scheme, 2008 : OTL : ‘Other Farmers’ :
OTS accounts may be treated as standard/performing provided such farmers (on obtention of
prescribed undertaking for OTS before 30th September ‘08) pay their share of the settlement/
instalment within one month of the due dates : e-Circular/358/2008-09.
While due / last dates for payment of OTS instalments have been stated as 30th September
2008, 31st March 2009 and 30th June 2009, the modification of treating the account as Standard/
Performing, if such farmers pay their share of settlement within one month of the due dates, have
been issued subsequently by RBI : e-Circular/359/2008-09.
IRAC : Floating Provisions : For advances, investments and general purpose. These are utilised
only for contingencies under extraordinary circumstances with the prior parmission of RBI.
IRAC Norms : Provision on Standard Assets is not deducted while computing net NPAs.
29
Adv - 29
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
INDUSTRY EXPOSURE SETTING NORMS
Advisories by CRMD : Credit Risk Management Department at Corporate Centre issues advisories
in respect of about 40 Industries from time to time. CRMD has also commenced issuance of
Guidance Notes in respect of relatively more dynamic industries at Quarterly intervals or as and
when developments take place that require a re-look at the exposure/portfolio : e-Cir/224/
2009-10.
Every loan proposal should invariably contain the latest/updated RMD advisory as also the threshold
levels with latest nomenclature for all the new sanctions as well as renewal and enhancement
proposals.
An Annexure indicating the mapping of New CRA ratings with the old ratings is enclosed to
e-Circular/661/2008-09 for ready reference of the Operating Units.
Bank Exposure Limits : The Bank Exposure Risk Model (BERI), on the basis of which the
Permissible Global Exposure Limits (PGEL) on Domestic Banks is arrived at, has since been
reviewed : CIRCO/ADV/CL/05/2002-03.
Industry Exposure Setting Norms : RBI Master Circular : Dated 01.07.2008 : e-Cir/426/
2008-09.
Computation methodology : Prescribed by RBI : Detailed in e-Cir/426/2008-09.
Revisions in IES Norms : CCFO/ADV/CL/311, 338/2007-08.
Exposure Ceiling : Prudential credit exposure limits : for different categories of borrowers :
detailed in e-Cir/285/2013-14.
Unsecured Exposures : Prudential Guidelines : In the Annual Policy Statement for the year
2004-05 of the RBI, the prescription with regard to the ceiling on unsecured advances (introduced
during May 1967) has been withdrawn. Simultaneously, all exemptions allowed for computation
of unsecured exposures also stand withdrawn: CCFO/ADV/CL/227/2004-05.
Clarification : CCFO/ADV/CL/239/2004-05
Revised definition of 'unsecured' exposure of a Bank : CIRCO/ADV/CL/227/2004-05.
Quarterly return : CIRCO/ADV/CL/254/2004-05.
Construction Entities : Loan Exposure : Risk determinants to be factored into assessment of
Construction Companies: CIRCO/ADV/CL/214/2004-05.
ICRA grading for construction entities is not mandatory. However, wherever grading is available,
the same may be kept in view at the time of sanction of proposals pertaining to construction
entities.
Construction Co. : Exposure : The Bank's instructions on the ceiling of nine times the net
owned funds for financing construction companies for setting up infrastructure facilities on contract
basis has not been withdrawn : CCFO/ADV/CL/42/2005-06.
Real Estate Sector : Bank’s Exposure : While appraising loan proposals involving real estate,
it should be ensured that the borrowers have obtained prior permission from Govt. / local Govt./
other statutory authorities for the proposed project, wherever required. However, with a view to
avoiding delay in processing of such loan proposals, these could be sanctioned in the normal
course, but the disbursements should be made only after the borrower has obtained requisite
clearances from the Govt. and the other related authorities : CCFO/ADV/CL/360/2005-06.
30
Adv - 30
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Capital Markets : Bank’s Credit Exposure : Loans extended by Banks to equity-oriented Mutual
Funds as well as Irrevocable Payment Commitments (IPCs) issued by Banks in favour of stock
exchanges on behalf of Mutual Funds form part of Bank’s Capital Market Exposure (CME) :
e-Circular/360/2008-09.
Other Instructions detailed in e-Circular/360/2008-09.
Infrastructure Projects : Exposure Ceiling : The Bank has recently enhanced the term loan
exposure limit from the present 10% of the Bank’s domestic advances to 15% of the Bank’s
domestic advances : e-Cir/145/2009-10.
Industry Exposure Setting Norms : Advisories by Credit Risk Management Department (CRMD) :
CRMD advisories are based on a detailed review of the manufacturing activity. These examine
factors such as demand, capacities, production, technology, imports and exports, raw material
availability and costs, pricing, Government and Regulatory policies, etc. (which are generally not
applicable/relevant in determining outlook for the trading activity) : e-Cir/592/2009-10.
The advisories of CRMD in respect of approach towards lending and threshold Rating Grades for
various industries are only applicable to the Manufacturing units and should not be extended for
the Units trading in the goods manufactured by the units falling in those industry categories :
e-Cir/592/2009-10.
Advisories by Credit Risk Management Department (CRMD) : Authority structure to permit
deviations : e-Cir/831/2009-10.
Exposure Norms : Commercial Real Estate : RBI’s comprehensive guidelines on classification
of Real Estate Exposure : e-Cir/442/2009-10. Change advised vide e-Cir/489/2009-10.
Assessment of Group Risk : Detailed in e-Cir/464/2009-10.
Prudential Exposure Norms : Relaxations : Current Norms are detailed in e-Cir/149/2010-11.
In exceptional circumstances, RBI has permitted banks to consider enhancement of the exposure
to a borrower up to a further 5% of capital funds with the approval of the Bank’s Board. Before
approaching the Board for approval, a consent letter from the borrower that he is agreeable to
the Bank making appropriate disclosure in its Annual Reports, must be obtained : e-Cir/149/
2010-11.
Prudential Norms : Unsecured Advances : Advances to the infrastructure sector for construction
of road/highway projects under the Build, Operate, Transfer (BOT) model : e-Cir/61/2010-11.
Exposure Norms : Real Estate Sector : Revised Exposure Cap : Detailed in e-Cir/49/2011-12.
Exposure Ceiling : Real Estate Sector : Revised Ceilings : e-Cir/531/2011-12.
31
Adv - 31
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
WILFUL DEFAULT
(LATEST DEFINITION)
Ref. : RBI Master Circular (2013) :
Updated up to 30.06.2013 : e-Cir/545/2013-14.
Definition :
The term “wilful default” has been re-defined in supersession of the earlier definition as under :
A “wilful default” is deemed to have occurred if any of the following events is noted :
a) The unit has defaulted in meeting its payment/repayment obligations to the lender even when
it has the capacity to honour the said obligations.
b) The unit has defaulted in meeting its payment/repayment obligations to the lender and has
not utilized the finance from the lender for the specific purposes for which finance was availed
of, but has diverted the funds for other purposes.
c) The unit has defaulted in meeting its payment/repayment obligations to the lender and has
siphoned off the funds so that the funds have not been utilized for the specific purpose for
which finance was availed of, nor are the funds available with the unit in the form of other
assets.
d) The unit has defaulted in meeting its payment/repayment obligations to the lender and has
also disposed of or removed the movable fixed assets or immovable property given by him or
it for the purpose of securing a term loan without the knowledge of the bank/lender.
Diversion and Siphoning of Funds :
The terms “diversion of funds” and “siphoning of funds” should construe to mean the following :
Diversion of funds, referred to at para (b) above, is construed to include any one of the undernoted
occurrences :
a) utilization of short-term working capital funds for long-term purposes not in conformity with
the terms of sanction;
b) deploying borrowed funds for purposes/activities or creation of assets other than those for
which the loan was sanctioned;
c) transferring funds to the subsidiaries/Group companies or other corporates by whatever
modalities;
d) routing of funds through any bank other than the lender bank or members of consortium
without prior permission of the lender;
e) investment in other companies by way of acquiring equities/debt instruments without approval
of lenders;
f) shortfall in deployment of funds vis-a-vis the amounts disbursed/drawn and the difference not
being accounted for.
Explanation :
Borrowers/promoters indulging in frauds, forgeries, cheating, etc. are also declared as wilful
defaulters. (These acts tantamount to deliberate/international and calculated default.)
32
Adv - 32
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
DEFAULTERS, WILFUL DEFAULTERS
Lists of Defaulters : The RBI has entrusted the work of publishing the lists of defaulters (suit-
filed accounts) of Rs. 1 crore and above, as also, wilful defaulters (suit-filed accounts) of Rs. 25Lac and above, to the Credit Information Bureau (India) Ltd. (CIBIL) as on 31-03-2003 and
onwards : CIRCO/ADV/CL/37/2004-05.
The RBI, however, continues to deal with the data relating to non-suit-filed accounts of the
defaulters lists of Rs. 1 crore and above, and wilful defaulters of Rs. 25 Lac and above, which are
disseminated only to banks/financial institutions for their confidential use.
Wilful Defaulters : Modified Guidelines : para 1(b) to (ii) of CIRCO/ADV/CL/295/2003-04 stands
deleted: CIRCO/ADV/CL/47/2004-05.
Thus, the penal measure against directors of wilful defaulter companies is applicable in case of
financial institutions only and not in case of banks.
Wilful Defaulters : Clarifications : CIRCO/ADV/CL/83/2004-05.
Classification of a borrower as wilful defaulter and the mechanism for redressal of grievance of
the borrower concerned :
a) The first stage is the Identification of default as 'Wilful' based in the prescribed norms.
b) The borrower should thereafter be suitably advised about his classification as wilful defaulter,
along with the reasons therefor. The concerned borrower should be provided 15 days time
for making representation against such decision to the Grievance Redressal Committee,
if he so desires. The representations from such identified wilful defaulters should be received
at the branches, who should forward the same to LHO for onward transmission to the NPA
Management Department under the control of CGM (Credit Management) at the Corporate
Centre who should in turn put up the representation to the Grievance Redressal Committee,
for their consideration.
c) The final decision of the Grievances Redressal Committee should be advised to the
borrower by the concerned branch and thereafter the name of such borrower should be
included in the list of wilful defaulters.
RBI Defaulters’ List : Consolidated instructions of RBI with regard to defaulters and wilful
defaulters and the Bank's approach thereto : CIRCO/ADV/CL/148/2004-05.
Wilful Defaulters : Committee for identification of Wilful Default. Detailed in CCFO/ADV/CL/327/
2007-08. Reconstituted vide e-Cir/196/2012-13.
Wilful Defaulters : Grievance Redressal Committee : Reviewed and Reconstituted : Detailed e-
Cir/822/2012-13.
Steps : RBI has now reiterated that Banks / FIs should, inter alia, take various steps in order to
check wilful defaults and initiate criminal proceedings against wilful defaulters, wherever
necessary : CIRCO/ADV/CL/233/2004-05.
Approach with regard to initiating criminal proceedings against the wilful defaulters : CIRCO/
ADV/CL/233/2004-05.
Wilful Defaulters : Penal Measures : The borrowing company should not induct a person who is
a director on the Board of a company which has been identified as a wilful defaulter, and that in
case such a person is fund to be on the Board of the borrower company, it would take expeditious
and effective steps for removal of the person from its Board : CCFO/ADV/CL/25/2005-06.
33
Adv - 33
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Approval : Wilful Defaulters : Whenever a borrower is to be identified as a wilful defaulter, it need
to be approved by the appropriate authority : CCFO/ADV/CL/317/2006-07.
The related procedure is detailed in CirCO/ADV/CL/150/2003-04.
Wilful Defaults : Review of Cases : RBI has advised that periodical reviews on cases of wilful
defaults should be submitted to the Audit Committee of the Bank : CCFO/ADV/CL/150/2005-06.
Format of half-yearly review: CCFO/ADV/CL/150/2005-06.
Suit-Filed Accounts : With effect from quarter ended March, 2003, dissemination of information
in respect of suit-filed accounts, is done by Credit Information Bureau (India) Limited (CIBIL)
through their website (www.cibil.com) instead of RBI : e-Circular/493/2008-09.
Wilful Defaulters : Deletion of Names : Deletion of the name(s) of the borrower(s) from the list
of wilful defaulters: CIRCO/ADV/CL/245/2004-05.
Wilful Defaulters’ List : Deletion of Names : Recent RBI Instructions : e-Cir/527/2008-09 :
As per the scheme of Defaulters/Wilful Defaulters, the data on defaulters/wilful defaulters can
only be collected from and disseminated to all scheduled commercial banks (excluding local
areas banks and regional rural banks) and All-India notified Financial Institutions (FIs). Therefore,
data from Asset Reconstruction Companies (ARCs) are not included in the defaulters lists. Further,
as the accounts are no longer in the books of the reporting Banks/FIs on account of selling/
assigning of assets to ARCs, they need not report such accounts to RBI/CIBIL in the Wilful
Defaulters Lists.
Wilful Defaulters : Reconstitution of Committees for Identification/Deletion of Wilful Defaulters
: at the Corporate Centre : e-Cir/196/2012-13.
Wilful Defaulters : Grievance Redressal Committee (GRC) : Reconstitution : at the Corporate
Centre : e-Cir/822/2012-13.
Wilful Defaulters : Reference to website of Ministry of Corporate Affairs (MCA) : List of Disqualified
Directors : The operating units are required to incorporate the position by verifying the list of
“Disqualified Directors”, in addition to verifying the position of Directors in the list of RBI Defaulters/
Wilful Defaulters : e-Cir/312/2012-13.
Wilful Defaulters : Action Thereagainst : Identification/Deletions of wilful Defaulters : Grievance
Redressal Committee (GRC) - Reconstitution : e-Cir/323/2012-13.
Wilful Defaulters : Formats of Notices : Standardisation : The concerned borrowers should be
provided reasonable time (say 15 days) for making representation against identification as Wilful
Defaulters to Grievance Redressal Committee (GRC) at Corporate Centre : e-Cir/445/2012-13.
Format of Notices, etc. : Enclosed to e-Cir/445/2012-13.
Wilful Defaulters : Identification & Declaration of name(s) of Company/Directors/Guarantors as
wilful defaulters (Rs.25 Lac and above - Suit-filed/non-suit-filed) : e-Cir/711/2012-13.
Format of proposal to be put up to Grievance Redressal Committee on appeal : Enclosed to e-Cir/
711/2012-13.
34
Adv - 34
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Format of letter on deferment of personal hearing before Grievance Redressal Committee (GRC) :
enclosed to e-Cir/711/2012-13.
Wilful Defaulters : Rs. 25 Lac and above - suit-filed, non-suit-filed : Standard Format : of proposal
to be put up to the Committee(s) for Identification/Deletion of cases of Wilful Default : e-Cir/1087/
2012-13.
Default, Willful Default : PAN/DIN : The Bank has recently evolved the procedure detailed in e-
Cir/1125/2013-14 for verifying Defaulters/Willful Defaulters list of RBI/CIBIL and other CICs to
ascertain whether the names of the Directors and the Company appear in such lists while
processing the loan proposals and to incorporate the details in format ‘S’ : e-Cir/1125/2013-14.
35
Adv - 35
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
FRAUDS IN ADVANCES
Adv. : Frauds : Caution : Branches should exercise caution and be vigilant while sanctioning
loans and meticulously comply with the Bank’s instructions regarding due diligence on borrowers,
guarantors, etc. so as to avoid chances of impersonation/frauds, etc. : CCFO/BO/CL/309/
2007-08.
Due Diligence : It is desirable to review the position regarding due diligence in respect of outstanding
advances and arrange to sensitise the operating functionaries towards the need to exercising due
care in establishing the genuineness/enforceability of the borrowers/guarantors, title deeds, other
documents at the time of sanction and thereafter on a regular basis : CCFO/ADV/CL/146/
2007-08.
Fake Documents : Branches should verify the identity of the customer. They should also
confirm the genuineness of the documents produced for finance, from the competent authorities :
CIRFO/BO/CL/29/2004-05.
High-Value Adv. : Fraud Cases : Branches should adhere to various extant instructions in
respect of sanction (pre / post sanction), control, monitoring and follow-up of advances and
those pertaining to general banking areas. Branches are advised to pay more attention in those
areas where various irregularities/lapses have been observed in high-value fraud cases which
came to light in the recent past. Such areas are listed in CCFO/ADV/CL/167/2005-06.
Central Electronic Registry : The Central Electronic Registry provides a database on the
mortgages created by all the Banks : e-Cir/650/2010-11.
Due Diligence : The operating staff should exercise appropriate care and carry out proper customer
due diligence as per Bank’s laid down guidelines, while financing loan proposals to avoid the
recurrence of incidents of frauds in future : e-Cir/290/2011-12.
Staff Accountability : In terms of the instructions contained in the Vigilance Manual, no disciplinary
proceedings will ordinarily lie against any official for any lapse not detected within two successive
internal regular audits/inspections of the same account or four years from the date of the event,
whichever is later. (It is expected that second audit/inspection would be completed within four
years). This time-limit is, however, not applicable to cases of (i) fraud, (ii) other criminal offences,
(iii) cases where malafides are inferable : e-Cir/289/2011-12.
Cheques : Frauds : All branches should be vigilant while handling requests for payment of non-
home branch cheques relating to accounts not maintained with paying branch : CCFO/ADV/CL/
145/2007-08.
Advocates / Valuers / Chartered Accountants : Action thereagainst : Branches should exercise
due caution in the cases where loans are sanctioned on the basis of certificates issued by
advocates/ valuers / chartered accountants, and take suitable action in the cases of submission
of wrong certificates. Such cases as and when detected, should invariably by reported to the
self-regulatory bodies of the professionals, such as Bar Council of India, Institute of Engineers,
Institute of Chartered Accountants of India, etc., giving full particulars of the certifying
professionals : CCFO/ADV/CL/254/2005-06, CCFO/BO/CL/159/2007-08.
Advances : Expectations of the Bank from Chartered Accountants : CCFO/ADV/CL/111/2007-08.
Branches should take due precautions while dealing with CAs so that the pitfalls due to false/
36
Adv - 36
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
incorrect certification by Chartered Accountants in borrowal accounts, as far as possible, are
avoided.
Frauds Committed by Professionals, etc. : Frauds Committed by Professionals, third-party
entities (TTEs) : Guidelines for establishing procedure for creating database of IBA : e-Cir/218/
2010-11.
Guidelines for establishing procedure for creating Database : Reporting the names of professionals/
Third-Party Entities (TPEs) involved in Frauds to IBA : e-Cir/481/2011-12.
Branches should ensure that the operating units / branches forward the details of TPEs/Other
professionals engaged by them, who have been found wanting in their service having indulged in
malpractices, in the format enclosed to e-Cir/548/2011-12 to their controllers, i.e., CGM-SME,
CGM-CAG, CGM-MCG, CGM-SAMG, as the case may be, for eventual consolidation at the
CPPD and forwarding the same to IBA as per RBI guidelines.
Advances : Frauds : Guidelines for Establishing Procedure for Creating Database : Reporting
the Names of Professionals/Third Party Entities (TPEs) involved in Frauds, to Indian Banks’
Association (IBA) : IBA have recently advised the members banks that henceforth’ a “Certificate”
is to be submitted by the Banks to IBA that TPEs involved in frauds have been provided an
opportunity of hearing by the Bank is required to be signed by the CMD/MD of the Bank : e-Cir/
304/2012-13.
Adv. : Irregularities by Professionals : In addition to de-panelment, the Banks should approach
the professional bodies, as mentioned below, with complaints of professional misconduct on the
part of any professional engaged by the Bank for suitable action thereon : e-Cir/508/2012-13 :
a) Advocates - Bar Council of India.
b) Chartered Accountants/Cost Accountants - ICAI/CWA.
c) Surveyors/Valuers - Institute of Engineering.
In the event of an advocate engaging in professional misconduct, the right to proceed against him
before the Bar Council of India is available under the law to the Bank. Similar avenues are also
available to the Bank is case of Chartered Accountants and Surveyors/Valuers engaged in
professional misconduct.
Advances : Frauds by Professionals, etc. : Revised Reporting Format : Prescribed by IBA :
Enclosed to e-Cir/644/2012-13.
37
Adv - 37
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
OUTSOURCING OF
FINANCIAL SERVICES
Outsourcing of Fin. Services : Based on RBI guidelines, the Bank’s ECCB has approved the
policy for outsourcing of financial services in respect of credit-related matters. BOD at Corporate
Centre is separetely drawing up the Bank’s Policy related to outsourcing of matters not related to
credit : CCFO/ADV/CL/60/2007-08.
Outsourcing of Fin. Services : Credit-related Matters : The IBA now circulates list of outsourcing
agencies whose services were terminated and reported to the IBA by member Banks by way of
Circulars, on a quarterly basis : CCFO/ADV/CL/315/2007-08.
List, containing Names and Addresses of Service Providers forwarded to the Bank by the IBA
whose services have been terminated by Banks : CCFO/ADV/CL/316/2007-08.
Outsourcing : RBI Guidelines : The RBI as now advised that if a complainant does not get satisfactory
response from the bank within 30 days from the date of his lodging the complaint, he will have the
option to approach the Office of the concerned Banking Ombudsman for redressal of his
grievance/s : e-Cir/129/2008-09.
The Bank’s extant policy for Grievance Redressal Mechanism applies mutatis-mutandis (with
suitable modifications) to the complaints against the outsourcing agency received from our
customers. The key instructions relevant to the outsourcing policy are enclosed to e-Cir/129/
2008-09.
38
Adv - 38
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
BUSINESS FACILITATORS /
CORRESPONDENTS
BFs /BCs : Engagement : Scheme for Financial Inclusion by extension of Banking Services
through Business Facilitators and Business Correspondents : CCFO/ADV/CL/18/2007-08.
With the twin objective of ensuring greater financial inclusion and increasing the outreach of the
Bank combined with the need to substantially increase our market share in the rural and semi-
urban segments, a scheme for extension of banking services through “Business Facilitators” (BF)
and “Business Correspondents” (BC) has been formulated in line with RBI’s directives : CCFO/
ADV/CL/103/2007-08.
The Bank has signed a Memorandum of Understanding (MoU) with Department of Post, M.P.
Circle to facilitate the banking services as Business facilitators in the state of Madhya Pradesh.
Copy of MoU is enclosed to CCFO/ADV/CL/103/2007-08 (detailed separately).
Business Correspondents : Financial Inclusion by Extension of Banking Services : Engagement
of Business Correspondents : Individuals : The RBI have now permitted banks to engage individuals
like retired bank employees, ex-servicemen and retired government employees as Business
Correspondents (BCs).
Detailed operating guidelines : Detailed separately.
39
Adv - 39
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
BUSINESS FACILITATORS &
BUSINESS CORRESPONDENTS
Business Facilitator : Use of intermediate entities/individuals to provide support services for non-
financial services of the Bank. They are not intended to involve in the conduct of banking business.
Business Correspondent : Use of identified institutonal agents/organizations and other entities,
for supporting the Bank in extending financial services, operating from different locations away
from the Bank branches. They involve in the conduct of banking business.
Objectives :
• To provide comprehensive financial services to the under-privileged in the untapped/unbanked
areas encompassing savings, credit, remittance, insurance, pension products, etc. in cost-
effective manner.
• To improve process efficiencies and reduce transaction cost by adopting technology-based
solutions.
• To leverage on the strength of intermediaries in accelerating the process of financial inclusion.
• To substantially increase rural business base and market share.
• To market various financial products of the State Bank Group, including insurance and mutual
funds across the nation.
• To extend Micro Finance Services (Self-Help Groups) for uplifting the poor.
• To emerge as the leader in financial inclusion.
Eligible Entities :
Business Facilitator : NGOs, Farmers’ club, Funcitional Co-operatives, Community-based
organsiations, I.T.-enabled rural outlets of corporate entities, well functioning Panchayats, Agro
clinics/Agri business centres, Krishi Vigyan Kendras, KVIC/KVB, Post Offces, Insurance agents,
social organizations, etc.
BFs : AMFI Certificate holders have been approved for engagement as individual Business
Facilitators (BFs) by the competent authority : e-Cir/565/2009-10.
BFs : The role of BCs also includes the activities of BFs. Therefore, the additional categories of
eligible individuals advised vide e-Cir/435/2010-11 are also eligible for engagement of Business
facilitators (BFs).
Business Correspondents : NGOs/MFIs set up under Indian Societies/Trusts Acts, Societies
regstered under MACS Act of Co-operative Societies Act of States, Post Offces, etc.
BCs : Appointment of Additional Individuals : Salient Features of Operating Guidelines : e-Cir/
741/2009-10.
Detailed procedure furnished in e-Cir/683/2009-10.
BCs & BFs : Clarifications issued by the RBI : e-Circular/386/2008-09 :
a) Banks can engage companies registered under Section 25 of the Companies Act, 1956 as
Business Correspondents (BCs) provided that the Section 25 companies are stand-alone
entities, or Section 25 companies in which NBFCS, banks, telecom companies and other
Corporate entities or their holding companies do not have equity holding in excess of 10%.
40
Adv - 40
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
b) While engaging Section 25 companies as BCs, banks will have to strictly adhere to the
prescribed distance criteria as applicable between the place of business of the BC and the
branch.
The RBI recently increased the maximum distance criterion (distance between the place of
business of a BC and the base branch) for operation of Business Correspondent (BC) for
rural, semi-urban and urban areas (from the earlier 15 kms) to 30 kms : e-Cir/154, 564/
2009-10.
BCs : Eligibility : The Bank has finalized additional categories of eligible individuals for engagement
of BCs. The existing instructions for constitution of Selection Committee for engaging individual
BCs continue with a small change : e-Cir/233/2010-11.
BCs : Companies : The RBI has recently permitted banks to engage companies registered under
the Indian Companies Act, 1956, excluding Non-Banking Financial companies (NBFCs) as BCs.
Operating guidelines for engagement of ‘for profit’ companies as BCs, are detailed in e-Cir/737/
2010-11.
BCs, BFs : Restrictions : The Bank will have exclusivity at the Customer Service Points of the
SP for the BC/BF arrangement. Accordingly, an outlet of the BC/BF sourcing business for the
Bank should not source any banking/financial product for any other/Bank/Institution : e-Cir/136/
2010-11.
The above clause should be incorporated in all the agreements to be entered with BCs/BFs.
Business Facilitators : Categories : Since the role of a BC also includes the activities of BFs,
the three categories of individuals viz. Retired Bank Employees, Ex-servicemen and Retired Govt.
Employees have been approved for engagement as Business Facilitators (BFs) by the competent
authority : e-Circular/387/2008-09.
Business Facilitators : CSCs : The RBI recently permitted Banks to engage Common Service
Centres (CSCs) established by Service Centre Agencies (SCAs) under the National e-Governance
Plan (NeGP) as Business Facilitators (BFs) : e-Circular/767/2008-09.
BCs : Agreement : Revised Format of Agreement for BCs : Enclosed to e-Cir/1027/2010-11.
Incorporation of modified clause for renewal for BC agreement : e-Cir/1075/2010-11.
BFs & BCs : Renewal of Agreement : The Bank recently drafted a simple (unstamped) letter of
continuance, in consultation with the Law Dept. at Corporate Centre, which can be exchanged
with the BC/BF and would serve the purpose of continuation and renewal of the agreement : e-Cir/
571/2009-10.
BCs : Security Deposit : Amount of S.D. : Detailed in e-Cir/434/2010-11.
The customer base serviced by the BCs would also increase proportionately with increase in
CSPs. Consequently, provision needs to be made for complaints/disputes. In some cases, the
BC may have to make good the loss to the customer due to the acts of omission of the CSP.
Obtention of additional security deposits is a cushion against such occurrences.
BFs, BCs : Circle Audit : To ensure that the various risks are detected and mitigated by complying
with the laid down instructions by the RBOs/Branches/BC/BF/CSP, etc., suitable Audit Report
formats have been devised in the consultation with the I&A Dept., Hyderabad. Details furnished in
e-Cir/742/2009-10.
Further clarifications furnished in e-Cir/749/2009-10.
BCs, BFs : Sourcing of Agri/Per Gold Loans : Revised Instructions : e-Cir/778/2009-10.
41
Adv - 41
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
BUSINESS CORRESPONDENTS (BCs) - INDIVIDUALS,
BUSINESS FACILITATORS (BFs)
BCs, BFs : Business Correspondents, Business Facilitators : Restrictions : The Bank will have
exclusivity at the Customer Service Points of the SP for the BC/BF arrangement. Accordingly,
an outlet of the BC/BF sourcing business for the Bank should not source any banking/financial
product for any other/Bank/Institution : e-Cir/136/2010-11.
The above clause should be incorporated in all the agreements to be entered with BCs/BFs.
BCs, BFs : Remuneration : Revised Rates of Remuneration : w.e.f. 01.11.2010 : e-Cir/821/
2010-11.
BCs : Remuneration : Payment of Remunerations to Agents/Employees (CSPs) : BCs should
furnish a certificate from their auditors to this effect at half-yearly intervals. A suitable clause in
this regard should also be incorporated in the letter of engagement being exchanged with BCs :
e-Cir/879/2010-11.
Security Deposit : Revised Instructions : The securty deposit to be equal to average 2 days of
the estimated turnover at the CSP (deposit, payment and remittances) with discretion to reduce
the minimum amount from Rs.0.50 Lac to any amount up to Rs. 0.25 Lac, i.e., the minimum
amount of security deposit cannot be less than Rs.0.25 Lac. The discretion to reduce the amount
rests with the Selection Committee : e-Cir/884/2010-11.
BCs, BFs : Security Deposit : Format of Bank Guarantee : To be obtained for engagement of
Business Correspondents (BCs) / Business Facilitators (BFs) in lieu of Security Deposit : Enclosed
to e-Cir/1016/2010-11.
Education Qualification : Revised Instructions : The condition has been amended as :
“Individuals who can read and write vernacular language”. The discretion to relax this condition
rests with the Selection Committee. The discretion should, however, be used by the Selection
Committee only as an exception in deserving cases, and not as a rule. Where discretion to relax
the educational qualification is used, giving relaxation in security deposit simultaneously should
be avoided : e-Cir/884/2010-11.
BCs : Service Charges : The competent authority has waived the charges on account of cheque
book fee, minimum balance fee, inter-core charges, ledger fee, etc. in respect of current account
- Funds settlement account - being maintained by BCs with the Branches : e-Cir/874/2010-11.
BCs : Sub-Agents/CSPs : BCs should ensure compliance with the selection procedure while
engaging sub-agents/CSP operators. Acknowledgement may be obtained from the BC on the
duplicate copy of the letter advising BC for the selection procedure and retained along with
application/agreement : e-Cir/1033/2010-11.
Banks are fully responsible for the actions of the BCs and their retail outlets/sub-agents. Hence,
it is necessary to ensure that the BC follows the proper selection procedure while appointing sub-
agents.
BCs, CSPs : Customer Service Points : Reputation Risk : Measures for its mitigation : e-Cir/
1059/2010-11 : deailed separately.
42
Adv - 42
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
BCs : Policy for Allocation of Urban Customer Service Points (CSPs) : e-Cir/1070/2011-12.
BCs : Monitoring : of Customer Service Point (CSP) of Business Correspondents (BCs) : In-
structions of Department of Financial Services (DFS), Govt. of India : reiterated vide e-Cir/1071/
2011-12.
BC/CSP Channel : Process of migrating Branch channel accounts to BC channel working on
PoS device and kiosk banking technology : Detailed in e-Cir/013/2013-14.
BCs : ‘Do’s & Don’ts’ : Displaying ‘Do’s & Don’ts’ at the CSP Outlet - Kiosk Banking Operations :
e-Cir/9/2011-12.
BCs : Financial Inclusion Centers : Structure and Functions of FIC : Detailed in e-Cir/139/
2011-12.
The FIC is a back-office support structure for the BCS/CSPs. Its activities include uploading of
account opening files received from the CSPs in the CBS, ensuring regular supply of stationery,
account opening forms, sign-boards, to the CSPs, monitoring of settlement accounts, visit to the
CSPs to ensure compliance of instructions by the CSPs, custody of agreements and account
opening forms, sanction of loans sourced by CSPs/BCs to be made available at CSPs, marketing
of Bank’s products at CSPs, verification of compliance with KYC norms by CSPs, etc.
BCs, BFs : Consumer Protection Measures : Reiterated vide e-Cir/389/2011-12.
BFs : Business Facilitators : Individual BFs : In view of the likely reputation risk to the Bank, the
functioning of the BF channel has been reviewed by the Bank and it has been decided to (e-Cir/
34/2012-13.) :
i) To discontinue to engagement of fresh individual BFs.
ii) To terminate existing individual BFs on expiry of their agreement.
43
Adv - 43
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
ENGAGEMENT OF BUSINESS CORRESPONDENTS (BCS)/
CUSTOMER SERVICE POINTS ( CSPS) :
REPUTATION RISK-MITIGATION
Ref. : e-Cir/1059/2010-11.
While conducting the cash transactions at CSPs, i.e., deposit/withdrawal/remittances, a few
CSPs have been found to indulge in malpractices such as asking for unauthorised money, over
and above the Bank’s approved rates of charges from the customers, for the service they are
rendering, particularly in remittances/Tatkal transaction, which is in contravention to the Bank’s
extant instructions. The gullible customers at the CSPs are likely to be exploited. This behaviour
poses serious risk to the reputation of the Bank.
The following measure should be adopted to mitigate reputation risk :
• Due diligence to be exercised at the time of selection of BC/CSP.
• Involvement of Link Branch/CMFs in the process of selection of CSPs and carrying out due
diligence as applicable for BC.
• Displaying Do’s and Don’t’s for customers while dealing with BCs/CSPs at the outlet.
• Displaying the structure of fess/charges to be borne by the customers at CSP outlet.
• Close monitoring of the activities of CSPs/BCs by CMFs/Link Branch/ CM (Rural)/AGM of
the Region, including periodical visits.
• Obtention of feedback from customers at periodic interval by CMFs/Link Branch and analy-
sis thereof.
• Audit of the CSP outlet by Circle Auditors while conducting the audit of the Link Branch.
• Imparting training to CSPs/BCs and hand-holdings.
• Customer education and financial literacy - Awareness campaign in the villages where CSPs
are functioning by CMFs/Link Branch/District co-ordinator.
• Identifying opinion leaders in the villages and keeping contacts with them for knowing the
functioning of CSPs/BCs.
• The contact numbers of Link Branch Managers/CMFs/CM (Rural) AGM of RBO should be
prominently displayed in the CSP, with an advice to customers to contact any of the officials
for any instance of overcharging/ unauthorized charges by the CSPs.
44
Adv - 44
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
FAIR LENDING PRACTICES CODE (FLPC)
FLPC : The Bank has now adopted a model 'Fair Lending Practices Code' (FLPC), a copy of
which is enclosed to CIRCO/ADV/CL/19/2004-05.
Format for periodical review of the functioning of the grievance redressal mechanism is enclosed
to CIRCO/ADV/CL/19/2004-05.
Response to a complaint should be generally given within 4 weeks from the date of receipt.
Proper record thereof should be maintained at the branches for perusal by officials of Inspection
& Audit Department.
Fair Practices Code for Lenders : Disclosure : The RBI have recently advised that with a view
to bringing fairness and transparency, the sanction letters/loan application forms should cover all
information about fees/charges payable for processing the loan application, the amount of fees
refundable if loan amount is not sanctioned/disbursed, pre-payment options and charges, if any,
penalty for delayed repayments, if any, conversion charges for switching loan from fixed to floating
rates or vice versa, existence of any interest re-set clause and any other matter which affects the
interest of the borrower : e-Cir/727/2010-11.
Loan Applications : Ackmt. : It is now mandatory to acknowledge all loan applications submitted
by MSME borrowers by recording running serial number on the application as well as on the
acknowledgement receipt : e-Cir/926/2011-12.
Advances : Disposal of Applications Seeking Finance : Time-limit prescribed by the Govt. of
India : e-Cir/554/2011-12.
The time norms of 30/45/90 days mandated by the GOI are the outer limits, for various loans;
these time-lines are sacrosanct and should be adhered to without any deviation
FLPC : Rejection of Loan Applications : Modified Provisions : CCFO/ADV/CL/104/2007-08 :
a) Along with the loan application form, the applicant should also be provided with a schedule
of various charges such as processing fee, pre-payment fee, etc. payable by him.
b) The existing proforma (Annexure-I enclosed to CCFO/ADV/CL/104/2007-08) for advising
rejection of a loan proposal for loans up to Rs. 2 Lac should now be made use for loan
applications above Rs. 2 Lac as well, with the proviso that the reason for rejections may be
suitably modified on a case to case basis, where considered appropriate.
Adv. : Non-sanction of Loans : Legal Opinion : Availing loan from the Bank is not a right
available to a person. It is the discretion of the Bank to grant the loan. It is advisable to
incorporate a sentence in the advertisement to the effect that loan will be granted by the Bank at
its discretion, and that the Bank reserves the right to decline any request for grant of loan without
assigning any reason : CCFO/ADV/CL/71/2005-06.
FLPC : Adoption : Operating units should invariably furnish a copy of the loan agreement along
with copies of all enclosures quoted in the loan agreement to all Borrowers at the time of sanction/
disbursement of loans against their acknowledgement : CCFO/ADV/CL/334/2007-08.
FLPC : Fees/Charges : RBI have now advised that the Banks besides providing information
about the fees/charges must inform all-in-cost to the customer to enable him to compare the
rates charged with other sources of finance : e-Cir/583/2008-09.
45
Adv - 45
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Please also ensure to incorporate that the rates are subject to change from time to time as
decided by the Bank. However, such changes will be effected prospectively after giving public
notice to this effect.
Review of G.R.M. (Grievances Redressal Mechanism) : Review : Revised Structure : e-Cir/62/
2009-10.
Loan Applications : Time Norms for Disposal : The policy approved by the ECCB is furnished in
e-Cir/218/2012-13.
46
Adv - 46
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
BEST PRACTICES CODE :
CREDIT MANAGEMENT
• Completed Loan Application / Bio-data should be entered in Loan Applications Received
and Disposal Register. At the Processing Cells, the Loan Application should be entered in
Tracking Sheet also.
• On receipt of Application, requisite documents and application fee, an acknowledgementshould be given to the Customer.
• Preliminary scrutiny should be done to ensure compliance with KYC norms and for prima
facie acceptability of the proposal. Compliance with Check-list should be ensured before
processing the proposal.
• Any application fees e.g. Mortgage Fee, Processing / Upfront Fee, Fee for Valuation of
Property, Fee for Legal Opinion, etc. should be recovered through an Account Payee Cheque
/ Banker’s cheque.
• The key data regarding date of receipt of proposal and processing / sanction / rejection /
return, etc. should be recorded in Tracking Sheet. A date chart should be enclosed with all
proposals.
• Details of concurrent dealings of the prospective customer with any other Bank / Financial
Institution should be obtained. If required, opinion report from other Bank / Financial Institution
should be called for.
• Information should be obtained about all associate / family / group concerns, along with
details on the inter-concern locking of funds and opinion report be sought from their Bankers.
• CIBIL data should be referred to and the Applicant’s details should be cross-checked with
RBI’s Defaulters’ List.
• Gaps found, if any, in the proposal should be advised to the Customer and further information/
documents sought.
• Opinion Reports on Promoters/Borrowers/Guarantors be compiled/updated.
• Preliminary Searches for Corporate Accounts should be made at the ROC Office and
Regd. Office of the Company.
• Valuation Report of the property to be charged to the Bank should be obtained from approved
valuer. Search Report on Title clearance/Non-encumbrance/Marketability of the property
should be obtained from Bank’s panel Advocate in the Bank’s approved format.
• The Bank officer should visit the site to ascertain correctness of the address and approximate
value of the property. Market enquiries should be made to ascertain ownership / occupancy
of the property. The date of pre-sanction visit for inspection of Primary / Collateral Security
should be recorded in the proposal.
• CGTMSE/ECGC cover, wherever intended to be obtained, should be intimated to the customer,
along with details of applicable fee/charges, etc.
• Pre-Sanction Survey should be done in all cases and properly recorded.
• The loan proposal should be appraised as per the Bank’s laid down procedure. CRA exercise,
wherever applicable, should be completed and got validated.
47
Adv - 47
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
• Sanction/approval for concessions or waivers should be obtained from the Appropriate Authority
as per current Delegation of Powers. Should also comply with the relevant regulatory guidelines.
• Control Return should be submitted to the Controlling Authority immediately after the sanction
of loan.
• Sanction letter of the loan, along with its Terms and Conditions, should be advised and
acceptance obtained from the Borrower-Customer and Guarantor, on the Arrangement Letter;
it should be kept along with other documents. In case of sanction at Processing Cell, the
sanction should be promptly advised to the Branch concerned also.
• In case of rejection of loan application, the same should be advised to the Applicant, citing
the reasons therefor.
• Security Documents, properly stamped, as prescribed for the advance should be obtained.
The documents should be executed by the Borrowers / Authorised persons on behalf of the
borrowers. In case of corporates, it should be backed by suitable Board resolution.
• The list of documents obtained should be entered in the loan document execution register,with the signature of the official in whose presence it was executed.
• Loan should be disbursed after compliance of all terms and conditions of sanction.
• Noting of the charge with ROC or other Revenue Authorities should be ensured.
• Required margin should be obtained upfront.
• The loan should be disbursed by direct payment of the supplier.
• Term Loan disbursement should be in stages as per disbursement schedule in line with
progress of implementation of the project.
• The disbursement should be made after inspection by the authorised official.
• End-use of funds should be ensured through post-disbursement monitoring / follow-up.
• Assets charged to the Bank should be insured comprehensively, unless specifically waived
by appropriate authority, for full market value or 110% of the sanctioned limits, whichever is
higher, covering all related risks, with the Bank’s interest noted thereon.
• Operations in the loan account should be scrutinised to ensure that these are in line with
declared activities and satisfactory conduct.
• Stipulated statements like Stock Statements, FFRs, MSOD, Annual Financial Statements,
etc. should be obtained as per terms and conditions of sanction in the prescribed formats.
For delayed submission, penal charges should be recovered as per extant instructions.
• Correct rate of interest should be applied. Revision, if any, should be promptly intimated to
the customer. Duplicate copy, along with the acknowledgement, to be kept with other
documents. Service charges should be collected as per approved rates.
• Irregularities in regard to conduct should be promptly taken up with the customer / guarantor
for regularisation.
• Irregularity Report should be submitted to the Controllers, for seeking necessary confirmation.
• Particulars related to the customer / guarantor / concern e.g. address, contact details, legal
heirs, etc. should be kept up-to-date.
• Stock statements submitted by the Borrower should be scrutinised and DP calculated as
per sanction. The DP should be modified and recorded in the system.
48
Adv - 48
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
• Verification of assets should be done at prescribed periodicity at irregular intervals, wherever
mandatory as per laid down norms.
• Stock Statements should be verified with the Stock Register for its correctness. Obsolete /
Non-moving stocks, if any, should be excluded for calculation of Drawing Power.
• Inspecting official / AVOs should submit the inspection report to the Controller and share
the adverse observations, if any, with the customer also. Book-debts beyond the cover period
stipulated in the sanction should be removed from the list of outstanding Book-debts given to
the Bank.
• Renewal / Review falling due Diary should be maintained and Financial data/ requisite
information should be called timely. Customer is required to submit Renewal data at least 2
months before the renewal falls due. The date of renewal should be incorporated in the CBS.
• Working Capital advances should be renewed every year and Term Loan should be reviewd
annually.
• CRA to be carried out annually independent of Renewal / Review.
• It is to be ensured that Security Documents always remain enforceable. Efforts for revivalshould be initiated at least nine months before expiry of the documents. Daily list should be
maintained properly for obtaining Revival Letters.
• SMAs (Special Mention Accounts) to be identified monthly and appropriate corrective actions
initiated immediately.
• Proper classification under IRAC norms to be ensured. Accounts identified as SMA / NPA,
appropriate approaches laid down for Regularization / Rehabilitation / Restructuring / Recovery
to be followed.
• The SMAs / NPA accounts, where recovery process is considered to be initiated, a legal
notice should be served to the Borrower / Guarantor and appropriate recovery action (Civil
Suit / DRT / SARFAESI / Recovery Certificate, etc.) started. Before the recovery proceedings
are started, it should be ensured that security documents, charges, etc. are in order.
• Instant Credit Scheme is now available up to Rs. 30,000/-. Proper records of cheques returnedshould be maintained customer-wise; due diligence should be observed before extending the
facility again to the same customer(s).
Ref. : e-Cir/619/2009-10.
49
Adv - 49
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
DEBT SECURITISATION
Process : Securitisation of assets is a good source for recycling of funds in addition to the
existing channels. It is a novel technique capable of revolutionising the debt market by
transforming assets, fixed and current, into tradeable securities, thus making them liquid
(and then selling securities in market). Defined in Sec. 2(z) of SARFAESI Act, 2002.
The concept of securitisation is catching on in India.
To use a new-classic definition, asset securitisation is a “carefully structured process whereby
loans and other receivables are packaged, underwritten and sold in the form of asset-backed
securities” : SBI Monthly Review, Oct. 1992.
In the broad sense, securitisation refers to the process whereby credit is accessed in the
form of negotiable securities by direct matching of suppliers and users of loanable funds,
thus bypassing balance sheets.
Securitisation is a funding process which allows banks to take loans off their balance sheet
thereby removing the risk of default and freeing up capital.
Flow Chart :
SECURITISING COMPANY ———————->——————— SELLS LOANS
é ê ê
INTERMEDIARY ———————————>—————----—— TRUST
(usually, a bank)
é ê ê
BUYERS —————————————<——————--------—-- A.B.S.
(Asset-based
security)
Asset securitisation is a synthetic technique of conversion of assets into securities, securities
into liquidity, liquidity into assets and assets into securities on an ongoing basis, increasing
thereby turnover of business and profits, while also providing for flexibility in yield, pricing
pattern, size, risks and marketability of instruments used to the advantage of both borrowers
and lender/investors : IIBJ, April-June 1993.
The SRESI/SARFAESI Act, 2002 prescribes the legal framework for securitisation. Further
details furnished in respective Chapter.
50
Adv - 50
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
ADVANCES :
SOME LEGAL ISSUES
Financing to Deaf & Dumb Illiterate : Legal Opinion :
The essential requirement for making the execution valid is that the executant should understand
the implications of the documents executed by him. In the instant case, the borrower is deaf and
dumb and is illiterate also. The document, therefore, cannot be explained to him by any one
except those who understand his language. If it becomes necessary to finance him, it is sug-
gested that persons who train deaf and dumb in the Institutions can be called at the Branch to
explain the implications of the documents to him and their evidence may be recorded for having
explained the documents to him. This is only a practical solution. Even so, there is always a riskin proving before the court that the documents were properly explained. The Bank will have to
depend upon the evidence of the person(s) who had explained the documents to him.
Interest Rates : Court’s Discretion :
N.I. Act, Sec. 79 : This section does not prevail over Sec. 34 of Civil Procedure Code, 1908. Both
are Central Acts covering the same field viz. the power of discretion given to the Court to fix a date
for payment of interest pendente lite (during the course of litigation; i.e., during the pendency of
the case). In addition, Sec. 34 of the Code does give power to fix rate of interest also. This section
applies to the claims based on negotiable instruments as well : Union Bank of India v/s P. Krishnaiah
& another, AIR 1989, AP 211.
Recovery of Rent Dues :
If the landlord impleads the lending banker as a defendant in a suit filed for recovery of rent dues,
the Bank has no option but to defend it forcefully. It should be made clear in the reply that the
Bank has no privity of contract with the landlord, and that the goods/machinery stored/installed in
the premises are charged to the bank as a pledgee/hypothecatee.
Recovery of State Govt. Dues :
As per the Sec. 33-C of the M.P. Sales-Tax Act, the State Govt. has a first charge over the
property of the person having sales-tax dues (tax and or dues). The Govt.’s charge will rank priorto that of the Bank regardless of when the charge was taken. The Chief Legal Adviser at the
Corporate Centre has opined that the provisions of the amended section are operative on allassets charged to the Bank even prior to 19th January 1976, when the amendment came into
force.
It is, therefore, imperative that timely and effective steps are taken by the branches to ensure
prompt payment of sales-tax by units financed by us. With this end in view, the receipted challans,
etc. should be called for periodically for close scrutiny.
No additional facilities/enhancements in limits should be made available to a defaulting unit with-
out the prior sanction of the concerned controlling authority.
Direct Payments :
Letters to Suppliers : To guard against the contingency of utilising the proceeds of the
drafts/banker’s cheques without actually delivering the vehicles, the usual forwarding letters
(of Account payee drafts/banker’s cheques) to the suppliers should contain the prescribed
additional paragraph (as per SIB/CL/77/1985), in respect of breach of trust.
51
Adv - 51
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Bank’s Liability in case of Accidents :
The hypothecating bank is not liable for the payment of compensation to the injured
passengers/victims of the accident caused by the hypothecated vehicle [as the bank is only
a creditor of the owner of the vehicle and holds the vehicle as security with neither de jure (in
the law) nor de facto (in fact) possession of it nor title to it] : Bank of Baroda, Ahmedabad v/
s Rabari Bachubhai Hirabhai & others, AIR 1987 Guj 1986 (I) G.L.R. (p. 144), SBI Monthly
Review, Jan. 1990.
Despite this, if the financing bank is impleaded as a defendant, the bank has no option but
to defend the suit forcefully. (If a defendant does not defend a case in the court, the court
proceeds ex-parte against him and a decree/award may be awarded against such a defendant).
52
Adv - 52
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
MID-CORPORATE GROUP (MCG)
Introduction :
The MCG was originally created under the Corporate Banking Group. Now, MCG is an independentGroup.
The MCG operates through Regional Offices and branches.
Objectives :
The M.C.G. (Mid-Corporate Group) has been created with the following objectives :
a) Providing exclusive focussed attention on the banking requirements of MCs (Mid-Corporates);
b) Selling vigorously our various products to these MCs through Relationship Management
model;
c) Improving turn - around - time (TAT) for credit delivery and ensuring consistency in credit
appraisal/quality;
d) Achieving the ultimate goal of increasing our income and market share in this segment; and
e) Improving customer service levels.
The ultimate objective is increasing our market share and income in the Mid-Corporate Business
Segment and thus strengthening the Bank’s Balance Sheet.
Structure :
The Mid-Corporate Group (MCG), headed by a Chief General Manager, has been created at the
Corporate Centre.
Mid-Corporate Regions (each headed by a General Manager) have been created in Mumbai,
Ahmedabad, New Delhi, Kolkata, Hyderabad, Chennai and Bangalore.
Select branches (in identified centres) with, high concentration of MC units, have been identified
as Sales Hubs and have been brought under the direct control of the Mid-Corporate set-up.
Also, Mid-Corporate accounts at branches in some additional identified centres, other than those
at MC-owned branches, have also been brought under control of additional Sales Hubs in the Mid-
Corporate Group through the Off-site model.
Mid-Corporate Group (MCG) : It was originally created under the Corporate Banking Group.
Now, MCG is an independent Group.
The MCG operates through Regional Offices and branches.
The cut-off total indebtendness for SME/commercial advances has been recently revised to
Rs. 50 crore for handling of business by NBG Branches at all MCG Centres : e-Cir/733/2010-11.
53
Adv - 53
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
Strategies :
While deepening the relationship value with existing MC clients through increasing the share of
the wallet and preparing a time-bound programme for acquisition of new business, some specific
strategies are being followed for securing a substantial expansion in Mid-Corporate business :
a) Pre-screening based on selected criteria for identifying customers to be targeted.
b) Account-planning for estimating business and revenue potential of existing/prospective clients.
c) Devising marketing/selling strategies for cross-selling of products of the Bank and Bank’s
subsidiaries.
d) Creating/customising products/services in tune with MC requirements.
e) Setting up technology-based facilities for handling bulk transactions in cash management,
trade finance, forex and treasury products.
f) Improving customer service levels.
With the launch of the MCG, the Bank expects the new thrust on Mid-Corporate business, based
on Relationship Management, to yield results in terms of increased volumes of business, both
credit-based and fee-based, and resultant income through improved turn-around-time (TAT) for
credit processing/delivery and improved service levels for Mid-Corporate customers.
Miscellaneous :
The philosophy underlying the creation of MCG is to increase the market share and to improve the
earnings from each of the Mid-Corporate (MC) accounts through meticulous Account Planning.MCG has been set up on Relationship Management basis, thrust being on aggressive marketing
for acceptable business.
The business model under MCG is operative at the centers where MC business has significant
concentration. The model functions as under :
w MCG has select Owned Branches in identified important centers all over the country and
these are controlled directly by MCG.
w It is also responsible for Off-Site MC accounts at identified centers (including those mentioned
above), at branches, which are under NBG (National Banking Group).
At centers, where MC-owned branches of MCG exist, and at additional centers, where there is
adequate concentration of MC accounts, the MC business is handled by MCG. Off-Site MC
accounts at all these centers continue to be serviced in NBG branches.
The Relationship Managers (RMs) for Off-Site MC accounts actively market for new MC business
and also strive to increase the wallet share from existing MC accounts. All such business generated
by the RMs is retained at the NBG branches concerned at the aforesaid centers.
For branches which have off-site MC Accounts at identified centres under NBG, some guidelines
have been prescribed for smooth transaction of business as well as in understanding the correct
role and responsibility of Relationship Managers (RMs)/Branch/Branches in handling off-site Mid-
Corporate Accounts in NBG.
The branches whether MCG-owned or under NBG should ensure that no acceptable business
whether MC or Retail goes past the Bank.
54
Adv - 54
SB
IO
AB
HO
PA
L
CI
RC
LE
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
A
BH
OP
AL
C
IR
CL
E
SB
IO
AB
HO
PA
L
CI
RC
LE
H. SULAIMAN (SBIOA)
STRESSED ASSETS MANAGEMENT GROUP (SAMG)
One of the initiatives suggested by the consultants (McKinsey & Co.) is the creation of a separate
organisation at the Corporate Centre for handling the NPAs of CAG and Mid-Corporate Group
[including NBG NPAs at SAMBs/RARBs and MC-owned branches, as well as NPAs with
outstandings above Rs. 1.00 crore (originally, above Rs. 5 Crore) at NBG branches at the MC-
owned branch Centres and control accounts].
Current Enhanced Ceiling (2013) : Above Rs. 10 Crore (w.e.f. March 2013).
This enables these groups to focus on clean business, without getting involved in NPAs. This new
organisation has been named as Stressed Assets Management Group (SAMG).
SAMG is now headed by a Dy. Managing Director. The SAMG controls the Stressed Assets
Management Branches (SAMBs). The Bank converted RARBs into SAMBs during 2004 and
brought them under the direct control of SAMG at the Corporate Centre.
SAMBs are kept as lean outfits with limited resources; they will continue to draw support from the
various Departments of the LHO on an on-going basis.
In 2010, the Bank decided as a policy matter to shift the control of Stressed Assets Resolution
Centres (SARCs) from Deputy General Manager (SAMB) to the respective Deputy General Manager
(B&O) in the Circles to maintain Circle ownership of the accounts throughout their lifecycle and
also to end dual control of NPAs. In addition to it, the SARCs have been re-named as Stressed
Assets Recovery Branches (SARBs).
Latest changes regarding control of SARBs, (2013-14) : detailed in ‘Misc. Topics’.