BANK OF MAHARASHTRA

STAFF TRAINING COLLEGE

PRABHAT ROAD PUNE

PRE-PROMOTION 2021

STUDY BOOK FOR OFFICERS

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 INDEX

Sr No Topic Page
1 Bank Results 4

2 BR Act 7

3 RBI Act 12

4 Indian Contract Act 14

5 KYC-AML Policy 17

6 Deposit Policy 29

7 Consumer Protection Act 56

8 Banking Ombudsman 60

9 Customer Service Policy 72

10 Forex Deposits 107

11 Forex Business 117

12 Priority Sector Guidelines 135

13 Financial Inclusion 152

14 Govt Sponsored Schemes 156

15 Lending Policy 161

16 Loan Review Policy 173

17 Agriculture Finance & Schemes 193

18 Recovery in Agriculture 234

19 MSME 237

20 Balance Sheet & Ratio Analysis 256

21 Working Capital Assessment 263

22 Term Loan Assessment 269

23 Retail Loan Products 272

24 IRAC Norms 308

25 Recovery Policy & NPA Management 319

26 OTS Schemes 342

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27 Basel III 348

28 Risk Management & Policy 355

29 IT Products MCQs 381

30 ABC Products 414

31 RBIA Policy 422

32 Fraud Management Policy 427

33 Deceased Claim Policy 438

34 IFRS 455

35 Some Terms explained 461

36 Preparing for Personal Interview 481

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 FINANCIAL RESULT
QUARTER/HALF YEAR ENDED 30TH SEPTEMBER 2020
Major highlights of Q2 FY 2020-21
1. Total Business increased by 12.53%, Total Advances increased by 13.13% & Total
Deposit increased by 12.15% YoY
2. Net Profit increased by 13.44% YoY to INR 130.07 crores
3. Gross NPA declined to 8.81%
4. Net NPA declined to 3.30%
5. Operating profit grew by 7.18% YoY to INR 805.73 crores
6. Net Interest Income increased by 4.38% YoY for Q2FY 20-21 to INR 1,120.42 crores
7. Cost to Income Ratio improved to 48.73% for Q2FY20-21 as against 51.25% of Q1FY20-
21
8. Healthy CASA at 50.51%. CASA increased by 17.46% YoY for Q2FY20-21
9. Provision Coverage Ratio improved to 87.15% for Q2FY20-21 as against 82.71% in
Q2FY19-20
TOPLINE- BUSINESS
(Rs. In Crore)

Particulars As on
Sep 19 Jun 20 Sep 20
Total Business 232847 249608 262034
Deposits 141440 152987 158626
of which CASA 68212 75824 80125
CASA Share (%) to Total 48.23% 49.46% 50.51%
Deposit
Gross Advances 91406 96621 103408
Gross Investment 60303 52861 60303

CREDIT PORTFOLIO
(Rs. In Crore)
Particulars As on
Sep 19 Jun 20 Sep 20
Gross Advances 91407 96621 103408
of which
Retail Sector 19809 24191 26628
Agriculture Sector 15164 14796 16039
MSME Sector 14357 18414 19057
Total RAM 49330 57401 61724
Corporate & Others 42077 39220 41863

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PROFITABILITY
(Rs. In Crore)

Particulars Half Year Ended Quarter Ended

Sep 19 Sep 20 Sep 19 Jun 20 Sep 20
Total Income 6488 6584 3296 3265 6584
Total Expenses 5078 5068 2544 2555 5068
Operating Profit 1410 1516 752 710 1516
Provisions & 1280 1030 359 609 1030
Contingencies other than
Taxes
Profit before tax 130 486 393 101 486
Tax Expense (65) 255 278 -- 255
Net Profit 196 231 115 101 231

Movement of NPA
(Rs. In Crore)

Particulars Half Year Ended Quarter Ended

Sep 19 Sep 20 Sep 19 Jun 20 Sep 20
Opening Gross NPA 15324 12152 16650 12152 10559
Less: Total Reduction 2066 3238 1849 1698 1578
Of which Recovery + 883 678 678 156 556
upgradation
Gross Addition 2150 191 608 105 125
of which: Variable 41 53 6 28 40
: Fresh Slippage 2109 138 602 77 84
Net Increase 84 (3047) (1241) (1594) (1453)
Closing level of Gross NPA 15409 9105 15409 10559 9105
Gross NPA [%] 16.86% 8.81% 16.86% 10.93% 8.81%
Net NPA [%] 5.48% 3.30% 5.48% 4.10% 3.30%

SHARE HOLDING PATTERN

Particulars Sept 20
% Holding
Govt of india 93.33%
Bank FIS & Insurance Co. 3.50%
FII, NRI & OCBs 0.17%
Others 3.00%
Total 100%

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As on 30th Sep 2019
No. of Shares (Cr) 656
Net Worth (Rs. In Cr) 7376
BV per share (Rs.) 11.22
Return on Equity (%) 7.64

BRANCH NETWORK

Category of Branch As on
Sep 19 Jun 20 Sep 20
Metro 466 458 462
Urban 325 331 338
Semi- Urban 426 428 437
Rural 615 616 613
Total Branches 1832 1833 1850

ATM NETWORK

Particular As on
Sep 19 Jun 20 Sep 20
Number of ATM 1860 1819 1735

STAFF

Category of Staff As on
Sep 19 Jun 20 Sep 20
Officers 6825 6531 6618
Clerk 4505 4183 4278
Sub-Staff 1651 1700 1670
Total 12981 12414 12566

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 BANKING REGULATION ACT 1949
Passed as the Banking companies Act1949 (came into force wef 16.03.49.It was made applicable
to J & K in 1956 (and now applicable throughout India). The act is not applicable to Primary
Agriculture Societies, Co-operative land mortgage banks and non-agriculture primary Credit
Societies.
Banking is defined under Section 5-b means accepting for lending or investment of deposits of
money from public repayable on demand or otherwise and withdraw able by cheque, drafts
order or otherwise.
Section Description
5-a Approved securities
5-b Baking is defined (Accepting deposit for lending & investment)
5-f Demand Time liabilities
5-n Secured loan or advances
6-1 Banking business
6-2 Restriction on business
7 Use of work banking
8 Restrictions on business of trading of goods except realization of
securities held by it.
9 Banks prohibited in holding Immovable properties more than 7 years
except acquired for own use
10 Management prohibition period of chairman and director etc. 5 year
may extend for further 5 year
11 & 12 Paid up capital, reserves and rules foreign banks
13 Commission or brokerage
14/14A Creating charge
15 Prohibits of payment of dividend
17-1 To create reserve fund 20% net profit transferred before dividend(RBI
–directs banks to transfer 25% net profit before dividend w.e.f 2011)
18 Cash reserve
19 Permit bank to form subsidiary company
19-2 No banking company shall hold shares in any company any amount
exceeding 30% of its own paid up share capital + reserve or 30% of the
paid up share capital of that company whichever is less.

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20 Bank cannot grant loan against security of their own share
21 Control over advances by RBI
21A Rate of interest charged by banks are not subject to scrutiny by courts
22 Licensing of banking companies from RBI
23 Branch Licensing
24 STATUTORY LIQUIDITY RATIO
26 Unclaimed Deposits
29 Bank to publish Balance Sheet
30-I Balance sheet to be got audited from qualified Auditors
31 Submit Balance sheet and audit Report within 3 months
35 Inspection of Banks by RBI
35A Powers to give directions in public interest
36 RBI can terminate Chairman or any employee
45 RBI has power to apply to Central Govt. for suspension of business by a
banking company and prepare a scheme of reconstitution or
amalgamation.
45Y Preservation of Records
45 ZA-ZF Nomination Facilities on Bank deposits ,safe deposit articles and lockers
45Z Return the paid instruments
47A RBI can impose penalty for various kind of violations
52 Central Govt can make rules for all matter
Banking Law Amendment Act 2012
1. In consultation with Central Government, RBI can order to supersede the Board of
directors up to 6 months can be extended up to 12 months
2. As per section 29 RBI call for information and records relating to business of the company
and /or its associate enterprises.
3. Nationalized bank can issue bonus shares and right issue and increase the authorized
capital with the approval from Central Government and RBI (maximum 3000 crore).
4. Section 26A provides to establish DEAF (Deposit Education and Awareness Fund) to create
awareness among the customers.
5. Prior approval of RBI is mandatory to hold 5% or more of share capital or voting rights in
a banking company.

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 6. Cooperative Societies should mandatorily obtain license from RBI for banking business.
7. Penalties- For providing false information to RBI the penalty would be INR 10 million.
Failure to furnish account books or any requested information up to INR 2 million.
8. Voting Rights- For Private sector Banks it increases shareholders voting rights from 10%
to 26%. It enables the government to raise voting rights in PSB to 10% from the current 1%.
Negotiable Instrument Act 1881
 The negotiable instrument act was passed during 1881 and came into force wef March
01, 1882.It has 147 sections and 17 chapters (Section 138 to 142 were added in 1988-
wef from April 01, 1989 and section 143 to 147 during Dec 2002.Last amendment was
done in Dec 2015.
 The act is applicable to entire India.
 Negotiable Instrument (NI) has not been defined directly in the NI Act but as per section
13, an NI means and include promissory note, bill of exchange and cheque payable
either to order or bearer
 As per Indian Currency Act (Sec 21), a Currency Note is not a Negotiable Instrument.
Negotiable Instruments
(1) Promissory Note (2) Bill of Exchange (3) Cheque
Negotiable Instruments u/s-137 of Transfer of Property Act: (documents of title to goods
such as) Bill of lading, Railway Receipts, Dock Warrant, Warehouse Receipts,
Wharfinger Certificate, GR Approved by IBA &All these are also document of title to goods
under Sale of Goods Act.
Characteristics of NIs
Following Characteristics distinguish NIs from other forms of written contracts:
(i) No formalities are necessary in transferring the rights in a NI.
(ii) The transferee can sue on the instrument in his own name and without making the
transferor a part to the suit.
(iii) Notice of transfer is not necessary to the liable party to ensure that he makes payment
only to the transferee.
(iv) A bonafide transferee gets even a better title than the transferor. This is an exception
to the general rule that no one can give a better title than he has.
Promissory Note (Sec. 4)
Promissory Note is an instrument:-In writing, containing an unconditional undertaking (or
promise), Signed by the maker, to pay a certain sum of money; to or to the order of a certain
person or to the bearer of the instrument. It needs to be noted that the matters of form like

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 number, place, date etc. are usually given in promissory notes but they are not essential in
law
Bill of exchange (Sec. 5)
A bill of exchange (BEO) is an instrument: -in writing; containing an unconditional order, signed
by the maker, directing a certain person to pay, a certain sum of money only to, or to the order
of, and a certain person or to the bearer of the instrument.
Parties to a bill of exchange (Sec. 7)
Drawer: The person (including a minor) who orders to pay- may be seller of goods. He is also
the creditor.
Drawee: Who is directed to pay- may be a buyer of goods, He is also the debtor. A minor cannot
be a drawee as he cannot incur liability.
Payee: Who is authorized to obtain the payment?
Acceptor: The drawee becomes acceptor on acceptance of BOE for payment.
Holder: The holder of the bill may be original payee named in the bill, or one to whom the bill
is endorsed over by the original payee. In the case of a bill or a promissory note payable to
bearer, the bearer is the holder.
Holder in due course (Sec.9)
a) is a person (payee or endorsee or bearer) who must have the instruments in possession
b) possession is obtained for valuable and lawful consideration (and not as a gift) before
its maturity (in case of bill)
c) He obtains it in good faith without sufficient reason to believe that any defect existed
in the title of the person from whom he obtained it.
He gets a defect free title even when the transferor had defective title
Lost bill of exchange: Where a bill is lost, the drawer is under obligation (Sec 45A) to issue a
duplicate bill
Cheque (Sec.6)
Cheque is a-Bill of exchange/drawn on a specified bank and not expressed to be payable
otherwise on demand. This includes the Electronic Cheque.

Parties to a cheque are

Drawer (the account holder);
Drawee (the bank with whom the account is maintained);
Payee (the person named in the cheque).
Other parties- Endorser, endorsee
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Drawee of a cheque can be a bank only.
Cheque (Sec.6) - Amendment Second Ordinance, 2015.
Published in the Gazette of India dated 22.09.2015;
Effective from 15th June, 2015;
A cheque in the electronic form’ means a cheque drawn in electronic form by using any
computer resource and signed in a secure system with digital signature (with or without
biometrics signature) and asymmetric crypto system or with electronic signature, as the case
may be;
If the cheque is presented for payment by payee or holder in due course otherwise through an
account (the branch of the drawee bank where the drawer maintains the account), new
provision of determining the jurisdiction of a Court to try a case u/s 138 of the NI Act 1881 will
be applicable from retrospective effect.
For the purposes of this section, the expressions ‘asymmetric crypto system’, “computer
resource”, “digital signature”, “electronic form” and “electronic signature” shall have the same
meanings respectively assigned to them in the Information Technology Act 2000.
Truncated Cheques-A Truncated cheque is one the physical movement of which is stopped. In
its place its electronic image (confirmed by electronic signatures of the collecting bank) is used
for collection and payment purpose.
A cheque is truncated during the course of a clearing process either by the clearing house or by
the bank whether paying or receiving the payment, immediately on generation of an electronic
image for transmission, substituting the further physical movement of the cheque in physical
form

Section Description

8 Holder

9 Holder in Due Course

15 Endorsement

18 Amount of Cheque words and figures differs then word to be

considered

20 Inchoate Instrument holder has implied authority to complete the

instruments

123 & 124 General Crossing & special Crossing

138-142 Dishonor of Cheque

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 RESERVE BANK OF INDIA
 RBI established on April 1, 1935 under RBI Act 1934 is the central bank of country and
was nationalized wef Jan 01, 1949.Prior to its existence Imperial Bank of India (now SBI)
was conducting the Central Bank’s functions.
 Originally it was Shareholders bank which was taken over by the Central Government
under Reserve Bank (Transfer of Public Ownership Act 1948) (paid up capital of Rs.5 Cr)
 RBI’s Central Office is in Mumbai.
 RBI is managed by Central Board of Directors with four local Boards at Mumbai, Delhi,
Kolkata and Chennai. It has one Governor, provision for four Deputy Governors and
fifteen other Directors.
Functions of RBI
1. Issuance of Currency
2. Banker to Govt.
3. Bankers Bank
4. Controller of Banks
5. Controller of Credit
6. Statutory Reserves
7. Collection of information
8. Maintenance of external Value
RBI ACT 1934 – Important Sections
Section Description
2(e) Scheduled Bank means a bank whose name is included in 2nd schedule of RBI act
17 Define various type of business which RBI may transact
18 RBI provides emergency loan to Banks
19 Describe which business RBI may not transact
20 Bankers to Govt.
21 RBI has right to transact Govt Business in India
22 Sole right to issue Bank notes
23 Bank note shall be issued by issue department of RBI
24 Denomination of notes 2,5,10,20,50,100,500,1000,5000,10,000,(2 & 5
discontinued)

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26 Bank note issued by RBI shall be legal tender and shall be guaranteed by Central
Govt.
28 Rules for refunding soiled, imperfect notes
29 Bank note shall be exempted from stamp duty under Indian Stamp Act
31 Prohibits issue of note payable to bearer
33 Assets of issue department
42 Cash Reserve Ratio
42 (c) Empowers RBI to add or delete the name of any Bank
45 A to F Empowers RBI to collect credit information
45H to 45 T Regulations relating to NBFC
48 Exemption to RBI from income tax
49 Announce / Publish Bank Rate

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 INDIAN CONTRACT ACT 1872

 An Agreement enforceable by law is a Contract (Sec 2(h)

 Promise with a consideration is an agreement

“ALL AGREEMENTS ARE CONTRACTS IF THEY ARE MADE BY FREE CONSENT OF THE
PARTIES, COMPETENT TO CONTRACT FOR A LAWFUL CONSIDERATION WITH A LAWFUL
OBJECT AND ARE NOT HEREBY EXPRESSLY DECLARED AS VOID.” (sec10)

What are the essentials of a valid contract?

1. Legal Offer & Its Acceptance

2. Free Consent
3. Capacity To Contract
4. Lawful Consideration
5. Lawful Object
6. Lawful Agreement

Consent –

Two or more persons are said to have consented, when they agree upon the same thing in the
same sense. (sec.13ICA)

What is free consent?

A consent is said to be free when it is not caused by –Coercion, undue influence, fraud,
misrepresentation or mistake

Coercion– is the act of committing or threating to commit any act forbidden by the Indian Penal
Code, or the unlawful detaining or threating to detain any property to the prejudice of any
person whatever, with the intention of causing any force in the place where coercion is
employed

Capacity To Contract–

 Age Of Majority (Indian Majority Act 1875)

 Sound Mind
 Disqualified Persons

Lawful Consideration –

Consideration is the benefit that each party receives, or expects to receive when entering into
contract.
As per section 2(d) “ When at the desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from doing, or promises to do or to abstain
from doing, something, such act or abstinence or promise is called consideration.

Consideration is often monetary.

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Some important sections of Indian Contract Act 1872

Section 124-Indemnity

A contract by which one party promises to save the other from losses caused to him by the
conduct of the promisor himself, or by any other person.

Section 125-Guarantee

A contract to perform the promise or discharge liability of a third person in case of his default.
Guarantee may be oral or written.

Discharge of Surety – Section 133 to 139

 By variance in terms of contract between principal debtor and creditor

 Release or discharge of principal debtor
 If creditor compounds with or gives time to debtors or agrees not to sue him
 Release of one surety does not discharge other sureties.
 Right of surety on payment/performance: Right of subrogation and right to benefit of
creditors securities

Bailment-Section 148

Delivery of goods by one person to another for some purpose, upon a contract that they shall,
when purpose is accomplished be returned or otherwise disposed off according to directions of
person delivering them.

Pledge-Section 172

Bailment of goods as security for the payment of debt or performance of promise.

Rights & Duties of Pledgor and Pledgee

 Goods to be retained for specific contract

 Right to recover extra ordinary expenses incurred
 Duty to take care of goods
 Right to give notice and sale pledged goods

Section 182 Agency Contract

 Agent is a person employed to do any act for another or to represent another in dealing
with third party. Person for whom this act is done is called as Principal.
 Principal and agent both should be major & of sound mind
 No consideration is necessary
 Agency may be express or implied
Sub-Agent/Termination

 Delegation by agent is not allowed unless permitted by custom.

 Ratification- Sect 196
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  Termination of agency by death of either of Principal/Agent or by revocation of
authority, or by business of agency completed or any of the two becoming of unsound
mind or insolvent
 Notice of revocation by either party to each other is necessary

Agent’s duty to Principal

 Agent is bound to act as per directions of Principal

 In absence of express directions, as per trade custom
 Agent has to make good loss if any occurred at his instance
 Also transfer profit if accrued
 Exercise skill and diligence and he must communicate with Principal

Principal’s Right

 Right to repudiate if agent acts without authority

 Right to get accounts
 Right to profit
 Agent’s lien on principal’s property for recovery of expenses

Principal’s Duty to Agent

 To indemnify him against consequences of lawful acts

 And acts done in good faith even without authority
 Compensation by Principal to Agent for injury caused by Principal’s neglect

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 KYC-AML AND CFT POLICY
Objective
The KYC guidelines have been regularly visited by RBI in the context of recommendation made
by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards) and on
Combating Financial Terrorism (CFT).
The objective of KYC-AML-CFT guidelines is to prevent Bank from being used, intentionally or
unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC
procedures also enable to know / understand customers and their financial dealings better
which in turn help manage their risks prudently. It also helps to put in place appropriate controls
for detection and reporting of suspicious activities in accordance with applicable laws/laid down
procedures and regulatory guidelines.
Scope
RBI has issued guidelines under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of
Prevention of Money Laundering (maintenance of records of the nature and value of
transactions, the procedure and manner of maintaining and time for furnishing information and
verification and maintenance of records of identity of the clients of the banking companies,
Financial Institutions and Intermediaries) Rules, 2005, along with amendments to the PML Act
and any contravention thereof or non-compliance may attract penalties under Banking
Regulation Act.
The policy is applicable across all branches and offices and is to be read in conjunction with
related operational guidelines issued from time to time.

Financial Action Task Force (FATF)

Financial Action Taskforce (FATF) was set up in 1989 to ensure global action to combat money
laundering in Paris. There are 40 Recommendations which is a complete set of counter-
measures against money laundering. There are nine Special Recommendations on Terrorist
Financing. FATF is an inter-government Policy Making body. It sets standards &
develops/promotes policies to combat money laundering & terrorist financing. There are 40 +
9 Recommendations – recognized by IMF and World Bank as International Standards.

Some recommendations applicable to Banks are as under;

• Countries should notify Money Laundering as a crime.
• Criminal Liability to Individuals and at least Civil Liability to Legal Persons who fail to
comply with anti-money laundering or terrorist financing requirements.
• Laws to search, seizure and confiscate property/ proceeds from Money Laundering.
• Laws of Financial Secrecy should not be impediment for implementation of FATF
recommendations.

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 • Banks should undertake Customer Due Diligence measures, including identifying and
verifying the identity of their customers.
• Additional Due Diligence measures for Politically Exposed Persons (PEPs).
• Additional Due Diligence measures for Cross-border Correspondents, including Banks.
• Specific Risks in relation to Non-face-to-face customers/ transactions.
• Record keeping for at least –5- years.
• Special attention to unusual transaction/ activities with no apparent economic or visible
lawful purpose.
• Report Suspicious Transactions to FIU.
• Protection to Bank, its directors/ employees for disclosure of customers’ information to
FIU/ Regulators.
• Screening of Employees. On-going employee training program.
• Countries not to approve establishment / operations of Shell Banks.
• Report cash transactions above certain threshold.

9- Special Recommendations on Terrorist Financing

• Ratification and implementation of UN instruments esp. UN Resolution 1373
• Criminalizing the financing of terrorism and associated money laundering
• Freezing and confiscating terrorist assets
• Reporting suspicious transactions related to terrorism
• International co-operation for sharing information/ mutual legal assistance
• Alternative remittance (other than Banks) – Licensed / Registered / subjected to all FATF
Recommendations
• Wire transfers – include accurate originator information.
• Non-profit organizations – vulnerable - ensure that they cannot be misused.
• Cash couriers – detect physical cross-border transportation of currency – declaration /
confiscation in case of false declaration etc.

Legal Framework – India

 Prevention of Money Laundering Act 2002 and the Rules notified thereunder inter alia
impose obligation on;
• banking companies

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 • to appoint Principal Officer
• verify identity of clients
• maintain records
• furnish information to FIU-INDIA, New Delhi
Definition of Money laundering under PML Act-2002
Sec-3 of the PML act 2002, has defined the offence of Money Laundering as
“Who so ever directly or indirectly attempts to indulge or knowingly assists or knowingly is a
party or is actually involved in any process or activity connected with the proceeds of crime and
projecting it as untainted property shall be guilty of offence of Money Laundering.”
Definition of E-KYC authentication facility
It means a type of authentication facility in which the biometric information and/or OTP and
Aadhhar number securely submitted with consent of the Aadhaar number holder through a
requesting entity, is matched against the data available in CIDR, and the authority returns a
digitally signed response containing eKYC data along with the other technical details to the
authentication transaction. It will be accepted as a valid process for KYC verification under the
PML rules.
Role & Responsibility
Designated Director-
Banks are required to nominate a Director on their boards as “Designated Director” as per the
provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, to
ensure overall compliance with the obligation under the Act and rules. Accordingly, our bank
has nominated Executive Director to ensure overall compliance. The name, designation and
address of the Designated Director is communicated to the Director, Financial Intelligence Unit-
India (FIUIND)
Principal Officer-
Bank has designated General Manager, Inspection & Audit, head Office as Principal Officer. He
is responsible for monitoring and reporting of all transactions and sharing of information as
required under the law. He has to ensure overall compliance with regulatory guidelines on
KYC/AML/CFT issued from time to time and obligations under the Prevention of Money
Laundering Act 2002.
Know Your Customer Guidelines
Who is a Customer?
• A person or entity that maintains an account and / or has a business relationship with
the Bank;
• One on whose behalf the account is maintained i.e. “Beneficial Owner”i.e on whose
behalf the transaction is being conducted
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 • Beneficiary of transactions conducted by professional intermediaries, such as stock
brokers, chartered accountants, solicitors etc. as permitted under the law;
• Any person or entity connected with a financial transaction which can pose significant
reputation or other risks to the Bank, say, a wire transfer or issue of a high value demand
draft as a single transaction.
Key elements of KYC Policy
1) Customer Acceptance (CAP)
2) Customer Identification (CIP)
3) Transactions Monitoring
4) Risk Management

1) Customer Acceptance Policy (CAP)

 Ensure that you accept only legitimate and bonafide customers.
 No account to be opened in anonymous or fictitious/ benami names
 A check on the list of terrorists or banned entities should be done before opening the
account.
 If customer does not cooperate or bank is unable to apply a risk based due diligence, do
not open an account (You can also close an existing account in case of non-cooperation
as above)
 As per PML amendment act 2017, the Aadhaar and PAN card is mandatory for new
account opening w.e.f 01/06/2017, for individual who is eligible for enrolment of
Aadhaar.
 Under revised PML Act 2017, officially valid documents (OVD) for KYC purpose include;
a. Passport
b. Driving License
c. Voter’s ID card
d. Job Card issued by NREGA signed by State Government Official
e. Letter issued by National population registrar containing details of name and
address

2) Customer Identification Procedure (CIP)

Customer Identification means identifying the customer and verifying his/her identity by using
reliable, independent source documents, data or information.
For customers that are natural persons, the branch shall obtain sufficient identification data
to verify the identity of the customer, his/her address/location and also his/her recent
photograph.
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 For customers that are legal persons or entities, the branch shall;
a) Verify the legal status of the legal person/entity through proper and relevant documents
b) Verify that any person purporting to act on behalf of the legal person/entity is so
authorized and identify and verify the identity of that person.
c) Understand the ownership and control structure of the customer and determine, who
are the natural persons who ultimately control the legal person.
Unique Customer Identification Code (UCIC)
UCIC helps the bank to identify customers, track the facilities availed, monitor financial
transactions in a holistic manner and to have a better approach to risk profiling of customers.
In our bank, CIF of the customer id the Unique Number for that customer and it serves the
purpose of Unique Customer Identification Code (UCIC).

Customer Due Diligence (CDD)

• Personal visit to the address
• Ascertaining information from Employer of account holder
• Ascertaining Name / Address from BSNL / MTNL website
• Making call to Mobile / Tel. no. mentioned in the AOF
• Verifying PAN details on line with NSDL / www.incometaxindia.gov.in
• Carrying out a financial transaction orWhile establishing a banking relationship
• When the bank has a doubt about the veracity/ authenticity or adequacy of the
customer data/ documents available.
• For legal persons/entities the bank should also identify any person acting on behalf of
the legal entity, the ownership and control structure and beneficial owners if any.
• Documents required to be based on risk perception and PMLA prescription
• Any international money transfer operations
• At periodical updation of customer identification data i.e. at least once in two years for
High Risk category accounts , once in eight years for Medium risk category accounts and
once in ten years for Low risk category accounts

Some of the Customers requiring enhanced due diligence (EDD)

• Trusts, Charities, NGOs, NPOs and organizations receiving donations.
• Companies having closed family shareholding.
• Firms with the sleeping partners.

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• Politically exposed persons (PEPs) of foreign origin
• Customers as close relatives of PEPs & accounts of which a PEP is ultimate beneficial
owner.
• Non face to face customers.
• Customers with dubious reputation as per public information.
CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR)
Government of India has authorized the Central Registry of Securitization Asset
Reconstruction and Security Interest of India (CERSAI) to act as, and to perform the functions
of the CKYCR vide Gazette Notification No. S.O.3183€ dated November 26, 2015. Branch
shall capture the KYC information for sharing with the CKYCR in the manner mentioned in
the rules, as required by the revised KYC templates prepared for “Individuals” and “Legal
Entities” as the case may be.

Operation of Bank Accounts and Money Mules

Money Mules can be used to launder the proceeds of fraud schemes (e.g. phishing and
identity theft) by criminals who gain illegal access to deposit accounts recruiting third
parties to act as “Money Mules”. In some cases these third parties may be innocent while
in others they shall be having complicity with the criminals.
To minimize the operations of such mule accounts, branches shall follow the guidelines on
opening and monitoring of transactions. Branches shall strictly adhere to the guidelines on
KYC/AML/CFT issued from time to time and periodical updation of customer identification
data.
3) Monitoring of Transactions

 Ongoing monitoring is an essential element of effective KYC proceduresfor identifying

suspicious and high value cash transactions
• Higher risk accounts and customer relationships will generally require more frequent or
intensive monitoring.
• Special attention to all complex, unusually large transactions and all unusual patterns
which have no apparent economic or visible lawful purpose.
• Transactions to be consistent with the profile of the customer

 Reporting to law enforcement authority through FIU

4) Risk Management

 Categorize each account into High / Medium / Low Money Laundering Risk Category

 Periodical Review of risk classification.

22
  In case of low risk customers, only the basic requirements of verifying the identity and
location of the customer shall be met. Updating KYC of low risk customers: Every 10
years.

 Customers that are likely to pose a higher than average risk but lower than high risk to
the bank shall be categorized as medium risk. Updating KYC of medium risk customers:
Every 8 years

 Customers especially those engaged in cash intensive businesses and for whom the
sources of funds are not clear and who are likely to pose a higher risk to the bank shall
be categorized as high risk depending on customer's background, nature and location of
activity, country of origin, sources of funds and his client profile, etc. Updating KYC of
high risk customers: Every 2 years

Risk parameters- Customers connected with high-risk business activity

• Money Services Bureaus (money transmitters, foreign exchange houses etc.)
• Arms, art and antique dealers
• Securities broker/ dealers, solicitor firms, CAs, etc. who are managing pooled accounts
on behalf of clients.
• Travel agencies
• Jewel/ Gem/ Precious metal dealers
• Property dealers/ builders
• Car/ boat dealerships

Maintenance of Records of transactions

Section 12 of the PMLA Act 2002 casts certain obligations on the banking companies in regards
to preservation and reporting of customer account information.
In terms of PMLA bank has to maintain for at least five years from the date of transaction
between the bank and the client, all necessary records of transactions, both domestic and
international, so as to provide necessary evidence for prosecution of persons involved in
criminal activity. It also has to maintain records of client’s identification for at least five years.
Such records and related documents shall be made available to help auditors to scrutinize the
transactions and also to Reserve Bank of India/ Other relevant authorities.
Anti-Money Laundering
• PLACEMENT- Money is injected into the system through various modes
• LAYERING- Creating a complex layers of financial transactions to separate illegal
proceeds from the original source
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 • INTEGRATION- Re-injecting the laundered money into the financial system so as to
appear normal business funds
Money launderers use the banking system for cleansing ‘dirty money’ obtained from
criminal activities with the objective of hiding / disguising its source. The process of money
laundering involves creating a web of financial transactions so as to hide the origin and true
nature of these funds.
• What are the Money Laundering Risks to banks?
(i) Reputation risk
(ii) Operation risk
(iii) Legal / Compliance risk
All risks are inter-related and together have the potential of causing serious threat to the
survival of the bank
Furnishing information to FIU-IND, New Delhi
1) Cash Transaction Reports (CTRs) –
a) All cash transactions of the value of equal to or more than rupees ten lakhs or its
equivalent in foreign currency
b) All series of cash transactions integrally connected to each other which have been
valued below rupees ten lakhs or its equivalent in foreign currency where such series
of transactions have taken place within a calendar month aggregating to rupees ten
lakhs or more.
c) CTRs to be reported to FIU-IND by 15th of next month

2) Counterfeit Currency Reports (CCRs)

Counterfeit currency transactions to be reported in following cases;
a. All cash transactions where forged or counterfeit currency notes have been used
as genuine or where any forgery of a valuable security or a document has taken
place facilitating the transactions
b. Not later than seven working days from the date of occurrence of such
transaction (Not valid now)
c. CCRs to be reported to FIU-IND by 15th of next month
3) Non-Profit Organization Transaction Reports (NTRs) & Cross border Wire Transfers
Non-Profit Organization transactions to be reported if
a. All transactions of Rs. Ten lacs and above in a month.
b. NTRs to be reported to FIU-IND by 15th of next month
4) Cross border Wire Transfers Report (CBWTR)

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 a. All cross border wire transfers of the value of more than five lakh rupees where
either the origin or destination of fund is in India.

b. To be reported to FIU-IND by 15th of next month.

5) Suspicious Transactions Reports (STRs)

Suspicious transactionmeans a transaction including an attempted one whether or not
made in cash regardless of the amount,which to a person acting in good faith –
a. gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime;
or
b. appears to be made in circumstances of unusual or unjustified complexity; or
c. appears to have no economic rationale or bonafide purpose; or
d. gives rise to a reasonable ground of suspicion that it may involve financing of the
activities relating to terrorism.
Walk-in Customers: Where the amount of transaction exceeds Rs.50000/-, it is necessary
to obtain PAN no. or form 60 and KYC documents (i.e. Officially Valid Documents in proof
of identity and address) from a walk-in-customer and to verify the same by the authorized
official of the bank. As per our extant guidelines, no transaction of exceeding Rs.50, 000/-
is allowed to a noncustomer against cash or otherwise, except in case of direct tax
collection.

AML Software
Bank has put in place an AML Software for generation of alerts on transactions based on certain
parameters. AML team at Regional Office level to investigate the alerts from suspicious / non-
suspicious angle and accordingly escalate STRs.
Some of the Reasons for Suspicion

 Identity of client
– False identification documents
– Identification documents which could not be verified within reasonable time
– Accounts opened with names very close to other established business entities

 Background of client
– Suspicious background or links with known criminals

 Multiple accounts
– Large number of accounts having a common account holder, introducer or
authorized signatory with no rationale
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 – Unexplained transfers between multiple accounts with no rationale

 Activity in accounts
– Unusual activity compared with past transactions
– Sudden activity in dormant accounts
– Activity inconsistent with what would be expected from declared business

 Nature of transactions
– Unusual or unjustified complexity
– No economic rationale or bona fide purpose
– Frequent purchases of drafts or other negotiable instruments with cash
– High account turnover inconsistent with the size of the balance maintained
– Transactions involving large amount of cash inconsistent with business activity

 Value of transactions
– Value just under the reporting threshold amount in an apparent attempt to avoid
reporting
– Value inconsistent with the client’s apparent financial standing
Do’s in STRs
 Clearly identify the suspicious transaction or activity.
 Clearly identify key players & related entities.
 If suspicious transaction or activity involves a group of persons, natural or legal, or if the
persons are related in some manner, file only one STR e.g. If same activity is seen in
accounts of husband and wife, or in accounts of two persons residing at the same
address, file only one STR.
 Mention all details such as PAN, DOB etc.
 Clearly elaborate the ground of suspicion.
 File the report in XML format

Don'ts in STRs
 Don’t send documents with the STR. The documents will be called, if required.
 Don’t file more than one STR for related persons or related transactions.
 Don’t let branches or regional offices send STRs directly to FIU. All STRs initiated by local
offices or branches are to be sent only by the Principal Officer.
26
  Do not “Tip Off” the customer.
 Do not stop transactions in the account

KEY COMPONENTS FOR GROUNDS OF SUSPICION

 Background / profile of the customer and other related individuals.
 When did the relationship with the customer begin?
 How was suspicion detected?
 What information was linked or collected during the review process?
 What explanation was provided by the subject(s) or other persons (without tipping off)?
 Who benefited, financially or otherwise from the transactions?
 What is the volume of transactions in reported accounts in the FY, and what is the
volume of cash transactions?
 Whether any STR filed for the customer earlier?

CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR)
Government of India has authorized the Central Registry of Securitization Asset
Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the
functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, 2015.
Branch shall capture the KYC information for sharing with the CKYCR in the manner
mentioned in the Rules, as required by the revised KYC templates prepared for ‘Individuals’
and ‘Legal Entities’ as the case may be. The ‘live run’ and operational guideline of the CKYCR
would be issued by the Operations department. Operations department shall prepare a
plan for uploading the data in respect of existing individual accounts and include the same
in their KYC Policy.
Combating Financing of Terrorism:
list of individuals and entities, approved by Security Council Committee established
pursuant to various United Nations' Security Council Resolutions (UNSCRs), are received
from Government of India / Reserve Bank, the Bank shall update the lists of individuals and
entities as circulated by Reserve Bank. The UN Security Council has adopted Resolutions
1988 (2011) and 1989 (2011) which have resulted in splitting of the 1267 Committee's
Consolidated List into two separate lists, namely:
I. The “ISIL (Da’esh) & Al-Qaida Sanctions List”, which includes names of individuals and
entities associated with the Al-Qaida. The updated ISIL & Al-Qaida Sanctions List is
availableat https://www.un.org/sc/suborg/sites/www.un.org.sc.suborg/files/1267.pdf II.

27
"1988 Sanctions List", which is maintained by the 1988 Committee. This list consists of
names previously included in Sections A ("Individuals associated with the Taliban") and B
("Entities and other groups and undertakings associated with the Taliban") of the
Consolidated List. The Updated 1988 Sanctions list is available at
http://www.un.org/sc/committees/ 1988/list.shtml
Both "Al-Qaida Sanctions List" and "1988 Sanctions List" shall be taken into account for the
purpose of implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967.
Full details of accounts bearing resemblance with any of the individuals / entities in the list
shall immediately be intimated to RBI and FIU-IND.
The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended by the Unlawful
Activities (Prevention) Amendment Act, 2008. Government has issued an Order dated
August 27, 2009 detailing the procedure for implementation of Section 51A of the Unlawful
Activities (Prevention) Act, 1967 relating to the purposes of prevention of, and for coping
with terrorist activities.

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 DEPOSIT POLICY

1. Types of Deposit Accounts

While various deposit products offered by the Bank are assigned different names, the deposit
products can be categorized broadly into the following types. Definition of major deposits
schemes is as under: -
1.1 “Demand deposit” means a deposit received by the bank, which is withdrawable on
demand.
1.2 “Savings deposit” means a form of demand deposit which is subject to the restrictions as to
the number of withdrawals as also the amount of withdrawals permitted by the bank during
any specified period.
1.3 "Term deposit" means a deposit received by the Bank for a fixed period withdrawable only
after the expiry of the fixed period and includes deposits such as Recurring Deposit Scheme/
Sulabh Deposit Scheme/ Fixed Deposit Scheme/ MIDS/ QIDS/ Short Term Deposit Scheme/
Mahabank Unit Deposit Scheme/ Cumulative Deposit Scheme / Mixie Deposit Scheme etc. The
salient features of the Schemes are given more precisely in Annexure A.
Term Deposit which are accepted for 7 days and over up to 12 months are called Short Term
Deposits.
1.4 Notice Deposit means term deposit for specific period but withdrawable on giving at least
one complete banking day's notice.
1.5 “Current Account” means a form of demand deposit wherefrom withdrawals are allowed
any number of times depending upon the balance in the account or up to a particular agreed
amount and will also include other deposit accounts which are neither Savings Deposit nor Term
Deposit.
1.6 Flexi Deposit- it has combined feature of current/saving deposit and fixed deposit, namely
liquidity with higher return on surplus funds.
1.7 Bulk Deposit means single rupee term deposit of Rupees Two Crore and above.

2. Account Opening and Operation of Deposit Accounts

2.1 The Branches before opening any deposit account shall carry out due diligence as required
under "Know Your Customer" (KYC) guidelines issued by the Bank, RBI, Anti-money Laundering
rules and regulations and/or such other norms or procedures as per the Customer Acceptance
Policy adopted by the Bank. If the decision to open an account of a prospective depositor
requires clearance at a higher level, reasons for any delay in opening of the account will be
informed to him/her and the final decision of the Bank will be conveyed at the earliest to
him/her.
2.2 The bank is committed to providing basic banking services to all sections of the society
including disadvantaged sections with a view to achieve the objective of greater financial
inclusion. Basic Savings Bank Deposit Account (BSBDA) or Small Account is offered as a normal
banking service available to all. The account can be opened by any individual without any
restriction like age, income criteria of the individual, and without requirement of making any
initial deposit for the opening the account and also without requirement of maintaining any
minimum balance. Such accounts can be opened with relaxed customer acceptance norms as
per Bank’s KYC guidelines. The salient features of the Small Account Scheme are given in
Annexure E.

29
2.3 As per Bank’s KYC policy guidelines, branches shall categorize customers based on risk
perception and prepare their profiles for the purpose of transaction monitoring. Inability or
unwillingness of a prospective customer to provide necessary information / details could result
in the bank not opening an account.
2.4 Inability of an existing customer to furnish details required by the bank to fulfil statutory
obligations could also result in closure of the account after due notice is provided to the
customer.
2.5 Savings Bank Accounts can be opened for eligible person / persons and certain organizations
/ agencies (as advised by Reserve Bank of India (RBI) from time to time).
Prohibitions for opening of Savings Bank Deposit Accounts
Savings Bank Deposit Account shall not be opened in the name of –
• Government departments
• Bodies depending upon budgetary allocations for performance of their functions
• Municipal Corporations or Municipal Committees
• Panchayat Samitis
• State Housing Boards
• Water and Sewerage / Drainage Boards
• State Text Book Publishing Corporations
• Societies
• Metropolitan Development Authority
• State / District Level Housing Co-operative Societies, etc.
• Any political party [i.e. an association or body of individual citizens of India, which is, or is
deemed to be registered with the Election Commission of India as a political party under the
Election Symbols (Reservation and Allotment) Order, 1968 as in force for the time being]
• Any trading / business or professional concern, whether such concern is a proprietary or a
partnership firm or a company or an association.

The above prohibition will not apply in the case of organizations / agencies listed below;

 Primary Co-operative Credit Society which is being financed by the bank.

 Khadi and Village Industries Boards.
 Agriculture Produce Market Committees.
 Societies registered under the Societies Registration Act, 1860 or any other
corresponding law in force in a State or a Union Territory except societies registered
under the State Co-operative Societies Acts and specific state enactment creating Land
Mortgage Banks. .
 Companies governed by the Companies Act, 1956 which have been licensed by the
Central Government under Section 25 of the said Act, or under the corresponding
provision in the Indian Companies Act, 1913 and permitted, not to add to their names
the words 'Limited' or the words 'Private Limited'.
 Institutions other than those mentioned in clause 2.26(n)(i) and whose entire income is
exempt from payment of Income-tax under the Income-Tax Act, 1961.
Government departments / bodies / agencies in respect of grants / subsidies released
for implementation of various programmes / Schemes sponsored by Central
Government / State Governments subject to production of an authorization from the
respective Central / State Government departments to open savings bank account.

30
  Self-help Groups (SHGs), registered or unregistered, which are engaged in promoting
savings habits among their members.
 Farmers' Clubs - Vikas Volunteer Vahini - VVV.

2.6 Current Accounts can be opened by individuals / partnership firms / Private and Public
Limited Companies / HUFs / Specified Associates / Societies / Trusts, Departments of Authority
created by Government (Central or State), Limited Liability Partnership, etc..
2.7 Term Deposits Accounts can be opened by individuals / partnership firms / Private and
Public Limited Companies / HUFs/ Specified Associates / Societies / Trusts, Departments of
Authority created by Government (Central or State), Limited Liability Partnership, etc..
2.8 While opening of a deposit account, due diligence process shall be followed for getting
satisfied about the identity of the person, verification of address / occupation / source of
income etc. Recent photographs of the person opening / operating the account shall also be
obtained as a part of due diligence process.
However when documents of identity & address, as required, are provided, third-party
introduction shall not be insisted for opening of bank accounts of customers. If felt necessary,
such introduction may however be insisted in case of non-face-to-face customers, cross border
customers etc.
2.9 In addition to the due diligence requirements, as required under KYC norms and by law, the
Bank is shall obtain Permanent Account Number (PAN) or General Index Register (GIR) Number
& Aadhaar Card or alternatively declaration in Form No. 60 or 61 as specified under the Income
Tax Act / Rules.
As per PML amendment act 2017, the revised KYC guidelines for opening savings account are:
a. If Aadhaar card is not available, proof of availment of Aadhaar is mandatory.
b. If PAN card is not available, one certified copy of OVD and form 60 is required.
c. If customer id\s not eligible for enrollment of Aadhaar then Pan Card or form 60 and one OVD
which must contain current address.

Officially valid documents (OVD), for KYC purpose include:

a. passport
b. driving license
c. voter’s id card
d. job card issued by NREGA signed by state government official
e. Letter issued by National population registrar containing details of name and address.

In case the identity information relating to the Aadhaar number or Permanent Account Number
submitted by the customer does not have current address of the customer and provided further
that where simplified measures are applied for verifying the limited purpose of proof of address
of the clients, where a prospective customer is unable to produce any proof of address, the
following documents shall be deemed to be ‘officially valid document’:
a. Utility bill which is not more than two months old of any service provider (electricity,
telephone, post-paid mobile phone, piped gas, water bill)
b. Property or Municipal tax receipt
c. Bank account or Post Office savings bank account statement
d. Pension or family pension payment orders(PPOs) issued to retired employees by Government
Departments or Public Sector Undertakings, if they contain the address

31
e. Letter of allotment of accommodation from employer issued by State and Central
Government departments or Public Sector Undertakings, Scheduled Commercial Banks,
Financial Institutions and listed companies.
f. Documents issued by Government departments of foreign jurisdiction and letter issued by
Foreign Embassy or Mission in India.

2.10 Standing Instructions:

Customers having Current or Saving account with our Bank may request Branch/ Bank in writing
dully signed to effect the payment of recurring nature on his/her behalf e.g. payment of
Insurance Premium, rent, crediting fixed deposit interest, installment towards recurring deposit
or housing loan, other loans, etc.

2.11 Minors’ Accounts

A Savings / Fixed / Recurring Bank Deposit account can be opened by a minor of any age through
his/her natural or legally appointed guardian. (Status: known as Joint Account).
Account in the name of minor with mother as guardian can also be opened. Such account shall
not allowed to be overdrawn and shall always remain in credit (so that the minors' capacity to
enter into contract would not be a subject matter of dispute).
Account in the name of minor jointly with a major can also be opened, where minor is
represented by natural guardian.
Minors above the age of 10 years may be allowed to open and operate savings bank accounts
independently, if they so desire, for depositing amounts in the account and self-withdrawals.
No overdraft facility and cheque-book facility shall however be allowed.

In case of self-operated minor accounts, Bank shall offer ATM / debit card subject to the
safeguards that the accounts are not allowed to be overdrawn and that they always remain in
credit.
In case of self-operated minor accounts, in addition to photograph and proof of age, the
documents required for establishing the Identity and address as applicable in case of Individual
is to be given. The account can also be opened jointly.
On attaining majority on the same day account should be made inoperative till the time
customer converts the minor account to major with required KYC documents. Thus, banks
should initiate the prior communication to Minor accounts that would attain to majority. The
erstwhile minor should confirm the balance in his/her account and if the account is operated
by the natural guardian / guardian, fresh specimen signature of the erstwhile minor duly verified
by the natural guardian would be obtained and kept on record.
Under “Mahabank Yuva Yojana” of the Bank, the younger generation (children / students) with
age of 10 years and above can open accounts with the bank. Salient features of the scheme are
as under;

 Account can be opened without any initial deposit.

 No minimum balance restriction / charges
 Withdrawals for self are only allowed.
 Cheque book shall be issued only on attaining the age of 18.
32
  Account holder can also open Recurring Deposit account of Rs 10/- and more and keep
Fixed Deposits.
 For education loans, preferential treatment as per eligibility shall be given.
 The Scheme shall have all other features of Savings Bank Deposit Scheme except those
mentioned above.

2.12 Account of Illiterate/Blind/ Visually Challenged Persons

The bank may at its discretion allow opening of deposit accounts other than Current accounts
of illiterate person. The account of such person may be opened provided he/she calls on the
Bank personally along with a witness who is known to both the depositor and the Bank.
Normally no chequebook facility is provided for such Savings Bank account. At the time of
withdrawal/ repayment of deposit amount and/or interest, the account holder should affix his
withdrawal/repayment of deposit amount/or interest, the account holder should affix his/ her
thumb impression or mark in the presence of the authorized officer who should verify the
identity of the person. The will explain the need for proper care and safe keeping of the
passbook etc given to the account holder.
Bank will facilitate opening of Saving Bank accounts as well as Term Deposit accounts to persons
with visual impairment. Such accounts will be operated by the accountholder personally.
Cheque book facility will be made available. Such account holders will have to be present before
the branch official and affix thumb impression and they will be identified through their
photograph to facilitate operations. Bank is also providing ATM & Internet banking facility to
visually challenged persons to operate their own accounts.
2.13 Accounts of Persons with Autism, Cerebral Palsy, Mental Retardation, Mental Illness and
Mental Disabilities
Savings bank and term deposits can also be opened in the name of persons with autism, cerebral
palsy, mental retardation and multiple disabilities by the legal guardian appointed by the
District Court under Mental Health Act, 1987 or by the Local Level Committees set up under the
National Trust for welfare of persons with autism, cerebral palsy, mental retardation and
multiple disabilities under Disabilities Act, 1999.
Legal guardian, so appointed, will furnish an indemnity-cum-undertaking bond duly stamped as
per the local law in force along with Guardianship Certificate. The Bond will state that the funds
will be used directly or indirectly for the benefit of the account holder.
2.14 Accounts of Transgender persons
In case of a person claiming to be transgender and needs to open account or to do any banking
transaction, the person will be recognized as “Third Gender” and the details shall be accepted
in the Account Opening Forms (AOFs)/ or other applicable forms as such.The salutation of such
person shall be “Mx”.
All transgender customers shall be treated equally to other male/ female customers without
any discrimination.

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2.15 Operation of Joint Account
The joint account holders can give any of the following mandates for the disposal of balance in
the above accounts:
I. Either or Survivor: if the account is in the name of two individuals say, A & B, the final balance
along with interest, if applicable, will be paid to either of account holders i.e. A or B, on date of
maturity or to the survivor on death of any one of the account holders.
II. Anyone or Survivor: If the account is in the name of two or more individuals say, A, B & C,
the final balance along with interest if applicable, will be paid to any of accountholders i.e. A or
B orC, on the date of maturity. On the death of any one of account holder say A, the final balance
along with interest if applicable, will be paid to any two of the surviving accountholders i.e. B or
C. On the death of any two of account holder say A and B, the final balance along with interest
if applicable, will be paid to surviving accountholder i.e. C.
III. Former or Survivor: If the account is in the name of two individuals say, A & B, the final
balance along with interest, if applicable, will be paid to the former i.e. A on date of maturity
and to the survivor on death of anyone of the account holders.
IV. Latter or Survivor: If the account is in the name of two individuals say, A & B, the final balance
along with interest, if applicable, will be paid to the latter i.e. B on date of maturity and to the
survivor on death of anyone of the account holders.
The above mandates will be applicable to or become operational only on or after the date of
maturity of term deposits. This mandate can be modified by the consent of all the account
holders.
2.16 Repayment of Term/Fixed Deposits in banks
2.16.1. If fixed/term deposit accounts are opened with operating instructions 'Either or
Survivor', the signatures of both the depositors need not be obtained for payment of the
amount of the deposits on maturity. In case of premature payment of term deposit where
operating instructions are 'Either or Survivor' following action is to be taken.
With Nomination:
a) In the event of death of one (or more but not all) of the depositors, the survivor(s) will
have the right to seek premature termination of term deposit account as per the terms
of contract and submission of proof of death of the depositor.
b) In the event of death of all the joint depositors, the nominee will have right to seek
premature termination of term deposit account as per the terms of the contract and on
submission of his/her identity (such as election ID card, Pan Card, Passport, Aadhar Card
etc.) and proof of death of depositors.
Without Nomination:
a) In the event of death of one (or more but not all) of the depositors premature
termination will be allowed against request from surviving depositor(s) as per the terms
of the contract on verification of the proof of the death of the depositor.

34
 b) In the event of death of all the joint depositors, premature termination will be permitted
against joint request by all legal heirs of the deceased depositors (or any one of them as
mandated by all the legal heirs) as per the terms of contract on verification of authority
of legal heirs and proof of death of depositors.
2.16.2. In case the mandate is 'Former or Survivor', the 'Former' alone can operate/withdraw
the matured amount of the fixed/term deposit, when both the depositors are alive. However,
the signature of both the depositors may have to be obtained, in case the deposit is to be paid
before maturity. If the former expires before the maturity of the fixed / term deposit, the
'Survivor' can withdraw the deposit on maturity. Premature withdrawal would however require
the consent of both the parties, when both of them are alive, and that of the surviving depositor
and the legal heirs of the deceased in case of death of one of the depositors.
2.16.3. If the joint depositors prefer to allow premature withdrawals of fixed/term deposits also
in accordance with the mandate of 'Either or Survivor' or 'Former or Survivor', as the case may
be, premature withdrawal shall be allowed, provided the depositors have given a specific joint
mandate for the said purpose. In other words, in case of term deposits with "Either or Survivor"
or "Former or Survivor" mandate, bank shall allow premature withdrawal of the deposit by the
surviving joint depositor on the death of the other, only if, there is a joint mandate from the
joint depositors to this effect.
2.16.4. The joint deposit holders shall be permitted to give the mandate for premature
withdrawal of the deposit either at the time of placing fixed deposit or anytime subsequently
during the term / tenure of the deposit. If such a mandate is obtained, bank shall allow
premature withdrawal of term / fixed deposits by the surviving depositor without seeking the
concurrence of the legal heirs of the deceased joint deposit holder. Besides, such premature
withdrawal would not attract any penal charge.
When a fixed deposit account is opened in the joint names of two depositors on 'Either or
Survivor' basis and the said joint depositors already have a savings bank account in their names
jointly on 'Either or Survivor' instructions, on maturity of the fixed deposit, proceeds of the
matured fixed deposit can be credited to the joint savings bank account already opened in the
bank. There is no need for opening a separate savings bank account in the name of the first
depositor for crediting the proceeds of the fixed deposit.

2.17 Additions or Deletion of the Name/s of Joint Account Holders

A bank may, at the request of all the joint account holders, allow the addition or deletion of
name/s of joint account holder/s if the circumstances so warrant or allow an individual
depositor to add the name of another person as a joint account holder. However, in no case
should the amount or duration of the original deposit undergo a change in any manner in case
the deposit is a term deposit.
A bank may, at its discretion, and at the request of all the joint account holders of a deposit
receipt, allow the splitting up of the joint deposit, in the name of each of the joint account
35
holders only, provided that the period and the aggregate amount of the deposit do not undergo
any change.
Note: NRE deposits shall be held jointly with two or more NRIs/PIOs. NRIs/PIOs can hold jointly
with a resident relative based on ‘former or survivor’ basis. The resident relative can operate
the account as a POA holder during the lifetime of the NRI/PIO accountholder. NRO accounts
may be held jointly in the names of two or more. They may be held jointly with residents on
‘former or survivor’ basis.
2.18 At the request of the depositor, the Bank will register mandate / power of attorney given
by him authorizing another person to operate the account on his behalf.
2.19 The minimum tenor of domestic/ NRO term deposits is seven days. NRE deposits shall be
accepted for a minimum period of one year.
2,20 The term deposit account holders at the time of placing their deposits can give instructions
with regard to closure of deposit account or renewal of deposit for further period on the date
of maturity. In absence of such mandate, the deposit will be treated as an auto renewal deposit
and shall be renewed for a similar period.
2.21 Nomination facility is available on all deposit accounts opened by the individuals.
Nomination facility is available on all deposit accounts opened by individuals. Nomination is also
available to an account opened by a sole proprietor. Nomination can be made in favour of one
individual only. Nomination so made can be cancelled or changed by the account holder/s any
time. While making a nomination, cancellation or change thereof, it is required to be witnessed
by a third party if the account holder is illiterate. Nomination can be modified by the consent of
account holder/s. Nomination can be made in favour of a minor also. In such cases at the time
of making nomination, depositor has to give a name of person (called appointee) who is a major
and will receive the amount of deposit on behalf of the nominee in the event of death of the
account holder during the minority of the nominee.
Bank shall insist that the person opening a deposit account makes a nomination. If the person
opening the account does not want the nominate, he/she shall be asked to give a specific letter
to the effect that he/she does not want to make a nomination. In case the person opening the
account declines to give such a letter, the branch shall record the fact on the account opening
form and proceed with opening of the account if otherwise found eligible. Under no
circumstances, opening of a bank account shall be refused solely on the ground that the person
opening the account refused to nominate.
2.22 The account-holders will be informed three months before classifying their accounts as
dormant as also the procedure to be followed to activate the account. No fees will be charged
by the bank for reactivation of a savings account.
2.23 Suo Motu closure of Saving and Current Account
The Bank shall close accounts, which are considered undesirable and un-remunerative. These
accounts shall be closed only after sending proper written notice to the customer, at the

36
address of the customer as per Bank’s records. Examples of undesirable and un-remunerative
features are;
a) Drawing cheques without funds
b) Fraudulent transactions in the account which may expose the Bank to unnecessary risks
c) Accounts wherein transactions (such as huge cash transactions) disproportionate to the
known profile of the customer, are being made
d) Accounts in which, in the opinion of the Bank, transactions having Money Laundering angle
are being conducted
e) Accounts in which Bank is not able to apply appropriate KYC measures due to non-furnishing
of information by the customer and/or non-cooperation in this regard
f) Non-compliance of minimum balance requirements for current and saving account as
applicable to the relevant scheme/product.
3.Non-Resident Indian (NRI)
‘Non Resident Indian’ (NRI) means a person resident outside India, who is citizen of India or is a
person of Indian origin.
3.1 Person of Indian Origin (PIO)
A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen of any country
other than Bangladesh or Pakistan or such other country as may be specified by the Central
Govt., satisfying the following conditions:
a) Who was a citizen of India by virtue of Constitution of India or the Citizenship Act, 155
(57 of 1955); or
b) Who belonged to a territory that became part of India after the 15th day of August, 1947;
or
c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person
referred to in clause (a) or (b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a
person referred to in clause (a) or (b) or (c).
3.2 FCNR(B) Deposits
FCNR(B) or Foreign Currency Non-Resident (Bank) Account is in the form term or fixed deposits
(it is not a savings account). Only NRIs or PIO are eligible to open a FCNR (B) account with a
bank. Individual entities of Pakistan and Bangladesh shall require approval of the RBI for
opening NRE account.
Period of deposit is 1 to 5 years. Both principal and interest earned thereon are repatriable and
both principal and interest are exempted from tax in India.
3.3 Manner of calculation of interest on FCNR (B) Deposits

37
a) interest on the deposits accepted under the scheme shall be calculated on the basis of 360
days to a year.
b) the interest on FCNR (B) deposits shall be calculated and paid at intervals of 180 days each
and thereafter for the remaining actual number of days.
Provided that the option to receive the interest on maturity with compounding effect shall vest
with the depositor.
3.4 Calculation of interest on renewal of FCNR (B) deposits.
Interest calculation on renewal of FCNR (B) deposits shall be as under:
a. if the interest from the date of maturity till the date of renewal (both days inclusive)
does not exceed 14 days, the rate of interest payable on the amount of the deposit so
renewed shall be the appropriate rate of the interest for the period of renewal as
prevailing on the date of maturity or on the date when the depositor seeks renewal,
whichever is lower.
b. In all the cases of renewal, interest rate for the overdue period on the renewed amount
shall be determined by treating it as a fresh term deposit.
c. If, after renewal, the deposit is withdrawn before completion of the minimum stipulated
period under the scheme, branch has to recover the interest paid for the overdue period
i.e. period beyond the original date of maturity.
3.5 Interest payable on the deposit of a deceased FCNR (B) depositor
Bank will pay interest on the term deposits standing in the name(s) of a deceased FCNR(B)
individual depositor or two or more joint depositors where one of the depositors has died, as
under: -
a. If paid on the maturity of the deposit, interest shall be paid at the contracted rate;
b. If the deposit is claimed before the maturity date, interest shall be paid not at the
contracted rate but at the rate applicable to the period for which the deposit remained
with the bank and without charging penalty for prepayment;
c. In case the depositor dies before the date of maturity of the deposit but the amount of
the deposit is claimed after the date of maturity, interest shall be paid at the contracted
rate till the date of maturity and simple interest at the applicable rate operative on the
date of maturity for the period for which the deposit remained with the bank beyond
the date of maturity.
d. In case of death of the depositor after the date of maturity of the deposit, the interest
rate operative on the date of maturity in respect of savings deposits held under Resident
Foreign Currency (RFC) Account scheme shall be paid from the date of maturity till the
date of payment.
e. In case the claimants are residents, the maturity proceeds shall be converted into Indian
Rupees on the date of maturity and interest shall be paid for the subsequent period at
the rate applicable to a domestic term deposit of similar maturity.
3.6 Payment of interest on FCNR (B) deposits of NRIs on return to India

38
On the receipt of the specific request from the depositor, branch may allow FCNR(B) deposits
of persons of Indian nationality / origin who return to India for permanent settlement to
continue till maturity at the contracted to FCNR(B) deposits shall continue
a. The rate of interest as applicable to FCNR(B) deposits shall continue.
b. Such deposits shall be treated as resident deposits from the date of return of the
account holder to India.
c. The FCNR(B) Deposits on maturity shall be converted into Resident Rupee Deposit
Account or RFC Account (if eligible) at the option of the account holder.
d. The rate of interest on the new deposit (Rupee account or RFC Account) shall be the
relevant rate applicable for such deposit account.
3.7 Conversion of FCNR(B) Accounts of Returning Indians into RFC Account/ Resident Rupee
Accounts- Payment of Interest
Bank shall pay interest at the time of conversion of FCNR(B) Account into RFT/Resident Rupee
Account even if the deposit has not completed the minimum maturity period mentioned in
section 19(b)(i) above
Provided that the rate of interest shall not exceed the rate payable on savings bank deposits
held under RFC Account Scheme.
3.8Ordinary Non-Resident (NRO) - NRIs can open Non-Resident Ordinary (NRO) deposit
accounts for collecting their funds from local bonafide transactions. NRO accounts being Rupee
accounts, the exchange rate risk on such deposits is borne by the depositors themselves. When
a resident becomes a NRI, his existing Rupee accounts are designated as NRO. Such accounts
also serve the requirements of foreign nationals resident in India. NRO accounts can be
maintained as current, saving, recurring or term deposits. while the principal of NRO deposits
is non-repatriable, current income and interest earning up to US $ 1 million per calendar year is
repatriable out of the NRO balances / sale proceeds of assets held in India. Interest income from
NRO accounts is not exempt from income tax, as is the case with domestic deposits.
NRO (current/ savings) account can be opened by a foreign national of non-Indian origin visiting
India, with funds remitted from outside India through banking channel or by sale of foreign
exchange brought by him in India.
NRIs and PIOs can hold an NRO account jointly with other NRIs and PIOs.
Loan against the deposits can be granted in India to the account holder or third party subject to
usual norms and margin requirement.
Interest earned on balance of NRO savings/ term deposits accounts attract tax deduction at
source (TDS). Current TDS rates applicable are 30% plus surcharge. Customers residing in
specified countries will have the option of availing TDS at a lower rate under DTAA (double tax
avoidance agreement). The customers need to submit a Tax Residency Certificate (TRC), issued
by the respective overseas authorities along with Form 10F as prescribed under the Income Tax
Rules.

39
3.9 Non-Resident (External) (NRE) Accounts - The Non-Resident (External) Rupee Account
NR(E)RA scheme, also known as the NRE scheme, was introduced in 1970. Any NRI can open an
NRE account with funds remitted to India through a bank abroad. This is a repatriable account
and transfer from another NRE account or FCNR(B) account is also permitted. A NRE rupee
account may be opened as current, savings or term deposit. Local payments can be freely made
from NRE accounts. Since this account is maintained in Rupees, the depositor is exposed to
exchange risk. NRIs / PIOs have the option to credit the current income to their Non-Resident
(External) Rupee accounts, provided the authorised dealer is satisfied that the credit represents
current income of the non-resident account holders and income-tax thereon has been deducted
/ provided for.
Credits permitted to this account as inward remittance are interest accruing on the account,
interest on investment, transfer from other NRE/ FCNR (B) accounts, maturity proceeds if such
investments were made from this account or through inward remittance.
Debits allowed from this account are local disbursements, transfer to other NRE/ FCNR (B) and
investments in India.
Income from interest on balances standing to the credit of NRE accounts is exempt from Income
Tax. Likewise balances held in such accounts are exempt from wealth tax.
Bank shall not mark any type of lien, direct or indirect, against NRE savings deposits.
In case the claimants of an NRE term deposit account of a deceased depositor are residents, the
deposit on maturity shall be treated as a domestic rupee term deposit and interest shall be paid
for the subsequent period at a rate applicable to a domestic term deposit of similar maturity.
4. Interest Payments
4.1 Interest rates on all types of deposit accounts are decided by the Bank within the general
guidelines issued by the Reserve Bank of India from time to time.
In case of saving bank deposits, interest shall be calculated on daily product basis. Interest shall
be credited only when interest payable is minimum Re. 1/-. Interest will be paid on Quarterly
basis.
4.2 In terms of Reserve Bank of India directives, interest shall be calculated at quarterly
intervals, on term deposits and paid at the rate decided by the Bank depending upon the period
of deposits. In case of Monthly Deposit Scheme, the interest shall be calculated for the quarter
and paid monthly at discounted value. The interest on term deposits is calculated by the Bank
in accordance with the formulae and conventions advised by IBA as under:
4.2.1 Bank may not accept any deposits for a period longer than 10 years; excepting in terms of
order of the competent courts or in the case of minors where interest of minors are involved,
provided bank is convinced that it is necessary to do so. Banks may decide in this matter based
on Asset Liability Management policies being followed.
4.2.2 Interest on deposits for fixed term may be paid, credited, transferred or reinvested with
frequency not less than the quarterly rests. However, payment of monthly interest may be
allowed, if required, by discounting the quarterly interest accrued.
40
4.2.3 On deposits repayable in less than three months or where the terminal quarter is
incomplete, interest would be paid for the actual number of days on the basis of 365 days in a
year.
4.2.4 interest on deposits where the terminal period (monthly/quarterly/half year etc. as the
case may be) is incomplete shall be paid on maturity.
4.3 Rounding off of Transactions
All transactions, including payment of interest on deposits / charging of interest on advances,
shall be rounded off to the nearest rupee i.e., fractions of fifty paise and above shall be rounded
off to the next higher rupee and fractions of less than fifty paise shall be ignored. Issue prices
of cash certificates should also be rounded off in the same manner. Cheques/ drafts issued by
clients containing fractions of a rupee shall not be however rejected or dishonored.
4.4 Payment of interest on Term Deposit maturing on Sunday/ Holiday/ Non-Business
Working Day
In case of deposits maturing for payment on Sunday/ holiday/ non-business working day (as
also Saturday in case of NRE deposits), interest shall be paid for the intervening Sunday/ holiday
etc, at the originally contracted rate.
In case of reinvestment deposits (such as CDR, RD etc.), interest for the intervening Sunday/
holiday etc. shall be paid on the maturity value and in the case of ordinary term deposits (such
as FDR, QIDS, MIDS etc.), the interest shall be paid on the original principal amount.
4.5 If a term deposit matures and proceeds are unpaid, the amount left unclaimed with the
bank will attract savings bank rate of interest.
4.6Discretion to pay additional interest not exceeding one percent on deposits of bank’s staff
and their exclusive associations.
The Bank shall allow additional interest at a rate not exceeding one percent per annum over
and above the rate of interest applicable to Deposits held in Domestic Accounts in respect of a
savings or a term deposit account Bank’s staff and their exclusive associations as well as on
deposits of Chairman, Chairman & Managing Director, Executive Director or such other
Executives appointed for a fixed tenure, subject to the following conditions:
i. The additional interest is payable till the person continues to be eligible for the same and in
case of his ceasing to be so eligible, till the maturity of a term deposit account.
ii. In case of employees taken over pursuant to the scheme of amalgamation, the additional
interest is allowed only if the interest at the contractual rate together with the additional
interest does not exceed the rate, which could have been allowed if such employees were
originally employed by the bank.
iii. In the case of employees taken on deputation from another bank, the bank from which they
are deputed may allow additional interest in respect of the savings or term deposit account
opened with it during the period of deputation.

41
iv. In the case of persons taken on deputation for a fixed tenure or on a contract of a fixed
tenure, the benefit will cease to accrue on the expiry of the term of deputation or contract, as
the case may be.
v. Bank Employees’ Federations, in which bank employees are not direct members, shall not be
eligible for additional interest.
vi. The additional interest may be paid on the following deposits after obtaining a declaration
from the depositor concerned, that the monies deposited or which may be deposited from time
to time into such account belong to the depositor:
a.) member or a retired member of the bank’s staff, either singly or jointly with any member or
members of his/her family; or
b.) the spouse of a deceased member or a deceased retired member of the bank’s staff; and
c.) an Association or a fund, members of which are members of the bank’s staff;
4.7 Payment of additional interest will be subject to the following conditions, namely;
4.7.1 In case of staff accounts, where the benefit of the higher rate of interest is allowed to
him/her, irrespective of the fact whether his/her name appears first or subsequent, he/she will
be considered as the recipient of the interest for TDS purposes.
Our CBS system presently does not support the identification of second or subsequently named
person in a joint deposit account as recipient of the interest for TDS purpose. Since we allow
additional interest to our staff member in the capacity of owner of monies and recipient of
interest thereon, it is necessary that the TDS should get calculated and deducted for the interest
income of staff member depositor, and not for any other person just by virtue of having name
at the first position.
As such in case of joint account deposits, where our employee is one of the depositors, he/she
should invariably be the first named depositor in order to be eligible for preferential rate of
interest.
4.7.2 Bank’s retired staff members, who are senior citizens (60 years of age or above), will be
eligible for the benefit of additional interest rates as admissible to senior citizens, as applicable
from time to time, over and above the additional interest of 1.00% payable to them by virtue
of their being retired members of the Bank staff.
4.7.3 A member or a retired member or the spouse of a deceased member or spouse of a
deceased retired member of the Bank’s staff will be offered an additional interest rate of 1.00%
only up to an amount of `1.00 crore ONLY.
However, the benefit of additional interest rate of 1.00% will be available to the associations or
a fund, members of which are Bank’s staff members, beyond a deposit amount of Rs. 1 crore
also.
4.7.4 The benefit of additional interest of 1% will not be available to the existing or retired staff
members in case of NRO/NRE/FCNR (B) accounts.

42
4.8 Discretion to pay additional interest not exceeding one per cent on deposits of Chairman
and Managing Director and Executive Directors of the Bank
On deposits accepted / renewed from Chairman, Chairman & Managing Director, Executive
Director or such other Executive appointed for a fixed tenure, the Bank shall pay additional
interest not exceeding one per cent per annum over and above the rate of interest stipulated.
However, they are eligible to get such benefit only during the period of their tenure.
4.9 Deposit Scheme for Senior Citizens (above 60 years of age)
Bank may offer additional rate of interest on term deposits of Resident Indian Senior citizens as
decided and declared from time to time (presently 0.50% p.a. only, for all maturity slabs of 91
days and above for deposits up to Rs. 2 crore only). The additional interest is not applicable to
any type of non-resident deposits.
Bank is giving the benefit of higher rate to the senior citizens automatically on maturity/rollover
of the existing term deposit receipts, after attaining the age of sixty w.e.f. 25th August 2018.
In the case of a term deposit which is standing in the name of an HUF, higher rate of interest
shall not be offered even if the Karta of the HUF is a resident Indian senior citizen, as the
beneficial owner of the deposit is the HUF and not the Karta in his individual capacity.
Simplified procedure for automatic transfer of deposits of Senior Citizens to their nominees in
the event of their death, shall be formulated.
4.10 Payment of interest on accounts frozen by bank
In case of Term Deposit Accounts of customers frozen by the orders of the enforcement
authorities, following procedure shall be followed;
i) A request letter shall be obtained from the customer on maturity, indicating therein term for
which the deposit is to be renewed. In case the depositor does not exercise the option of
choosing the term for renewal, bank shall renew the same for a term equal to the original term.
ii) No new receipt shall be issued.
iii) Renewal of deposit shall be advised by registered letter / speed post / courier service to the
concerned Government department under advice to the depositor. In the advice to the
depositor, the rate of interest at which the deposit is renewed shall also be mentioned.
iv) If overdue period does not exceed 14 days on the date of receipt of the request letter,
renewal should be done from the date of maturity. If it exceeds 14 days, interest for the overdue
period shall be paid as per our policy (refer Annexure D of policy) and kept it in a separate
interest free sub-account which should be released when the original fixed deposit is released.
v) With regard to the savings bank accounts frozen by the enforcement authorities, bank shall
continue to credit the interest to the account on a regular basis.
4.11 Acknowledgement by banks at the time of submission of Form 15-G / 15-H

43
Bank shall not deduct TDS from depositors who submit declaration in Form 15-G/15-H under
Income Tax Rules, 1962. Bank shall give an acknowledgment at the time of receipt of Form 15-
G/15-H.
Bank shall provide TDS Certificate in Form 16A, to their customers in respect of whom tax at
source is deducted by the Bank.
4.12 Opening of Current Accounts - Need for discipline
Bank shall, at the time of opening current account, insist on a declaration to the effect that the
account holder is not enjoying any credit facility with any other bank. Current accounts of
entities which enjoy credit facilities (fund based or non-fund based) from the banking system
shall not be opened without specifically obtaining a No-Objection Certificate from the lending
bank(s). Bank may however open current account of prospective customer in case no response
is received from the existing bankers after a minimum waiting period of a fortnight. If a response
is received within a fortnight, bank shall assess the situation with reference to information
provided on the prospective customer by the bank concerned and may not solicit a formal no
objection.
In case of a prospective customer who is a corporate or large borrower enjoying credit facilities
from more than one bank, the bank shall exercise due diligence and inform the consortium
leader, if under consortium, and the concerned banks, if under multiple banking arrangement.
5. Customer Information
The customer information collected from the customers shall not be used for cross selling of
services or products by the Bank, their subsidiaries and affiliates. If the Bank proposes to use
such information, it should be strictly with the consent of the accountholder.
6. Secrecy of Customer’s Accounts
The Bank shall not disclose details/ particulars of the customer's account to a third person or
party without the expressed or implied consent from the customer. However, there are some
exceptions, viz. disclosure of information under compulsion of law, where there is a duty to
public to disclose and where interest of the Bank requires disclosure.
7. Premature Withdrawal/Closure of Term Deposit
The Bank on request from the depositor, shall allow withdrawal of term deposit before
completion of the period of the deposit agreed upon at the time of placing the deposit. At
present bank does not charge penalty on premature withdrawal of term deposits, having
maturity up to one year (tenor at the time of opening the account). Interest rates on
prematurely withdrawn term deposits with maturity period more than 1 year shall be 1% below
the applicable rate currently.
a) For Domestic deposits below Rs 2 crore: For deposits up to 1 year maturity (tenor at the time
of opening the account) interest is payable at the rate applicable to the period for which deposit
has actually been held with the bank and there will be NO PENALTY on the applicable rate of
interest. Interest rates on prematurely withdrawn term deposits with maturity more than one
year will be 1 % below the applicable rate. However, if premature withdrawal of deposit is taken
44
for reinvestment in the Bank for a period longer than residual maturity period of existing deposit
there will be no penalty on applicable rate.
b) For Domestic deposits from Rs 2 crore to Rs 100 crore: While prematurely withdrawing/
closing a deposit from Rs 2 crore to Rs 100 crore “the applicable rate of interest will be the
contracted rate of interest for that specific period with a penalty of 0.50 % over and above
applicable rate.
c) For Domestic deposits above Rs 100 crore : While prematurely withdrawing/ closing a
deposit above Rs 100 crore “the applicable rate of interest will be the contracted rate of interest
for that specific period with a penalty of 0.50 % over and above applicable rate.
d) In case of NRE/FCNR deposits, no interest shall be paid if deposit is prematurely closed
before the minimum period of one year. Premature payment after one year shall attract penalty
as per point 8(b) and (c). However No penalty to be levied on premature withdrawal of
NRE/FCNR after completion of one year if it is for reinvestment for a period longer than residual
maturity period of existing deposit .
e) No interest will be paid for premature withdrawal within 7 days of opening the deposit.
However Bank may change the penalty clause at any time and the latest interest rate circular
shall prevail. The existing provisions governing the premature withdrawal of deposits are given
more precisely in Annexure-C.
However as regards bulk deposits of Rs. 2 Cr & above, the bank at its discretion may disallow
premature withdrawal of such large term deposits of all depositors, including deposits of
individuals and HUFs. Bank shall however notify such depositors of its policy of disallowing
premature withdrawal in advance i.e. at the time of accepting such deposits.
8. Premature Renewal of Term Deposit
In case the depositor desires to renew the deposit by seeking premature closure of an existing
term deposit account, the bank will permit the renewal at the applicable rate on the date of
renewal, provided the deposit is renewed for a period longer than the balance period of the
original deposit. While prematurely closing a deposit for the purpose of renewal, interest on
the deposit for the period it has remained with the bank will be paid at the rate applicable to
the period for which the deposit remained with the bank and not at the contracted rate.
9. Renewal of Term Deposits / Overdue Term Deposits
The bank offers auto-renewal facility for term deposits. If this facility is opted for by the
customer, the term deposit on maturity is auto-renewed for the tenor same as the maturing
deposit at the rate prevailing on the date of renewal. If auto-renewal facility is not opted for by
the customer, and the term deposit is renewed by the customer on maturity, interest rate for
the period specified by the depositor as applicable on the date of maturity would be applied on
the deposit so renewed.
If request for renewal is received after the date of maturity, such overdue deposits will be
renewed with effect from the date of maturity at interest rate applicable as on the due date,
provided such request is received within 14 days from the date of maturity. In respect of
45
overdue deposits renewed after 14 days from the date of maturity, interest for the overdue
period will be paid at the rates decided by the Bank from time to time. The latest guidelines in
this respect are given in Annex-D.
10. Intra-bank deposit/term deposit account portability Banks is allowing unrestricted transfer
of intra-bank deposit or term deposit accounts if KYC done by one branch is fully complete. In
order to comply with KYC requirements of correct address of the person, fresh address proof
may be obtained from him/her upon such transfer by the transferee branch.
11. Advances against Deposits
The Bank may consider request of the depositor/s for loan / overdraft facility against term
deposits [unless prohibited under the respective deposit scheme] duly discharged by the
depositor/s on execution of necessary security documents. The Bank may also consider loan
against deposit standing in the name of minor, however, a suitable declaration stating that loan
is for the benefit of the minor, will have to be furnished by the guardian/ depositor/ applicant.
12. Insurance Cover for Deposits
All bank deposits are covered under the insurance scheme offered by Deposit Insurance and
Credit Guarantee Corporation of India (DICGC) subject to certain limits and conditions.
13. Unclaimed Deposits / Inoperative Accounts
A savings as well as current account shall be treated as inoperative / dormant if there are no
transactions in the account for over a period of two years. Such accounts shall be marked by
the CBS system as inoperative accounts.
The depositor can request the Bank to activate the account for operating it. No charge shall be
levied for non-maintenance of minimum balance in or activation of any dormant / inoperative
account.
For the purpose of classifying an account as 'inoperative' both the type of transactions i.e., debit
as well as credit transactions induced at the instance of customers as well as third party shall
be considered. However, the service charges levied by the bank or interest credited by the bank
shall not be considered.
Credit of interest on term deposit account/s of the customers to their Saving Bank accounts as
per their mandates shall be treated as customer induced transactions. Though there are no
other operations in the Savings Bank accounts, they shall be treated as operative accounts as
long as the interest on term deposit/s is credited to the Savings Bank accounts. Such Savings
Bank accounts shall be treated as inoperative accounts only after two years from the date of
the last credit entry of the interest on term deposit/s.
Similar treatment shall be given where the customer has given a mandate for crediting dividend
on shares to Savings Bank account and there are no other operations in the Savings Bank
account. Such account shall be treated as inoperative account only after two years from the
date of the last credit entry of the dividend, provided there is no other customer induced
transaction.

46
The segregation of the inoperative accounts is from the point of view of reducing risk of frauds
etc. However, the customer should not be inconvenienced in any way, just because his account
has been rendered inoperative. The classification is there only to bring to the attention of
dealing staff, theincreased risk in the account. The transaction may be monitored at a higher
level both from the point of view of preventing fraud. Operation in such accounts may be
allowed after due diligence as per risk category of the customer. Due diligence would mean
ensuring genuineness of the transaction, verification of the signature and identity etc. However,
it has to be ensured that the customer is not inconvenienced as a result of extra care taken by
the bank.
Interest on savings bank accounts shall be credited on regular basis whether the account is
operative or not. If a Term Deposit Receipt matures and proceeds are unpaid, the amount left
unclaimed with the bank will attract savings bank rate of interest.
Section 26 of the Banking Regulation Act, 1949 provides, inter alia, that every banking company
shall, within 30 days after close of each calendar year submit a return in the prescribed form
and manner to the Reserve Bank of India as at the end of each calendar year (i.e., 31st
December) of all accounts in India which have not been operated upon for 10 years.
14. The Depositor Education & Awareness Fund Scheme - 2014
As per RBI directives under the provisions of Banking Regulation Act 1949, Section 26 A, any
amount to the credit of any account in India with any bank, which has not been operated upon
for a period of ten years, or any deposit or any amount remaining unclaimed for more than ten
years, shall be credited to the 'The Depositor Education and Awareness Fund' (DEAF) on
monthly basis.
In case of demand from a customer / depositor whose unclaimed amount / deposit had been
transferred to the Fund, banks shall repay the customer / depositor, along with interest, if
applicable, and lodge a claim for refund from the Fund for an equivalent amount paid to the
customer / depositor.
Proper due diligence as per the risk category of the customers shall however be carried out
before making payments to the customers approaching the banks for repayment. Branches shall
invariably verify that genuineness of the claimants and genuineness of the transactions
intended to be undertaken.
15. Struck off accounts
After the demonetization exercise by the Government in November 2016, the step of striking-
off is a clean-up exercise mainly targeting shell companies suspected of money laundering. The
current Government at Centre is fully committed to not only help in checking the menace of
black money but also to promote an ecosystem of ‘ease of doing businesses and enhance
investor’s confidence. Though strike-off of such companies, that are not operating or carrying
on business, by the ROC, is not new to the corporate world; there are several intriguing legal
issues in the aftermath of such a dissolution.
A company is classified as a shell company, if it is a non-trading company that has been floated
with the intention of financial maneuvering. There has been a rise in the number of shell
47
companies floated across the country in recent years. The fight against black money shall be
incomplete without breaking the network of shell companies. There is a lot of possibility of using
the shell companies for laundering of the black money. This threat cannot be undermined. As a
comprehensive step to address the issue of shell companies and their role in money laundering
and circulation of unaccounted money, the Government has decided to track down the
beneficial owners of suspected shell companies and take penal action against those who divert
funds from companies that are struck off the records of the Registrar of Companies (RoC). The
intent of the Government is to ensure that companies take their statutory obligations seriously
and to deter firms from using a complex corporate structure to divert funds raised from financial
institutions or to launder money.
Operations in accounts of Struck off companies: Since these companies are deregistered they
are no more legal entities, hence no credit exposure can be considered. It is therefore utmost
essential to care that no request from such company either for credit facility or even for opening
of current/deposit account should be entertained at branch level
16. Settlement of dues in Deceased Deposit Accounts
i) If the depositor has registered nomination with the Bank, the balance outstanding in the
account of the deceased depositor will be transferred to the account of / paid to the nominee
after the Bank satisfies about the identity of the nominee etc.
ii) The above procedure will be followed even in respect of a joint account where nomination is
registered with the Bank.
iii) In a joint deposit account, when one of the joint account holders dies, the Bank is required
to make payment jointly to the legal heirs of the deceased person and the surviving depositor(s).
However, if the joint account holders had given mandate for disposal of the balance in the
account in the forms such as "either or survivor, former / latter or survivor, anyone of
survivorsor survivor; etc.”, the payment will be made as per the mandate to avoid delays in
production of legal documents by the heirs of the deceased.
Premature withdrawal of Term Deposit with Survivorship mandate shall be allowed in the
manner as clarified at Clause No. 3.19.2, 3.19.3 and 3.19.4 of deposit policy.
iv) In the absence of nomination and when there are no disputes among the claimants, the Bank
will pay the amount outstanding in the account of deceased person against joint application
and indemnity by all legal heirs or the person mandated by the legal heirs to receive the
payment on their behalf without insisting on legal documents up to the threshold limit of Rs. 1
lakh as approved by the bank's board. This is to ensure that the common depositors are not put
to hardship on account of delays in completing legal formalities.
For the amount outstanding over the prescribed limit, the necessary legal formalities as
prescribed by the Bank from time to time to be completed.
17. Interest Payable on Term deposit in Deceased Account
i. In the event of death of the depositor before the date of maturity of deposit and amount of
the deposit is claimed after the date of maturity, the Bank shall pay interest at the contracted

48
rate till the date of maturity. From the date of maturity to the date of payment, the Bank shall
pay simple interest at the applicable rate prevailing on the date of maturity, for the period for
which the deposit remained with the Bank beyond the date of maturity; as per the Bank's policy
in this regard.
ii. If the amount of deposit is claimed before the date of maturity, interest at the rate applicable
to the period for which the deposit has remained with the Bank will be paid as per 8(a), (b), (c),
(d) and (e) mentioned in deposit policy.
iii. However, in the case of death of the depositor after the date of maturity of the deposit, the
bank shall pay interest at savings deposit rate prevailing on the date of maturity from the date
of maturity till the date of payment.
iv. In respect of Balances lying in Current a/c standing in the name of Deceased Individual / Sole
Proprietorship Concern, interest shall be paid from the date of death of the depositor till the
date of repayment to the claimant at the rate of interest applicable to Savings Deposits as on
the date of payment.
v. In case of NRE deposit when the claimants are residents, the deposit on maturity shall be
treated as domestic Rupee deposit and interest shall be paid for the subsequent period at a rate
applicable to the domestic deposit of a similar maturity.
18. Safe Deposit Lockers
This facility is not offered through all bank branches and wherever the facility is offered,
allotment of safe deposit vault will be subject to availability and compliance with other terms
and conditions attached to the service. Safe deposit lockers may be hired by an individual (being
not a minor) singly or jointly with another individual(s), HUFs, firms, limited companies,
associates, societies, trusts etc. Nomination facility is available to individual(s) holding the
lockers singly or jointly. Joint locker holderscan give mandate for access to the lockers in the
event of death of one of the holders on the lines similar to those for deposit accounts. In the
absence of nomination or mandate for disposal of contents of lockers, with a view to avoid
hardship to common persons, the bank will release the contents of locker to the legal heirs
against indemnity on the lines as applicable to deposit accounts.
19. Redressal of grievances
Depositors having any complaint / grievance with regard to services rendered by the Bank has
a right to approach authority(ies) designated by the Bank for handling customer complaint /
grievances. The details of the internal set up for redressal of complaints / grievances will be
displayed in the branch premises. The branch officials shall redress the grievances of the
Customer if any. They will provide all required information regarding procedure for lodging the
complaint in case complainant is not satisfied with his action. In case the depositor does not get
response from the Zonal Office within 4 weeks from date of lodging complaint or if he is not
satisfied with the response received from the Bank, he has a right to approach banks Nodal
Officer for Public Grievances, Head Office, “Lokmangal”, ‘1501, Shivajinagar Pune –411005 or
Banking Ombudsman appointed by the Reserve Bank of India.

49
 Annexure-A
Term Deposit Schemes of Bank of Maharashtra

Sr. Name of Deposit Peri Min. Amt. of Min. Max. Interest Loan
No Scheme odic Deposit Rs. Peri Period Pattern Facility
. ity od

1 Recurring M 50/- pm No ceiling 6 M 120 M C Yes

2 Mahasanchay M 100/- pm 50000/- pm 12 M 60 M S Yes
Systematic
Deposit
Plan
(MSDP)
3 Maha Lakhpati M Suitable for No ceiling 12 M 120 M C Yes
Recurring MV of min.
Deposit (MLRD) Rs. 1 lac
4 Maha Millionaire M Suitable for No ceiling 12 M 120 M C Yes
Recurring MV of min.
Deposit (MMRD) Rs. 10 lac
5 Fixed Deposit L 1000/- No ceiling 12 M 120 M S Yes
6 MIDS L 1000/- No ceiling 12 M 120 M D Yes
7 QIDS L 1000/- No ceiling 12 M 120 M S Yes
8 Short Term L 1000/- No ceiling 7 364 S Yes
deposit Days Days
9 Mahabank L 5000/- No ceiling 46 60 M S Yes
Unit Days
Deposit (Sheetal)
10 Cumulative L 1000/- No ceiling 6M 120 M C Yes
Deposit
11 Mixie Deposit L 10000/- No ceiling 24 M 120 M C Yes
12 Bank Term L 100/- 1,50,000/- 5Y 10 Y D, S or C No
Deposit Scheme in one F.Y. as the
2006 [u/s 80C of case be.
I.T. Act)
13 Mahabank Yuva --
Yojana Zero --
1. SB A/C -- No ceiling S No

2. Recurring M 10/- p.m. No ceiling 6M C Yes

120 M
3. Fixed Deposit L Suitable for No ceiling 12 M S Yes
MV of min. 120 M
Rs. 0.50 lac
4.Mahasaraswati M R/SU- No Limit 36 M 120 M C Yes
50/pm M/U-
100/pm
50
Annexure-A (Contd.)
Term Deposit Schemes of Bank of Maharashtra

Sr. Name of Deposit Peri Min. Amt. of Max. Amt Min. Max. Interest Loan
No Scheme odic Deposit Rs. of Deposit Period Peri Pattern Facility
. ity Rs od
14 Mahalaxmi Term
Deposit Scheme 1000/- 3Y 3Y
1. Fixed Deposit Yes
L No ceiling S
2. MIDS L 1000/- No ceiling 3Y 3Y D Yes
3. QIDS L 1000/- No ceiling 3Y 3Y S Yes
4. CDR L 1000/- No ceiling 3Y 3Y C Yes
15 Mahanidhi Term
Deposit Scheme 1000/- 444 days
1. Fixed Deposit Yes
L < 1 Crore S
2. MIDS L 1000/- 444 days D Yes
< 1 Crore
3. QIDS L 1000/- 444 days S Yes
< 1 Crore
4. CDR L 1000/- 444 days C Yes
< 1 Crore
16 Mahalabh Term 1000/- 666 days Yes
Deposit Scheme L < 1 Crore C
17 Mahabank Flexi 10.00 Crs 180 days No
Deposit Scheme L No ceiling S
M= Month/Monthly Y=Year/Yearly L=In lump sum C=Compound S=Simple
D=Discounted

51
Annexure-E
Basic Savings Bank Deposit Account (BSBDA) – Salient Features
With a view to make the basic banking facilities available to all sections of population under all
income groups in a more uniform manner across the banking system, RBI had advised the banks
to offer a “Basic Savings Bank Deposit Account (BSBDA)” with some common minimum facilities
to all the customers.
Accordingly, our Bank has introduced Basic Savings Bank Deposit Account (BSBDA) with the
product name as “Maha Sarvajan Savings Bank Deposit Account”. The features of the product
shall be as below;

Eligibility of opening of the account

The Account is considered as a normal banking service available to all. The account can be
opened by any individual, without any restriction like income criteria of the individual.

Initial Deposit
There is no requirement for any initial deposit for opening the account. Account can be opened
with Zero initial deposit.

Requirement of maintenance of minimum balance

The account is without requirement of maintaining any minimum balance.

Rate of interest
Rate of interest payable on credit balance in the account is at par with the rate applicable for
normal Savings Bank Deposit Account.

Normal banking services available in the account free of cost

a. Deposit and withdrawal of cash at bank branch as well as ATMs.
b. Receipt / credit of money through electronic payment channels or by means of deposit /
collection of cheques drawn by Central / State Government agencies and departments.
The above normal facilities shall be provided without any charges.

Charges of non-operation of the account

There is no charge for non-operation of the account.

Charges of activation of in-operative BSBDA account

There is no charge for activation of in-operative account.

Number of deposits allowed in a month

There is no limit on number of deposits that can be made in a month.

Number of withdrawals allowed in a month

52
Maximum four withdrawals in a month free of charge through any mode including ATMs, RTGS,
NEFT, Clearing, Branch cash withdrawal, transfer, internet debit, Standing Instruction, EMI etc.,
are allowed.
Passbook Facility
Account holder is offered passbook facility free of charge.
Cheque Book Facility
Cheque Book of 10 leaves per year, free of cost.
(In fact, BSBDA does not envisage cheque book facility in the minimum facilities that should be
provided to BSBDA customers. However, we have extended this as an additional facility free of
charge).
ATM Card Facility
ATM-cum-Debit Card is offered free of charge and no Annual fee shall be levied on such Cards.
ATM debit cards is offered at the time of opening of the account and issued if the customer
requests for the same in writing. .
In case of illiterate or old customers who may not be in a position to safe keep and use the
ATM debit card and ATM PIN, the customer while opening the account shall be made aware
about the same and risk associated with it. However, if a customer chooses not to have an ATM
Debit Card, he/she shall not be compelled to accept the same.
Applicability of KYC/AML instructions & treatment to existing no-frill / Mahabank Lok Bachat
accounts
Existing No-frill / Mahabank Lok Bachat accounts shall be continued to be treated as ‘Basic
Savings Bank Deposit Accounts' and they shall carry the same features as mentioned above in
respect of prescribed facilities, other rules etc.
No-frill / Mahabank Lok Bachat accounts opened / to be opened with simplified / relaxed KYC
norms shall be treated as "BSBDA-Small Account" and would be subject to the following
conditions;
Total credits in such accounts should not exceed one lakh rupees in a year.
Maximum balance in the account should not exceed fifty thousand rupees at any time
The total of debits by way of cash withdrawals and transfers will not exceed ten thousand
rupees in a month
Remittances from abroad cannot be credited to Small Accounts without completing normal
KYC formalities
Small accounts are valid for a period of 12 months initially which may be extended by another
12 months if the person provides proof of having applied for an Officially Valid Document.
Bank’s following existing products fall under "BSBDA-Small Account" category;

53
 Sr. No. Name of the Product Product Code
1 SB-Mahabank Lokbachat Yojana 2022-1401
2 FI-Mahabank Lokbachat Yojana 2033-1401
3 SB-MahaSetu-FI-w/oChq_pub_Ind 2122-1401

“Maha Sarvajan Savings Bank Deposit Account” is opened with a separate Product Code 2059-
1401. It is subject to full KYC compliance without any relaxation. The above restrictions with
respect to total credits in the year, maximum balance in the account, total debits in the month
etc. are not applicable for “Maha Sarvajan Savings Bank Deposit Account”.
Account opened under the products falling under "BSBDA-Small Account" category (as
mentioned in the above table), shall be converted to “Maha Sarvajan Savings Bank Deposit
Account”, on production of the proof of identity and address by the account holder and on
becoming of the account full KYC-compliant. Thereafter the restrictions with respect to total
credits in the year, maximum balance in the account, total debits in the month etc. shall not be
applicable to that account.
Number of Savings Bank accounts of a BSBDA holder in the bank
An individual shall be eligible to have only one Savings Bank account under BSBDA-Small or
BSBDA-General category in our bank in any of the following products;

Sr. No. Name of the Product Product Code Category

1 SB-Mahabank Lokbachat Yojana 2022-1401 BSBDA-Small
2 FI-Mahabank Lokbachat Yojana 2033-1401 BSBDA-Small
3 SB-MahaSetu-FI-w/oChq_pub_Ind 2122-1401 BSBDA-Small
4 Maha Sarvajan Savings Bank 2059-1401 BSBDA-General
Deposit Account
BSBDA customer cannot have any other Savings Bank Account in the same Bank, under BSBDA
(Small or General) category or otherwise. If a customer has any other existing Savings Bank
Account in our bank, he/she will be required to close it within 30 days from the date of opening
a BSBDA. While opening the BSBDA, customers' consent/undertaking in writing shall be
obtained stating that he/she shall close his/her existing other Savings Bank account/s within 30
days of opening BSBDA and bank shall be free to close such account/s after 30 days.
BSBDA holder can however continue with existing or open new term/fixed deposit account/s,
Recurring deposit account/s with us.
Conversion of normal SB account into BSBDA
Normal Saving Bank account can be converted into BSBDA at the request of customer. The
customer should give his consent in writing and he/she will be informed of the features and
extent of services available in BSBDA.
Levying of charges for additional facilities beyond those prescribed above
Bank may, at its discretion, offer additional facilities beyond those prescribed under BSBDA free
of cost. (Initially, we are offering cheque book of 10 leaves per year, free of cost as an additional
facility).
54
However if we levy any charge for any facility (prescribed or additional), the BSBDA status of
the account shall be lost.
Inclusion under Financial Inclusion
The aim of introducing BSBDA is a part of furthering the Financial Inclusion objectives of the
bank. All the no-frill accounts opened earlier under Financial Inclusion and all the new accounts
opened under BSBDA (new product) shall be included in reporting of progress of Financial
Inclusion plans by the bank

55
 CONSUMER PROTECTION ACT
Consumer Protection Act was initially enacted during 1986 and implemented wef April 15, 1987
to enable the consumers to enforce his rights as consumer through a simple legal procedure
(not applicable in J & K). A comprehensive amendment (The Consumer Protection (Amendment)
Act 2002) has been passed on Dec 17, 2002 (implemented wef March 15, 2003). The major
provisions of the amended Act are as under:
Consumer: A person who buys goods or hires services for consideration (i.e. for a price) for
his/her use (and not for resale) is a consumer. Any user of such goods and services, with the
permission of the buyer, is also a consumer.
Coverage: All goods and services including banking, insurance, transport, processing, physicians
etc. in private, public and cooperative sector, are covered. All banking services are covered due
to their being essential services.
Who can file a complaint – A consumer individually or jointly, any voluntary consumer
organization, Central or State Govt.
Limitation period: 2 years from the date of cause of action
CONSUMERS GET PROTECTION AGAINST

 Unfair trade practice Under S. (2) C of the act.

 An unfair trade practice
 Deficiencies in services / Overcharging of price
 Short payment of interest amt. in case of deposit a/cs

CONSUMER'S RIGHTS
 Right to safety against hazardous goods and services
 Right to be informed about quality, quantity, purity, standard, price
 Right to choose from a variety at competitive prices
 Right to be heard
 Right to seek redressal
 Right to consumer education

FORUM AND JURISDICTION

District Forum (President Qualified to be Dist. Judge plus 2 other Up to Rs. 1 crore
members)
State Commission (President qualified to be High Court Judge Above 1 crore up to Rs.10
plus 2 other members) crore & appeals
National Commission (President qualified to be supreme court Above Rs.10 crore &
Judge plus 4 other members) appeals
ESSENTIAL INFORMATION IN THE APPLICATION

Name and full address of complainant

Name and full address of opposite party

56
Description of goods and services
Quality and quantity
Price
Date & proof of purchase
Nature of deception
Type of redressal prayed for

BENEFITS
– Disposal within 90 days
– No adjournment shall ordinarily be granted - Speedy trial
RELIEFS
– Removal of defects in goods or deficiency in services.
– Replacement of defective goods.
– Refund against defective goods or deficient services.
– Compensation.
– Prohibition on sale of hazardous goods.
TIME LIMITS
Admissibility of the complaint from date of receipt of the complaint 21 days
Without analysis or testing of commodities 3 months
With analysis or testing of commodities 5 months
National and state commission 3 months
Decision on appeals 90 days

Penalty for non-compliance of orders:

Imprisonment for not less than one month and up to three years or fine not less than Rs.2000
and up to Rs.10000 or both.

 Cost can be awarded up to Rs.10000 against Frivolous complaints

Appeals – The period for appeal is limited to 30 days from date of order in all cases. The party
liable to make the payment, as per decision, to deposit the following at the time of appeal:

Appeal to State commission against Dist. 50% or Rs. 25000, whichever is less
Forum
Appeal to National commission against State 50% or Rs.35000 whichever is less
Commission
Appeal to Supreme Court against National 50% or Rs.50000 whichever is less
Commission

Fee Schedule
Up to Rs. 1 lakh Rs.100
Above Rs.1 lakh up to Rs.5 lakh Rs. 200
Above Rs.5 lakh up to Rs.10 lakh Rs.400
Above Rs.10 lakh up to Rs.20 lakh Rs. 500

Banking services are also covered under this act. Both customer and public.

57
Some examples for deficiencies:
 Unlawful dishonour of cheques
 Negligence in Cheque collection
 Negligence in issuing DD/PO
 Negligence in case of guarantees
 Not granting a loan is NOT a deficiency

Right To Information Act 2005

Right to information for citizens to secure information to promote transparency and

accountability

What is Right to Information?

Access to the information which is held by any Public Authority, Such as records, documents,
memos, emails, opinions, advices, press releases, circulars, orders, logbooks, contract, reports,
etc

Purpose of the act

 Transparency
 Accountability
 Good Governance

Who can seek the information

 Any ‘citizen’
 By making an application in writing or electronic form
 In English/Hindi or any local language
 Reason for seeking info. Not required
 With the requisite fee of Rs.10/- by way of cash, DD, Bankers Cheque or Indian Postal
Order (below poverty line exempted)
 Corporate entities are not citizens

Who will receive the application

 Any designated Central Assistant Public Information Officer (CAPIO)

 In our Bank, all Branch heads are CAPIOs
 CAPIO can receive the application only and cannot respond to it.
 CAPIO should forward the application immediately to CPIO

TIMELINES
CAPIO should forward the application to concerned CPIO immediately to enable him to receive
it before 5 days from the date of receipt of the application.

The CPIO (Central Public Information Officer) should respond to the application on ‘priority
basis’ and any case within a maximum of
30 days of its receipt at CPIO’s office.
48 hours for the information concerning life and liberty of a person
40 days if third party is involved
58
Penalty for failure to provide information

PIO to pay penalty of Rs. 250 per day, max being Rs. 25000

As per Right to Information (Regulation of Fee & Cost) Rules, 2005 the public authority shall
charge:
1. Rs.2/- for each page created or copied (A-4, A-3 Size paper)
2. Actual charge or cost price of a copy in larger size paper
3. Actual cost or price for samples or models;
4. For inspection of records, no fee for the first hour, and a fee of Rs.5 for each subsequent
hour or fraction thereof
To provide information under section 7(5) the public authority shall charge:
1. R. 50/- per diskette or floppy and
2. For information in printed form at a price fixed for such publication or Rs.2 per page of
photocopy for extracts from the publication

Record Preservation: IBA has clarified that the extant practice of preserving various records
such as ledgers, registers, instruments, vouchers, etc. for a period of 5 to 8 years as prescribed
under Banking Companies (Period of Preservation of Records) Rules 1985 may be continued.

Exempted Information
i. information, disclosure of which would prejudicially affect the sovereignty and integrity
of India, the security, strategic, scientific or economic interests of the State, relation with
foreign State or lead to incitement of an offence
ii. information which has been expressly forbidden to be published by any court of law or
tribunal or the disclosure of which may constitute contempt of court;

Name of the Zones CPIO Appellate Authority

Pune, Mumbai, Delhi AGM at Zonal Office General Manager

Zones headed by Dy Gen AGM/Chief Manager at Zonal Zonal Head

Manager Office
Regions headed by AGM Chief Manager/ Senior Zonal Head
Manager at Zonal Office
Head Office Asst.Gen Manager (Planning) General Manager (Planning

59
 BANKING OMBUDSMAN SCHEME, 2006

 What is the Banking Ombudsman Scheme?

 The Banking Ombudsman Scheme is an expeditious and inexpensive forum
for bank customers for resolution of complaints relating to certain services
rendered by banks. The Banking Ombudsman Scheme is introduced under
Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from
1995. Presently the Banking Ombudsman Scheme 2006 (As amended up to
July 1, 2017) is in operation.
 Who is a Banking Ombudsman?
 The Banking Ombudsman is a senior official appointed by the Reserve Bank
of India to redress customer complaints against deficiency in certain banking
services covered under the grounds of complaint specified under Clause 8 of
the Banking Ombudsman Scheme 2006 (As amended up to July 1, 2017).
 How many Banking Ombudsmen have been appointed and where are they
located?
 As on date, twenty-one Banking Ombudsmen have been appointed with their
offices located mostly in state capitals. The addresses and contact details of
the Banking Ombudsman offices have been provided under Annex I of the
Scheme.
 Which are the banks covered under the Banking Ombudsman Scheme,
2006?
 All Scheduled Commercial Banks, Regional Rural Banks and Scheduled
Primary Co-operative Banks are covered under the Scheme.
 What are the grounds of complaints?
 The Banking Ombudsman can receive and consider any complaint relating to
the following deficiency in banking services:
 non-payment or inordinate delay in the payment or collection of cheques,
drafts, bills etc.;
 non-acceptance, without sufficient cause, of small denomination notes
tendered for any purpose, and for charging of commission in respect thereof;
 non-acceptance, without sufficient cause, of coins tendered and for charging
of commission in respect thereof;
 non-payment or delay in payment of inward remittances;
 failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;
 non-adherence to prescribed working hours;
 failure to provide or delay in providing a banking facility (other than loans and
advances) promised in writing by a bank or its direct selling agents;
 delays, non-credit of proceeds to parties' accounts, non-payment of deposit
or non-observance of the Reserve Bank directives, if any, applicable to rate
of interest on deposits in any savings, current or other account maintained
with a bank;
 complaints from Non-Resident Indians having accounts in India in relation to
their remittances from abroad, deposits and other bank related matters;
 refusal to open deposit accounts without any valid reason for refusal;

60
 levying of charges without adequate prior notice to the customer;
 Non-adherence to the instructions of Reserve Bank on ATM / Debit Card and
Prepaid Card operations in India by the bank or its subsidiaries
 Non-adherence by the bank or its subsidiaries to the instructions of Reserve
Bank on credit card operations
 Non-adherence to the instructions of Reserve Bank with regard to Mobile
Banking / Electronic Banking service in India by the bank
 Non-disbursement or delay in disbursement of pension (to the extent the
grievance can be attributed to the action on the part of the bank concerned,
but not with regard to its employees);
 Refusal to accept or delay in accepting payment towards taxes, as required
by Reserve Bank/Government;
 Refusal to issue or delay in issuing, or failure to service or delay in servicing
or redemption of Government securities;
 Forced closure of deposit accounts without due notice or without sufficient
reason;
 Refusal to close or delay in closing the accounts;
 Non-adherence to the fair practices code as adopted by the bank;
 Non-adherence to the provisions of the Code of Bank's Commitments to
Customers issued by Banking Codes and Standards Board of India and as
adopted by the bank;
 Non-observance of Reserve Bank guidelines on engagement of recovery
agents by banks;
 Non-adherence to Reserve Bank guidelines on para-banking activities like sale
of insurance / mutual fund /other third party investment products by banks
 Any other matter relating to the violation of the directives issued by the
Reserve Bank in relation to banking or other services.
 A customer can also lodge a complaint on the following grounds of deficiency
in service with respect to loans and advances
 non-observance of Reserve Bank Directives on interest rates;
 delays in sanction, disbursement or non-observance of prescribed time
schedule for disposal of loan applications;
 non-acceptance of application for loans without furnishing valid reasons to
the applicant; and
 non-adherence to the provisions of the fair practices code for lenders as
adopted by the bank or Code of Bank’s Commitment to Customers, as the
case may be;
 Non-observance of any other direction or instruction of the Reserve Bank as
may be specified by the Reserve Bank for this purpose from time to time.
 The Banking Ombudsman may also deal with such other matter as may be
specified by the Reserve Bank from time to time.
 When can one file a complaint?
 One can file a complaint before the Banking Ombudsman if the reply is not
received from the bank within a period of one month after the bank
concerned has received one's complaint, or the bank rejects the complaint,
or if the complainant is not satisfied with the reply given by the bank.

61
 When will one's complaint not be considered by the Ombudsman?
 One's complaint will not be considered if:
 One has not approached his bank for redressal of his grievance first.
 One has not made the complaint within one year from the date of receipt of
the reply of the bank or if no reply is received, and the complaint to Banking
Ombudsman is made after the lapse of more than one year and one month
from the date of complaint made to the bank.
 The subject matter of the complaint is pending for disposal / has already been
dealt with at any other forum like court of law, consumer court etc.
 Frivolous or vexatious complaints.
 The institution complained against is not covered under the scheme.
 The subject matter of the complaint is not pertaining to the grounds of
complaint specified under Clause 8 of the Banking Ombudsman Scheme. If
the complaint is for the same subject matter that was settled through the
office of the Banking Ombudsman in any previous proceedings.
 What is the procedure for filing the complaint before the Banking
Ombudsman?
 One can file a complaint with the Banking Ombudsman simply by writing on
a plain paper. One can also file it online at (“click here to lodge a complaint”)
or by sending an email to the Banking Ombudsman. There is a form along
with details of the scheme in our website. However, it is not mandatory to
use this format.
 Where can one lodge his/her complaint?
 One may lodge his/ her complaint at the office of the Banking Ombudsman
under whose jurisdiction, the bank branch complained against is situated.
 For complaints relating to credit cards and other types of services with
centralized operations, complaints may be filed before the Banking
Ombudsman within whose territorial jurisdiction the billing address of the
customer is located. (Click here for address and area of operation of the
Banking Ombudsman)
 Can a complaint be filed by one’s authorized representative?
 Yes. The complainant can be filed by one’s authorized representative (other
than an advocate).
 Is there any cost involved in filing complaints with Banking Ombudsman?
 No. The Banking Ombudsman does not charge any fee for filing and resolving
customers’ complaints.
 Is there any limit on the amount of compensation as specified in an Award?
 The amount, if any, to be paid by the bank to the complainant by way of
compensation for any loss suffered by the complainant is limited to the
amount arising directly out of the act or omission of the bank or ₹20 lakhs
(₹Two Million), whichever is lower.
 Can compensation be claimed for mental agony and harassment?
 The Banking Ombudsman may award compensation not exceeding ₹1 lakh
(₹One Hundred Thousand) to the complainant for mental agony and
harassment. The Banking Ombudsman will take into account the loss of the

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 complainant's time, expenses incurred by the complainant, harassment and
mental anguish suffered by the complainant while passing such award.
 What details are required in the application?
 Name and address of the complainant, the name and address of the branch
or office of the bank against which the complaint is made, facts giving rise to
the complaint supported by documents, if any, the nature and extent of the
loss caused to the complainant, the relief sought from the Banking
Ombudsman and a declaration about the compliance with conditions which
are required to be complied with by the complainant under Clause 9(3) of the
Banking Ombudsman Scheme.
 What happens after a complaint is received by the Banking Ombudsman?
 The Banking Ombudsman endeavors to promote, through conciliation or
mediation, a settlement of the complaint by agreement between the
complainant and the bank named in the complaint.
 If the terms of settlement (offered by the bank) are acceptable to one in full
and final settlement of one's complaint, the Banking Ombudsman will pass
an order as per the terms of settlement which becomes binding on the bank
and the complainant.
 Can the Banking Ombudsman reject a complaint at any stage?
 Yes. The Banking Ombudsman may reject a complaint at any stage if it
appears to him that a complaint made to him is:
 not on the grounds of complaint referred to above
 Compensation sought from the Banking Ombudsman is beyond 20 lakh (₹
Two Million).
 requires consideration of elaborate documentary and oral evidence and the
proceedings before the Banking Ombudsman are not appropriate for
adjudication of such complaint
 the complaint is without any sufficient cause
 the complaint that it is not pursued by the complainant with reasonable
diligence
 In the opinion of the Banking Ombudsman there is no loss or damage or
inconvenience caused to the complainant.
 What happens if the complaint is not settled by agreement?
 If a complaint is not settled by an agreement within a period of one month,
the Banking Ombudsman proceeds further to pass an Award. Before passing
an award, the Banking Ombudsman provides reasonable opportunity to the
complainant and the bank, to present their case.
 It is up to the complainant to accept the award in full and final settlement of
or to reject it.
 Is there any further recourse available if one rejects the Banking
Ombudsman’s decision?
 Any person aggrieved by an Award issued under Clause 12 or the decision of
the Banking Ombudsman rejecting the complaint for the reasons specified in
sub-clause (d) to (g) of Clause 13 of the Banking Ombudsman Scheme 2006
(As amended up to July 1, 2017) can approach the Appellate Authority. The
Appellate Authority is vested with a Deputy Governor of the RBI.

63
  Other recourse and/or remedies available to him/her as per the law can also
be explored. The bank also has the option to file an appeal before the
Appellate Authority under the Scheme.
 Is there any time limit for filing an appeal?
 One can file the appeal against the award or decision of the Banking
Ombudsman rejecting the complaint within 30 days of the date of receipt of
the Award, The Appellate Authority may, if he/ she is satisfied that the
applicant had sufficient cause for not making an application for appeal within
time, also allow a further period not exceeding 30 days.
 How does the appellate authority deal with the appeal?
 The appellate authority may:
 dismiss the appeal; or
 allow the appeal and set aside the Award; or
 send the matter to the Banking Ombudsman for fresh disposal in accordance
with such directions as the appellate authority may consider necessary or
proper; or
 modify the Award and pass such directions as may be necessary to give effect
to the modified award; or
 Pass any other order as it may deem fit.

 The Reserve Bank introduces Ombudsman Scheme for Digital Transactions

 The Scheme, launched under Section 18 of the Payment and Settlement
Systems Act, 2007, will provide a cost-free and expeditious complaint
redressal mechanism relating to deficiency in customer services in digital
transactions conducted through non-bank entities regulated by RBI.
Complaints relating to digital transactions conducted through banks will
continue to be handled under the Banking Ombudsman Scheme. The
offices of Ombudsman for Digital Transactions will function from the
existing 21 offices of the Banking Ombudsman and will handle complaints
of customers from their respective territorial jurisdiction.
 The Scheme provides for an Appellate mechanism under which the
complainant / System Participant has the option to appeal against the
decision of the Ombudsman before the Appellate Authority

THE BANKING OMBUDSMAN SCHEME 2006 Revised -----JUNE 16,2017

1. Section 35A of the Banking Regulation Act, 1949 Reserve Bank of India hereby amends the
Banking Ombudsman Scheme2006, directs that all commercial banks , regional rural banks and
scheduled primary co-operative banks, incorporated in India or outside India. Shall comply with
the Banking Ombudsman Scheme, 2006 as amended in the Scheme shall come into force from
July 1,2017.
2. Banking ombudsman Object of enabling resolution of complaints relating to certain services
rendered by banks and to facilitate the satisfaction or settlement of such complaints.

This Scheme may be called the Banking Ombudsman Scheme,2006.

64
It shall come into force on such date as the Reserve Bank may specify.
It shall extend to the whole of India.
The Scheme shall apply to the business in India of a bank as defined under the Scheme.

3. DEFINITIONS
'Award’ means an award passed by the Banking Ombudsman in accordance with the Scheme.
‘Appellate Authority’ means the Deputy Governor in charge of the Department of the Reserve
Bank implementing the Scheme.

‘authorized representative’ means a person duly appointed and authorized by a complainant to

act on his behalf and represent him in the proceedings under the Scheme before a Banking
Ombudsman for consideration of his complaint.

‘Banking Ombudsman’ means any person appointed under Clause 4 of the Scheme
‘Complaint’ means a representation in writing or through electronic means containing a
grievance alleging deficiency in banking service as mentioned in clause 8 of the Scheme.
‘Settlement’ means an agreement reached by the parties either by conciliation or mediation
under Clause 11 of the Scheme.

4. OFFICE OF BANKING OMBUDSMAN APPOINTMENT &TENURE

The Reserve Bank may appoint one or more of its officers in the rank of Chief General Manager
or General Manager to be known as Banking Ombudsmen for a period not exceeding three
years at atime.

5. LOCATION OF OFFICE AND TEMPORARYHEADQUARTERS

The offices of Ombudsman for Digital Transactions will function from the existing 21 offices of
the Banking Ombudsman and will handle complaints of customers from their respective
territorial jurisdiction.

The office of the Banking Ombudsman shall be located at such places as may be specified by
the ReserveBank. In order to expedite disposal of complaints, the Banking Ombudsman may
hold sittings at such places within his area of jurisdiction as may be considered necessary and
proper by him in respect of a complaint or reference beforehim.

6. DUTIES OF BANKING OMBUDSMAN OWERS AND JURISDICTION

The Reserve Bank shall specify the territorial limits to which the authority of each Banking
Ombudsman appointed under Clause 4 of the Scheme shall extend.
The Banking Ombudsman shall receive and consider complaints relating to the deficiencies in
banking or other services filed on the grounds mentioned in clause 8 irrespective of the
pecuniary value of the deficiency in service complained and facilitate their satisfaction or
settlement by agreement or through conciliation and mediation between the bank concerned
and the aggrieved parties or bypassing an Award as per the provisions of theScheme.

The Office of the Banking Ombudsman shall draw up an annual budget for itself in consultation
with Reserve Bank and shall exercise the powers of expenditure within the approved budget on
the lines of Reserve Bank of India Expenditure Rules, 2005.
The Banking Ombudsman shall send to the Governor, Reserve Bank, a report, as on 30 June
every year, containing a general review of the activities of his Office during the preceding
65
financial year and shall furnish such other information as the Reserve Bank may direct and the
Reserve Bank may, if it considers necessary in the public interest so to do, publish the report
and the information received from the Banking Ombudsman in such consolidated form or
otherwise as it deemsfit.

7. PROCEDURE FOR REDRESSAL OF GRIEVANCE GROUNDS OF COMPLAINT

Any person may file a complaint with the Banking Ombudsman having jurisdiction on any one
of the following grounds alleging deficiency in banking including internet banking or
otherservices. Non-payment or inordinate delay in the payment or collection of cheques, drafts,
bills etc.; non-acceptance, without sufficient cause, of coins tendered and for charging of
commission in respect thereof; non-payment or delay in payment of inward remittances;
Failure to issue or delay in issue of drafts, pay orders or bankers’ Cheques, non-adherence to
prescribed working hours; failure to provide or delay in providing a banking facility (other than
loans and advances) promised in writing by a bank or its direct sellingagents; delays, non-credit
of proceeds to parties' accounts, non-payment of deposit or non-observance of the Reserve
Bank directives, if any, applicable to rate of interest on deposits in any savings, current or other
account maintained with abank; complaints from Non-Resident Indians having accounts in India
in relation to their remittances from abroad, deposits and other bank- relatedmatters;
Refusal to open deposit accounts without any valid reason for refusal; (k). Levying of charges
without adequate prior notice to the customer; non-adherence to the instructions of Reserve
Bank on ATM /Debit Card and Prepaid Card operations in India by the bank or its subsidiaries
on any of the following: Account debited but cash not dispensed byATMs

Account debited more than once for one withdrawal in ATMs or for POS transaction. Less /
Excess amount of cash dispensed by ATMs Debit in account without use of the card or details
of the card Use of stolen/cloned cards &Others non-adherence by the bank or its subsidiaries
to the instructions of Reserve Bank on credit card operations on any of the following:
Unsolicited calls for Add-on Cards, insurance for cardsetc. Charging of Annual Fees on Cards
issued free forlife Wrong Billing / Wrong Debits Threatening calls / inappropriate approach of
recovery by recovery agents including non-observance of Reserve Bank guidelines on
engagement of recovery agents. Wrong reporting of credit information to Credit Information
Bureau. Delay or failure to review and correct the credit status on account of wrongly reported
credit information to Credit Information Bureau. Others non-adherence to the instructions of
Reserve Bank with regard to Mobile Banking / Electronic Banking service in India by the bank
on any of delay or failure to effect online payment / Fund Transfer, unauthorized electronic
payment / Fund Transfer, non-disbursement or delay in disbursement of pension (to the extent
the grievance can be attributed to the action on the part of the bank concerned, but not with
regard to its employees); refusal to accept or delay in accepting payment towards taxes, as
required by Reserve Bank / Government; refusal to issue or delay in issuing, or failure to service
or delay inservicing or redemption of Government securities;
forced closure of deposit accounts without due notice or without sufficient reason; refusal to
close or delay in closing the accounts; non-adherence to the fair practices code as adopted by
the bank; non-adherence to the provisions of the Code of Bank's Commitments to Customers
issued by Banking Codes and Standards Board of India and as adopted by the bank; non-
observance of Reserve Bank guidelines on engagement of recovery agents by banks; non-
adherence to Reserve Bank guidelines on para-banking activities like sale of insurance /mutual
fund /other third party investment products by banks with regard to following: improper,
unsuitable sale of third party financial products, non-transparency / lack of adequate
66
transparency insale, non-disclosure of grievance redressal mechanism available delay or refusal
to facilitate after sales service by banks Any other matter relating to the violation of the
directives issued by the Reserve Bank in relation to banking or otherservices.

(xi) A complaint on any one of the following grounds alleging deficiency in banking service in
respect of loans and advances may be filed with the Banking Ombudsman having jurisdiction:
non-observance of Reserve Bank Directives on interestrates; delays in sanction, disbursement
or non-observance of prescribed time schedule for disposal of loan applications; non-
acceptance of application for loans without furnishing valid reasons to the applicant;and non-
adherence to the provisions of the fair practices code for lenders as adopted by the bank or
Code of Bank’s Commitment to Customers, as the case may be; Non-observance of Reserve
Bank guidelines on engagement of recovery agents by banks; and Non-observance of any other
direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this
purpose from time totime.
The Banking Ombudsman may also deal with such other matter as may be specified by the
Reserve Bank from time to time in thisbehalf.

8. PROCEDURE FOR FILINGCOMPLAINT

Any person who has a grievance against a bank on any one or more of the grounds mentioned
in Clause 8 of the Scheme may, himself or through his authorized representative (other than an
advocate), make a complaint to the Banking Ombudsman within whose jurisdiction the branch
or office of the bank complained against is located. Provided that a complaint arising out of the
operations of credit cards and other types of services with centralized operations, shall be filed
before the Banking Ombudsman within whose territorial jurisdiction the billing address of the
customer is located.

The complaint in writing shall be duly signed by the complainant or his authorized
representative and shall be, as far as possible, in the form specified the name and the address
of the complainant, the name and address of the branch or office of the bank against which the
complaint ismade, the facts giving rise to the complaint, the nature and extent of the loss caused
to the complainant,and The relief sought for the complainant shall file along with the complaint,
copies of the documents, if any, which he proposes to rely upon and a declaration that the
complaint is maintainable under Sub-Clause (3) of this Clause.
A complaint made through electronic means shall also be accepted by the Banking Ombudsman
and a print out of such complaint shall be taken on the record of the Banking Ombudsman.

The Banking Ombudsman shall also entertain complaints covered by this Scheme received by
Central Government or Reserve Bank and forwarded to the Banking Ombudsman fordisposal.

No complaint to the Banking Ombudsman shall lie unless:- the complainant had, before making
a complaint to the Banking Ombudsman, made a written representation to the bank and the
bank had rejected the complaint or the complainant had not received any reply within a period
of one month after the bank received his representation or the complainant is not satisfied with
the reply given to him by the bank; the complaint is made not later than one year after the
complainant has received the reply of the bank to his representation or, where no reply is
received, not later than one year and one month after the date of the representation to the
bank the complaint is not in respect of the same cause of action which was settled or dealt with
67
on merits by the Banking Ombudsman in any previous proceedings whether or not received
from the same complainant or along with one or more complainants or one or more of the
parties concerned with the cause of action the complaint does not pertain to the same cause
ofaction, for which any proceedings before any court, tribunal or arbitrator or any other forum
is pending or a decree or Award or order has been passed by any such court, tribunal, arbitrator
orforum; the complaint is not frivolous or vexatious in nature;The complaint is made before the
expiry of the period of limitation prescribed under the Indian Limitation Act, 1963 for
suchclaims.

9. POWER TO CALL FORINFORMATION

For the purpose of carrying out his duties under this Scheme, a Banking Ombudsman may
require the bank against whom the complaint is made or any other bank concerned with the
complaint to provide any information or furnish certified copies of any document relating to the
complaint which is or is alleged to be in its possession. Provided that in the event of the failure
of a bank to comply with the requisition without sufficient cause, the Banking Ombudsman may,
if he deems fit, draw the inference that the information if provided or copies if furnished would
be unfavorable to thebank.

The Banking Ombudsman shall maintain confidentiality of any information or document that
may come into his knowledge or possession in the course of discharging his duties and shall not
disclose such information or document to any person except with the consent of the person
furnishing such information ordocument.

Provided that nothing in this Clause shall prevent the Banking Ombudsman from disclosing
information or document furnished by a party in a complaint to the other party or parties to the
extent considered by him to be reasonably required to comply with any legal requirement or
the principles of natural justice and fair play in the proceedings.

10. SETTLEMENT OF COMPLAINT BY AGREEMENT

As soon as it may be practicable to do, the Banking Ombudsman shall send a copy of the
complaint to the branch or office of the bank named in the complaint, under advice to the nodal
officer and endeavors to promote a settlement of the complaint by agreement between

The complainant and the bank through conciliation or mediation.

For the purpose of promoting a settlement of the complaint, the Banking Ombudsman shall not
be bound by any rules of evidence and may follow such procedure as he may consider just and
proper, which shall, however, at the least, require the Banking Ombudsman to provide an
opportunity to the complainant to furnish his / her submissions in writing alongwith
documentary evidence within a time limit on the written submissions made by thebank.

Provided, where the Banking Ombudsman is of the opinion that the documentary evidence
furnished and written submissions by both the parties are not conclusive enough to arrive at a
decision, he may call for a meeting of bank or the concerned subsidiary and the complainant
together to promote an amicable resolution.

68
Provided further that where such meeting is held and it results in a mutually acceptable
resolution of the grievance, the proceedings of the meeting shall be documented and signed by
the parties specifically stating that they are agreeable to the resolution and thereafter the
Banking Ombudsman shall pass an order recording the fact of settlement annexing thereto the
terms of thesettlement.

The Banking Ombudsman may deem the complaint as resolved, in any of the following
circumstances:

Where the grievance raised by the complainant has been resolved by the bank or the concerned
subsidiary of a bank with the intervention of the Banking Ombudsman;or The complainant
agrees, whether in writing or otherwise, to the manner and extent of resolution of the grievance
provided by the Banking Ombudsman based on the conciliation and mediation efforts;or In the
opinion of the Banking Ombudsman, the bank has adhered to the banking norms and practices
in vogue and the complainant has been informed To this effect through appropriate means and
complainant's objections if any to the same are not received by Banking Ombudsman within
the time frame provided. The proceedings before the Banking Ombudsman shall be summary
in nature.

11. AWARD BY THE BANKINGOMBUDSMAN

If a complaint is not settled by agreement within a period of one month from the date of receipt
of the complaint or such further period as the Banking Ombudsman may allow the parties, he
may, after affording the parties a reasonable opportunity to present their case, pass an Award
or reject the complaint.

The Banking Ombudsman shall take into account the evidence placed before him by the parties,
the principles of banking law and practice, directions, instructions and guidelines issued by the
Reserve Bank from time to time and such other factors which in his opinion are relevant to
thecomplaint.

The award shall state briefly the reasons for passing theaward.

The Award passed under Sub-Clause (1) shall contain the direction/s, if any, to the bank for
specific performance of its obligations and in addition to or otherwise, the amount, if any, to be
paid by the bank to the complainant by way of compensation for any loss suffered by the
complainant, arising directly out of the act or omission of thebank.

Notwithstanding anything contained in Sub-Clause (4), the Banking Ombudsman shall not have
the power to pass an Award directing payment of an amount towards compensation which is
more than the actual loss suffered by the complainant as a direct consequence of the act of
omission or commission of the bank, or two million rupees whichever is lower. The
compensation that can be awarded by the Banking Ombudsman shall be exclusive of the
amount involved in thedispute.

The Banking Ombudsman may also award compensation in addition to the above but not
exceeding rupees 0.1 million to the complainant, taking into Account the loss of the

69
complainant's time, expenses incurred by the complainant, harassment and mental agony
suffered by the complainant.

A copy of the Award shall be sent to the complainant and thebank.

An award shall lapse and be of no effect unless the complainant furnishes to the bank concerned
within a period of 30 days from the date of receipt ofcopy of the Award, a letter of acceptance
of the Award in full and final settlement of his claim. Provided that no such acceptance may be
furnished by the complainant if he has filed an Appeal. The bank shall, unless it has preferred
an appeal under Sub-Clause (1) of Cclause 14, within one month from the date of receipt by it
of the acceptancein writing of the Award by the complainant under Sub-
Clause(8),complywiththe Award and intimate compliance to the BankingOmbudsman.

12. REJECTION OF THECOMPLAINT

A. The Banking Ombudsman may reject a complaint at any stage if it appears to him that the
complaint madeis; not on the grounds of complaint referred to in clause 8;or
otherwise not in accordance with Sub Clause (3) of clause 9;or beyond the pecuniary jurisdiction
of Banking Ombudsman prescribed under clause 12 (5) and 12 (6):or requiring consideration of
elaborate documentary and oral evidence and the proceedings before the Banking Ombudsman
are not appropriate for adjudication of such complaint; or without any sufficient cause; or that
it is not pursued by the complainant with reasonable diligence; or
In the opinion of the Banking Ombudsman there is no loss or damage or inconvenience caused
to thecomplainant.

(B) The Banking Ombudsman, shall, if it appears at any stage of the proceedings that the
complaint pertains to the same cause of action, for which any
proceedingsbeforeanycourt,tribunalorarbitratororanyotherforumispending or a decree or
Award or order has been passed by any such court, tribunal,
arbitratororforum,passanorderrejectingthecomplaintgivingreasonsthereof.

13. APPEAL BEFORE THE APPELLATEAUTHORITY:

Party to the complaint aggrieved by an Award under Clause 12 or rejection ofa complaint for
the reasons referred to in sub clauses (d) to (g) of Clause 13,may within 30 days of the date of
receipt of communication of Award or rejection of complaint, prefer an appeal before the
AppellateAuthority; Provided that in case of appeal by a bank, the period of thirty days for filing
an appeal shall commence from the date on which the bank receives letter of acceptance of
Award by complainant under Sub-Clause (8) of Clause 12; Provided that the Appellate Authority
may, if he is satisfied that the applicant had sufficient cause for not making the appeal with in
time, allow a further period not exceeding 30days; Provided further that appeal may be filed by
a bank only with the previous sanction of the Chairman or, in his absence, the Managing
Director or the Executive Director or the Chief Executive Officer or any other officer of
equalrank.” The Appellate Authority shall, after giving the parties a reasonable opportunity of
beingheard dismiss the appeal;or allow the appeal and set aside the Award;or remand the
matter to the Banking Ombudsman for fresh disposal in accordance with such directions as the
Appellate Authority may consider necessary or proper;or modify the Award and pass such
directions as may be necessary to give effect to the Award so modified;Pass any other order as
it may deemfit.
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14. BANKS TO DISPLAY SALIENT FEATURES OF THE SCHEME FOR COMMON KNOWLEDGE
OFPUBLIC.

The banks covered by the Scheme shall ensure that the purpose of the Scheme and the contact
details of the Banking Ombudsman to whom the complaints are to be made by the aggrieved
party are displayed prominently in all the offices and branches of the bank in such manner that
a person visiting the office or ranch has adequate information of theScheme.
The banks covered by the Scheme shall ensure that a copy of the Scheme is available with the
designated officer of the bank for perusal in the office premises of the bank,if anyone, desires
to do so and notice about the availability of the Scheme with such designated officer shall be
displayed along with the notice under Sub-Clause (1) of this Clause and shall place a copy of the
Scheme on theirwebsites.

The banks covered by the Scheme shall appoint Nodal Officers attheir Regional/Zonal Offices
and inform the respective Office of the Banking Ombudsman under whose jurisdiction the
Regional/Zonal Office falls. The Nodal Officer so appointed shall be responsible for representing
the bank and furnishing information to the Banking Ombudsman in respect of complaints filed
against the bank. Wherever more than one zone/region of a bank are falling within the
jurisdiction of a Banking Ombudsman, one of the Nodal Officers shall be designated as the
'Principal Nodal Officer' for such zones or regions.

Banks have form internal Banks Ombudsman for attending the customer grievances Replies to
the customer complaints, rejected partially or fully be first referred to our Manabank banks
internal ombudsman (HO) for his comments on the matter.

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 CUSTOMER SERVICE POLICY

In compliance with the guidelines of Reserve Bank of India, IBA and the Banking code &
Standards Board of India, the bank has reviewed various policies regarding Customer Service.
Major Policies regarding Customer Service are follows-

1. Customer Rights Policy

2. Compensation Policy
3. Policy on collection of Cheques/Instruments
4. Grievance Redressal Policy
5. Deposit Policy

Customer Rights Policy

Upon directions from RBI, IBA& BCSBI had prepared a draft of model customer Rights Policy. RBI
approved the draft after making certain Changes and requested IBA to forward the same to
member banks to formulate own Board approved Policy.

OBJECTIVES OF THE POLICY

1. To enhance Customer Protection based on domestic experience and global best practices
2. To enshrine basic rights of the customers of the bank
3. To spell out the rights of the customer and also the responsibilities of the bank

SCOPE OF THE POLICY

The Policy shall apply to all products and services offered by the bank or its agents, whether
provided across the counter, over phone, by post, through interactive electronic devices, on
internet or by any other method.

BASIC CUSTOMER RIGHTS

The policy encompasses the following five basic customer rights;

a) Right to Fair Treatment

b) Right to Transparency, Fair and Honest Dealing
c) Right to Suitability
d) Right to Privacy
e) Right to Grievance Redress and Compensation

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a) Right to Fair Treatment

Both the customer and the financial services provider have a right to be treated with courtesy.
The customer should not to be unfairly discriminated against on grounds such as gender, age,
religion, caste and physical ability when offering and delivering financial products. Bank will –

1. Promote good and fair banking practices by setting minimum standards in all dealings with
the customers;
2. Promote a fair and equitable relationship between the bank and the customer;
3. Train bank staff attending to the customers, adequately and appropriately;
4. Ensure that staff members attend to customers and their business promptly and courteously
5. Treat all customers fairly and not discriminate against any customer on grounds such as
gender, age, religion, caste, literacy, economic status physical ability, etc.
6. Ensure that the above principle is applied while offering all products and services;
7. Ensure that the products and services offered are in accordance with relevant laws and
regulations;

b) Right to Transparency, Fair and Honest Dealing

The financial services provider should make every effort to ensure that the contracts or
agreements it frames are transparent, easily understood by and well communicated to, the
common person. Bank will-
1. Ensure complete transparency so that the customer can have a better understanding of what
he or she can reasonably / fairly expect from the bank.
2. Ensure that the bank's dealings with the customer rest on ethical principles of equity, integrity
and transparency.
3. Provide customers with clear information about its products and services, terms and
conditions, and the interest rates / service charges.
4. Provide information on interest rates, fees and charges either on the Notice Board in the
branches or website or through help-lines or help-desk and where appropriate the customer
will be informed directly.
5. Display the tariff Schedule on their website and a copy of it will be made available at every
branch for customer's perusal.
6. Inform the customer of any change in the terms and conditions through a letter or Statement
of Account, SMS or email as agreed by the customer at least one month prior to the revised
terms and conditions becoming effective.
7. Provide information about the penalties livable in case of non-observance / breach of any of
the terms and conditions governing the product / services chosen by the customer.
8. Display on public domain the Banks' Policies on Deposits, Cheque Collection, Grievance
Redressal, Compensation and Collection of Dues and Security Repossession.
9. Communicate unambiguously the information about -
a. discontinuation of particular products,
b. relocation of their offices
c. changes in working hours
d. change in telephone numbers
e. closure of any office or branch

- With advance notice of at least 30 days.

C) Right to Suitability
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The products offered should be appropriate to the needs of the customer and based on an
assessment of the customer's financial circumstances and understanding. Bank Will-

1. Ensure that it has a Board approved policy for assessing suitability of products for customers
prior to sale.
2. Endeavour to make sure that the product or service sold or offered is appropriate to the
customer's needs and not inappropriate to the customer's financial standing.
3. Sell third party products only if it is authorized to do so, after putting in place a Board
approved policy for marketing and distributing third party financial products.
4. Not compel a customer to subscribe to any third party products as a quid-pro-quo for any
service availed from the bank.
5. Ensure that the products being sold or service being offered, including third party products,
and are in accordance with extant rules and regulations.

d) Right to Privacy

Customers' personal information should be kept confidential unless they have offered specific
consent to the financial services provider or such information is required to be provided under
the law or it is provided for a mandated business purpose (for example, to credit information
companies).

1. Treat customer's personal information as private and confidential (even when the customer
is no longer banking with us.
2. Shall not use or share customer's personal information for marketing purpose, unless the
customer has specifically authorized it.
e) Right to Grievance Redress and Compensation

The customer has a right to hold the financial services provider accountable for the products
offered and to have a clear and easy way to have any valid grievances redressed. The provider
should also facilitate redress of grievances stemming from its sale of third party products. Bank
will-
1. Place in public domain its Customer Grievance Redressal Policy, including the grievance
redressal procedure available for the customer.
2. Place in public domain the compensation policy for delays / lapses in conducting / settling
customer transactions within the stipulated time and in accordance with the agreed terms of
contract.
3. Display name, address and contact details of the Grievance Redressal Authority / Nodal
Officer. The time limit for resolution of complaints will be clearly displayed / accessible at all
service delivery locations;
4. Inform the complainant of the option to escalate his complaint to the Banking Ombudsman
if the complaint is not redressed within the pre-set time.
5. Place in public domain information about Banking Ombudsman Scheme.
6. Display at customer contact points the name and contact details of the Banking Ombudsman
under whose jurisdiction the bank's branch falls.

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Compensation Policy

1.0 Introduction
The Compensation Policy of the Bank is designed to cover areas relating to unauthorized
debiting of account, payment of interest to customers for delayed collection of cheques /
instruments, payment of cheques after acknowledgement of stop payment instructions,
remittances within India, foreign exchange services, lending, etc. The policy is based on
principles of transparency and fairness in the treatment to customers.

The objective of this policy is to establish a system where by the Bank compensates the
customer for any financial loss he / she might incur due to deficiency in service on the part of
the Bank or any act of omission or commission directly attributable to the Bank. By ensuring
that the customer is compensated without having to ask for it, the Bank expects instances when
the customer has to approach Banking Ombudsman or any other Forum for redressal to come
down significantly.

2.0 Unauthorized / Erroneous Debit

Part (A) “Unauthorized Electronic Banking Transactions”

1. Limited Liability of a Customer

(a) Zero Liability of a Customer

A customer’s entitlement to zero liability shall arise where the unauthorized

transaction occurs in the following events:

i. Contributory fraud/ negligence/ deficiency on the part of the bank (irrespective of whether
or not the transaction is reported by the customer).
ii. Third party breach where the deficiency lies neither with the bank nor with the customer
but lies elsewhere in the system, and the customer notifies the bank within three working days
of receiving the communication from the bank regarding the unauthorized transaction.

(b) Limited Liability of a Customer

A customer shall be liable for the loss occurring due to unauthorized transactions in the
following cases:
i. In cases where the loss is due to negligence by a customer, such as where he has shared
the payment credentials, the customer will bear the entire loss until he reports the
unauthorized transaction to the bank. Any loss occurring after the reporting of the unauthorized
transaction shall be borne by the bank.
ii. In cases where the responsibility for the unauthorized electronic banking transaction lies
neither with the bank nor with the customer, but lies elsewhere in the system and when there
is a delay (of four to seven working days after receiving the communication from the bank) on
the part of the customer in notifying the bank of such a transaction, the per transaction liability
of the customer shall be limited to the transaction value or the amount mentioned in Table 1,
75
whichever is lower.

Table 1
Maximum Liability of a Customer under paragraph b (ii)
Maximum liability(Rs)
Type of Account
5,000.00
• BSBD Accounts
• All other SB accounts
• Pre-paid Payment Instruments and Gift Cards
• Current/ Cash Credit/ Overdraft Accounts of MSMEs
• Current Accounts/ Cash Credit/ Overdraft Accounts of 10,000.00
Individuals with annual average balance (during 365 days
preceding the incidence of fraud)/ limit up to Rs.25 lakh
• Credit cards with limit up to Rs.5 lakh
• All other Current/ Cash Credit/ Overdraft Accounts 25,000.00
• Credit cards with limit above Rs.5 lakh

Further, if the delay in reporting is beyond seven working days, the customer liability shall be
determined on merits and on case-to-case basis.
Overall liability of the customer in third party breaches, as detailed in paragraph a (ii) and
paragraph b (ii)above, where the deficiency lies neither with the bank nor with the customer
but lies elsewhere in the system, is summarized in the Table 2 given below.
Table 2

Summary of Customer’s Liability

Time taken to report the fraudulent Customer’s Liability (Rs.)

transaction from the date of receiving the
communication
Within 3 working days
Within 4 to 7 working days
Beyond 7 working days up to 15 days
Zero Liability
The transaction value or the amount
mentioned in Table 1 whichever is lower
As per the table below.

Minimum liability of Maximum Liability of the

Type of Account Customer Bank
(A) (B)

Category1 Rs. 5,000.00 plus 50% of the Rs. 10,000.00 or amount as

• BSBD Accounts remaining claim amount per column(A), whichever is
lower

Category 2 Rs.10, 000/- plus 50% of the Rs.20,000/- or amount as per

All other SB accounts remaining claim amount. column (A) ,Whichever is
lower
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 Pre-paid Payment
Instruments and Gift Cards
Current/ Cash Credit/
Overdraft Accounts of
MSMEs
Current Accounts/ Cash
Credit/ Overdraft Accounts of
Individuals with annual
average balance (during 365
days preceding the incidence
of fraud)/ limit up to Rs.25
lakh
Credit cards with limit up to
Rs.5 lakh

Rs. 25,000.00 plus Rs. 50,000.00 or amount as

 All other Current/ Cash
50% of remaining claim per column(A), whichever is
Credit/ Overdraft Accounts Lower
 Credit cards with limit
amount
above Rs.5 lakh

Beyond 15 Working days No Liability of the Bank

The number of working days mentioned in Table 2 shall be counted as per the working
schedule of the home branch of the customer excluding the date of receiving the
communication.

2. Reversal Timeline for Zero Liability/ Limited Liability of customer

On being notified by the customer, the bank shall credit (shadow reversal) the amount involved
in the unauthorized electronic transaction to the customer’s account within 10 working days
from the date of such notification by the customer (without waiting for settlement of insurance
claim, if any).

Banks may also at their discretion decide to waive off any customer liability in case of
unauthorized electronic banking transactions even in cases of customer negligence. The credit
shall be value dated to be as of the date of the unauthorized transaction.
Accordingly, the delegated powers for waiver of customer liability in case of unauthorized
electronic banking transactions in cases where there is customer negligence will be as under:
(A) Committee of GMs at H.O. Up to & inclusive Rs.100000.00
(B) Committee of Executive Director (In
Above Rs. 100000.00 Full Powers
charge customer Service
3. Further, Bank shall ensure that:
i. A complaint is resolved and liability of the customer, if any, established within 60 days but
not exceeding 90 days from the date of receipt of the complaint, and the customer is
compensated as per provisions mentioned above;
ii. Where it is unable to resolve the complaint or determine the customer liability, if any, within
90 days, the compensation as prescribed above is paid to the customer; and
77
iii. In case of debit card/ bank account, the customer does not suffer loss of interest, and in
case of credit card, the customer does not bear any additional burden of interest.

4. Burden of Proof
The burden of proving customer liability in case of unauthorized electronic banking
transactions shall lie on the bank.

5. Reporting & Monitoring

The monitoring and reporting of the customer liability cases shall be done to the sub-Committee
of the Board for Customer Service in a structured format as per RBI directives on quarterly basis.
The reporting shall, inter alia, include volume/number of cases viz. card present transactions,
card not present transactions, internet banking, mobile banking, ATM transactions etc.

6. Reversal/Payment of compensation for Unauthorized Electronic Banking Transactions

After it is established that the transaction under question is a fraudulent transaction, the
sanction for reversal/payment of compensation to the complainant for Unauthorized
Electronic Banking Transactions shall be as per delegated powers (per reference) as mentioned
below through a committee approach
Committee of Dy. General Manager, Up to &Inclusive Rs.200000.00
Operations at H.O
Committee of General Manager, IT & From Rs. 200001.00 to Rs. 500000.00
Operations at H.O.
Committee of GMs at H.O. From Rs. 500001.00 to Rs. 1000000.00
Committee of Executive Director (In charge
customer Service) From Rs. 1000001 .00 to Rs. 2000000.00
Committee of Managing Director & C.E.O.
From Rs. 2000001.00 to Rs. 5000000.00
Management Committee Full Powers Above Rs.5000000.00

1) If claim of the customer is considered favorably, the amount may be debited to G/L
Sundry Debtors-Fraud Account.
2) A monthly noting should be sent to the Fraud Monitoring Cell by Customer Service
Department.

Part (B) – Other than “Unauthorized Electronic Banking Transactions”

1. If the Bank has raised an unauthorized / erroneous direct debit to an account, the entry
will be reversed immediately on being informed of the erroneous debit, after verifying the
position. In the event the unauthorized / erroneous debit has resulted in a financial loss for
the customer by way of reduction in the minimum balance applicable for payment of
interest on savings bank deposit or payment of additional interest to the Bank in a loan
account, the Bank will compensate the customer for such loss. Further, if the customer has
suffered any financial loss incidental to return of a cheese or failure of direct debit
instructions due to insufficiency of balance because of the unauthorized / erroneous debit,
the Bank will compensate the customer to the extent of such financial losses.

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2. In case verification of the entry reported to be erroneous by the customer does not
involve a third party, the Bank shall arrange to complete the process of verification within a
maximum period of 7 working days from the date of reporting of erroneous debit. In case,
the verification involves a third party, the Bank shall complete the verification process within
a maximum period of one month from the date of reporting of erroneous transaction by the
customer.

3. Erroneous transaction reported by customers in respect of credit card/ debit card operations,
which require reference to a merchant establishment, will be handled within 60 days.

4. Reversal of erroneous debits arising on fraudulent or other transactions:

1)In case of any fraud, if the branch is convinced that an irregularity / fraud has been committed
by its staff towards any constituent, branch should at once acknowledge its liability & forward
the note to competent authority, recommending for paying compensation.
2) In cases where the branch is at fault, they may forward the note to competent authority for
paying compensation to the customer without demur.
3) In cases where neither the branch nor the customer is at fault, but the fault lies elsewhere in
the system, branches should forward the note to competent authority for paying compensation.
Compensation will be sanctioned to the customer up to a limit as per the extant powers (per
instance), specified as under.

Designation Powers for settling claims of Customers

Branches Headed by Scale I to Scale III NIL*
Committee of Branch Head/Dy. Zonal Up to & Inclusive Rs. 20000.00
Heads in Scale IV
Committee of Branch Head /Dy. Zonal From Rs. 20001.00 to Rs.100000.00
Head/Zonal Heads in Scale V
Committee of Branch Head /Dy. Zonal From Rs. 100001 .00 to Rs. 200000.00
Head/Zonal Heads in Scale VI/Zonal
Head in Scale VIII
Committee of GMs at H.O From Rs. 200001.00 to Rs. 500000.00
Committee of Executive Director (In From Rs. 500001.00 to Rs. 1000000.00
charge customer Service)

Committee of Managing Director & From Rs. 1000001 .00 to Rs. 2000000.00
C.E.O.

Management Committee From Rs. 2000001 .00Full Powers

*These branches shall recommend the proposal to respective Zonal Offices.

1) The sanctioning authority shall exercise delegated powers as above through a committee
approach
2) If claim of the customer is considered favorably, the amount may initially be debited to G/L
Sundry Debtors-General Account and after receipt of letter from the FRM Department

79
confirming the case as ‘fraud’, the amount may be transferred to G/L Sundry Debtors-Fraud
Account.

3.0 ECS direct debits/other debits to accounts

The Bank will undertake to carry out direct debit/ ECS debit instructions of customers in time.
In the event the Bank fails to meet such commitments customer will be compensated to the
extent of any financial loss the customer would incur because of delay in carrying out the
instruction / failure to carry out the instructions.

The Bank would debit the customer’s account with any applicable service charge as per the
schedule of charges notified by the Bank. In the event the Bank levies any charge in violation of
the arrangement, the Bank will reverse the charges when pointed out by the customer subject
to scrutiny of agreed terms and conditions. Any consequential financial loss to the customer will
also be compensated.

Where it is established that the Bank had issued and activated a credit card/ debit card without
written consent of the recipient, the Bank would not only reverse the charges immediately but
also pay a penalty without demur to the recipient amounting to twice the value of charges
reversed.

4.0 Payment of Cheques after Stop Payment Instructions:

In case a cheese has been paid after stop payment instruction is acknowledged by the Bank, the
Bank shall reverse the transaction and give value-dated credit to protect the interest of the
customer. Any consequential financial loss to the customer will be compensated as provided
under para one above. Such debits will be reversed within 2 working days of the customer
intimating the transaction to the Bank.

5.0 Foreign Exchange Services:

The Bank would not compensate the customer for delays in collection of cheques designated in
foreign currencies sent to foreign countries, as the Bank would not be able to ensure timely
credit from overseas banks. It is the Bank’s experience that time for collection of instruments
drawn on banks in foreign countries differ from country to country and even within a country,
from place to place. The time norms for return of instruments cleared provisionally also vary
from country to country. Bank however, would consider upfront credit against such instrument
by purchasing the cheese/instrument, provided the conduct of the account has been
satisfactory in the past. However, the Bank will compensate the customer for undue delays in
affording credit once proceeds are credited to the Nostro Account of the Bank with its
correspondent. Such compensation will be given for delays beyond one week from the date of
credit to Nostro Account/ due date after taking into account normal cooling period stipulated.
The compensation in such cases will be worked out as follows.
a)Interest for the delay in crediting proceeds as indicated in the Policy on Collection of
Cheques/Instruments.
b) Compensation for any possible loss because of adverse movement in foreign exchange rate.
80
6.0 Remittances in India:
The compensation because of delays in collection of instruments and other expenses incurred
by the customer would be as indicated in the Bank’s Policy on Collection of
Cheques/Instruments, which is reproduced below at point No 6.2, for information:

6.1 Payment of interest on delayed collection of local cheques/ instruments

As a policy, Bank would give credit to the customer’s account on the day, clearing settlement
takes place. In case there is delay in collection of local cheques and in turn delay in crediting the
amount of cheques deposited in local clearing in the normal course of business, except for the
reasons of “Force Majeure” i.e. unforeseen events explained at Point No 10, Bank should pay
compensation / interest at saving bank interest rate to the depositor/customer for the
corresponding period of delay.

6.2 Payment of Interest for delayed Collection of Outstation Cheques:

The Bank will pay interest to its customer on the amount of collection of instruments in case
there is delay in giving credit beyond the period mentioned below. Such interest shall be paid
without any demand from customers in all types of accounts. There shall be no distinction
between instruments drawn on the Bank’s own branches or on other banks for the purpose of
payment of interest on delayed collection.

If the time taken for collection of outstation instruments is beyond stipulated time, interest at
following rates will be paid for the period of delay beyond respective time limit

a) Interest at Savings rate for the period of delay beyond 7/10/14 days as the case may
be in case of outstation cheques.

b)Where the delay is beyond 14 days interest will be paid at the applicable rate for term deposits
for the corresponding period or Savings Bank rate whichever is higher.

c)In case of extraordinary delay, i.e. delays exceeding 90 days additional interest will be paid at
the rate of 2% over and above the corresponding term deposit rate.

d)In the event the proceeds of cheese under collection were to be credited to an overdraft/
loan account of the customer, interest will be paid at the rate applicable to the loan account. In
case of extraordinary delays, interest will be paid at the rate of 2% above the rate applicable to
the loan account.
e)The claim for payment of interest on delayed collection of instrument should be settled by us,
irrespective of the fact whether reasons for such delay are attributable to the paying bank. The
issue of reimbursement of such interest paid to customer should be taken up with paying bank
subsequently, for settlement.
It may be noted that interest payment as given above would be applicable only for instruments
sent for collection within India.

6.3 Cheques / Instruments lost in transit / in clearing process or at paying bank’s branch:

81
In the event a cheese or an instrument accepted for collection is lost in transit or in the clearing
process or at the paying bank’s branch, the Bank shall immediately on coming to know of the
loss, bring the same to the notice of the accountholder so that the accountholder can inform
the drawer to record stop payment and also take care that cheques, if any, issued by him / her
are not dishonored due to non-credit of the amount of the lost cheques / instruments. The Bank
would provide all assistance to the customer to obtain a duplicate instrument from the drawer
of the cheese.

In line with the Compensation Policy of the Bank, the Bank will compensate the account holder
in respect of instruments lost in transit in the following way:

a) in case intimation regarding loss of instrument is conveyed to the customer beyond

The time limit stipulated for collection (7/14 days as the case may be) interest will be paid for
the period exceeding the stipulated collection period at the rates specified above.

b) In addition, Bank will pay interest on the amount of the cheese for a further period of 15 days
at Savings Bank rate to provide for likely further delay in obtaining duplicate cheese/instrument
and collection thereof.

c) The Bank would also compensate the customer for any reasonable charges he/she incurs in
getting duplicate instrument upon production of receipt, in the event the instrument is to be
obtained from a bank / institution who would charge a fee for issue of duplicate instrument.
However, Bank’s liability will be restricted to a maximum of Rs.100/-

6.4 Payment of interest for delay in issue of duplicate drafts

In case of delay in issue of the duplicate draft beyond a fortnight after completing all relevant
formalities by the applicant, Bank will pay interest on the amount of demand draft at term
deposit rate of corresponding period

6.5 Delay in credit of pension/Pension Arrears

The Bank shall pay compensation at the Bank Rate plus 2% penal interest to the pensioner’s
account without any claim from the pensioner on the same day when the credit is afforded for
revised pension / pension arrears in respect of all delayed pension payments.
6.6 Payment of interest for delayed credit /refunds on NEFT instructions.

As per RBI guidelines, banks are required to pay penal interest at the current RBI LAF Repo Rate
plus two percent for the period of delay / till the date of refund, as the case may be, to the
affected customers.

In case the bank receives NEFT message for crediting a certain sum of money to the account
number specified therein, TIBD Mumbai processes the same and credits it to the account
number mentioned in the message. If for some reason, the credit is not given within the
stipulated time penal interest at the current RBI LAF Repo Rate plus two percent for the period
of delay / till the date of refund as the case may be, will be paid to the affected customer’s suo-
moto, without waiting for a claim from the customer.
82
7.0 Violation of the Code by Bank’s agent

In the event of receipt of any complaint from the customer that the Bank’s representative /
Courier or DSA has engaged in any improper conduct or acted in violation of the Code of Bank’s
Commitment to Customers which the Bank has adopted voluntarily, Bank shall take appropriate
steps to investigate and communicate the findings to the customer within 7 working days from
the date of receipt of complaints and compensate the customer for financial losses, if any, as
contemplated under this policy.

8.0 Transaction of “at par instruments” of Co-operative Banks by Commercial Banks the RBI
has expressed concern over the lack of transparency in the arrangement for payment of “at
par” instruments of co-operative banks by commercial banks resulting in dishonor of such
instruments when the remitter has already paid for the instruments. In this connection, it is
clarified that the Bank will not honor cheques drawn on current accounts maintained by other
banks with it unless arrangements are made for funding Cheques issued. Issuing bank should
be responsible to compensate the cheese holder for non-payment/delayed payment of cheques
in the absence of adequate funding arrangement.

9.0 Lenders liability; Commitments to borrowers:

The bank has adopted the principles of lenders of liability. In terms of the guidelines for lenders
liability, and the Code of Bank’s Commitment to customers adopted by the bank, the Bank
would return to the borrowers all the securities / documents / title deeds to mortgaged
property, within 15 days of repayment of all dues agreed to or contracted. The Bank will
compensate the borrower for monitory loss suffered, if any due to delay in return of the same.
In the event of loss of title deeds to mortgage property at the hands of the bank, the
compensation will cover out of pocket expenses for obtaining duplicate documents plus a lump
sum amount as decided by the bank.
10.0 Force Majeure

The Bank shall not be liable to compensate customers for delayed credit if some unforeseen
event (including but not limited to civil commotion, sabotage, lockout, strike or other labor
disturbances, accident, fires, natural disasters or other ‘Acts of God’, war, damage to the Bank’s
facilities or of its correspondent bank/s) absence of the usual means of communication or all
types of transportation, etc., beyond the control of the Bank, prevents it from performing its
obligations within the specified service delivery parameters.

11.0 ATM Failure:

Bank will reimburse the customer; the amount wrongfully debited because of failed ATM
transactions within a maximum period of 7 working days from the receipt of the complaint. For
any failure to re-credit the customer’s account within 7 working days from the date of receipt
of the complaint, bank shall pay compensation of Rs.100/- per day to the aggrieved customer.

83
Such compensation will be paid to the complainant, only if the claim is lodged with the issuing
bank within 30 days of the date of transaction.

12.0 Recovery of cost of grievances from service provider wherever applicable:

Whenever we are required to give compensation for deficiency in service by the service
provider, possibility should be explored to recover the cost from the service provider, wherever
applicable.

13.0 Change / Modification

Bank reserves it right to change or to modify the Policy or any of its provisions from time.

4. Grievance Redressal Policy

1.0 Introduction

In the present scenario of competitive banking, excellence in customer service is the most
important tool for sustained business growth. Customer complaints are part of the business
life of any corporate entity. This is more so for banks because banks are service organizations.
As a service organization, customer service and Customer Satisfaction is the prime
concern of bank. The Bank believes that providing prompt and efficient service is
essential not only to attract new customers, but also to retain existing ones. This policy
document aims at minimizing instances of customer complaints and grievances through
proper service delivery and review mechanism and to ensure prompt redressal of customer
complaints and grievances. The review mechanism will help in identifying shortcomings in
product features and service delivery.

1.1 Principles for Grievances Redressal Mechanism-

The Bank’s policy for redressal of grievances follows the under noted Principles:

1. Customers are treated fairly at all times.

2. Complaints raised by customers are dealt with courteously and in time.

3. Customers are fully informed of avenues to escalate their complaints/grievances

within the organization and their rights to alternative remedy, if they are not fully
satisfied with the response of the Bank to their complaints.

4.Bank will treat all complaints efficiently and fairly as they can damage the Bank’s
reputation and business, if handled otherwise.
The bank employees will work in good faith and without prejudice to the interests of the
customer.

84
 2.0 Why complaint arises?

The customer complaint arises due to;

a. The attitudinal aspects of staff in dealing with customers

b. Inadequacy of the functions / arrangements made available to the

customers or gaps in standards of services expected and actual services
rendered.

c. Difference in perception and interpretation of provisions, rules and

regulations and law.

3.0 The customer is having full right to register his complaint if he is not satisfied
with the services provided by the Bank. He can give his complaint in writing, orally
or over telephone. If customer’s complaint is not resolved within given time or if he is not
satisfied with the solution provided by the Bank, he can approach Banking
Ombudsman/ Consumer Forum / BCSBI with his complaint or resort to other legal
avenues available for grievance redressal.

4.0 Internal Machinery to handle Customer complaints/ grievances

4.1Customer Service and Complaint Position to Board:

Customer Service and Complaint Position / Redressal Mechanism Position is being put
up before every Board Meeting and the compliance / present status of the action
points suggested by the Board on the same is reported to the B oard in subsequent
/next Board Meeting.

4.2 Board Committee on Customer Service

This sub-committee of the Board would be responsible for formulation of a

Comprehensive Deposit Policy incorporating the issues such as the treatment to and
operation in the account on the death of a depositor, the product approval process and
the annual survey of depositor satisfaction and the tri-enniel audit of such services.
The Committee will also examine any other issues including examination of loan policies
and service issues for the individual as a borrower also having a bearing on the quality
of customer service rendered. This Committee will also review the functioning of
Standing Committee on Customer Service.

4.3 Standing Committee on Customer Service

The Executive Director of the Bank will chair the Standing Committee on Customer
Service. Besides two to three senior executives of the Bank, the committee will also

85
have two to three eminent non-executives drawn from the public as members. The
committee will have the following functions.

1. Evaluate feedback on quality of customer service received from various quarters.

The committee would also review comments/feed-back on customer service and
implementation of commitments in the Code of Bank’s Commitments to Customers as
received from BCSBI. It will take periodical review and take necessary steps for
implementation of the Code. The committee would review complaints relating to non -
compliance with the code provisions on quarterly basis.

2. The Committee would be responsible to ensure that all regulatory instructions

regarding customer service are followed by the Bank. Towards this, the committee will
obtain necessary feedback from field / functional heads / Regional Customer Service
Committees.

3. The committee also would consider unresolved complaints/grievances referred to

it by functional heads responsible for redressal and offer their advice.

4. The committee would submit report on its performance to the Customer Service
Committee of the Board at quarterly intervals.

The Standing Committee on customer service at HO shall review the unauthorised

electronic banking transactions reported by customers or otherwise, as also the action
taken thereon, the functioning of the grievance redress mechanism on Quarterly basis
and will take appropriate measures to improve the systems and procedures

4.4 A. Zonal Office Customer Service Committee

At Zonal level, Zonal Office Customer Service Committees will take review of
complaints in the region. They will submit their quarterly report to Standing Committee
on customer service.

B. Branch level Customer Service Committees

At branch level, branches will take necessary steps for strengthening the branch level
committees with greater involvement of customers. It will also include customers,
senior citizens per guidelines issued from time to time. Such reconstituted committee
should meet every month to study complaints / suggestions, cases of delay; difficulties
faced / reported by customers / members of the committee and evolve the ways and
means of improving customer service
4.5Nodal Officer and other designated officials to handle complaints and grievances

a) General Manager (Planning) will act as Principal Nodal Officer / Chief Grievance Redressal
Officer and he/she will be responsible for the implementation of customer service and

86
complaint handling for the entire Bank.
b) Zonal Head will act as Grievances Redressal Authority at the Zone to handle
complaints/grievances in respect of zones / branches respectively, under their control.
c) At the branch level, Branch Head will act as Grievances Redressal Authority.

5.0 Mandatory display requirements

Each branch will display,

1. The Name, address and contact number of Principal Nodal Officer(s)/Chief Grievances
Redressal Authorities / Code Compliance Officer / Principal Code Compliance Officer.
2. Contact details of Banking Ombudsman of the area
3. Code of Bank’s Commitments to Customers / Fair Practice Code

6.0 Resolution of Grievances

Appropriate arrangement for receiving complaints and suggestions will be made by the branch.
Every Branch Head, Supervisor and Officers will be primarily responsible or extending
courteous, efficient and prompt customer service and thereby avoiding scope for customer
grievances. Resolution of complaints to the satisfaction of complainant will be their
responsibility.
Branches will submit weekly report of pending complaints to Zonal Offices, Zonal
Offices will submit a fortnightly report of pending Complaints to Nodal Officer who
will ensure redressal of such complaints within four weeks
7.0 Dealing with Complaints and Improving Customer Relations

7.1Complaints/Suggestion box

Complaint/Suggestion box should be provided and be fixed at prominent place at each

branch/office of the Bank. Further, at every branch of the Bank a notice requesting the
customers to meet the branch manager shall be displayed regarding grievances, if the
grievances remain unredressed.

7.2 Complaint book / Register

Complaint book, as per IBA Design, with perforated copies in each set shall be introduced, so
designed as to instantly provide an acknowledgement to the customers and intimation to the
controlling office. Complaint register be kept at prominent place in the branch.

The complaint registers maintained by the branches should be scrutinized by the concerned
Zonal Manager, during his periodical visit to the branches and his observations / comments
thereon be recorded in his visit report.

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7.3 Complaint Form

A complaint form, along with the name of the nodal officer for complaint redressal,
shall be provided in the home page itself to facilitate complaint submission by
customers. The complaint form shall also indicate that the first point for redressal of
complaint is the Bank itself and that complainants may approach the Banking
Ombudsman only, if the complaint is not resolved at theBank level within a month.

7.4 Time frame

Complaint has to be seen in the right perspective because they indirectly reveal a weak
spot in the working of the Bank. Complaint received shall be analyzed from all possible
angles. Time Schedule set up for handling complaints and disposing them at all levels
including Branches, Zonal Offices and Head Office will be as under-

1. Branches: The complaint will be redressed within 2 DAYS.

2. Zonal Office: The complaints will be redressed within 1 Week (Inclusive of Initiation
of complaint at Br Level).

3. Head Office: Complaints received by different departments at Head Office will be

redressed within 2 weeks.
4. When complaints are escalated from branch to Head Office, they will be redressed
maximum within 2 weeks.
5. Complaints unresolved for 30 days or more will be forwarded to the Nodal Officer
concerned under Banking Ombudsman Scheme.

8.0 Acknowledgment / Interim Reply

All complaints will be acknowledged immediately. If the complaint is relayed over

telephone at designated telephone, help desk, or Customer Facilitation Center of the
Bank, a complaint reference number will be provided and complainant will be kept
informed of the progress within a reasonable period. Complaint Redressal Authorities
will try to resolve the complaint within specified time frames, specified by the Bank.
8.1 Staff Meeting and Review of Systems and Procedure

Branches will conduct a staff meeting after receipt of a complaint. The various aspects
of the complaint including systemic failure, if any, will be discussed in the meeting
and if there is any flaw in the system, necessary steps will be taken for changing the
system in consultation with the Zonal Head, so that there is no recurrence of such
complaint.

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9.0Monitoring

Branch will send to Zonal Office every month and Zonal Office will send to Head Office
bi-monthly, the consolidated action taken report on complaints r eceived
10.0 Interaction with customers
The Bank recognizes that customer’s expectation/requirement/grievances can be better
appreciated through personal interaction with customers by Bank’s staff. Planned customer
meets, say once in a Month will give a message to the customers that the Bank cares for
them and values their feedback / suggestions for improvement in customer service.

11.0 Sensitizing operating staff on handling complaints

Staff shall be properly trained for handling complaints. We are dealing with people and
hence difference of opinion and areas of friction can arise. With an open mind and a
smile on the face, we shall be able to win the customer’s confidence. It would be a n
integral part of training programme schedules to include training session on imparting
soft skills required for handling irate /agitated customers, Customer Service, and
Behavioral Science also.

12.0 Standardized Public Grievances Redressal System Introduced by Govt of India

Ministry of Finance on 11.06.2012

Bank has introduced “Standardized Public Grievances Redressal System (PGRS)” advised by
GOI, MOF, Department of Financial Services, and New Delhi on 11.06.2012, the main features
of SPGRS are as under.

a) All complaints received from multiple sources/channels like i) Complaint Registers at

Branch level ii) Written Complaints iii) Toll free telephone Numbers iv) Mobiles v)
Online Grievances vi) E-mails vii) CPGRAMS , should invariably be lodged into a
common digital platform in order to have an integrated information system for
customer grievances. Bank has upgraded its own soft ware for automatic recording of
such data in the system where applicable.

b) There are three level structure of Grievances Redressal, i.e. Branch, Zone and Head
Office.

c) All the grievances should be classified under various heads and sub heads.

d) All written grievances received at any level should also be entered into the web based
computerized PGRS system and should generate unique number which should be
intimated to complainant while sending acknowledgment. The same can be access
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 through ULC login.

e) Banks has developed a uniform interface for its web based PGRS software.

f) Three level redressal structure i.e. Branch, Zone and Head Office been adopted with
maximum period of 21 days for redressal.

g) Branch to redress complaint in 10 days, if not redressed then the same should
automatically get escalated to ZO who is to redress the same in 5 days. If the same is
not redressed at ZO, the same is to be escalated to HO where it should be redressed
in 6 days.
12.1 Appointment of Chief Customer Service Officer (Internal Ombudsman)

To boost the quality of customer service and to ensure that, there is undivided attention to
resolution of customer complaints in Bank, it has been decided to appoint an internal
ombudsman designated as Chief Customer Service Officer, (CCSO) in the Bank. The bank’s
internal ombudsman will be a forum available to the Bank customers for Grievance Redressal,
before, they can approach the Banking Ombudsman.

13.0 Change / Modification

Bank reserves it right to change or to modify the Policy or any of its provisions from time to time
without Notice.

5) DEPOSIT POLICY:

1. Scope of the Policy:

 This policy document on deposits outlines the guiding principles in respect of formulation
of various deposit products offered by the Bank and terms and conditions governing the
conduct of the account.
 It recognizes the rights of depositors and aims at dissemination of information with regard
to various aspects of acceptance of deposits from the members of the public, conduct and
operations of various deposits accounts.
 It will impart greater transparency in dealing with the individual customers and create
awareness among customers of their rights.
 The ultimate objective is that the customer should get services they are rightfully entitled
to receive without demand.

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 While adopting this policy, the bank reiterates its commitments to individual customers
outlined in the Code of Banks Commitment to Customer adopted by Bank. This document
is a broad framework under which the rights of common depositors are recognized.
Detailed operational instructions on various deposit schemes and related services will be
issued from time to time.
Types of Deposit Accounts:

The deposit products can be categorized broadly into the following types. Definition of
major deposits schemes is as under: -
 “Demand deposit” means a deposit received by the bank, which is with drawable on
demand.
 “Savings deposit” means a form of demand deposit, which is subject to the restrictions as
to the number of withdrawals as also the amount of withdrawals permitted by the bank
during any specified period.
 "Term deposit" means a deposit received by the Bank for a fixed period withdrawable only
after the expiry of the fixed period and includes deposits such as Recurring Deposit
Scheme/ Sulabh Deposit Scheme/ Fixed Deposit Scheme/ MIDS/ QIDS/ Short Term
Deposit Scheme/ Mahabank Unit Deposit Scheme/ Cumulative Deposit Scheme / Mixie
Deposit Scheme etc. The salient features of the Schemes are given more precisely in
Annexure A.
 Term Deposit which are accepted for 7 days and over up to 12 months are called Short
Term Deposits.
 Notice Deposit means term deposit for specific period but withdrawable on giving at least
one complete banking days’ notice.
 “Current Account” means a form of demand deposit wherefrom withdrawals are allowed
any number of times depending upon the balance in the account or up to a particular
agreed amount and will include other deposit accounts, which are neither Savings Deposit
nor Term Deposit.

 Ordinary Non-Resident (NRO) - NRIs can open Non-Resident Ordinary (NRO) deposit
accounts for collecting their funds from local bonafide transactions. NRO accounts
being Rupee accounts, the exchange rate risk on such deposits is borne by the
depositors themselves. When a resident becomes a NRI, his existing Rupee accounts
are designated as NRO. Such accounts also serve the requirements of foreign nationals
resident in India. NRO accounts can be maintained as current, saving, recurring or
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 term deposits. while the principal of NRO deposits is non-repatriable, current income
and interest earning up to US $ 1 million per calendar year is repatriable out of
the NRO balances / sale proceeds of assets held in India. Interest income from NRO
accounts is not exempt from income tax, as is the case with domestic deposits.
 Non-Resident (External) (NRE) Accounts - The Non-Resident (External) Rupee Account
NR(E)RA scheme, also known as the NRE scheme, was introduced in 1970. Any NRI can
open an NRE account with funds remitted to India through a bank abroad. This is a
repatriable account and transfer from another NRE account or FCNR(B) account is
also permitted. A NRE rupee account may be opened as current, savings or term deposit.
Local payments can be freely made from NRE accounts. Since this account is maintained
in Rupees, the depositor is exposed to exchange risk. NRIs / PIOs have the option to
credit the current income to their Non-Resident (External) Rupee accounts, provided
the authorized dealer is satisfied that the credit represents current income of the
nonresident account holders and income-tax thereon has been deducted / provided for.

3. Account Opening and Operation of Deposit Accounts:

 The Branches before opening any deposit account shall carry out due diligence as
required under "Know Your Customer" (KYC) guidelines issued by the Bank, RBI, Anti-
money Laundering rules and regulations and/or such other norms or procedures as per
the Customer Acceptance Policy adopted by the Bank.
 Basic Savings Bank Deposit Account (BSBDA) or Small Account is offered as a normal
banking service available to all.
 Branch official opening the account shall explain the procedural formalities and provide
necessary clarification sought by the prospective depositor when he approaches for
opening a deposit account.
 As per Bank’s KYC policy guidelines, branches shall categorize customers based on risk
perception and prepare their profiles for the purpose of transaction monitoring.
 Inability or unwillingness of a prospective customer to provide necessary information /
details could result in the bank not opening an account.
 In the case existing customer fails to furnish details required by the bank to fulfil
statutory obligations could also result in closure of the account after due notice is
provided to the customer.

Savings Bank Accounts can be opened for eligible person / persons and certain organizations /
agencies (as advised by Reserve Bank of India (RBI) from time to time)
Prohibitions for opening of Savings Bank Deposit Accounts. Savings Bank Deposit Account shall
not be opened in the name of—

 Government departments
 Bodies depending upon budgetary allocations for performance of their functions

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  Municipal Corporations or Municipal Committees
 Panchayat Samitis
 State Housing Boards
 Water and Sewerage / Drainage Boards State Text Book Publishing Corporations
 Societies
 Metropolitan Development Authority
 State / District Level Housing Co-operative Societies, etc.
 Any political party [i.e. an association or body of individual citizens of India, which is, or
is deemed to be registered with the Election Commission of India as a political party
under the Election Symbols (Reservation and Allotment) Order, 1968 as in force for the
time being]
 Any trading / business or professional concern, whether such concern is a proprietary or
a partnership firm or a company or an association.

The above prohibition will not apply in the case of organizations / agencies listed
below;
 Primary Co-operative Credit Society, which is being financed by the bank.
 Khadi and Village Industries Boards.
 Agriculture Produce Market Committees.
 Societies registered under the Societies Registration Act, 1860 or any other
corresponding law in force in a State or a Union Territory except societies registered
under the State Co-operative Societies Acts and specific state enactment creating Land
Mortgage Banks. Companies governed by the Companies Act, 1956 which have been
licensed by the Central Government under Section 25 of the said Act, or under the
corresponding provision in the Indian Companies Act, 1913 and permitted, not to add
to their names the words 'Limited' or the words 'Private Limited'.
 Institutions other than those mentioned in clause 2.26(n)(i) and whose entire income is
exempt from payment of Income tax under the Income-Tax Act, 1961.
 Government departments / bodies / agencies in respect of grants / subsidies released
for implementation of various programmes / Schemes sponsored by Central
Government / State Governments subject to production of an authorization from the
respective Central / State Government departments to open savings bank account.
 Self-help Groups (SHGs), registered or unregistered, which are engaged in promoting
savings habits among their members.
 Farmers' Clubs - Vikas Volunteer Vahini - VVV.
Current Accounts can be opened by individuals / partnership firms / Private and Public Limited
Companies / HUFs / Specified Associates / Societies / Trusts, Departments of Authority created
by Government (Central or State), Limited Liability Partnership, etc..
The NOC should be taken from customer, nearby banks for not having any current account and
loan facilities with them. While opening of a deposit account, due diligence process shall be
followed for getting satisfied about the identity of the person, verification of address /

93
occupation / source of income etc. Recent photographs of the person opening / operating the
account shall also be obtained as a part of due diligence process.

Debit card- Bank issues Debit cards to customers having Saving Bank/Current Accounts. Bank
will charge on debit card transactions within stipulated benchmark as per regulatory guidelines.

Mobile and Internet banking- Bank offers an easy registration process for mobile and internet
banking. Bank has placed per transaction limits based on its risk perception. Bank prohibits use
of mobile banking services for cross border inward and outward transfers.

3.14 Minors’ Accounts

A Savings / Fixed / Recurring Bank Deposit account can be opened by a minor of any age through
his/her natural or legally appointed guardian. (Status: known as Joint Account). Account in the
name of minor with mother as guardian can also be opened. Such account shall not allowed
being overdrawn and shall always remain in credit (so that the minors' capacity to enter into
contract would not be a subject matter of dispute).
Account in the name of minor jointly with a major can also be opened, where natural guardian
represents minor.
Minors above the age of 10 years may be allowed to open and operate savings bank accounts
independently, if they so desire, for depositing amounts in the account and self-withdrawals.
No overdraft facility and cheque-book facility shall however be allowed. The accounts shall also
be subject to following restrictions on transactions;
Age of the Minor Maximum permissible Maximum permissible one-time
balance in the account withdrawal / per day withdrawal

Above 10 years but not Rs. 50,000/- Rs. 10,000/-

exceeding 12 years

Above 12 years but not Rs. 1,00,000/- Rs. 20,000/-

exceeding 15 years

Above 15 years but not Rs. 2,00,000/- Rs. 40,000/-

exceeding 18 years

On attaining majority on the same day, account should be made inoperative till the time
customer converts the minor account to major with required KYC documents. Thus, banks
should initiate the prior communication to Minor accounts that would attain to majority.

Under “Mahabank Yuva Yojana” of the Bank, the younger generation (children / students) with
age of 10 years and above can open accounts with the bank. Salient features of the scheme are
as under;

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 Account can be opened without any initial deposit.
No minimum balance restriction / charges
Withdrawals for self are only allowed.
Cheque book shall be issued only on attaining the age of 18.
Account holder can also open Recurring Deposit account of Rs 10/- and more and keep
Fixed Deposits.
Loan Facility up to 90% of the term deposit can be allowed.
For education loans, preferential treatment as per eligibility shall be given.
ATM cards shall be issued to students under “Yuva Insta Card” Scheme.
The Scheme shall have all other features of Savings Bank Deposit Scheme except those
mentioned above.

3.15 Account of Illiterate/Blind/ Visually Challenged Persons

The bank may at its discretion allow opening of deposit accounts other than Current accounts
of illiterate person. The account of such person may be opened provided he/she calls on the
Bank personally along with a witness who is known to both the depositor and the Bank.
Normally no cheque book facility is provided for such Savings Bank account. At the time of
withdrawal/ repayment of deposit amount and/or interest, the account holder should affix his
withdrawal/repayment of deposit amount/or interest, the account holder should affix his/ her
thumb impression or mark in the presence of the authorized officer who should verify the
identity of the person. The will explain the need for proper care and safekeeping of the
passbook etc. given to the account holder.
Bank will facilitate opening of Saving Bank accounts as well as Term Deposit accounts to
persons with visual impairment. Such accounts will be operated by the accountholder
personally. Chequebook facility will be made available. Such account holders will have to be
present before the branch official and affix thumb impression and they will be identified
through their photograph to facilitate operations. Bank is also providing ATM & Internet
banking facility to visually challenged persons to operate their own accounts.

3.16 Accounts of Persons with Autism, Cerebral Palsy, Mental Retardation, Mental Illness and
Mental Disabilities

Savings bank and term deposits can also be opened in the name of persons with autism, cerebral
palsy, mental retardation and multiple disabilities by the legal guardian appointed by the
District Court under Mental Health Act, 1987 or by the Local Level Committees set up under the
National Trust for welfare of persons with autism, cerebral palsy, mental retardation and
multiple disabilities under Disabilities Act, 1999.

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Legal guardian, so appointed, will furnish an indemnity-cum-undertaking bond duly stamped
as per the local law in force along with Guardianship Certificate. The Bond will state that the
funds will be used directly or indirectly for the benefit of the account holder.
3.17 Accounts of Transgender persons
In case of a person claiming to be transgender and needs to open account or to do any banking
transaction, the person will be recognized as “Third Gender” and the details shall be accepted
in the Account Opening Forms (AOFs)/ or other applicable forms as such.

The salutation of such person shall be “Mx”. All transgender customers shall be treated
equally to other male/ female customers without any discrimination.
3.18 Operation of Joint Account
The joint account holders can give any of the following mandates for the disposal of balance in
the above accounts:

I. Either or Survivor: if the account is in the name of two individuals say, A & B, the final
balance along with interest, if applicable, will be paid to either of account holders i.e. A
or B, on date of maturity or to the survivor on death of any one of the account holders.

Anyone or Survivor: If the account is in the name of two or more individuals say, A, B &
C, thefinal balance along with interest if applicable, will be paid to any of accountholders
i.e. A or B or C, on the date of maturity. On the death of any one of account holder say
A, the final balance along with interest if applicable, will be paid to any two of the
surviving accountholders i.e. B or C. On the death of any two of account holder say A
and B, the final balance along with interest if applicable, will be paid to surviving
accountholder i.e. C.

III. Former or Survivor: If the account is in the name of two individuals say, A & B, the final
balance along with interest, if applicable, will be paid to the former i.e. A on date of
maturity and to the survivor on death of anyone of the account holders.

IV. Latter or Survivor: If the account is in the name of two individuals say, A & B, the final
balance along with interest, if applicable, will be paid to the latter i.e. B on date of
maturity and to the survivor on death of anyone of the account holders.
The above mandates will be applicable to or become operational only on or after the date of
maturity of term deposits. This mandate can be modified by the consent of all the account
holders.
3.19 Repayment of Term/Fixed Deposits in banks

If fixed/term deposit accounts are opened with operating instructions 'either or Survivor', the
signatures of both the depositors need not be obtained for payment of the amount of the
deposits on maturity. However, the signatures of both the depositors may have to be obtained,
96
in case the deposit is to be paid before maturity. If the operating instruction is 'Either or
Survivor' and one of the depositors expires before the maturity, no pre-payment of the
fixed/term deposit may be allowed without the concurrence of the legal heirs of the deceased
joint holder. This, however, would not stand in the way of making payment to the survivor on
maturity.
3.19.2. In case the mandate is 'Former or Survivor', the 'Former' alone can operate/withdraw
the matured amount of the fixed/term deposit, when both the depositors are alive. However,
the signature of both the depositors may have to be obtained, in case the deposit is to be paid
before maturity. If the former expires before the maturity of the fixed / term deposit, the
'Survivor' can withdraw the deposit on maturity. Premature withdrawal would however require
the consent of both the parties, when both of them are alive, and that of the surviving depositor
and the legal heirs of the deceased in case of death of one of the depositors.
3.19.3. If the joint depositors prefer to allow premature withdrawals of fixed/term deposits
also in accordance with the mandate of 'either or Survivor' or 'Former or Survivor', as the case
may be, premature withdrawal shall be allowed, provided the depositors have given a specific
joint mandate for the said purpose. In other words, in case of term deposits with "Either or
Survivor" or "Former or Survivor" mandate, bank shall allow premature withdrawal of the
deposit by the surviving joint depositor on the death of the other, only if, there is a joint
mandate from the joint depositors to this effect.
3.19.4. The joint deposit holders shall be permitted to give the mandate for premature
withdrawal of the deposit either at the time of placing fixed deposit or anytime subsequently
during the term / tenure of the deposit. If such a mandate is obtained, bank shall allow
premature withdrawal of term / fixed deposits by the surviving depositor without seeking the
concurrence of the legal heirs of the deceased joint deposit holder. Besides, such premature
withdrawal would not attract any penal charge.
3.20 Additions or Deletion of the Name/s of Joint Account Holders
A bank may, at the request of all the joint account holders, allow the addition or deletion of
name/s of joint account holder/s if the circumstances so warrant or allow an individual
depositor to add the name of another person as a joint account holder. However, in no case
should the amount or duration of the original deposit undergo a change in any manner in case
the deposit is a term deposit.
A bank may, at its discretion, and at the request of all the joint account holders of a deposit
receipt, allow the splitting up of the joint deposit, in the name of each of the joint account
holders only, provided that the period and the aggregate amount of the deposit do not undergo
any change.
Note: NRE deposits shall be held jointly with two or more NRIs/PIOs. NRIs/PIOs can hold jointly
with a resident relative based on ‘former or survivor’ basis. The resident relative can operate
the account as a POA holder during the lifetime of the NRI/PIO accountholder. NRO accounts
may be held jointly in the names of two or more. They may be held jointly with residents on
‘former or survivor’ basis.

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3.21 At the request of the depositor, the Bank will register mandate / power of attorney given
by him authorizing another person to operate the account on his behalf.
3.22 The minimum tenor of domestic/ NRO term deposits is seven days. NRE deposits shall be
accepted for a minimum period of one year.
3.23 The term deposit account holders at the time of placing their deposits can give instructions
with regard to closure of deposit account or renewal of deposit for further period on the date
of maturity. In absence of such mandate, the deposit will be treated as an auto renewal deposit
and shall be renewed for a similar period.
3.24 Nomination facility is available on all deposit accounts opened by the individuals.
Nomination facility is available on all deposit accounts opened by individuals. Nomination is also
available to an account opened by a sole proprietor. Nomination can be made in favour of one
individual only. Nomination so made can be cancelled or changed by the account holder/s any
time. While making a nomination, cancellation or change thereof, it is required to be witnessed
by a third party if the account holder is illiterate. Nomination can be modified by the consent
of account holder/s. Nomination can be made in favour of a minor also. In such cases at the
time of making nomination, depositor has to give a name of person (called appointee) who is a
major and will receive the amount of deposit on behalf of the nominee in the event of death of
the account holder during the minority of the nominee.
3.28 Suo Motu closure of Saving and Current Account
The Bank shall close accounts, which are considered undesirable and un-remunerative. These
accounts shall be closed only after sending proper written notice to the customer.
a) Drawing cheques without funds b) Fraudulent transactions in the account which may expose
the Bank to unnecessary risks c) Accounts wherein transactions (such as huge cash transactions)
disproportionate to the known profile of the customer, are being made d) Accounts in which,
in the opinion of the Bank, transactions having Money Laundering angle are being conducted e)
Accounts in which Bank is not able to apply appropriate KYC measures due to non-furnishing of
information by the customer and/or non-cooperation in this regard f) Non-compliance of
minimum balance requirements for current and saving account as applicable to the relevant
scheme/product.

Interest Payments :
In case of saving bank deposits, interest shall be calculated on daily product basis. Interest shall
be credited only when interest payable is minimum Re. 1/-. Interest will be paid on Quarterly
basis.
Interest shall be calculated at quarterly intervals, on term deposits and paid at the rate decided
by the Bank depending upon the period of deposits. In case of Monthly Deposit Scheme, the
interest shall be calculated for the quarter and paid monthly at discounted value. The interest
on term deposits is calculated by the Bank in accordance with the formulae and conventions
advised by Indian Banks’ Association, as under:
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4.2.1 Bank may not accept any deposits for a period longer than 10 years, excepting in terms of
order of the competent Courts or in the case of minors where interests of minors are involved,
provided bank is convinced that it is necessary to do so. Banks may decide in this matter based
on Asset Liability Management policies being followed.
4.2.2 Interest on deposits for fixed term may be paid, credited, transferred or reinvested with
frequency not less than the quarterly rests. However, payment of monthly interest may be
allowed, if required, by discounting the quarterly interest accrued.
4.2.3 Interest on deposits where the terminal period (monthly/quarterly/half year etc. as the
case may be) is incomplete shall be paid on maturity.
4.2.4 On deposits repayable in less than three months or where the terminal quarter is
incomplete, interest would be paid for the actual number of days based on 365 days in a year.
The branches will continue to seek permission from TIBD before acceptance of deposits, so as
to prevent any kind of ALM mismatch (for instance, through the portal).
For deposits more than Rs 100 Cr to Rs 500 crore, Bank will accept the deposits as per its daily
liquidity requirements. TIBD will recommend the rate to be offered on the deposit quote
received from the branch, considering the cost benefit analysis. The rate will be communicated
by the Resource Planning Department to the branch under a copy to Zonal Office and TIBD.
For deposits more than Rs 500 crore, Resource Planning Department will place the note to MD
& CEO, based on the recommendations received from TIBD and Investment Committee and will
convey the sanction to the branch under a copy to ZO/TIBD However in case of any exigency or
in absence of MD & CEO, the decision may be taken by the Investment Committee.
If a term deposit matures and proceeds are unpaid, the amount left unclaimed with the bank
will attract savings bank rate of interest.
Bank has statutory obligation to deduct tax at source if the total interest paid / payable on all
term deposits held by a person exceeds the amount specified under the Income Tax Act. The
Bank will issue a tax deduction certificate (TDS Certificate) for tax deducted. The depositor, if
entitled to exemption from TDS can submit declaration in the prescribed format at the
beginning of every financial year. Besides, the Bank has statutory obligation to charge / deduct
Service Tax as well as Transaction Tax as specified / notified by the Govt. of India, from time to
time.
Bank may pay interest on current account of a Regional Rural Bank at the rate specified by
sponsored bank directive from time to time.
3.14 Payment of interest on accounts frozen by bank:

In case of Term Deposit Accounts of customers frozen by the orders of the enforcement
authorities, following procedure shall be followed;

 A request letter shall be obtained from the customer on maturity, indicating therein
term for which the deposit is to be renewed. In case the depositor does not exercise

99
 the option of choosing the term for renewal, bank shall renew the same for a term
equal to the original term. ii) No new receipt shall be issued.
 Renewal of deposit shall be advised by registered letter / speed post / courier service
to the concerned Government department under advice to the depositor. In the advice
to the depositor, the rate of interest at which the deposit is renewed shall also be
mentioned.
 If overdue period does not exceed 14 days on the date of receipt of the request letter,
renewal should be done from the date of maturity. If it exceeds 14 days, interest for
the overdue period shall be paid as per our policy (refer Annexure D) and kept it in a
separate interest free subaccount which should be released when the original fixed
deposit is released.
 With regard to the savings bank accounts frozen by the enforcement authorities, bank
shall continue to credit the interest to the account on a regular basis.
3.15 Opening of Current Accounts - Need for discipline:
 Bank shall, at the time of opening current account, insist on a declaration to the effect
that the account holder is not enjoying any credit facility with any other bank.
 Current accounts of entities which enjoy credit facilities (fund based or non-fund
based) from the banking system shall not be opened without specifically obtaining a
No-Objection Certificate from the lending bank(s).
 Bank may however open current account of prospective customer in case no response
is received from the existing bankers after a minimum waiting period of a fortnight. If
a response is received within a fortnight, bank shall assess the situation with reference
to information provided on the prospective customer by the bank concerned and may
not solicit a formal no objection.

Extension of Alternate Delivery Channels to Savings Bank & Current Deposit account
holders
The Bank offers choice of electronic channels to customers for conducting their banking
transactions. The choice of electronic channels includes ATM, Internet banking, mobile
banking including SMS banking facility and phone banking. Wherever such electronic
facilities are offered as a part of the basic account/product, Bank should obtain specific
consent of the customers after explaining the risk elements associated for availing the
facility, for e.g., informing the customer to not disclose their password, OTP to anyone,
etc.
8. Premature Withdrawal/Closure of Term Deposit
The Bank on request from the depositor, shall allow withdrawal of term deposit before
completion of the period of the deposit agreed upon at the time of placing the deposit. At
present bank does not charge penalty on premature withdrawal of term deposits, having
maturity up to one year (tenor at the time of opening the account). Interest rates on
prematurely withdrawn term deposits with maturity period more than 1 year shall be 1%
below the applicable rate currently.

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 a) For Domestic deposits below Rs 1 crore: For deposits up to 1 year maturity (tenor at
the time of opening the account) interest is payable at the rate applicable to the period
for which deposit has actually been held with the bank and there will be NO PENALTY on
the applicable rate of interest.
Interest rates on prematurely withdrawn term deposits with maturity more than one year
will be 1 % below the applicable rate. However, if premature withdrawal of deposit is taken
for reinvestment in the Bank for a period longer than residual maturity period of existing
deposit there will be no penalty on applicable rate.
b) For Domestic deposits from Rs 1 crore to Rs 100 crore: While prematurely withdrawing/
closing a deposit from Rs 1 crore to Rs 100 crore “the applicable rate of interest will be the
contracted rate of interest for that specific period with a penalty of 0.50 % over and above
applicable rate.
c) For Domestic deposits above Rs 100 crore : While prematurely withdrawing/ closing a
deposit above Rs 100 crore “the applicable rate of interest will be the contracted rate of
interest for that specific period with a penalty of 0.50 % over and above applicable rate.
d) In case of NRE/FCNR deposits, no interest shall be paid if deposit is prematurely closed
before the minimum period of one year.
Premature payment after one year shall attract penalty as per point 8(b) and (c). However
No penalty to be levied on premature withdrawal of NRE/FCNR after completion of one
year if it is for reinvestment for a period longer than residual maturity period of existing
deposit .
e) No interest will be paid for premature withdrawal within 7 days of opening the deposit.
However, as regards bulk deposits of Rs. 1 Cr & above, the bank at its discretion may
disallow premature withdrawal of such large term deposits of all depositors, including
deposits of individuals and HUFs. Bank shall however notify such depositors of its policy
of disallowing premature withdrawal in advance i.e. at the time of accepting such deposits.
Renewal of Term Deposits / Overdue Term Deposits:
The bank offers auto-renewal facility for term deposits. If the customer opts for this facility,
the term deposit on maturity is auto-renewed for the tenor same as the maturing deposit at
the rate prevailing on the date of renewal. If the customer does not opt for auto-renewal
facility, and the customer renews the term deposit on maturity, interest rate for the period
specified by the depositor as applicable on the date of maturity would be applied on the deposit
so renewed.
If request for renewal is received after the date of maturity, such overdue deposits will be
renewed with effect from the date of maturity at interest rate applicable as on the due date,
provided such request is received within 14 days from the date of maturity. In respect of
overdue deposits renewed after 14 days from the date of maturity, interest for the overdue
period will be paid at the rates decided by the Bank from time to time. The latest guidelines in
this respect are given in Annex-D.

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The Depositor Education & Awareness Fund Scheme – 2014:
As per RBI directives under the provisions of Banking Regulation Act 1949, Section 26 A, any
amount to the credit of any account in India with any bank, which has not been operated upon
for a period of ten years, or any deposit or any amount remaining unclaimed for more than ten
years, shall be credited to the 'The Depositor Education and Awareness Fund' (DEAF) on
monthly basis.
In case of demand from a customer / depositor whose unclaimed amount / deposit had been
transferred to the Fund, banks shall repay the customer / depositor, along with interest, if
applicable, and lodge a claim for refund from the Fund for an equivalent amount paid to the
customer / depositor.
Proper due diligence as per the risk category of the customers shall however be carried out
before making payments to the customers approaching the banks for repayment. Branches shall
invariably verify that genuineness of the claimants and genuineness of the transactions
intended to be undertaken.
Interest Payable on Term deposit in Deceased Account:

i. In the event of death of the depositor before the date of maturity of deposit and
amount of the deposit is claimed after the date of maturity, the Bank shall pay
interest at the contracted rate till the date of maturity. From the date of maturity to
the date of payment, the Bank shall pay simple interest at the applicable rate
prevailing on the date of maturity, for the period for which the deposit remained
with the Bank beyond the date of maturity; as per the Bank's policy in this regard.
ii. If the amount of deposit is claimed before the date of maturity, interest at the rate
applicable to the period for which the deposit has remained with the Bank will be
paid as per 8(a), (b), (c), (d) and (e) mentioned above.
iii. However, in the case of death of the depositor after the date of maturity of the
deposit, the bank shall pay interest at savings deposit rate prevailing on the date of
maturity from the date of maturity till the date of payment.
iv. In respect of Balances lying in Current a/c standing in the name of Deceased
Individual / Sole Proprietorship Concern, interest shall be paid from the date of
death of the depositor till the date of repayment to the claimant at the rate of
interest applicable to Savings Deposits as on the date of payment.
v. In case of NRE deposit when the claimants are residents, the deposit on maturity
shall be treated as domestic Rupee deposit and interest shall be paid for the
subsequent period at a rate applicable to the domestic deposit of a similar maturity.

Safe Deposit Lockers

 This facility is not offered through all bank branches and wherever the facility is
offered, allotment of safe deposit vault will be subject to availability and
compliance with other terms and conditions attached to the service.

102
  Safe deposit lockers may be hired by an individual (being not a minor) singly or
jointly with another individual(s), HUFs, firms, limited companies, associates,
societies, trusts etc. Nomination facility is available to individual(s) holding the
lockers singly or jointly.
 Joint locker holders can give mandate for access to the lockers in the event of
death of one of the holders on the lines similar to those for deposit accounts.
 In the absence of nomination or mandate for disposal of contents of lockers, with
a view to avoid hardship to common persons, the bank will release the contents
of locker to the legal heirs against indemnity on the lines as applicable to deposit
accounts.

Annexure-A

Term Deposit Schemes of Bank of Maharashtra (read with Para No. 1)

Sr. Name of Peri Min. Amt. of Max. Amt Min. Max. Interest Loan
No Deposit Scheme odic Deposit Rs. of Deposit Peri Period Pattern Facility
. ity Rs od

1 Recurring M 50/- pm No ceiling 6M 120 M C Yes

2 Mahasanchay M 100/- pm 50000/- 12 M 60 M S Yes

Systematic pm
Deposit Plan
(MSDP)

3 Maha Lakhpati M Suitable for No ceiling 12 M 120 M C Yes

Recurring MV of min.
Deposit (MLRD) Rs. 1 lac

4 Maha Millionaire M Suitable for No ceiling 12 M 120 M C Yes

Recurring MV of min.
Deposit (MMRD) Rs. 10 lac

5 Fixed Deposit L 1000/- No ceiling 12 M 120 M S Yes

6 MIDS L 1000/- No ceiling 12 M 120 M D Yes

7 QIDS L 1000/- No ceiling 12 M 120 M S Yes

8 Short Term L 1000/- No ceiling 7 364 S Yes

deposit Days Days

9 Mahabank Unit L 5000/- No ceiling 46 60 M S Yes

103
 Deposit (Sheetal) Days

10 Cumulative L 1000/- No ceiling 6M 120 M C Yes

Deposit

11 Mixie Deposit L 10000/- No ceiling 24 M 120 M C Yes

12 Bank Term L 100/- 1,50,000/- 5Y D, S or C No

Deposit Scheme in one F.Y. 10 Y as the
2006 [u/s 80C of Case be.
I.T. Act)

13 Mahabank Yuva
Yojana
1. SB A/C -- Zero No ceiling -- S No
--
2. Recurring M 10/- p.m. No ceiling 6M C Yes
120 M
3. Fixed Deposit L Suitable for No ceiling 12 M S Yes
MV of min. 120 M
Rs. 0.50 lac
4.Mahasaraswati R/SU- 50/- 36 M 120 M Yes
M pm No Limit C
M/U- 100/-
pm

Annexure-A (Contd.)
Term Deposit Schemes of Bank of Maharashtra (read with Para No. 1)

Sr. Name of Peri Min. Amt. of Max. Amt Min. Max. Interest Loan
No Deposit Scheme odic Deposit Rs. of Deposit Period Peri Pattern Facility
. ity Rs od

14 Mahalaxmi Term
Deposit Scheme
1. Fixed Deposit L 1000/- No ceiling 3Y 3Y S Yes

104
 2. MIDS L 1000/- No ceiling 3Y 3Y D Yes

3. QIDS L 1000/- No ceiling 3Y 3Y S Yes

4. CDR L 1000/- No ceiling 3Y 3Y C Yes

15 Mahanidhi Term
Deposit Scheme
1. Fixed Deposit 1000/- 444 days Yes
L < 1 Crore S
2. MIDS L 1000/- 444 days D Yes
< 1 Crore
3. QIDS L 1000/- 444 days S Yes
< 1 Crore
4. CDR L 1000/- 444 days C Yes
< 1 Crore

16 Mahalabh Term 1000/- 666 days Yes

Deposit Scheme L < 1 Crore C

M= Month/Monthly Y=Year/Yearly L=In lump sum C=Compound S=Simple D=Discounted

Subject to changes from time to time

105
 Annexure-C
Interest payable on premature payment of term deposits

Period for which the deposit has Procedure

remained with the Bank

Less than 7 days (Applicable to both No interest is payable

Normal and DRI deposits)

7 days and above up to 1 year The interest rate should be the applicable rate for the actual
period for which the deposit has remained with the bank as
prevailing on the date of deposit and payable for the period
for which the deposit actually remained with the Bank.

Above 1 year The interest rate shall be 1.00% below the applicable rate
for the actual period for which the deposit has remained
with the bank as prevailing on the date of deposit and
payable for the period for which the deposit actually
Remained with the Bank.

1) However, as regards bulk deposits of Rs. 1 Cr & above, the bank at its discretion may
disallow premature withdrawal of such large term deposits of all depositors, including
deposits of individuals and HUFs. Bank shall however notify such depositors of its
policy of disallowing premature withdrawal in advance i.e. at the time of accepting
such deposits.

2) In case the bank decides to adjust term deposit prematurely for the recovery of loans
the penal clause will not be applicable and the interest at contractual rate from the
date of deposit till the date of adjustment be allowed subject to following conditions-
a. Such recovery should result either in NPA recovery or preventing the defaulted
account from becoming NPA.
b. The loan should not be against term deposits.

3) In case of NRE deposit, no interest shall be paid if the deposit is prematurely closed
before the minimum period of one year. Premature payment of of NRE deposit after
one year shall attract penalty of 1% on the applicable interest rate.

106
 FOREX DEPOSITS

A Non-Resident Indian is –

A Non Resident Indian (NRI) as per Foreign Exchange Management Act 1999 (FEMA), is an Indian
citizen or Foreign National of Indian Origin resident outside India for purposes of employment,
carrying on business or vocation in circumstances as would indicate an intention to stay outside
India for an indefinite period.

A Non-resident Indian is a person resident outside India who is a citizen of India. An individual
will be considered NRI if his stay outside India is more than 182 days during the preceding
financial year.

1. A person who has gone out of India or who stays outside India for
 Taking up employment outside India,
 Carrying on a business or vocation or education
 Any other purpose in such circumstances as would indicate his intention to stay
outside India for an uncertain period.

A person mentioned as above is considered as Non-resident Indian immediately after his

foreign stay begins.

2. Indian citizens working abroad on assignment with Foreign Governments, Government

Agencies or International/regional agencies such as United Nations Organization (UNO) and
its affiliates, IMF, IBRD etc.
3. Government officials and other officials of public sector undertakings deputed abroad on
assignment or posted abroad (including diplomatic missions) are considered as Non
Resident Indians.
4. Person of Indian Origin (PIO) is a citizen of any country other than
Bangladesh or Pakistan, if
a. He at any time held Indian Passport, or
b. He or either of his parents or any of his grandparents was a citizen of India by
virtue of the constitution of India or the citizenship Act, 1955, or
c. The person is a spouse of an Indian Citizen or a person referred to in (a) or (b)
above

PIOs are extended the same facilities for bank account maintenance in India as NRIs and
are also, for such purposes, called by the generic name as NRIs.

Definition of NRI as per Income Tax Act:

You are considered an Indian resident for a financial year:

i. When you are in India for at least 6 months (182 days to be exact) during the financial year

ii. You are in India for 2 months (60 days) for the year in the previous year and have lived for
one whole year (365 days) in the last four years

107
SCHEME NRO NRE FCNR

Who can NRI/PIO (PAK & NRI/PIO (PAK & BD NRI/PIO (PAK & BD
open BD national national requires RBI national requires
requires RBI approval) RBI approval)
approval)

Joint NR + RI NR + NR (Joint with RI NR + NR (Joint with

Account (permitted as F/S permitted F/S basis) RI permitted F/S
basis) basis)

Nomination Permitted Permitted Permitted

Currency of INR (@domestic) INR (@domestic) USD, EUR, JPY, GBP,

Dep & CAD, AUD
Interest (LIBOR+200bps<3yr,
LIBOR+300bps>3yr)

Repatriation Not Repatriable Free Repatriation Free Repatriation

except for
specified
purposes. (USD
1mn per Fin year)

Account SB, CA, TD, RD, SB, CA, TD, RD, TD TD (MIN 1 YEAR)
Types TD

Loans in PERMITTED PERMITTED PERMITTED

India to
account
holder in
rupees

Purpose of PERSONAL PERSONAL/ PERSONAL /

loan BUSINESS/HOUSE BUSINESS / HOUSE
/ BUSINESS (OWN USE) (OWN USE)

Permitted Proceeds of By Foreign Currency

Credits remittances Cheques, Drafts,
received from Travellers Cheques,
outside India NRE / FCNR accounts,
through normal Interest on Govt.
banking channel securities and dividend
or foreign of UTI and other
currency notes investments in shares
tendered by the and debentures
account holder provided that the
during his investments were
temporary visit to

108
 India or transfers made by debit to the
or legitimate dues NRE / FCNR account.
in India of the
account holder.

Permitted All local Local Disbursements,

Debits payments in Remittances outside
Rupees including India, transfer to
payments for NRE/FCNR of your own
investments. account. Investments
in shares
Remittance /securities/debentures
outside India of of an Indian company
current income in is permitted.
India net of
applicable taxes

Interest Rates on fresh FCNR(B) & RFC Deposits for the month of 01/01/2021 shall be as
under:

Rates for Rates for Rates for Rates for Rates for
Period
USD GBP EURO AUD CAD
12-15-18-21
0.72 0.26 0 0.32 0.94
months
24-27-30-33
0.72 0.28 0 0.37 0.77
months
36-39-42-45
0.74 0.35 0 0.26 0.87
months
48-51-54-57
1.10 0.65 0 0.51 1.24
months

60 months 1.20 0.69 0 0.51 1.35

RFC USD
60
12-15-18-21 24-27-30-33 36-39-42-45 48-51-54-57
MONTHS
0.72 0.72 0.74 1.10 1.20

Please note that any single FCNR(B) deposit in EUR, AUD, CAD will be for a minimum amount of
5000/- in the respective currencies and in GBP for a minimum of GBP 2000/-. Branches should
seek prior approval from Treasury & International Banking Division, Mumbai before accepting
fresh FCNR (B) deposits denominated in GBP, EUR for a period of 2 years and above and before
accepting any deposit in AUD, CAD. These deposits would be accepted by Bank subject to
109
sizeable ticket size and deployment opportunity. Before giving commitment to depositor,
branches should seek approval from TIBD.

Deposits are to be accepted for a minimum period of 12 months and thereafter in multiples of
quarters only. Please note that in case of SGD acceptance of fresh deposits /Renewal of existing
FCNR (B) is discontinued till further instructions (Please refer HO circular no
AX2/TIBD/FCNR/2018-19/Cir 53 dated 10th September 2018).

4. RESIDENT FOREIGN CURRENCY ACCOUNT (RFC Account): -

 This is a scheme permitting persons of Indian nationality or origin who have returned to
India for permanent settlement (Returning Indians) after being resident outside India
for a continuous period of not less than one year to open foreign currency accounts
against the proceeds held in NRE/FCNR accounts or funds remitted from abroad.
 You can open Current, Savings and Term Deposit Accounts under the RFC Scheme.
However, you will not be given a Cheque book facility on the RFC Savings/Current
Account. The account can be maintained in any currency such as USD, GBP, JPY, EURO
etc.

Permissible Credits:

o Amounts of Foreign Exchange Assets including deposits with banks outside India,
investments in foreign currency such as shares and securities and immovable property
outside India acquired or held while you were resident outside India.
o Balances standing to the credit of NRE/FCNR accounts together with interest due
thereon.
o Amount of Foreign Currency Notes and Travelers’ Cheques brought at the time of
returning to India. Currency Declaration Form (CDF) is required if the foreign currency
notes exceed USD 5000 or value of Travelers Cheques and notes exceeds USD 10,000.
o Dividend /Income or sale proceeds of overseas foreign currency assets.
o Pension from abroad.

Permissible Debits:

o Expenses for Education abroad,

o Family Travel,Medical expenses,
o Other bonafide purpose permissible under the exchange control regulations,
o Bank charges, Transfer to other Foreign Currency Account of the depositor himself and,
all local payments.
o Nomination facility is available for RFC deposit accounts.

RECEIVING INWARD REMITTANCE THROUGHSWIFT:

NRI or Resident Indians can receive money through SWIFT in their account with Bank. The Swift
Code of Bank of Maharashtra is "MAHBINBB". To facilitate quick and safe transfer of funds, we
maintain our NOSTRO accounts with banks all over the world in various foreign currencies. The

110
Inward remittance messages are received by bank through SWIFT for further crediting to the
customer’s account by converting it to Indian Rupee.

INWARD / OUTWARD REMITTANCE FACILITIES TO RESIDENTS

Travel Abroad: -
Max USD 10000, (FCN max USD 2000 or equivalent, Bal in TC/DD/TT)
For trip to Iraq / Libya – FCN max USD 5000,
For trip to Russia / Other commonwealth country – full in FCN. Simplified A2 form.
Medical treatment abroad: -Max USD 100000,
For amount exceeding USD 250000, estimate from Indian doctor/ doctor from hospital abroad
is to be submitted.
Remittance available for one who fell ill abroad after going abroad under travel trip.
Education Purpose: USD 100000 per annum
Cultural Trip: Dance troupe / artistes – on the basis of approval from ministry of human
resources.
Business trip:USD 25000, per financial year
Other remittances:For employment/ education / emigration / maintenance of close relatives
abroad – max USD 25000 per financial year,

OTHER TERMS
Cash payment max INR 50000, For exchange beyond value INR 50000, by:
A. By Cross Cheque
B.By DD / PO
Unspent exchange to be returned to AD within 180 days from date of return to India.
Max upto USD 2000, out of unspent exchange can be retained beyond 180 days for next trip or
can be kept in resident foreign currency account (domestic).
Any income abroad during stay abroad can be kept in RFC (domestic) account.
Inward exchange beyond USD 10000, requires customs declaration form (CDF).
Max INR 25000, can be brought to India.
Endorsement of passport is not mandatory

LIBERALISED REMITTANCE SCHEME (LRS)

w.e.f 26.05.2015, max USD 250000 by any resident individual per financial year for any
permitted Current / Capital transaction.
Gift / donations & other outward remittances are subsumed under LRS
Excludes remittances to Nepal, Bhutan, Mauritius, Pakistan.
Remittances to be made in prescribed format (A2).
The remitter’s a/c should be KYC compliant and more than 1year old (Capital A/c transactions
&Current A/c transaction >USD 25000).
No loan to be extended for remittance under LRS.
AD bank to ensure that remittance is out of own funds of remitter.

Society for Worldwide Interbank Financial Telecommunication (SWIFT)

SWIFT is a worldwide community of financial institutions whose purpose is to be the leader in

communications solutions enabling interoperability between its members, their market
infrastructures and their end-user communities. SWIFT is a global member-owned cooperative
111
and the world’s leading provider of secure financial messaging services. SWIFT is a cooperative
society under Belgian law owned by its member financial institutions with offices around the
world. SWIFT headquarters are in Belgium, near Brussels.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network
that enables financial institutions worldwide to send and receive information about financial
transactions in a secure, standardized and reliable environment. SWIFT also sells software and
services to financial institutions, much of it for use on the SWIFT Net network, and ISO 9362.
Business Identifier Codes (BICs, previously Bank Identifier Codes) used for transmission and
identification of authorized terminals are popularly known as "SWIFT codes".

The majority of international interbank messages use the SWIFT network. As of 2018, SWIFT
linked more than 11,000 financial institutions in more than 200 countries and territories, who
are exchanging over 15 million messages per day. SWIFT transports financial messages in a
highly secure way but does not hold accounts for its members and does not perform any form
of clearing or settlement. SWIFT hosts an annual conference, called Sibos, specifically aimed at
the financial services industry.

SWIFT does not facilitate funds transfer; rather, it sends payment orders, which must be settled
by correspondent accounts that the institutions have with each other. Each financial institution,
to exchange banking transactions, must have a banking relationship by either being a bank or
affiliating itself with one (or more) so as to enjoy those particular business features.

As per SWIFT standard account number to be entered in IBAN (International Bank Account
Number) format or in BBAN format (for domestic payments).

IMPORT FINANCE

Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry
of Commerce & Industry, Department of Commerce, Government of India. Authorized Dealer
Category – I (AD Category – I) banks should ensure that the imports into India are in conformity
with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account
Transactions) Rules, 2000 framed by the Government of India vide Notification No. G.S.R.381
(E) dated May 3, 2000 and the Directions issued by Reserve Bank under Foreign Exchange
Management Act, 1999 from time to time.

Import Payments:
AD Category I Banks may allow remittance for making payments for imports into India, after
ensuring that all the requisite details are made available by the importer and the remittance is
for bona fide trade transactions as per applicable laws in force.

The importing firm or an individual has to obtain a license and Importer-Exporter Code (IEC)
number from the Controller of Exports and Imports. The import licenses are usually issued for
a period of one year at a time.

112
Time Limit for Settlement of Import Payments:

Time limit for Normal Imports:

(i) In terms of the extant regulations, remittances against imports should be completed not
later than six months from the date of shipment, except in cases where amounts are withheld
towards guarantee of performance, etc.

(ii) AD Category I – Bank may permit settlement of import dues delayed due to disputes,
financial difficulties, etc. However, interest if any, on such delayed payments, Usance bills or
overdue interest is payable only for a period of up to three years from the date of shipment and
may be permitted in terms of the directions in para C.2 of Section III below.

Time Limit for Deferred Payment Arrangements:

Deferred payment arrangements (including suppliers’ and buyers’ credit) upto five years, are
treated as trade credits for which the procedural guidelines as laid down in the RBI Master
Circular for External Commercial Borrowings and Trade Credits may be followed.

Extension of Time:
(i) AD Category I – Banks can consider granting extension of time for settlement of import dues
up to a period of six months at a time (maximum up to the period of three years) irrespective
of the invoice value for delays on account of disputes about quantity or quality or non-
fulfillment of terms of contract; financial difficulties and cases where importer has filed suit
against the seller. In cases where sector specific guidelines have been issued by Reserve Bank
of India for extension of time (i.e. rough, cut and polished diamonds), the same will be
applicable.

(ii) While granting extension of time, AD Category –I bank must ensure that:
a. The import transactions covered by the invoices are not under investigation by Directorate
of Enforcement / Central Bureau of Investigation or other investigating agencies;
b. While considering extension beyond one year from the date of remittance, the total
outstanding of the importer does not exceed USD one million or 10 per cent of the average
import remittances during the preceding two financial years, whichever is lower; and
c. Where extension of time has been granted by the AD Category – I bank, the date up to which
extension has been granted may be indicated in the ‘Remarks’ column

Import of Foreign Exchange into India:

A person may–
(i) Send into India, without limit, foreign exchange in any form other than currency notes, bank
notes and travelers Cheques;
(ii) Bring into India from any place outside India, without limit, foreign exchange (other than
unissued notes), subject to the condition that such person makes, on arrival in India, a
declaration to the Custom Authorities at the Airport in the Currency Declaration Form (CDF)
annexed to these Regulations; provided further that it shall not be necessary to make such
declaration where the aggregate value of the foreign exchange in the form of currency notes,
bank notes or Travellers Cheques brought in by such person at any one time does not exceed
113
USD 10,000 (US Dollars ten thousand) or its equivalent and/or the aggregate value of foreign
currency notes (cash portion) alone brought in by such person at any one time does not exceed
USD 5,000 (US Dollars five thousand) or its equivalent.

Import of Indian Currency and Currency Notes:

(i) Any person resident in India who had gone out of India on a temporary visit, may bring into
India at the time of his return from any place outside India (other than from Nepal and Bhutan),
currency notes of Government of India and Reserve Bank of India notes up to an amount not
exceeding Rs.25,000 (Rupees twenty five thousand only).

(ii) A person may bring into India from Nepal or Bhutan, currency notes of Government of India
and Reserve Bank of India for any amount in denominations up to Rs.100/-.

Third Party Payment for Import Transactions:

AD category I banks are allowed to make payments to a third party for import of goods, subject
to conditions as under:
a. Firm irrevocable purchase order / tripartite agreement should be in place. However, this
requirement may not be insisted upon in case where 8 documentary evidence for
circumstances leading to third party payments / name of the third party being mentioned in
the irrevocable order / invoice has been produced.
b. AD bank should be satisfied with the bonafide of the transactions and should consider the
Financial Action Task Force (FATF) Statement before handling the transactions;
c. The Invoice should contain a narration that the related payment has to be made to the
(named) third party;
d. Bill of Entry should mention the name of the shipper as also the narration that the related
payment has to be made to the (named) third party; e. Importer should comply with the related
extant instructions relating to imports including those on advance payment being made for
import of goods.

The importer has to make necessary arrangements for paying for import after obtaining the
foreign exchange. The following documents are to be submitted to the exporter-

Import Payment can be settled in following ways:

Advance remittance: It is permitted without any ceiling for bonafide trade transactions subject
to the condition that if it exceeds US $ 200000, a Standby LC or Guarantee should be obtained
from an International Bank of repute.

AD Category – I - Bank may allow advance remittance for import of goods without any ceiling
subject to the following conditions:
(a) If the amount of advance remittance exceeds USD 200,000 or its equivalent, an
unconditional, irrevocable standby Letter of Credit or a guarantee from an international bank
of repute situated outside India or a guarantee of an AD Category – I bank in India, if such a
guarantee is issued against the counter-guarantee of an international bank of repute situated
outside India, is obtained.

114
(b) In cases where the importer (other than a Public Sector Company or a
Department/Undertaking of the Government of India/State Government/s) is unable to obtain
bank guarantee from overseas suppliers and the AD Category – I bank is satisfied about the
track record and bonafide of the importer, the requirement of the bank guarantee / standby
Letter of Credit may not be insisted upon for advance remittances up to USD 5,000,000 (US
Dollar five million). AD Category – I - bank may frame their own internal guidelines to deal with
such cases as per a suitable 10 policy framed by the bank's Board of Directors.

(c) A Public Sector Company or a Department/Undertaking of the Government of India / State

Government/s which is not in a position to obtain a guarantee from an international bank of
repute against an advance payment, is required to obtain a specific waiver for the bank
guarantee from the Ministry of Finance, Government of India before making advance
remittance exceeding USD 100,000.

Evidence of Import: Physical Imports (i) In case of all imports, irrespective of the value of foreign
exchange remitted / paid for import into India, it is obligatory on the part of the AD Category–
I bank through which the relative remittance was made, to ensure that the importer submits:-
(a) The importer shall submit BoE number, port code and date for marking evidence of import
under IDPMS as detailed in para C.8.

Evidence of Import in Lieu of Bill of Entry:

(i) AD Category – I bank may accept, in lieu of Exchange Control Copy of Bill of Entry for home
consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company
that the goods for which remittance was made have actually been imported into India provided
(a) The amount of foreign exchange remitted is less than USD 1,000,000 or its equivalent and
(b) The importer is a company listed on a stock exchange in India and whose net worth is not
less than Rs.100 crores as on the date of its last audited balance sheet, or, the importer is a
public sector company or an undertaking of the Government of India or its departments.

2. Open Account:
Unsecured Open Account terms allow the importer to make payment at some specific date in
the future and without the buyer issuing any negotiable instrument evidencing his legal
commitment to pay at the appointed time. Under an Open Account payment method, title to
the goods usually passes from the seller to the buyer prior to the payment and subject the Seller
to risk of default by the buyer. Furthermore, there may be a time delay in payment, depending
on how quickly documents are exchanged between seller and buyer

3. Bills on collection basis:

The importer may request the exporter to forward the documentary bill through his banker,
which would be delivered to him either against acceptance of the Bill of Exchange or against its
payment. Thus, the documents may be received either through D/A(documents against
acceptance of Bill of Exchange) or D/P (documents against payment) basis.

Collection terms offer an important bank payment mechanism that can serve the needs of both
the exporter and importer. Under this arrangement, the sale transaction is settled by the bank
through an exchange of documents, thus enabling simultaneous payment and transfer of title.
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The importer is not obliged to pay for the goods prior to shipment and the exporter retains title
to the goods until the importer either pays for the value of the draft upon presentation(sight
draft) or accept to pay at later date and time(term draft). The Principal obligations of the parties
to a documentary collection are arranged under the guidelines of “uniform rules for collections
(URC) drafted by the Paris based International Chamber of Commerce.

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 FOREX BUSINESS

LETTER OF CREDIT
A documentary issued by a bank to another bank (especially one in a different country) to serve
as a guarantee for payments made to a specified person under specified conditions.

A letter of credit is a document from a bank that guarantees payment. There are several types
of letters of credit, and they provide security when buying and selling.

A letter of credit guarantees payment of a specified sum in a specified currency, provided the
seller meets precisely-defined conditions and submits the prescribed documents within a fixed
timeframe.

These documents almost always include clean bill of lading or air way bill, commercial invoice,
certificate of origin. The seller or exporter called the beneficiary and buyer called the applicant.

Seller protection: If a buyer fails to pay a seller, the bank that issued a letter of credit will pay
the seller if the seller meets all of the requirements in the letter. This provides security when
the buyer and seller are in different countries.

Buyer protection: Letters of credit can also protect buyers. If you pay somebody to provide a
product or service and they fail to deliver, you might be able to get paid using a standby letter
of credit. That payment can be a penalty to the company that was unable to perform, and it’s
similar to a refund, allowing you to pay somebody else to provide the product or service
needed.

Parties to the Letter of Credit:

Applicant: The party who requests the letter of credit. This is the person or company that will
pay the beneficiary. The applicant is typically (but not always) an importer or buyer who uses
the letter of credit to make a purchase.
Beneficiary: The party who receives payment. This is usually a seller or exporter who has
requested that the applicant use a letter of credit (because the beneficiary wants more
security).

Issuing bank: The bank that creates or issues the letter of credit at the applicant’s request. It is
typically a bank where the applicant already does business (in the applicant’s home country,
where the applicant has an account or a line of credit).

Negotiating bank: The bank that works with the beneficiary. This bank is generally located in
the beneficiary’s home country, and may be a bank where the beneficiary already conducts
business. The beneficiary will submit documents to the negotiating bank, and the negotiating
bank acts as a liaison between the beneficiary and other banks involved.

Confirming bank: A bank that “guarantees” payment to the beneficiary as long as the
requirements in the letter of credit are met. The issuing bank already guarantees payment, but
the beneficiary may prefer a guarantee from a bank in her home country (with which she is
more familiar). This may be the same bank as the negotiating bank.
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Advising bank: The bank that receives the letter of credit from the issuing bank and notifies the
beneficiary that the letter is available. This bank is also known as the notifying bank, and may
be the same bank as the negotiating bank and the confirming bank.

Intermediary: A company that connects buyers and sellers, and which sometimes uses letters
of credit to facilitate transactions. Intermediaries often use back-to-back letters of credit (or
transferable letters of credit).

Freight forwarder: A company that assists with international shipping. Freight forwarders often
provide the documents exporters need to provide in order to get paid.

Shipper: The company that transports goods from place to place.

Types of LC:
Irrevocable LC. This LC cannot be cancelled or modified without consent of the beneficiary
(Seller). This LC reflects absolute liability of the Bank (issuer) to the other party.

Revocable LC. This LC type can be cancelled or modified by the Bank (issuer) at the customer's
instructions without prior agreement of the beneficiary (Seller). The Bank will not have any
liabilities to the beneficiary after revocation of the LC.
Stand-by LC. This LC is closer to the bank guarantee and gives more flexible collaboration
opportunity to Seller and Buyer. The Bank will honour the LC when the Buyer fails to fulfill
payment liabilities to Seller.

Confirmed LC. In addition to the Bank guarantee of the LC issuer, this LC type is confirmed by
the Seller's bank or any other bank. Irrespective to the payment by the Bank issuing the LC
(issuer), the Bank confirming the LC is liable for performance of obligations.

Unconfirmed LC. Only the Bank issuing the LC will be liable for payment of this LC.

Transferable LC. This LC enables the Seller to assign part of the letter of credit to other
party(ies). This LC is especially beneficial in those cases when the Seller is not a sole
manufacturer of the goods and purchases some parts from other parties, as it eliminates the
necessity of opening several LC's for other parties.

Back-to-Back LC. This LC type considers issuing the second LC on the basis of the first letter of
credit. LC is opened in favor of intermediary as per the Buyer's instructions and on the basis of
this LC and instructions of the intermediary a new LC is opened in favor of Seller of the goods.

Payment at Sight LC. According to this LC, payment is made to the seller immediately
(maximum within 7 days) after the required documents have been submitted.

Deferred Payment LC. According to this LC the payment to the seller is not made when the
documents are submitted, but instead at a later period defined in the letter of credit. In most
cases the payment in favour of Seller under this LC is made upon receipt of goods by the Buyer.

Red Clause LC. The seller can request an advance for an agreed amount of the LC before
shipment of goods and submittal of required documents. This red clause is so termed because
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it is usually printed in red on the document to draw attention to "advance payment" term of
the credit.

Suppliers credit:

It is extended by overseas exporter to the importer. Suppliers credit is a financing system in

which the can give credit to the foreign importer to finance his purchase. Normally the importer
can pay a portion of the value and signs a promissory note to pay the rest on receipt of the
goods and on acknowledging acceptance. The importer’s bank is called the presenting bank and
the exporter’s bank is called the remitting bank.

The exporter’s bank collects documents and sends to importer’s bank. The importer’s bank gets
the acceptance acknowledgement and the pending money from the importer and sends that
to the exporter’s bank from where the exporter gets the money minus the transaction fees and
other charges. The maximum tenure of supplier’s credit in case of capital goods is 3 years and
that for revenue goods is 1 year.

Buyers credit:

It is arranged by Importer from foreign Banks / Inst. The period of buyer’s credit for Raw
Material it is <360days, & for Capital goods it is <1080days. Amount is maximum USD 20 mn.
The period of trade credit is to be linked to trade cycle. No roll over or extension is allowed.
Each buyers credit must bear a unique ID number.

Buyer credit is a short term credit available to an importer (buyer) from overseas lenders such
as banks and other financial institution for goods they are importing. The overseas banks usually
lend the importer (buyer) based on the letter of comfort (a bank guarantee) issued by the
importer's bank.

Export finance

Export:

Export in simple words means selling goods abroad. International market being a very wide
market, huge quantity of goods can be sold in the form of exports. Export refers to outflow of
goods and services and inflow of foreign exchange.

Export Finance:
The exporter may require short term, medium term or long term finance depending upon the
types of goods to be exported and the terms of statement offered to overseas buyer. The short-
term finance is required to meet “working capital” needs. The working capital is used to meet
regular and recurring needs of a business firm. The regular and recurring needs of a business
firm refer to purchase of raw material, payment of wages and salaries, expenses like payment
of rent, advertising etc.

Export finance is short-term working capital finance allowed to an exporter. Finance and credit
are available not only to help export production but also to sell to overseas customers on credit.
An exporter may avail financial assistance from any bank, which considers the ensuing factors:
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Availability of the funds at the required time to the exporter & Affordability of the cost of
funds.

Objectives of Export Finance:

To cover commercial & Non-commercial or political risks attendant on granting credit to a

foreign buyer. To cover natural risks like an earthquake, floods etc. The exporter may also
require “term finance”. The term finance or term loans, which is required for medium and long
term financial needs such as purchase of fixed assets and long term working capital.

Financial institutions which offer export finance:

1. EXIM Bank
2. ECGC- Export Credit Guarantee Corporation of India
3. Development banks such as IDBI, ICICI,
4. National Small Industries Corporation
5. Commercial banks
6. State Finance Corporations

Reserve Bank of India- though it doesn’t provide export finance directly, it adopts policies to
provide them. The departments under RBI which deals with export finance are

1. Industrial and credit department

2. Exchange control department

Different types of export finance are as follows:

1. Pre- shipment finance

2. Post shipment finance
3. Export finance against the collection of bills.
4. Deferred export finance
5. Export finance against allowances and subsidies

PRE-SHIPMENT FINANCE:

Meaning: Pre-shipment is also referred as “packing credit”. It is working capital finance

provided by commercial banks to the exporter prior to shipment of goods. The finance required
to meet various expenses before shipment of goods is

Definition for pre-shipment: Financial assistance extended to the exporter from the date of
receipt of the export order till the date of shipment is known as pre-shipment credit. Such
finance is extended to an exporter for the purpose of procuring raw materials, processing,
packing, transporting, warehousing of goods meant for exports.

Importance of finance at Pre Shipment stage:

To purchase raw material, and other inputs to manufacture goods.
To assemble the goods in the case of merchant exporters.
To store the goods in suitable warehouses till the goods are shipped.
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To pay for packing, marking and labelling of goods.
To pay for pre-shipment inspection charges.
To import or purchase from the domestic market heavy machinery and other capital goods to
produce export goods.
To pay for consultancy services.
To pay for export documentation expenses.

FORMS OR METHODS OF PRE-SHIPMENT FINANCE:

Cash Packing Credit Loan:

In this type of credit, the bank normally grants packing credit advantage initially on unsecured
basis. Subsequently, the bank may ask for security.

Advance Against Hypothecation:

Packing credit is given to process the goods for export. The advance is given against security
and the security remains in the possession of the exporter. The exporter is required to execute
the hypothecation deed in favour of the bank.
Advance Against Pledge:
The bank provides packing credit against security. The security remains in the possession of the
bank. On collection of export proceeds, the bank makes necessary entries in the packing credit
account of the exporter.
Advance Against Red L/C:
The Red L/C received from the importer authorizes the local bank to grant advances to exporter
to meet working capital requirements relating to processing of goods for exports. The issuing
bank stands as a guarantor for packing credit.
Advance Against Back-To-Back L/C:
The merchant exporter who is in possession of the original L/C may request his bankers to issue
Back-To-Back L/C against the security of original L/C in favour of the sub-supplier. The sub-
supplier thus gets the Back-To-Bank L/C on the basis of which he can obtain packing credit.
Advance Against Exports Through Export Houses:
Manufacturer, who exports through export houses or other agencies can obtain packing credit,
provided such manufacturer submits an undertaking from the export houses that they have not
or will not avail of packing credit against the same transaction.
Advance Against Duty Draw Back (DBK):
DBK means refund of customs duties paid on the import of raw materials, components, parts
and packing materials used in the export production. It also includes a refund of central excise
duties paid on indigenous materials. Banks offer pre-shipment as well as post-shipment
advance against claims for DBK.
Special Pre-Shipment Finance Schemes:
Exim-Bank’s scheme for grant for Foreign Currency Pre- Shipment Credit (FCPC) to exporters.
Packing credit for Deemed exports.

FOREIGN CURRENCY PRE-SHIPMENT CREDIT (FCPC)

The FCPC is available to exporting companies as well as commercial banks for lending to the
former. It is an additional window to rupee packing credit scheme & available to cover both the
domestic i.e. indigenous & imported inputs.

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The exporter has two options to avail him of export finance. To avail him of pre-shipment credit
in rupees & then the post shipment credit either in rupees or in foreign currency denominated
credit or discounting /rediscounting of export bills.

POST-SHIPMENT FINANCE:

Meaning: • Post shipment finance is provided to meet working capital requirements after the
actual shipment of goods. It bridges the financial gap between the date of shipment and actual
receipt of payment from overseas buyer thereof. Whereas the finance provided after shipment
of goods is called post-shipment finance.

Definition: • Credit facility extended to an exporter from the date of shipment of goods till the
realization of the export proceeds is called Post-shipment Credit.
Importance of finance at Post shipment Stage:
To pay to agents/distributors and others for their services.
To pay for publicity and advertising in the overseas markets.
To pay for port authorities, customs and shipping agents charges.
To pay towards export duty or tax, if any.
To pay towards ECGC premium.
To pay for freight and other shipping expenses.
To pay towards marine insurance premium, under CIF contracts.
To meet expenses in respect of after sale service.
To pay towards such expenses regarding participation in exhibitions and trade fairs in India and
abroad.
To pay for representatives abroad in connection with their stay board.

FORMS/METHODS OF POST SHIPMENT FINANCE:

Export bills negotiated under L/C: • The exporter can claim post-shipment finance by drawing
bills or drafts under L/C. The bank insists on necessary documents as stated in the L/C. if all
documents are in order, the bank negotiates the bill and advance is granted to the exporter.
Purchase of export bills drawn under confirmed contracts: The banks may sanction advance
against purchase or discount of export bills drawn under confirmed contracts. If the L/C is not
available as security, the bank is totally dependent upon the credit worthiness of the exporter.
Advance against bills under collection: In this case, the advance is granted against bills drawn
under confirmed export order L/C and which are sent for collection. They are not purchased or
discounted by the bank. However, this form is not as popular as compared to advance purchase
or discounting of bills.

Advance against claims of Duty Drawback (DBK): DBK means refund of customs duties paid on
the import of raw materials, components, parts and packing materials used in the export
production. It also includes a refund of central excise duties paid on indigenous materials. Banks
offer pre-shipment as well as post-shipment advance against claims for DBK.
Advance against goods sent on Consignment basis: The bank may grant post-shipment finance
against goods sent on consignment basis.

Advance against Undrawn Balance of Bills: There are cases where bills are not drawn to the
full invoice value of gods. Certain amount is undrawn balance which is due for payment after
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adjustments due to difference in rates, weight, quality etc. banks offer advance against such
undrawn balances subject to a maximum of 5% of the value of export and an undertaking is
obtained to surrender balance proceeds to the bank.

Advance against Deemed Exports: Specified sales or supplies in India are considered as exports
and termed as “deemed exports”. It includes sales to foreign tourists during their stay in India
and supplies made in India to IBRD/ IDA/ ADB aided projects. Credit is offered for a maximum
of 30 days.
Advance against Retention Money: In respect of certain export capital goods and project
exports, the importer retains a part of cost goods/ services towards guarantee of performance
or completion of project. Banks advance against retention money, which is payable within one
year from date of shipment.
Advance against Deferred payments: In case of capital goods exports, the exporter receives the
amount from the importer in installments spread over a period of time. The commercial bank
together with EXIM bank do offer advances at concessional rate of interest for 180 days.

ECGC LTD
Based on the recommendations of the TC Kapur Committee appointed by the Government of
India to examine the feasibility of setting up an organization to provide insurance against export
credit risks, the Export Risk Insurance Corporation (ERIC) was registered on 30th July 1957 in
Mumbai as a Private Ltd. Company, entirely owned by the Government of India with an
authorized capital of Rs. 5 Cr. and paid up capital of Rs. 25 lakhs. The first policy was issued on
14th October 1957. After the introduction of insurance cover to banks, ERIC’s name was
changed to Export Credit & Guarantee Corporation Ltd. in 1964. The organization was renamed
as Export Credit Guarantee Corporation of India Ltd. in the year 1983. The Corporation has since
been renamed as ECGC Ltd.

ECGC is a public sector enterprise which signs a MOU with the Government of India. It is also
subject to the control of the Insurance Regulatory & Development Authority of India (IRDAI).
ECGC is a self-sustaining company meeting all recurring and non-recurring expenses, including
manpower costs, out of the income generated from its operations. No budgetary support from
the Government is envisaged, except for the capital to be provided from time to time as per
need. The authorized share capital of ECGC is Rs. 5,000 Cr and the paid up capital at present
stands at Rs. 1,250 Cr. Despite occasional setbacks caused by political and economic upheavals
in different parts of the world, the Corporation has continued to provide yeoman service to the
cause of exports from the country.

What does ECGC do?

Provides a range of credit risk insurance covers to exporters against loss in export of goods and
services
Offers Export Credit Insurance covers to banks and financial institutions to enable exporters to
obtain better facilities from them
Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad
in the form of equity or loan

How does ECGC help exporters?

ECGC Offers insurance protection to exporters against payment risks.
Provides guidance in export-related activities.
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Makes available information on different countries with it’s own credit ratings.
Makes it easy to obtain export finance from banks/financial institutions.
Assists exporters in recovering bad debts.
Provides information on credit-worthiness of overseas buyers.

Need for export credit insurance

Payments for exports are open to risks even at the best of times. The risks have assumed large
proportions today due to the far-reaching political and economic changes that are sweeping
the world. An outbreak of war or civil war may block or delay payment for goods exported. A
coup or an insurrection may also bring about the same result. Economic difficulties or balance
of payment problems may lead a country to impose restrictions on either import of certain
goods or on transfer of payments for goods imported. In addition, the exporters have to face
commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign
buyer going bankrupt or losing his capacity to pay are aggravated due to the political and
economic uncertainties. Export credit insurance is designed to protect exporters from the
consequences of the payment risks, both political and commercial, and to enable them to
expand their overseas business without fear of loss.

PRODUCTS AND SERVICES OF ECGC:

Export credit insurance is available for exporters and for banks. Some of the products and
services of ECGC are as under:

EXPORT CREDIT INSURANCE FOR EXPORTERS:

Shipment Comprehensive Risk Policy: SCR or Standard Policy

An exporter whose annual export turnover is more than Rs.500 lakhs is eligible for this Policy.
This is a Standard Wholeturnover Policy wherein all shipments are required to be covered under
the policy.
Period of Policy: 12 Months

Exclusions Permitted: Exports to Associates. Shipments backed by Letters of Credit

Risks Covered:
Commercial Risk / Buyer Risk.
Political Risk
L/C Opening Bank Risk

Percentage of Cover: 90%

Minimum Premium: Rs. 10,000/- shall be adjusted towards premiums falling due on the
shipments effected under the policy and is non-refundable.

Important Obligations of the Exporter:

Obtaining valid credit limit on buyers and banks from ECGC.

Premium is payable in advance before commencement of risks and sufficient premium deposit
is also to be maintained in advance based on the turnover projection at all times during the
policy.
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Submission of Monthly declaration of shipments by 15th of the subsequent month.
Notifying/Declaration of payments for bills that have remained unpaid beyond 30 days from its
due date of payment, by the 15th of the subsequent month.
Filing of claim within 360 days from the due date of the export bill or 540 days from expiry date
of the Policy Cover whichever is earlier.
Initiating recovery steps including legal action.
Sharing of recovery.

The risks covered under the Standard Policy:

Under the Standard Policy, ECGC covers, from the date of shipment, the following risks:

Commercial Risks
Risks covered on the overseas buyers:
Insolvency of the buyer.
Failure of the buyer to make the payment due within a specified period, normally four months
from the due date.
Buyer’s failure to accept the goods, subject to certain conditions.
II. Risks covered on the L/C opening Bank:
Insolvency of the L/C Opening bank.
Failure of the L/C opening bank to make the payment due within a specified period normally
four months from the due date.
Insolvency of the L/C Opening bank.

Political Risks

Imposition of restriction by the Government of the buyer’s country or any Government action,
which may block or delay the transfer of payment made by the buyer. War, civil war, revolution
or civil disturbances in the buyer’s country. New import restrictions or cancellation of a valid
import license in the buyer’s country. Interruption or diversion of voyage outside India resulting
in payment of additional freight or insurance charges which cannot be recovered from the
buyer. Any other cause of loss occurring outside India not normally insured by general insurers,
and beyond the control of both the exporter and the buyer.

SMALL EXPORTER POLICY:

The Small Exporter’s Policy is basically the Standard Policy, incorporating certain improvements
in terms of cover, in order to encourage small exporters to obtain and operate the policy. It is
issued to exporters whose anticipated export turnover for the period of one year does not
exceed Rs. 5 crores. The Maximum Liability under the SEP shall be fixed as per laid down
guidelines, but shall not exceed Rs. 2 crores. The nature of commercial risks and political risks
cover is similar to that of the Shipment Comprehensive Risk (SCR) or Standard policy.

The salient features of Small Exporters Policy:

Period of Policy:
Small Exporter’s Policy is issued for a period of 12 months.

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Minimum premium:
Premium payable will be determined on the basis of projected exports on an annual basis
subject to a minimum premium of Rs. 5000/- for the policy period. No claim bonus in the
premium rate is granted every year at the rate of 5%.

Declaration of shipments:
Shipments need to be declared monthly.

Declaration of overdue payments:

Small exporters are required to submit monthly declarations of all payments remaining overdue
by more than 60 days from the due date, as against 30 days in the case of exporters holding the
Standard Policy.

Waiting period for claims:

The normal waiting period of 4 months under the Standard Policy has been halved in the case
of claims arising under the Small Exporter’s Policy.

Change in terms of payment of extension in credit period:

In order to enable small exporters to deal with their buyers in a flexible manner, the following
facilities are allowed:

A small exporter may, without prior approval of ECGC convert a D/P bill into DA bill, provided
that he has already obtained suitable credit limit on the buyer on D/A terms.
Where the value of this bill is not more than Rs.3 lacs, conversion of D/P bill into D/A bill is
permitted even if credit limit on the buyer has been obtained on D/P terms only, but only one
claim can be considered during the policy period on account of losses arising from such
conversions.
Resale of unaccepted goods:
If, upon non-acceptance of goods by a buyer, the exporter sells the goods to an alternate buyer
without obtaining prior approval of ECGC even when the loss exceeds 25% of the gross invoice
value, ECGC may consider payment of claims up to an amount considered reasonable, provided
that ECGC is satisfied that the exporter did his best under the circumstances to minimize the
loss. In all other respects, the Small Exporter’s Policy has the same features as the Standard
Policy.

SPECIFIC SHIPMENT POLICY:

These policies can be availed of by exporters who do not hold any of the Standard Policy/Whole
turnover Policy or by an exporter having a Standard Policy, wherein shipments have been
excluded from the purview of cover. Exporter can pick and choose the contract/shipment to be
covered and indicate the type of risk cover required.

Period of Policy:
The policy would be valid for shipment(s) made from the date of issue of the policy and upto
the last date for shipment under the relevant contract.

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Risks Covered:
Commercial Risk / Buyer Risk, Political Risk, and L/C Opening Bank Risk.

Percentage of Cover: 80%

Important Obligations of the Exporter:

Processing fee of Rs.2000/- (non-refundable) is payable. Upfront premium payment in

full.Submission of Monthly declaration of shipments by 15th of the subsequent
month.Submission of Payment Advice Slip (PAS). Notifying/Declaration of payments for bills
that have remained unpaid beyond 30 days from its due date of payment, by the 15th of the
subsequent month. Filing of claim within 360 days from the due date of the export bill or 540
days from expiry date of the Policy Cover whichever is earlier. Initiating recovery steps including
legal action. Sharing of recovery.

Highlights:
Selection of Insurance cover. All other exports, if any, not to be declared.
Cover for Merchanting trade with prior approval by making necessary endorsement.

Service Policy:

Where Indian companies conclude contracts with foreign principals for providing them with
technical or professional services, payments due under the contracts are open to risks similar
to those under supply contracts. In order to give a measure of protection to such exporters of
services, ECGC has introduced the Services Policy.

What are the different types of Services Policy and what protection do they offer?
Specific Services Contract (Comprehensive Risks) Policy;
Specific Services Contract (Political Risks) Policy;
Whole-turnover Services (Comprehensive Risks) Policy; and
Whole-turnover Services (Political Risks) Policy

Specific Services Policy, as its name indicates, is issued to cover a single specified contract. It is
issued to provide cover for contracts, which are large in value and extend over a relatively long
period. Whole-turnover services policies are appropriate for exporters who provide services to
a set of principles on a repetitive basis and where the period of each contract is relatively short.
Such policies are issued to cover all services contracts that may be concluded by the exporter
over a period of 24 months ahead.

The Corporation would expect that the terms of payment for the services are in line with
customary practices in international trade in these lines. Contracts should normally provide for
an adequate advance payment and the balance should be payable periodically based on the
progress of work. The payments should be backed by satisfactory security in the form of Letters
of Credit or bank guarantees.

Services policies are designed to cover contracts under which only services are to be rendered.
Contracts under which the value of services to be rendered forms only a small part of a contract
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involving supply of machinery or equipment will be covered under an appropriate specific policy
for supply contract.

EXPORT TURNOVER POLICY:

Turnover Policy is for the benefit of large exporters who contribute not less than Rs.20 lakhs
per annum towards premium based on projection of the export turnover of the policy holder
for a year. This is a Whole turnover declaration based Policy wherein all shipments are required
to be covered under the Policy.

Period of Policy: 12 Months

Exclusions Permitted:Exports to Associates. Shipments backed by Letters of Credit

Risks Covered:
Commercial Risk / Buyer Risk
Political Risk
L/C Opening Bank Risk

Percentage of Cover: 90%

Important Obligations of the Exporter:

Obtaining valid credit limit on buyers and banks from ECGC. Premium is payable in four equal
quarterly installments in advance before commencement of risks and sufficient premium
deposit is also to be maintained in advance based on the turnover projection at all times during
the policy. Submission of Monthly declaration of shipments by 15th of the subsequent month.
Notifying/Declaration of payments for bills that have remained unpaid beyond 30 days from its
due date of payment, by the 15th of the subsequent month.
Filing of claim within 360 days from the due date of the export bill or 540 days from expiry date
of the Policy Cover whichever is earlier. Initiating recovery steps including legal action. Sharing
of recovery.

Highlights:
Higher percentage of cover.Competitive premium rate.No Claim Bonus (NCB) of 5% subject to
no claim, upto a maximum of 50%.A turnover discount in the standard premium rate is offered
subject to the total discount including NCB being not less than 20% to those exporters whose
net annual premium payable exceeds Rs. 20 lacs.Additional discount in standard premium rate
is offered if the actual premium exceeds beyond 10% of the projected premium.
Discrepancy cover for L/C transactions subject to certain conditions. Automatic covers for
resale/reshipment up to 25% of Gross Invoice Value (GIV).Availability of Discretionary Limits on
buyers on conditions. Cover for Merchanting trade with prior approval by making necessary
endorsement.

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EXPORT CREDIT INSURANCE FOR BANKS

Export Credit Insurance for Banks Packing Credit (ECIB-INPC)

Eligibility:
A bank or a financial institution authorized to deal in foreign exchange can obtain
the Individual Packing Credit Cover for each of its exporter clients who has been classified as
astandard asset and whose CR is acceptable to ECGC.

Period of Cover:12 months

Eligible Advances:All packing credit advances as per RBI guidelines.
Protection Offered. Against losses that may be incurred in extending packing credit advances
due to protracted default or insolvency of the exporter-client.

Percentage of Cover: 66% i.e-2/366-2/3% of the Packing Credit Limit sanctioned and approved
by ECGC.

Important Obligation of the Bank:

Monthly declaration of advances granted and payment of premium before 10th of succeeding
month. Approval of the Corporation for extension of due date beyond 360 days from due date
to be obtained. Default to be reported within 4 months from due date or extended due date of
advances, if not recovered, filing of claim within 6 months of the Report of Default. Recovery
action after payment of claim and sharing of recovery.

Highlights:
Bank can take the cover selectively.

Export Credit Insurance for Banks Turnover Packing Credit (ECIB-WTPC)

Eligibility: A bank or a financial institution dealing in foreign exchange is eligible to obtain this
Whole-turnover Cover for all its accounts.

Risks Covered:12 months

Eligible Advances: All packing credit advances as per RBI guidelines. Protection Offered: Against
losses that may be incurred in extending packing credit advances due to protracted default or
insolvency of the exporter-client.
Percentage of Cover: For banks taking the cover for the first time it is 75% up to certain Limit
and 65% beyond the said Limit. (For others varies from 55% to 75% depending on claim
premium ratio of the bank). For Small Scale Exporters (SSE)/ Small Scale Industrial Units (SSI),
it is 90%.

Maximum Liability:
Overall limit up to which claims can be paid by the Corporation in respect of advances granted
in any ECIB year and will be determined on the basis of aggregate outstanding. Important
Obligation of the Bank: Monthly declaration of advances granted and payment of premium
before the end of the month. Approval of the Corporation for extension of due date beyond
360 days from due date to be obtained. Default to be reported within 4 months from due date
or extended due date of advances, if not recovered, filing of claim within 6 months of the Report
of Default. Recovery action after payment of claim and sharing of recovery.
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Export Credit Insurance for Banks Branch Wise Packing Credit (ECIB-BIPC)

Eligibility: A branch of a bank or a financial institution authorized to deal in foreign exchange

can obtain the Branch-wise Packing Credit Cover in respect of one or more of its exporter clients
who has been classified as a standard asset and whose Credit Rating is acceptable to ECGC.

Period Of Cover:12 months

Eligible Advances: All packing credit advances as per RBI guidelines.

Protection Offered: Against losses that may be incurred in extending packing credit advances
due to protracted default or insolvency of the exporter-client.

Percentage Of Cover:66-2/3%

EXPORT CREDIT INSURANCE-INDIVIDUAL POST – SHIPMENT (ECIB – INPS)

Eligibility: Any bank or financial institution who is an authorized dealer in foreign exchange that
provides post-shipment finance to the exporter by way of purchase, negotiation or discount of
export bills after the shipment has been affected pertaining to a particular project.

Risks Covered: Protracted default or insolvency of the exporter-client.

Period Of Cover:12 months

Percentage Of Cover:75%
Maximum Liability: 75% of the Post-shipment Limits of the account.

Important Obligation Of The Bank:

Obtain cover for each project separately. Maintain advance deposit equivalent to one month’s
premium. Submission of monthly declaration of advances granted and repayments made in the
account and payment of due premium on or before 10th of the succeeding month. Approval of
the Corporation for extension of due date. Default to be reported within 4 months from due
date or extended due date of advances. If not recovered, filing of claim within 6 months of the
Report of Default. Recovery action after payment of claim and sharing of recovery.

Export Credit Insurance For Banks Whole Turnover Post Shipment (ECIB -WTPS)

Eligibility: A bank or a financial institution dealing with foreign exchange is eligible to obtain
this Whole-turnover Cover for all its accounts.

Period Of Cover:12 months

Eligible Advances: All post-shipment advances granted to exporters by way of

purchase/discount /negotiation of export documents or advances granted against export bills
sent on collection basis, as per RBI guidelines.

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Protection Offered: Against losses that may be incurred in extending post-shipment advances
due to protracted default or insolvency of the exporter-client.

Percentage Of Cover: Varies from 90% to 95% in respect of exporters who are Policyholders of
ECGC and 50% to 75% for non-Policyholders, depending upon the claim premium ratio of the
bank. For bills drawn on Associates of Policyholders coverage is 60% and of non-Policyholders
it is 50%.

Maximum Liability: An overall limit will be fixed for the bank up to which claims can be paid by
the Corporation in respect of advances granted during the ECIB-WTPS year.

Important Obligations Of The Bank: Monthly declaration of advances granted and payment of
premium before the end of the succeeding month. Approval of the Corporation for extension
of due date beyond 180 days (360 days for status holders) from due date to be obtained. Default
to be reported within 4 months from due date or extended due date of advances, if not
recovered, filing of claim within 6 months of the Report of Default. Recovery action after
payment of claim and the subsequent sharing of recovery.

Highlights:
Option to exclude, Govt. Cos., advances to associates, units in OBU and L/Cs under the Cover.
Submission of a single proposal for all accounts to be covered.

Insurance Cover for Buyer’s Credit and Line of Credit

Buyer’s Credit is a credit extended by a bank in India to an overseas buyer enabling the buyer
to pay for machinery and equipment that he may be importing from India for a specific project.
A Line of Credit is a credit extended by a bank in India to an overseas bank, institution or
government for the purpose of facilitating import of a variety of listed goods from India into the
overseas country. A number of importers in the overseas country may be importing the goods
under one Line of Credit.

ECGC has evolved schemes to protect the lending banks from certain risks of non-payment.
These covers take the form of an agreement between the lending bank and ECGC and are issued
on a case to case basis. Credit terms and the length of the credit period should be in conformity
with what is appropriate for the export of the relevant items. There should be adequate security
for the repayments to be made by the borrower.

Risks Covered:
Political
The occurrence of war between the country of the overseas party and India.
The occurrence of war, hostilities, civil war, revolution, rebellion, insurrection or other
disturbances in the country of overseas party.

The operation of law or of an order, decree or regulation having the force of law which in
circumstances outside the control of the lender and/or the overseas party, prevents, restricts
or controls, the transfer of the sums due to the lender by the overseas party under the Financial
Agreement.

Commercial
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The risk of protracted default of the borrower to pay the amounts due under the loan
agreement and insolvency of the borrower.
Loss Coverage:90%
Period of Cover: As per the agreement.
Obligations: Seek in principal approval prior to signing of agreement. Advise disbursement and
repayment schedule. Inform overdue payments. Filing of claim
Recovery action after payment of claim and sharing of recovery.

Customer Specific Policy Cover:

In order to cater to the specific need for export credit insurance cover, of reputed large value
exporters which otherwise could not be fully addressed under any one of standard products,
the customer specific policies have been introduced and are issued to large exporters on a
selective basis on the merits respective requests for such cover. Normally such policies are
issued without changing the basic risk cover profile of the export transaction.

Some of the features of customer specific policies are as under.

Policies can be issued combining feature of more than one standard type (Off the shelf) policies;
Policies are issued with the base cover of an appropriate standard policy with added feature
from other standard policies if required; Customer specific policies are considered only in
respect of cases where anticipated annual premium is more than Rs.10 lacs; The customer’s
policies are issued in line the credit insurance covers approved by IRDA.

Overseas Investment Insurance Cover:

ECGC has evolved a scheme to provide protection for Indian Investments abroad. Any
investment made by way of equity capital or untied loan for the purpose of setting up or
expansion of overseas projects will be eligible for cover under investment insurance. The
investment may be either in cash or in the form of export of Indian capital goods and services.
The cover would be available for the original investment together with annual dividends or
interest receivable.
The risks of war, expropriation and restriction on remittances are covered under the scheme.
As the investor would be having a hand in the management of the joint venture, no cover for
commercial risks would be provided under the scheme.

What are the main features of the Overseas Investment Insurance?

For investment in any country to qualify for investment insurance, there should preferably be
a bilateral agreement protecting investment of one country in the other. ECGC may consider
providing cover in the absence of any such agreement provided it is satisfied that the general
laws of the country afford adequate protection to the Indian investments.
The period of insurance cover will not normally exceed 15 years in case of projects involving
long construction period. The cover can be extended for a period of 15 years from the date of
completion of the project subject to a maximum of 20 years from the date of commencement
of investment. Amount insured shall be reduced progressively in the last five years of the
insurance period.

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Risks Covered:

Political
War, Civil War, Revolutions in buyer’s country. Expropriation. Restrictions on remittances

Loss Coverage:90%

Obligations:
Obtain indicative premium rate. Seek approval from RBI for the designed investments. Obtain
in-principle approval. Seek cover after payment of premium. Declaration of overdue. Filing of
claim within 12 months from due date. Sharing of recovery

BANK GUARANTEE

A Bank Guarantee is a commitment letter from a bank or other lending institution that if a
particular borrower defaults on a loan/obligation, the bank will cover the loss.

A Bank guarantee is like a letter of credit, guarantees a sum of money to a beneficiary,

however, unlike a letter of credit, the sum is only paid if the opposing party does not fulfil the
stipulated obligations under the contract.

The applicant (the party that requests a bank guarantee from the bank and borrows from a
creditor). The beneficiary (the party that receives a partial guarantee). The bank (the party that
agrees to sign and assures payment in case the applicant fails to repay the loan)

Process of Bank Guarantee:

First, an applicant will ask for a loan from a beneficiary or creditor. While applying for the loan,
these 2 parties will agree that a bank guarantee is necessary. Then, the applicant will request a
bank to provide a bank guarantee for the loan taken from the creditor. The bank guarantee will
be taken on behalf of the creditor. The bank will now offer the bank guarantee to the applicant
and send a financial instruction to an advising bank.

Types of Bank Guarantee:

Deferred payment guarantee: This refers to a bank guarantee or a payment guarantee that is
offered to the exporter for a deferred period or for a certain time period. When a buyer
purchases capital goods or machinery, the seller will give credit to the buyer when the buyer’s
bank gives a guarantee that it will pay the unsettled dues of the buyer to the seller. Under this
type of guarantee, payment will be made in installments by the bank for failure in supplying
raw materials, machinery or equipment.

Financial guarantee: A financial bank guarantee assures that money will be repaid if the party
does not complete a particular project or operation entirely. According to the financial
guarantee agreement, when there is a delay in the completion of the project, the bank will
make the payment.

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Advance payment guarantee: Under this kind of guarantee, an advance payment will be made
to the seller. There will also be a guarantee that if the seller fails to deliver the service or product
accurately or promptly, the buyer will receive a refund of the payment.
Foreign bank guarantee: A foreign bank guarantee is provided by a bank on behalf of a
borrower. This will be offered on behalf of the foreign beneficiary or creditor.

Performance guarantee: Under a performance guarantee, compensation of money will be

made by the bank when there is any delay in delivering the performance or operation. Payment
will have to be made even if the service is delivered inadequately.

Bid bond guarantee: Under this type of guarantee, there will be a supply bidding procedure.
This will be conducted by the contractor for the owner of an infrastructure or industrial project
or any kind of operation. The contractor of the project will guarantee that the best bidder or
the highest bidder will have the capability and authority to implement a project as per his or
her preferences. The bid bond will be given to the owner of the project as a proof of guarantee
and the bond will imply that the project will have to be devised according to the bid contract.

Comparison between Bank Guarantee and Letter of Credit

Letter of credit Bank guarantee
1 A letter of credit is a commitment taken A Bank Guarantee is a bank’s commitment to
on by a bank to make a payment to a honor payment to a beneficiary if the opposing
beneficiary once certain criteria are party does not fulfil their contractual
met. obligations.
2 Used more commonly by merchants Often used for contractors bidding on larger
involved in imports and exports of projects such as infrastructure projects.
goods on a regular basis.
3 Protects both parties in the transaction Protects both parties in the transaction but
but favors the exporter. favors the beneficiary (usually the importer).
4 Example: A LC could be used in the Example: A Bank Guarantee is used when a
shipment of goods or for the completion buyer purchases goods from the seller, who
of a service. then encounters financial difficulty and cannot
pay.

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 PRIORITY SECTOR GUIDELINES

1. The categories under priority sector are as follows: -

i. Agriculture
ii. Micro, Small and Medium Enterprises
iii. Export Credit
iv. Education
v. Housing
vi. Social Infrastructure
vii. Renewable Energy
viii. Others
Thedetailsofeligibleactivitiesundertheabovecategoriesarespecified subsequently.

2. Targets /Sub-targets for Priority sector: -

The targets and sub-targets set under priority sector lending for all scheduled
commercial Banks operating in India are furnished below:

Categories Domestic Scheduled commercial Banks & Foreign

Banks with 20 branches and above
Total Priority Sector 40percentof Adjusted Net Bank Credit (ANBC) or Credit
Equivalent Amount of Off-Balance Sheet Exposure,
whichever is higher
Agriculture 18 percent of ANBC or Credit Equivalent Amount of
Off-Balance Sheet Exposure, whichever is higher.

Within the 18 percent target for Agriculture, a target

of 10 percent #of ANBC or Credit Equivalent Amount
of Off-Balance Sheet Exposure, whichever is higher
is prescribed for Small and Marginal Farmers (SMFs)
Micro Enterprises 7.5 percent of ANBC or Credit Equivalent Amount of
Off-Balance Sheet Exposure, whichever is higher

Advances to Weaker 12 percent #of ANBC or Credit Equivalent Amount of

Sections Off-Balance Sheet Exposure, whichever is higher

# Revised targets for lending to Small and Marginal Farmers (SMFs) and for Weaker
Sections will be implemented in a phased manner from FY 2021-22 onwards as
follows:

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 Financial Year Small and Marginal Weaker Sections target ^
Farmers target *
2020-21 8% 10%
2021-22 9% 11%
2022-23 9.5% 11.5%
2023-24 10% 12%

The applicable target for lending to the non-corporate farmers for FY 2020-21 will
be12.14%ofANBCorCredit Equivalent Amount of Off-Balance Sheet Exposure
(CEOBE) whichever is higher.

3. DESCRIPTION OF ELIGIBLE CATEGORIES UNDER PRIORITY SECTOR: -

A. Agriculture: -

I) The lending to Agriculture sector will include (i) Farm Credit (Agriculture and Allied
Activities), (ii) lending for Agriculture Infrastructure and (iii) Ancillary Activities.

A list of eligible activities under the three sub-categories is indicated as below:

1. Farm Credit A) Loans to individual farmers [including Self Help Groups (SHGs) or
Joint Liability Groups (JLGs) i.e. groups of individual farmers,
provided banks maintain disaggregated data of such loans] and
Proprietorship firms of farmers, directly engaged in Agriculture
and Allied Activities, viz. dairy, fishery, animal husbandry, poultry,
bee-keeping and sericulture.

This will include:

i. Crop loans including loans for traditional/non-traditional
plantations, horticulture and allied activities.
ii. Medium and long-term loans for agriculture and allied activities
(e.g. purchase of agricultural implements and machinery and
developmental loans for allied activities).
iii. Loans for pre and post-harvest activities viz. spraying,
harvesting, grading and transporting of their own farm produce.
iv. Loans to distressed farmers indebted to non-institutional
lenders.
v. Loans under the Kisan Credit Card Scheme.
vi. Loans to small and marginal farmers for purchase of land for
agricultural purposes.
vii. Loans against pledge/hypothecation of agricultural produce
(including warehouse receipt1) for a period not exceeding 12
months’ subject to a limit up to Rs. 50 lakhs.(1- includes
negotiable warehouse receipt (NWR) and electronic negotiable
warehouse receipt (e-NWR)
viii. Loans to farmers for installation of stand-alone Solar Agriculture
Pumps and for solarisation of grid connected Agriculture Pumps.
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 ix. Loans to farmers for installation of solar power plants on
barren/fallow land or in stilt fashion on agriculture land owned by
farmer.

B) Farm Credit - Corporate farmers, Farmer Producer Organisations

(FPOs)/(FPC) Companies of Individual Farmers, Partnership firms
and Co-operatives of farmers engaged in Agriculture and Allied
Activities
a) Loans for the following activities will be subject to an aggregate limit
of Rs. 2 crore per borrowing entity:

(i) Crop loans to farmers which will include traditional/non-

traditional plantations and horticulture and loans for allied
activities.
(ii) Medium and long-term loans for agriculture and allied activities
(e.g. purchase of agricultural implements and machinery and
developmental loans for allied activities).
(iii) Loans for pre and post-harvest activities viz. spraying,
harvesting, grading and transporting of their own farm produce.
b) Loans up to Rs. 50 lakh against pledge/hypothecation of
agricultural produce (including warehouse receipts2) for a period
not exceeding 12 months.{2- includes negotiable warehouse receipt
(NWR) and electronic negotiable warehouse receipt (e-NWR) }
c) Loans up to Rs. 5 crore per borrowing entity to FPOs/FPCs
undertaking farming with assured marketing of their produce at a
pre-determined price
2. Agriculture Loans for Agriculture infrastructure will be subject to an aggregate
Infrastructure sanctioned limit of Rs. 100 crore per borrower from the Banking system.
List of activities is furnished as below:
i)Loans for construction of storage facilities (warehouse, market yards,
godowns and silos) including cold storage units/cold storage chains
designed to store agriculture produce/products, irrespective of their
location.
ii) Soil conservation and watershed development.
iii) Plant tissue culture and Agri-biotechnology, seed production,
production of bio-pesticides, bio-fertilizer, and vermi composting.
iv) Loans for construction of oil extraction/ processing units for
production of bio-fuels, their storage and distribution infrastructure
along with loans to entrepreneurs for setting up Compressed Bio Gas
(CBG) plants.
3. Ancillary a) Following loans under ancillary services will be subject to limits
activities prescribed as under:-

i. Loans up to Rs. 5 crore to co-operative societies of farmers for

purchase of the produce of members
ii. Loans up to Rs. 50 crore to Start-ups, as per definition of
Ministry of Commerce and Industry, Govt. of India that are
engaged in agriculture and allied services. (An entity shall be
considered as a Startup: i. Upto a period of seven years from the

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 date of incorporation/registration, if it is incorporated as a private
limited company (as defined in the Companies Act, 2013) or
registered as a partnership firm (registered under section 59 of the
Partnership Act, 1932) or a limited liability partnership (under the
Limited Liability Partnership Act, 2008) in India. In the case of
Startups in the biotechnology sector, the period shall be upto ten
years from the date of its incorporation/ registration. ii. Turnover of
the entity for any of the financial years since incorporation/
registration has not exceeded Rs. 25 crore iii. Entity is working
towards innovation, development or improvement of products or
processes or services, or if it is a scalable business model with a high
potential of employment generation or wealth creation. Provided that
an entity formed by splitting up or reconstruction of an existing
business shall not be considered a ‘Startup’).
iii. Loans for Food and Agro-processing up to an aggregate sanctioned
limit of Rs.100 crore per borrower from the Banking system.
iv. Outstanding deposits under RIDF and other eligible funds with
NABARD on account of priority sector shortfall.

b) An indicative list of eligible activities under Ancillary activities is

as under:

i. Loans for setting up of Agri-clinics and Agri-business centres.

ii. Loans to Custom Service Units managed by individuals, institutions
or organizations who maintain a fleet of tractors, bulldozers, well-
boring equipment, threshers, combines, etc., and undertake farm
work for farmers on contract basis.
iii. Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’
Service Societies (FSS) and Large-sized Adivasi Multi- Purpose
Societies (LAMPS) for on-lending to agriculture.
iv. Loans sanctioned by banks to MFIs for on-lending to agriculture
sector as per the conditions specified in paragraph 5.5 of this circular.
v. Loans sanctioned by banks to registered NBFCs (other than MFIs) as
per conditions specified in paragraph 5.6 of this circular.

c) The eligible activities under Food and Agro-Processing Sector as

shared by Ministry of Food Processing Industries (MoFPI) is as
under:
1. Cleaning, Air Cooling (Field Heat Removal), Sorting, Grading/Sizing,
Packaging, Warehousing, Distribution of Fruits & Vegetables etc.
2. Transportation including in refrigerated van/Cold Chain
infrastructure system Packaging and storage including techniques
like Silo, Hermetic storage; pest management.
3. Storage at low temperature/Cold Storage/Modified/Controlled
Atmosphere packaging, Refrigeration/Chilling etc.
4. Primary and/or Minimal Processing of F&V: - Blanching
(Vegetables), Peeling, Cutting, Storage, Distribution at Low
temperature, vacuum packaging etc.

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5. Sun Drying and Mechanical Drying: - Solar Drying, Hot air drying,
Dehydration, hybrid drying, fluidized bed drying, refractive window
drying, drum drying, radio frequency drying, Lyophilisation (Freeze
Drying), Vacuum Drying, Spray Drying, De-hydro-freezing etc.
6. Preservation through various methods; both traditional and modern.
7. Frozen Products: Individually Quick Frozen (10F) of Fruit,
Vegetables, Meat, Fish, Sea Foods etc.
8. Milk and Milk products processing, including their transportation,
packaging and storage.
9. Canning of Fruit, Vegetables including Mushrooms, Meat, Fish,
crustaceans, molluscs, other Sea Foods etc.
10. Milling Grains, Legumes & Pulses, Preparation of their by-products
such as Bran Oil, Cattle Feed/Poultry feed etc.
11. Processing of F&V into different products such as juices,
concentrates, sauces, jam, jellies, marmalades, Chips, Flakes,
Powders etc.
12. Processing of Grains & Pulses, Fish, Meat, Poultry, Sea Foods, Egg
etc. into their different products including extruded, popped, puffed
and flaked products and their packaging and storage including
fumigation, Smoking etc.
13. Oil seed Extraction- Rendering, Pressing, Hydrogenation, Refining
with Extraction, Filling/packaging etc.
14. Spices, Seasoning and Condiments - Grinding, Crushing, Milling,
Sieving, Mixing, Blending, Roasting, Packaging, Storage,
Distribution.
15. Production of fermented Products and Alcoholic- Wines, Vinegar,
Milk products, Prebiotics, Probiotics etc.
16. Production of beverages - Juices, RTS, Nectar, Squash, Cordial,
Syrups/Sherbets, Soups, Carbonated Beverages etc.
17. Production of Cocoa, Coffee, Chicory and Tea Products; including
Cocoa Butter, Cocoa Powder, Chocolates, wafers etc.
18. Production of Bakery and Confectionary Products - Biscuits, Bread,
Cakes, Cookies, Toffee etc.
19. Production of Jaggery, Sugar, Khandasari etc from Sugarcane, Beet,
Palm etc.
20. Production of apiary products (honey processing; both natural and
artificial honey).
21. Production of Starch and Starch Products - Sago, Tapioca, Corn,
Noodles, Macroni, Vermicelli etc,
22. Slaughtering of animals/ruminants/birds etc. and their processing.
23. Nuts Processing; coconut-based product processing such as water,
nuts etc.

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 24. Processing of other products such as Instant Mixes, Ready to Eat
(RTE) retort- based products, ready to cook and Beverages etc.
25. Nutraceutical products/functional foods/fortified food/enriched food
preparation.
26. Production of Organic food products.
27. Processing of algal and fungal products (eg Spirulina, Mushrooms
etc), including packaging and enhancement of shelf life.
28. Processing plantation crops, packaging, storage and enhancement
of shelf life.
29. Production of food grade packaging material such as laminates, tetra
packs, bottles, tin containers etc.

II) Small and Marginal Farmers (SMFs): -

For the purpose of computation of achievement of the sub-target, Small and Marginal
Farmers will include the following:

i. Farmers with landholding of up to 1 hectare (Marginal Farmers).

ii. Farmers with a landholding of more than 1 hectare and up to 2 hectares (Small
Farmers).
iii. Landless agricultural labourers, tenant farmers, oral lessees and share- croppers
whose share of landholding is within the limits prescribed for SMFs.
iv. Loans to Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups of
individual SMFs directly engaged in Agriculture and Allied Activities, provided banks
maintain disaggregated data of such loans.
v. Loans up to Rs. 2 lakh to individuals solely engaged in Allied activities without any
accompanying land holding criteria.
vi. Loans to Farmer Producer Organisations (FPOs) /Farmer Producer Companies
(FPCs) of individual farmers and co-operatives of farmers directly engaged in
Agriculture and Allied Activities where the land-holding share of SMFs is not less
than 75 per cent.

III) Lending by banks to NBFCs and MFIs for on-lending in Agriculture: -

(i) Bank credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts
etc.) which are members of RBI recognised SRO for the sector, for on-lending to
individuals and also to members of SHGs / JLGs will be eligible for categorisation
as priority sector advance under respective categories of agriculture subject to
conditions specified in para 5.5 of this circular.

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 (ii) Bank credit to registered NBFCs (other than MFIs) towards on-lending for ‘Term
lending’ component under agriculture will be allowed up to Rs. 10 lakh per
borrower subject to conditions specified in para 5.6 and 5.8 pf this circular.

B. Micro, Small and Medium Enterprises (MSMEs): -

I) The definition of MSMEs based on investment in plant and machinery or equipment &
turnover as per Government of India (GoI), Gazette Notification S.O. 2119 (E) dated
June 26, 2020 is as under: -
An enterprise shall be classified as a Micro, Small or Medium enterprise on the basis
of the following criteria, namely:

1) Micro Enterprise - The Investment in Plant and Machinery or Equipment does not
exceed one crore rupees and turnover does not exceed five crore rupees.
2) Small Enterprise - The Investment in Plant and Machinery or Equipment does not
exceed ten crore rupees and turnover does not exceed fifty crore rupees.

3) Medium Enterprise - The Investment in Plant and Machinery or Equipment does

not exceed fifty crore rupees and turnover does not exceed two hundred and
fifty crore rupees.

Summarised as under: -

MSME Firm Investment in Plant and AND Turnover

/ Criteria Machinery or Equipment
Micro Enterprise does not exceed Rs. 1 Crore and does not exceed Rs.5 Crore
Small Enterprise does not exceed Rs. 10 and does not exceed Rs.50
Crore Crore
Medium Enterprise does not exceed Rs. 50 and does not exceed Rs.250
Crore Crore

Further, such MSMEs should be engaged in the manufacture or production of goods,

in any manner, pertaining to any industry specified in the First Schedule to the
Industries (Development and Regulation) Act, 1951 or engaged in providing or
rendering of any service or services. All bank loans to MSMEs conforming to the
above guidelines qualify for classification under priority sector lending.

II) Factoring Transactions

(i) ‘With Recourse’ Factoring transactions by banks which carry out the business of
factoring departmentally wherever the ‘assignor’ is a Micro, Small or Medium
Enterprise would be eligible for classification under MSME category on the reporting
dates.
(ii) In terms of paragraph 9 of Circular DBR.No. FSD.BC.32/24.01.007/2015- 16 dated
July 30, 2015 on ‘Provision of Factoring Services by Banks- Review’, inter-alia, the
borrower’s bank shall obtain from the borrower, periodical certificates regarding
factored receivables to avoid double financing/ counting. Further, the ‘factors’ must
intimate the limits sanctioned to the borrower and details of debts factored to the
banks concerned, taking responsibility to avoid double financing.

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 (iii) Factoring transactions pertaining to MSMEs taking place through the Trade
Receivables Discounting System (TReDS) shall also be eligible for classification
under priority sector.

III) Khadi and Village Industries Sector (KVI)

All loans to units in the KVI sector will be eligible for classification under the sub-
target of 7.5 percent prescribed for Micro Enterprises under priority sector.

IV) Other Finance to MSMEs

(i) Loans up to Rs. 50 crore to Start-ups, as per definition of Ministry of Commerce and
Industry, Govt. of India that confirm to the definition of MSME as mentioned earlier
in point No B.I.
(ii) Loans to entities involved in assisting the decentralized sector in the supply of inputs
and marketing of output of artisans, village and cottage industries. In respect of
UCBs, the term “entities” shall not include institutions to which UCBs are not
permitted to lend under the RBI guidelines / the legal framework governing their
functioning.

(iii) Loans to co-operatives of producers in the decentralized sector viz. artisans, village
and cottage industries
(iv) Loans sanctioned by banks to NBFC-MFIs and other MFIs (Societies, Trusts etc.)
which are members of RBI recognised SRO for the sector for on-lending to MSME
sector as per the conditions specified in para 5.5.
(v) Loans to registered NBFCs (other than MFIs) for on-lending to Micro & Small
Enterprises as per conditions specified in para 5.6.

(vi) Credit outstanding under General Credit Cards (including Artisan Credit Card, Laghu
Udyami Card, Swarojgar Credit Card and Weaver’s Card etc. in existence and
catering to the non-farm entrepreneurial credit needs of individuals).
(vii) Overdraft to Pradhan Mantri Jan-Dhan Yojana (PMJDY) account holders as per
limits and conditions prescribed by Department of Financial Services, Ministry of
Finance from time to time, will qualify as achievement of the target for lending to
Micro Enterprises.
(viii) Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority sector
shortfall.

C. Export Credit: -

Export credit under Agriculture and MSME sectors are allowed to be classified as PSL
in the respective categories viz. Agriculture and MSME. Export Credit (other than in
Agriculture and MSME) will be allowed to be classified as priority sector as under:

Domestic Banks Foreign banks with 20

branches and above

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 Incremental export credit over
corresponding date of the preceding year,
up to 2 per cent of ANBC or Credit
Equivalent Amount of Off-Balance Sheet
Exposure, whichever is higher, subject to
asanctionedlimitofuptoRs.40 crore per
borrower.
Incremental export credit over
corresponding date of the preceding
year, up to 2 percent of ANBC or Credit
Equivalent Amount of Off-Balance Sheet
Exposure, whichever is higher.

Export credit includes pre-shipment and post-shipment export credit (excluding off-
balance sheet items) as defined in Master Circular on Rupee / Foreign Currency Export
Credit and Customer Service to Exporters issued by Department of Regulation, RBI.
('Pre-shipment / Packing Credit' means any loan or advance granted or any other
credit provided by a bank to an exporter for financing the purchase, processing,
manufacturing or packing of goods prior to shipment / working capital expenses towards
rendering of services on the basis of letter of credit opened in his favour or in favour of
some other person, by an overseas buyer or a confirmed and irrevocable order for the
export of goods / services from India or any other evidence of an order for export from
India having been placed on the exporter or some other person, unless lodgement of
export orders or letter of credit with the bank has been waived. And 'Post-shipment
Credit' means any loan or advance granted or any other credit provided by a bank to
an exporter of goods / services from India from the date of extending credit after
shipment of goods / rendering of services to the date of realisation of export proceeds.,
and includes any loan or advance granted to an exporter, in consideration of, or on the
security of any duty drawback allowed by the Government from time to time)

D. Education: -
Loans to individuals for educational purposes, including vocational courses, not
exceeding Rs. 20 lakh will be considered as eligible for priority sector classification.
Loans currently classified as priority sector will continue till maturity

E. Housing: -
1. Loans to individuals up to Rs. 35 lakh in metropolitan centres (with population of
ten lakh and above) and up to Rs. 25 lakh in other centres for
purchase/construction of a dwelling unit per family provided the overall cost of the
dwelling unit in the metropolitan centre and at other centres does not exceed Rs.45
lakh and Rs. 30 lakh respectively.
2. Housing loans to banks’ own employees will not be eligible for classification under
the priority sector.
3. Since Housing loans which are backed by long term bonds are exempted from
ANBC, banks should not classify such loans under priority sector
4. Loans up to Rs.10 lakh in metropolitan centres and up to Rs. 6 lakh in other centres
for repairs to damaged dwelling units conforming to the overall cost of the dwelling
unit as prescribed in point E-1 above.

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 5. Bank loans to any governmental agency for construction of dwelling units or for
slum clearance and rehabilitation of slum dwellers subject to dwelling units with
carpet area of not more than 60 sq.m.
6. Bank loans for affordable housing projects using at least 50% of FAR/FSI for
dwelling units with carpet area of not more than 60 sq.m.
7. Bank loans to Housing Finance Companies (HFCs) approved by NHB for their
refinance, for on-lending, up to Rs. 20 lakh for individual borrowers, for
purchase/construction/ reconstruction of individual dwelling units or for slum
clearance and rehabilitation of slum dwellers, subject to conditions specified in Para
5.7 & 5.8 of this circular.
8. Outstanding deposits with NHB on account of priority sector shortfall

F. Social Infrastructure: -

1. Bank loans up to a limit of Rs. 5 crore per borrower for setting up schools, drinking
water facilities and sanitation facilities including construction/ refurbishment of
household toilets and water improvements at household
level,etc.andloansuptoalimitofRs.10croreperborrowerforbuildinghealth
carefacilitiesincludingunder‘AyushmanBharat’inTierIItoTierVIcentres.

2. Bank loans to MFIs extended for on-lending to individuals and also to members of
SHGs/JLGs for water and sanitation facilities subject to the criteria laid down in para
5.6.

G. Renewable Energy: -
Bank loans up to a limit of Rs.30 crore to borrowers for purposes like solar based
power generators, biomass-based power generators, wind mills, micro-hydel plants
and for non-conventional energy based public utilities, viz., street lighting systems and
remote village electrification etc., will be eligible for Priority Sector classification. For
individual households, the loan limit will be Rs.10 lakh per borrower.

H. Others: -
1. Loans not exceeding Rs.1.00 lakh per borrower provided directly by banks to
individuals and individual members of SHG/JLG, provided the individual borrower’s
household annual income in rural areas does not exceed Rs.1.00 lakh and for non-
rural areas it does not exceed Rs.1.60 lakh, and loans not exceeding Rs. 2.00 lakh
provided directly by banks to SHG/JLG for activities other than agriculture or MSME,
viz., loans for meeting social needs, construction or repair of house, construction of
toilets or any viable common activity started by the SHGs.
2. Loans to distressed persons [other than distressed farmers indebted to non-
institutional lenders] not exceeding Rs.1.00 lakh per borrower to prepay their debt
to non-institutional lenders.
3. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/
Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or
the marketing of the outputs of the beneficiaries of these organisations.

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 4. Loans up to Rs. 50 crore to Start-ups, as per definition of Ministry of Commerce
and Industry, Govt. of India that are engaged in activities other than Agriculture or
MSME.

4. Weaker Section: -

Priority sector loans to the following borrowers will be considered as lending under
Weaker Sections category: -

(i) Small and Marginal Farmers

(ii) Artisans, village and cottage industries where individual credit limits do not
exceed Rs.1 lakh
(iii) Beneficiaries under Government Sponsored Schemes such as National Rural
Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM) and Self-
Employment Scheme for Rehabilitation of Manual Scavengers (SRMS)

(iv) Scheduled Castes and Scheduled Tribes

(v) Beneficiaries of Differential Rate of Interest (DRI) scheme

(vi) Self Help Groups
(vii) Distressed farmers indebted to non-institutional lenders
(viii) Distressed persons other than farmers, with loan amount not exceeding Rs.1
lakh per borrower to prepay their debt to non-institutional lenders
(ix) Individual women beneficiaries up to Rs.1 lakh per borrower (For UCBs, existing
loans to women will continue to be classified under weaker sections till their maturity
/ repayment.)

(x) Persons with disabilities

(xi) Minority communities as may be notified by Government of India from time to time.

(xii) Overdraft availed by PMJDY account holders as per limits and conditions prescribed
by Department of Financial Services, Ministry of Finance from time to time may be
classified under Weaker Sections.

In States, where one of the minority communities notified is, in fact, in majority, item
(xi) will cover only the other notified minorities. These States / Union Territories are
Punjab, Meghalaya, Mizoram, Nagaland, Lakshadweep and Jammu & Kashmir.

5. MISCELLANEOUS

5.1 Investments by banks in securitised assets

Investments by banks in ‘securitised assets’, representing loans to various

categories of priority sector, except 'others' category, are eligible for classification
under respective categories of priority sector depending on the underlying assets
provided:

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 (i) The assets are originated by banks and financial institutions and are eligible
to be classified as priority sector advances prior to securitisation and fulfil
the Reserve Bank of India guidelines updated from time to time on
securitisation.

(ii) The all-inclusive interest charged to the ultimate borrower by the originating
entity should not exceed the External Benchmark Lending Rate (EBLR)/
MCLR of the investing bank plus appropriate spread which will be
communicated separately.

(iii) The investments in securitised assets originated by MFIs, which comply

with the guidelines in Paragraph 5.5 of these Master Directions are
exempted from this interest cap as there are separate caps on margin and
interest rate for MFIs.

(iv) Purchase/ assignment/investment transactions undertaken by banks with

NBFCs, where the underlying assets are loans against gold jewellery, are
not eligible for priority sector status.

5.2 Transfer of Assets through Direct Assignment /Outright purchase

Assignment/outright purchase of pool of assets by banks representing loans

under various categories of priority sector, except the ‘others’ category, will be
eligible for classification under respective categories of priority sector provided:

(i) The assets are originated by banks and financial institutions which are
eligible to be classified as priority sector advances prior to the purchase and
fulfil the Reserve Bank of India guidelines updated from time to time on
outright purchase / assignment.

(ii) The all-inclusive interest charged to the ultimate borrower by the originating
entity should not exceed the External Benchmark Lending Rate (EBLR)/
MCLR of the purchasing bank plus appropriate spread as communicated
separately.

(iii) The Assignments/Outright purchases of eligible priority sector loans from

MFIs, which comply with the guidelines in Paragraph 5.5 of these Master
Directions are exempted from this interest rate cap as there are separate
caps on margin and interest rate for MFIs.

(iv) When the bank undertakes outright purchase of loan assets (eligible to be
classified under priority sector) from banks/ financial institutions, they must
report the outstanding amount actually disbursed to priority sector
borrowers and not the premium embedded amount paid to the seller.

(v) Purchase/ assignment/ investment transactions undertaken by banks with

NBFCs, where the underlying assets are loans against gold jewellery, are
not eligible for priority sector status.

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5.3 Inter Bank Participation Certificates (IBPCs)

(i) IBPCs bought by banks, on a risk sharing basis, are eligible for classification
under respective categories of priority sector, provided the underlying
assets are eligible to be categorized under the respective categories of
priority sector and the banks fulfil the Reserve Bank of India guidelines on
IBPCs.

(ii) IBPCs bought by banks on risk sharing basis relating to ‘Export Credit’ as
per Para C of this circular, may be classified from purchasing bank’s
perspective for priority sector categorization. However, in such a scenario,
the issuing bank shall certify that the underlying asset is ‘Export Credit’, in
addition to the due diligence required to be undertaken by the issuing and
the purchasing bank as per guidelines in this regard.

5.4 Priority Sector Lending Certificates (PSLCs)

The outstanding PSLCs bought by banks will be eligible for classification under
respective categories of priority sector provided the underlying assets originated
by banks are eligible to be classified as priority sector advances and fulfil the
Reserve Bank of India guidelines on Priority Sector Lending Certificates issued
from time to time.

5.5 Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending

(i) Bank credit extended to registered NBFC-MFIs and other MFIs (Societies, Trusts
etc.) which are members of RBI recognised SRO for the sector, for on-lending to
individuals and also to members of SHGs / JLGs will be eligible for categorisation
as priority sector advance under respective categories viz., Agriculture, MSME,
Social Infrastructure and Others provided the MFIs adhere to the conditions
prescribed in Chapter II (xx) and Chapter VIII of Master Directions DNBR PD.007
and Chapter II (xx) and Chapter IX of Master Directions DNBR PD.008/03.10.119/
2016-17 dated September 1, 2016.

(ii) “Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI)”

means a non-deposit taking NBFC (other than a company formed and registered
under section 25 of the Companies Act, 1956) that fulfils the following conditions:
(a) Minimum Net Owned Funds of Rs. 5 crore. (For NBFC-MFIs registered in the
North Eastern Region of the country, the minimum NOF requirement shall stand
at Rs. 2 crore). (b) Not less than 85% of its net assets are in the nature of
“qualifying assets.” (Only the assets originated on or after January 1, 2012 shall
have to comply with the Qualifying Assets criteria. As a special dispensation, the
existing assets as on January 1, 2012 shall be reckoned towards meeting both the
Qualifying Assets criteria as well as the Total Net Assets criteria. These assets
shall be allowed to run off on maturity and shall not be renewed). For the purpose
of clause (b) above, “Net assets” shall mean total assets other than cash and bank
balances and money market instruments; and “Qualifying assets” shall mean a
loan which satisfies the following criteria: -

I. Loan disbursed by an NBFC-MFI to a borrower with a rural household

annual income not exceeding Rs 1,25,000/- or urban and semi-urban
household income not exceeding Rs 2,00,000/-
II. Loan amount does not exceed Rs 75,000/- in the first cycle and Rs 1,
25,000/- in subsequent cycles.
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 III. Total indebtedness of the borrower does not exceed Rs 1,25,000/- Provided
that loan, if any availed towards meeting education and medical expenses
shall be excluded while arriving at the total indebtedness of a borrower.
IV. Tenure of the loan not to be less than 24 months for loan amount in excess
of Rs. 30,000/- with prepayment without penalty
V. Loan to be extended without collateral
VI. Aggregate amount of loans, given for income generation, is not less than 50
per cent of the total loans given by the MFIs
VII. Loan is repayable on weekly, fortnightly or monthly instalments at the
choice of the borrower

(III) Further, the banks have to ensure that MFIs comply with the following caps on
margin and interest rate as also other “pricing guidelines’ to be eligible to
classify these loans as priority sector loans.

I. Margin cap: The margin cap should not exceed 10 percent for MFIs having
loan portfolio exceeding Rs.100 Crore and 12 percent for others. The interest
cost is to be calculated on average fortnightly balances of outstanding
borrowings and interest income is to be calculated on average fortnightly
balances of outstanding loan portfolio of qualifying assets.
II. Interest cap on individual loans: With effect from April 1, 2014, interest rate
on individual loans will be the average Base Rate of five largest commercial
banks by assets multiplied by 2.75 per annum or cost of funds plus margin
cap, whichever is less. The average of the Base Rate shall be advised by
Reserve Bank of India.

III. Only three components are to be included in pricing of loans viz., (a) a
processing fee not exceeding 1 percent of the gross loan amount, (b) the
interest charge and (c) the insurance premium.

IV. The processing fee is not to be included in the margin cap or the interest cap.

V. Only the actual cost of insurance i.e. actual cost of group insurance for life,
health and livestock for borrower and spouse can be recovered;
administrative charges may be recovered as per IRDA guidelines.

VI. There should not be any penalty for delayed payment.

VII. No Security Deposit/ Margin is to be taken.

VIII. The banks should obtain from MFI, at the end of each quarter, a Chartered
Accountant’s Certificate stating, inter-alia, that the criteria on (i) qualifying
assets, (ii) the aggregate amount of loan, extended for income generation
activity, and (iii) pricing guidelines are followed.

5.6 Bank loans to NBFCs for on-lending

Bank credit to registered NBFCs (other than MFIs) for on-lending will be eligible
for classification as priority sector under respective categories subject to the
following conditions:

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 (i) Agriculture: On-lending by NBFCs for ‘Term lending’ component under
Agriculture will be allowed up to Rs. 10 lakh per borrower.
(ii) Micro & Small enterprises: On-lending by NBFC will be allowed up to Rs. 20
lakh per borrower.

The above dispensation shall be valid upto March 31, 2021 and will be reviewed
thereafter. However, loans disbursed under the on-lending model will continue to
be classified under Priority Sector till the date of repayment/maturity.

5.7 Bank loans to Housing Finance Companies (HFCs) for on-lending

Bank credit to Housing Finance Companies (HFCs), approved by NHB for their
refinance, for on-lending for the purpose of purchase/construction/ reconstruction
of individual dwelling units or for slum clearance and rehabilitation of slum dwellers,
subject to an aggregate loan limit of Rs. 20 lakh per borrower. Banks should
maintain necessary borrower-wise details of the underlying portfolio.

5.8 Cap on On-lending

Bank credit to NBFCs (including HFCs) for on-lending as applicable in para 5.6 and
5.7 above, will be allowed up to an overall limit of five percent of individual bank’s
total priority sector lending. Banks shall compute the eligible portfolio under on-
lending mechanism by averaging across four quarters, to determine adherence to
the prescribed cap.

5.9 Co-origination of loans by Banks and NBFCs for lending to priority sector

All commercial banks may engage with NBFCs-ND-SI (hereinafter referred to as

NBFC) to co-originate loans for the creation of priority sector assets. The
arrangement should entail joint contribution of credit at the facility level, by both
lenders. It should also involve sharing of risks and rewards between the bank and
the NBFC for ensuring appropriate alignment of respective business objectives, as
per the mutually decided agreement between the bank and the NBFC.

Essential Features of Co-Origination Model between Banks and NBFC

I. Sharing of Risk and Rewards: Minimum 20% of the credit risk by way of direct
exposure shall be on NBFC’s books till maturity and the balance will be on bank’s
books. The NBFC shall give an undertaking to the bank that its contribution towards
the loan amount is not funded out of borrowing from the co-originating bank or any
other group company of the partner bank.

II. Interest Rate: NBFC would have the flexibility to price their part of the exposure,
while bank shall price its part of the exposure in a manner found fit as per their
respective risk appetite/ assessment of the borrower and the RBI regulations
issued from time to time. However, the charging of a single blended/ weighted
average rate of interest from the borrower, the repayment/ recovery of interest shall
be shared between the bank and the NBFC in proportion to their share of credit
and interest.

III. Know Your Customer (KYC): The co-originating lenders shall adhere to
applicable KYC/ AML guidelines, as prescribed by Department of Banking
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 Regulation (DBR)/ Department of Non-Banking Regulation (DNBR) of RBI from
time to time.

IV. Loan Sanction: The NBFC shall recommend to the Bank proposals as found
relevant for joint lending. The lenders shall be entitled to independently assess the
risks and requirements of the applicant borrowers. The loan agreement would be
tripartite in nature, wherein, both the Bank and the NBFC shall be parties as lenders
to the loan agreement with the customer.

V. Common Account: The Bank and the NBFC shall open an escrow type common
account for pooling respective loan contributions for disbursal as well as to
appropriate loan repayments from borrowers, without holding the funds for usage
of float. Regarding loan balances, the NBFC/ Bank shall maintain individual
borrower’s accounts and should also be able to generate and share a single unified
statement to the customer, through appropriate sharing of required information with
the Bank/ NBFC.

VI. Monitoring & Recovery: Both lenders shall create the framework for day to day
monitoring and recovery of the loan, as mutually agreed upon.

VII. Security and Charge Creation: The lenders shall arrange for creation of
security and charge as per mutually agreeable terms.

VIII. Provisioning/Reporting Requirement: Each of the lenders shall follow its

independent provisioning requirements including declaration of account as NPA,
as per the regulatory guidelines respectively applicable to each of them. Each of
the lenders shall carry out their respective reporting requirements including
reporting to Credit Information Companies, under respectively applicable law and
regulations for their portion of lending.

IX. Assignment/ Change in Loan Limits: Any assignment of loans by any of the
lenders can be done only with the mutual consent of both the lenders. Further, any
change in loan limit of the co-originated facility can be done only with the mutual
consent of both the lenders.

X. Grievance Redressal: It shall be the responsibility of the NBFC to explain to end

borrower regarding the difference between products offered through the co-
origination model as compared to its own products. The front-ending lender will be
primarily responsible for providing the required customer service and grievance
redressal to the borrower. However, any complaint registered by a borrower with
the NBFC and/or bank shall also be shared with the bank/ NBFC and in case, the
complaint is not resolved within 30 days, the borrower would have the option to
escalate the same with concerned Banking Ombudsman/ Ombudsman for NBFCs.

XI. Business Continuity Plan: Both the bank and the NBFC shall formulate a
business continuity plan to ensure uninterrupted service to the borrowers till
repayment of the loans under the co-origination agreement.

6. Monitoring of Priority Sector Lending targets

To ensure continuous flow of credit to priority sector, the compliance of banks will be
monitored on ‘quarterly’ basis. The data on priority sector advances has to furnish by
Banks at Quarterly and Annual intervals as per the reporting formats prescribed by
RBI.
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7. Non-achievement of Priority Sector targets

(i) Banks having any shortfall in lending to priority sector shall be allocated amounts
for contribution to the Rural Infrastructure Development Fund (RIDF) established
with NABARD and other funds with NABARD/NHB/SIDBI/ MUDRA Ltd., as
decided by the Reserve Bank from time to time.

(ii) While computing priority sector target achievement, shortfall / excess lending for
each quarter will be monitored separately. A simple average of all quarters will be
arrived at and considered for computation of overall shortfall / excess at the end
of the year. The same method will be followed for calculating the achievement of
priority sector sub-targets.

(iii) The interest rates on banks’ contribution to RIDF or any other funds, tenure of
deposits, etc. shall be fixed by Reserve Bank of India from time to time.

(iv) The mis-classifications reported by the Reserve Bank’s Department of

Supervision would be adjusted / reduced from the achievement of that year, to
which the amount of misclassification pertains, for allocation to various funds in
subsequent years.

(v) Non-achievement of priority sector targets and sub-targets will be taken into
account while granting regulatory clearances/approvals for various purposes.

8. Common guidelines for priority sector loans

Banks should comply with the following common guidelines for all categories of
advances under the priority sector.

(i) Rate of interest:

The rates of interest on bank loans will be as per directives issued by
Department of Regulation (DoR), RBI from time to time.

(ii) Service charges:

No loan related and ad hoc service charges/inspection charges should be
levied on priority sector loans up to Rs. 25,000. In the case of eligible
priority sector loans to SHGs/ JLGs, this limit will be applicable per member
and not to the group as a whole.

(iii) Receipt, Sanction/Rejection/Disbursement Register:

A register/ electronic record should be maintained by the bank wherein the
date of receipt, sanction/rejection/disbursement with reasons thereof, etc.
should be recorded. The register/electronic record should be made available
to all inspecting agencies.

(iv) Issue of acknowledgement of loan applications:

Banks should provide acknowledgement for loan applications received under
priority sector loans. Bank Boards should prescribe a time limit within which
the bank communicates its decision in writing to the applicants.

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 FINANCIAL INCLUSION

Banks are providing banking services through the Branches, ATMs and Internet Banking to the
customers. To some extent, the service area approach helped customer to build confidence
level with banks and encourage people to use banking services in required areas. However,
there is need to reach the unreached people who are yet unaware of banking services which
may have improved their financial conditions for healthier life. Looking at need of hour, the ICT
based solution with BC model have been started where business correspondent agents are
available at village level to provide banking services to unreached people. As per government
guidelines, Bank officials visiting Ultra small branches are helping individuals to improve trust
and confidence level by creating awareness about banking services that may be useful for their
day to day life.
Additionally, banks are commencing Business Correspondent services with help of the
established network of Common Services Centre (CSC) at Gram Panchayat and urban areas. The
person at CSC can provide services like opening bank account, provide transaction to account
and Aadhaar based payment system.
Financial inclusion has objective to bring about financial literacy amongst all individuals in
country with door step financial services for betterment of every family in all spheres of life. As
the ICT based financial Inclusion provides communicable link among people in unreached area,
it will ensure flow of information/benefits & access to all amenities and benefits for the targeted
people. Banks are approaching towards coverage for financial services using Business
correspondent model with the help of Individual BC, Corporate BC and Common Service Centre
BC. The technology for biometric authentication at Bank’s server as well as UIDAI server for
online transaction to CBS account is implemented where benefits are reached to genuine
customer.
ICT-based financial Inclusion will help to improve financial literacy in various areas and inculcate
the habit of banking in unreached people.
Business Correspondent Model

We are implementing financial inclusion project with help of following vendors –

1. M/s Bartronics India Limited in all over India for villages above 2000 population.
BC agent enrolls information of customer on POS machine or Laptop. Branch need to
approve these enrollments in Link Branch Approval site – http://10.128.33.100:8001/lba
(on gateway PC of VSAT) and http://10.100.200.41:8001/lba (on any PC of Lease line
branch). Branch then have to download approved file and send this file in bulk account
menu for opening account under FI-SB-Mahasetu (2122-1401) product in CBS.
Presently smart card based technology as well as Aadhaar based payment technology is
enabled on POS machine. If Aadhaar is linked to account, we can provide payment to
customer based through POS of BC agent with authentication from UIDAI.

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 2. M/s Vakrangee Finserve Limited in Maharashtra under Common RFP module
BC Agent operating in villages use laptop with internet connection and provide cardless
transaction service by authentication biometrics on Bank’s Central Authentication
Server.
Under Common RFP module, Bank has own FI Gateway which is integrated with Client
terminal of M/s Vakrangee. Branch need to approve the details of enrollments in
separate menu “Financial Inclusion Create Customer” provided in CBS to open account.

3. Common Service Center e-Governance Ltd.

As directed by the GoI our bank have signed an agreement with the CSC e-Governance
Services India Ltd (CSC SPV), a special purpose vehicle setup by the Government of India
to monitor and manage the Common Services Centre, for engaging CSCs as BCA.
CSC is monitored and control by respective State Govt. State Govt. has appointed district
wise Service Centre Agencies (SCA). Main functioning of CSC-SCA to issue various public
utility certificates like birth certificate, ration card, affidavits etc. to resident. They
functions under “one window system” of Govt. In addition to this SCA will perform the
job of BCA. SCAs are equipped with necessary IT hardware. Our bank have provided
web based KIOSK software to CSC which has capability to enroll individual for account
opening and do transaction based on their Biometric authentication to central server.
CSC’s are also enabled to do AEPS transactions.

The mapping of CSC agent to Bank branch village has been done and is in process of
implementation. These BC agent are under various CSC vendors like M/s MahaOnline,
M/s Spanco, M/s CMS, M/s Basix etc.

In all above cases, transaction happens ONLINE and accounts get affected in CBS. However, to
activate BC agent branches need to open a current account for BC Agent in 1533-2401 product.
This current account operates as settlement account during transaction at village level.

Ultra Small Branch (USB)

While the objectives of technology intervention shall be basically to ensure reach and reduce
costs of doing business, the approach to implementation requires a re-look. The
implementation should go beyond opening of NO FRILL accounts and facilitate providing various
types of minimum financial services to the villagers as envisaged in FI guidelines of the RBI.
Considering the above, it is felt that the new approaches to implementation needs to be infused
to develop confidence of the beneficiaries in the system & enable the bank to take deeper
inroads in the rural areas depending upon the available potential.

With the above objective in mind, process initiated to set-up a Ultra Small branch where bank
staff visits with laptop to village on predefined day for providing services to villagers through
site – https://www.mahaconnect.in/jsp/TellerIntermediateLogin.jsp. This is Internet based
application and can provide online transaction service to customer, based on signature
verification.
Please refer various related circulars with File no. 628 under Credit Priority Department.

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Position of coverage of villages under Financial Inclusion (FI)
As advised by the Board of Directors, bank has initiated special drive for coverage of 1215 FI
villages under Phase- I (Having population above 2000) through BC and other models & has
covered all the 1215 villages. Further under phase II, (villages having population between1600
to 2000) common BC vendor M/s Vakrangee Finserve Ltd. is appointed. He has completed
appointment of BC agents & creations of users in all 588 habitations allotted to our bank in
Maharashtra State.
Govt. of India has decided to implement the scheme of Direct Cash Transfer of subsidies in 34
notified schemes, directly to the Bank account of the beneficiary in 51 districts. Out of these 51
districts we are operating in 39 districts with 398 branches. For implementing the project, all
the beneficiaries of the scheme should have bank accounts. These accounts are required to be
seeded with Aadhar Numbers of the beneficiaries. For the same, each family needs to have a
bank account. The account opening is in progress in all the 398 branches. Every effort has been
made for creating awareness among the people; sign boards are displayed at prominent places,
pamphlets were distributed, Davandis (Munadi) are made in villages on weekly bazardays, and
advertisements have been given in local news papers. Branch staff has been sensitized for
implementation of the project as well as for linking of Aadhar number to beneficiaries accounts
& opening of accounts of Aadhar enrollee who have given consent to open the account with
our bank.
As of 31, March-2013 our bank in 39 DCT districts, through 398 branches under one family one
account have 41, 52,554 accounts & 4, 82,796 accounts were seeded with Aadhar number.
During the month of March-2013 bank has opened 1,43,547 no frill accounts & at the end of
March 2013 we are having 19,54,047 no frill accounts.
AADHAAR

Aadhaar is a 12 digit individual identification number issued by the Unique Identification

Authority of India (UIDAI) on behalf of the Government of India.

The Department of Financial Services, Govt. of India advised all banks to launch a campaign to
ensure at least one bank account for each family for Electronic Benefit Transfer and Aadhaar
based payment systems. Benefit of subsidy under the various schemes of Govt. of India will be
given directly into the accounts of the beneficiaries who can then withdraw it from the bank
branch or the ATM or the micro ATM/POS or KIOSK centers.

As per requirements of Government for making Aadhaar (UID) as a basis for conducting banking
transactions, it has been proposed to update the Aadhaar (UID) in CIF of our customers and put
to use this Aadhaar (UID) for putting through transactions in account by linking one account
with the Aadhaar (UID).
Please refer website http://uidai.gov.in for more details

Also there are various functionaries related to Aadhaar as under –

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 A. Aadhaar Issuance
Our Bank as a Registrar for UIDAI can appoint EA for Aadhaar issuance to individuals.
We have appointed EAs as under –
1. M/s Microtech Technologies (India) Ltd.
2. M/s FINO
3. M/s Alankit Finsec Ltd
4. M/s Vakrangee
5. M/s Terasoft
6. M/s Gujrat Infotech
Enrollment agencies will enroll details of individuals and submit to UIDAI.
UIDAI will issue Aadhaar numbers to individuals.

B. Aadhaar Enabled Bank Account Opening (AEBA)

 AEBA System Available in ULC
 UIDAI is sharing Aadhaar based data to Bank
 Enabling our branches for accessing Aadhaar Based data & update for KYC details and
 Open an account in CBS.

C. Aadhaar Payment Bridge System (APBS)

 Bank provides Mapper file with Aadhaar and Account Number mapping to National
Payments Corporation of India (NPCI).
 Sponsor bank sends file with Aadhaar, Amount and Bank Identification Number to NPCI.
 NPCI compares file with mapper and sends bank-wise segregated files to destination
bank.
 Destination Banks processes file to effect credit to beneficiary account in CBS.

D. Aadhaar Enabled Payment System(AEPS)

 Customer aadhaar number should be linked to his/her account in Bank CBS.
 Cash payment to individual based on Aadhaar number and Biometric effecting CBS
transaction online.
 POS and KIOSK are ready with biometric devices for payment system.

We are ready with functionaries like AEBA, APBS and AEPS.

This whole system will work base on Accounts opened in CBS and Aadhaar linking to Account.
Branch person have to carry out major role for opening of accounts of each individual and
linking of Aadhaar number in CIF wherever available with specific consent of customer.

An Aadhaar Enabled Bank Account Opening system- Branch level model is now made available
in ULC login. Branch person can key in Aadhaar number in system and view the details for
individual. Information of person can be updated for KYC details and Bulk account opening file
can be generated. Branch person then will have to upload this generated file in File Upload
menu with BLK option.

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 GOVERNMENT SPONSORED SCHEMES

PMEGP-Prime Minster Employment Generation Program

PMEGP was formulated by merging existing two schemes as under.

1. PMRY- Prime Ministers’ RojgarYojana and
2. REGP- Rural Employment Generation Program
 PMEGP implemented w.e.f. 01.04.2008
 PMEGP scheme is being administered by Ministry of MSME, Govt. of India
 Scheme is implemented by KVIC-Khadi and Village Industries Commission, a
statutory organization under Ministry of MSME, GoI
 Ministry of MSME, Govt. of India- A single nodal agency at national level for
implementation of the same.
 At state level, scheme is being implemented by State KVIC Directorates, Sate
KVIBs, DIC [District Industries Centre] and Banks.
 Scheme is applicable for all technically viable and economically viable projects.
 Maximum cost of the admissible project – Manufacturing sector – Rs. 25 lakhs
and Business/Services sector – Rs.10.00 lakhs
 Only one person from family is eligible for obtaining financial assistance
 Assistance is available only for the new projects
 Scheme aimed at encouraging manufacturing sector

Project Cost under PMEGP

Bank Finance Subsidy from KVIC Promoters

Urban Area Rural Area Contribution
General 90% 15% 25% 10%
Category
Beneficiary /
Institution
Special Category 95% 25% 35% 5%
Beneficiary /
Institution
Quantum and Nature of Financial Assistance:

Levels of funding under PMEGP

Categories of Beneficiaries Beneficiary’s Rate of subsidy

under PMEGP Contribution [of for Project Cost
the project cost] Urban Rural
General Category 10% 15% 25%
Special category 5% 25% 35%
[SC/ST/OBC/Minorities/Women/ Ex
Serviceman/ Physically
Chalengeed / NER / Hill and
Border Areas]
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DAY NRLM:

 Deendayal Antyodaya Yojana National Rural Livelihood Mission

 It is in this context that the Ministry of Rural Development (MoRD), Government of India
(GoI) constituted a Committee on Credit Related Issues under SGSY (under the
Chairmanship of Prof. Radhakrishna) to examine various aspects of the scheme
implementation.
 The Committee recommended adoption of a ‘Livelihoods Approach’ to rural poverty
elimination.
 As NRLM follows a demand driven strategy, the States have the flexibility to develop
their livelihoods-based perspective plans and annual action plans for poverty
reduction.

NRLM Mission:

"To reduce poverty by enabling the poor households to access gainful self-employment and
skilled wage employment opportunities, resulting in appreciable improvement in their livelihoods
on a sustainable basis, through building strong grassroots institutions of the poor."

NRLM Guiding Principles:

 Poor have a strong desire to come out of poverty, and they have innate capabilities
 Social mobilization and building strong institutions of the poor is critical for unleashing the
innate capabilities of the poor.
 An external dedicated and sensitive support structure is required to induce the social
mobilization, institution building and empowerment process.
Facilitating knowledge dissemination, skill building, access to credit, access to marketing,
and access to other livelihoods services underpins this upward mobility.

Implementation of Scheme:

N.R.L.M is a highly process oriented programme and requires intensive application of resources,
both financial and human, in order to mobilize the poor into functionally effective institutions,
promote their financial inclusion and diversify and strengthen their livelihoods. It is, therefore,
not feasible to roll out the programme in full scale across the country in one go, and therefore, it
has been decided to phase the implementation of the programme over period of 10 years.

Implementation of the Scheme at Block Level:

NRLM intends to work in a block for a period of ten years till community federations take
responsibility of implementation. A typical block having about 13,500 (90% of total poor)
157
mobilize-able poor households spread over 100-120 villages is divided into 4 clusters of 30
villages each. In a typical intensive block, the first 3 years are spent in building the organisations
of the poor by mobilising them into SHGs, Federations at Village, Cluster level and Block level.
Funds flow to the community institutions over the first 4-5 years. The middle years, years 3-6,
are invested in deepening the activities and addition of various layers such as health, nutrition,
interventions for Persons with Disability (PwD), etc. Last 4 years is essentially a maintenance
and withdrawal phase where the community institutions graduate to self-reliance and self-
sustainability.

Support Structure:

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Standup India [SUI] Scheme:

 Scheme launched by Government of India on 5 April 2016

 To support entrepreneurship among women and SC & ST communities.

 Similar to but distinct from Startup India. Both are enabler and beneficiary of other key
Government of India schemes, such as Make in India, Industrial corridor, Dedicated
Freight Corridor, Sagarmala, Bharatmala, UDAN-RCS, Digital India, BharatNet and
UMANG

 The scheme offers bank loans of between Rs. 10 lakh and Rs.1 crore for scheduled
castes and scheduled tribes and women setting up new enterprises outside of the farm
sector.

Pradhan Mantri Mudra Yojana [PMMY]:

 Scheme launched by the Hon’ble Prime Minister on April 8, 2015

 for providing loans up to 10 lakh to the non-corporate, non-farm small/micro enterprises

 These loans are classified as MUDRA loans under PMMY

 These loans are given by Commercial Banks, RRBs, Small Finance Banks, MFIs and
NBFCs.

 Micro Units Development & Refinance Agency Ltd (MUDRA) was set up by the
Government of India (GoI)

 MUDRA has been initially formed as a wholly owned subsidiary of Small Industries
Development bank of India (SIDBI) with 100% capital being contributed by it.

 Presently, the authorized capital of MUDRA is 1000 crores and paid up capital is 750
crore, fully subscribed by SIDBI.

 MUDRA has been formed with primary objective of developing the micro enterprise
sector in the country by extending various support including financial support in the form
of refinance.

 MUDRA is providing refinance support, monitor the PMMY data by managing the web
portal, facilitate offering guarantees for loans granted under PMMY and take up other
activities assigned to it from time to time

 The borrower can approach any of the lending institutions mentioned above or can apply
online through this portal www.udyamimitra.in .

159
  MUDRA has created three products namely 'Shishu' [uptoRs. 50,000/-], 'Kishore' [Loans
more than Rs.50000/- and uptoRs. 5 lakhs] and 'Tarun' [loans more than Rs. 5 lakhs and
uptoRs 10 lakhs] to signify the stage of growth / development and funding needs of the
beneficiary micro unit / entrepreneur and also provide a reference point for the next
phase of graduation / growth.

 MUDRA was registered as a Company in March 2015 under the Companies Act 2013
and as a Non Banking Finance Institution with the RBI on 07 April 2015.

Some Important Old Schemes

Swarnajayanti Gram SwarojgarYojana [SGSY]

GoI launched a new scheme known as Swarnajayanti Gram SwarojgarYojana [SGSY]

by restructuring the following existing schemes.
1. IRDP-Integrated Rural Development Program
2. TRYSEM- Training of Rural Youth for Self Employment
3. DWCRA- Development of Women and Children in Rural Area
4. SITRA-Supply of Imported Toolkits to Rural Articans
5. GKY- Ganga KalyanYojana
6. MWS-Million Wells Scheme

SGSY was made operative by GoI from 01.04.1999 in the rural areas of the country.

Funding of the scheme Central Govt and State Govt in proportion of 75:25. It has been
implemented by Commercial Banks, RRBs and Cooperative Banks.

Swarnajayanti Shahari Rojgar Yojana [SJSRY]

SJSRY launched on 01.12.1997 by merging earlier three schemes

1. NRY-Nehru RojgarYojana
2. UBSP- Urban Basic Services for the poors
3. PMIUPEP- Prime Minister Integrated Urban Poverty Eradication Program
4. The scheme was made operationalize wef 01.04.2009.

160
 LENDING POLICY

1. Preamble

The Loan Policy is framed with the purpose of sanctioning, managing and monitoring
credit risk and aims at making the systems and controls effective.

The Loan Policy of the Bank is framed to provide broad guidelines for handling new credit
proposals as well as existing credit portfolio, to evaluate the risk profile of the credit portfolio so as
to ensure reasonable return on advances with adequate safety of the funds.

In the present scenario, when spreads are thinning and competition is acut e, managing
credit risk has become crucial. Extending credit is a basic function of banking which
involves risks. The Bank should aim at managing risk in such a way that a healthy credit
portfolio is built and returns are maximized.

The Loan Policy of the Bank envisages that funds would be deployed in such a way so as to
optimize the return on funds lent and credit would be priced accordingly. It is thus imperative
that the Bank’s Assets portfolio comprises mainly Performing Assets. To achieve the same it is
necessary to have a well-defined Loan Review mechanism.

2. Objectives

The main objectives of the Loan Policy are as under:

 Due compliance of all regulatory requirements, such as regulatory clearances, exposure

norms, sectoral limits, prudential norms, asset-liability management guidelines, regulatory
and other statutory restrictions, other related directives / instructions issued by the
Government of India, the Reserve Bank of India, the Bank’s Board of Directors and the top
management.
 To ensure planned lending and healthy growth of loan portfolio and achieve lending targets
as per the Corporate Plan, an optimal CD ratio after meeting the statutory preemptions and
preventing asset-liability mismatches while keeping the NPA level to the minimum and
improving the yield on advances, which is the main driver of profit.
 To induce improvement of systems and procedures and ensure expeditious decision-
making and have in built flexibility in operations.
 To have a well-balanced and diversified loan portfolio with proper pricing policies, dispersed credit
risks covering various sectors of the economy and different industries / sectors vis-à-vis
market forces and competition.
 Special emphasis on flow of credit towards segments of priority sector i.e. agriculture,
MSME, retail trade, export, housing finance to individuals and other allied sectors.
 To enlarge client base through aggressive credit marketing and meet the diverse needs of
customers through product mix, development and innovation.
 To improve the non-fund business with a view to increase fee based income.
 To ensure that aggregate risk in loan assets is not allowed to increase by stabilizing and
percolating credit risk management system.
 To ensure effective capital conservation and utilization through enhanced credit
appraisal skills and prudent lending decisions.
While this Loan Policy document articulates the broad guidelines and approach to
administration of the credit portfolio, the Bank recognizes that there may be occasions when

161
it would be appropriate and necessary, based on sound commercial considerations that are
agreed after careful evaluation of individual cases to permit relaxations from prescribed
norms.

Accordingly, authority structure covering delegation of power to permit such relaxations has been
laid down (approved by the appropriate authority).The policy document shall be read in conjunction
with the circular instructions, periodic guidelines and credit procedure manual.

3. Borrower Identification
Following the concept of KYC (Know Your Customer) in letter and spirit. KYC shall not be
restricted only to the documents produced by the applicants. KYC shall cover actually all
applicants and also guarantors.

The data required for updation in records of Credit Information Companies shall be
mandatorily obtained in respect of the borrowers, partners / directors and guarantors before the
credit facilities are sanctioned.

Photograph and Aadhar Card as Proof of Identity and Address

Copies of Aadhar card / PAN Card / Officially Valid Documents (OVD) viz., Driving License,
Voter’s ID Card, of the applicant borrowers and guarantors shall be kept with the Branch after
due verification of photographs and the finger prints of the illiterate borrowers.
The photographs of the borrowers and the guarantors shall be obtained along with other
KYC documents.

4. Diversification of Credit Portfolio:

Diversification of Credit Portfolio is to be undertaken after consideration of due risk evaluation.
The Bank shall explore the possibility of entry into the industries / sectors / segments / activities
hitherto not financed or unrelated to the present exposures or where the current exposure level
allows scope for further exposure.

SN Particulars Guidelines
1 Thrust Areas Thrust areas shall be communicated to branches by the Credit
Dept / Credit Priority Dept HO from time to time depending
upon the features and prospects of the Industry / Activity.

2 Medium Medium priority areas shall be communicated by Credit / Credit

Priority Areas Priority Dept HO to branches from time to time depending upon
the features and prospects of the Industry / Activity.
3 Industries / Low priority areas shall also be communicated by Credit / Credit
sectors Priority Dept HO to branches from time to time depending upon
under Low the features and prospects of the Industry / Activity.
Priority Areas

162
 4 Specific Prior Branches / Zonal offices shall obtain specific prior approval (sectoral
Approval approvals) in respect of new / enhancement proposals of exposures
above Rs.5.00 crore in case of CRE and above Rs. 10.00 crore in
case of other sensitive sectors from Head Office even though the
request from the applicants of below mentioned sectors may fall
within the delegated powers of respective authorities. Such
approvals shall be accorded by the CAC-III headed by GM at H.O.

Presently the sectors requiring specific prior approval are as under

 Commercial Real Estate exposures (Promoters, builders etc.)

 Funded / non-funded facilities to NBFCs
 Capital Market exposure (Other than Loans to individuals against shares)
 Erection of new sugar factories/Cogeneration Plants /Ethanol Plants/Toli Advance.
 Advances to participants of commodity exchange in the form of traders / brokers.
 Power Sector (Except Renewable Energy)
 Road sector
 Educational institutions
 Investment in Basel II/ Basel III Bonds
 Financing acquisition of equity shares by promoters
 Issuance of Standby Letters of Credit (SBLC). (For monitoring purposes, SBLC shall be
given a separate code number and such exposures shall be reported separately by the
branches).
 Gems and Jewellery especially Diamond trade (To undertake extra caution irrespective of
the size of the exposure of the account.)
 Cultivation of Jatropha
 Emu Farming.

5. Documentation Standards

The Bank has standardised the set of documents to be executed by a borrower/guarantor for
various credit facilities. The Bank attaches due importance in improving the quality of
documentation by means of issuance of instructions on the subject matter from time to time. In
addition, the Bank shall continue to follow the practice of scrutiny of security documents, by the
Law Officer/Advocate on panel:

i) In respect of the borrowal accounts where the sanctioned aggregate (funded and non-
fund) credit facilities are of Rs. 500.00 lakh and above the security documents must be
vetted by Law Officer / Advocate on panel before disbursement. Any rectification
suggested shall also be carried out before disbursement.

ii) In respect of the borrowal accounts where the sanctioned aggregate (funded and non-
fund) credit facilities are of Rs. 50.00 lakh and above but less than Rs. 500.00 lakh,
scrutiny is to be completed by Law Officer / Advocate on Bank’s panel before disbursal.
In case the same cannot be ensured before disbursal the documents must be vetted
within 30 days from date of disbursement and any rectification suggested be carried
out.

The responsibility of maintaining documentation standards, registration of charges,

insurance cover etc. shall rest with the Branch Manager / credit officer concerned of the
branch handling the particular account. The Documents so obtained shall be got renewed at
periodic intervals preferably within one year, so as to keep them within the period of limitation.
163
The field offices shall ensure that the data is properly updated in CBS on renewal of
documents.

The Bank shall give written receipt for all documents to title taken as security/ collateral for
any loan as well as for dated/undated cheques received from borrowers. The Bank shall
supply to the borrowers authenticated copies of all the loan documents executed by
borrowers along with a copy of each and all enclosures quoted in the loan document against
acknowledgement which is to be kept on record. The Bank shall return to borrowers all the
securities / documents / title deeds to mortgaged property within 15 days of the repayment of
all dues agreed to or contracted. If any right to set off is to be exercised for any other claim,
Bank shall give due notice with full particulars about the other claims and retain the
securities/documents/title to mortgaged property till the relevant claim is settled/paid.

The Bank shall process request for transfer of borrowal account, either from the borrower or
from a bank/financial institution, in the normal course and convey concurrence or otherwise
within 21 days of receipt of request.It is advised that, all field level functionaries are precluded
from disbursement without compliance of terms and conditions of the sanction and without
forwarding the compliance certificate to the respective sanctioning authority and without
ensuring pre-disbursement authorization in the ULC Portal for Pre-disbursement Authorization
in respect of borrowal accounts of Rs.10 lakh and above except MKCC, Loan Against Deposit
and Aadhar Loans.

There shall be minimum two independent valuation reports from panel valuers for fixed
assets (Building, machinery, equipment, furniture, real estate) valued at Rs.5 crore and
above. It shall be ensured that there is no unreasonable gap between the two valuations.
Lower of the two valuations should be taken for assessment

6. Registration Under CERSAI is Mandatory for Eligible Cases

The facility has been provided in the Central Registry to take search of the charges on
payment of prescribed fees hence it is desirable to take a search of the Central Registry
before processing the proposal and also before creation of mortgage to ascertain any prior
charges created on the property to be mortgaged. This will avoid creation of multiple charges on
the same property and prevent fraudulent transactions. Therefore filing of charges with Central
Registrar as well as taking a search before creation of mortgage is to be ensured.

Obtaining End-Use Certificate from Borrowers

For all credit facilities of Rs.10.00 lakh and above certifying that funds have been used for the
purpose for which the facilities have been sanctioned, except in case of all staff advances
and advances against term deposit receipts of the Bank. Where the borrowers’ accounts are
subjected to audit, the end use certificate should be obtained from the borrower’s Auditor.
Refer Annexure of the extant Loan Review for the specimen of End-Use certificate.

7. Restrictions on Grant of Financial Assistance to Industries Producing/

Consuming Ozone Depleting Substances (ODS)
Government of India has advised that as per the Montreal Protocol, to which India is a party,
Ozone Depleting Substances (ODS) are required to be phased out as per schedule prescribed
therein. The Protocol has identified the main ODS and set time limit on phasing out their

164
production/consumption in future, leading to a complete phase out eventually. Projects for
phasing out ODS in India are eligible for grants from the Multilateral Fund. The sectors covered in
the phase out program are given below:

Sector Type of substance

Foam products Chlorofluoro carbon - 11 (CFC - 11)
Refrigerators and Air-conditioners CFC 12
–

Aerosol products Mixtures of CFC - 11 and CFC 12 –

Solvents in cleaning applications CFC - 113 Carbon Tetrachloride, Methyl

Chloroform
Fire extinguishers Halons - 1211, 1301, 2402

The Bank shall not extend finance for setting up of new units consuming/producing above ODS.
No financial assistance shall be extended to small/medium scale units engaged in the manufacture
of the aerosol units using CFC and no refinance would be extended to any project assisted in
this sector.
Advances against Sensitive Commodities under Selective Credit Control

In this respect, the Bank shall follow the guidelines prescribed by Reserve Bank of India.
 Presently the following commodities are covered under stipulation of selective Credit
control.
i) Buffer stock of sugar with sugar mills,
ii) Unreleased stock of sugar with sugar mills representing levy sugar and free
sale sugar.
 The stipulated margin on Buffer stock of sugar is 0% and the margin on unreleased
stock of sugar with sugar mills representing levy sugar is 10%.
 Margins on credit for free sale sugar shall be decided by the Bank based on its
commercial judgment.
 The unreleased stocks of the levy sugar charged to the Bank as security by the sugar
mills shall be valued at levy price fixed by Government.
 The unreleased stocks of free sale sugar including buffer stocks of sugar charged to the
Bank as security by sugar mills, shall be valued at the average of the price realized in the
preceding three months (moving average) or the current market price, whichever is lower;
the prices for this purpose shall be exclusive of excise duty.
Commodities, Generally Treated as Sensitive Commodities

(a) Food grains i.e. cereals and pulses,

(b) Selected major oil seeds indigenously grown, viz. groundnut, rapeseed/mustard,
cottonseed, linseed and castor seed oils thereof, vanaspati and all imported oils and
vegetable oils,
(c) R a w c o t t o n a n d k a p a s ,
(d) S u g a r / G u r / k h a n d s a r i ,
(e) Cotton textiles which include cotton yarn, man-made fibers and yarn and fabrics made
out of man-made fibers and partly out of cotton yarn and partly out of man-made fibers.
Advances against Fixed Deposit Receipts (FDRs) issued by Other Banks

No credit facilities shall be sanctioned against FDRs, or other term deposits of other
banks.

165
 Advances against NRE, FCNR (B) Deposits in Rupee, Foreign Currency

Sanction of fresh loans and / or renewal of existing loans sanctioned against the security of
NRE / FCNR (B) deposits either to the depositors and / or to third parties, shall be without
any ceiling and subject to usual margin and other operational norms prescribed by RBI from
time to time. Further, the facility of premature withdrawal of NRE/FCNR deposits shall not
be available where loans against such deposits are to be availed of. This requirement may
specifically be brought to the notice of the deposit holder at the time of sanction of the loan.
The existing loans which are not in conformity with the above instructions shall continue for
their existing term and shall not be rolled over/renewed. Other conditions as regards grant
of loan against NRE/FCNR deposits shall remain unchanged.

Loans against Certificate of Deposits (CDs)

No Loans shall be granted against CDs

Finance for Loans and Advances against Indian Depository Receipts (IDRs)

The Bank shall not grant any loan / advance for subscription to Indian Depository
Receipts (IDRs). Further, Bank shall not grant any loan / advance against security /
collateral of IDRs issued in India.

Exposure Ceilings as per LEF

Exposure Ceilings for Individual and Group borrower as per RBI norms and Bank’s internal limit
as a percentage of eligible capital base (TIER I) as per Basel III guidelines as on 31 stMarch of
previous year are as under:

Exposure Ceiling Limits RBI

guideline
1 For Individual Borrowers/ Single Counterparty (including individuals 20%
engaged in Infrastructure Activities and Oil Companies who have been
issued Oil Bonds (non-SLR status) by GOI)
In exceptional cases, Board of the Bank may allow an additional
exposure of the 5% of Bank s Tier I Capital to a Single Counterparty.
’

2 For Group Borrowers/ Group of Connected Counterparties (including 25%

companies engaged in Infrastructure Activities)
3 Interbank Exposure 25%
4 Single NBFCs * (including NBFCs engaged in Infrastructure Activities, 20%
AFC & IFC)
5 Single NBFC predominantly engaged in lending against Gold " 7.50%
Single NBFC predominantly engaged in lending against Gold if the 12.50%
additional exposure is on account of funds on-lent by NBFCs to the
infrastructure sector
6 Group of connected NBFCs 25%

166
Intra-Group Exposure Limits

Intra Group Transactions can originate in a variety of ways, for example, through:

a) Cross shareholdings;
b) Trading operations whereby one group company deals with, or on behalf of another
group company;
c) Central management of short-term liquidity within the conglomerate;
e) Guarantees, loans and commitments provided to, or received from, other companies
in the group; The provision of management and other service arrangements,
e.g. pension arrangements or back office services;
f) Exposures to major shareholders (including loans and off-balance sheet exposures
such as commitments and guarantees);
g) Exposures arising through the placement of client assets with other group
companies;
h) Purchases or sales of assets with other group companies;
i) Transfer of risk through reinsurance; and
j) Transactions to shift third party-related risk exposures between entities within the
conglomerate.
Bank shall adhere to the following intra-group exposure limits:

Particulars As a % of Paid Up Capital and Reserves

(excluding Revaluation reserves)
a. Single Group Entity Exposure :
Non-financial companies and unregulated 5%
financial services companies.
Regulated financial services companies. 10%
b. Aggregate Group Exposure
Non-financial companies and unregulated 10%
financial services companies taken together.
Group i.e. all group entities (financial and non- 20%
financial) taken together.

Threshold Limit/ Substantial Exposure

Threshold Limit shall be 10% of capital funds (Tier-I) as of 31st March of previous year.
Exposure to any borrower beyond threshold limit shall be termed as “Substantial Exposure”.
The Bank shall restrict total Substantial Exposure to 7.5 times of the Bank’s capital funds as
of 31st March of Previous Year.

167
Sectoral Ceilings
Priority Sector/ Weaker Sector
There is no upper ceiling for disbursement under Priority sector lending and the Bank
shall aim to achieve the sectoral / sub-sectoral targets under priority sector as set by
Reserve Bank of India/Government of India from time to time.

Ceilings in Respect of Other Sectors

As approved by the Board of Directors in meeting held on 04.05.2017 the Bank shall
maintain the following ceilings in respect of the under mentioned sectors in relation to the
Gross Credit Outstanding of immediate preceding quarter:

SN Name of the Sector Exposure not to exceed (%) of

Gross Credit of immediate
preceding quarter
1 Real Estate Sector 30%
Of which,
Housing Loan to Individuals No sub ceiling
Commercial Real Estate 6.00%
Indirect Real Estate 6.00%
Within overall ceiling of 6% for CRE & 6% for
Indirect Real Estate ceiling on:

Individual borrower exposure limit shall not exceed 7.50% of Tier 1 capital of as of
31st March of previous year

Group borrower exposure limit shall not exceed 15% of Tier 1 capital of as of 31st
March of previous year
2 Advances to NBFC / NBFI 15.00%
(Including HFC & All India Financial Institution)
Of which,
Housing Finance Companies / NHB / HB 3.00% "
All other NBFC, AFC & IFC Factoring & other 12.00% "
activities including NBFCs predominantly engaged
in lending against Gold
3 Infrastructure 40.00%
Of which,
Power Sector 20.00%
* With a condition that long term exposure, i.e.,
residual tenor of 1 year and above shall not be
more than 12.50%, and
Renewable energy finance exposure shall not be
more than 5% of the total 20%
Road (including Highways) 6.00%
Telecommunication 5.00%
Residual Infrastructure Activities 9.00%
4 Any other sector 10.00%
5 Non-Fund Business 30.00%

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 Ceilings for Industries
The Bank shall maintain the following ceilings in respect of the under mentioned
industries in relation to the Gross Credit Outstanding.
SN Name of the Industry Exposure not to exceed % of Gross Credit
of immediate preceding quarter
1. Sugar 2%
2. Textile 5%
3. Film Industry 1%
4. Software /IT Industry 5%
5. Auto and Auto Ancillary 10%
6. Any other Industry 10%

Time Frame for Disposal of MSME Proposals

The Bank has stipulated the time frame for disposal of MSME proposals vide H.O. circular
AX1/PSRC/Cir. No.78/2017-18 dated 07.12.2017. The gist of the guidelines are as under:
redit Limit or Enhancement in the Timeframe for disposal provided the application
existing credit limit complete in all respects and is accompanied by
the documents as per checklist provided.
Up to Rs.5.00 lakh 2 Weeks
Above Rs. 5.00 Lakh and upto 3 Weeks

Rs. 25.00 Lakh

Above Rs.25.00 lakh 6 Weeks

Loan to Value Ratio (LTV)

Upon making a mortgage loan for the purchase of a property, lenders usually require that the
borrower make a down payment; that is, contribute a portion of the cost of the property. This
down payment may be expressed as a portion of the value of the property (see below for a
definition of this term). The loan to value ratio (or LTV) is the size of the loan against the
value of the property. Therefore, a mortgage loan in which the purchaser has made a down
payment of 20% has a loan to value ratio of 80%. For loans made against properties that the
borrower already owns, the loan to value ratio will be imputed against the estimated value of
the property.

The loan to value ratio is considered an important indicator of the riskiness of a mortgage
loan: the higher the LTV, the higher the risk that the value of the property (in case of
foreclosure) will be insufficient to cover the remaining principal of the loan.

Risk weight calculation and capital requirement can be understood from following example:
e.g. A housing loan of Rs. 25 lakh sanctioned to a borrower to purchase a flat having
value of Rs. 30 lakh.

Calculation:

(a) Risk weight calculation - LTV of the loan will be = 25/30 = 0.8333 or 83.33%. Here,
borrower margin will be = 5/30 = 0.1666 or 16.66%.

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For a Loan upto Rs. 30 Lakh and LTV > 80 and <= 90, applicable Risk weight is 50% So,
Risk weight asset (RWA) = 50%*25 = Rs. 12.25 lakh

Minimum Capital required will be = 10.25% * RWA =10.25% * 12.25 = Rs. 1.26 lakh

Various Risk Weights on Retail Loans:

RBI has stipulated various risk weights applicable to different borrowers based on the risks
associated with a particular type of loan. Proposed risk weights for various categories
of retail loans are as under:
Individual Housing Loan: Lending to individuals meant for acquiring residential
property which are fully secured by mortgages, are to be risk weighted based on LTV
ratio as under:
(a) For Loans sanctioned on or before 06.06.2017

Category of loans LTV ratio (%) Risk weight (%)

Up to Rs 30 lakh <= 80 35
>80 and <= 90 50
Above Rs 30 lakh and up to Rs 75 lakh <=75 35
>75 and <=80 50
Above Rs 75 lakh <=75 75

(b) For Loans sanctioned on or after 07.06.2017

Category of loans LTV ratio (%) Risk Weight
Up to Rs 30 lakh <= 80 35
(%)
> 80 and <= 90 50
Above Rs 30 lakh and up <= 80 35
to Rs 75 lakh
Above Rs 75 lakh <= 75 50

S Type of Loan Risk Weight (%)

1 Consumer
N loan, Personal loan 100
Credit card receivables 125
2 Staff loans
a Loans and advances to own staff covered by 20
superannuation benefits or mortgage of flat / house
b Loans and advances to own staff Not covered by 75
superannuation benefits or mortgage of flat / house
3 Any other retail loan 75

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Timely Disposal of Credit Applications! Turnaround Time (TAT):
Sanction of Facilities:
Bank will endeavor to dispose all credit applications by its operational units
in respect of various discretionary authorities as under:
SN Product ! Category Maximum Time Limit for sanction
1 Housing Loan 7 days
2 Education Loan - Clean/ Paper Security 3 days
With immovable security 7 days

3 Vehicle Loan - Four Wheeler 2 days

Two Wheeler 2 days
4 Personal Loan 1 day
5 Aadhar Loan ( Loan to Pensioners) 1 day
6 Gold Loan 1 day
7 Reverse Mortgage 7 days
8 Loan against Property 7 days

Bank recognizes that above time limits are outer limits only and expeditious disposal even
before expiry of above time limits, preferably at the earliest within TATs from the date when
the application, complete in all respects with usually required information and financial
statements, is submitted to the Bank, will be endeavored at all levels.

To achieve the above time frame, panel advocates should be asked to submit search report
wherever applicable within 3 working days and empaneled valuer should be asked to submit
the report within 2 working days. In case default in submitting the report is observed
continuously for three times then authority may decide on removing them from the panel.
The same clause should be included while conveying the empanelment sanction letter by
the zonal office.During the stipulated period if the proposal is found not up to the mark
and the concernsanctioning authority is of opinion not to give accord for its sanction,
then such proposalsmust be rejected through delegated authority i.e. next to sanctioning
authority within period.
Benchmark Ratios for credit appraisal:
Micro and small enterprises:

Min/ Micro & Small Enterprises

Current Ratio Max
Minimum 1.17:1
Ratio
Debt Equity Ratio (Total Term Maximum 3:1
Liability /Tangible Net worth)
TOL/TNW Maximum 4.5:1
Fixed Asset coverage ratio Minimum 1.25:1
(FACR)
Average Gross DSCR for Minimum 1.50:1
Term Loan
Interest Coverage Ratio Minimum 2:1
(EBIT/ Interest Expense)

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 Other Industries (Including medium Industries) and Take Over Borrowers
Ratio Min/ Max Other Industries (including Medium
Enterprises) & Take Over Borrowers
Current Ratio Minimum * 1.25:1
Debt Equity Ratio (Total Term Maximum 3:1
Liability /Tangible Net worth)
Debt equity of 2:1 and TOL/TNW of 3.5:1
shall be insisted for financing Gems
&Jewellery.
TOL/TNW Maximum 4:1 (5:1 for export credit facilities)
Fixed Asset coverage ratio Minimum 1.25:1
(FACR)
Average Gross DSCR for Minimum 1.50:1
Term Loan (For takeover proposals min 1.25:1 in
respect of completed financial years/ and
min 1.50:1 in respect of residual tenor of
the project)

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 LOAN REVIEW POLICY

1.1 INTRODUCTION
The Lending Policy of the Bank envisages that funds would be deployed in such a way so as
to optimize the return on funds lent and credit would be priced accordingly. It is thus
imperative that the Bank's Assets portfolio comprises mainly of Performing Assets. To
achieve the same it is necessary to have a well-defined loan review mechanism.

The Loan Review Policy is being reviewed regularly with a view to refining the scope of the
Credit monitoring Mechanism and to ensure that the fresh delinquencies in the Asset
Quality are kept at minimum.

1.2 OBJECTIVES

 To ensure that credit decisions by various authorities are in conformity with the Bank's
Lending Policy and the delegated lending powers.
 To ensure that the stipulated terms and conditions of sanction are complied with and
various post sanction follow up, monitoring and supervision measures laid down by the Bank
are adhered to.
 To ensure that all credit facilities i.e. working capital limits, term loans, non-fund limits
etc. are reviewed/renewed well in time so as to identify and detect any weak areas at an
early stage and take necessary corrective action immediately. In this regard the Bank shall
ensure that the guidelines issued by R.B.I. as regards review / renewal of credit facilities are
adhered to.
 To aim at achieving maintenance of the Standard Asset quality and improvement in
NPA accounts so as to have a favorable impact on profitability of the Bank through
prevention/ reduction/up gradation of NPAs.
 To assess the health of credit portfolio of the Bank and to apprise Top Management
about the same from time to time and initiate corrective measures.
 To identify promptly loans which develop credit weaknesses and initiate timely
corrective action;
 To evaluate portfolio quality and identify potential problem areas;

1.2.1 Depth of Loan Review

The loan reviews shall focus on:

 Adherence to internal policies and procedures, and applicable laws / regulations;

 Sufficiency of loan documentation;
 Compliance with loan covenants;
 Post-sanction follow-up;
 Portfolio quality; and Recommendations for improving portfolio quality

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1.3 CREDIT RISK MANAGEMENT

 The Loan Review mechanism shall take into account the guidelines issued from time to
time under Credit Risk Management.

REPORTING OF CREDIT SANCTIONS

The loan applications/credit proposals shall be disposed off within the time frame stipulated
by Head Office, Credit Department from time to time. Sanctioning authorities shall
communicate all sanctions accorded by them including sanction of any short-term facilities
/ funded / non-fund facilities / obligation during the month to the next higher authority for
the purpose of noting / ratification within 10 days of completion of the month to which the
statement relates. Along with the statement the authorities shall confirm that the
disbursements during the months have been effected only after compliance of terms and
conditions of sanction.
If a sanctioning authority fails to submit the statement of advances sanctioned by him/her
within 30 days, from the end of the month to which it pertains, to the next higher authority,
he shall not exercise his/her sanctioning powers in the succeeding months, till the pending
statements are submitted to next higher authority with specific reasons for delay and
acknowledgement thereof is received from the competent authority.
Statement of advances sanctioned by them with copies of appraisal notes to the respective
ZO monthly basis within a period of 10 days in the succeeding month. ZO shall scrutinise the
statements. The Statements shall be put up to the ZLCC of ZM for noting and the same shall
be sent to Branch / CPC duly noted with observations if any within a period of one month
from date of receipt of the statement.

As per extant guidelines, branches shall not allow temporary overdrafts in current accounts
without specific prior sanction from the Zonal Manager. Branches may allow excess
overdrafts in cash credit accounts upto 10% of the sanctioned limit with approval of the ZM,
within his delegated powers. Weekly statement of TODs / EODs if any allowed shall be
submitted to ZM for noting and confirmation.

In case of all sanctions / review / renewal of Rs. 10 lakh and above, a scanned copy (inpdf'
format) of the sanction letter shall be sent to Zonal office and uploaded to Head Office in
the manner prescribed by Head Office, Credit Monitoring Department.

In case of more than five similar loans sanctioned in any branch during a month, other than
crop loans / KCC and personal loans, reasons for such sanction should be clearly mentioned
in the Monthly Loan Noting. Zonal Managers to ensure close scrutiny of such loans to ensure
compliance of due diligence while noting.

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DISBURSEMENT
Disbursement of sanctioned credit facilities shall be only after proper and complete
documentation and compliance of all terms and conditions of sanction, unless and
otherwise compliance of terms and conditions is specifically allowed to be deferred by the
sanctioning authority. Documentation shall be done by filling the document templates
available online andtaking printouts thereof in the manner prescribed by legal department

Mandatory use of LOAN DOC software

It should be mandatory to get signatures of borrowers / guarantors on the loan documents
printed from LOAN DOC software and failure to comply may entail penal action.

Predisbursement Compliance:

Before disbursement of the advances up to Rs.10 lakh the compliance of terms and
conditions of sanction including documents shall be vetted by second officer in the branch
and certificate to that effect (in the prescribed format) is to be submitted to Zonal Office
before the disbursement. In case second officer is not posted at a branch, Branch Manager
shall send self certification in the said prescribed format.

In respect of advances above Rs.10 lakh the terms and conditions of sanction including
documents shall be vetted by the neighboring Branch officials. Schedule / tie-up for
neighboring branch shall be finalized by Zonal Office. In case of exigencies Z.O.shall
nominate other officer.
Over and above this compliance, the documents in respect of advances of Rs.50 lakh and
above shall be continued to be vetted by the Law Officer or the Panel Advocate.

Registration under CERSAI is mandatory for eligible cases. As per CERSAI Circular
No.CERSAI/2016/1350 dated 13.06.2016 following types of Security Interest are required to
be filed on the CERSAI Portal:

Particulars of creation, modification or satisfaction of security interest in immovable

property by mortgage other than mortgage by deposit of title deeds (equitable mortgage)
shall be filled in Form I and Form II, as the case may be and shall be authenticated by a
person specified in the Form for such purpose by use of valid digital signature.

1. Particulars of creation, modification or satisfaction of security interest in hypothecation

of plant and machinery, stocks, debt including book debt or receivables, whether existing or
future shall be filled in Form I or Form II , as the case may be, and shall be authenticated by
a person specified in the Form for such purpose by use of valid digital signature.
2. Particulars of creation, modification or satisfaction of security interest in intangible
assets being knowhow, patent, copyright, trade mark, license, franchise or any other
business or commercial right of similar nature, shall be filed in Form I or Form II, a s the case
may be, and shall be authenticated by a person specified in form for such purpose by use of
valid signature.

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The facility has been provided in the Central Registry to take search of the charges on,
payment of prescribed fees hence it is desirable to take a search of the Central Registry
before creation of hypothecation / mortgage to ascertain any prior charges created on the
property to be hypothecated / mortgaged. This will avoid creation of multiple charges on
the same property and prevent fraudulent transactions. Therefore filing of charges with
Central Registrar as well as taking a search before creation of mortgage is to be ensured.

Every three years search report be taken out to confirm the creation of hypothecation /
mortgage charge of the Bank.

VALUATION AND INSPECTION

(i) Valuation of Land and Building in respect of existing accounts shall be done once
in three years as under:

Nature of Finance Valuation of Land & Building

(a) Advances against property -outstanding Independently by two valuers on the Bank's
balance Rs.1.00 crore and above (Other than panel. It should be ensured that there is no
Housing Loans). unreasonable gap between the two
(b) 'Housing Loan to acquire resale house - valuations. Lower of the two valuations should
outstanding balance above Rs.1.00 crore. be taken for assessment. (excluding New
Residential Housing Loan and lease rental
(c) Other Advances having total exposure
accounts)
above Rs.5.00 crore.
(d) Advances other than above. By single valuer on the Bank's panel.
In respect of new sanctions, the valuation should be latest and should not be older than 6
months, thereafter valuation should be done once in three years.
In case of consortium accounts valuation should be as per Consortium discipline.
In case account becomes NPA, valuation should be done immediately.

(ii) Inspection of fixed assets including plant and machinery should be done on yearly basis.
Where the finance is under consortium, the schedule as per consortium should be followed.
In case consortium has not prescribed any schedule, the inspection should be carried out by
the branch on yearly basis.

(iii)Valuation and inspection of current assets: Verification of securities charged to the Bank
should be on half yearly basis through independent chartered accountants / cost
accountants or their firms where working capital (fund and non fund) limit of Rs. 50 lakh
and above has been sanctioned. In respect of amount less than Rs. 50 lakh, the responsibility
of verification of securities is with the branch.

(iv)The Branch Head /Official shall visit the property to be mortgaged to judge and arrive at
the acceptable approximate value of the property based on Govt. Rates / Local Market
enquiry / Original Purchase Deed etc. with proper justification

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INSURANCE

The Bank shall maintain adequate insurance cover for all the tangible securities charged
including collateral securities. Power for waiver of insurance shall rest with next higher
authority.

REGISTRATION OF VEHICLES

To ensure that the latest record of the vehicles i.e. registration number and insurance policy
are updated in CBS. The branches shall
i. Disburse the loan amount through NEFT / RTGS duly mentioning the purpose and details
of remittance
ii Confirm registration of the Bank's charge with RTO. Registration details of the vehicle
should be obtained directly from RTO by making an application.
iii. Send a letter to the dealer informing about the Bank's finance and to arrange for the
Bank's hypothecation charge on the vehicle and to deliver the vehicle to the borrower.
iv. Obtain invoice and challan from the dealer duly mentioning the engine number and
chassis number.

Visit to units:
Every unit /borrower shall be visited as following frequency

Below Rs.1 crore Branch officials half yearly

Rs.1 to Rs.5 Crore Branch officials Quarterly
Above Rs.5 Crore Branch officials Quarterly & ZO officials yearly

(In case of housing loans to public the visit shall be once in two years, if repayment is regular,
preferably by branch managers. And for housing loan above 1 Cr, joint visit to be done by
CPC-Retail official and Branch official) -Circular dt-11/10/2019
End Use of Funds
Obtaining End-Use Certificate from borrowers for all credit facilities of above Rs.10.00 lakh
certifying that funds have been used for the purpose for which the facilities have been
sanctioned, except in case of staff advances and advances against term deposit receipts of
the Bank.

STOCK & RECEIVABLE AUDIT (SRA)

OBJECTIVE

In the context of rapid growth of credit, effective supervision & monitoring of advances have
assumed considerable importance. In case of working capital finance, one of the measures
that is deployed by the lenders for ensuring the end use of funds and monitoring the

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borrowal account is the system of periodical Stock & Receivable Audit (SRA) by the
independent qualified Stock Auditors.

The main objective of Stock & Receivable Audit (SRA) is to ascertain whether the security
(borrower's stock and debtors) against which working capital finance has been made is safe
and is valued correctly. It is the duty of the Stock auditor to verify the physical existence and
absolute ownership of inventory / movable property charged to the bank and to examine
the genuineness of the Sundry Debtors list submitted by the borrower

Stock &Receivable Audit (SRA): Coverage &Applicability:

The borrowal accounts having working capital limits of Rs.200 lakh &above (both Fund
based and Non Fund based Limits) where the primary security is hypothecation of Stock
and / or Book Debts come under the purview of Stock & Receivable Audit (SRA). In case of
NPA borrowal accounts having Working Capital limits of Rs.50 lakh and above where the
primary security of stock and/ or Book Debts are available also come under the purview of
SRA in order to enhance the reliability on stock valuation.

a) Fund Based limits:

Fund Based Limit includes all types of Working Capital Limits sanctioned such as Cash Credit
(Stock), Cash Credit -(Book Debts), Overdraft, Term Loan / Demand Loan (For Working
Capitalpurpose), Bill limits Packing Credit Limit, Ware House Receipts Loan etc.

b) Non Fund Based limits:

Non Fund Based Limits sanctioned for Working Capital purposes such as Bank Guarantees,
ILC (DA terms / FLC (DA terms), Buyers Credit Limit etc., for the supply of goods on! credit
terms.

c) Advances under Consortium I Multiple Banking arrangement:

In case of advances coming under Consortium / Multiple Banking arrangement, the Bank may
fall in line with the Leader of the Consortium or Highest lender in case of JLF formed in
multiple banking, as the case may be.

Following borrowers are exempted from the Stock & Receivable Audit process:

1. Borrowers with minimum External Credit risk rating of AA.

2. NBFC.
3. Government Guaranteed borrowal accounts.
4. Government bodies and PSUs.

Periodicity of Stock & Receivable Audit (SRA):

Stock & Receivable Audit (SRA) should be conducted for the eligible borrowal accounts of
Rs.200Iakh and above yearly. It should be ensured that there is no omission either in the

178
eligible accounts or: in the area of coverage. It should be arranged in such a way that Stock
& Receivable Audit (SRA), post credit supervision etc., are carried out not simultaneously in
a branch but within a reasonable time gap.

Asset Performance Review (APR) FORMS:

Taking advantage of the technology available the Bank has introduced a web based
application for submission of APRs by branches, duly integrating data available from other
applications like CBS/MIS/CRR/BRAINS (inspection)

Branches shall submit the APR forms every month in respect of standard and substandard
assets having funded limit / outstanding balance of Rs. 50.00 lakh and above through the
web based application, before 5th of succeeding month.

Loan against', Deposit (TDR) does not come under the purview of APR. In case of borrowers
enjoying only Housing Loan and no other credit facility the limit for submission of APR is
Rs.1.00 crore, if the asset is not under stress.

The reporting of stressed accounts having funded limit / outstanding balance of Rs.50.00
lakh and above is also integrated in the web based APR application. Branches should report
meticulously the early warning signals in the respective accounts in the APR and ensure that
no account slips into NPA without being marked as a stressed account in the previous
months.

Zonal offices shall ensure ongoing monitoring of above accounts based on, inter-alia,
scrutiny of APR forms to detect early warning signals and to take necessary corrective
actions / remedial measures.

Accounts having funded limit / outstanding balance of Rs.10 crore and above shall be
monitored by Head Office; also through scrutiny of APR forms to detect early warning signals
and guide the field offices to take necessary corrective actions / remedial measures.

In Case of working capital limits, transactions in the account should be scrutinized to ensure
the proper end use of funds and also genuine turn-over in the account. For this branches
shall scrutinize the accounts with limits up to Rs.5 crore and Zonal Office with limits above
Rs. 5 crore.

DEVOLVEMENT / INVOCATION OF NON FUND LIMITS

The Bank shall ensure that devolvement on account of Non-fund exposure such as
LC/BG/DPG is kept to the 'minimum. In case of devolvement, such amount shall be debited
to the designated operative account for effective monitoring and recovery. As per extant
guidelines, branches shall allow over drawings in the account to the extent of devolved /

179
invoked amount for a period upto 30 days with suitable cut back mechanism in consultation
with the borrower.
For allowing operations beyond 30 days and upto 60 days, concurrence shall be obtained
from the Zonal Manager. Further LCs / BGs shall be opened if limit is available after
deducting the amount of devolved / invoked LC /BG outstanding in the operative account.
In case the operative account continues with overdrawn position beyond 60 days, further
LC/BG shall be opened only with approval of Credit / Priority Department at H.O.
CREDIT AUDIT
Introduction

a) Credit Audit is an effective tool for periodic evaluation of quality of the credit portfolio
and to bring about qualitative improvement in credit administration. Bank, therefore, has
put in place a proper Credit Audit Mechanism for large value accounts with responsibilities
assigned in various areas such as, evaluating the effectiveness of loan administration,
maintaining the integrity of credit rating process, portfolio quality, etc. Credit Audit
examines compliance with extant sanction and post-sanction processes/ procedures laid
down by the bank from time to time.

Credit Audit is an integral part of risk based internal audit system, aimed at. Identification
of credit risk and may also suggest the remedial measures for controlling the credit risk
underlying the loan portfolios of high value.

Coverage of Credit Audit:

As per RBI guidelines, the Bank is required to undertake credit audit as per the following
criterion

All standard accounts (fresh sanctions / enhanced sanctions of cash credit accounts and
other working capital facilities) having exposure of Rs. 10 crore(including enhanced portion)
and above shall be subjected to credit audit within 3 months from date of fresh sanction /
enhancement.
Further, 5 % of all existing and 5% of fresh sanctions of standard accounts having credit
facilities of Rs. 5 crore and above but less than Rs.10 crore shall be subjected to credit audit.
Group/sister/ associate concerns of the accounts of any of the accounts mentioned above
with credit limits of Rs. 1 crore and above shall be subjected to simultaneous credit audit.

In respect of Takeover accounts of Rs. 2 crore and above except Housing loans, credit audit
is to be conducted within 3 months of disbursement.

With a view to ensure better monitoring and compliance, Credit Monitoring Department,
Head Office may allocate more accounts than specified above based on the availability of
manpower and infrastructure.

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Exemptions:

Following borrowers are exempted from the credit audit:

 Central and State Government bodies and PSUs

 Loan against Deposits

Legal Audit of Title documents

Legal Audit of Title deed and other related documents for all accounts with credit facilities
of Rs.5crore and above is to be conducted by a panel advocate other than the advocate who
has given the title clearance or vetted the documents.(For detailed guidelines refer AX1/CR-
MON/Cir/7/2013-14 dated 268.2013.

1. At Zonal Office all borrowal accounts having credit facilities Rs.5 crores and above
secured by mortgage of title deeds or where certificate or letter issued by any authority are
relied upon for mortgage or agreement of mortgage should be identified in the Zone. Such
security may be primary or collateral.
2. The work of legal audit is to be entrusted to bank's panel advocates.
3. Such legal audit should be carried out immediately after the first disbursement is done
but maximum within three months for existing accounts. In case of new advances of Rs.5
crore and above legal audit be carried out before disbursement. If additional period is
allowed for security perfection, then the audit should be again conducted after completion
of the additional period.

Report on Verification of Compliance of Terms and Conditions of Sanction for New Loans
and Advances of Rs. 100 Lakh and above (Compliance Audit)
In case of new loans and advances of Rs. 100 lakh and above verification of compliance of
terms and conditions of sanction shall be ordered by the Zonal Office by deputing senior
officials from Z.O. / other branches. The Z.O. shall ensure to rectify the deficiencies and close
the reports.

Monitoring Tools

Branches shall go through the following reports given in the Branch Profile on daily basis to
know the fresh slippages, potential slippages, accounts having time barred documents,
accounts having inadequate turn over and accounts due for review / renewal.

 NPA monitoring reports -

i. Fresh NPAs (slippages) as per CBS during the quarter ( report 6)
ii. List of stressed accounts (potential) - financial (report 7F ) and non-financial (report

7NF)

iii. List of CC turnover accounts (report 7 D)

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 Branch reports to be seen for monitoring of time barred accounts -
i. B2G2 not updated in CBS
ii. B2G2 not created in CBS
iii. CC accounts overdue for review renewal, CC/OD limit expired
(All these reports are available in Unified Login Cell - ULC portal of the bank in branch profile
screen)

Recourse to Securitisation Act 2002.Branches/Zones to take following steps

immediately:

Initiation of SARFAESI action by issuance of Notice under Section 13(2) of SARFAESI Act 2002
through "Cris-Mac Legal" software which is provided by Recovery & Legal Department Head
Office to CM / AGM headed branches, other branches to take the support from Zonal
Offices.
Latest valuation of the primary and collateral securities if existing valuation is older than 3
years.
Declaring the borrower as wilful defaulter in eligible cases and submission of Notes to
Recovery Department, Head Office under copy to Legal Dept,H.O. for declaring the borrower
as wilful defaulter.
Subsequent follow up for taking SARFAESI action to its logical conclusion.

In respect of consortium accounts, branches / zones to take above steps as per the decision
of JLF.

Fresh slippages in Housing Loan Accounts: Initiation of SARFAESI action by issuance of

Notices under Section 13(2) of SARFAESI Act, 2002.

Subsequent follow up for taking SARFAESI action to its logical conclusion.

Education Loans for Overseas education:

In addition to issuing Notice under Section 13(2) of SARFAESI Act, 2002 letters to be sent to
the borrowers informing that Bank may approach Passport Office informing default, if there
is no positive response from the borrower.
Early Alert System
Early Alert System - Stressed Accounts
The system of reporting on large borrowal accounts by the branches through Asset
Performance Review (APR) reports and their review in monthly ILRC meetings by the Zonal
Offices for early detection and countering of weaknesseswhichis already in vogue in the Bank
shall be continued.

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Early Alert System - Standard Accounts.

Any standard account showing the under mentioned signs shall be classified under Early
alert System.

1. Accounts where there is a delay of 2 months in submission of stock statements /

Financial Statements.
2. Accounts where cheques /bills issued/drawn by/on the borrower are dishonored for
want of funds and/or where there is a regular frequency of return of cheques/ bills
lodged for clearing/collection or have been purchased/ discounted.
3. Any devolvement under DPG/LC and invocation of Bank Guarantees by the
beneficiaries, and non-payment within 15 days.
4. Nonpayment of Bills Purchased/Discounted Returned Unpaid and not reimbursed
within a period of 15 days.
5. Account being continuously overdrawn for 15 days.
6. Accounts where interest is not being serviced in the account within a maximum period
of 10 days.
7. Term Loan accounts where installments are not being repaid within a maximum Period
of 15 days
8. Declining financial performance in terms of declining sales and profits, cash losses! net
losses, erosion of net worth, etc.
9. Deficiencies in Auditors Report/s
10. Non-compliance of terms and conditions of sanction

Red flagged accounts

RBI has suggested framework for dealing with loan frauds and marking of accounts with red
flags to decide on existence of fraud or otherwise in respect of accounts where early warning
signals are observed.

A Red Flagged Account (RFA) is one where a suspicion of fraudulent activity is thrown up by
the presence of one or more Early Warning Signals (EWS). These signals in a loan account
should be taken as an alert regarding a weakness or wrong doing which may ultimately turn
out to be fraudulent. Such Early Warning Signals (EWS) should not be ignored but must,
instead, be used as a trigger to launch a detailed investigation into a RFA.
The threshold for EWS and RFA is an exposure of Rs.50.00 crores or more irrespective of the
lending arrangement (whether solo banking, multiple banking or consortium). All accounts
beyond Rs.50.00 crores classified as RFA or 'Frauds' must also be reported on the CRILC data
platform together with the dates on which the accounts were classified as.
Special Mention Accounts

RBI has suggested that a new category of asset designated as "Special Mention Accounts
(SMA)" may be introduced by banks, between "Standard" and "Sub-Standard" to facilitate
internal monitoring in line with international best practices. However, until such time as

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IRAC Norms for the suggested SMA is introduced by the RBI, the system referred above of
identifying Stressed Accounts would be continued by the Bank.

 The asset has potential weaknesses which deserve close monitoring and which can be
resolved through timely remedial action. If left un-corrected, the potential weaknesses in
Special mention assets may result in deterioration of the repayment prospects and
subsequent adverse asset classification. Often a bank's weak origination/servicing policies
are the reason behind classification of an asset under the Special mention category though
there may be cases where technical or other factors may also be responsible.
 Apart from continuing irregularities, "special mention accounts" may also be
categorized on the basis of factors such as inadequate cash flows and management integrity.
Special mention assets would not require provisioning, as they are not classified as NPAs.
The accounts outstanding with above weaknesses for a period up to 30 days are treated as
SMA-0. If the account continues to be irregular/overdue beyond 30 days and up to 60 days,
it becomes SMA-1 and then on 61st day it becomes SMA-2. If the account becomes SMA-2,
immediate information should be sent to RBI through CRILC in case of exposures of Rs. 5
crore and above. RBI in turn circulates such information to all other banks having exposure
to the account for sharing of information and also for initiating remedial actions.

Reporting:

Every month branches shall report the list of stressed accounts, having credit facilities less
than Rs. 50 lakh to respective Zonal Offices. In respect of accounts having credit facilities of
Rs. 50 lakh and above, branches shall identify and mark them as stressed accounts through
web based APR every month. Monitoring of accounts under "stressed accounts" category
shall be given focused attention by all field functionaries. In addition to proper identification
and reporting, all field functionaries shall make efforts for removal of stress signals and
maintenance of standard asset status.

Focus on Cash Flows

Appraisal of fresh/interim credit requirements on the part of constituents shall be done by

analyzing the Funds Flow in conjunction with the Cash Flows and not merely on the basis of
the former, so as to render the appraisal more objective.
RESOLUTION OF STRESSED ASSETS - REVISED FRAMEWORK

The Reserve Bank of India vide its circular DBR No.BP.BC.101/21.04.048/201718 dated
12.02.2018 has issued revised guidelines for harmonized and simplified generic framework
for resolution of stressed assets substituting the existing guidelines in view of the enactment
of the Insolvency and Bankruptcy Code, 2016 (IBC),.

I. Revised Framework

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A. Early identification and reporting of stress

Bank shall identify incipient stress in loan accounts, immediately on default, by classifying
stressed assets as special mention accounts (SMA) as per the following categories:

SMA Sub-categories Basis for classification - Principal or interest payment or any other
amount wholly or partly overdue between

SMA-01-30 days
SMA-131-60 days
SMA-261-90 days
The Bank shall report credit information, including classification of an account as SMA to
Central Repository of Information on Large Credits (CRILC) on all borrower entities having
aggregate exposure of Rs.5 crore and above. The CRILC-Main Report will now be required
to be submitted on a monthly basis effective April 1 , 2018.; In addition, the Bank shall
report to CRILC, all borrower entities in default (with aggregate exposure of Rs. 5 crore and
above), on a weekly basis, at the close of business on every Friday, or the preceding working
day if Friday happens to be a holiday

B. Implementation of Resolution Plan

As soon as there is a default in the borrower entity's account with any bank, all lenders singly
or jointly - have to initiate steps to cure the default. The resolution plan (RP) may involve
any actions / plans / reorganization including, but not limited to, regularization of the
account by payment of all overdues by the borrower entity, sale of the exposures to other
entities / investors, change in ownership, or restructuring. The RP is to be clearly
documented by all the lenders (even if there is no change in any terms and conditions)

C. Implementation Conditions for RP

The Resolution Plan (RP) in respect of borrower entities to whom the Bank continues to have
credit exposure, shall be deemed to be 'implemented' only if the following conditions are
met

A. The borrower entity is no longer in default with any of the lenders;

B. If the resolution involves restructuring; then
i. All related documentation, including execution of necessary agreements between
lenders and borrower/ creation of security charge /perfection of securities are completed
by all lenders, and
ii. The new capital structure and/or changes in the terms and conditions of the existing
loans get duly reflected in the books of all the lenders and the borrower.

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Additionally, RPs involving restructuring / change in ownership in respect of 'large' accounts
(i.e., accounts where the aggregate exposure of lenders is Rs. 100 crore and above), shall
require independent credit evaluation (ICE) of the residual debts by credit rating agencies
(CRAs) specifically authorized by the Reserve Bank of India for this purpose. While accounts
with aggregate exposure of Rs. 500 crore and above shall require two such ICEs, others shall
require one ICE. Only such RPs which receive a credit opinion of RP4 or better for the
residual debt from one or two CRAs, as the case may be, shall be considered for
implementation.

D. Timelines for Large Accounts to be referred under IBC

In respect of accounts with aggregate exposure of the lenders(all Banks and Financial
Institutions taken together) at Rs. 2000 crore and above, on or after March 1, 2018
('reference date'), including accounts where resolution may have been initiated under any
of the existing schemes as well as accounts classified as restructured standard assets which
are currently in respective specified periods (as per the previous guidelines), Resolution Plan
(RP) shall be implemented as per the following timelines:

i) If in default as on the reference date, then 180 days from the reference date.
ii) If in default after the reference date, then 180 days from the date of first such default

• If the Resolution Plan (RP) in respect of such large accounts is not implemented as per the
timelines specified in paragraph D above, lenders shall file insolvency application, singly or
jointly, under the Insolvency and Bankruptcy Code 2016 (IBC) within 15 days from the expiry
of the said timeline8.

In respect of such large accounts, where the Resolution Plan (RP) involving
restructuring/change in ownership is implemented within the 180-day period, the account
should not be in default at any point of time during 'the 'specified period', failing which the
lenders shall file an insolvency application, singly or jointly, under the IBC within 15 days
from the date of such default.
;'Specified period' means the period from the date of implementation of Resolution Plan
(RP) up to the date by which at least 20 percent of the outstanding principal debt as per the
RP and interest capitalization sanctioned as part of the restructuring, if any, is repaid.
Provided that the specified period cannot end before one year from the commencement of
the first payment of interest or principal (whichever is later) on the credit facility with
longest period of moratorium under the terms of RP.

Any default in payment after the expiry of the specified period shall be reckoned as a fresh
default for the purpose of this framework.

For other accounts with aggregate exposure of the lenders below Rs. 2000 crore and, at or
above Rs.100 crore, the Reserve Bank of India intends to announce, over a two-year period,

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reference dates for implementing the RP to ensure calibrated, time-bound resolution of all
such accounts in default.

E. Prudential Norms:

The provisioning' in respect of exposure to borrower entities against whom insolvency

applications are filed under the IBC shall be as per their asset classification in terms of the
Master Circular on Prudential norms on Income Recognition, Asset Classification and
Provisioning, as amended from time to time.

F. Supervisory Review

Any failure on the part of lenders in meeting the prescribed timelines or any actions by
lenders with an intent to conceal the actual status of accounts or evergreen the stressed
accounts, will be subjected to stringent supervisory / enforcement actionsas deemed
appropriate by the Reserve Bank of India, including, but not limited to, higher provisioning
on such accounts and monetary penalties.

G. Disclosures

Bank shall make appropriate disclosures in the financial statements, under 'Notes on
Accounts', relating to resolution plans implemented
RBI vide its above referred circular dated 12.02.2018 has informed that the extant
instructions on resolution of stressed assets such as Framework for Revitalizing Distressed
Assets, Corporate Debt Restructuring Scheme, Flexible Structuring, of Existing Long Term
Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside
SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) stand withdrawn with
immediate effect. Accordingly, the Joint Lenders' Forum (JLF) as an institutional mechanism
for resolution of stressed accounts also stands discontinued.

Norms Applicable to Restructuring

Restructuring is an act in which a lender, for economic or legal reasons relating to the
borrower's financial difficulty, grants concessions to the borrower. Restructuring would
normally involve modification of terms of the advances / securities, which would generally
include, among others, alteration of repayment period / repayable amount / the amount of
installments / rate of interest / rollover of credit facilities / sanction of additional credit
facility / enhancement of existing credit limits / compromise settlements where time for
payment of settlement amount exceeds three months.

A. Asset Classification
In case of restructuring, the accounts classified as 'standard' shall be immediately
downgraded as non-performing assets (NPAs), i.e., 'sub-standard' to begin with. The non-
performing assets, upon restructuring, would continue to have the same asset classification

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as prior to restructuring. In both cases, the asset classification shall continue to be governed
by the ageing criteria as per extant asset classification norms.
B. Conditions for Upgrade
Standard accounts classified as NPA and NPA account retained in the same category on
restructuring by the lenders may be upgraded only when all the outstanding loan/facilities
in the account demonstrate ‘satisfactory performance’(i.e. the payments in respect of
borrower entity are not in default at any point of time) during the specified period.
For the large accounts (i.e. accounts where the aggregate exposure of lenders is Rs.100 crore
and above) to qualify for an upgrade, in addition to demonstration of satisfactory
performance, the credit facilities of the borrower shall also be rated as investment grade
(BBB- or better) as at the end of the 'specified period' by Credit Rating Agencies (CRAB)
accredited by the Reserve Bank of India for the purpose of bank loan ratings. While accounts
with aggregate exposure of Rs. 500 crore and above 'shall require two ratings, those below
Rs. 500 crore shall require one rating. If the ratings are obtained from more than the
required number of CRAs, all such ratings shall be investment grade to qualify for an
upgrade.

C Provisioning Norms
Accounts restructured under the revised framework shall attract provisioning as per the
asset classification category as laid out in the Master Circular on Prudential Norms on
Income Recognition, Asset Classification and provisioning.

D. Additional Finance
Any additional finance approved under the RP (including any resolution plan approved by
the Adjudicating Authority underI B C ) may be treated as 'standard asset' during the
specified period under the approved RP, provided the account performs satisfactorily (as
defined in paragraphs B above) during the specified period. If the restructured asset fails
to perform satisfactorily during the specified period or does not qualify for up gradation at
the end of the specified period, the additional finance shall be placed in the same asset
classification category as the restructured debt.

E. Income recognition norms

Interest income in respect of restructured accounts classified as 'standard assets' shall be

recognized on accrual basis and that in respect of the restructured accounts classified as
'non-performing assets' shall be recognized on cash basis.
In the case of additional finance in accounts where the pre-restructuring facilities were
classified as NPA, the interest income shall be recognized only on cash basis except when
the restructuring is accompanied by a change in ownership.

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F. Conversion of Principal into Debt / Equity and Unpaid Interest into 'Funded
Interest Term Loan' (FITL), Debt or Equity Instruments
The FITL / debt / equity instruments created by conversion of part of principal / unpaid
interest, as the case may be, shall be placed in the same asset classification category in
which the restructured advance has been classified.
G. Change in Ownership
In case of change in ownership of the borrowing entities, credit facilities of the concerned
borrowing entities shall be continued/upgraded as 'standard' after the change in ownership
is implemented, either under the IBC or under this framework.
Restructuring /Rehabilitation of Borrowal accounts
Subject to a continued commitment on the part of the promoter/s while considering
proposals for restructuring/rehabilitation of borrowal units, the following aspects shall be
taken care of.

Identification of accounts in such cases shall be completed at an early stage of the financial
year. A reasonable time frame in arriving at a decision shall be adhered to. Only genuine
cases requiring such treatment shall be eligible for this purpose and no accounts shall be
restructured / rehabilitated merely for the purpose of ever-greening of the assets.

Adequacy of finance shall be ensured. The Repayment program in respect of loans shall be
scheduled in line with conservative net cash inflows which otherwise conforms to the
minimum DSCR norm's. A suitable Exit Option shall be incorporated under the sanctioned
terms.

Management Effectiveness
Where default/irregularities in borrowal accounts are found to be the result of inherent
deficiencies or weaknesses in the quality of the management, a proper techno-economic
viability study shall be got done before any future course of action is decided upon. Such
study shall be made in-house or through the appointment of a suitable consultant as
approved by the Zonal Head, selected from the list of empanelled TEV firms by H.O

Consortium/Multiple Banking

The guidelines are in place, issued vide H.O. Circular No. AXI/CCC/Cir. No. 30/2007 dated
18.12.2007 and AXI/CCC/Cir. No.20/2008-09 Dated 24.09.08 by Dy General Manager,
Commercial & Corporate Credit. The same shall be followed in respect of Consortium/
Multiple Banking financing. The mutual co-operation of other banks shall be solicited in case
of sharing of information with consortium banks.

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Legal Recourse

In respect of borrowal accounts where foreclosure of the account is the only viable
option/course available to the Bank, such course of action should be initiated immediately
either through recourse to the Securitisation Act, 2002 or to the Courts/DRT.

Field offices shall ensure regular updation of personal information on borrowers/

guarantors, as it is very important to avoid any constraint, which may arise in effective
management of such problematic accounts.

AUDITORS' RESPONSIBILITY
In cases where it is observed by Branches/Zonal Offices, on a scrutiny of audited statements
relating to borrowal accounts, that the auditors have been negligent or deficient in
conducting the audit and as a result of which the account has turned bad/doubtful of
recovery, the matter be referred to Head Office by the Zonal Head giving complete details
of the deficiencies noticed. Steps shall be initiated, where necessary, for deterrent action to
be taken against the concerned auditor through the Institute of Chartered Accountants of
India (ICAI). In respect of operative and apparently Standard Assets where such deficiencies
are observed, the financial statements of the borrower shall be treated with caution and
the account shall be placed under the Stressed Accounts category until the matter is cleared.
REVIEW / RENEWAL OF WORKING CAPITAL CREDIT LIMITS
The Bank's policy in this area would be to ensure 100% renewal of all fund and non-fund
based working capital credit limits within a year from the dates of respective sanction.

 The validity period of working capital facility is 12 months. Follow up shall be made with
each and every borrower enjoying working capital facilities well in time to ensure that
review/renewal is carried out on or before expiry of the validity.
 Credit Monitoring Department at H.O. (CRMD) shall send intimations to all customers
having working capital facilities of Rs. 10 crore and above to submit financial statements to
the respective branch for undertaking review / renewal of the facilities at least one month
in advance under copy to the zonal office. ZO shall also make follow up to get the details
and to arrange for review / renewal.

CONTINUATION OF WORKING CAPITAL LIMITS PENDING REGULAR REVIEW

RENEWAL/ENHANCEMENT
Permission to continue the limits beyond 12 months pending regular review/ renewal
/enhancement shall have to be obtained from the sanctioning authority.
In case any borrower has a genuine difficulty in submission of the audited financial
statements and other related papers within the time frame prescribed for the same, then
on a request from the borrower for continuation of limits beyond 12 months (pending
renewal) from the date of earlier review stating therein the period required for submission
of proposal with relative necessary statements, extension may be considered. Such period

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shall normally not exceed 3 months from the due date of review of credit facilities. It shall
be endeavored that such cases are rare. The sanctioning authority of existing credit facilities
on being satisfied about the genuineness of request may allow extension maximum up to 3
months from the due date of review pending regular review/renewal with specific
stipulation

 That the borrower shall submit proposal for full review based on audited financial
statements before the expiry of this extension.
 Penal interest @1% shall be levied during this period.
 Processing fee shall be recovered for the extended period.

In case the proposal could not be submitted by the borrower within the extended period of
three months, 'due to genuine difficulties and further extension of the continuation is
desired for a period beyond 3 months from the due date, authority for granting such
extension shall vest with the next higher authority than the sanctioning authority. On being
satisfied about the genuineness of request, next higher authority may allow extension up to
maximum another 3 months (i.e. not exceeding 6 months from the due date of review).
With the condition that

 That the borrower shall submit proposal for full review based on audited financial
statements within next 45 days.
 Penal interest @2% shall be levied during extended period.
 Processing fee shall be recovered for the extended period.

The granting of extensions shall be duly recorded in the CBS system and be invariably
reported through the monthly statement of advances sanctioned.

In case despite follow up by the branch, the information required for review/renewal of
accounts including audited financial results is not submitted by the borrower/firm/company
the account be; reviewed by placing a short review note on the account before the
sanctioning authority. Suchshort review should be necessarily followed by a full review
within six months. Total period from earlier review / renewal should not exceed 18 months.
Concessions, if any, availed by such borrower should be rolled back for a period ranginq
between 3 months and 12 months onmerits of each case.

If any working capital limits remain not reviewed beyond 18 months from the date of last
sanction, the facilities are treated as out of order and NPA as per IRAC norms, such facilities
shall stand discontinued and necessary steps should be initiated to recover the outstanding
dues, if any.

REVIEW /RENEWAL TERM LOAN/ NON FUND LIMITS

The borrowal accounts where only Term Loans or only non-fund limits of Rs. 25.00 lakhs and
above are granted shall be reviewed, in the prescribed format, at least once in a year though
IRAC norms regarding review/renewal are not applicable in such cases. Standalone term

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loan / Non-Fund facilities above 25 lakh and up to Rs.10.00 Crore shall be reviewed by the
branches and shall be directly submitted to respective sanctioning authorities for approval.
DOCUMENTATION

Renewal of Documents
As spelt out in the Lending Policy, the Bank has standardized a set of documents to be
executed by a borrower/guarantor for various credit facilities. Further, the responsibility of
maintaining documentation standards shall rest with the Branch Manager/concerned credit
officer of the branch handling the particular account. All documents so obtained pertaining
to outstanding advances shall be got renewed at periodic intervals, preferably one year in
advance, so as to keep them within the period of limitation. Date of renewal of Documents
should be promptly recorded in CBS.

Time Barred Documents

It is expected that there is regular renewal of documents in case of all outstanding advances.

REJECTION OF PROPOSALS

The powers for rejection of credit proposals, for all categories of borrowers irrespective of
any threshold limit, falling within the sanctioning powers of any authority shall vest' with
the next higher authority.

UPDATION OF DATA FROM CREDIT INFORMATION COMPANIES

The names of the proprietors / partners / directors shall be given in the data base of Credit
Information Companies to have full information of the borrowers.

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 AGRICULTURE FINANCE AND SCHEMES

1) MARGIN AND SECURITY NORMS

1. Margin Norms
1.1 Crop loans and other Margin
Short Term Loans
i. Up to Rs. 1.60 lakh No Margin
ii. Above Rs.1.60 lakh For Crop Loans: No Margin (considered in fixing scale of
finance)
For other Short Term Loans: 15 % to 20%
(depending upon purpose and quantum of finance)
1.2. Term Loans
i. Up to Rs. 1.60 lakh No Margin
ii. Above Rs. 1.60 lakh 15 % to 25%
(depending upon purpose and quantum of finance)
1.3. Agri-clinics & Agri-business centers:
i. Up to Rs. 5.00 lakhs No margin
ii. Above Rs.5.00 lakhs 15% to 25%
(depending upon purpose and quantum of finance)

2. Security Norms

Type of credit Loan Type Security to be furnished

facility
2.1 Crop Loans i. Up to Rs. 1.60 lakh Hypothecation of crops
ii. Above Rs. 1.60 lakh a) Hypothecation of crops and
b) Mortgage of land / third party
guarantee
2.2 Term Loans i. Up to Rs. 1.60 lakh Hypothecation of assets created out of loan
ii. Above Rs. 1.60 lakh a) Hypothecation of assets and
b) Mortgage of land / third party
guarantee
2.3 Agri-clinics & i. Upto Rs. 5.00 lakhs a) Hypothecation of assets
Agri-business
centres ii. Above Rs. 5.00 a) Hypothecatifon of assets and
lakhs b) Mortgage of land or alternate security

Other points:
a) In case of Term Loans above Rs. 1.60 lakh where movable assets are not created,
mortgage of land should be taken as a primary security.

In states where legislation on the line suggested by Talwar Committee has been passed, a
simple declaration creating a charge on land offered as security will be sufficient. In such
cases mortgage of land may not be necessary.

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2. INTEREST SUBVENTION: AGRICULTURE LOANS
Salient features and detailed operational guidelines of the scheme and submission of
the claims are as under.

A. INTEREST SUBVENTION ( BASIC CRITERIA )

 Rate of interest subvention @ 2 % p.a
 Subvention is available for Short term crop loan / KCC and loan against ware house
receipt for Small & Marginal Farmers and crop loans converted into Medium term loan due
to natural calamities in the first year of conversion; for loans upto Rs.3.00 lakhs only
 Interest subvention @ 2% p.a.for KCC to Fishery and Animal Husbandry Farmers upto
Rs. 2.00 lakhs
 Additional Interest Subvention: for the short term crop loans / MKCC / MKCC against
Gold disbursed during the FY 2019-20
 Disbursement period from 01/04/2019 to 31/03/2020
 Interest to be charged to the loan account of farmers @7 % p.a only for becoming
eligible for interest subvention & incentive.
 Linkage of Aadhaar number in CBS is mandatory to get benefit of interest subvention.

1. Short Term Crop loan / MKCC / MKCC against gold –

a) Interest subvention is available to banks @ 2 % p.a for Short Term Crop loans/ MKCC /
MKCC against gold disbursed to farmers during the year 2020-21 ie from 01/04/2020 to
31/03/2021.

b) The amount of subvention will be calculated @ 2% p.a on the crop loan amount from the
date of its disbursement/drawal up to the date of actual repayment of the crop loan by the
farmer or up to the due date of the loan fixed by the bank for the repayment of the loan,
whichever is earlier, subject to a maximum period of one year.

Crop loan / MKCC against Gold – Branches should ensure the following before
claiming subvention for crop loans financed against gold.

 Loans are sanctioned for cultivation of crops and end use has been verified.
 Loan Limit has been sanctioned strictly as per scale of finance decided by DLTC.
 Loan application being obtained in the prescribed format furnishing all particulars of land
holding , crops grown and complete in all respect.
 The interest subvention claimed for loan amount maximum upto Rs 3.00 lakh taking into
account both crop loan / crop loan against gold.
 There should not be multiple limits for the same crop.
 Due date of repayment is fixed as per seasonality of crops

2. Loan against ware house receipt to Small and Marginal Farmers

a) Small and Marginal farmers having Kisan Credit Card are also eligible for the benefit of
2 % p.a interest subvention on post harvest loans against negotiable warehouse receipt
disbursed during the current year 2020-21.

b) Amount of subvention will be calculated @ 2 % p.a from the date of loan upto maximum
period of six month or the date of payment which ever is earlier. Branches should charge
interest @ 7% p.a to the account for the said period. Normal interest be charged to the
account beyond six months.

c) Linkage of Aadhaar number in CBS is mandatory to get benefit of interest subvention.

3. Crop loans disbursed during FY 2019-20 and converted to Medium Term due to
natural calamities during 2020-21

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In order to provide relief to farmers affected by Natural Calamities, the interest subvention
of 2 % will continue to be available to banks for the first year on the restructured amount.
Such restructured loans will attract normal rate of interest from the second year onwards i.e
branches have to apply 7 % interest to such accounts and claim 2 % interest subvention for
the first year and charge normal interest from the second year onwards.

ADDITIONAL INTEREST SUBVENTION (INCENTIVE) FOR PROMPT REPAYMENT

Government of India will also provide additional interest subvention @ 3% p.a. to prompt
paying farmers who repay their short-term production credit availed during the year 2019-20
within one year of disbursement / drawal of such loans. This subvention will be available to
such farmers on the short-term production credit up to a maximum amount of Rs.3 lakh.

The amount of additional subvention should be calculated from the date of

disbursement/drawal of the crop loan up to the actual date of repayment by farmers or up to
the due date fixed by the bank for repayment of crop loan, whichever is earlier, subject to a
maximum period of one year from the date of actual disbursement. This benefit would not
accrue to those farmers who repay after one year of availing such loans.

3 % additional interest subvention for prompt repayment is not available to loan

against ware house receipt and converted crop loans due to natural calamities as
mentioned above.

SUBMISSION OF CLAIM:
a) Interest Subvention

Branches are required to submit their 2.0 % interest subvention claim on a half-yearly basis
as at September 30, 2020 and March 31, 2021, of which, the claim for the half year March
31, 2021 needs to be certified by the Statutory Auditor certifying that claims for subvention
for the entire year ended March 31, 2021 (i.e. for half year September 2020 & March 2021)
as true and correct.

Any remaining 2.0 % claim pertaining to the disbursements made during the year 2019-
20 and not included in the claim for March 2020 be consolidated separately and marked as
an 'Additional Claim' and submitted latest by 30th April 2021 duly audited by Statutory
Auditors certifying the correctness.

b) Interest Incentive claim

In respect of the 3% additional subvention, branches have to submit their one‐time

consolidated claims pertaining to the disbursements made during the entire year 2018-19
latest by April 30, 2021 duly audited by Statutory Auditors certifying the correctness.
Branches are required to maintain category wise data (General, Scheduled Caste (SC),
Scheduled Tribe (ST), North East Region (NER)-General, North East Region (NER)-SC,
North Eastern Region (NER)-ST) of beneficiaries under the scheme for reporting the same
on ISS portal individual farmer wise to settle the claims arising from 2018-19 onwards.
Branches shall therefore invariably update the category of farmers in CBS while
pursuing review / renewal of MKCC or issuing fresh MKCCs.
RBI in consultation with Govt of India is working on the detailed modalities regarding
categorization of loans. Till such time the modalities are finalized, Branches may obtain the
category-wise data on self-declaration basis. There should however be no cap on the loans
given under each category.

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3. PRADHAN MANTRI FASAL BIMA YOJANA (PMFBY)
Major Changes made in Revamped PMFBY and R-WBCIS:
 Allocation of branches to insurance companies to be done for 3 years (both PMFBY and
R-WBCIS)
 Option has been given to State/UTs to choose Scale of Finance or District Level Value
of Notional Average Yield [NAY] i.e. NAY*MSP as sum insured for any District crop
combination [both PMFBY and R-WBCIS]. Farm Gate Price will be considered
 Central subsidy under PMFBY and R-WBCIS to be limited for premium rates upto 30%
for unirrigated areas/crops and 25% for irrigated areas/crops. Districts having 50% or more
irrigated area will be consolidated as irrigated area/district (both PMFBY and R-WBCIS)
 Flexibility to States/UTs to implement the Scheme with option to select any/many of
additional risk covers/feathures like prevented sowing, localized calamity, mid season
adversity and post-harvest losses. Further States/UTs can offer specific peril risk / insurance
covers like hailstorm under PMFBY even with or without opting for base cover [both PMFBY
and R-WBCIS]
 States not to be allowed to implement the scheme in Subsequent Seasons in case of
considerable delay by States in release of requisite Premium Subsidy to concerned
Insurance Companies beyond a prescribed time limit.
 For estimation of crop losses / admissible claims “Two Step Process of Loss Estimation”
to be adopted based on defined “Deviation Matrix” using specific triggers like weather
indicators, satellite indicators etc. for each area alongwith normal ranges and deviator
ranges. Only areas with deviation will be subject to Crop Cutting Experiaments (CCE) for
assessment of yield loss.
 Technology solution like Smart Sampling Techniques (SST) and optimization of number
of CCEs to be adopted in conducting CCEs (PMFBY)
 In case of non provision of yield data beyond cut off date by the States to implementing
Insurance Companies, claims to be settled based on yield arrived through use of Technology
Solution (PMFBY alone)

Enrolment under the scheme to be made voluntary for all the farmers (both PMFBY and R-
WBCIS)

 The scheme is now made voluntary (Optional) for all the farmers (Loanee as well as
Non Loanee)
 The main objective of making this scheme voluntary is to empower the farmers to take
an informed decision on mechanism to protect the crops
 Existing loanee farmers will be given a provision to opt out from the scheme by
submitting requisite declaration to branches any time during the year but at leasr 7 days prior
to the cut off date for enrollment of farmers for the respective seasons.
 Branches shall conduct the special awareness drive among existing loanee farmers in
this regard and also directed to maintain proper records of farmers declarations.
 Further all farmers who approach bank for renewals / fresh issuance of KCC shall be
asked by the respective bank branches to convey their willingness to participate in the
scheme by and will be enrolled accordingly by the branches on National Crop Insurance
Portal.
 The Banks are also serving the beneficiary farmer for schemes like PM-Kisan and many
farmers having Jan Dhan Accounts / Savings Accounts who may be encouraged for which
Banks have to provide all facilities.
 Result of participation under voluntary coverage would be reviewed after 3 years.
Suitable measures including incentivization of farmers may be undertaken by State Govt /
Insurance companies to encourage farmers to enroll under the scheme.
 Central share in Premium Subsidy to be increased to 90% for NER from existing sharing
pattern of 50:50 (both PMFBY and R-WBCIS)

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 Provisioning of upto 3% of the total allocation for the scheme to be made by GoI and
implementing State Governments for administrative expenses (both PMFBY and R-WBCIS)

Also Department of Agriculture, Co-operation and Farmer Welfare is informed as

under.

 The revamped guidelines of PMFBY and R-WBCIS will be operational from Kharif 2020
onwards.
Other Features:

 PMFBY will provide a comprehensive insurance cover against failure of the crop thus
helping in stabilising the income of the farmers and encourage them for adoption of
innovative practices.
 The Maximum Premium payable by the farmers will be 2% for all Kharif Food & Oilseeds
crops, 1.5% for Rabi Food & Oilseeds crops and 5% for Cash /Horticultural Crops.
 The difference between premium and the rate of Insurance charges payable by farmers
shall be shared equally by the Centre and State. The seasonality discipline shall be same
for loanee and non-loanee farmers.
 The scheme will be implemented by AIC and other empanelled private general
insurance companies. Selection of Implementing Agency (IA) will be done by the concerned
State Government through bidding.
 The existing State Level Co-ordination Committee on Crop Insurance (SLCCCI), Sub-
Committee to SLCCCI, District Level Monitoring Committee (DLMC) shall be responsible for
proper management of the Scheme.
 The Scheme shall be implemented on an ‘Area Approach Basis’. The unit of insurance
shall be Village/Village Panchayat level for major crops and for other crops it may be a unit
of size above the level of Village/Village Panchayat.
 The Loss assessment for crop losses due to non-preventable natural risks will be on
Area approach.
 In case of majority of insured crops of a notified area are prevented from sowing/planting
the insured crops due to adverse weather conditions that will be eligible for indemnity claims
upto maximum of 25% of the sum-insured.
 However losses due to localized perils (Hailstorm, landslide & inundation) and Post-
Harvest losses due to specified perils (Cyclone/Cyclonic rain & Unseasonal rains) shall be
assessed at the affected insured field of the individual insured farmer.
 Three levels of Indemnity, viz., 70%, 80% and 90% corresponding to crop Risk in the
areas shall be available for all crops.
 The Threshold Yield (TY) shall be the benchmark yield level at which Insurance
protection shall be given to all the insured farmers in an Insurance Unit Threshold of the
notified crop will be moving average of yield of last seven years excluding yield upto two
notified calamity years multiplied by Indemnity level.
 There will be a provision of on account claims in case of adverse seasonal conditions
during crop season viz. floods, prolonged dry spells, severe drought and unseasonal rains.

Restructured Weather Based Crop Insurance Scheme (WBCIS)

 The structure of farmer’s premium under WBCIS will be at par with the proposed PMFBY
i.e. 5% for notified horticultural crops.
 The Criteria of selection of Implementing Agency and area allocation will be same as
PMFBY.
 The other broad features will remain same.

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 CALENDER OF ACTIVITY:
S.No. Activity Kharif Rabi
1 Issuance of Administrative Instructions February August
by Government of India
2 Conduct of SLCCCI meeting to decide March September
for notification of Crops and Notified
areas, limits of Sum Insured and
adoption of Level of Indemnity etc.
3 Loaning period (loan sanctioned) for April to July October to
Loanee farmers covered on December
Compulsory basis.
4 Cut-off date for receipt of Proposals of 31th July 31st December
farmers (loanee & non-loanee).
5 Cut-off date for receipt of Declarations Within 15 working days Within 15 working
of Loanee farmers covered on for loanee farmers and days for loanee
compulsory basis & non-loanee seven working days for farmers and seven
farmers covered on Voluntary basis non-loanee farmers after working days for
from Bank branches to Respective cut-off date non-loanee farmers
Nodal Offices. after cut-off date
6 Cut-off date for receipt of Declarations Within two working days Within two working
of farmers covered on Voluntary basis after receiving days after receiving
from designated Insurance Agent(s) to declaration/ premium. declaration/premiu
Insurance Companies m
7 Cut-off date for receipt of Declarations Within seven working Within seven
of Loanee farmers covered on days from receipt of working days from
compulsory basis & non-loanee Declarations by the receipt of
farmers covered on Voluntary basis Respective Nodal Declarations by the
from Respective Nodal Offices of Offices of Banks. Respective Nodal
Banks to Insurance Company Offices of Banks.
8 Cut-off date for receipt of yield data Within a month from Within a month from
final harvest final harvest

4. RATE OF INTEREST ON AGRICULTURE ADVANCES

I. Farm Credit Category:

a) Working Capital Loans: Short Term Crop Loans / MKCC / MKCC against Gold / Loan
against Ware House Receipt to Small & Marginal Farmers having KCC:
Size of Advance Revised Rate of Interest
1) Short term production credit 7.00% (Fixed) for One Year.
including Gold Loan up to Rs. 3.00
lakh to Farmers where interest
subvention is available
2) Short term production credit Applicable rate of interest will be as below:
above Rs. 3.00 lakh to Farmers 1) Upto Rs. 3 lakh- 7.00% (Fixed) for one year
where interest subvention is available
2) Above Rs.3 lakh & up to Rs.10 lakh- 1 Year
MCLR + BSS@0.50%+1.75%
3) Above Rs.10 lakh- 1 Year MCLR
+BSS@0.50%+ 2.75%
Currently 1 Yr MCLR is @ 7.30 % p.a.

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If Short term Crop Loan / MKCC loan remains unpaid after cut-off date / repayment period
stipulated, the Rate of Interest to be charged (automatically switch over) are as follows:-

Size of Advance Revised Rate of Interest

1) Up to Rs.10.00 lakh 1 Year MCLR + BSS@0.50% + 1.75%

2) Above Rs.10.00 lakh 1 Year MCLR +BSS@0.50%+ 2.75%

b) Investment Credit:
Size of Advance Revised Rate of Interest
1) Up to Rs.10.00 lakh 1 Year MCLR + BSS@0.50% + 1.75%
2) Above Rs.10.00 lakh 1 Year MCLR +BSS@0.50%+ 2.75%

II. Agri Infrastructure & Agri Ancillary Activities:

a) Slab wise Rate of Interest for exposure upto Rs. 25 lakh:

Size of Advance Revised Rate of Interest

Up to Rs.25 Lakh 1 Year MCLR + BSS@0.505% +1.75%

b) Risk Based Pricing for loans above Rs. 25 lakh & upto Rs. 10 crore as per
Internal Credit Risk Rating.
c) Risk Based Pricing for loans above Rs. 10 crore as per External Rating vis-a-vis
Internal Credit Rating Matrix.

d) Incentive for collateral securities- Reduction in Rate of Interest:

The incentive of reduction in applicable interest rate is as under:

Percentage of collateral security offered Discount / Reduction in Rate of
Interest Offered
More than 50% and Upto 75% 0.25%
More than 75% and Upto 100% 0.50%
More than 100% 0.75%

Eligible collateral securities for concession in rate of interest are as under:

Sr Nature of Security Valuation
No
1 Free hold land and building (Excluding Agri land) Distress Value
2 Paper Securities in the form of
a) Term Deposits Receipts Principal + accrued interest.
Value applicable to payment before
maturity
b) NSCs/KVPs (Kisan Vikas Patra) Principal+ accrued interest
c) Insurance policies Surrender value

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 d) Debt instruments of Public Ltd Companies with Principal amount / Market Value
AAA & AA rated by RBI approved external rating whichever
agencies is lower
e) Government Securities (only Central & State Govt Principal amount / Market Value
bonds) whichever
is lower
3 Gold Valuation by approved valuer

All the above securities should be unencumbered. The respective sanctioning authorities,
except Branch Heads, shall allow the concession as above, upto the exposure within their
delegated power. However, in case of Branch level sanction, authority to offer concession
shall be the Zonal Head. Zonal Head after recording the justification and eligibility of the
borrower, can accord approval for concession in rate of interest.

6. SUGGESTED REPAYMENT SCHEDULE AND DUE DATE/S OF REPAYMENT

Sr. Types of Investment Minimum- Loans Moratorium Due date

No. Maximum Instalment Period
Repayment Period
Period in
Years (including
moratorium
Period)
1 2 3 4 5 6
1. Dugwell with or without 11-15* Yearly 23 months 30th June
pumpset every year
2. Deepening of well 5 Yearly 11 months -do-
3. Pumpset 9 Yearly 11 months -do-
4. Filter Point + Pumpset 11-15 * Yearly 11 months -do-
5. Shallow Tubewells 11 - 15 Yearly 11 months -do-
6. Persian Wheels / Rahat 5 Yearly 11 months -do-
7. Sprinkler / drip irrigation 10 - 15 Yearly 11 months -do-
8. Land Development 9 - 15 Yearly 23 months -do-
9. Soil Conservation 9 - 15 Yearly 23 months -do-
10. Ravine Reclamation 9 - 15 Yearly 23 months -do-
11. Lift Irrigation 11 - 15 Yearly 23 months -do-
12. Linking of Water 9 - 15 Yearly 11 months -do-
Courses
13. OFD under CAD 11 - 15 Yearly 23 months -do-
Projects
* Repayment instalments fixed should be adequate to repay the portion of pumpset loan
with interest fully within a period of nine years i.e. the maximum period allowed for a loan
for pumpset

14. Cross-Bred Cow 5 Monthly / Repayment Month end /

Quarterly to be linked quarter end
with
lactation
period /

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 Moratorium
Period
15. Buffaloes 4-5 Monthly / -do- -do-
Quarterly
16. 2 graded Murrah 4-5 Monthly / -do- -do-
Buffaloes Quarterly
17. Cross-bred Calf rearing 5-6 Monthly / 30 months -do-
Quarterly
18. Sheep breeding 5 Half Yearly 11 months June & Dec.
or Sept. &
March
19. Piggery 4-5 Yearly 11 months June end
20. Goat Rearing 4-5 Quarterly / 11 months Quarter end /
Half yearly June and
Dec. or Sept.
& March
21. Duckery 4-5 Quarterly / 11 months -do-
half yearly
22. Camel and Cart 5-7 Quarterly / - -do-
half yearly
23. Bullocks and Cart 5-7 Quarterly / - -do-
half yearly
24. Animal drawn carts 5-7 Quarterly / - -do-
Half yearly
25. Jhota Buggi 4 Quarterly / - -do-
Half yearly
26. Poultry 6–9 Quarterly 12 months -do-
27. Camel 5 Half yearly - -do-
28. Bullocks 4 Half yearly / - June & Dec.
yearly or Sept. &
March
29. Fisheries
a.Non mechanized boat 4-7 Monthly No Month end
(excluding instalments
monsoon) in 4 months
each
b.Mechanised boat 8 - 12 -do- -do- -do-
30. Inland Fisheries
a.Pond Fish Culture 5-8 Half yearly 11 months June & Dec.
or Sept. &
March
b.Brackish water fish / 5 - 10 Half yearly 11 months -do-
prawn culture
31. Sericulture
a.New Plantation 4 Half yearly 11 months June & Dec.
or
b.Equipment 3 Half yearly 11 months Sept. & March
c.Rearing house 5 Half yearly 11 months
d.Cottage Basin 7 Half yearly 11 months
e.Wiremesh 3 Half yearly 11 months

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 Plantation / Horticulture
32. Cashew Plantation 12 - 15 Yearly 6 - 7 Years June end
33. Mango Plantation 12 - 15 Yearly 6 - 7 Years
34. Lime / Citrus Plantation 10 - 15 Yearly 5 Years
35. Guava Plantation 10 - 15 Yearly 4 - 5 Years June end
36. Sapota Plantation 10 - 15 Yearly 5 - 6 Years
37. Ber Plantation 10 - 15 Yearly 4 - 5 Years
38. Acid Lime Plantation 10 - 15 Yearly 4 - 5 Years
39. Casurina Plantation 7 - 15 Yearly 6 Years
40. Coconut Plantation 14 - 15 Yearly 8 - 9 Years
41. Grape Cultivation 7 - 15 Yearly 3 Years
42. Orange Plantation 10 - 15 Yearly 5 - 7 Years
43. Betelvine Plantation 5 - 15 Yearly 1 Year
44. Arecanut replantation 13 - 15 Yearly 7 - 8 Years
45. Pine apple cultivation 4-5 Yearly 1 - 2 Years
46. Gobar gas (upto 5 cu.M) 7 Yearly -
47. Farm Forestry 7 - 10 Yearly 6 Years
48. Storage Bins 3-5 Half yearly
49. Farm Mechanization
Tractor & equipment’s 9 Yearly 11 months June end
Power tiller 7-9 Yearly 11 months June end
Transporter of Agri. 5 Yearly / Half 11 / 6 June end /
produce yearly / months quarter end
quarterly
50. Crop Loans
Kharif crops - Lumpsum - 31st March
Rabi crops - Lumpsum - 30th June
Summer crops - Lumpsum - 30th Sept.
Perennial Crops - Lumpsum - 30th June or
30th Sept.
depending
on the
season /
period of
crops
NB :
1. It will be open to a beneficiary farmer to repay the loan amount earlier than the
prescribed period depending on his incremental income ability.
2. Where no minimum and maximum range is shown the period indicated should be
allowed.
11 months moratorium means the instalment will be due for repayment by 12th month
(or) next June (wherever June is indicated as due date) after expiry of 11 months.

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VARIOUS SCHEMES OF THE BANK UNDER AGRICULTURE CREDIT

1 Mahabank Kisan Credit Card (MKCC)

(Ref HO Circulr No. AX1/PSRC/ Agri/KCC/Cir.50/2018-19dated 31.08.2018)

Type of Facility Cash Credit (MKCC)

Purpose Working capital for:
 Cultivation of crops
 Post-harvest Expenses.
 Consumption requirements of farmer household
 Maintenance of farm equipment’s
 Working capital for allied agricultural activities
Eligibility  All farmers- Individual / Joint landholders
 Tenant Farmers, Share Croppers, Oral Lessees
 SHG’s/JLG’s of farmers
Limit Limit for first year - Scale of finance of crop ( as decided by DLTC *
Extent of area cultivated + 10% of limit towards post-harvest /
household / consumption requirements + 20% of limit towards repairs
and maintenance expenses of farm assets. From 2nd year onwards plus
10 % of the limit towards cost escalation / increase in scale of finance
for every successive year { 2nd,3rd ,4th and 5th year}
Drawing Power Drawing limit (D.P.) for each year as worked out as above
Margin NIL as margin is considered while fixing Scale of Finance
Rate of Interest  Limit up to Rs. 3.00 lakhs: @7% p.a. (fixed) under interest
subvention scheme up to one year &
 Limit above Rs. 3.00 lakhs: as applicable to Agricultural advances
Security  Limit Up to Rs 1.60 lakh :1)Hypothecation of Crops
 Limit Above Rs 1.60 lakh:1) Hypothecation of Crops &
2)Third Party Guarantee / Mortgage of Land

Repayment  Kharif- Next March

 Rabi- Next June
 Summer crops - Next September
Validity / Renewal The KCC limit is valid for 5 years subject to annual review.
Other Terms & Insurance for notified crops is available as per Government guidelines
Conditions from time to time.
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding
financial institutions including PACS

203
  Legal search from advocate on Bank’s panel for loans above
Rs.1.60 lakh where land is to be mortgaged
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

2 Minor Irrigation

Type of Facility Agri Term Loan (ATL)

Purpose  Sinking a well/ repair or deepening of well

 Sinking a tube well
 Installation of an electric/ diesel pump set
 Drip irrigation system
 Sprinkler irrigation system
 Laying irrigation channels/ pipelines
 Farm pond/water tank
 Composite minor irrigation which includes more than one purpose
mentioned above

Eligibility All farmers- Individual / Joint landholders

Amount  For new dug wells/pipeline/pump sets: As per the NABARD Unit
costs/ Estimates (for reference)
 For equipment’s/machinery: As per price quotations.
Margin  Limit up to Rs 1.60 Lakh- NIL
 Limit above Rs 1.60 Lakh-15% to 25%
(Depending upon purpose & quantum of finance)

Rate of Interest ROI shall be as applicable to Agricultural advances

Security  Hypothecation of Crops, equipment’s, machineries & other assets
 Third Party Guarantee/ Mortgage of Land
Repayment 7 to 11 years, depending upon the repaying capacity
Other Terms &  Proposed well should be located in white watershed area. It should
Conditions not be in dark watershed area.
 GSDA certificate for digging of new well in Grey Watershed is
required.
 Insurance of assets created out of banks finance to be done.
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant

204
  No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.60 lakh where land is to be mortgaged
 Price quotations/ Plan estimates / Permissions etc. depending
up on the purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

3 Farm Mechanization

Type of Facility Agri Term Loan (ATL)

Purpose  Purchase of Tractors/Power tillers

 Purchase of Combine Harvesters
 Purchase of Threshers & other farm implements
 Purchase of vehicle for transportation of farm input / produce
Eligibility All farmers- Individual / Joint landholders
Land Holding  Tractor up to 35 HP: Minimum 4 acres of perennial irrigated land.
Criteria  Tractor above 35 HP: Minimum 6 acres of perennially irrigated land
(Corresponding acreage of dry land or seasonally irrigated land)
 Power tiller: Minimum 3 Acres of perennially irrigated land
Amount As per cost of machinery along with implements and accessories
Margin For tractor / Power tiller unit –
a) Loan Up to Rs 1.60 lakh : No Margin
b) Loan Over Rs 1.60 lakh : 15 % -25% of investment cost of unit
Rate of Interest RoI shall be as applicable to Agricultural advances
Security 1) Up to Rs 1,60,000: Hypothecation of tractor unit
2) Above Rs 1,60,000:
a) Hypothecation of tractor unit and
b) Third party guarantee (Two)/Mortgage of land
Noting of Bank’s hypothecation charge in the RC book
Two blank TTO forms signed by the borrower/s.

Repayment 5 to 9 years, depending upon the purpose of loan

Other Terms &  Bank will finance only for those models of tractors which have
Conditions completed the commercial test from organizations viz Central Farm
Machinery Training & Testing Institute (CFMTT) Budni (Madhya
Pradesh) or Farm Machinery Training and testing Institute ( FMTT),
Hissar
 Registration of the tractor - The tractor should be registered with
concerned Regional Transport Authority with bank clause.

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  Insurance – Comprehensive insurance should be obtained in respect of
assets acquired.
 Bank’s hypothecation should be prominently displayed on the
machinery
 Where ever there is tie up arrangement the terms and condition as per
MOU be followed.
Paper 1. Loan application ie Form No -138, & Enclosure – B2
requirement  All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above Rs.1.60
lakh where land is to be mortgaged
 Price quotations/ Plan estimates / Permissions etc. depending up
on the purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors
4 Animal Husbandry

Type of Facility Agri Term Loan (ATL) &/or Cash Credit (CC)

Purpose  Purchase of Milch Animals like Cows/Buffaloes etc

 Purchase of Draft Animals like Bullock /Camel etc
 Poultry: Broiler / Layers Farm, Hatchery, Feed Mill
 Sheep/Goat: Rearing
 Construction of Byre, Purchase of equipment / machinery
 Working Capital Requirements.
Eligibility  All farmers- Individual / Joint landholders
 Tenant Farmers, Share Croppers, Oral Lessees
 SHG’s/JLG’s of farmers
(Who have necessary expertise)
Amount  Animal: NABARD unit costs (for reference)
 Others: As project Cost / Estimates/ Price quotations.
Margin  Limit up to Rs 1.60 Lakh- NIL
 Limit above Rs 1.60 Lakh-15% to 25%
(Depending upon purpose & quantum of finance)
Rate of Interest ROI shall be as applicable to Agricultural advances
Security  Hypothecation of Animals/Plant Machinery to be purchased
 Third Party Guarantee (Two) / Mortgage of land.
Repayment Within 3 to 7 years with suitable monthly/ quarterly/ half yearly
installments (As per Cash-flow generation)

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Other Terms & Insurance of all animals/birds & equipment’s / machineries purchased is
Conditions essential.
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.60 lakh where land is to be mortgaged
 Price quotations/ Plan estimates / Permissions etc. depending
up on the purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

5 Horticulture / Plantation Activities

Type of Facility Agri Term Loan (ATL)

Purpose Cultivation of fruit crops-Mango, Pomegranate, Grapes, Guava etc.

Eligibility All persons engaged in raising fruit gardens, plantations and nursery crops
as owners of land or permanent tenants or as lease holders (for reasonably
long period).

Amount  NABARD/NHB Unit costs (for reference)

 Project cost
Margin  Limit up to Rs 1.60 Lakh- NIL
 Limit above Rs 1.60 Lakh-15% to 25%
(Depending upon purpose & quantum of finance)
Rate of Interest ROI shall be as applicable to Agricultural advances
Security  Hypothecation of Crops, equipments, machineries & other assets
 Third Party Guarantee/ Mortgage of Land
Repayment Within 7-15 years including gestation period.
Coinciding with harvesting of crops/marketing of produce.
Subsidy Subsidy for the eligible projects is available from NHB/NHM
Paper 1. Loan application ie Form No -138, & Enclosure – B2
requirement  All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.60 lakh where land is to be mortgaged

207
  Price quotations/ Plan estimates / Permissions etc. depending up
on the purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

208
 6 Financing For Setting Up of Agri-Clinics and Agri-Business Centers for Agriculture Graduates(Please
refer HO Circular No AX1/Agriculture/ACABC/Cir No 29/2017-18 dated 29.06.2017)

Type of Facility Agri Term Loan (ATL)

Purpose  Setting up of Agri Clinics

 Setting up of Agri Business Centers
Eligibility  Graduates in Agriculture and allied subjects from State Agriculture Universities
(SAUs) / Central Agricultural Universities / Universities recognized by ICAR /
UGC.
 Diploma in Agriculture and allied subjects from State Agricultural Universities.
 Science graduates with Post Graduation in Agriculture and allied subjects
Amount  Individuals: Maximum Rs 20 lakh,
 Group (5 members) : Maximum Rs 100 lakh
Margin  Limit up to Rs 5.00 lakh: NIL
 Limit above Rs 5.00 lakh:15% to 25%
(However, concessions will be available to SCs / STs, women and beneficiaries
of North Eastern states, Hill areas)
Rate of Interest ROI shall be as applicable to Agricultural advances
Security  Limit upto Rs 5.00 Lakh:
a) Hypothecation of Assets created out of bank loan
 Limit above Rs 5.00 Lakh:
a) Hypothecation of Assets created out of bank loan
b) Mortgage of land / other property.
Repayment 5 to 10 years depending up on the cash flows
Subsidy Credit linked capital subsidy @ 25% of the capital cost of the project funded through
bank loan is available from NABARD. This subsidy would be 33.33% in respect of
candidates belonging to SC, ST, Women and other disadvantaged sections and those
from North-Eastern and Hilly States.
Other Terms & Applicant should complete training programme conducted by National Tanning
Conditions Institute approved by MANAGE
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above Rs.1.00 lakh
where land is to be mortgaged
 Price quotations/ Plan estimates / Permissions etc. depending upon the
purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

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7 Scheme for Financing Farmers for Purchase of Land by Small & Marginal Farmers (Please refer
HO Circular No. AX1/PSRC/AGRI/CIR NO1996/2012-13 dated 30.10.2012)
Type of Facility Agri Term Loan (ATL)

Purpose Purchase of land for agricultural purposes

Eligibility  Small & Marginal Farmers (Who owns maximum of 5 acre of non-
irrigated land or 2.5 acres of irrigated land including land to be
purchased)
 Share Croppers/tenant farmers cultivating up to 2.5 acres of irrigated
land or 5 acres of unirrigated land
 Entrepreneurs with agricultural background are also eligible
(Provided state laws permits purchase of agri lands by non-
agriculturists)
Amount A) Lower of the 1, 2 & 3
1) Valuation as assessed by the branch
2) Circle rate fixed by the state
3) Registration Value
plus Stamp duty & registration charges for sale deed
Maximum Rs 20.00 Lakh
Margin Margin shall be minimum of 20%.
Rate of Interest ROI shall be as applicable to Agricultural advances
Security  The land presently owned, if any & also the lands to be purchased
out of the bank finance be mortgaged in favour of the bank.
 Hypothecation of Crops grown from time to time on the land
Repayment 7 to 10 years half yearly / yearly installments including maximum
moratorium of 24 months
Other Terms &  Total land holding including proposed land should not exceed 5 acres
Conditions for non-irrigated land & 2.5 acres for irrigated land.
 Applicant farmers may be encouraged to purchase the land at one
place & not in fragmented holdings to step up productivity & save
production expenses.
Documents / Papers  Copies of land records regarding land owned & to be purchased,
to be submitted for certified by concerned revenue authorities
loan proposal  Documents of title, Copy of sale agreement, if entered
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.00 lakh where land is to be mortgaged

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 2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

8 Hi-tech Agri Projects

Facility Agri Term Loan (ATL)

Purpose Hi-tech Agricultural projects (Green House/ Polyhouse /Shed net
/Pre Cooling / Cold Storage etc)
Eligibility All farmers- Individual / Joint landholders
Amount As per the project cost/ estimates

Margin  Limit up to Rs 1.60 Lakh- NIL

 Limit above Rs 1.60 Lakh-15% to 25%
(Depending upon purpose & quantum of finance)
Rate of Interest ROI shall be as applicable to Agricultural advances
Security  Hypothecation of Crops/ other assets &
 Third Party Guarantee/ Mortgage of Land
Repayment Within 5 to 9 years depending upon the cash flows of the activity
Other Terms &  All statutory licenses, permissions from respective authorities/
conditions departments for setting up unit/ project are mandatory.
 Subsidy is available from NHB/NHM subject to complying
documentation as per their requirement.
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding
financial institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.60 lakh where land is to be mortgaged
 Price quotations/ Plan estimates / Permissions etc.
depending up on the purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

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9 Mahabank Kisan All Purpose Term Loan
(Please refer HO Circular No. AX1/PSRC/AGRI/CIR NO1999/2012-13 dated 30.10.2012)
Facility Agri Term Loan (ATL)
Purpose To create hassle free single term loan limit to farmer for all term loan
requirements excluding development projects with long gestation
periods (more than 3-4 years)
Eligibility Individuals, Joint/ Group of farmers- owner cultivators & JLG’s/SHG’s
engaged in agriculture & allied activities
Amount  To be based on the investment plan given by the farmer to be
undertaken in the next 2-3 years
 The plan can be a combination of investment/ development
activities relating to agriculture & allied activities.
 It shall be subject to 5 times of Annual Income (Current pre
development stage) of the farmer including allied activities or 50% of
value of land mortgaged whichever is lower subject to Maximum of
Rs 20.00 Lakh
Margin  Small & Marginal Farmers: 5%
 Other Farmers:15%
Rate of Interest ROI shall be as applicable to Agricultural advances
Security  Up to Rs 1.60 lakh- Hypothecation of assets created out of bank
finance
 Above 1.60 lakh (aggregate limit)- Mortgage of land, value thereof
shall be at least 200% of limit sanctioned
Repayment Repayable within 9 years maximum in suitable installments coinciding
overall income generation of the farmer, without linking to individual
projects.
Insurance Asset created have to be insured for full value.
Other Terms & The farmer should undertake to create/ complete the project within
Conditions 15/30 days of availing the disbursement.
Paper requirement 1. Loan application ie Form No -138, & Enclosure – B2
 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.60 lakh where land is to be mortgaged
 Price quotations/ Plan estimates / Permissions etc. depending
up on the purpose of loan
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

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 10 Mahabank Kisan Tatkal Scheme
(Please refer HO Circular No. AX1/PSRC/AGRI/CIR NO 2000/2012-13 dated 30.10.2012)
Facility Agri Term Loan (ATL)
Purpose For instant credit for farming community to meet emergency requirements
Eligibility Individual Farmers / Joint borrowers (not exceeding 4 farmers) who are existing
KCC holders having satisfactory track record of at least 2 years
Amount Minimum- Rs 5000/-
Maximum- Rs 50000/-
(Subject to ceiling at 50% of KCC limit / 25% of annual income)
Margin NIL
Rate of ROI shall be as applicable to Agricultural Advances
Interest
Security Existing Security obtained for KCC to be continued.
Repayment 3 years in half yearly / yearly installments coinciding with harvest of the crop
Other terms The loan is to be cleared in full if a fresh/ enhanced limit is sought in the
& subsequent year based on revised KCC limit.
conditions
Paper 1. Loan application ie Form No -138, & Enclosure – B2
requirement  All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS

11. Gold Loan –Agriculture:

Sr. MKCC against Gold Agri Cash Credit against Term Loan
Particulars
No. Gold
1 Product 6122-1323 6722-1331 6622-1232
Code
2 Crop Production Credit needs for agriculture Credit needs for
Purpose and allied activities agriculture and
allied activities
3 Applicant should be an Applicant should be an Applicant should
Agriculturist Agriculturist be an Agriculturist

Eligibility The applicant should satisfy The applicant should satisfy The applicant
the KYC guidelines(Aadhaar the KYC guidelines should satisfy the
Card is Mandatory for this KYC guidelines
product)
4 Type of Cash Credit Cash Credit Term Loan
facility
5 Minimum: No Min Limit Minimum: No Min Limit Minimum: No Min
Limit
Maximum: Rs. 3.00 lakh Maximum: Rs. 20.00 lakh Limit

213
 Maximum: Rs.
20.00 lakh
6 A) The quantum of loan will be A) On the basis of actual A) On the basis of
assessed strictly on the basis credit requirement / actual credit
of Land Holding of the declaration of the farmer in requirement /
Applicant, Crops Cultivated & the application. declaration of the
prevailing Scale of Finance of farmer in the
the crops. application.

B) 75% of the market value of B) 75% of the market value

the net weight of Gold of the net weight of Gold
Ornaments as per empanelled Ornaments as per B) 60% of the
valuer / appraiser report empanelled valuer / market value of
appraiser report the net weight of
C) On the basis of Gold Value Gold Ornaments
Based as per Banks C) On the basis of Gold as per empanelled
prescribed advance rate set Value Based as per Banks valuer / appraiser
for per gram of 22 Carat Gold: prescribed advance rate set report
for per gram of 22 Carat
(*Subject to periodic review by Gold : C) On the basis
HO based on the market price (*Subject to periodic review Gold Value Based
Assessment of gold) by HO based on the market as per Banks
of Limit price of gold). prescribed
Out of A, B, C above, advance rate set
whichever is lower. Out of A, B, C above, for per gram of 22
whichever is lower. Carat Gold :
Maximum Limit under this (*Subject to
product is Rs. 3.00 Lakh per Maximum Limit under the periodic review by
borrower Gold Loan Scheme (CC+TL) HO based on the
is Rs. 20.00 Lakh per market price of
borrower. gold).

Out of A, B, C
above, whichever
is lower.

Maximum Limit
under the Gold
Loan Scheme
(CC+TL) is Rs.
20.00 Lakh per
borrower.
7 Margin Minimum 25% Minimum 25% Minimum 40%
8 Maximum- 12 Months Maximum- 12 Months Maximum- 60
Loan Tenure
Months
9 Repayment Annual review. However, Annual review. However, The Repayment
farmers have to repay as per farmers have to repay as per period of term loan
crop season. income generation from should be fixed
allied activities &/or with the purpose
Interest should be charged anticipated harvesting & but not exceeding
based on the cash flow / marketing of produce. 5 years. The due
fluidity of the borrower. The date of repayment
same should be recovered as Interest should be charged should be monthly
and when applied. based on the cash flow / / quarterly / half

214
 fluidity of the borrower. The yearly / yearly
same should be recovered coinciding with the
as and when applied. harvesting season
/ generation of
income from the
activity. The
interest shall be
due at the time of
instalment.

Interest should be
charged based on
the cash flow /
fluidity of the
borrower. The
same should be
recovered along
with principal
amount on due
date.
10 Pledge of gold jewellery / ornaments. Bank shall not grant any advance against
Security
bullion / primary gold.
11 MKCC: 7% p. a. (fixed) upto 1 Year MCLR + 0.30% i.e. 7.80% p.a. at present
Rs. 3.00 lakh underInterest subject to annual reset.
subvention scheme upto one
year. The account becoming
overdue or irregular shall not
Interest Rate
qualify for interest subvention
& normal RoI be charged.
Interest Subvention to be
claimed as per extant
guidelines under MKCC.
12 Processing NIL NIL NIL
Charges
13 Upto Rs. 25000/- : NIL Upto Rs. 25000/- : NIL Upto Rs. 25000/- :
Documentati Above Rs. 25000/- : 0.25% + Above Rs. 25000/- : 0.25% NIL
on Charges GST + GST Above Rs. 25000/-
: 0.25% + GST
14 Inspection NIL NIL NIL
Charges
15 Out of Rs. 100/- + GST Rs. 100/- + GST Rs. 100/- + GST
Pocket
Expenses
(Packing
Charges)
16 As per extant delegated As per extant delegated As per extant
sanctioning powers i.e. sanctioning powers i.e. delegated
Scale I Branches – Rs. 5.00 Scale I Branches – Rs. sanctioning powers
lakh 5.00 lakh i.e.
Sanctioning
Scale II & III Branches – Rs. Scale II & III Branches – Scale I Branches –
Authority
8.00 lakh Rs. 8.00 lakh Rs. 5.00 lakh
Scale IV & above Branches- Scale IV & above Scale II & III
As per their delegated lending Branches- As per their Branches – Rs.
powers delegated lending powers 8.00 lakh

215
 (As per HO Circular dated (As per HO Circular dated Scale IV & above
31.03.2020) 31.03.2020) Branches- As per
their delegated
lending powers
(As per HO Circular
dated 31.03.2020)
17 The borrower may be The borrower may be The proceeds of
allowed to draw from the allowed to draw from the the loan may be
Disburseme account directly with the help account directly with the credited to the
nt of Cheque Book / Debit Card help of Cheque Book / Savings account
etc. Debit Card etc. of the borrower.

18 Classificatio The finance granted under the scheme shall be eligible for classification under
n of “Agriculture – Farm Credit”.
Advance
19 As the purpose of the loan Agri Purpose : If the Agri Purpose : If
(single transaction loan) is for purpose of the loan (single the purpose of the
cultivation of crops, the transaction loan) is for crop loan (single
concept of Crop season based based activity, the concept transaction loan) is
delinquency norms should be of Crop season based for crop based
applied (Two crop seasons for delinquency norms applied activity, the concept
‘short term crops’ and one (Two crop seasons for of Crop season
crop season for ‘long term ‘short term crops’ and one based delinquency
crops’). However, Branch crop season for ‘ long term norms applied (Two
should ensure that the crops’). However, Branch crop seasons for
minimum margin of 25% is should ensure that the ‘short term crops’
maintained during entire loan minimum margin of 25% is and one crop
Asset tenure. maintained during entire season for ‘ long
Classificatio loan tenure. term crops’).
n Allied activities: The However, Branch
account shall be should ensure that
considered as NPA after 90 the minimum
days from default in loan margin of 40% is
instalment & or Interest. maintained during
entire loan tenure.
Allied activities:
The account shall
be considered as
NPA after 90 days
from default in loan
instalment & or
Interest.

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12 Scheme for Financing against Warehouse Receipts to farmers

Type of Facility Short Term Loan (STL)

Purpose Loan against receipts of warehouse/cold storage is available to provide

liquidity to the farmers & prevent them from resorting to distress sale
of their produce at the time of harvest.
Valuation Market Price or Value shown in warehouse receipt whichever is lower
Margin 25% of the valuation
Rate of Interest  Loans upto Rs 3.00 lakh to Small & Marginal farmers who has
availed MKCC limit: @7% p.a. upto six months
 For all others: At MCLR + BSS @0.50% + 1.75%
Security  Loan upto Rs 25.00 lakh:
a) Charge on Warehouse Receipts being endorsed in favour of
bank
b) Lien should be noted with concern warehouse
 Loans above Rs 25.00 lakh:
a) Charge on Warehouse Receipts being endorsed in favour of
bank
b) Lien should be noted with concern warehouse
c) Mortgage of land
d) Third party guarantee having sufficient net worth
Repayment The loan should be liquidated as & when the produce is sold during
the interim period not exceeding 12 months
Other Terms & Warehouse receipt should be duly endorsed in favour of bank
Conditions

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13 Scheme for construction of farmhouse to Agriculturists
(Please refer Circular No AX1/PSRC/AGRI/Cir No 146/2016-17 dated 06.03.2017)
Facility Agricultural Term Loan (ATL)
Purpose Construction of farmhouse on agricultural land to facilitate
farmers to have dwelling unit at farm which may also take care
of other requirement such as storage of agriculture produce &
farm implements, cattle shed, drying yard etc. for effective
supervision and farm management.
Eligibility  Person/s engaged (singly or jointly) in agriculture and allied
activities.
 Farmers having minimum irrigated land holding of 2.5 acres
 Farmers having sufficient disposable income from his own farm
as well as from other sources.
 Existing borrowers having good track record for the past 3
years with the Bank and new borrowers who have not availed
any agriculture loan facilities from any bank / financial
institutions.
 Multiple banking not allowed.

Age Limit:
(i) Minimum: The applicant/s must be 18 years old
(completed) as on the date of application
(ii) Maximum: 65 years subject to having sufficient disposable
income
Age at Loan Maturity should not exceed 75 Years.
Loan Amount A) Rs. 2.00 lakh upto Rs. 10.00 lakh: - Farmer/s having perennially
irrigated land holding of minimum 2.5 acres with sufficient
disposable income from his own farm, allied activities as well as
from other sources.
B) Rs. 10.00 lakh upto Rs. 50.00 lakh: - Farmer/s having perennially
irrigated land holding of minimum 5 acres with sufficient
disposable income from his own farm, allied activities as well as
from other sources.
Margin Minimum 25 % of construction cost of proposed farmhouse.
Rate of Interest ROI shall be as applicable to Agricultural advances
Security Registered Mortgage of Agril. Land/s* & Farm House constructed
thereon.
 Hypothecation of standing crop, other movable assets
etc.

218
  Two acceptable guarantors having adequate Net Worth

* In case landed property cannot be mortgaged for some reasons,

NSC, FDR (of our Bank), Government security or such acceptable
security with Margin @ 25 % may be taken as security. Security in
the form of Shares shall not be accepted.
Repayment A) Moratorium period may be allowed upto 18 months or
completion of the construction which is earlier
B) Repayment:
 The entire loan along with interest shall be repaid in yearly / half
yearly / quarterly / monthly instalments along with interest
within a period of 15 years including moratorium period.
The repayment shall be linked to harvesting season of the main
/ cash crop / income generation cycle of the activity.
Insurance Asset created have to be insured for full value.
Legal aspects  Permission for farmhouse construction should be obtained
along with other requirements as per the norms stipulated by
the respective State laws.
 Title clearance & search report shall be obtained from
empaneled advocate for the agricultural land proposed to be
mortgaged where farmhouse will be constructed.
Other Terms &  Conversion of Agriculture land into Non-agriculture (N.A) is not
Conditions required for construction of farm house subject to compliance
of stipulated clause (if any) specified by the respective State
Government.
 The valuation certificate be obtained from respective
Registrar / Sub-Registrar of the area to ascertain the value of
land.
 Income of co-applicants may be clubbed for deciding quantum
of loan & repayment capacity if property held jointly by them
or individually.
 The farmer should have adequate income, liquidity and
capacity to serve the loan installments.
 The applicant/s should satisfy the KYC guidelines.
 Income certificate issued by Tahsildar / Mandal Revenue
Officer / Revenue Department Officer having State Level
Gazetted rank can be accepted where income tax returns are
not filed by the farmers

Paper requirement 1. Loan application i.e. Form No -138, & Enclosure – B2

 All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant

 In case of Co-Applicant is salaried or businessmen, the latest
salary slips / ITR / Form 16 / Balance Sheet & P/L statements

219
  No dues certificates of the applicant from surrounding
financial institutions including PACS
 Legal search from advocate on Bank’s panel where land is to
be mortgaged for 30 years
 Price quotations/ Plan estimates / Permissions / Lay out etc.
 Valuation Certificate from Registrar / Sub – Registrar of the
area

2. Guarantee form F-138

 All 7/12, 8 A & PACS dues certificate of the guarantors
 In case of Guarantor is salaried or businessmen, the latest
salary slips / ITR / Form 16 / Balance Sheet & P/L
14 Scheme for financing farmers for Purchase of Vehicles (Two / Three Wheelers)
(Please refer Circular No AX1/PSRC/AGRI/Cir No 147/2016-17 dated 06.03.2017)
Facility Agricultural Term Loan (ATL)
Purpose Purchase of brand new vehicles such as Two Wheelers, Three Wheeler
Carriages for supervising agriculture operations / effective
management of farm / estate and for transportation of agricultural
produce / inputs, labour, etc.

Eligibility  The applicant/s should be an agriculturist, cultivating his own land or

should be engaged in allied activities such as Dairy, Poultry,
sericulture, fisheries etc.
 The applicant/s should possess a valid driving license or engage
driver possessing valid driving license.
 The applicant or any member of the family should not be defaulters
to any bank or financial institutions.
 Multiple banking is not allowed.

Age Limit:

 For individuals: 18 years and above.

 Maximum Age at Maturity of loan should not exceed 70 years.

Income & Land  The applicant/s should have net annual income of minimum Rs.1.00
holding criteria Lakh from farm / allied activities / other sources and should own
minimum 2 acres of perennial irrigated land or minimum 4 acres of
seasonally irrigated land.
Loan Amount Maximum Rs. 1.25 Lakh

Margin 25 % of the cost of vehicle plus RTO charges.

Rate of Interest 1 year MCLR +0.75 %
Security 1. Loan amount upto Rs. 1.60 lakh

220
  Hypothecation of Vehicle.
2. Loan amount above Rs. 1.60 lakh
 Hypothecation of Vehicle
 Mortgage of Land / Third Party Guarantee
Repayment  The entire loan along with interest shall be repaid within a period of
5-7 years. The repayment would be monthly / quarterly / half- yearly
/ yearly instalments depending upon generation of income / cash
flow.
 The repayment shall be linked to harvesting season of the main /
cash crop / income generation cycle of the activity.
Insurance Asset created have to be insured for full value.
Other Terms &  KYC norms to be followed scrupulously.
Conditions  CIBIL report/RBI defaulter list should be obtained and verified.
 All documents should be submitted in original before
disbursement of the loan.
 Disbursement through RTGS, only in favour of dealers on
ascertaining the Account details
 Invoice / Receipt, Copy of RC Book with Banks charge and
Insurance with bank clause is required.
Paper 1. Loan application i.e. Form No -138, & Enclosure – B2
requirement
 All 7/12, 8 A, 6 D extracts of the applicant
 In case of Co-Applicant is salaried or businessmen, the latest salary
slips / ITR / Form 16 / Balance Sheet & P/L statements
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel where land is to be
mortgaged for 30 years
 Price quotations of Vehicle from Authorized Dealers.

2. Guarantee form F-138

 All 7/12, 8 A & PACS dues certificate of the guarantors
 In case of Guarantor is salaried or businessmen, the latest salary
slips / ITR / Form 16 / Balance Sheet & P/L

221
15 Scheme for financing farmers for Purchase of Vehicles (Four Wheelers)
(Please refer Circular No AX1/PSRC/AGRI/Cir No 147/2016-17 dated 06.03.2017)
Facility Agricultural Term Loan (ATL)
Purpose Purchase of brand new Four Wheel vehicles i.e. Car, SUVs, Jeep, Van &
other Light Motor Vehicles / Multi Utility Vehicles (MUVs) for supervising
agriculture operations / effective management of farm / estate and for
transportation of agricultural produce / inputs, labour etc.

Eligibility  The applicant/s should be an agriculturist, cultivating his own land or

should be engaged in allied activities such as Dairy, Poultry, sericulture,
fisheries etc.
 The applicant/s should possess a valid driving license or engage driver
possessing valid driving license.
 The applicant or any member of the family should not be defaulters to
any bank or financial institutions.
 Multiple banking is not allowed.

Age Limit:
 For individuals: 18 years and above.
 Maximum Age at Maturity of loan should not exceed 70 years.

Income &  The applicant/s should have netannual income of minimum Rs.3.00
Land Lakh from farm / allied activities / other sources and should own
holding minimum 4 acres of perennial irrigated land or minimum 6 acres of
criteria seasonally irrigated land
Loan Maximum Rs. 10.00 Lakh
Amount
Margin 25 % of the cost of vehicle plus RTO charges.
Rate of 1 year MCLR +0.50 %
Interest
Security 1) Loan amount upto Rs. 1.60 lakh
 Hypothecation of Vehicle.
2) Loan amount above Rs. 1.60 lakh
 Hypothecation of Vehicle
 Mortgage of Land / Third Party Guarantee
Repayment  The entire loan along with interest shall be repaid within a period of 5-7
years. The repayment would be monthly / quarterly / half- yearly / yearly
instalments depending upon generation of income / cash flow.
 The repayment shall be linked to harvesting season of the main / cash
crop / income generation cycle of the activity.
Insurance Asset created have to be insured for full value.

222
 Other Terms  KYC norms to be followed scrupulously.
&  CIBIL report/RBI defaulter list should be obtained and verified.
Conditions  All documents should be submitted in original before disbursement of
the loan.
 Disbursement through RTGS, only in favour of dealers on ascertaining
the Account details
 Invoice / Receipt, Copy of RC Book with Banks charge and Insurance
with bank clause is required.
Paper 3) Loan application ie Form No -138, & Enclosure – B2
requirement
 All 7/12, 8 A, 6 D extracts of the applicant
 In case of Co-Applicant is salaried or businessmen, the latest salary
slips / ITR / Form 16 / Balance Sheet & P/L staments
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel where land is to be
mortgaged for 30 years
 Price quotations of Vehicle from Authorized Dealers.

2. Guarantee form F-138

 All 7/12, 8 A & PACS dues certificate of the guarantors
 In case of Guarantor is salaried or businessmen, the latest salary slips
/ ITR / Form 16 / Balance Sheet & P/L

16 Scheme for Estate Purchase Loans (Refer

Ho Circular No AX1/PSRC/AGRI/CIR NO1997/2012-13 dated 30.10.2012)

Type of Facility Agri Term Loan (ATL)

Purpose Purchase of estates growing traditional plantation crops viz. coffee, tea,
rubber, cardamom, cashew, pepper, coconut etc.
Eligibility  The purchaser should have yielding estates and should be in a
position to rejuvenate the Estate proposed to be purchased.
 Satisfactory past dealings
 Experienced, Financially sound and able to bring Margin & Service
the debt
 Buyer should qualify respective State Govt norms
 The estate should preferably neglected one.

223
  Total land holding including the land to be acquired be within the
land ceiling norms of respective state.
Amount B) Lower of the 1, 2 & 3
1) Market Value
2) Guidance Value / Circle rate fixed by the state
3) Purchase Consideration after retaining necessary margin
plus Stamp duty & registration charges for sale deed
Maximum Rs 20.00 Lakh
Margin Margin shall be normally of 50% on purchase consideration or value of
the estate, whichever is lower.
Rate of ROI shall be as applicable to Agricultural advances
Interest
Security Primary:
1) Mortgage of property to be purchased
2) Hypothecation of Plantation crops raised on the field / estate

Collateral:
1) Mortgage of existing landed properties including preferably residential
property is to be obtained.
In any case, the value of the security should not be less than 200% of the
loan amount.

Repayment 7 to 9 years period

In specific cases, depending on the status of the Estate & rejuvenation
period required, it may be extended upto 20 years.
Documents /  Copies of land records regarding land owned & to be purchased,
Papers to be certified by concerned revenue authorities
submitted for  No dues certificate from PACS / Commodity Boards / Financial
loan proposal Institutions.
 Documents of title & other relevant documents related to landed
property as well as lands to be purchased.
 Copy of sale agreement, if entered into or offer letter by the vendor
 Crop history of the Estate to be purchased as well as existing Estates
 Valuation report of the Estate to be purchased from the Panel Valuer
Paper 1. Loan application ie Form No -138, & Enclosure – B2
requirement  All 7/12, 8 A, 6 D extracts, Chatu Sima of the applicant
 No dues certificates of the applicant from surrounding financial
institutions including PACS
 Legal search from advocate on Bank’s panel for loans above
Rs.1.00 lakh where land is to be mortgaged
2. Guarantee form F-138
 All 7/12, 8 A & PACS dues certificate of the guarantors

224
17 Maha Dal Mill Scheme
(Please refer HO Circular No. AX1/Credit Priority/Cir No.88/2017-18 dated 01.01.2018)
Target Group Dal Mills – New & Existing
Eligibility a) Individuals, Sole-proprietorship, Joint Borrowers, Partnerships,
LLPs and Company.
b) For New and Existing Units
c) For existing units – Profit making units with BBB and above
rating as per Credit Risk Assessment.
d) Takeover of units conforming to takeover norms as per lending
policy is also permitted
Purpose a) Acquisition of Machineries / Purchase or Construction of
Factory Building / For modernization of existing Dal Mills.
[Acquisition of Second Hand Machineries may be allowed with
the prior permission of next higher authority and margin at 40%
to be kept]
b) Working Capital needs.
Type of Facilities Term loan, Cash Credit (Hypothecation) outward bill limit, LCs, BGs
Quantum Need based.
Term Loans: Based on the project cost.

Working Capital:
For Limits up to Rs.5 Crores – Turnover Method – As per Nayak
Committee recommendation

For Limits above Rs.5 Crores – As per Projected Working Capital Gap
Method
Assessment of a) For Limit up to Rs.5.00 Crores:
Working Capital Turnover Method – As per Nayak Committee recommendation
Limit
b) For Limits above Rs.5.00 Crores: As per Projected Working
Capital Gap (PWCG) Method
Being a seasonal industry, when any unit requires high working capital
due to large raw material / inventory holding, then peak level and non-
peak level limits can be fixed based on the Cash Budget Method and
depending on the actual needs.

225
Illustration for Assessment by Turnover Illustration for Assessment by PWCG Method:
Method:
Let XYZ & Co has following financial data:
Let ABC & Co has following financial data:
Projected Sales: Rs.7000.00 Lakh, Current Assets:
Projected Sales: Rs.2500.00 Lakh, Current Rs.2424.00 Lakh, Other Current Liabilities
Assets: Rs.858.00 Lakh, Other Current (excluding Bank Borrowings): Rs.215 Lakh, Actual
Liabilities (excluding Bank Borrowings): Rs.21 NWC: Rs.709.00 Lakh
Lakh, Actual NWC: Rs.337.00 Lakh
Sr. Particulars Amount Sr. Particulars Amount
A. Gross Working 25% of Rs.2500.00 A. Total Current Assets Rs.2424.00 Lakh
Capital = 25% of Lakh = Rs.625.00 B. Other Current Rs.215 Lakh
Projected Lakh Liabilities (excluding
Annual Sales Bank Borrowings)
B. Net Working 5% of Rs.2500.00 C. Working Capital Gap Rs.2209.00 Lakh
Capital = 5% of Lakh = Rs.125.00 D Minimum NWC Rs.606.00 Lakh
Projected Lakh Required = 25% of
Annual Sales Total Current Assets
C. Actual NWC Rs.337.00 Lakh E Actual NWC Rs.709.00 Lakh
D A–B Rs.500.00 Lakh F C–D Rs.1603.00 Lakh
E A–C Rs.288.00 Lakh G C–E Rs.1500.00 Lakh
F MPBF = D or E, Rs.288.00 Lakh H MPBF = F or G, Rs.1500.00 Lakh
whichever is whichever is Lower
Lower

Margin Term Loan – Minimum 25%

Working Capital:
Stocks – Minimum 25%.
Book Debts – Minimum 40%. (Cover period – Maximum 60 days)

Note: Margin for book debts can be lowered up to 25% where more than 75%
collateral security is available or where the loan accounts have been
satisfactorily conducted with us for at least 4 years.
Security Primary Security
Hypothecation/Mortgage of Assets financed by bank.

Collateral Security
Loans up to Rs.50 Lakh: To be mandatorily covered under CGTMSE

For loans above Rs.50 Lakh up to Rs.2.00 Crores: To be covered under

CGTMSE if borrower is unable to provide collateral security.

Loans where CGTMSE cover is not available or not taken, collateral security
in form of Freehold or Leasehold Land & Building (SARFAESI Compliant) in
the name of applicant/s or close relatives of the applicant/s, FDRs of our
bank, NSCs/KVPs, Insurance Policies, Debt Instruments of Public Limited

226
 Companies with AAA and AA rating by RBI approved external rating agencies
and Government Securities (Only Central & State Government Bonds) to be
obtained as under:

Sr. Quantum of Loan Collateral Security (Minimum)

1. Loan Amount up to New customer-50% of Exposure
Rs.10.00 Crores Existing Customer-40% of exposure
2. Loan Amount above New customer-40% of Exposure
Rs.10.00 Crores Existing Customer-30% of Exposure

Incentive for higher collateral securities may be offered as per the HO Circular
No. AX1/PSRC/36/2017-18 dated 30-06-2017 on “collateral policy on MSME
advances.”
Credit Rating Internal Credit Rating is applicable for all accounts with aggregate exposure
(Fund + Non-Fund) of Rs.25.00 Lakh and above.
For limits above Rs.5.00 Crores, External Credit Rating is mandatory
Interest Rate 1 year MCLR +2.00% for loan up to Rs.25. Lakh
inclusive of BSS 1 year MCLR + 2.25% for loan above Rs.25.00 Lakh up to Rs.2 Crores
1 year MCLR + 2.75% for loan above Rs.2 Crores & up to Rs.5.00 Crores
Above Rs.5.00 Crores – Based on Risk based pricing
Repayment Term Loan: 5 to 7 years including the moratorium period of maximum 12
months
Working Capital: Repayable on demand
Review/ Working Capital: Review / Renewal at every year
Renewal Term Loan: Yearly Review of Term Loan of Rs.25.00 Lakh and above

Documentation Up to Rs.2.00 Lakh: Nil

Charges Above Rs.2.00 Lakh: 0.20% of the Sanctioned Amount
[Minimum Charges – Rs.500/- and Maximum Charges – Rs.15,000/-]
Supervision / Up to Rs.25,000/-: Nil
Inspection Above Rs.25,000/-: 0.25% p.a.
Charges [Minimum Charges – Rs.250/- and Maximum Charges – Rs.5,000/-]
Documentation Appropriate documents as per As per HO Circular No.AX1/PLN/Service
charges/Cir No.5/2017 dated 28.06.2017
Stock To be submitted monthly.
Statements
Insurance Comprehensive Insurance to be obtained for assets hypothecated / charged
to bank.
Inspection/Visit As per HO Circular No.AX1/PLN/Service charges/Cir No.5/2017 dated
28.06.2017.
Sanction As per the extant delegation of sanctioning powers.

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18 Maha Cotton Ginning Mill Scheme
(Please refer HO Circular No. AX1/Credit Priority/Cir No.71/2017-18 dated 10.11.2017)
Target Group Cotton Ginning Mills – New & Existing
Eligibility a) Sole-proprietorship, Joint Borrowers, Partnerships, LLPs and
Company.
b) For New and Existing Units
c) For existing units – Profit making units with BBB and above rating as
per Credit Risk Assessment.
d) Takeover of units conforming to takeover norms as per lending
policy is also permitted
Purpose a) Acquisition of Machineries / Purchase or Construction of Factory
Building / For modernization of existing Dal Mills.
[Acquisition of Second Hand Machineries may be allowed with the prior
permission of next higher authority and margin at 40% to be kept]
b) Working Capital needs.
Type of Term loan, Cash Credit (Hypothecation) outward bill limit, LCs, BGs
Facilities
Quantum Need based.
Term Loans: Based on the project cost.
Working Capital:
For Limits up to Rs.5 Crores – Turnover Method – As per Nayak Committee
recommendation
For Limits above Rs.5 Crores – As per Projected Working Capital Gap Method
Assessment a) For Limit up to Rs.5.00 Crores:
of Working Turnover Method – As per Nayak Committee recommendation
Capital Limit
b) For Limits above Rs.5.00 Crores: As per Projected Working Capital
Gap (PWCG) Method
Inventory Norms

Raw Material: Not exceeding 2 months average consumption of raw cotton

Packing Material: Not exceeding 1 months requirement of packing material
Stock in Progress: Not exceeding ¼ months cost of production
Finished Goods: Not exceeding ½ months cost of sales
Receivable Norms: Not exceeding 1 months credit sales

Illustration for Assessment by Turnover Illustration for Assessment by PWCG Method:

Method:
Let ABC & Co has following financial data:
Projected Sales: Rs.2500.00 Lakh, Current
Assets: Rs.858.00 Lakh, Other Current
Liabilities (excluding Bank Borrowings): Rs.21
Lakh, Actual NWC: Rs.337.00 Lakh
Let XYZ & Co has following financial data:
Projected Sales: Rs.7000.00 Lakh, Current
Assets: Rs.2424.00 Lakh, Other Current
Liabilities (excluding Bank Borrowings): Rs.215
Lakh, Actual NWC: Rs.709.00 Lakh

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 Sr Particulars Amount Sr Particulars Amount
. .
A. Gross Working 25% of Rs.2500.00 A. Total Current Assets Rs.2424.00 Lakh
Capital = 25% of Lakh = Rs.625.00 B. Other Current Rs.215 Lakh
Projected Lakh Liabilities (excluding
Annual Sales Bank Borrowings)
B. Net Working 5% of Rs.2500.00 C. Working Capital Gap Rs.2209.00 Lakh
Capital = 5% of Lakh = Rs.125.00 D Minimum NWC Rs.606.00 Lakh
Projected Lakh Required = 25% of
Annual Sales Total Current Assets
C. Actual NWC Rs.337.00 Lakh E Actual NWC Rs.709.00 Lakh
D A–B Rs.500.00 Lakh F C–D Rs.1603.00 Lakh
E A–C Rs.288.00 Lakh G C–E Rs.1500.00 Lakh
F MPBF = D or E, Rs.288.00 Lakh H MPBF = F or G, Rs.1500.00 Lakh
whichever is whichever is Lower
Lower

Margin Term Loan – Minimum 25%

Working Capital:
Stocks – Minimum 25%.
Book Debts – Minimum 40%. (Cover period – Maximum 60 days)

Note: Margin for book debts can be lowered up to 25% where more than
75% collateral security is available or where the loan accounts have been
satisfactorily conducted with us for at least 4 years.
Security Primary Security
Hypothecation/Mortgage of Assets financed by bank.
Collateral Security
Loans up to Rs.50 Lakh: To be mandatorily covered under CGTMSE
For loans above Rs.50 Lakh up to Rs.2.00 Crores: To be covered under
CGTMSE if borrower is unable to provide collateral security.

Loans where CGTMSE cover is not available or not taken, collateral

security in form of Freehold or Leasehold Land & Building (SARFAESI
Compliant) in the name of applicant/s or close relatives of the
applicant/s, FDRs of our bank, NSCs/KVPs, Insurance Policies, Debt
Instruments of Public Limited Companies with AAA and AA rating by
RBI approved external rating agencies and Government Securities
(Only Central & State Government Bonds) to be obtained as under:
Sr. Quantum of Loan Collateral Security (Minimum)
1. Loan Amount up to New customer-50% of Exposure
Rs.10.00 Crores Existing Customer-40% of exposure
2. Loan Amount above New customer-40% of Exposure
Rs.10.00 Crores Existing Customer-30% of Exposure
Incentive for higher collateral securities may be offered as per the HO
Circular No. AX1/PSRC/36/2017-18 dated 30-06-2017 on “collateral
policy on MSME advances.”

229
Credit Rating Internal Credit Rating is applicable for all accounts with aggregate
exposure (Fund + Non-Fund) of Rs.25.00 Lakh and above.
For limits above Rs.5.00 Crores, External Credit Rating is mandatory
Repayment Term Loan: 5 to 7 years including the moratorium period of maximum
12 months
Working Capital: Repayable on demand
Review/ Renewal Working Capital: Review / Renewal at every year
Term Loan: Yearly Review of Term Loan of Rs.25.00 Lakh and above

Documentation Appropriate documents as per As per HO Circular No.AX1/PLN/Service

charges/Cir No.5/2017 dated 28.06.2017
Stock Statements To be submitted monthly.
Insurance Comprehensive Insurance to be obtained for assets hypothecated /
charged to bank.
Inspection/Visit As per HO Circular No.AX1/PLN/Service charges/Cir No.5/2017 dated
28.06.2017.
Sanction As per the extant delegation of sanctioning powers.

19 Scheme for financing Farmer Producer Organizations (FPOs)

(Please refer HO Circular No AX1/PSRC/AGRI-FPO/Cir No.46/2018-19 dated 25.07.2018)
Target Group Registered Farmer Producer Organizations (FPOs)
Definition FPO: It is an organization of farmer producer members as defined in
section IX A of the Indian Companies Act, 2013 (including subsequent
amendments there to or re-enactment thereof) and incorporated with
the Registrar of Companies (RoC).
Eligibility a) All registered Farmer Producer Organizations with at least six
months of operations since registration
b) FPOs applying for collateral free loan based on Credit Guarantee
from SFAC under EGCGFS shall comply with the eligibility criteria as
specified in the EGCGFS scheme document
c) Takeover of units conforming to takeover norms as per lending
policy is also permitted
(Please refer HO Circular No AX1/PSRC/FPO-SFAC/Cir No.104/2017-18
dated 05.02.2018 for detailed guidelines regarding Equity Grant & Credit
Guarantee Fund Scheme of SFAC)
Purpose Loan facilities may be considered for any / few / all the activities
depending upon the requirement of FPO:
a) Purchase of Input material supplying to the farmers
b) Warehouse Receipt finance
c) Marketing activities
d) Setting up of Common Service Centers
e) Setting up of Processing Centers
f) Common Irrigation Facility
g) Custom Purchase / Hiring of Farm Equipment
h) Purchase of High-tech farming Equipment’s
i) Other productive Purposes- Based on submitted investment plan

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Type of Facilities Term Loan / Cash Credit
Quantum 1) Covered under Credit Guarantee from SFAC
Minimum – above Rs. 3.00 lakh
Maximum – upto Rs. 1.00 crore
Term Loans: Based on the project cost (i.e. expenses related to Land &
Building, Plant & Machinery, Furniture & Fixtures, Electrical Fittings,
Other Fixed costs etc. excluding expenses incurred for purchase of land)
Working Capital:
Turnover Method – As per Nayak Committee recommendation
2) Not Covered under Credit Guarantee from SFAC:
Loans above Rs. 1.00 crore shall be considered as per extant lending
policy of the bank.
Margin Term Loan – Minimum 25%
Working Capital:
Stocks – Minimum 25%.
Book Debts – Minimum 40%. (Cover period – Maximum 60 days)
Equity Grant Fund Scheme of SFAC enables eligible FPOs to receive a
grant equivalent in amount to the equity contribution of their
shareholder members. It addresses nascent and emerging FPOs, which
have paid up capital not exceeding Rs. 30 lakh as on the date of
application. Equity Grant by SFAC shall be a cash infusion equivalent to
the amount of shareholder equity in the FPO subject to a cap of Rs. 10
lakh per FPO.
Security Primary Security
Hypothecation / Mortgage of Assets created out of bank finance.

Collateral Security
a) Loans upto Rs. 1.00 crore: To be covered under Credit Guarantee
from SFAC: No collateral security shall be required.

The Credit Guarantee Cover is provided by SFAC to Bank so as to enable

them to provide collateral free credit to FPOs by minimizing their lending
risks in respect of loans not exceeding Rs. 100.00 lakhs. Maximum
Guarantee Cover shall be restricted to the extent of 85% of the eligible
sanctioned credit facility, or Rs. 85 Lakh, whichever is lower.
 Onetime Guarantee Fees: 0.85% of the sanctioned credit facility
subject to maximum of Rs. 85000/- payable by respective FPOs
 Annual Service Fees of 0.25% per annum payable by respective
FPOs
b) Loans above Rs. 1.00 crore: Not covered under Credit Guarantee
from SFAC: As per banks’ extant lending / collateral policy.
Credit Rating  Internal Credit Rating is applicable for all accounts with aggregate
exposure (Fund + Non-Fund) of above Rs.25.00 Lakh.
 For limits above Rs.5.00 Crores, External Credit Rating is
mandatory

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Interest Rate Size of Advance ROI
RATE OF INTEREST FOR “FARM CREDIT”
Above Rs.3 lakh & up to Rs.10 lakh 1 Year MCLR
+BSS@0.25%+2.00%
Above Rs.10 lakh 1 Year MCLR
+BSS@0.25%+3.00%
RATE OF INTEREST FOR “AGRI As per Risk Based Pricing
INFRASTRUCTURE & AGRI (RBP) guidelines (latest
ANCILLARY ACTIVITIES” updated on 07.07.2018)
Branches have to manually add the BSS @ 0.25% in CBS through Rate
Increment menu in CBS.
Repayment Term Loan: Repayable within 3 to 7 years period (including the
moratorium period of maximum 12 months) depending upon the
purpose of investment, economic life of assets and cash flow of the
activity
Working Capital: Repayable on demand. To be reviewed / renewed
annually
Disbursement  The disbursement of term loan shall be made in two to three
tranches based on the requirement of the project and progress of the
work
 Payment shall be made directly to the supplier / dealers by NEFT
/ RTGS only.
 The concern dealer / supplier shall be informed by letter / email
about the disbursement of loan by bank for purchase of goods / plant
& machineries and in any case, dealer / supplier shall not part / return
the loan amount to borrower.
Loan Guarantee  In case of FPO seeking collateral free loan under Credit Guarantee
Fees available from SFAC-Onetime Guarantee Fess @ 0.85% of sanctioned
loan amount shall be charged at the time of sanction and should be
recovered upfront and every year Annual Service Fees @ 0.25% loan
amount till coverage of the guarantee.
 The Branches / Zonal Offices shall apply to SFAC for Guarantee
Cover in the specified form for credit proposals sanctioned by them
during any quarter prior to expiry of the following quarter viz.,
application with respect to credit facility sanctioned in April–June
Quarter must be submitted in the ensuing quarter, i.e. July-September
to qualify for consideration under the Credit Guarantee Fund Scheme of
SFAC. (Please refer HO Circular No AX1/PSRC/FPO-SFAC/Cir
No.104/2017-18 dated 05.02.2018 for detailed guidelines)
 Onetime Guarantee Fees & Annual Service Fees payable to SFAC
shall be borne by the beneficiary FPOs
Review/ Renewal Working Capital: Review / Renewal on yearly basis
Term Loan: Yearly Review of Term Loan having sanction amount of
Rs.25.00 Lakh and above

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Processing Fee Working Capital Limits Processing Fees
Above Rs.5.00 Lakh & up 0.50% + GST @ 18%, minimum Rs.1000/- at
to Rs.100.00 Lakh present subject to changes as per HO
guidelines
Term Loans
Up to Rs.20.00 Crores 1% + GST @ 18% of sanctioned amount at
present subject to changes as per HO
guidelines
Non Fund 2/3rd of processing charges applicable to
Working Capital Limits
Documentation Up to Rs.2.00 Lakh: Nil
Charges
Above Rs.2.00 Lakh to Rs. 10 crore: 0.20% + GST @ 18% of the Sanctioned
Amount at present subject to changes as per HO guidelines

[Minimum Charges – Rs.500/- and Maximum Charges – Rs.25000/-]

Above Rs. 10.00 crore: Rs. 50000/-+ GSR @ 18% of Sanctioned Amount
at present subject to changes as per HO guidelines
Supervision / Up to Rs.25,000/-: Nil
Inspection Charges Above Rs.25,000/-: 0.25% + GST @ 18% p.a. at present subject to
(Yearly) changes as per HO guidelines
[Minimum Charges – Rs.250/- and Maximum Charges – Rs.5,000/-]
Stock Statements To be submitted monthly.
Insurance Comprehensive Insurance for full value to be obtained for assets
hypothecated / charged to bank (no deviation shall be allowed)
Inspection/Visit Branch Manager / Agri Field Officers shall pay pre sanction visit while
appraising the loan. Periodical post sanction inspections / visits (at least
once in a quarter) after disbursement shall be made to verify the end use
and creation of the asset by the FPOs.
Further, visiting officials should enter details about Pre-Sanction / Post-
Sanction visits in the system “Customer Visit Report” under ULC on the
same day of visit.
Sanction As per the extant delegation of sanctioning powers.
Classification Priority - Agriculture
Product Code 1) CC 6765-8303 CC-FARMER PRODUCER ORG FPO
2) TL 6622-1246 TL- FARMER PROD ORG FPO

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 RECOVERY IN AGRICULTURE

RELIEF MEASURES IN AREAS AFFECTED BY NATURAL CALAMITIES

A) Agriculture Loans: Short-term Production Credit (Crop Loans)

 All short-term loans, except those which are overdue at the time of occurrence of
natural calamity, should be eligible for restructuring. The principal amount of the short-term
loan as well as interest due for repayment in the year of occurrence of the natural calamity
may be converted into term loan.
 The repayment period of the restructured loan may vary depending on the severity of
the calamity, the impact on loss of economic assets and distress it caused. A maximum
repayment period of up to 2 years (including the moratorium period of 1 year) should be
allowed if the loss is between 33% and 50%. If the crop loss is 50% or more, repayment period
may be extended upto a maximum of 5 years (including the 1 year moratorium period).

In all restructured loan accounts, moratorium period of at least one year should be
considered. Branches should also not insist on additional collateral security for such
restructured loans.

B) Agriculture Loans: Long term (Investment) Credit

The existing term loan installments should be rescheduled keeping in view the repaying
capacity of the borrower and the nature of natural calamity viz.

 Natural Calamities where only crop for that year is damaged and productive assets are
not damaged.
 Natural Calamities where the productive assets are partially or totally damaged and
borrowers are in need of a new loan.

In regard to natural calamity under category abovewhere only crop for that year is damaged
and productive assets are not damaged, the branches may reschedule the payment of
installment during the year of natural calamity and extend the loan period by one year. Under
this arrangement the installments defaulted wilfully in earlier years will not be eligible for
rescheduling. The branches may also have to postpone payment of interest by borrowers.

In regard to category where the borrower’s assets are partially/totally damaged, the
rescheduling by way of extension of loan period may be determined on the basis of overall
repaying capacity of the borrower vis-a-vis his total liability (old term loan, restructured crop
loan, if any and the fresh crop/term loan being given) less the subsidies received from the
Government agencies, compensation available under the insurance schemes etc. While the
total repayment period for the restructured/fresh term loan will differ on case-to-case basis,
generally it should not exceed a period of 5 years.

234
 SLBC GUIDELINES ON ASSET CLASSIFICATION & NPA NORMS UNDER AGRICULTURE IN
MAHARASHTRA STATE

IRAC norms applicable for Crop loans & Farm Credit where repayment is from harvest of
crops are as under:

A) Short Duration Crops:

I.Kharif / rabi crops: A loan granted for Kharif / rabi crops will be treated as NPA if the
installment of principal or interest thereon remains overdue for two crop season covering
a period of 21 months from repayment due date.
II.Horticulture crops: A loan granted for Horticulture crops will be treated as NPA if the
installment of principal or interest thereon remains overdue for two crop season covering
a period of 24 months from repayment due date .

B) Long duration crops:

I.Perennial Sugarcane (Adsali): A loan granted for sugar cane (Adsali) will be treated as NPA
if the installment of principal or interest thereon remains overdue for one crop season
covering a period of 18 months from repayment due date
II.Perennial Crop Banana (Mrig Bahar): A loan granted for Banana crop will be treated as NPA
if the installment of principal or interest thereon remains overdue for a period of 21 months
from repayment due date

NPA CLASSIFICATION FOR AGRICULTURE IN MAHARASHTRA

Particulars Short Duration Crops Horticulture Perennial Perennial
Crops Sugar Cane- Banana Crop-
Kharif Rabi Adsali Mrig Bahar
Season Season
Year of Finance 2018-19 2018-19 2018-19 2018-19 2018-19
Date of Finance 01.06.2018 01.10.2018 01.06.2018 01.06.2018 01.06.2018
Season Starts Jun-18 Oct-18 Sep-18 Jul-18 Jun-18
Harvesting Nov-18 Mar-19 May-19 Dec-19 Jun-19
Time
Repayment 31.03.2019 30.06.2019 30.06.2019 30.06.2020 30.09.2019
Due Date

First Crop
Season after
Due Date
Season Starts Jun-19 Oct-19 Sep-19 Jul-20 Jun-19
Harvesting Nov-19 Mar-20 May-20 Dec-21 Jun-20
Time

235
 Second Crop
Season after
Due Date
Season Starts Jun-20 Oct-20 Sep-20 ## Jun-20
Harvesting Nov-20 Mar-21 May-21 ## Jun-21
Time
NPA Date 31.12.2020 31.03.2021 30.06.2021 31.12.2021 30.06.2021
*For other states, the norms are applicable as per respective SLBC guidelines

236
 MICRO SMALL AND MEDIUM ENTERPRISES (MSME)

1) Definition of Micro, Small & Medium Enterprises

Micro Enterprise - The investment in Plant and Machinery or Equipment does not exceed one crore
rupees and turnover does not exceed five crore rupees.

Small Enterprise - The investment in Plant and Machinery or Equipment does not exceed ten crore
rupees and turnover does not exceed fifty crore rupees.

Medium Enterprise - The investment in Plant and Machinery or Equipment does not exceed fifty
crore rupees and turnover does not exceed two hundred and fifty crore rupees.

Summary in tabular form is mentioned as below:

MSME, Investment in Plant and And Turnover

Firm\Criteria Machinery or Equipment
Micro does not exceed Rs.1 crore and does not exceed Rs. 5 crore
Enterprise
Small does not exceed Rs.10 crore and does not exceed Rs. 50 crore
Enterprise
Medium does not exceed Rs.50 crore and does not exceed Rs. 250
Enterprise crore

Note: A composite criterion of investment and turnover classification of an

enterprise as micro, small or medium

2) MSME SCHEMES OF THE BANK:

A) Mahabank GST Credit Scheme for MSMEs

Eligibility MSME Units engaged in trading/services/manufacturing activity
irrespective of constitution. The MSME unit/borrower should have
requisite registration under GST Act i.e., Provisional Registration (GST
REG-25) or Final Registration (GST REG-06). The MSME unit/borrower
should have valid GST returns i.e., GSTR-1(Regular) for minimum latest 3
months / GSTR-4(Composition) for latest quarter.

Requirement of filings as under

GSTR-1(Regular) or GSTR-4(Composition)
For latest 3 months For latest quarter

The borrower shall have all the statutory approvals/NOCs from respective
departments in place. The internal credit rating of the MSME

237
 unit/Borrower should be BBB and above. The facility under the scheme is
available only under Sole Banking.
Purpose To fund need based working capital requirement for
trading/services/manufacturing activity
Quantum Minimum Rs.10.00 lakh; Maximum Rs. 10.00 crore

Assessment Assessment needs to be done strictly as per turnover (Sales) in GSTR-1 /

GSTR- 4 returns by the borrower. No CMA should be insisted upon. In
case of existing borrower, the turnover as per GST return should be
reconciled with the turnover in CBS.
Margin 25% of paid stock and receivables
Rate of For Advances upto Rs.25.00 lakh: RLLR + 0.75 + BSS
Interest
For Advances above Rs.25.00 lakh:
Internal CRR Applicable ROI
AAA RLLR + 0.75 + BSS
AA RLLR + 1.00 + BSS
A RLLR + 1.30 + BSS
BBB RLLR + 1.50 + BSS
Security Primary: Hypothecation of Inventory and receivables

Collateral: As per collateral policy of the bank.

Repayment On Demand
Drawing DP shall be computed based on value of stock & receivables minus sundry
Power (DP) creditors (Trade) after deduction of 25% margin.
Computation
Takeover Takeover of existing borrowal accounts from other banks / FIs is permitted
subject to compliance with takeover norms of the bank

B) Maha-Doc+ & MPLS ( Mahabank Professional Loan Scheme):

Target Doctors, Chartered Accountant, Engineers & Architects etc.
group
Purpose Doctors (Qualified and Registered Qualified Chartered Accountant,
Medical Practitioners with minimum Engineers& Architect (Registered with
qualification BHMS/BAMS/BPT/ central & State body and having
MBBS/BDS) independent practice)
 For acquiring premises on  For acquiring premises on ownership
ownership basis required for running basis required for office purpose subject to
Clinics/Nursing Homes, Polyclinics, compliance with license / registration
pathological lab subject to compliance requirements under laws of State / Central
with license / registration Govt. as the case may be, be ensured
requirements under laws of State /  Renovations, expansion and
Central Govt. as the case may be, be modernization of existing centre.
ensured  Purchase of equipments, furniture &
fixture, furnishing, renovating existing

238
  Purchase of equipments, furniture office, professional tools, computers, UPS,
& fixture, furnishing, professional software etc.
tools, computers, UPS, software etc.  Purchase of vehicles for self-use.
 Renovations, expansion and
modernization of existing centre.
 Purchase of vehicles, ambulance
etc. for medical practitioner.
 Working Capital requirement
including stock of medicine
/disposables
Quantum Doctors Chartered Accountant, Engineers&
Architect
Rural area & Semi-Urban: Rs.50.00 Rural area & Semi-Urban: Rs.50.00 lakh
lakh (Composite loan limit ) (Composite loan limit)
Urban & Metros: Rs.500.00 lakh Urban & Metros: Rs.200.00 lakh
(Composite loan limit ) (Composite loan limit)
Loan requirement above Rs. 500 lakh to Doctors and above Rs.200 lakh to Chartered
Accountant, Engineer & Architect be considered under our regular loan scheme.
Facility Doctors Chartered Accountant, Engineers&
Architect
 Term loan  Term loan
 Clean Cash Credit limit: Clean  Clean Cash Credit limit: Clean Cash
Cash credit limit of 20% of the term credit limit of 20% of the term loan
loan amount maximum up to Rs. 5.00 amount maximum up to Rs. 2.00 lakh by
lakh by way of sub limit. (The clean way of sub limit (The clean cash credit limit
cash credit limit be sanctioned only be sanctioned only when term loan is
when term loan is availed and availed and additional charge is created on
additional charge is created on the the asset created through the term loan.)
asset created through the tem loan.)
 Cash credit Limit: For regular
working capital requirement (Only in
case of hospitals) based on financial
assessment.
Margin For loans upto Rs. 100.00 lakh For loans above Rs. 100.00 lakh
 For term loan minimum margin of  For term loan minimum margin of
20% of the total project cost be 25% of the total project cost be stipulated.
stipulated.  For working capital other than clean
 For purchase of vehicle 15% CC limit minimum margin 25% be
margin on the on road cost of vehicle. stipulated
 For working capital other than
clean CC limit minimum margin 25% be
stipulated.
Rate of Advances upto Rs.100.00 lakh: RLLR + 0.50 + BSS
Interest Advances above Rs.100.00 lakhs and up to Rs. 200.00 lakh:
RLLR + 0.90 + BSS
Advances above Rs.200.00 lakhs and upto Rs. 500.00 lakh:
RLLR + 1.40 + BSS

239
 Security Primary: Hypothecation/Mortgage of assets to be purchased/acquired with the
assistance of bank's finance.

Mortgage of business premises if financed by the bank

Collateral: As per collateral policy of the bank.

Repaymen Max. 7 years including Moratorium Period. For term loans sanctioned to doctors for
t purchase/construction of building the repayment period shall not exceed 12 years
including moratorium period.

C) Mahabank Transport Operator Loan Scheme:

Eligibility Individuals, Sole Proprietorships, Partnership Firms, HUFs, Companies, Trusts/
Institutions are eligible. The business activity should have potential to service
85 repay the extended facility.
Purpose Term loan for purchase of commercial vehicles for transportation of goods and
passenger. Individuals, Sole Proprietorships, Partnership Firms, HUFs,
Companies, Trusts/ Institutions are eligible.
Quantum Max.85% of on road cost of vehicle subject to maximum loan of Rs.2.00 crore
for new vehicle. On road cost of vehicle includes body building cost,
registration, insurance, road tax, accessories etc.
Margin Minimum 15% on road cost of vehicle.
Rate of Advances upto Rs.25.00 lakh: RLLR + 0.75 + BSS
Interest Advances above Rs.25.00 lakh and upto Rs. 100.00 lakh:
RLLR + 1.10 + BSS
Advances above Rs.100.00 lakhs and upto Rs. 200.00 lakh:
RLLR + 2.00 + BSS
Security Primary: The primary security will be hypothecation of vehicle/s, Bank's charge
should be registered with RTO & blank TTO transfer forms should be obtained
duly signed by borrower. The eligible accounts should be covered under
CGTMSE.

Collateral: As per collateral policy of the bank.

Repayment Repayment period of maximum 7 years including moratorium.

D) Maha MSME Project Loan Scheme:

Objective In order to provide timely and need based finance to start up

manufacturing/service activity/expansion of existing unit. It is expected that the
scheme will give big boost to the finance to manufacturing/service sector in
metro, urban, semi urban and rural areas.
Eligibility All Micro, Small and Medium Enterprises, as defined under MSMED Act, 2006 are
eligible for finance under the scheme. Commercial real estate exposure shall not
be considered under the scheme.
Purpose Term loan for purchase of land and construction of factory building/office
premises/godown/sheds to start up manufacturing/service activity/expansion of
existing unit.

240
 Quantum The maximum quantum of credit facility shall be 75% of project cost
accepted/assessed by bank.
Margin Minimum 25%. Where margin of 50% and above is provided, no collateral
security be insisted upon.
Rate of ROI as per Risk Based Pricing Linked to RLLR
Interest
Security Primary:
Equitable/Registered Mortgage of land, building, lease hold
rights of the property where enforceable charge can be created in favour of
the bank and Hypothecation of all other assets created out of bank loan. For
advances covered under CGTMSE existing assets of the borrower as per
definition of CGTMSE
Collateral: As per collateral policy of the bank.
Repayment Repayment Period shall not exceed 10 years including
moratorium period of maximum 24 months.

Interest shall be capitalized / serviced during the moratorium period. In case

interest is capitalized during the moratorium period the same shall be added to
the principal and repayment installment to be calculated accordingly.

E) Maha MSME Collateral Free Term Loan Scheme:

Objective In order to provide timely and need based finance to purchase
equipments/machinery/vehicles/furniture & fixtures, a scheme is proposed for this
purpose without collateral security. It is expected that the scheme will give big boost
to finance to manufacturing and service sector in metro, urban and semi urban areas.
Eligibility All Micro and Small Enterprises, as defined under MSMED Act, 2006 are eligible for
finance under the scheme.
Purpose Term loan for purchase of Machinery/Equipment/
vehicles/Furniture & Fixtures.
Quantum Rs. 100.00 lakh or 75% of the proforma invoice whichever is lower.
Security Primary:
 Hypothecation of assets created out of bank loan.
 Hypothecation/Mortgage of existing assets in the name
of the borrowing firm/company as per definition of
CGTMSE
Collateral: No Collateral security
Repayment Repayment Period shall not exceed 7 years including
moratorium period.
Rate of As per Risk Based Pricing Linked to RLLR
Interest

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F) Maha MSME Collateral Free Cash Credit Scheme:
Target Group In order to provide timely and need based working capital assistance to new
entrepreneurs as well as established units, where the applicant/borrower is
not in a position to offer adequate collateral security/third party guarantee.
Eligibility All Micro and Small Enterprises, as defined under MSMED Act, 2006 are eligible
for finance under the scheme.
Purpose Working Capital
Quantum Rs. 100.00 lakh
Security Primary:
a) Hypothecation of inventory & receivables.
The finance against receivables may be made
available up to maximum 180 days depending upon
the past trend and debtor realisation history. The limit/drawings against
receivables beyond 90 days and up to 180 days should not exceed 60% of total
fund based limits.
b) Hypothecation/Mortgage of existing assets in the
name of the borrowing firm/company as per
definition of CGTMSE

Collateral: No collateral security.

Repayment Repayment Period shall not exceed 7 years including
moratorium period.
Rate of As per Risk Based Pricing Linked to RLLR
Interest

G) Mahabank MSME Credit+:

Objective To provide timely and need based additional working capital and Term Loan
assistance to existing MSME borrowers of the Bank as well as of MSME borrowers
of other Banks by taking over the credit facilities.
Eligibility All Micro, Small and Medium Enterprises, as defined under MSMED Act,
2006 are eligible for finance under the scheme with external rating AAA to BBB or
Collateral Security (Non Agriculture property/Paper based Security) with
collateral cover (Realizable Value) of more than 100% for the existing fund based
credit facilities upto limit Rs.20.00 crore and non fund based limits upto Rs.10.00
crore. The short term loan should be need based and supported by proper assessment.
Operations and conduct of the account should be satisfactory for a period of last one
year.
All the irregularities pointed out in the stock audit / visit report / inspection / concurrent
audit! statutory audit should be rectified.
Purpose Working Capital/Purchase of equipments/machineries etc.
Quantum Existing Credit Limit Max. STL allowed
Fund Based: 25% of credit facilities
Upto Rs.20.00 crore
Non Fund Based: 25% of credit facilities
Upto Rs.10.00 crore
Security PRIMARY:
 Assets created out of additional funding.

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 Collateral: As per collateral policy of the bank.
Repayment All the credit facilities of the borrower shall be reviewed within six months from the
date of sanction of STL based on the audited financials.
Delegation ZLCC of Zonal Manager in all cases

H) Maha LAP – Mortgage Loan

 Traders, Manufacturers, Businessman & Professionals engaged in trading,
manufacturing or rendering service
 For buildup of current assets and fixed assets needed for business purpose, capacity
expansion, modernization, short term working capital (Including shring up of NWC etc)
 Term Loan/Drop-line OD Facility / Non Fund Facility
 Margin 50% on Realizable Value of Property
 Quantam: Minimum Rs.0.10 crore Max. Rs.10.00 crore; Non Fund Facility Maximum
Rs. 5.00 crore
 Rate of Interest: RLLR + 2.30% + BSS

I) Mahabank Scheme for Contractors:

Scheme Mahabank Scheme for Contractors
Target Group Civil Contractors, Mining Contractors, Engineering Contractors,
Transport Contractors, Electrical Contractors, Road Contractors,
Irrigation Contractors, Pipeline Contractors etc
established as Proprietorship / Partnership firms / Limited Companies
Eligibility Individuals, Proprietorship, Partnership Firm and limited
companies eligible to be classified as MSME under the MSMED Act,
2006 with Credit Rating (Internal / External as applicable) of BBB and
above
1. Engaged in the business line at least for the last 3 years
2. Having Audited Financial Statements for last 2 years
3. Profit making for last 3 years
4. CIBIL Score as under
 For Individuals viz., partners and
proprietor 700 and
above
 For Commercial Report CIBIL MSME Rank (CMR) CMR
1 to CMR 5

Purpose 1. Cash Credit, FLC/ILC & BG facility for meeting working

capital requirement
2. Term Loan for purchase of equipment/machinery/vehicle.

Quantum Min: Rs. 10.00 lakh; Max. Rs. 10.00 crore

Security Primary: Hypothecation of assets acquired from Bank finance
Collateral: As per collateral policy of the Bank for MSME Advances
Repayment Working Capital: Payable on demand.

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 Term Loan: Maximum period upto 7 years. Variable repayment
programme based on the cash flow may also be considered at the request
of the borrower. Interest to be serviced as and when applied.
Review/Renewal Working Capital: Annual Review.
Term Loan: Annual Review for above Rs. 25.00 lakh
Credit Rating Internal Credit Rating is applicable for all accounts with aggregate
exposure (Fund + Non-Fund) of above Rs. 25.00 Lakh and upto Rs.
10.00 crore.
External Credit Rating is applicable for all accounts with aggregate
exposure (Fund & Non Fund) of above Rs. 10.00 crore
Benchmark Ratios

Takeover of existing borrowal accounts from other Banks / Fls is permitted subject to
compliance with takeover norms of the Bank as per Bank's Lending Policy/guidelines.
Reference should be made to Central Fraud Registry (CFR), CRILC, RBI Defaulters list etc.
and details of the same be incorporated in the appraisal note.

J) Mahabank Scheme for units engaged in Hospitality:

Scheme Mahabank Scheme for units engaged in Hospitality
Target Group Existing / Prospective owners of Hotels, Restaurants, Fast food Centers, Pizza
Centers (Franchise), Caterers, Motels (Dhaba), Bakeries, Mess, Tour
Operators, Water Sports, Amusement Parks, Floating Restaurants, House
Boats etc.
Eligibility Individuals, Proprietorship, Partnership Firm, LLP, & Corporates (Investments
in equipment should be less than Rs. 5.00 crore for classifying under MSME
sector as per MSMED Act)
Units should be on the owned premises. Leased .premises is allowed if it is
owned and in the name of applicant/s, proprietor, partners, directors or close
relatives such as spouse, parents (father & mother), brother, sister, son,
daughter and daughter-in law. The owner of the property invariably be taken
as personal guarantor to the credit facilities. The KYC compliance of the
guarantor should be completed as per the extant guidelines.
Purpose  Purchase of land & construction/premises for running small
hotel/restaurant. The finance for purchase of Land in project cost shall not
exceed 25% of the total project cost.
 Furniture & Kitchen Equipments
 Interior Decoration

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  Purchase of Vehicles, Boats for activity purpose
 Modernization of existing facilities
 Working Capital

Nature of Term Loan, Working Capital

facility
Quantum of Term Loan: Min. Rs. 0.10 crore; Max. of Rs. 10.00 crore
Finance Working Capital: Min. Rs. 0.10 crore; Max. of Rs. 2.00 crore
Total exposure including TL & WC should not exceed Rs. 10.00 crore under
the scheme
Security Primary: Mortgage of immovable properties purchased/constructed with
Bank Finance. Hypothecation of assets acquired our of Bank finance.
Collateral: As per the Collateral Policy for MSME Advances.
Repayment Working Capital: Payable on demand
Term Loan: Maximum period of 7 years in Equated Monthly Installments
with a maximum moratorium period of 12 months. Variable
repayment/Step up repayment programme based on the cash flow may also
be considered at the request of the borrower.
Review/Renew Working Capital: The limit sanctioned is valid for 1 year
al Term Loan: Annual Review for above Rs. 25.00 lakh
Credit Rating Internal Credit Rating is applicable for all accounts with aggregate
exposure (Fund + Non-Fund) of above Rs. 25.00 Lakh and upto Rs. 10.00
crore.
External Credit Rating is applicable for all accounts with aggregate
exposure (Fund & Non Fund) of above Rs. 10.00 crore
Benchmark
Ratios

Takeover of existing borrowal accounts from other Banks / Fls is permitted subject to compliance
with takeover norms of the Bank as per Bank's Lending Policy/guidelines.
Reference should be made to Central Fraud Registry (CFR), CRILC, RBI Defaulters list etc. and
details of the same be incorporated in the appraisal note.

K) Standby Line of Credit for MSME (SLC-MSME):

Name of the Standby Line of Credit for MSME (SLC-MSME)
product
Purpose To meet the temporary liquidity mismatch arising out of delayed realisation
of receivables, receipts of GST Inputs tax credits (including for Exports) and
other Business requirements.

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Eligibility Existing MSME Units having Limits upto Rs.25. crore
only with Internal Rating of 'BBB & above' and
irrespective of external rating.
 Account to be standard. SMA-0, SMA-1 and SMA-2 accounts are also
eligible under the scheme.
Loan amount  Calculation based on 25% of the existing working capital limit or total
(Limit) Exposure (Total Exposure = FBWC + NFBWC). Max Rs.1.25 cr based on cash
flow statement, certified by CA in case of requirement above Rs. 10.00 lakh.
 Existing customers who have availed ‘Mahabank Credit +’ can avail the
‘SLC-MSME’ under this scheme, after reaping the earlier limit under
‘Mahabank Credit +’.
 CA certificate to be obtained certifying the outstanding receivables,
amount of pending GST dues up to the month for which the returns have
been filed.
 Charted Accountant (CA)has to get the Unique Document Identification
Number of the certificate issued through the UDIN Portal this UDIN should be
mentioned on the certificate issued by the CA and verified by the branch on
UDIN portal (https://udin.icai.orq) by the Branch official

Disbursal The borrower can avail the sanctioned amount in one go or in tranches. The
entire loan under the scheme have to repaid within maximum period of 12
& months from the date of disbursal or validity of sanction whichever is
Repayment earlier.
In case the limts are availed in tranches repayment /liquidation of the
tranches should be 12 months from the date of disbursal or validity of
sanction whichever is earlier.
Borrower may make early repayment. In case of early liquidation /
repayment of the loan/ tranche borrower may be allowed to apply again to
drawdown in one go or in tranches. However, the subsequent drawls should
also be liquidated as above.
I.The facility will be considered as an exposure on the borrower and
guidelines stipulated under the RBI Prudential Norms shall be adhered to.
II.The facility shall be made available as Fund Based
Limit only.

Margin  NIL for the SLC-MSME. However, margin for the existing limits will
continue as per the sanctioned terms.
 As the proposed margin under SLC for MSME will be nil, the market
value and the advance value of the security will be same.
 However, the existing working capital limits have to be covered by
the Advance value of the stocks and receivables as hitherto.

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  Operating units shall ensure that the DP has not been provided on
the GST portion for extending DP for other facilities — Working Capital
limits and ensure that there is no double financing.

Interest Rate  0.50 % above the sanctioned Cash Credit rate.

 Penal Interest as applicable to Cash Credit account will be charged, if
not repaid within the stipulated period.
 Interest shall be charged with monthly rests.

Security Hypothecation of stocks and receivables. Extension of charge on the

Primary Security / Collateral security.
Others 1. The limit will be over and above the MPBF.
2. SLC for MSME to be made available at the specific request of the
borrower.
3. IRAC norms as per extant guidelines is applicable.

3) Score Card for MSE Advances upto Rs.10.00 lakh

Sr. Parameter Max. Mark Criteria Mark

No marks Scored
1. Age 3 18-30 yrs. 3
31-45 yrs. 2
45 yrs. and above 1
2. Residing at same address 5 5 yrs. And more / 5
Permanent Address
3-5 yrs. 3
2-3 yrs. 1
Less than 2 yrs. 0
3. Academic qualification 5 Graduate 5
12th or more 3
10th to more 2
Literate 1
Illiterate 0
4. Experience in the line of business 5 Existing (more than 3 yrs.) 5
Existing (1- 3 yrs.) 3
New 1
Scope for business 4 Good scope 4
5. Limited scope 2
No scope 0
6. Skill certification course / R-SETI / 5 Yes 5
ITI / Driving Licence No 0
7. Any other earning member 2 Yes 2
No 0
8. Type of activity 2 MFG / Service 2
Trade / Other 1

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 9. Track record of repayment to any 3 Prompt 3
bank Standard but irregular 1
No track record 0
10 Relationship with bank 5 Satisfactory relations 5
. more than 3 yrs. With our
bank.
Satisfactory relations 3
more than 3 yrs. With
other bank.
Satisfactory relations for 2
1-3 yrs. With any bank.
No banking relationship 0
11 Has PMSBY (Pradhan Mantri 4
. Suraksha Yojana) / PMJJY Yes 4
(Pradhan Mantri Jevan Jyoti
Yojana)/ or any other insurance
policy or pension scheme. No 1
Marketing arrangement for 3 Tie up arrangement 3
12 finished product Regular Buyers 2
. others 1
13 Registered with Govt. – Sales tax 2 yes 2
. / Vat/ shop act./ Permit No. 0
14 ITR filling/ regular income 2 Yes 2
. source/proof of income No 0
Total 50
Women/SC/ST/minority/handicapped/ Govt. sponsored scheme will get 1 bonus mark.
The cut-off grade will be 40% for Shishu, 50% for Kishor and 60% for Tarun category.

4) Government Sponsored Schemes

5.1 Pradhan Mantri Mudra Yojana (PMMY)
i.Under the aegis of Pradhan Mantri Mudra Yojana (PMMY), MUDRA has created products /
schemes. The interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the
stage of growth / development and funding needs of the beneficiary micro unit /
entrepreneur and also provide a reference point for the next phase of graduation / growth
to look forward to
 Shishu: Covering loans upto Rs.50000/-
 Kishor: Covering loans above Rs.50000/- to Rs.5.00 lakh
 Tarun: Covering loans above Rs.5.00 lakh to Rs.10.00 lakh

5.2 Purpose of MUDRA

Mudra loan is extended for a variety of purposes which provide income generation and
employment creation. The loans are extended mainly for:
i. Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities.
ii. Working capital loan through MUDRA Cards.
iii. Equipment Finance for Micro Units.

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iv. Transport Vehicle loans.

5.3 Following is an illustrative list of the activities that can be covered under MUDRA
loans:
Transport Vehicle: Purchase of transport vehicles for goods and personal transport such as
auto rickshaw, small goods transport vehicle, 3 wheelers, e-rickshaw, passenger cars, taxis,
etc.
Community, Social & Personal Service Activities: Saloons, beauty parlours, gymnasium,
boutiques, tailoring shops, dry cleaning, cycle and motorcycle repair shop, DTP and
Photocopying Facilities, Medicine Shops, Courier Agents, etc.
Food Products Sector: Activities such as papad making, achaar making, jam / jelly making,
agricultural produce preservation at rural level, sweet shops, small service food stalls and
day to day catering / canteen services, cold chain vehicles, cold storages, ice making units,
ice cream making units, biscuit, bread and bun making, etc.
Textile Products Sector / Activity: Handloom, powerloom, khadi activity, chikan work, zari
and zardozi work, traditional embroidery and hand work, traditional dyeing and printing,
apparel design, knitting, cotton ginning, computerized embroidery, stitching and other
textile non-garment products such as bags, vehicle accessories, furnishing accessories, etc.
Business loans for Traders and Shopkeepers: Financial support for on lending to
individuals for running their shops / trading & business activities / service enterprises and
non-farm income generating activities with beneficiary loan size of upto 10 lakh per
enterprise / borrower.
Equipment Finance Scheme for Micro Units: Setting up micro enterprises by purchasing
necessary machinery / equipments with per beneficiary loan size of upto 10 lakh.
Activities allied to agriculture: 'Activities allied to agriculture', e.g. pisciculture, bee
keeping, poultry, livestock, rearing, grading, sorting, aggregation agro industries, diary,
fishery, agriclinics and agribusiness centres, food & agro-processing, etc.(excluding crop
loans, land improvement such as canal, irrigation and wells) and services supporting these,
which promote livelihood or are income generating shall be eligible for coverage under
PMMY.

5.4 Stand Up India Scheme

Objective To promote entrepreneurship at grass root levels focusing on economic
empowerment and job creation through bank loans between Rs.10.00
lakh to Rs.100.00 lakh.
Eligibility  SC/ST and/or Woman entrepreneurs above 18 years of age.
 Loans under the scheme is available for only green field project.
Green field signifies, first time venture of the beneficiary in the
manufacturing or services or trading sector.
 In case of non-individual enterprises, 51% of the shareholding
and controlling stake should be held by either SC/ST and/or Women
Entrepreneur.

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  Applicant should not be in default to any bank/financial
institution.
Type of Facility Composite loan (Inclusive of term loan and working capital) between
Rs.10.00 lakh and up to Rs.100.00 lakh.
Size of Loan Composite loan of 75% of the project cost inclusive of term loan and
working capital. The stipulation of the loan being expected to cover 75%
of the project cost would not apply if the borrower’s contribution along
with convergence support from any other schemes exceed 25% of the
project cost.
Security Besides Primary Security, the loan may be secured by collateral security
or guarantee of Credit Guarantee Fund Scheme for Stand Up India Loans
(CGFSIL)
Repayment Term Loan: Repayable in 7 years with a maximum moratorium of 18
months.
Working Capital: To be reviewed annually.
Margin Money The scheme envisages 25% margin money which can be provided in
convergence with eligible central / state schemes. While such schemes
can be drawn upon for availing admissible subsidies or for meeting
margin money requirements, in all cases the borrower shall be required
to bring in minimum of 10% of the project cost as own contribution.

5.5 Prime Minister’s Employment Generation Programme (PMEGP)

Description The scheme is implemented by Khadi and Village Industries
Commission (KVIC) functioning as the nodal agency at the national
level. At the state level, the scheme is implemented through State
KVIC Directorates, State Khadi and Village Industries Boards (KVIBs),
District Industries Centres (DICs) and banks. In such cases KVIC routes
government subsidy through designated banks for eventual disbursal
to the beneficiaries / entrepreneurs directly into their bank accounts.
Nature of The maximum cost of the project/unit admissible in manufacturing
Assistance sector is 25 lakhs and in the business/service sector it is 10 lakhs.

Categories of Beneficiary’s Rate of subsidy beneficiaries contribution

(of project cost) under PMEGP (of project cost)

Area (Location of project/unit) Urban Rural

General Category 15% 25%
Special 25% 35%
(Including SC/ ST/ OBC/ Minorities/Women, Ex-servicemen, Physically
handicapped, NER, Hill and Border areas, etc.)

The balance amount of the total project cost will be provided by the
banks in the form of term loan and working capital.
Who can apply Any individual above 18 years of age as on the date of making the
application can apply. The beneficiary must have passed at least VIII
standard for projects costing above 10 lakh in the manufacturing
sector, and above 5 lakh in the business / service sector. Only new

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 projects are considered for sanction under PMEGP. SHGs (including
those belonging to BPL, provided that they have not availed benefits
under any other scheme), Institutions registered under Societies
Registration Act, 1860, Production Cooperative Societies and
Charitable Trusts are also eligible.

Existing units (under PMRY, REGP or any other scheme of Government

of India or State Government) and units that have already availed
Government subsidy under any other scheme of Government of India
or State Government are not eligible.

5.6 Credit Linked Capital Subsidy for Technology Upgradation

Description CLCSS provides 15% subsidy for additional investment up to 1 crore
for technology upgradation by MSEs. Technology upgradation would
ordinarily mean induction of state-of-the-art or near state-of-the- art
technology. In the varying mosaic of technology covering more than
7,500 products in the Indian small scale sector

List of technologies is available at www.dcmsme.gov.in

Units looking to replace existing equipment/technology withthe same

equipment/technology will not qualify for subsidy under this scheme.
Similarly, units upgrading with used machinery would not be eligible
under this scheme.
Nature of The revised scheme aims at facilitating technology upgradation by
Assistance providing 15% up front capital subsidy to MSEs, including tiny, khadi,
village and coir industrial units, on institutional finance availed by
them for induction of well-established and improved technologies in
specified sub-sectors/products approved under the scheme.
Who can apply Any MSE unit

5) Collateral Policy for MSME Advances

Sl. Exposure to MSME Borrower Minimum Collateral Cover based on Realizable Value
No. of the Security
a. Upto Rs.10.00 lakh (Mudra The advance shall be compulsorily covered under
Loans) Credit Guarantee Fund for Micro Units (CGFMU)
b. Above Rs.10.00 lakh to Rs.100.00 If Collateral Security / Third Party Guarantee is not
lakh (Under Stand Up India available: The advance shall be covered under Credit
Scheme) Guarantee Scheme for Stand Up India (CGSSI)

If Collateral Security up to 75% of the exposure is

available: The unsecured exposure beyond the
collateral coverage (Considering Realizable Value)
should compulsorily be covered under CGTMSE
Scheme.

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c. For MSE Advances above
Rs.10.00 lakh up to Rs.200.00
lakh and MSE Advances to
RetailTrade Activity above
Rs.10.00 lakh to Rs. 1.00 crore
eligible to be covered under
CGTMSE.
If Collateral Security is more than 75% of the
exposure for unsecured portion : CGTMSE cover for
unsecured portion may be taken subject to borrowers
consent but should not be insisted
If Collatral Security or Third Party Guarantee is not
available: The advance shall compulsorily be covered
under CGTMSE.
If Collateral Security up to 75% of the exposure is
available: The unsecured exposure beyond the
collateral coverage (Considering Realizable Value)
should compulsorily be covered under CGTMSE
Scheme.

If Collateral Security is more than 75% of the

d. Advance to MSME units above
Rs.2.00 crore to Rs.10.00 crores,
if the same are not covered
under CGTMSE /CGSSI /Any
other Guarantee Scheme
e. Advances to MSME units above
Rs.10.00 crore
exposure: CGTMSE cover may be taken subject to
borrowers consent but should not be insisted
If the facility is sanctioned for purchase of immovable
property exclusively with Realizable Value of 135% of
the facility and above, such primarily secured facility
need not be covered under CGTMSE
For New Borrowers:
Minimum 50% Collateral Security of the exposure
For Existing Borrowers:
Enhancement: Minimum 40% Collateral Security of
the enhanced exposure
For New Borrowers:
Minimum 40% collateral Security of the Exposure

Enhancement: Minimum 30% Collateral Security of

the enhanced exposure
f. If more than one facility is sanctioned and any of the facility is primarily / collaterally
secured by mortgage of immovable property (SARFAESI compliant) with realizable value
of 135% of the total exposure, additional collateral security should not be insisted.
g Relaxation in collateral coverage requirement for MSME advances:

Proposals falling up to the sanctioning powers of CPC Commercial / Branches headed by

CM and AGM: Relaxation by ZLCC of ZM

Proposals falling within the lending powers of ZLCC of ZM: Relaxation by CAC III

Proposals falling within the HO sanctioning authorities: Relaxation by respective next

higher sanctioning authority at H.O.
h The policy shall cover all the MSME Advances and supersedes the collateral
requirements under schematic MSME loans except Scheme for financing Business Loan

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 Against Property – Maha LAP Mortgage Loan (Circular Ref: AX1/Credit Priority /LAP –
Business /Cir.No.56/2017-18 dated 293832017) and Scheme for financing traders,
services & MSE (LAP) (New sanctions discontinued from 29.08.2017. Old accounts may
be reviewed as per the scheme norms)

1. No fresh collateral be insisted for existing borrowers requesting for review / renewal of
the existing credit facilities. The collateral coverage for the exposure be continued as per the
existing sanction.
2. If retail loans are sanctioned to MSME unit, the exposure under the Retail Loan should
not be included in total exposure to the MSME unit while computing the collateral cover.
3. Partial collateral security is allowed under CGTMSE Hybrid Security Model. For e.g., The
total exposure to the MSE unit is Rs.5.00 crore, Collateral Security available Rs.3.00 crore,
CGTMSE coverage can be obtained for the exposure of Rs.2.00 crore.

6) Type of Collateral Security

Sl. Nature of Security Value to be considered
No.
a. Free hold land & building (SARFAESI Realizable Value
Compliant)
b. Lease hold land & building (SARFAESI Distress Value
Compliant)
The period of lease should be at least 5 years
more than the repayment period of the loan.
c. Paper securities in the form of
i. FDR / CDR of our Bank i. Principal + Accd. Int.
ii. NSCs/KVPs(Kisan Vikas Patra) ii. Principal+ Accd. Int.
iii. Insurance policies iii. Surrender Value
iv. Debt instruments of public Ltd companies iv. Principal amount / Market
with AAA and AA rated by RBI approved value
external rating agencies
v. Government securities (only central and v. Principal amount / Market
state govt. bonds). value

The property in the name of applicant/s, proprietor, partners, directors or close relatives such as
spouse, parents (father & mother), brother, sister, son, daughter and daughter-in-law may be
accepted as security. The owner of the property invariably be taken as guarantor to the credit
facilities. The KYC compliance of the guarantor should be completed as per the extant guidelines.

The policy shall cover all the MSME Advances and supersedes the collateral requirements under
schematic MSME loans except Scheme for financing traders, services & MSE (Loan against
Property).

Relaxation in collateral coverage requirement for MSME advances may be allowed with proper
justification by next higher authority.

Rationale:
 Increase in asset backed MSME portfolio of the Bank

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 It is expected incidence of NPAs will be low in assets having collateral security.
 Provision requirement is low for impaired assets backed by collateral security.

However, the existing concessions in ROI will be continued in case of availability of collateral
security as under:

Percentage of Collateral Reduction in ROI offered

Security Offered
More than 100% 0.75%
More than 75% to 100% 0.50%
More than 50% to 75% 0.25%

All the offices of the Bank are advised to consider the policy guidelines while assessing the MSME
credit proposals.

7) MSME Restructuring / Reschedulement Policy (Gist)

9.1 The policy shall be applicable to MSMEs having loan limits upto Rs.25.00 crore, including
accounts under consortium or multiple banking arrangement (MBA). Restructuring of loan
accounts with exposure of above Rs.25.00 crore will continue to be governed by the extant
guidelines on Corporate Debt Restructuring (CDR) / Joint Lenders’ Forum (JLF) mechanism.

9.2 Identification of incipient stress under Framework for Revival and Rehabilitation of
MSMEs:
Identification by banks or creditors: Before a loan account of a Micro, Small and Medium
Enterprise turns into a Non-Performing Asset (NPA), banks or creditors should identify incipient
stress in the account by creating three sub-categories under the Special Mention Account (SMA)
category as given in the Table below:
SMA Sub-categories Basis for classification
SMA-0 Principal or interest payment not overdue for more than 30 days
but account showing signs of incipient stress
SMA-1 Principal or interest payment overdue between 31-60 days
SMA-2 Principal or interest payment overdue between 61-90 days

9.3 On the basis of the above early warning signals, the branch maintaining the account
should consider forwarding the stressed accounts with aggregate loan limits above Rs.10 lakh to
the Committee for Stressed Micro, Small & Medium Enterprises.As regards accounts with
aggregate loan limits upto Rs.10 lakh identified as SMA-2, the account should be mandatorily
examined for CAP by the branch itself under the authority of the Branch Manager.

9.4 Restructuring cases shall be taken up by the Committee only in respect of assets reported
as Standard, Special Mention Account (SMA) or Sub-Standard by one or more lenders of the
Committee.

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9.5 The viability of the account shall be determined by the Committee based on acceptable
viability benchmarks determined by them. The parameters may, inter-alia, include the Debt Equity
Ratio, Debt Service Coverage Ratio, Liquidity or Current Ratio, etc.

9.6 For exposure above Rs.10 crore, the services of empaneled/reputed agencies may be
availed for conducting viability study.

9.7 Willful defaulters shall not be eligible for restructuring. Cases of Frauds and Malfeasance
remain ineligible for restructuring.

8) Different Guarantee Schemes available for Micro & Small Enterprises

Credit Guarantee Trust for Micro &Small Enterprises (CGTMSE)

Credit Facilities (Both Funded & Non Funded) upto Rs.200 lakh sanctioned to MSEs without
Collateral Security and/or third party guarantee.
The loan may be secured by primary security (i.e. assets created out of the finance and/or which
are directly associated with the business/project of the borrower for which credit facility has
been extended).
Max. ROI should not exceed as per RBI guidelines.
Extent of Guarantee Cover

Maximum extent of Guarantee where credit facility is

Up to Rs. 5.00 Above Rs. 5.00 Above Rs. 50.00
Category
lakh lakh up to Rs. 50.00 lakh up to Rs.
lakh 200.00 lakh
Micro Enterprises 85% of the 75% of amount in
amount in default subject to a
default subject maximum of Rs. 75% of amount in
a maximum of 37.50 lakh default subject to a
Rs. 4.25 lakh maximum of
Women 80% of amount in default subject to a Rs.150 lakh
entrepreneurs / Units maximum of Rs. 40.00 lakh
located in N. E.
Region including
Sikkim
MSE Retail Trade 50% of amount in default subject to maximum of Rs. 50
Up to Rs. 100 lakh lakh

All other category of 75% of amount in default subject to a maximum of Rs. 150
borrowers lakh

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 BALANCE SHEET AND RATIO ANALYSIS

A financial statement is an organized collection of data according to logical and consistent

accounting procedures and its purpose is to understand financial aspects of a business entity.
The two main financial statements are-
1. Income Statement (Profit & Loss account)
2. Balance Sheet

1. Income Statement
Income statement presents the revenues and expenses of an enterprise for an accounting period
and shows excess of revenues over expenses or vice versa.

Format of Profit and Loss account

For the year ending ……………………..

To opening stock of finished By sales

goods
To cost of goods produced By closing stock of finished goods
To Gross profit c/d By Gross loss c/d

To Gross loss b/d By Gross profit b/d

To office Rent By Discount Received
To Printing & Stationery By Net Loss taken to Capital
account
To carriage outwards
To provision for Bad Debts
To Advertising
To Discount allowed
To Net Profit taken to Capital
account

2. Balance Sheet

Balance Sheet is a statement of Assets & Liabilities of a concern as on any given date. It is a
statement of financial position of a business at a specified moment of time. It represent what a
concern owns and what it owes (Loans) at a particular date.

The main difference between income statement and Balance Sheet is that income statement is
for a period while Balance sheet is on a particular date.

256
Proforma of Balance Sheet

Balance Sheet As on …..

LIABILITIES ASSETS
31.03…….. 31.03………
NET WORTH FIXED ASSETS
Capital Land & Building
Reserves & Surplus Plant & Machinery
Furniture & Fixtures

TERM LIABILITIES CURRENT ASSETS

Debentures Cash on hand
Term Loans Cash at Bank
Unsecured Loans Stock(raw material)
Work in Progress
Finished Goods
CURRENT LIABILITIES Sundry Debtors
Sundry Creditors Bills receivable
Bills Payable
Bank Cash Credit
Outstanding NON CURRENT
Expenses ASSETS
Provisions Investments
Security Deposit
Loans & advances

INTANGIBLE ASSETS
Goodwill
Preliminary Expenses

TOTAL LIABILITIES TOTAL ASSETS

LIABILITY: This indicates the sources of fund the entrepreneur has raised.
ASSETS: This is the utilization / Uses of fund by enterprise.

 Internal Source.

 External Source.

Internal sources:
Capital: It is brought in by promoter/ proprietor/ Partner/s/, Director/s, Share holders. Govt
subsidy received becomes owner’s fund, hence taken as capital.

257
a. Authorized Capital: Shown in inner column of Balance sheet. (Ceiling amount as per MOA)

b. Issued capital: Out of total, the capital opened up for subscription by public.

c. Subscribed Capital: Out of total issued capital, capital subscribed by various investor in
response to public issue.

d. Paid up Capital: The actual amount paid by subscriber for shares allotted to him.

Reserve/ Surplus:
It is the fund generated from out of profit earned by business. It depends on level of retention
done by enterprise.
Reserve: It is portion of profit earned earmarked for specific or general purpose.
Revaluation reserve: It is created due to revaluation of Fixed assets to reflect fair market value. It
is balancing figure to equate with appreciation in value of fixed assets. It is just paper entry and
hence do not reflect real Net Worth.
Statutory Reserve: It is minimum amount transferred as per legal requirement under company
Act.
Premium Reserve: It is premium fetched over and above face value of equity share.
Debenture redemption reserve: Portion of profit reserved for redemption of Debenture on due
date.
Surplus: Excess of profit left after making appropriation/ provisions/dividend. It is also referred
as Credit balance in PL.
External sources (Outside liabilities): They are of two types:
(1) Short term Sources (Current Liability): It is debt owned by enterprise for short term duration
i.e. Up to 1 year.
(2) Long Term Sources (Term Liability):
The liability which is to be liquidated for tenor beyond 12 months.
(1) Fixed assets: There are the funds utilized for acquiring assets having operating life of long
duration for generating production/income.
(2) Current Assets:
These are the rotating assets beginning with cash and ultimately resulting in cash within operating
cycle not more than 1 year. These are the items of working capital cycle.
3) Non Current Assets: (NCA)
These are assets which are not realizable within a period of operating cycle.
(4) Intangible Assets: (IA):

258
These are assets which do not have intrinsic monetary value but appearing in Balance sheet.
Fictitious assets are assets such as loss which appears as assets as accounting compulsion.
RATIO ANALYSIS

Ratios are relationship expressed in mathematical terms between figures. In ratio analysis two
sets of figures are compared which are connected with each other. Ratio is used as a tool for
financial analysis. Ratios are classified into different categories which are as under.

A Profitability Ratios
B Turnover Ratios
C Financial Ratios

A. Profitability Ratios

1. Return on Capital Employed (ROCE)

It indicates percentage of return on total capital employed in the business. The formula for
calculating ROCE is

Operating Profit
---------------------- X100
Capital employed
The term operating Profit means Profit before Interest and tax.

2. Return on Total Assets

The ratio is calculated to know the productivity of total assets.
It is expressed as

Net profit After Tax

----------------------------- X 100
Total assets

3. Earning per Share (EPS)

It shows the company capacity to pay dividend to equity shareholders. It shows whether equity
share capital is effectively used.

Net profit after Tax and Preference dividend

EPS = --------------------------------------------------------------
Number of Equity Shares

4. Gross Profit Ratio

It shows relationship between gross profit and net sales.

Gross profit
----------------- X 100
Net sales

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5. Debt service Coverage Ratio (DSCR)
This ratio shows ability of company to make payment of Principal amount in time. It is used for
assessing repaying capacity of the firm in case of Term Loan.

Net profit after tax + Depreciation + Interest

DSCR = ------------------------------------------------------------
Interest +Installment
Benchmark ratio is 1.5:1.

6. Pay out Ratio

It shows the proportion of earning per share used for paying dividend.
It is expressed as

Dividend per Share

------------------------------------
Earning Per share

B Turnover Ratios
Turnover Ratio indicates the efficiency of capital employed rotated in business. The different
ratios are

1. Fixed Assets Turnover Ratio

This ratio shows the investment made by firm in fixed assets contribute towards sales.

Net sales
-------------------
Fixed Assets

2. Debtors turnover Ratio

Debtors are important for any business and this ratio used to judge the liquidity of the firm.It is
calculated as

Credit Sales
---------------------------
Average Debtors

It is also known as Debtors velocity.

Debt collection period ratio is another useful ratio which shows the extent to which debts have
been collected in time by the firm. It is calculated by following formula.

Average Debtors
------------------------- X Months (Days) in a year
Credit sales

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3. Creditors Turnover Ratio
This ratio indicates payments made to creditors. The ratio can be computed as under-

Credit Purchase
--------------------------
Average Creditors
The average credit period is calculated as under.

Average Creditors
------------------------- X Months (Days) in a year
Credit Purchase

C Financial Ratios

Financial ratios show the financial position of company. For a company to carry out business and
meet all its obligations i.e. long term as well as short term. This ratios are used to judge the
financial position of the company.

1. Fixed assets ratio

The ratio is calculated as under

Fixed Assets
-----------------------
Long term funds
Fixed assets are used for long term in business and it is to be financed from Long term funds i.e
Term Loan.

2. Current Ratio
This ratio indicates firm’s commitment to meet its short term Liabilities.

Currrent Asset
Current Ratio = ----------------------
Current Liabilities

Benchmark ratio is 1.25:1.

3. Liquidity Ratio
This ratio is also known as quick ratio or acid test ratio. For calculation of this ratio liquid assets
are taken. Liquid asset are those asset which can be immediately converted into cash.

Liquid Assets
Liquidity Ratio = ---------------------------------
Current Liabilities
Liquid Asset = Current Assets – Inventory

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4. Debt-Equity Ratio
The ratio indicates the proportion of owner stake in the business.

Total Long Term Debt

Debt Equity Ratio = ----------------------------------
Shareholders fund

It establishes the relationship between owner's funds and the outside liabilities. For this
purpose long term debt includes, all term loans, Debentures maturing after one year. Net worth
or Equity consists of entire share capital, free reserves and surplus. It indicates how much
money the concern has borrowed from outside in comparison with its own capital (equity). The
ratio indicates the soundness of the long- term financial policy of the concern. It is generally
desirable that the owners should have a high stake in the project so that the burden of paying
interest on borrowed funds may be avoided initial years. For a new unit debt equity ratio of 1:1
is considered good. But for the running units’ ratio of 3:1 is Ok. But ratio more than this
indicates that the unit is running more by outside loans than its own equity (funds.)

5. Total Indebtedness Ratio

It is the ratio between total outside liabilities to tangible net worth. Total outside liability means
Long term loans plus short term liabilities (Current Liabilities). If the outside liability is more, the
company is required service the outside liability through interest etc. For that, the company has
to earn more without any hindrance to take care of the repayment obligations of instalments and
interest. Any small disturbance may affect the whole repayment schedule.
TOL (Total outside Liabilities)
Total indebtedness ratio=_________________________________
TNW (Tangible Net worth)
Our Bench Mark for this ratio is 4:1 for domestic industry and 5:1 for export-oriented industry.
But ratio more than the above is not desirable, If it is more it indicates that the company is banking
on other money with less owned funds.

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 WORKING CAPITAL AND TERM LOAN ASSESSMENT

Working Capital means funds required for day to day operation of afirm. The firm may be
manufacturing unit, Trading unit or Service unit. All required fund for day to day activity to run the
business.
Working Capital Comprises of
1. Amount of Raw material of various kinds
2. Amount of stock in Process
3. Amount of all finished goods in stores and in transit
4. Amount of receivables or Sundry Debtors
5. Other routine expenses

Need for working Capital

Basic objective of the firm is to earn Profit. The amount of profit depends on the magnitude of
sales. However sales do not convert into cash immediately. There is always a time gap between
the sales and receipt of cash. Working Capital is required for this period.

Operating Cycle
Time taken between cash outlay and cash realization through sale of finished goods and realization
of receivables is known as operating cycle. For example in case of manufacturing company, the
length of operating cycle is the length of time to complete the following cycle.

1. Conversion of cash into raw materials

2. Conversion of raw materials into work in process
3. Conversion of work in process into finished goods
4. Conversion of finished goods into accounts receivable
5. Conversion of accounts receivable into cash.

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 30 Cash
Days 60
Days
Raw
Bills
Receivable Material
OPERATING
CYCLE

20 Finished Stock in
Goods Process 10
Days
Days

Length of Operating Cycle =

60+10+20+30 = 120 days
i.e. 3 Cycles in a year (365 / 120)

Concept of Working Capital

1. Gross working Capital-Firm investment in total current assets is gross working capital.

2. Net working Capital-NWC or liquid surplus is difference between Current Assets and
Current Liabilities.

3. Working Capital Gap-Total Current assets less other Current Liabilities.

Committees in respect of Working Capital finance

1. Deheja Committee Report 1969

2. Tandon Committee Report 1975

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3. Chore Committee Report 1980
4. Marathe Committee Report 1984

Assessment of Working Capital Requirement

Generally there are three methods followed by banks for assessing the working
requirement of the firm.i.e

1. Traditional method suggested under Tandon Committee

2. Turnover method suggested by Nayak Committee
3. Cash Budget method followed in case of Seasonal Industries

1. Traditional method suggested under Tandon Committee

The committee has suggested norms for 15 major industries. The norms proposed
represent the maximum level for holding inventories and receivables. The lending norms
have been suggested in view of the banker role as a supplement to the borrower’s
resources and not to meet entire working capital. The committee has suggested three
methods.

A First Method
Borrower to contribute 25% of working capital gap from own fund and term Loan.
Sno Particulars Rs.
1 Total Current Asset 100
2 Other Current Liabilities (excluding Bank 20
Borrowings)
3 Working Capital Gap(1-2) 80
4 Borrowers Contribution (25% of WCG i.e. 25% 20
of 3)
5 Bank finance (3-4) 60

If actual margin available i.e. NWC is more than borrower’s contribution then limit will
reduced accordingly. If actual NWC in this case is Rs.30 then MPBF is (80-30) i.e. 50.

B Second Method
Borrower to contribute 25% of total Current assets.

Sno Particulars Rs.

1 Total Current Asset 100
2 Other Current Liabilities (excluding Bank 20
Borrowings)
3 Working Capital Gap(1-2) 80
4 Borrowers Contrribution (25% of CA i.e 25% of 1) 25
5 Bank finance (3-4) 55

If actual margin available i.e NWC is more then borrowers contribution then limit will
reduced accordingly. If actual NWC in this case is Rs.40 then MPBF is (80-40) i.e 40.

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C Third Method
Borrower contribution from entire core current assets and 25% of balance of current
assets. The core current assets refers to minimum level of current assets required to carry
out minimum level of business activities.

Sno Particulars Rs.

1 Total Current Asset 100
2 Core Current asset 20
3 (1-2) 80
4 Other Current Liabilities (excluding Bank 20
Borrowings)
5 Working Capital Gap(1-2) 60
6 Borrowers Contrribution (25% of 3 ) 20
7 Bank finance (3-4) 40

2. Turnover method suggested by Nayak Committee

WC requirement is computed at 25% of projected annual turnover Of which

Bank finance = 20%
Contribution of theborrower (Margin) = 5%

A Projected sales by borrower 1200

B Turnover accepted by bank 1200
C Working capital requirement (25% of B) 300
D Minimum Margin requirement(5% of B) 60
F Eligible Bank Finance (C-D) 240
G Limit Requested by Borrower 260
H Limit Recommended (Lower of F or G) 240

If a Borrower requests limit higher than 20% of the Projected/accepted sales turnover or borrower’s
margin is less than 5% .CC Limit as per Working Capital Gap method may be sanctioned with proper
justifications thereon.

As per lending Policy of the Bank The finance to following category of borrowers shall be considered on
the basis of turnover method.

i) Micro and Small Enterprises (MSE) Borrowers availing fund based facilities up to Rs. 5crore.

In view of prevailing economic environment the working capital cycle has been extended, leading
to additional working capital requirements. Therefore, 25% of the projected turnover be
considered for credit limit to Micro and Small Enterprises (MSE) Borrowers availing fund based
facilities; up to Rs. 5 crore.

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To encourage digital transactions, 30% of the projected turnover be considered for credit limit to
Micro and Small Enterprises (MSE) Borrowers transacting digitally and availing fund based
facilities up to Rs. 5 Crore.

ii) Other category of borrowers availing fund based facilities up to Rs. 2 crore.

It is to be noted that though the limit will be decided by Turnover Method, the actual drawings in
the account shall be based on the availability of Drawing Power, based on the actual position of
Stocks, receivables etc and margin stipulated.

Calculation of Drawing Power (DP)

A Total Stock(Net of obsolete/non moving/slow moving)

B Add Book Debts(As per Debt Statement) Less than 90
days
C Less Creditors for Purchase
Total paid stock & Book Debts o/s upto 90 days
Less prescribed Margin @ 25%
D P against stock & Book Debts

3. Cash Budget
A cash Budget is summary statement of the firms expected cash inflows and outflows over a
projected time period. Cash Budget involves Cash receipts from various sources and cash payment
to different agencies. The peak level cash deficit will be the level of total working capital finance
to be provided to the borrower by the Bank. The peak level cash deficit will be ascertained from
the projected cash Budget statement submitted by the borrower.
The cash budget system comprises of projected receipts and payments for the next 12 months on
account of:
• Business operations –cash sales, cash purchases, manufacturing expenses, collection from
debtorsetc
• Non-business operations– sale of investments, dividend/interest paid/received, exchange
fluctuationprofit/loss
• Cash flow from capital accounts : Issue of shares/debentures, borrowings from
directors/relatives/public, purchase of FA, repayment of long term borrowings
• Sundry items: - IT refund/penalty, insurance claim
For Seasonal industries such as sugar, tea etc; Software industry; Sick units;
Construction/Contractors/Developers cash budget method shall be used for assessment of
working capital requirements. Separate Peak and Non Peak level credit limits shall be given
consideration while working on the credit appraisal where the borrower's activities are of
seasonal nature.

CMA DATA
• CMA data obtained regarding past/projected production, sales, cost of production, COS,
OP etc
• CMA data covers 7 forms:
• Form I - particulars of existing/proposed limits from the banking system

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• Form II – Operating Statement – Breakup of P&L
• Form III – Analysis of Balance Sheet – last two years
• Form IV – Comparative statement of CA and CL
• Form V – Computation of MPBF
• Form VI – Funds Flow Statement
• Form VII – Statement showing the total cost of project and sources of finance

268
 TERM LOAN APPRAISAL

Credit appraisal is a holistic exercise which starts from the time a prospective borrower walks into
the branch and culminates in credit delivery and monitoring with the objective of ensuring and
maintaining the quality of lending and managing credit risk within acceptable limits.

In case of term loan appraisal is done for fixed assets singly i.e. it is for few machines or vehicle or
land and building.

In project loan the whole project is considered starting from preoperative expenses, Preliminary
expenses, land & building, Plant & Machinery, office equipments, Furniture Fixtures, godowns
etc. So it is very exhaustive.

Steps in Appraisal
 Managerial Competence
 TEV Study
 Market Viability
 Financial Viability

Human Appraisal/Managerial Competence

Appraisal of Promoter and their Managerial Competency is one of the important steps. The
information on track record may be obtained from following.

1. List of suit filed accounts (Rs.1 Cr & above)

2. List of willful Defaulters
3. ECGC maintains a Caution List
4. Credit Information Agency (CIBIL, D&B)

TEV Study/Technical Appraisal

In case of new or evolving technology a detailed report on examination of the technical feasibility
aspects becomes necessary. The report may be prepared by outside agency.
1. Size& Location of the Plant
2. Availability of Raw material
3. Energy Requirements
4. Environmental issues

Market Viability

Demand of the product in the market and position of supply is one of the important factor.
Whether the firm is in a position to generate adequate surplus over a period of time.

Financial Viability

For term loan appraisal we start with the type of assets acquired called as cost of Project and
means to acquire them.

269
Whether projected assets are sufficient to carry out proposed level of activity.
The acquired assets will help in production/manufacture and then sale which will generate fund
so as to repay the loan.

Cost of the Project Means of finance

Land & Building Capital & Reserve
Plant & Machinery Debentures
Godowns Long term Loans from Bank
Furniture & Fixtures Unsecured Loans
Technical fee Any other Source
Infrastructure
Margin for working Capital
Miscellaneous Exp

Important ratios for term Loan assessment-

Once the banker is satisfied then to study long term ability of a concern to repay the loan.
The important ratios are –

1.Debt Equity Ratio TERM LOAN/EQUITY(Term Liability against the stake of

shareholders)

2.Debt Service Coverage Ratio NPAT+DEPRECIATION+INTEREST

(DSCR) INTEREST+INSTALLMENT
(Servicing Capability of Repayment obligations)

3.Interest Coverage Ratio PBDIT/INTEREST(Servicing Capability of interest obligations)

4.FACR FIXED ASSETS/TERM DEBT

(outstanding balance in term loan account is covered by the
value of fixed assets)

5. TOL/TNW Total outside Liability/Tangible Net Worth

Break Even Analysis

Bankers are interested in whether borrower can generate enough funds to repay the loan also
when and to what extent funds/profit would be available for repayment.
Break even analysis is one of the important tool for measuring a stage where value of sales equals
to cost of sales. Thus it is a no profit no loss situation. With these viablility of project can be
evaluated indicating the level of production below which the unit will incur losses.
Break even point is expressed in following terms
1. Sales value
2. Number of units manufactured/sold

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3. Percentage of plant capacity utilization

Concept of costs- In case of BEP is to analyzed. Costs are divided into two parts-
1. Fixed Costs-Fixed costs are those costs which are fixed irrespective of volume of sales.

2. Variable Costs-Variable costs are those which vary with the change in the volume of sales
/Production.

Formula for calculation of BEP is as under

 BEP (Breakeven point in units) = Fixed cost/(contribution)

 BEP (Breakeven point in Rupees)= (Fixed cost/ contribution)*Sales

Where, Contribution= (Sale-Variable cost) or (Sale Price per unit minus variable cost per unit)

Example-1

A company makes a single product with a sale price of Rs.10 and a marginal cost of Rs.6. fixed cost
are Rs.80000/- p.a. calculate?
1) NO. Of units to break even.
2) Sales at BEP.

Solution-
1) BEP (Breakeven point in units) = Fixed cost/ (Sale price per unit-Variable cost per unit)
= 80000/(10-6)=20000 units.

2) Sales at BEP= 20000*Sale price=20000*10/-=200000/-

Example-2

A firm has the following budgeted data for year ending 31st March 2019: Budgeted Sales
Rs 9, 50,000/- Budgeted Variable Costs Rs 6, 50,000/- Budgeted Fixed Costs Rs 1, 50,000/-
The B.E.P in rupees will be:

Solution:
BEP (Breakeven point in Rupees) = [Fixed cost/ (Sale-variable cost) i.e. contribution]*Sales
= [ 1,50,000/ ( 9,50,000-6,50,000)]*9,50,000
= (1,50,000/3,00,000 ) * 9,50,000
= (1/2)*9,50,000 = Rs. 4,75,000/-

271
 RETAIL LOANS – MAHABANK AADHAR LOAN SCHEME FOR PENSIONERS
PURPOSE
 Personal expenses - medical, pilgrimage, domestic needs, etc.
ELIGIBILITY
 Central/State Government/ Municipal Corporation/ PSU and such other pensioners
(including Family pensioners). Drawing pension at our branches.
 Please note: The beneficiaries of Central/State Govt. welfare schemes like Old Age
Pension, Freedom fighter pension, Disability pension, Niradhar pension etc. are not eligible.
INCOME CRITERIA
 Not applicable
AGE LIMIT
 Maximum 73 Years on disbursement date, subject to 77 years of age at loan maturity
LOAN QUANTUM
Equivalent to 18 Months Pension subject to Maximum
OTHER PENSIONERS
 Maximum Rs. 4.00 Lakh up to the age of 65 years.
 Maximum Rs. 3.00 Lakh up to the age of 70 years.
 Maximum Rs. 2.00 Lakh up to the age of 73 years.
BOM STAFF PENSIONERS
 Maximum Rs. 6.00 Lakh up to the age of 65 years.
 Maximum Rs. 4.50 Lakh up to the age of 70 years.
 Maximum Rs. 3.00 Lakh up to the age of 73 years.
MARGIN
 Nil
REPAYMENT
 60 EMIs, Subject to 77 years of age at loan maturity
RATE OF INTEREST
 BOM Staff Pensioners => RLLR + 2.15%
 Others => RLLR + 3.15 %

272
PROCESSING FEE
 0.50% of the Loan Amount (Min.:Rs.500/-) plus GST.
DOCUMENTATION CHARGES
 0.20% of the Loan Amount (Min.:Rs.500/-) plus GST.
DEDUCTION
 Pension up to Rs.12500/- => 40% of gross monthly pension(including Proposed EMI)
 Pension above Rs.12500/-=>50% of gross monthly pension(including Proposed EMI)
SECURITY
 Clean
 Person entitled for family pension to be taken as co-borrower.
 In case, there is no beneficiary of Family pension, an acceptable guarantor drawing salary/
pension from our branch be obtained.
 In case, the loan is sanctioned to the Family pensioner, two acceptable guarantors having
sufficient Net worth and drawing salary/pension from our branch be obtained.
 Guarantor should not give guarantee to more than two Adhaar loan accounts.
DUE DILIGENCE
 Disbursement through pension paying branch only.
 Irrevocable standing instructions to deduct loan installment
 Loan is subject to closure of existing loan.
 No. of times for loan – up to 67 years- no restriction
 Pensioner of 67 to 73 year -3 times
 Irrevocable mandate from borrower and guarantors that they will not transfer their
pension/ salary account to any other bank/ branch until any NOC issued by our bank.
Product Code:
 BOM Staff Pensioners => 6812-3414
 Others => 6812-3232

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RETAIL LOANS- - EDUCATION LOANS
PURPOSE
 Providing financial support from the banking system to meritorious students for pursuing
higher education in India & abroad.
ELIGIBILITY
 Student should be Indian National
 Should have Secured admission to professional / technical courses in India or abroad
through Entrance Test / Merit Based Selection Process.
COURSES
STUDIES IN INDIA:
 Diploma/ Degree/ Post Graduation Courses recognized by central / State Govt., affiliated
to Universities etc.
 Courses like CA/CS/CWA etc.
 Courses conducted by IIMs,IITs,NIFT,NID,XLRI,IISC etc.
 Regular Degree/Diploma Courses like Aeronautical, Pilot training, Shipping, degree/
diploma in Nursing, or any other discipline approved by Director General of Civil Aviation, Shipping/
Indian Nursing Council or any regulatory body as the case may be, if the courses pursued in India.
STUDIES IN ABROAD:
 Job oriented Prof./Technical/PG Courses
 Post-Graduation- MCA/MBA/MS etc.
 Courses conducted by CIMA/ AFFA- London, CPA/CFA in USA etc.
 Regular Degree/Diploma Courses like Aeronautical, Pilot training, Shipping, degree/
diploma in Nursing, or any other discipline approved by Director General of Civil Aviation, Shipping/
Indian Nursing Council or any regulatory body as the case may be, if the courses pursued in India/
abroad.
QUANTUM OF LOAN
 Need based finance subject to repaying capacity of the parents / students
EXPENSES CONSIDERED FOR LOAN
 Fee- college/school, Hostel (reasonable lodging and boarding charges will be considered in
case the student chooses/ is required to opt for outside accommodation)
 Examination, library, Lab
 Travel expenses/ passage money for study abroad.

274
 Insurance premium for student borrower
 Caution deposit, building fund/refundable deposit-with bills/receipt*
 Purchase of Books, Equipments, Instruments, Uniforms**
 Purchase of computer- essential for completion of course**
 Any other expenses required to complete the course- study tours, project work etc…not
more than 10% of the tuition fee**
*These expenses could be considered subject to the condition that the amount does not exceed
10% of the total tuition fee for the entire course.
**These charges may not be available in the schedule of fees and charges prescribed by the college
authorities. Therefore a realistic assessment may be made to the requirement under these heads.
However the maximum expenses included for these items may be capped at 20% of the total tuition
fees payable for completion of course.

REPAYMENT
 Up to 15 years for all loans irrespective of amount of loan, in EMI after Moratorium
MORATORIUM PERIOD
 Repayment holiday / Moratorium - Course period(the period of completion of initial
course) + 1 year (Uniform 1 year moratorium for repayment after completion of studies in all cases)
NATURE OF FACILITY
 Term Loan
MARGIN
 Up to Rs. 4.00 lakh - NIL
 Above Rs.4.00 lakh –
a. 5% for studies in India
b. 15% for studies abroad

RATE OF INTEREST
 Up to Rs.7.50 lakh- RLLR + 2.00%
 Above Rs.7.50 lakh: RLLR + 1.65%
 Simple interest during Moratorium period thereafter compounded monthly.

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SECURITY
PRIMARY SECURITY:
 Upto Rs.7.50 lakh: Clean /Parent(s) to be Joint Borrowers/ Coverage under NCGTC
 Above Rs.7.50 lakh: Parent(s) to be Joint Borrowers
COLLATERAL SECURITY:
 Up to Rs.7.50 lakh: No Collateral/ Coverage under NCGTC
 Above Rs.7.50 lakh: Collateral equivalent to quantum of finance after providing requisite
margin
 The margins for the securities are as under-
Type of Security Margin
Govt Securities- Public Sector Bonds 25%
Shares (as per approved list from time to time)/
50%
Debentures
LIC Policies Surrender Value
NSCs/ KVPs/ Bank’s own deposits 100% of face value + accrued interest
Mortgage of Land and Building  Realisable value of the property to be
considered
 Valuation not older than 2 years.
 Second charge allowed subject to stipulated
margins and security coverages.
CONCESSION
 0.25% concession for Mahasaraswati RD accounts for 3 years.
 0.50% concession for girls.
 0.50% for housing loan borrower who has completed at least 3 years.
 0.50% concession – for students getting admission in top rated Premier Institutions/
 Risk based Pricing: An additional concession in interest is given to meritorious
students(based on their previous academic performance) based on risk rating as under-

% of marks obtained at all Rating Concession in applicable ROI

levels
90 and above AAA 0.50%
80-89 AA 0.25%
75-79 A 0.15%
60-74 B NIL
Below 60 C NIL

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 *Concession is subject to maximum of 0.50%
 Interest concession @ 1% during moratorium period only – for prompt servicing of interest
during the moratorium period

CHARGES
 Processing charges (refundable) of 0.50% of the loan amount should be charged upfront
for studies in abroad.
 No Processing charges on loan for studies in India.
 Documentation charges -0.20%+GST of the loan amt.
 CIBIL- Rs 100 +GST person.
 CERSAI(if collateral)-Rs 100+GST
 Legal and Valuation charges (if collateral) - As decided by the zones as per the builder’s
approval project circular.

CSIS –REGULAR
• Education Loan sanctioned for Studies in India. The quantum of loan should be upto Rs.
7.50 Lakh.
• Education Loan disbursed after 01.04.2009 is eligible for subsidy
• Subsidy eligible for the moratorium period only
• Disbursed after 01.04.2009
• Entire interest charged to the account during the financial year 2016-17 is eligible for
subsidy.
• Parental income of the student should not be more than Rs. 4.50 lakh
• Income Certificate issued by the Competent Authority only should be taken as basis for
determining the eligibility of the student.
• Entire interest charged to the account during the moratorium period is eligible for subsidy.

VLP-ONLINE EDUCATION
 Henceforth all Education Loans should be routed through VLP online portal either directly
from vidyalakshmi.in or bankofmaharashtra.in

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 Student can apply education loans through common Education Loan Application Form as
provided by IBA and same should be accepted for further processing of the proposal
 Physical application submitted by the student applicant must be routed through VLP after
sanction. Rs. 100/- to be charged to the applicant for the handling of VLP by NSDL.
 Ensure all the education loan proposal received through Vidya Lakshmi Portal has to be
attended on priority basis and updated it on regular interval.
 The student can view the status of his application on Vidya Lakshmi portal and can submit
grievances, if any.
 Zonal offices/ CPC-R to organize orientation programme to sensitize field offices under
their control on Educational Loans, CSIS and VLP and ensure awareness campaign/ seminar for
popularization of VLP.

REFERENCE
1) AX1/CREDIT PRIORITY/MASTER MELS/CIR 11/2018-19 Dated 21/04/2018

2) AX1/PSRC/ROI/Cir No.168/2019-20 dated 20/01/2020

RETAIL LOANS – Mahabank GOLD LOAN scheme

PURPOSE
 Meeting other personal expenses, which include personal expenditure of varied needs like
marriage, higher education, medical emergencies, business travel etc.
 Purpose of loan will have to be specified along with an undertaking that loan will not be
used for any speculative purpose whatever including speculation on real estate and equity shares
ELIGIBILITY
 All individuals desirous of availing Gold Loan against gold jewellery/ornaments
 The applicant must be local resident & must have saving account with the Branch.

AGE CRITERIA
 Minimum : 18 Years
 Maximum : 70 Years

QUANTUM OF LOAN
 Minimum:No minimum limit prescribed.
 Maximum: Rs.20.00 lakh
 Eligible loan amount

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 Rs.3610/- per gram of 22 carat gold ornament (Subject to the amendments from HO from
time to time). For 24 Carat gold coin (issued by banks in tamper proof package)- Rs. 100/- per
gram above the limit defined for 22 carat gold ornaments as above subject to maximum ceilings
of loan.
Or

 80% of the market value of the net weight of the Gold ornaments excluding stones
attached (whichever is less)
 In case of repayment mode is “Bullet Repayment”, scale of finance per gram of Gold will
be Rs. 3,160/- per gram or 70% of market value of Gold, whichever is less.

NATURE OF FACILITY
 Cash credit Or Term loan repayable in 24 months.
 In case of Bullet Repayment maximum repayment- 12 months.

MARGIN

Particulars Margin
Bullet Repayment 30%
In all other cases (TL/CC) 20%

 LTV of 80% is to be maintained throughout the tenure of the Loan. (Total Outstanding
including Interest/ Value of Gold)

RATE OF INTEREST
 RLLR +0.45%.

REPAYMENT
 Term Loan:
 Principal: The maximum repayment period is 24 Months. Repayment should be fixed in
terms of monthly/ quarterly/ half yearly. The repayment can also be fixed as bullet payment.
 Interest: Interest is charged on monthly basis and should be serviced as and when applied.
 Bullet Repayment: The repayment period of such loans shall not exceed 12 months. Bullet
Repayment of Interest and Principal at the end of term. Interest will be charged to the account at
monthly rests but will become due for payment along with the Principal only at maturity.
 Cash Credit :
 Annual Review subject to entire amount to be repaid once in year

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 Interest: Interest is charged on monthly basis and should be serviced as and when applied.
DEDUCTION
 Not to exceed 60% of Gross Income including Proposed EMI of the Loan
SECURITY
 Pledge of gold jewellery/ ornaments. Bank shall not grant any advance against bullion /
primary gold
CHARGES
 Processing charges : Rs.500/- per application
 Documentation/Inspection Charges: NIL
 Out of Pocket Expenses(Packing Charges): Rs. 100/- plus GST.
DUE DILIGENCE
 Declaration stating Jewellery/ Ornaments being pledged is his own property and no other
person has any claim against them & he has full right to pledge them to bank.
 Testing and certification to be done by appraiser empanelled by Bank. Charges will be borne
by the borrower
 Certificate having details as Description of Ornaments, their fitness/ purity (22 Or 24 Carats),
Gross Weight of ornaments, Net weight of the Gold exclusive of stones, lac, alloy, string fastenings
and value of Gold at prevailing market Price.
 Pledge Gold with list of articles having description, weight, purity certificate in a box/ pack
duly sealed with joint signature of borrower and authorized bank officials.
 Box/ Pack should bear respective Loan account number and Name of the Borrower.
 Bank has full authority to recover dues in case of non-repayment of Interest or loan amount
by sell of Pledged Gold and Irrevocable Authority be obtained from borrower before sanction.
 At the time of closure of loan account and releasing the pledged gold, seal of the box/pack
be opened before borrower
 Jewels or ornaments should be released immediately on adjustment of loan amount, If not
released, even after adjustment of the loan, custodial charges should be levied.
 Gold Loans should not be granted under multiple IDs/CIFs of the same Customer/Borrower.
 Name of nominee should be obtained invariably at the time of sanction of Gold Loan.
 Pledge of Jewellery from pawn brokers is prohibited.
Reference:
1) AX1/PSRC/Gold Loan - Retail/Cir. 77/2020-21 Dated 30th July, 2020

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RETAIL LOAN – MAHA SUPER HOUSING LOAN
PURPOSE
 For Construction/Acquiring of House/Flat / Apartment
 Purchase of Residential House/Flat / Apart.
 Take over from other Banks/HFI
 Purchase of Plot & construction thereon
 Repair/ Renovation/ Extension
Classification under Priority Sector
 Loans to individuals up to 35 Lakhs in metropolitan centers (with population of ten lakh and
above) and loans up to 25 Lakhs in other centers for purchase / construction of a dwelling unit per
family, are eligible to be considered as priority sector provided the overall cost of the dwelling unit
in the metropolitan center and at other centers does not exceed 45 lakhs and 30 Lakhs, respectively.
Housing loans to banks' own employees (under Staff schematic) are not eligible for classification
under priority sector.
 Loans for repairs to damaged dwelling units of individuals up to 10 Lakhs in metropolitan
centers and up to 6 Lakhs in other centers are eligible to be considered as priority sector.
ELIGIBILITY
 Permanent salaried employees with minimum 1 year confirmed service in the current
organization. Loan request for considering relaxation in service period below 1 year in current
organization shall be considered by Zonal Manager’s committee on case-to- case basis. (The same
may be relaxed on the basis of previous work experience if any)
 Businessman/Self-Employed Professionals having regular source of income
 Pensioners (only in case of Defence Professionals retired in short service commission or
having age less than 60 years) having pension account with us and sufficient disposable income
 Farmers having minimum 5 acres of irrigated land holding and sufficient disposable income.
In case of agriculturists not filing income tax returns, latest income certificate issued by Tehsildar/
Mandal Revenue Officer/ Revenue Department Officer having State Level Gazette rank may be
considered for sanction of housing loans upto Rs. 25.00 Lakh.
 Agriculture NPA borrowers not to be sanctioned loan
Min Annual Income Criteria (For repairs/renovation/alteration of existing house/flat for new
standalone borrowers):

 For Salaried: Rs.3.00lakh (last year income) - Minimum past 2 year ITR/Form 16 from the
Employer is Mandatory.
 For Self-employed Professionals: Rs.3.00lakh (as per last year ITR income) - Minimum past 2
year ITR with supporting documents are mandatory.

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 For Businessmen: Rs.3.00lakh (as per last year ITR income) - Minimum past 3 year ITR with
supporting documents are mandatory.
 For Persons engaged in Agriculture & Allied activities having ascertainable Minimum income
of Rs.3.00lakh
AGE CRITERIA
 Minimum: 21 years old (completed)
 Maximum: 65 Years for Professional & self employed/ 60 years for others
 Age at Loan Maturity should not exceed 75 Years
 Age Criteria/Service Criteria is to be applied only to the applicant or/and Co-applicant whose
income is relied upon for deciding loan eligibility and repayment conditions
 If income of applicant and co applicant maintained with in ratio of 75:25 for repayment then
the age of applicant will be considered for deciding loan tenure. Otherwise higher age of co
applicants will be considered for deciding loan tenure.
ELIGIBLE QUANTUM OF LOAN
For (a) construction / acquiring of new flat/house or extension in the existing house
(b) Purchase of plot and construction thereon
 Permissible Deduction norms
 Maximum permissible LTV Ratio
 Loan amount requested
 The income of Father, Mother, son, daughter, sister, brother, along with the spouse can be
taken for deciding the quantum of loan and repayment capacity.
For Repair/Renovation
 100% of the actual cost of repairs/renovations/alterations
 Maximum Quantum: Maximum up to 25% of the realizable value of the property
Maximum Quantum of Loan

The quantum of finance shall depend upon the Maximum permissible LTV ratio and repaying
capacity of the borrower.
1) In case of construction of New Residential House- Cost of construction of House will include
the cost of all non-movable fixed assets, fittings; being constructed thereon. In case of construction
of individual house , where plot is already owned by the borrower , the LTV will be calculated on the
estimated cost of construction , duly vetted by empaneled valuer / Govt. approved
Architect/Engineer, plus the current market value of the plot (as per the latest valuation report).
2) Purchase of New ready built independent house or Flat:
 Either purchase cost excluding-

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 Registration, stamp duty and other documentary charges, cost of life insurance cover on the
life of the borrower and any other non-realisable costs should not be included in cost of housing
unit. In case of borrowers from EWS and LIG, these charges(Stamp duty, registration and other
Documentation charges) may be added to the cost of the house/dwelling unit for the purpose of
calculating LTV ratio/minimum margin requirement, where the cost of the house/dwelling unit does
not exceed Rs. 10.00 Lakh
Or
 Present Market value of the Flat/House as assessed by the empaneled valuer
(Whichever is lower)
3) Purchase of New Under construction independent house or Flat: Cost of construction of the
Flat as per construction agreement with the builder (or Tripartite agreement or any other agreement
of similar nature which defines the builder‘s responsibility to complete the construction of the
structure under construction) excluding registration, stamp duty and other documentary charges,
cost of life insurance cover on the life of the borrower and any other non-realisable costs should not
be included in cost of housing unit. In case of borrowers from EWS and LIG, these charges(Stamp
duty, registration and other Documentation charges) may be added to the cost of the
house/dwelling unit for the purpose of calculating LTV ratio/minimum margin requirement, where
the cost of the house/dwelling unit does not exceed Rs. 10.00 Lakh.
4) Extension (additional construction) in the existing house/flat: Estimate of cost of
construction as per the Govt. approved engineers/valuers. For house/flat older than 20 years but
not more than 30 years, structural stability of the property is to be ascertained and residual life of
the property should be atleast 5 years more than the repayment period considered for the currency
of the loan.

5) Purchase of old house/flat not older than 30 years:

 Present market value of the Flat/house as per the valuation report or agreement to sale value
(excluding registration, stamp duty and other documentary charges) whichever is lower.
 For house/flat older than 20 years but not more than 30 years, structural stability of the
property is to be ascertained and residual life of the property should be atleast 5 years more than
the repayment period considered for the currency of the loan.
 Loan request for purchase of old house/flats older than 30 years shall be considered by Zonal
Manager’s committee on case-to- case basis subject to structural stability report by Govt. approved
Structural Engineer and valuation report by valuer on panel provided residual life of the
building/structure should be at least 5 years more than the repayment period.
6) Adding Cost of furnishing / interior to the cost of House / Flat. Cost of furnishings /
interior/Modular kitchen/etc. is added to the cost of the house/ flat for acquiring of new or existing
house / and new or extension in the existing house/Flat. The loan component for this purpose being
limited to 10% of agreement value of flat and estimated value of construction or Rs 25.00 lakh,
whichever is less.

7) Inclusion of cost of Solar Photo Lightening System. The cost of rooftop Solar Photo Voltaic
System may be included in the cost / agreement of sale value for arriving at the Home Loan eligibility
for purchase / Construction / Extension (additional construction) of residential units in respect of all
applicants willing to install such system.

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 8) For Purchase of Plot & construction thereon:
a. For Plot Loan: 70% of the cost (registered value) of Plot and estimated cost of construction
after complying with Net Take Home Pay/Income norms.
i.Plot on standalone basis should not be financed.
ii.Cost of the Plot should not exceed 75% of the total cost of housing unit.
b. For Construction Loan:
i.Cost of construction of House – inclusive of the cost of all non-movable fixed assets, fittings; being
constructed thereon.
ii.The LTV will be calculated on the estimated cost of construction, duly vetted by empaneled valuer /
Govt. approved Architect/Engineer, plus the current market value of the plot (as per the latest
valuation report).

Moratorium Period:

 For Construction/acquiring of new or existing house/flat and extension of existing

house/flat
Construction of residential Maximum of 36 months from date of first
House & purchase of Flat under disbursement. However the interest may be
construction capitalized for a maximum period of 18 months
thereafter Interest to be serviced as and when
applied

Purchase of New/Existing Maximum of 2 months from date of first

ready built house or Flat disbursement of Loan

Extension of existing Pre- Maximum of 18 months from date of first

owned Residential building disbursement

Takeover of Housing Loan From the next month from the date of
disbursement

 However in all cases maximum tenor will be 30 years or on borrower reaching the age of 75
years whichever is earlier. Also Interest capitalization request may be considered by maintaining
necessary margin and LTV.
 For Purchase of Plot and Construction thereon
 For Purchase of Plot- No moratorium period for Plot loan
 For Construction- Maximum of 36 months from date of first disbursement. However the
interest may be capitalized for a maximum period of 18 months thereafter Interest to be serviced
as and when applied.

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Loan to Value and Margin:

 For construction / acquiring of new flat/house or extension in the existing house

Loan to value (LTV) ratio

Category of Loan (Individual Minimum

Home Loan amount LTV Ratio Margin
Up to Rs.30.00 Lakh 90% 10%
80% 20%
Above Rs.30.00 Lakhs
90%* 10%
For Loans above Rs. 30 Lakh, additional 0.15% is
applicable when LTV >80 to ≤ 90.
The LTV is calculated on realisable value of residential
property. The above LTV is applicable upto 31.03.2022.

 For Purchase of plot and construction thereon

For Purchase of Plot- Minimum 30% margin of the registered value of the plot

 For repair and renovation

Nil Margin

 Reimbursement of excess margin money paid by borrower during preceding 12 months

can be considered subject to submission of documents and transaction statement on case to
case basis after proper due diligence and verification of submitted documents.
RATE OF INTEREST
For construction / acquiring of new flat/house or extension in the existing house

Loan Amt CIBIL Salaried Others

750 &> RLLR + 0.05 RLLR +0.15
700-749 RLLR +0.15 RLLR +0.30
650-699 RLLR +0.30 RLLR +0.45
Upto 30 Lakh
600-649 RLLR +0.35 RLLR +0.65
< 600 RLLR +0.80 RLLR +1.15
-1 to 05 RLLR +0.20 RLLR +0.45
750 &> RLLR + 0.05 RLLR +0.15
700-749 RLLR +0.15 RLLR +0.50
650-699 RLLR +0.35 RLLR +0.65
>30 Lakh
600-649 RLLR +0.40 RLLR +0.90
< 600 RLLR +1.00 RLLR +1.50
-1 to 05 RLLR +0.35 RLLR +0.65

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For Repair and Renovation:

Loan Amt CIBIL Salaried Others

>750 RLLR +0.50 RLLR +0.75
700-749 RLLR +0.50 RLLR +0.85
650-699 RLLR +0.75 RLLR +1.00
Upto 30 Lakh
600-649 RLLR +0.85 RLLR +1.10
< 600 RLLR +1.25 RLLR +1.50
-1 to 05 RLLR +0.75 RLLR +1.00
>750 RLLR +0.50 RLLR +0.85
700-749 RLLR +0.50 RLLR +0.90
650-699 RLLR +0.75 RLLR +1.10
>30 Lakh to 75 Lakh
600-649 RLLR +0.85 RLLR +1.15
< 600 RLLR +1.25 RLLR +1.50
-1 to 05 RLLR +0.75 RLLR +1.10
>750 RLLR+ 0.75 RLLR +0.95
700-749 RLLR +0.75 RLLR +1.00
650-699 RLLR +0.85 RLLR +1.20
>75 Lakh
600-649 RLLR +1.00 RLLR +1.25
< 600 RLLR +1.50 RLLR +1.75
-1 to 05 RLLR +0.85 RLLR +1.25

Deduction

 For Salaried

Gross monthly Income Permissible

Deduction
<20000/- Maximum 50%
25000/- to < 50000 Maximum 60%
50000 to <2Lakh Maximum 65%
2Lakh to < 5Lakh Maximum 70%
>5Lakh Maximum 75%

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 For Others

 Professionals- Avg of last 2 yrs income, based on IT returns.

 Businessmen- Avg of last 3 yrs income, based on IT returns

Gross monthly Income Max.

Ded.
< 3Lakh Maximum50%
3Lakh to < 6Lakh Maximum60%
6Lakh to < 10Lakh Maximum65%
10Lakh to < 20Lakh Maximum70%
>20Lakh Maximum75%

ZLCC can consider additional relaxation in deduction norms upto 5% on case to case basis.

REPAYMENT
 For construction/acquiring of new House/ Flats/ Plot Purchasing/ Extension of existing
house/flat: Maximum 30 years or on borrower reaching the age of 75 years whichever is earlier.
 In case of salaried individuals, the repayment period may be extended beyond the
retirement of the employee up to maximum age of 75 years, provided the post-retirement income
is adequate to meet the EMI liability.
 For repairs/renovation: Maximum 20 Years

OTHER GUIDELINES

 Guarantor/ co-applicant not to be insisted upon.

 In case of takeover, CIBIL must be 700, however ZLCC of ZM can consider CIBIL score of
within the range of 650-699 for takeover loans on case to case basis on merits.
 Loan request for takeover of Housing Loan for Non-Salaried, Self-Employed professionals
and Businessmen can be sanctioned by CM and above subject to delegated sanctioning powers. In
case of others, it will be considered by ZLCC of ZM.
 Legal Search report of 13 yrs to be obtained for loan ≤ 1Cr, subject to flow of title is clear.
For above 1 Cr, 30 yrs search to be obtained.
 In case of Housing Loan to NRI, the documents Salary Slips/ Bank Statement/ Passbook,
Appointment Letter, Company Profile etc. should be countersigned by embassy or by officials of
their foreign offices.
 NOC from builder must be obtained if property is under construction. NOC from society if
Builder has executed conveyance deed with the society.
 In case construction is completed, society is not formed, NOC from builder to be obtained.
 In search report, an advocate has to certify that having verified Lis Pendency noted in
revenue records/ municipal records.

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CHARGES
 Processing fee @ 0.25% of the Loan Amount (Min: Rs. 1000/- Max: Rs.25,000/-)
 Documentation Charges: 0.10% of Loan amount(Max: Rs.10,000/-)
 CERSAI Registration Charges- Rs. 100 + GST
 Legal Charges & Valuation charges - Decided by respective Zone as per Builder’s approval
project circular.
 CIBIL Charges-Rs. 50+GST per person.
 No foreclosure/prepayment charges on Floating Rate of interest.

OFFER
 Waiver of last 2 EMI to Housing Loan borrowers having regular repayment of 20 years and
above (for fresh sanctions only)

DUE DILIGENCE
CHECKS
 CREDIT SCORING MODEL APPROACH SHOULD BE FOLLOWED.
 KYC norms to be scrupulously followed
 CIBIL report /RBI defaulter list should be obtained and verified
 Pre sanction Inspection should be made invariably & visit report to be kept on record
 Verify Income Tax Returns / F 16/ BS & PL
 All documents should be obtained in original before disbursement of loan
 Check Eligible income, deductions, salary details- account Statement
 Banks Charge on the property
 Loan to be disbursed in stages
 SI/PDC for all cases except where employer is deducting installment from salary
 NACH mandate for all cases when the loan instalment is from other bank.

HOUSE PROPERTY CHECKS

 Pre-sanction Visit
 CIBIL Check
 Income Document/Bank statement Check
 Title Search
 Physical property Verification.
 Valuation
 Post Sanction Visit
 Possession / Completion Certificate
 Builder/Seller due diligence
 Structural Stability Report, if required

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DOCUMENTATION
 Application Format
 Appraisal Note
 Sanction Letter
 Loan docs
 Account Opening
 Mortgage Process: Anx. “A, B & C”
 CERSAI & Notice Of Intimation
 Charge Noting

Reference:
1) AX1/Credit Priority/ Retail/Housing/Cir. 83 /2019-20 dated 12th September, 2019
2) AX1/PSRC/Retail/Housing Loan/Cir. 192/2020-21 dated 21.12.2020
3) AX1/PSRC/Housing Loan/Cir No, 178/2020-21 dated 13/11/2020
4) ROI circular dated 08.06.2020

RETAIL LOANS – LOAN AGAINST MORTGAGE OF SELF OCCUPIED PROPERTY

PURPOSE
 For meeting varied personal needs like children’s education, marriage of children, medical
treatment, tour / travel expenses, buying vehicle or hi-tech gadgets, other domestic needs etc.
 Should not be used for speculative purposes.
ELIGIBILITY
 Individuals (age group of 18 - 65 yrs)
 Permanent Employee of Central/ State Govt/ PSUs
 Individual Businessmen, professional & Self employed having minimum 3 years standing
 Prior approval from ZLCC of ZM for considering employees of reputed Companies/ MNCs.
NATURE OF PROPERTY
 Unencumbered & self-occupied Residential property/ commercial property/ or building in
his/ her own name.
 Property mortgaged to our bank for some other credit facilities may be considered subject
to Margin and LTV norms including existing facilities.
 Property leased to Bank of Maharashtra on monthly rental can be considered, subject to
compliance of following.

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 There should not be any restriction on the disposal of the property in case the bank wants
to recover the dues by disposal of such property.

 In the event of sale of property by the bank for recovery of dues entire proceeds should
be available for bank.

 There should not be any onerous clause in the rent agreement affecting Bank’s interest.

 Property should be SARFAESI compliant.

 Residual lease period should be more than the Repayment tenure of the loan

 In such case, Loan request shall be considered by ZLCC of Zonal Manager on merit basis.
 Leasehold property may be accepted as security, where Government/ Quasi Government
Development Authorities allot properties on lease, subject to compliance of following.

 Residual lease period should be at least 25 years

 Mortgage of such property/ flat should be permissible as per the land lease deed and other
applicable laws, if any.

 The borrower/ branch will have to comply with the provisions like obtaining NOC from the
lesser/ building society and other conditions, if any, in lease deed etc., for creation of mortgage
charge on the property/ flat on leased plot in such cases, wherever required.

 Permission should be obtained from respective Development Authority for creating

mortgage in Bank’s favour and sale of property in case of default by the borrower.

 There should not be any restriction on the disposal of the property in case the bank wants
to recover the dues by disposal of such property.

 In the event of sale of property by the bank for recovery of dues entire proceeds should
be available for bank and there should not be clause of sharing of sale proceeds with Development
Authority.

 There should not be any onerous clause in the lease deed affecting Bank’s interest. Lease
property should be SARFAESI compliant.
 Property should be exclusive property.
 Holding the property for a period not less than 1 yr.
 Loan against 3rd party property is strictly prohibited.
 Loan against open plot is strictly prohibited.
 Rental based property is strictly prohibited.
 Multiple borrowal accounts against same property are permitted subject to margin and LTV
norms including existing facilities. The realizable value of the property should cover the margin for
all the facilities as per the stipulations of the respective schemes.

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 SEZ property not to be taken as security under this scheme.
 Mortgaged property should be within a radius of 25 km from the Branch, wherein the
account is maintained. Sanctioning authority may decide going beyond 25 km on case to case basis
with proper justification.
AGE OF PROPERTY
 Not more than 30 years old
 Relaxation of 5 years may be allowed by ZLCC of ZM subject to Structural stability report
from Govt approved Structural engineer stating residual working life of the building to be more
than 20 years.
MINIMUM ANNUAL INCOME
 For Salaried and self-employed professionals Rs.5.00 lakh (Last 2 years average gross
income), Minimum past 2 year ITR/Form 16 is Mandatory
 For Others - Last 3 years Gross Average income – Rs.5.00 Lakh (Minimum past 3 year ITR is
Mandatory)
 Maximum 2 close relatives may join as co applicant for repayment obligation. The co-
applicants should be in tax paying bracket.
NATURE OF FACILITY
 Term Loan / OD facility
QUANTUM OF LOAN
 Maximum : Rs. 3.00 Crore for Metro and Rs.1.00 Crore for Other centres
 Minimum : Rs.2.00 Lakh
MARGIN
 40 % - on the realizable value of the property.
RATE OF INTEREST

CIBIL SCORE ROI

750 & ABOVE RLRR + 1.65
700 TO 749 RLRR + 2.00
650 TO 699 RLRR + 2.15
600 TO 649 RLRR + 2.40
BELOW 600 RLRR + 2.65
-1 TO 05 RLRR + 2.15

Note: Below 600 CIBIL Score is to be sanctioned by next higher authority subject to genuineness
and as per delegated amount of default as mentioned ahead

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REPAYMENT
 Term Loan: Max- 10 years by way of EMI or borrower reaching the age of 75 years
 OD Facility: Max Repayment period of 10 years or borrower reaching the age of 75 years
 OD facility to be squared off within 10 yrs of repayment. Renewal with enhancement is not
allowed during the currency of the loan.
 Interest to be serviced as and when applied.
DEDUCTION
 Not exceed 60% of gross annual income.
CHARGES
 Processing fee @ 0.50 %+GST
 Document charges @ 0.10%+GST
 Inspection Charges @ 0.25% + GST
 CIBIL Charges-Rs 50+GST per person.
 CERSAI-Rs 100+GST
 Legal and Valuation charges- As decided by the zones as per the builder’s approval project
circular.

ADVANTAGES OF THE PRODUCT

 Assessment mainly based on value of security
 Loan to be disbursed in stages or in lump sum as per demand of borrower by credit to the
borrower’s Saving/ Current account/ RTGS/ NEFT etc.
 No need for End use, only self-declaration from borrower be obtained stating that the loan
is utilized for the purpose mentioned in application
 Loans should not be used for speculative purposes
DOCUMENTS REQUIRED
 For Salaried: Employer certificate, Past 2 yrs ITR/ Form 16 is mandatory
 For Self Employed Professional: Past 2 yrs ITR is mandatory.
 For Business and others: Requisite Registration/ Licenses, as applicable under Local Law,
Min past 2 yrs Profit making (having a track record of profit making of past three years), Audited
B/S & ITR of past two yrs.

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IMPORTANT PRESCRIPTION
 Credit scoring model should be followed before sanction.
 LTV ratio not exceeding 60% during currency of loan.
 Extra overdraft is strictly prohibited.
 Valuation of property not more than 6 months old. Valuation to be done every three years
after the loan is sanctioned.
SECURITY VERIFICATION AND INSPECTION
AMOUNT OF LOAN INCLUDING VISIT BY AND PERIODICITY
EXISTING FACILITY, IF ANY
Below Rs. 1.00 Crore Branch Officials Half Yearly
Rs. 1.00 Crore to Rs. 5.00 Crore Branch Officials Quarterly
Above Rs. 5.00 Crore Branch Officials Quarterly and
ZO Officials Half Yearly
Reference:
1) AX1/Credit Priority/ LAP-Personal/Cir. 27 /2019-20 dated 24th May, 2019
2) ROI circular dated 08.06.2020.

RETAIL LOAN – MAHA SUPER CAR LOAN

PURPOSE
Purchase of new 4 wheeler (car, jeep, SUV for personal use)
ELIGIBILITY
 Permanent salaried employees with minimum 1 year confirmed service in the current
organization (request for considering relaxation in service period below 1 years shall be
considered by the ZMs committee on case to case basis).
 Businessman/ Independent Entrepreneurs who have regular source of income based on 3
years IT Returns
 Self-Employed Professionals who have regular source of income based on 2 years IT
Returns
 Pensioners of Central/State Govt. with minimum monthly pension of Rs.25000
 Farmers having minimum 5 acres of land holding engaged in production oriented
agricultural activities provided all agri loans are regular. The assessment of income should be
based upon regular cash flow as per the EMI pattern on Monthly basis. The loan not to be given
to agriculture loan NPA borrowers.

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 Existing Corporate Clients customers with 1 year standing, 2 Years IT Returns/Income
proofs based on audited balance sheet, P&L A/c Others to be considered on perusal of 3 years IT
Returns/ Income proofs.
 Scoring model approach should be followed.
AGE CRITERIA
 Minimum: 18 years old (completed)
 Age at Loan Maturity should not exceed 70 Years
INCOME CRITERIA
 For Salaried/Pensioners:: Rs.3.00 lakh
 For Businessmen/Professionals/ Agriculturist: Rs.4.00 lakh
 For Corporate Clients :Rs.4.00 lakh
 Note: Following income which is of non-permanent in nature not to be considered while
calculating the repayment capacity of borrowers until it is substantiated by the bank statement
as regular 1. Beauty parlor/ Boutique income 2. Tuition income 3. Brokerage 4. Free lancing
income of irregular and inconsistent nature 5. Other income of non-permanent in nature
 Income of Family member can be considered as co-applicant (only one) subject to the ratio
of 70:30.

ELIGIBLE QUANTUM OF LOAN

 For Salaried Persons: - Up to 36 times of Net Monthly Salary
 For Self- Employed Professionals: Up to 2 times Average annual income of last 2 years ITR
or 2 times of Gross taxable income as per latest ITR, whichever is lower.
 Maximum Loan amount: No Upper Limit
 For Other Individuals: Up to 2 times Average annual income of last 3 years ITR or 2 times
of Gross taxable income as per latest ITR, whichever is lower.
 For Corporate Clients (Firms/Companies): Max. Rs.100.00 Lakh or Up to 3 times of Average
annual income based on 2 years ITR or Gross Taxable Income as per latest ITR(whichever is lower)

MARGIN

 For Housing Loan Borrowers(New/Existing) and Corporate Salary Account holders - Min.
10%
 For Others - Minimum 15%
 For Corporate Clients : Minimum 20%
Note: The margin is against Ex-Showroom Price + RTO Charges + Insurance Charges

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RATE OF INTEREST

Particulars CIBIL Score Salaried Non-Salaried

New 4 Wheeler 750 and above RLLR+ 0.65 RLLR+ 1.15

700 to 749 RLLR+ 0.90 RLLR+ 1.25
650 to 699 RLLR+ 1.40 RLLR+ 1.40
600 to 649 RLLR+ 1.40 RLLR+ 1.65
Below 600* RLLR+ 1.65 RLLR+ 1.90
-1 or 0 and 01 to RLLR+ 0.90 RLLR+ 1.40
05
For Partnership Firms RLLR + 1.40
and Companies

*Below 600 CIBIL Score, loan is to be sanctioned by next higher authority.

Concession in ROI:
 0.25% to Existing Housing Loan / MSME & Corporate borrowers/ Corporate Salary Account
holders/ Professional & Self Employed Borrowers having minimum standing of 1 year relationship
with our Bank.
 Maximum 0.05% discount to be allowed to women and armed forces (including
paramilitary forces) personnel.
 Maximum of the above two concessions to be given in case the applicant is eligible for both
the concessions.
REPAYMENT
 Maximum 84 Months
DEDUCTION
 Maximum Up to 65%
 Upto 70% for existing Housing Loan Borrower
 ZLCC can consider an additional relaxation of 5% for annual income above Rs. 20.00 Lakh
on case to case basis.
CHARGES
 Processing fee @ 0.25% of the Loan Amount (Min.: Rs.1000/- & Max: Rs.15,000/-) plus GST
 Documentation Charges: 0.20% of Loan amount
 CIBIL Charges-Rs 50+GST per person.
 CERSAI charges-Rs 100+GST

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SECURITY:
Primary Security
 Hypothecation of vehicle purchased. Our Hypothecation charge should be registered with
Regional Transport Office Authorities
Collateral Security
 For Loan up to Rs.20.00 Lakhs-Nil.
 For Loan above Rs.20.00 Lakhs-with tangible security of minimum 50% value of Loan
amount in favour of Bank. In case of immovable properties being offered as collateral security, it
is to be ensured that the property is SARFAESI compliant. If the property is already mortgaged with
the Bank, the unencumbered portion may be taken as security subject to the coverage of required
loan amount.
 For existing customers (having minimum 1 year satisfactory relation with the Bank) ZLCC
can consider loans upto Rs. 50 Lakh without any collateral security.
 Guarantor: Not to be insisted upon.
DUE DILIGENCE
 KYC norms to be scrupulously followed
 CIBIL report /RBI defaulter list should be obtained and verified
 Pre sanction Inspection should be made invariably & visit report to be kept on record
 All documents should be obtained in original before disbursement of loan
 No loan to be disbursed on the basis of Xerox copy or certified copy of these documents.
 Authenticity of the dealer of the company or supplier of vehicles should be ascertained.
Sub-dealers not to be encouraged. Special care to be taken in case authorized dealers’ account is
maintained at Co-operative Bank.
 Price of the vehicle should be cross checked from the website of the company.
 Disbursement should be through RTGS/NEFT/DD/PO
 An Instruction letter must be issued to bind the dealers for providing the vehicle and
documents viz RTO and insurance paper etc.
 Branch should ensure of the receipt the invoice, insurance with bank clause. Bank’s Charge
with RTO be ensured.
 Post sanction inspection should be made.
 The details of the vehicle embossed in vehicle viz. engine number, chassis number etc.
should be inspected personally & verified
 Employer's undertaking to deduct installment from salary
 Irrevocable undertaking by the borrower for deduction of loan installment from salary a/c.
 Irrevocable undertaking/acknowledgement from employer not to shift salary a/c
 SI/PDC for all cases except where employer is deducting installment from salary
 NACH mandate for all cases when the loan instalment is from other bank.

DOCUMENTATION

 Application Format
 Appraisal Note

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 Sanction Letter
 Loan Docs
 Account Opening
 Hypothecation deed
 CERSAI & Notice Of Intimation
 Charge Noting

Reference:
1) AX1/Credit Priority/Master Car Loan/Cir. 28 /2019-20 dated 24th May, 2019
2) AX1/PSRC/Retail/Car Loan/ Cir 193/2020-21 dated 22/12/2020

RETAIL LOANS – MAHASCHOLAR

OBJECTIVE
Providing financial support at preferential terms to meritorious students who have secured
admissions in premier educational institutes of the country are eligible to avail loan under the
scheme.

ELIGIBILITY CRITERIA
COURSES ELIGIBLE
 Regular full time Degree/Diploma courses offered by premier institutes eligible under the
scheme, admission in which is obtained through an Entrance Test/Selection process as prescribed
by the institute would be allowed. No certificate course will be allowed except specifically
mentioned.
STUDENT ELIGIBILITY
 Should be an Indian individual
 Secured admission in regular full time Degree/Diploma courses of Premium Institutions
covered as per Annexure A, B & C
AGE LIMIT
 Maximum Age limit for General – 38 years
 Maximum Age limit for SC/ST – 40 years
 No restriction on minimum age.
MAXIMUM LOAN AMOUNT
 For category A- Rs. 30 lakhs.
[For students of ISB, the maximum loan amount is Rs. 35.00 Lakh]
 For category B- Rs. 25 lakhs.

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 For category C- Rs. 20 lakhs.
MARGIN
 Education Loan to Students of Premier Institutions A- NIL
 5 % for Institutions specified in List B &C.
 Scholarship/ assistantship be included in margin.
 Margin may be brought-in on year-to-year basis as and when disbursements are made on
a pro-rata basis.

COLLATERAL SECURITY

Category of Institutions Collateral Security

List A No collateral security for A list institutions for loans upto Rs.
30 Lakh (maximum loan under the scheme is Rs. 30 Lakh)
[For students of ISB, the maximum loan amount is Rs. 35.00
Lakh]
List B  No collateral security for loan upto Rs. 20 Lakh.
 Tangible collateral security for the full value of loan
amount above Rs. 20 Lakh to Rs. 25 Lakh.
List C  No collateral security for loan upto Rs. 15 Lakh.
 Tangible collateral security for the full value of loan
amount above Rs. 15 Lakh to Rs. 20 Lakh.
 In case of a married person, co-obligator can be spouse or the Parent(s)/ Parent(s)-in-law.

 Parental obligation can also be substituted by a suitable third party guarantee acceptable
to the bank.
REPAYMENT
 Repayment of the loan will be maximum 180 equated monthly instalments (EMIs). (i.e. 15
years maximum excluding moratorium period).
MORATORIUM PERIOD
 Repayment holiday / Moratorium - Course period* + 1 year (Uniform 1 year moratorium
for repayment after completion of studies in all cases)
NATURE OF FACILITY
 Term Loan

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RATE OF INTEREST

Institutes Loan amount Rate of interest

For List - A Institutions --- RLLR +0.15

For List - A Institutions --- RLLR +0.15

For List - B Institutions Up to Rs 7.50 Lakh RLLR+ 0.90

Above Rs 7.5 Lakh RLLR+ 0.65

For List - C Institutions Up to Rs 7.50 Lakh RLLR+ 1.15

Above Rs 7.5 Lakh RLLR + 0.90

0.10% interest concession to a girl student.

REIMBURSEMENT OF FEES:
BM may consider reimbursement of fee already paid by the student/guardian at the time
of admission or subsequent stages within six months from the date of payment of fees on
individual merits of the case. Reimbursement after a period of more than six months may
be considered at ZO level. The reimbursement will be within sanctioned limit and subject
to production of proper receipt/ documentary evidence to the satisfaction of the Bank.
NO HIDDEN CHARGES
 No prepayment charges
 No Foreclosure charges
CHARGES
 NIL Processing fee
REFERENCES
1)AX1/CREDIT PRIORITY/RETAIL/ MAHA SCHOLAR /CIR 18/2018-19 Dated 25/05/2018

2) AX1/PSRC/Retail Credit/Edu Loan/Cir No.31/2020-21 dated 30/05/2020.

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RETAIL LOANS – MAHABANK PERSONAL LOAN SCHEME
PURPOSE
 Personal expenses –personal expenditure of various needs like Marriage, higher
education, medical emergencies, business travel etc. Purpose of loan will have to be specified
along with an undertaking that the same will not be used for any speculative purposes.
ELIGIBILITY
All confirmed employees of
 Central/ State Government
 Reputed PSUs/ Joint Stock Companies.
 Govt. and Govt. aided educational institution.
 Reputed corporates. / Public or Private limited companies / MNC*
*For the employees of Pvt/Public limited company, maintaining salary accounts with the bank,
such companies should have external rating (in force) of A and above.
 Confirmed employees with minimum 1-year service in current organisation
 Salaried customers, not having salary account with our Bank, are to be considered for
Personal Loan subject to Employer undertakes to deduct loan instalment from salary.
 Self-employed professionals (only Doctors (MBBS, MD, MS), CAs, Architects having own
business) can also be given personal loan in case they are banking with us (credit facilities) for last
one year.
 ZLCC of ZM is empowered for sanction of personal loan to Non-Salaried, Self-Employed
professionals and salaried customers not having salary account with us.
 Bank of Maharashtra employee can also avail this facility subject to deduction norms.
 Either Salary Gain Loan scheme or Personal Loan scheme can be granted at a time.
Service criteria:

 Salary account with the branch with the undertaking from the employer not to shift salary
account without permission.
 In the case of new relationship, 3 months’ salary should have been received and credited
in the salary account regularly.
 In case of takeover of personal loan from other Banks/FIs, ZLCC of ZM can consider the
relaxation of minimum 3 months’ salary credit to salary account on case to case basis. Loan can
be sanctioned after opening of salary account.

INCOME CRITERIA
 Minimum annual income 3 Lakh (Last year income)
 Minimum 2 years ITR/FORM 16 from the employer.

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AGE LIMIT
 Minimum: 21 years
 Maximum:
 58 years at the time of Sanction.
 60 years at loan maturity in case of salaried
 65 years at loan maturity in case of self-employed.
LOAN QUANTUM:
 Maximum Rs. 20.00 Lakh.
 Loan amount is 20 times of Gross Monthly Income or as per maximum quantum of Finance
whichever is lower.
Margin : NIL
REPAYMENT
 For Salaried- 84 months
 For others- 60 months
RATE OF INTEREST

CIBIL SCORE ROI

750 & ABOVE RLLR + 2.65
650 to 749 RLLR + 3.15
600 to 649 RLLR + 3.65
(-1) or (0) & 1 to 5 RLLR + 3.65
Charges:
Processing Fee: 1% of the loan amount + GST (Min 1000/-)
Documentation charges: 0.20% of the loan amount +GST
Insp charges: NIL.
CIBIL Charges: Rs. 50 per CIBIL report + GST

DEDUCTION
 Not to exceed 60% of the gross monthly Income including proposed EMI.
 If existing Housing loan borrowers, 65% of gross monthly Income including proposed EMI.
 ZLCC can consider an additional relaxation in deduction norms upto 5% on case to case
basis.

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SECURITY
 Clean
Guarantor:

 One Guarantor acceptable to the bank.

 Guarantor’s salary should be equal or more than the borrower.
 Another employee of same institutions/organization/ Company/ Firm etc. can be taken as
Guarantor.
 Mutual Guarantee may be obtained subject to one employee can join as a guarantor for
one loan only.
DUE DILIGENCE
 Credit scoring model approach should be implemented before sanctioning the loan.
 Irrevocable standing instructions to deduct loan instalment and an irrevocable
undertaking not to shift the salary account till the closure of the loan.
 Irrevocable mandate from employer that he will not transfer the salary account to any
other bank/ branch until any NOC issued by our bank.
Reference:
AX1/Credit Priority/Personal Loan/Cir. 195 /2020-21 dated 22nd December, 2020

RETAIL LOANS – MAHABANK SALARY GAIN

AMOUNT OF OD
 3 times of monthly take home salary.
ELIGIBILITY
 Permanent salaried employees with minimum 1 year confirmed service in the current
organization.
 For the employees of any other Pvt./Public ltd, company other than reputed corporate
concerns, maintaining salary account with the bank, branches should take approval from the
Zonal Manager for OD facility under the scheme. Such company should be listed, operational and
profit making for the last 3 years.
MINIMUM TAKE HOME SALARY
 Minimum take home salary of the applicant should be Rs 25000/- p.m.
 For deciding take home salary, average of last 3 last months’ salary credited in the account
be reckoned.

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DEDUCTIONS
 Total deduction of the applicant including the notional interest of the proposed OD facility
should not exceed 60% of the Gross Monthly salary.
ROI
 RLLR + 3.15%.
 Interest will be applied on monthly basis.
 Interest at the rate of SB account would be credited to the account for days the account
is in credit.
PROCESSING FEE
 0.50% of the OD amount per annum subject to Min. Rs 500/- P.A.

SANCTIONING AUTHORITY
 As per the Existing Sanctioning / delegated lending Powers.

DUE DILIGENCE
 A beneficiary of Salary Gain Scheme will not be entitled to avail Personal Loan under
“Mahabank Personal Loan Scheme” & “Mahabank Corporate Supreme Payroll Scheme”
simultaneously, i.e. only one facility can be granted at a time.
 Applicant’s Salary accounts should be with the concerned branch.
 Applicability of scheme for Staff: Confirmed employee of bank not having ECC facility/
Personal Loan is also eligible under the scheme, i.e. only one facility can be granted at a time

 Deviation: In case of any deviation to be allowed within the scheme, the loan is to be
treated at par with the Personal Loan scheme and policy guidelines with regard to deviation
approval for same may be applied.
OPERATIONS, ACCOUNTING AND OTHER TERMS
 A new Salary Gains account to be opened
 An agreement of clean OD to be obtained. In case of joint account, both the applicants to
sign the agreement.
 An undertaking to abide by the rules of the agreement to be taken.
 Account to be reviewed once in a year. It is to be ensured that the account is brought in
credit at least once in a year.
 The salary and other credits to be credited to the New Salary Gain account only.
 An irrevocable mandate from borrower to the employer is to given to route salary, all
payments and allowances including terminal benefits through the account maintained with the
bank and the same is to be confirmed with the employed.

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Reference
1) AX1/Credit Priority/Salary Gain/Cir. 106 /2017-18 dated 17th February, 2018
2) ROI dated 08.06.2020

RETAIL LOAN – TOP UP LOAN

PURPOSE
 Top-up Loan for repair/ renovation/ furnishing of house
 Top-up Loan Scheme for General purpose includes personal expenditure of varied needs
like Children's Education, Marriage of Children, Medical treatment, buying a vehicle or hi-tech
gadgets etc.
ELIGIBILITY
 Existing/Take over Housing loan borrowers (without deviation/
restructuring/rephasement) with minimum 18 months standing (12 months in case of Take over
Loans) where repayment commences w.e.f. next month of disbursement and in standard
category.
 Existing/Take over Housing loan borrowers (without deviation/
restructuring/rephasement) with minimum 24 months standing including moratorium (maximum
18months) and in standard category.
 Old Housing Loan borrowers (Regular and Standard only) of our bank who have repaid and
closed their existing housing loan, for maximum repayment tenure of 180 months.
 Minimum cut off CIBIL score is 700 (for Take Over Loan)
 Number of Top up loan maximum two at a times against the same property subject to LTV
norms.
MINIMUM ANNUAL INCOME
 Need not be reassessed for considering top-up loan proposals.
QUANTUM OF LOAN – FOR REPAIR/ RENOVATION/ EXTENSION/ FURNISHING
 For existing/old housing Loan Borrowers
a. 100% of estimated cost of repair/renovation/furnishing of house OR
b. Overall LTV (Loan to Value) should not be more than 75%. (whichever is lower)

 For Takeover Housing loan and additional facility of Top-up Loan:

a. Takeover of the O/s housing Loan: as per the prevailing norms complying take over as per
lending policy and framework elaborated in Takeover of Housing Loan circular vide circular no
AX1/PSRC/Takeover Guidelines/162/1819 dated 08.03.2019.

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b. Additional Top up Loan:
Maximum up to Overall LTV (Loan to Value) ≤ 75% based on the latest valuation report not older
than 3 years or 100% of estimated cost of repair/ renovation/ furnishing of house. (Whichever is
lower?)
QUANTUM OF LOAN – FOR OTHER PURPOSES
 For existing/old housing Loan Borrowers
a.Application amount Or
b. Overall LTV (Loan to Value) should not be more than 75%. (whichever is lower)
 For Takeover Housing loan and additional facility of Top-up Loan:
a.Takeover of the O/s housing Loan: As per the prevailing norms complying take over as per
lending policy and framework elaborated in Takeover of Housing Loan circular vide circular no
AX1/PSRC/Takeover Guidelines/162/18-19 dated 08.03.2019.
b.Additional Top up Loan: Maximum up to Overall LTV (Loan to Value) ≤ 75% based on the latest
valuation report not older than 3 years
NATURE OF FACILITY
 Term Loan
MARGIN
 NIL
RATE OF INTEREST
 For repair/ renovation/ furnishing of house

NON
LOAN AMOUNT CIBIL SCORE SALARIED SALARIED

750 & ABOVE RLRR + 0.50 RLRR + 0.75

700 TO 749 RLRR + 0.50 RLRR + 0.85
650 TO 699 RLRR + 0.75 RLRR + 1.00
UP TO 30 LAKH
600 TO 649 RLRR + 0.85 RLRR + 1.10
BELOW 600 RLRR + 1.25 RLRR + 1.50
-1 TO 05 RLRR + 0.75 RLRR + 1.00
750 & ABOVE RLRR + 0.50 RLRR + 0.85
700 TO 749 RLRR + 0.50 RLRR + 0.90
ABOVE RS 30 LAKH & 650 TO 699 RLRR + 0.75 RLRR + 1.10
UPTO RS 75 LAKHS 600 TO 649 RLRR + 0.85 RLRR + 1.15
BELOW 600 RLRR + 1.25 RLRR + 1.50
-1 TO 05 RLRR + 0.75 RLRR + 1.10

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 750 & ABOVE RLRR + 0.75 RLRR + 0.95
700 TO 749 RLRR + 0.75 RLRR + 1.00
650 TO 699 RLRR + 0.85 RLRR + 1.20
ABOVE RS 75 LAKHS
600 TO 649 RLRR + 1.00 RLRR + 1.25
BELOW 600 RLRR + 1.50 RLRR + 1.75
-1 TO 05 RLRR + 0.85 RLRR + 1.25

 For OTHER PURPOSES: -

DEDUCTION NORMS APPLICABLE ROI

UPTO 60% RLRR + 1.15
ABOVE 60% RLRR + 1.40
REPAYMENT
 Maximum Repayment period of 180 months (subject to Age at Loan Maturity should not
exceed 75 Years).
DEDUCTION
 Not to exceed 65% of Gross Income including Proposed EMI of the Loan
SECURITY
 Additional mortgage charge on existing house property mortgaged to the Bank
CHARGES
 Processing fee @ 0.50 % plus GST
 Document charges @ 0.10% on the loan amount max 10,000/- plus GST
 Cersai Charges- Rs. 100 per property plus GST
DUE DILIGENCE
 Credit scoring model should be followed.
 Assessment mainly based on value of security
 Overall Loan to value (LTV) should not be more than 75%. Overall LTV should be calculated
based on outstanding balance plus undrawn portion if any in the existing housing loan account plus
the proposed Top-up loan together into account.
 Loans should not be used for speculative purposes
 No loan for restructured/ rephrased accounts
 Income proof to be verified & compared with the present housing loan account
 Classification Priority / Non priority should be done based on purpose of the advance.
 In case guarantor is obtained for the existing housing loan, the same guarantee to be
obtained for the top-up loan. In case the housing loan is granted in joint names, the top-up loan is
to be granted in joint names.

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 For House/flat older than 20 years but not more than 30 years, structural stability report is
to be obtained and should have the residual life of the property atleast 5 years more than the
repayment period.
Reference:
1) AX1/Credit Priority/Top up/Cir. 37 /2019-20 dated 26th June, 2019
2) ROI from Circular dated 08.06.2020

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 GIST OF PRUDENTIAL NORMS ON INCOME RECOGNITION

ASSET CLASSIFICATION & PROVISIONING PERTAINING TO ADVANCES

In line with the international practices and as per the recommendations made by the committee
on the financial system (headed by Shri M. Narasimham), the Reserve Bank of India has introduced,
in a phased manner, prudential norms for income recognition, asset classification and provisioning
for the advances portfolio of the banks so as to move towards greater consistency and transparency
in the published accounts.
The policy of income recognition should be objective and based on record of recovery rather than
on any subjective considerations. Likewise, the classification of assets of banks has to be done on
the basis of objective criteria, which would ensure a uniform and consistent application of the
norms. Also, the provisioning should be made on the basis of the classification of assets based on
the period for which the asset has remained non-performing and the availability of security and the
realizable value thereof.

Banks are urged to ensure that while granting loans and advances, realistic repayment schedules
may be fixed on the basis of cash flows with borrowers. This would go a long way to facilitate
prompt repayment by the borrowers and thus improve the record of recovery in advances.

Earlier, Banks had Health Code System in vogue as a monitoring tool. Banks may, however, continue
the system at their discretion as an additional management information tool.
NON-PERFORMING ASSETS
Definition: An asset, including a leased asset, becomes non-performing when it ceases to generate
income for the bank. A non-performing asset (NPA) is a loan or an advance where;
i) Interest and/ or installment of principal remain overdue for a period of more than 90 days
in respect of a term loan,
ii) The account remains ‘out of order’ as indicated at paragraph 2.2 below, in respect of an
Overdraft/Cash Credit (OD/CC),
iii) The bill remains overdue for a period of more than 90 days in the case of bills purchased
and discounted,
iv) The installment of principal or interest thereon remains overdue for two crop seasons for short
duration crops,
v) The installment of principal or interest thereon remains overdue for one crop season for
long duration crops.
Banks should, classify an account as NPA only if the interest charged during any Quarter is not
serviced fully within 90 days from the end of the quarter.
‘OUT OF ORDER’ STATUS
An account should be treated as ‘out of order’ if the outstanding balance remains continuously in
excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the
principal operating account is less than the sanctioned limit/drawing power, but there are no credits
continuously for 90 days as on the date of balance sheet or credits are not enough to cover the
interest debited during the same period, these accounts should be treated as ‘out of order’.

‘OVERDUE’
Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the due date
fixed by the bank.

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INCOME RECOGNITION
INCOME RECOGNITION - POLICY
Income from non-performing assets (NPA) is not recognized on accrual basis but is booked as
income only when it is actually received. Therefore, the banks should not charge and take to income
account interest on any NPA.
However, interest on advances against term deposits, NSCs, IVPs, KVPs and life policies may be
taken to income account on the due date, provided adequate margin is available in the accounts.
Fees and commissions earned by the banks as a result of re-negotiations or rescheduling of
outstanding debts should be recognized on an accrual basis over the period of time covered by the
re-negotiated or rescheduled extension of credit.
If government guaranteed advances become NPA, the interest on such advances should not be
taken to income account unless the interest has been realized.
REVERSAL OF INCOME
If any advance, including bills purchased and discounted, becomes NPA as at the close of any year,
interest accrued and credited to income account in the corresponding previous year, should be
reversed or provided for if the same is not realized. This will apply to central/state government
guaranteed accounts also.
In respect of NPAs, fees, commission and similar income that have accrued should cease to accrue
in the current period and should be reversed or provided for with respect to past periods, if
uncollected.
LEASED ASSETS
The finance charge component of finance income [as defined in ‘as 19 - leases’ issued by the council
of the institute of chartered accountants of India (ICAI)] on the leased asset which has accrued and
was credited to income account before the asset became non-performing, and remaining
unrealized, should be reversed or provided for in the current accounting period.
APPROPRIATION OF RECOVERY IN NPAS
Interest realized on NPAs may be taken to income account provided the credits in the accounts
towards interest are not out of fresh/ additional credit facilities sanctioned to the borrower
concerned.
In the absence of a clear agreement between the bank and the borrower for the purpose of
appropriation of recoveries in NPAs (i.e. towards principal or interest due), banks should adopt an
accounting principle and exercise the right of appropriation of recoveries in a uniform and
consistent manner.
INTEREST APPLICATION
There is no objection to the banks using their own discretion in debiting interest to an NPA account
taking the same to interest suspense account or maintaining only a record of such interest in
proforma accounts.
REPORTING OF NPAS
Banks are required to furnish a report on NPAs as on 31st March each year after completion of
audit. The NPAs would relate to the banks’ global portfolio, including the advances at the foreign
branches. The report should be furnished as per the prescribed format given in the annex I.
While reporting NPA figures to RBI, the amount held in interest suspense account, should be shown
as a deduction from gross NPAs as well as gross advances while arriving at the net NPAs and net
advances. Banks which do not maintain interest suspense account for parking interest due on non-
performing advance accounts, may furnish the amount of interest receivable on NPAs as a foot note
to the report.

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Whenever NPAs are reported to RBI, the amount of technical write off, if any, should be reduced
from the outstanding gross advances and gross NPAs to eliminate any distortion in the quantum of
NPAs being reported.

ASSET CLASSIFICATION -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 would be one, which has remained NPA for
a period less than or equal to 12 months.
(AS per our bank’s guidelines in respect of sub standard assets, the realizable value of the securities
should be enough to cover the outstanding ledger balance. If there is any shortfall in the value of
security (more than 10% but less than 50%) vis-a-vis outstanding ledger balance, the account should
be downgraded to doubtful asset, except in case, the advance is sanctioned as clean (ab initio), it
would remain in substandard category for 12 months).

DOUBTFUL ASSETS

With effect from March 31, 2005, an asset would be 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 the bank or internal or external auditors have identified loss or the RBI
inspection but the amount has not been written off wholly. In other words, such an asset is
considered uncollectible and of such little value (less than 10% Realisable value of security) that its
continuance as a bankable asset is not warranted although there may be some salvage or recovery
value.

GUIDELINES FOR CLASSIFICATION OF ASSETS

Broadly speaking, classification of assets into above categories should be done Taking into account
the degree of well-defined credit weaknesses and the extent of dependence on collateral security
for realization of dues.
Banks should establish appropriate internal systems to eliminate the tendency to delay or postpone
the identification of NPAs, especially in respect of high value accounts. The banks may fix a
minimum cut off point to decide what would constitute a high value account depending upon their
respective business levels. The cut off point should be valid for the entire accounting year.
Responsibility and validation levels for ensuring proper asset classification may be fixed by the
banks. The system should ensure that doubts in asset classification due to any reason are settled
through specified internal channels within one month from the date on which the account would
have been classified as NPA as per extant guidelines.

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Accounts with temporary deficiencies

The classification of an asset as NPA should be based on the record of recovery. Bank should not
classify an advance account as NPA merely due to the existence of some deficiencies which are
temporary in nature such as non-availability of adequate drawing power based on the latest
available stock statement, balance outstanding exceeding the limit temporarily, non-submission of
stock statements and non-renewal of the limits on the due date, etc. In the matter of classification
of accounts with such deficiencies banks may follow the following guidelines:
a) Banks should ensure that drawings in the working capital accounts are covered by the
adequacy of current assets, since current assets are first appropriated in times of distress. Drawing
power is required to be arrived at based on the stock statement, which is current. However,
considering the difficulties of large borrowers, stock statements relied upon by the banks for
determining drawing power should not be older than three months. The outstanding in the account
based on drawing power calculated from stock statements older than three months, would be
deemed as irregular.A working capital borrowal account will become NPA if such irregular drawings
are permitted in the account for a continuous period of 90 days even though the unit may be
working or the borrower’s financial position is satisfactory.
b) Regular and ad hoc credit limits need to be reviewed/ regularized not later than three
months from the due date/date of ad hoc sanction. In case of constraints such as non-availability
of financial statements and other data from the borrowers, the branch should furnish evidence to
show that renewal/ review of credit limits is already on and would be completed soon. In any case,
delay beyond six months is not considered desirable as a general discipline. Hence, an account
where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180 days from the
due date/ date of ad hoc sanction will be treated as NPA.

Up gradation of loan accounts classified as NPAs

If the borrower in the case of loan accounts classified as NPAs pays arrears of interest and principal,
the account should no longer be treated as non-performing and may be classified as ‘standard’
accounts.

Accounts regularised near about the balance sheet date

The asset classification of borrowal accounts where a solitary or a few credits are recorded before
the balance sheet date should be handled with care and without scope for subjectivity. Where the
account indicates inherent weakness on the basis of the data available, the account should be
deemed as a NPA. In other genuine cases, the banks must furnish satisfactory evidence to the
Statutory Auditors/Inspecting Officers about the manner of regularizations of the account to
eliminate doubts on their performing status.

Asset Classification to be borrower-wise and not facility-wise

i) It is difficult to envisage a situation when only one facility to a borrower/one investment in any
of the securities issued by the borrower becomes a problem credit/investment and not others.
Therefore, all the facilities granted by a bank to a borrower and investment in all the securities
issued by the borrower will have to be treated as NPA/NPI and not the particular
facility/investment or part thereof which has become irregular.
ii) If the debits arising out of devolvement of letters of credit or invoked guarantees are parked in
a separate account, the balance outstanding in that account also should be treated as a part of the
borrower’s principal operating account for the purpose of application of prudential norms on
income recognition, asset classification and provisioning.

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Advances under consortium arrangements

Asset classification of accounts under consortium should be based on the record of recovery of the
individual member banks and other aspects having a bearing on the recoverability of the advances.
Where the remittances by the borrower under consortium lending arrangements are pooled with
one bank and/or where the bank receiving remittances is not parting with the share of other
member banks, the account will be treated as not serviced in the books of the other member banks
and therefore, be treated as NPA. The banks participating in the consortium should, therefore,
arrange to get their share of recovery transferred from the lead bank or get an express consent
from the lead bank for the transfer of their share of recovery, to ensure proper asset classification
in their respective books.

Accounts where there is erosion in the value of security/frauds committed by borrowers:

In respect of accounts where there are potential threats for recovery on account of erosion in the
value of security or non-availability of security and existence of other factors such as frauds
committed by borrowers it will not be prudent that such accounts should go through various stages
of asset classification. In cases of such serious credit impairment the asset should be straightaway
classified as doubtful or loss asset as appropriate.
i) Erosion in the value of security can be reckoned as significant when the realizable value of the
security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of
last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful
category and provisioning should be made as applicable to doubtful assets.
ii. If the realizable value of the security, as assessed by the bank/ approved valuers/ RBI is less
than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be
ignored and the asset should be straightaway classified as loss asset. It may be either written off or
fully provided for by the bank.

Advances to PACS/FSS ceded to Commercial Banks

In respect of agricultural advances as well as advances for other purposes granted by banks to PACS/
FSS under the on-lending system, only that particular credit facility granted to PACS/ FSS which is
in default for a period of two crop seasons in case of short duration crops and one crop season in
case of long duration crops, as the case may be, after it has become due will be classified as NPA
and not all the credit facilities sanctioned to a PACS/ FSS. The other direct loans & advances, if any,
granted by the bank to the member borrower of a PACS/ FSS outside the on-lending arrangement
will become NPA even if one of the credit facilities granted to the same borrower becomes NPA.

Advances against Term Deposits, NSCs, KVP/IVP, etc

Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life policies need not
be treated as NPAs. Advances against gold ornaments, government securities and all other
securities are not covered by this exemption.

Loans with moratorium for payment of interest

i) In the case of bank finance given for industrial projects or for agricultural plantations etc. where
moratorium is available for payment of interest, payment of interest becomes ‘due’ only after the
moratorium or gestation period is over. Therefore, such amounts of interest do not become
overdue and hence do not become NPA, with reference to the date of debit of interest. They
become overdue after due date for payment of interest, if uncollected.
ii) In case of housing loans or similar advances granted to staff members where interest is payable
after recovery of principal, interest need not be considered as overdue from the first quarter

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onwards. Such loans/advances should be classified as NPA only when there is a default in
repayment of installment of principal or payment of interest on the respective due dates.

Agricultural advances

i) A loan granted for short duration crops will be treated as NPA, if the installment of principal
or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops
will be treated as NPA, if the installment of principal or interest thereon remains overdue for one
crop season. For the purpose of these guidelines, “long duration” crops would be crops with crop
season longer than one year and crops, which are not “long duration” crops, would be treated as
“short duration” crops. The crop season for each crop, which means the period up to harvesting of
the crops raised, would be as determined by the State Level Bankers’ Committee in each State.
Depending upon the duration of crops raised by an agriculturist, the above NPA norms would also
be made applicable to agricultural term loans availed of by him.
ii) Where natural calamities impair the repaying capacity of agricultural borrowers, banks may
decide on their own as a relief measure - conversion of the short-term production loan into a term
loan or re-schedulement of the repayment period; and the sanctioning of fresh short-term loan,
subject to guidelines contained in RBI circular RPCD. No. PLFS.BC.6/ 05.04.02/ 2004-05 dated July
1, 2005.
iii) In such cases of conversion or re-schedulement, the term loan as well as fresh short-term
loan may be treated as current dues and need not be classified as NPA. The asset classification of
these loans would thereafter be governed by the revised terms & conditions and would be treated
as NPA if interest and/or instalment of principal remains overdue for two crop seasons for short
duration crops and for one crop season for long duration crops. For the purpose of these guidelines,
“long duration” crops would be crops with crop season longer than one year and crops, which are
not ‘long duration” would be treated as “short duration” crops.
vi) While fixing the repayment schedule in case of rural housing advances granted to agriculturists
under Indira Awas Yojana and Golden Jubilee Rural Housing Finance Scheme, banks should ensure
that the interest/instalment payable on such advances are linked to crop cycles.

Government guaranteed advances

The credit facilities backed by guarantee of the Central Government though overdue may be
treated as NPA only when the Government repudiates its guarantee when invoked. This exemption
from classification of Government guaranteed advances, as NPA is not for the purpose of
recognition of income. The requirement of invocation of guarantee has been delinked for deciding
the asset classification and provisioning requirements in respect of State Government guaranteed
exposures. With effect from the year ending 31 March 2006 State Government guaranteed
advances and investments in State Government guaranteed securities would attract asset
classification and provisioning norms if interest and/or principal or any other amount due to the
bank remains overdue for more than 90 days.
PROVISIONING NORMS: -
Loss assets
Loss assets should be written off. If loss assets are permitted to remain in the books for any reason,
100 percent of the outstanding should be provided for.
Doubtful assets
i) 100 percent of the extent to which the advance is not covered by the realizable value of the
security to which the bank has a valid recourse and the realizable value is estimated on a realistic
basis.
ii) In regard to the secured portion, provision may be made on the following basis, at the rates
ranging from 20 percent to 100 percent of the secured portion depending upon the period for which
the asset has remained doubtful:

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Period for which the advance has remained Provision
In ‘doubtful’ category requirement (%)
Up to one year 25
More than One to three years 40
More than three 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 crores and above stock audit at annual
intervals by external agencies appointed as per the guidelines approved by the Board would be
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.
Sub-standard assets
A general provision of 15 percent on total outstanding should be made without making any
allowance for ECGC guarantee cover and securities available.
The ‘unsecured exposures’, which are identified as ‘substandard’, would attract additional
provision of 10 per cent, i.e., a total of 25 per cent on the outstanding balance unsecured
infrastructure 20%. The provisioning requirement for unsecured ‘doubtful’ assets is 100 per cent.
Unsecured exposure is defined as an exposure where the realizable value of the security, as
assessed by the bank/approved valuers/Reserve Bank’s inspecting officers, is not more than 10
percent, ab-initio, of the outstanding exposure. ‘Exposure’ shall include all funded and non-funded
exposures (including underwriting and similar commitments). ‘Security’ will mean tangible security
properly discharged to the bank and will not include intangible securities like guarantees, comfort
letters etc.

Provision on NPA Assets

Category Age(12 months as NPA) Provision Required in %

A.Sanctioned as A.15% on outstanding balance without

secured credit facility considering securities available &
guarantee cover.

B. sanctioned as
unsecured credit facility B.25% of outstanding balance.
Sub Standard

C. If unsecured
substandard for
C.20% of outstanding balance.
infrastructure.

Doubtful Assets:
1. Unsecured portion: Outstanding minus Realizable value of security (RVS): 100 %
2. Secured portion: RVS: 25% to 100% depending on the period for which account is DA.

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 25% of RVS (Realizable value of security)
More than 12 month as
Doubtful – 1 + 100% on unsecured portion of
NPA
outstanding balance.

40% of RVS + 100% on unsecured portion

Doubtful – 2 DA-2 & DA-3
of outstanding balance.

Doubtful - 3 More than 3 year DA 100% of outstanding balance.

Loss 100% of outstanding balance.

Committed by the 100% provision on outstanding is to be

Fraud Accounts
borrower provided over four quarters

Guaranteed by Provision on unsecured portion of

ECGC,CGFT,CGTMS For doubtful assets(DA) doubtful assets after deducting
ME guarantee cover

Classified as NPA if
Advance against
sufficient margin is not As per their asset classification.
FD,NSC,LIP,KVP
maintained

Standard assets: - As per the Reserve Bank of India’s Circular. The structure of provision
requirement on standard assets is as under: In this respect we clarify that since the
provision for standard assets is done at Central Office level, no effect needs to be given at
Branch/ Regional Office level.

Category of standard asset Rate of provisioning

1. Direct advances to agriculture, housing to individual up 0.25%

to 75 lakh and MSE sectors.

2.A.Commercial Real Estate 1.00%

2.B Commercial Real Estate Housing 0.75%

3. all advances other than stated above 0.4%

4.new Restructured Standard Accounts- 5%

Guidelines for Provisions under Special Circumstances

(i) In respect of advances under rehabilitation package approved by BIFR/term lending

institutions, the provision should continue to be made in respect of dues to the bank on the
existing credit facilities as per their classification as sub-standard or doubtful asset.

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(ii) As regards the additional facilities sanctioned as per package finalized by BIFR and/or term
lending institutions, provision on additional facilities sanctioned need not be made for a period of
one year from the date of disbursement.
(iii) In respect of additional credit facilities granted to SSI units which are identified as sick [as
defined in Section IV (Para 2.8) of RPCD circular RPCD.PLNFS.BC. No 83 /06.02.31/2004-2005
dated 1 March 2005] and where rehabilitation packages/nursing programmes have been drawn
by the banks themselves or under consortium arrangements, no provision need be made for a
period of one year.
Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs, and life policies would
attract provisioning requirements as applicable to their asset classification status. However,
advances against gold ornaments, government securities and all other kinds of securities are not
exempted from provisioning requirements.
Treatment of interest suspense account
Amounts held in Interest Suspense Account should not be reckoned as part of provisions. Amounts
lying in the Interest Suspense Account should be deducted from the relative advances and
thereafter, provisioning as per the norms, should be made on the balances after such deduction.
Advances covered by ECGC guarantee
In the case of advances classified as doubtful and guaranteed by ECGC, provision should be made
only for the balance in excess of the amount guaranteed by the Corporation. Further, while arriving
at the provision required to be made for doubtful assets, realizable value of the securities should
first be deducted from the outstanding balance in respect of the amount guaranteed by the
Corporation and then provision made.
Advance covered by CGTSI guarantee
In case the advance covered by CGTSI guarantee becomes non-performing, no provision need be
made towards the guaranteed portion. The amount outstanding in excess of the guaranteed
portion should be provided for as per the extant guidelines on provisioning for non-performing
advances.

Some Important points

1. Overall provision: Provisioning coverage ratio, including floating provisions should not be
less than 70 per cent. Banks should achieve Provisioning coverage ratio is the ratio of provisioning
to gross NPAs.

2. Provision on standard account to be kept as part of other liabilities in schedule-5 of bank’s

balance sheet.

3. Provision on standard accounts to be done on global balance and for NPA accounts on gross
balance

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4. For doubtful accounts, provision to be done separately for secured portion and unsecured
portion of total balance in the account.

5. In case of standard and substandard assets, provision is on outstanding balance without

bifurcating the balance into secured or unsecured.

6. If one account of the borrower in the bank becomes NPA in one branch then all accounts
of the borrower in other branches of the same branch also are classified as NPA. Thus classification
as NPA is done borrower wise and not account wise. Only exception to this rule is loan granted to
primary Agriculture credit societies.

7. In NPA account interest or any other charges can be debited to the account only when it is
recovered. Thus after becoming accounts NPA unrecovered interest is to be reversed.

8. In all NPA accounts, make provision based on NPA date & asset classification.

9. The income recognition policy: Income recognition has to be objective and based on
records of recovery. For NPA account, Interest is not recognized on accrual basis but it is booked
as income only when it is actually received. The bank should not charge and take income a/c
interest on any NPA. Even this will apply to government guarantee account also.

10. However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies
may be taken to income account on the due date, provided adequate margin is available in the
accounts.

11. If government guaranteed advances become NPA, the interest on such advances should
not be taken to income account unless the interest has been realized.

12. Examples on calculation of provisions

Balance outstanding Rs.10.00 lac and realizable value of security is Rs.8 lac

1. If the account under provision of SA (0.4%) is standard the provision is 10,00,000*0.40% =

Rs.4000/

2. If the account is standard but for raising a crop, then provision is 10,00,000*0.25% = Rs
2500/-

3. If the account is substandard, the provision will be 10,00,000*15%= Rs.150000/-

4. If the account is substandard but it was unsecured exposure while sanctioning the credit
facility, the provision will be 10,00,000*25% = Rs 250000/-

5. If the account is in D1 category, then on Rs 2 lac (unsecured portion) provision will be 100%
and on the secured portion of Rs.8 lacs, the provision will be 25%

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i.e. in the above example, balance outstanding is Rs.10, 00,000

Available realizable security is Rs.8, 00,000/ and unsecured is Rs.2, 00,000/

25% of Rs.8, 00,000/ + 100% of 2, 00,000 lacs = 4, 00,000/-

Suppose in the case of above if guarantee (75%) cover is there example CGTMSME then total
provision is as below

25% of 8 lakh + 100% (200000-75% of 2 lacs) = 2, 00,000 + 100 %( 50,000)

= 2, 50,000/-

13. Gross and Net Advances and Gross and Net NPA:

a) Gross Advance = standard Assets + Gross NPA. (For computing Gross Advances, interest
recorded in the Memorandum account should not be taken into account).

b) Net NPA = Gross NPA minus provisioning for NPAs.

c) Net advances = Gross advances minus provisioning for NPAs

d) Net NPA ratio = Net NPA/Net advances*100

e) Provision coverage Ratio PCR = Total Provision divided Gross NPA multiply 100

f) Countercyclical provisioning buffer CCPB made over 70% of PCR

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 RECOVERY POLICY AND NPA MANAGEMENT
Please Refer below mentioned Circulars for detail

1. NPA Management/Recovery circular Dated 18/09/2019 AX1/Recovery/policy/2019-20

Objectives & Scope of Recovery Policy
• Twin impacts of loan defaults- less interest income & provisions to absorb defaults
• Sucks away capital which is having dearth
• Guiding principle is - persuasion pays
• Avoidance of NPA rather than remedial action on being declared as NPA
• Restructuring may be resorted to in deserving cases
• Rehabilitation/CDR
• Sale of NPAs to ARC/Banks/FIs
• Enforce “Willful Defaulter” declaration
• Code for collection of dues & Repossession policy as per BCSBI

Recovery is a product of what?

• Practical approach & fair treatment
• Subjective treatment for every NPA
• Characteristics of security, reasons of delinquency & scope of revival is determining factor
for recovery
• Outsourcing for recovery mechanism
• RBI guidelines on BIFR & credit monitoring be studied

IRAC norms
• Specified period which triggers degradation of IRAC status
• General loan: - Payment of interest, charges, installment of principal remains overdue for
more than 90 days from due date
• Agriculture & MKCC: Default in repayment of interest or installment beyond 2 crop season
for short term duration crops and one crop season for long duration crops

General CC
• Out of Order concept-for continuous for90 days
• Outstanding balance remains in excess of sanctioned limit/DP continuously for 90 days
• Total credit in the accounts are not enough to cover the interest debited during 90 days.
• No credit continuously during 90 days
• Security statement of current assets older than 180 days
• Facility overdue for review for more than 180 days
• Adhoc facility/ Debit balances in SB &CA: - outstanding for more than 90 days
• BP/BD: bills remain unpaid for more than 90 days from due date

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Other incidences of NPA

• Devolved LC & invoked BG: forced loans outstanding for more than90 days
• Securitized transaction: amount of liquidity facility that remains o/s for over 90 days
• Derivative transactions: overdue receivables representing +ve mark to market value of a
derivative contract if remains unpaid for more than 90 days or more from specified due
date of payment
• In respect of MSME IRAC norms as RBI guidelines from time to time

Level of NPA: SSA, DA, Loss

• SSA: STD to SSA: for period of 12 months from date of NPA (Exception: Depletion in security
value of > 50 % of realizable value; or accepted by RBI in last inspection, direct doubtful). If
depletion is over 90 %; direct loss.
• All assets identified as fraud be classified as loss asset irrespective of age of NPA.
• Doubtful asset: asset once degraded to NPA will be classified as DA after completion of 12
months in normal course.
• Loss: Erosion in value of security> 90 % & assets identified as fraud. Facility sanctioned as
clean ab initio shall be first SSA, then loss after 12 months
• Asset class is borrower-wise and not a/c wise
• Once a/c becomes NPA, interest income on it will not be recognized except income earned
Advance against LAD, NSC, LIC provided margin is available
• Reversal of interest from P/L for NPAs other than above exceptions

Recovery appropriation in NPAs

• Interestrealized on NPA may be taken in income provided credits in a/c are not out of
additional credit facility sanctioned to borrower
• Bank’s policy as per RBI guidelines.
• Once NPA, interest and income debited & not recovered be reversed immediately including
government guaranteed a/cs.
• No practice of parking unrealizedinterest in separate head. Hence no further charging of
interest, comm. Etc.
• Any recovery with specific mandate be accordingly adjusted. Otherwise, following is the
priority.

CC a/cs where operations are allowed

• CC where operations are allowed & turnover is sufficient to serve the interest. It may be
noted that whenever operation are allowed subsequent to NPA date. There must be progressive
reduction in the outstanding balance in Comparing with balance/ Limit/Drawing power as on NPA.

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Monthly stamping of NPAsIdentification of NPA is ongoing basis and stamping is done on End of
the month

Up-gradation of NPA

• Once delinquency is removed, asset can be upgraded & income can be recognized being
SA. Banks introduced in system.
• Handling of NPAs:
• early upgradation
• Removal of A/Cs from books through recovery
• Absorbing loss to strengthen B/S

NPA a/cs – check point rests

• In all NPAs CIBIL with defaulter tag be checked and names in RBI defaulters be ensured.
• Adjust Deposit-credit balance, LAD balanceetc. in NPA a/cs after due notice to party.
• Field authority to ensure that documents are in order and security is charged to bank
• Valuation and visit reports be held on record
• Reserve price of the security is to be arrived at for auction proceedings & also proper
provisions by auditor

Valuation of securities in respect

• NPAs having ledger balance above Rs 100 lakhs: valuation by approved valuear has to be
done and NPAs having ledger balance upto Rs 100 lakh bank officials and technical officers. and
same has to cross checked by ZO
• For compromise valuation report not older than 6 months (deviation allowed but not
beyond 12 months
• For agriculture lands, registrar office to give valuation on prevailing government rates
available with registrar
• Machinery: -Purpose of machinery, obsolete/upgraded technology and age be verified
• Land & Building (factory and residential): free hold/leasehold, self-occupied, rented,
encroached, location with accessibility, type and year of construction, depreciation, statutory
dues, worker’s dues, litigation or reservation by T.P. authority are the considerations
• Realizable value is shall be considered provision & negotiation for OTS

Recovery action

• Recall notice giving 15 days’ time for repayment of entire dues

• If he repays entire overdues, recall notice may be cancelled & a/c upgraded

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• If sub-limits are allowed, ZM may review continuation of limits or to suspend operations by
transferring balances to base branch
• Crystalize liabilities after appropriating deposits (set off)

SARFAESI

• If no response to recall notice, 13/2 notice to borrower & guarantors

• Publish names in local newspaper giving details of securities
• Receipt of notice is imp and notice period of 60 days will be reckoned from date of
receipt(not date of notice), Authorized officer to ensure proper service of notice and preserve
acknowledgement
• If entire overdues are repaid, Zonal Sec Enforcement Cell can withdraw SARFAESI action

Proceedings under SARFAESI

• If no response under 13/2; possession be taken immediately after completion of notice

period.
• Representation or raise of objection of the borrower-- to be justified within 15 days from
receipt of the such representation or raise of objection.
• Publish the possession in news media within 7 days
• CAVEAT be field with DRT & other courts to preempt the borrower from getting stay on
recovery action
• Symbolic possession if physical one is not possible
• File application with DM/CMM for taking physical possession
• Auction cum sale notice be given to borrower on taking possession and auction date be
fixed after lapse of 30 days from date of notice
• Entire action under SARFAESI should be finished within 150 days of a/c becoming NPA
• Suit be filed within 30 days from date of NPA and plaint to include prayer for disclosure of
assets by parties before DRT
• A/Cs where there is no security but unit is functioning: - winding up procedure be initiated
(in 30 days) with approval of ZO in addition to legal action.

SARFAESI action

• Total Over dues Rs 1 lakhs for security charged to bank. Following primary and collateral
securities can be attached
• Immovable property other than agriculture land
• Machinery/equipment & other movable assets charged to bank
• Stock/WIP/F/G under hypothecation
• Identifiable receivables
• MIS for SARFAESI in CBS be completed by MARC & Recovery officer at ZO

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• Stress Asset Management Vernicle under CM or above is formed in Every Zones of the
Banks, to take care the all stressed and NPA account for recovery and Upgradation with BMs

Other tools of recovery

• Linkage and liaison with sugar factory

• Government forum like BLBC, BLRRC, DLCC, DLRC
• Compromise: Spl OTS SCHEMES OF THE BANKS
• Sales and securitization of assets with prior approval of board
• Write off: with prior approval of board & field level has no powers
• Agriculture sector: Natural calamities: Rainfall information to be collected by ZO to assess
crop damage. Liaison with government to tackle this calamity.
• Diversion of funds: Mis-utilization of bank finance in marriages is a common phenomenon.
It can be curbed by staff, LDM and AFO.
• Temptation of debt waiver: proper counseling by conducting village camps by farmers club
can help.
• Excess yield resulting in slump in prices of commodity: ZO can collect such data on demand
zones across the country to have brighter prospects of recovery.

Preventive NPA Management

• Pre-sanction stage: benefits of timely repayment can be discussed in village camps. Farm
inputs can be bulk purchased from wholesalers to earn discount.
• Advanced reminders about dues with slogans
• Personal contact: Increase field mobility by contacting farmer in presence of his family.
Regular borrowers be praised and rewarded. Nonpolitical problems may be discussed like hygiene,
medicine by experts from bank or government authority in meetings.
• Relief in case of calamities: Bonding with borrower can be increased by rephasing,
conversion of crop loan.

Agriculture problems

• Building up confidence level in farmers by quick service in regularizing a/cs and fresh
finance.
• Utilize SLBC, DIC, DRDA platforms to create impact on defaulters
• Recovery camp in khariff and rabbi season for compromise campaign
• Lok Adalat when payment is likely or received by farmers.

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Retail lending & MSME

• EWS: 7 days before due date, SMS be sent by capturing mobile no. This will build good CIBIL
record.
• On due date- another SMS
• Due date to 6thday: ensure collection of EMI. Try ECS mode or SI in deposit a/c or PDC.
• 7th day to 30thday: 1st registered reminder system generated
• 30thday: visit by MARC/ZO
• Prevention of slippages: entire process be documented with remarks of visiting official.
• Authority to deviate from recovery process vests with ZM.

MSME & Corporate Advances

• EWS: Watch project implementation so that time and cost overrun does not occur. Other
signals like diversion, lakhs of performance, sickness symptoms etc. be read.
• Preventive monitoring system (PMS): A monitoring tool which assigns PMS index score to
the unit based on last year performance. It tracks and evaluates health on continuous basis. It
probes into reasons behind signals and gives speedy remedy.
• Inspection & physical verification of stocks: It reveals computation of D.P. & exclusive
banking with us. If projects are delayed due to pending statutory clearances, the matter be taken
up with SLBC.
• CDR: o/s balances of Rs 10 cr and above, eligible cases be taken up to CDR. Only viable cases
can be taken up for DRM (Debt restructuring Mechanism)
• JLF: Joint Lender’s Forum: - All consortium banks or Multiple Banking Arrangement (MBA)
bankers to come together for recovery
• Other methods: Engaging recovery agents, legal action, SARFAESI, sale to ARC or NBFC,
engage detectives, OTS.

Recovery in loss assets

• ZM to review of nodal officers attending DRT on weekly basis, fix up Lok Adalat
• Scan the loss asset portfolio and seek arrest warrants in deserving cases
• Initiate steps for non-renewal of passport/VISA of defaulters
• Put up MARC machinery and formulate Task Force for recovery
• Cases of quick mortality be dealt with separately.

Why compromise & settlement policy?

• NPAs have quadruple effect. No income generation, drain on profits, additional expenses
like legal and security charges and additional capital

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• Benefits: recycling of funds, savings manpower, time and expenses involved in legal
process, gross NPA level is reduced, provision held against NPA will be released on recovery which
can take care of fresh provisions on slippages.

Fit case for compromise

• Activity closed or about to be closed

• Activity is running but in losses and deteriorating the quality and value of security
• Net worth of parties is meagre
• Difficulty in disposal of security
• Complicated legal procedure through E.P.
• Borrower has sincere desire to come out
• Where field functionary is satisfied about OTS
• Compromise is applicable for
 A/cs identified as NPA as on last financial year
 including written off
 fresh slippages during current financial year but date of NPA should be 6 months prior to
date of compromise.

General guidelines – compromise

• Policy is for private circulation

• Only Management Committee can take up case of willful default/fraud
• Repaying capacity of parties be looked into like age, health, running of activity,
continuation of business
• Group concept does not apply in recovery cases; hence each case has different merits
• It should be ensuring by the sanction authority that compromise amount should not be
less than Realizable value of the security.
• If the OTS amount is less than net present value, the proposal to be considered by next
Authorities in whose power it otherwise falls.
• Prior ECGC permission before crediting OTS amount: in case of ECGC claims settled a/cs.
In case, OTS amount is more than ECGC claim, bank may settle OTS and refund ECGC to the extent
of their claim amount.
• CGFSI (Credit Guarantee Fund Scheme for Small Ind, 2000: -availability of CGFSI cover,
government guarantee be taken into consideration in computing OTS
• Bullet payment or deferred payment (max 12 Months)
• Source of payment: - if OTS payment period> 3 months, interest on OTS amount @ MCLR
be stipulated in sanction
• Down payment in No Lien a/c:-Insist upon 10 to 25 % in no lien a/c so that his integrity is
proved. Adjust this amount, immediately on sanction.
• No deferment of legal action even if OTS proposal is under active consideration
• Inform terms of OTS to DRT/court

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• No adjournment allowed
• If OTS is in advanced stage, 10 % OTS amount be deposited in No Lien a/c
• Borrower be asked to withdraw Counter claim/suit against the bank in case of OTS sanction
• Issue compromise sanction letter to borrower & guarantors mentioning therein clauses
related to them only
• Consent decree be drawn in case of repayment > 3 months
• Remarks in no due certificate: “The accounts of borrowers are deemed to be settled
through a mutually accepted compromise involving sacrifice on the part of the bank.”
• Fresh credit facilities to borrower/guarantor who’s a/c is settled through compromise:-In
exceptional cases, this is allowed if sacrifice amount is repaid by the parties. As per bank policy.
• In agri loans, fresh sanction to OTS borrowers can be given in case reason for NPA is
“reasons beyond control”. Decision as regards fresh financing will be taken by ZO and not branch.
• In case of debt waiver/relief schemes approved by government/state government/RBI,
guidelines issued by authority should be followed.

Staff accountability & other point rests:

• To be completed within given time frame as per instructions of inspection dept.

• Staff accountability format will include name of officer involved in sanction. The same
authority should not sanction compromise.
• Other point rests: Field office should put remarks like- Not Traceable- judiciously.
• If multiple NPA a/cs, all a/c be considered simultaneously for compromise. In case sister
concerns are performing, due care be taken to monitor operations closely by restricting further
exposure and to reduce our liabilities and also to prevent such borrowers from taking undue
concessions.
• Try to get compromise in a/c< Rs 1 lakhs balance as legal costs are very high.
• In suitfiled a/cs, borrower approaches for compromise generally when court is about to
issue final order. Bank should better obtain decree and file EP first rather than considering OTS at
this stage.
• Similarly, if compromise proposal is moved after filing EP, the same be deferred to find out
outcome of EP
• Refund of interest wrongly charged is not a sacrifice
• Total dues = L.B. as on date of NPA +unapplied interest+ other charges

•Interest Rate for OTS

Category Rate of Interest
a) All NPAs Prevailing simple Contractual ROI or
MCLR simple whichever is less
b)in respect of decree accounts MCLR simple or ROI awarded in decree
whichever is less

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Marketability of security

• Machinery &Land &bldg. (Factory or residential): Marketability is based on: -

• Location: metro/urban/rural
• Usage: commercial/residential/industrial
• Land: agri/non agri
• Status: self-occupied, tenanted, vacant, disputed, lease
• Possession: ability to take possession, sale.

Realizable value of security

• If realization of security may take more than 1 year, present value of future yearly stream
of cash flows from sale of securities shall be calculated.
• Present value can be ascertained by discounting future cash flows using discount rate = base
rate of the bank.
• Similarly, if OTS amount is to be receive dover 1 year, present value of compromise amount
be ascertained by using discount rate = base rate of bank.
• RBI has stated that present value of OTS amount should be greater than NPV of realizable
value of security. Otherwise, proposal can be considered by next higher authority.

Writing off – (TWO& RWO)

• TWO: Technical Write Off: availing tax benefits and cleansing of B/S as per RBI guidelines
• Such a/cs have no prospects of recovery
• Fully provided for
• Inherent weakness in underlying securities
• RWO (Regular Write Off): No powers at branch since Dec 2010. ZSEC recommends a/cs for
write off to HO.
• Recovery in W O a/c: atleast quarterly notices to be issued. BM or recovery agent to pay
visit or hold camps for comp.

Dr Balance Credit card, ATM card & BPCS

• Comp can be sanctioned provided a/c is classified as NPA, staff accountability examined, all
efforts taken, no credit balance remaining.
• Branch head not empowered. ZO & HO to consider it.
• Debit balance owing to wrong casting, posting mistakes: -
• This is out of purview of recovery policy.
Engaging recovery agents

• Code of conduct on monitoring agents for recovery.

• recovery agents to appointed from approved panel of the banks

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• Due diligence in selection like - pre employment police verification as per RBI guidelines on
financial outsourcing.
• Details of agents to be informed to borrowers/bank’s website and agent to carry identity
card issued by bank/agency.
• Bank has to set up grievances redress mechanism for complaints against recovery agents.
• All other term and condition as per banks policy to be considered.

DRA: Debt Recovery Agents

• Appointed under Securitization act 2002. DA & Loss assets. SSA with permission of ZM.
• Advocates, SHG, professional/consultant firms, retired ITO etc. can be appointed by release
of advt. and entering into agreement.
• Branch may give job from pre inspection to final recovery to one agent or employ agent at
various stages like getting order from DM
• Bank to verify that only such jobs to be given to DRA which cannot be done by our staff.
• ZM to decide commission for different works. DRA can be changed if no satisfactory is done.
• Impose time limit to do the work for an a/c: say 6 to 12 months.

Engaging detectives in fraud cases

• Detectives: To get details of assets of parties

• Frauds: highest priority for recovering amount in fraud
• Special team at ZO to report in 24 hours
• Taking possession of assets & documents after approval from legal authorities.

Willful default

• Following is to be submitted to RBI on willful defaulters:

a. deliberate non-payment despite cash flows & sound net worth
b. siphoning off funds
c. assets financed are not purchase/sold
d. misrepresentation or falsification of records
e. removal of or disposal of securities without bank knowledge
f. fraudulent transactions by borrower
• Accordingly, banks are reporting a/cs of Rs 25 lakhs and above which are identified by
committee of ED & 2 GMs.
• a/cs >Rs 1 crore are verified for filing of suits and criminal action
• Similar steps in consortium lending

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What is diversion of funds?

• Utilizing short term funds for long term

• Deploying sanctioned funds for creation of other assets
• Transfer of funds to sister concerns/group
• Routing funds through other banks
• Investment in other company without knowledge of lender
• End use verification: - How? Obtaining end use certificate from CA. Giving clean facility only
to deserving parties

Measures for ascertaining end use

• Scrutiny of qly progress report/operating statement/B/S

• Regular inspection of assets
• Scrutiny of borrower’s books and no-lien a/cs maintained with other banks
• Stock audit in CC a/cs
• Periodical comprehensive management audit of CREDIT function of the lenders so as to
check weakness in credit administration

Penal measures-willful defaulters

• Copy of willful defaulters list is forwarded to SEBI & CIBIL

• No additional facility (even for a new venture)
• Expediting legal and criminal process
• Proactive approach for change of management of unit
• No other willful defaulter is allowed to become a part of management in borrowers
hierarchy
• Group Company whose guarantees are not honored are also to be classified as willful
defaulters.
• File complaint of auditors of borrowers with ICAI for not pointing out case of willful default
• Internal inspection should bring this out

Grievances redressal mechanism

• Borrower be informed about bank’s decision to publish his name as willful defaulter and
given 15 days’ time to make representation
• Grievances redressal committee headed by CMD may hear the borrower for wrongful
classification and then finally decide upon it.
• Criminal action: - for cheating, breach of trust, mala-fide intention wrong certification of end
use
• Board to approve criminal action
• In case of government company, names of directors are not to be reported

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• DIN (Directors Identification No) be used in list of willful defaulters while giving data to
RBI/CIBIL

Policy on collection of dues & repossession of security

• It aims at recovery of dues in the event of default and is not whimsical deprivation of
property
• Policy recognizes transparency in repossession, valuation & realization of security
• It is inconsonance with the law
• General: a person should be contacted at his business place or residence or his choice place
• Identity of person representing the bank will be known to the borrower.
• Privacy to be respected
• Civil manners for collection of dues/repossession of security

Normal guidelines

• Contact between 7 a.m.to 7 p.m. unless special circumstances force bankers to follow other
timings
• Borrower’s request not to make calls at a particular time be honored
• Bank will document efforts made for recovery and send copies of communication to him
• Assistance will be given to resolve issues in collection in mutually agreed manner
• Inappropriate occasions like death in family would be avoided by banker
• Bankers general lien to be made amply clear to borrower while availing loan

Notice to borrower

• In addition to other measures, notice is imp communication before initiating legal or other
recovery measure.
• Notice to be acknowledged and 60 day’s time for payment.
• After this period, repossession etc. will be done
• Repossession is done with intent to recovery and not depriving the borrower of the
property.
• Fair and transparent deal in disposal of property and security and safety of the same before
while in possession of the bank.

Valuation and sale

• Borrower will be given notice of time, date and venue of auction.

• Bank may recover balance of dues if any. Excess amount will be refunded after meeting
related expenses and right of set off for other dues.

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• In hypothecated assets, 7 days’ notice to respond will be given if no payment is forthcoming
after repossession. As per SARFAESI, 30 days of notice will be given. When public auction or tender
is envisaged, it will be published in 2 leading newspapers, of which 1 in local vernacular paper.

Sale of securities

• Value< Rs 1 lakhs: pvt sale. Offers invited in sealed covers from interested parties.
• Value>Rs 1 lakhs: public auction including E auction from approved agency
• Properties where 2 or more public auctions failed: By Public or E auction or pvt sale.
• Agencies conducting auction: ABC Procure, MATEX, Atishya Technology
• Opportunity for borrower: borrower may pay entire dues, over dues up to date and get
possession of security. But further regularity in installments is to be ensured by authority releasing
repossessed security.
• Authority to deviate from the policy: ED/CMD

Sale of assets to SC (Securitization co)/RC (Reconstruction co)

• Sale of NPA shall be without recourse basis i.e. credit risk attached with the asset will be
transferred to purchasing ARC& NPAs once sold will be removed from books of bank and no liability
shall devolve on them after sale.
• Bank shall not assume operational. Legal risk to asset sold. Asset shall not be sold at
contingent price so that there is no shortfall in realization.
• In some cases, where it is necessary, bank may enter into agreement with ARCs to share any
surplus realized in agreed proportion. No credit for expected profit will be taken by bank until the
profit materializes on actual sale.
• Assets can be offered for sale to banks/FI/NBFC/ARC and sale shall be conducted in
transparent manner inviting min 3 institutions.
• In the case of sale to banks/FI/NBFCs- Sale will be only cash basis

NPAs eligible for sale to securitization companies (SCs)/reconstruction companies (RCs)/ financial
institution like NBFC & banks
A. Identification of Financial Asset for sale
 At least, once in a year preferably at the beginning of the year identified the list of the
eligible accounts for sale with approval of the credit approval committee-III
 5 crores and above for DA, LA NPAs- will be reviewed by credit approval committee-III & SSA
Management committee (MC) of the board has to take the decision on case to case
 As per RBI guidelines to be followed.
• Account should be classifiedas NPA

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• Written off RWO/TWO Suit field /decreed accounts irrespective of the stage of suit/decree
execution.
• Staff accountability exercise completed before sale
• Not eligible -Not identified as fraud NPAs already under OTS concluded & restructuring
under implementation

B. Valuation of the financial Assets selling

 RBI guidelines to be followed for (Fund+ Non Fund base) exposure beyond Rs 50 crores two
external valuation reports from banks approved valuers & up to
• Floating assets such as inventory/receivable should be considered for value from approved
valuer not older than three months
• Every valuation will fair Market value (FMV), realizable value (RV) & distress sale value (DSV)
and fourth is Government rate value for immovable properties.
• Reserve price (RP) for determining the reserve Price for sale of NPAs/Stress Assets
• For details refer the circular recover management & compromise policy
Axi/recovery/policy/ 2019-20

Sale process etc.

• Assets approved for sale shall be put to min 3 institutions, inviting bids and highest bid will
be finalized. On receipt of sale consideration, asset shall be transferred/assigned to successful
bidder.
• Bank shall include suitable clause for assignment of debt in documentation and till such
time, 15 days’ notice will be given to borrower/guarantors regarding assignment of debt if they fail
to repay the dues.
• Prudential disclosures: sale transaction shall be disclosed in notes on a/c forming part of B/S
of the bank as: a. no of a/cs b. aggregate value (net of prov)sold c. aggregate consideration d.
additional consideration realized in respect of assets sold earlier e.aggregate gain/loss over NBV

Policy on legal action

• SARFAESI: The Securitization & Reconstruction of Financial Assets & Enforcement of Security
Interest Act 2002. This act provides for setting up ARC for acquiring NPAs which helps in cleaning
B/S without intervention of court.
• Enforcement of sec interest: notice u/s 13(2) of act to discharge their liability in 60 days from
date of notice provided: a. default is committed in payment of loan amount or installment thereof
b. a/c classified as NPA.
• Objection by borrower: after receipt of notice if borrower raises objection, secured creditor
shall consider it. If secured creditor comes to a conclusion that representation is not tenable, he
shall communicate within 15 days’ reasons for non-acceptance thereof.

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Mode of enforcement of security

• Section 13(4): -in case borrower fails to discharge full liability within 60 days, secured
creditor may have following recourse:
• Taking possession of secured assets including right to transfer by way of lease, assignment,
sale for realizing secured asset. Possession may be notional/physical.
• Taking over management of secured assets of borrower including right to transfer by way
of lease, assignment or sale &realizing secured assets.
• Appointing manager to manage secured assets
• Requiring third party who has acquired secured assets from borrower & from any amount
is due or may become due to the borrower to pay the said amount to secured creditor. After receipt
of such payment, secured creditor shall give valid discharge to such person as if he has made
payment to the borrower.

Consortium Advances

• In consortium advances, aforesaid action can be taken if secured creditors representing 60%
or more in value agree to do it. In case, dues are paid before date fixed for sale, secured assets shall
not be sold.
• If, after enforcement, amount to be recovered, is not fully recovered, secured creditor may
apply to court/DRT for balance amount.
• Secured creditor is also entitled to issue a copy of notice to guarantors & to proceed against
him for recovery.
Officers authorized

• Special authority for scale IV & above

• Section 32 of the act protects such action initiated against any bank or any officer exercising
rights under the act where it is taken in good faith. But revengeful action will have no protection.
• Non alienation of assets by borrower: after receipt of notice, no borrower can sale, assign,
lease in ordinary course of business secured assets referred to in notice without consent of secured
creditor.

Exceptions to SARFAESI
• Lien created by borrower already for specific purpose
• Borrower created pledge in favor of third party
• Borrower acquired security under higher purchase or conditional sale from his seller or lease
acquired the rights on such goods and thus security interest is created on others
• Rights of unpaid seller u/s 47 of sale of goods act 1930
• Such of the properties exempted u/s 60 of CPC

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• Security interest on agriculture land
• Security interest for securing repayment of asset< Rs 1 lakhs
• Amount due < 20 % of principal and interest
Taking possession

• Secured creditor intending to take possession has to make application to DM(Dist.

collector), CMM (at Mumbai, Delhi, Kolkata, Chennai) within whose jurisdiction asset or other
documents are situated/found.
• Even notional possession will suffice.
• Actual possession is taken for assets lying vacant or borrower/guarantor agree to hand over
asset without opposition.
• After possession, sale on “as is where is” basis is arranged. Actual possession of assets
through CMM/DM can be demanded after sale process is complete.
• All notices of auction sale be published and uploaded on “tenders.gov.in”

Sale of secured asset

• Through e auction only

• If not successful, pvt auction
• Appeal against the actions taken under this act: -
• A person (including borrower) aggrieved by measures taken u/s 13(4) by secured creditor
may appeal to DRT within 45 days from date of action.
• A person aggrieved by orders of DRT may appeal to DRAT within 30 days of such order,
provided borrower has deposited min 50 % amount due from him as claimed by secured creditor
or amount decided by DRT, whichever is less. Appellate tribunal may reduce it to not less than 25
% of amount due.

Jurisdiction

• No civil court will have jurisdiction in respect of matters which DRT/DRAT is dealing with.
• No injunction against any order of DRT/DRAT under Recovery of Debts Due to Banks &
Financial Institutions Act 1993.
• No secured creditor shall be entitled to take all or any of measures u/s 13(4) unless his claim
in respect of financial asset is made within limitation period as per Limitation Act 1963.
• Company in liquidation: amount realized from sale of secured asset will be distributed as
per provision of section 529A of Companies act 1956.

Legal action

• Demanding over dues is not recall.

• Powers to recall are allied to powers to initiate legal action.

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• Issuing legal notice is not mandatory and is generally issued to deter parties.
• Cases identified for legal action should be reported well in advance- 3 months preferably to
respective authority.
• If no response to legal notice, hand over papers and documents to advocate assigned by
legal cell ZO for preparing plaint.
• Draft plaint should be verified by BM first and then sent to ZO for vetting for dues Rs 50
lakhs and above.
• Suit to be filed in civil court/DRT as the case may be.
• Waiver of legal action: in deserving cases.

Suit filed a/cs

• Plaint/O.A. should include prayer for attachment of encumbered/unencumbered assets of

borrower/guarantor.
• Before filing suit, doc executed by parties be verified and whether they are enforceable.
• Limitation period.
• Legal notice through panel advocate
• Securities pledged like CDR be adjusted to reduce suit claim
• Letters between bank and borrower & B/S of borrower be ready for proving our claim
• Update the assets not charged to the bank for borrower and guarantor

Accounts eligible for filing suit

• Personal and consumer loan: L.B. > Rs 50000

• Other than above: Rs 1 lakhs and above
• Mortgage suit: where underlying security is mortgage (Primary or Collateral)
• Summary Suit: order 37 CPC at specific centers in following cases: a. if suit against pro-note
of borrower only or term loan agreement and no security b. if suit against pro-note of borrower
only or term loan agreement and or guarantor or letter of guarantee & no security c. suit is against
guarantor alone on guarantee bond. BP/BD and suit is against borrower and acceptors and
guarantors and no security is involved.
• Summary suits are faster and hence can be filed for cases where there is no security.

Money suit

• Where there is no security by way of mortgage and bank has to recover dues on basis of
loan documents or repayments made. Money decree can be executed against all parties and their
assets not charged to bank.
• Steps after filing suit:
• Keep liaison with advocate, stage of suit

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• Prepare for trivial objections likely to be raised
• Prayer for interim relief like appointment of receiver, commissioner, injunction, inventory
attachment before judgment
• Paper publication of summons
• Complicated suits be allotted to senior advocates
• Withdrawal of suits if chances of recovery are bleak

Decreed a/cs

• Execution of decree is neglected area.

• But an imp area for improving recovery/increase pressure on parties
• Obtain certified copy of decree promptly
• Check whether relief granted by court is same as per prayer. Otherwise file appeal after
obtaining permission from competent authority.
• In case of preliminary decree, apply for final decree after obtaining decree, call upon JDs to
repay dues as per terms of decree. Otherwise file EP.

Garnishee orders

• Garnishee orders be issued attaching amount lying with other banks/FI/mutual funds etc.
• Entrust execution to outsourced recovery agents/lawyers if possible
• After proclamation of sale through DRT or SARFAESI, details of assets be put on bank
website.
• All notices of auction sale be published and put on “tenders.gov.in”
• Auction proceedings be conducted on electronic platform only.
• Wherever, bank could not identify assets for enforcement, apple for seeking warran2t be
made before DRT

Debt Recovery Tribunal

• The Recovery of Debts Due to Banks & Financial Institutions Act 1993 came into force on
25.6.93. Expeditious settlement in suits of Rs 20lakhs and above was sought.
• Amendments in 2000 to be considered in drafting plaint.
• Tribunals can pass interim orders like injunction, attachment
• Appointment of receiver of properties/ Commissioner for taking inventory and sale
• Procedure for hearing is streamlined by giving specific period for filing written statement.
Set off and counter claims can now be filed by defendants
• Tribunal can direct defendant to furnish security if it apprehended that they may
sale/remove property. If security is not furnished, attachment can be ordered.
• Disobedience of order of tribunal entails penalty by way of civil imprisonment upto 3
months as well as attachment of property of the person

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• Where property is situated within jurisdiction of 2 or more tribunals, copy of recovery cert
will be sent to each tribunal for execution. Execution to be completed in 180 days.
• To enable recovery of debt, recovery officer has powers to ask for declaration of assets.
Provision for appeal against order of recovery officer within 30 days.
• Amendments in 2013: -u/s 19(5), deft to give W.S. within 30 days from service of summons.
P.O. may give max 2 adjournments in rare cases.
• Once hearing begins, it would continue until it is concluded. P.O. may grant adjournment
not more than 3 times in case there are more than 3 parties. Total adjournments< 6.
2013 amendments

• With more DRTs it is possible to expedite matters through Presiding Officers. Following will
help:
1. Nodal officer shall be nominated for each DRT who will ensure require doc production and follow
up. He would reduce adjournments.
2. If we are nodal Bank for DRT coordination committee is to be formed having member from each
bank/FI and they should meet P.O. once in a month to sort out problems.
• Similarly, coordination committee at DRAT once in 3 months would resolve issues.
• DRT liaison officer at each DRT to monitor DRT of respective Zone. In ZO where DRT Nodal
officer is nominated, he will monitor DRT cases of said Zones.

Lok Adalat

• No court fees
• Cognizance of existing suit
• If no settlement, suit can continue
• Decree passed by lok Adalat is binding. No appeal.
• RBI guidelines: a. DA & Loss total dues > Rs 20 lakhs without cutoff date in lok Adalat
• Operational guidelines like comp policy
• Negotiated settlement to contain a default clause as per which if 1 installment is defaulted,
entire debt falls due and legal proceedings will be initiated.
• Empower officials attending lok Adalat suitably.
• Field functionary to get in touch with state/tehsil/dist. legal services authority to organize
lokadalat
• Wide publicity by lead bank etc.
• Identify cases and campaign through recovery agents etc.
• Field offices to obtain copy of awards and file EP if recovery is not forthcoming.
• Legal proceedings can be started/continued with due permission from BIFR. If any of the
parties are aggrieved by decision of BIFR, appeal is to be filed before AAIFR (Appellate Authority for
Ind & Financial Reconstruction) within 45 days.

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Corporate Debt Restructuring

• It is a voluntary non statutory system based on debtor- Creditor Agreement and the
principles of approval by super majority of 75 % candidates (by value) which makes it binding on
remaining 25 % to fall in line.
• CDR covers only multiple banking a/cs, syndication, consortium a/cs where all banks and
institutions have exposure of Rs 10 crore and above.
• CDR mechanism covers all categories of assets –even DRT/BIFR cases eligible.
• Reference to CDR mechanism may be triggered by a bank/FI having min 20 % share in
finance or by corporate if supported by bank/FI having min 20 % share above.

Legal basis of CDR

• Legal basis of CDR system is provided by Debtor- Creditor Agreement (DCA) and Inter-
Creditor Agreement (ICA). All banks/FI in CDR system are required to enter interest legally binding
ICA with necessary enforcement and penal prov.
• Important provision – if 75 % creditors (By value) agree to debt restructuring package, the
same would be binding on others.
• Asset classification shall remain as in case of other assets till package is approved and
implemented and status as of cutoff date shall be restored.
• However, provision/leverage allowed in case of restructuring is available up to 31.3.14 only.

Sale of immovable secured assets through private treaty under SARFAESI

• Public auction be generally being preferred mode of sale and the alternative of private
treaty should be resorted to only when other modes are not successful
• Min 1 attempt is prescribed for sale of immovable assets through other transparent mode
of obtaining quotations if assessed value/reserve price of secured assets is up to Rs 1 crores.
• Min 2 such attempts are made for value more than Rs 1 crore
• Alternative of private treaty may be considered without resorting to other modes ofsale if
all dues of bank are fully recovered.
• Where dues are not being fully recovered &amount recoverable through sale of private
treaty is less than assessed value/reserve price as agreed between mortgagor and the bank (after
getting written consent of borrower to sale the property below assessed value/reserve price),
approval should be sought from committee constituted at H.O

Sale of secured assets through e-auction under SARFAESI

• Ministry of finance has informed that hereafter all auctions under SARFAESI/DRT will be
through e-auction only. Empanelment of agencies to do this work is communicated to DRT also.
Service providers are there for availing e auctions.
• E auction will help in the following manner:

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A. platform available round the clock to conduct auctions on real time basis
B. ensures fair pricing
C. transparent e auction bidding process
D. prevents buyer cartelization
E. facilitates large no of bid submissions
How to carry out sale?

• Person from empanelled service is to be contacted in adv. for enabling the agency to make
necessary arrangements such as creation of IDs, password, instructions, training to bidders. Other
requirements are to be completed except the auction is there.
• On appointed day, bidders can participate in the bid by logging in and submitting /increasing
their bids online. The process also incorporates elements of inter se bidding, maintaining
transparency, at the same time enhancing possibility of fetching better price. Entire transaction is
to be recorded by service provider which should be obtained for our record.
• After the auction, procedure as is prevalent such as letter to highest bidder requiring him to
pay 25 % immediately and remaining in 15 days, issuance of sale certificate is to be done.

Policy on time bared debts

• Doc must be in force till

A. suit is filed
B. dues are settled. A/c is closed through recovery or compromise
C. waiver of legal action by competent authority.

• In following cases, bank may not waive legal action.

1. Personal and consumer loan: NPA with L.B. above Rs 50000
2.other than above Rs 1.00 lakhs and above

Provisioning at a glance

Category of Assets Rate of provision (%)

Sub Standard Assets
 Secured Exposures 15
 Unsecured Exposures (Limits sanctioned as clean ab initio) 25
 Unsecured Exposures in respect of Infrastructure Loan
Accounts where certain safeguards such as escrow accounts are
available 20
Doubtful Assets – Unsecured Portion 100
Doubtful Assets – on secured portion

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  For Doubtful Assets up to 1 year 25
 For Doubtful Assets 1 year to 3 years 40
 For Doubtful Assets More than 3 years 100

Loss Assets 100

Restructured accounts classified as Standard Assets;
 Provision is to be made in respect of accounts restructured
on & after 01/06/2013
 Provision is to be made in respect of restructured standard
accounts up to 31/03/2013; in the following manner; 3.50
 With effect from March 31, 2014 (spread over the four
quarters of 2013-14)
 With effect from March 31, 2015 (spread over the four 4.25
quarters of 2014-15)
 With effect from March 31, 2016 (spread over the four 5.00
quarters of 2015-16)

Provisions in respect of other Standard Assets

Category of Advances Existing Rate (%)
 Direct advances to Agriculture and Small and Micro Enterprises 0.25
(SME) sector
 Advances to Commercial Real Estate 1.00
 CRE Residential Housing 0.75
 Housing loan under Teaser Rates 2.00
* (The provisioning on these assets would revert to 0.40% after 1 year
from the date on which the rates are reset at higher rates, if the
accounts remain “standard” 0.40
 All other loans and advances excluding above

(Provision on Standard Assets including Restructured Standard A/cs shall be made centrally at
H.O.)

As per extant guidelines, any asset is downgraded from standard category shall remain in sub-
standard category for 12 months from the date of NPA. However, if there is depletion in value of
security more than 50% of realizable values assessed by the bank or accepted by RBI at the time
of last inspection, such asset will directly degrade to Doubtful category. If the depletion in value of
security is more than 90%, the asset will directly degrade to Loss category. (Ref RBI Master Circular
dated 01/07/2015 / Clause Nos 4.1.1 & 4.2.9).

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Accelerated Provisioning
(Ref: Para no 31 of RBI Master Circular RBI/2015-16/101 DBR.No.BP.BC.2/21.01.048/2015-16
dated 01/07/2015 Re: Prudential norms on Income Recognition, Asset Classification and
provisioning pertaining to Advances).

In cases where banks fail to report SMA status of the accounts to CRILC or resort to methods with
the interest Ent to conceal the actual status of the accounts or evergreen the account, banks will
be subjected to accelerate provisioning for these accounts and /or other supervisory actions as
deemed appropriate by RBI. The current provisioning requirement and the revised accelerated
provisioning in respect of such non-performing accounts are as under.
Asset Period as NPA Current Provisioning (%) Revised
Classification Accelerated
Provisioning (%)
Substandard Up to 6 months 15 No change
(secured) 6 months to 1 year 15 25
25 (other than infrastructure
Sub-standard Up to 6 months loans) 25
(unsecured ab 20 (infrastructure loans)
initio) 6 months to 1 year 25 (other than infrastructure
loans) 40
20 (infrastructure loans)

Doubtful I 2nd year 25 (secured portion) 40 (secured portion)

100 (unsecured portion) 100 (unsecured
portion)
Doubtful II 3rd and 4th year 40 (secured portion) 100 (for both
secured and
100 (unsecured portion)
unsecured portions)
Doubtful III 5th year onwards 100 100

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 STRUCTURED OTS SCHEME – MAHA SAMADHAN YOJANA
The new MAHA SAMADHAN scheme is applicable to all NPA borrowers having ledger balance
above Rs 1.00crores and upto Rs 50 crores as on 31/03/2020,
It is divided in 2 sub-groups
A) NPA Accounts in Doutfull-1,2 & 3 and Two/loss with outstanding ledger balance above Rs.
1.00 crores and up to Rs. 25.00 crores
B) NPA Accounts in Doutfull-3 and Two/loss with outstanding ledger balance above Rs. 25.00
crores and up to Rs. 50.00 crores
Eligible accounts under MahaSamadhan:
 Accounts under consortium or multiple banking arrangements.
 NPA accounts in Doubtful 1,Doubtful 2, Doubtful 3, Loss and TWO accounts as on
31.03.2020
 All Housing loan where loans are sanctioned on TPA and/or property sold be covered under
the OTS. Housing loans where no physical security is available.
 Cases pending before court/ Decreed cases are eligible. However consent decree to be
obtained from Courts.
 Cases where Bank has issued notice u/s 13 (2) or taken action u/s 13 (4) of the SARFAESI
Act- 2002.
 Fraud cases are eligible subject to Management Committee
 NCLT cases where the finance is under sole banking, are also eligible.
 Housing loans with total dues less than Rs. 1.00 lakh which is not covered for SARFESAI
action.
 Accounts where Bank holds Physical Possession of the Immovable Property/ies under
SARFAESI, but e-auction failed minimum 2 times or more

Accounts not covered under the scheme

 Accounts secured by deposits, paper securities, Gold, pension loan,Adhaar loans etc.
 Accounts related to staff
 Compromise case under repayment
 Units under rehabilitation / restructured
 Central Govt., State Govt. guaranteed accounts
 Accounts where bank holds physical possession of the immovable properties under
SARFAESI and minimum OTS amount will be higher of DSV of applicable slab (This condition shall
not, however, be applicable to those cases where e-auction has failed on two or more occasions).
 Housing loan accounts with mortgaged security.
 Accounts which have turned NPA within one year of the date of sanction i.e. accounts
sanctioned on or after 01/04/2019 and NPA as on 31/03/2020
 Sub-Standard accounts
 Accounts of Corporate Borrowers (Company/LLP). Partnership firms, Individuals where the
accounts of Directors/Partners, Proprietor (in their individual capacity) or vice versa, are also NPA.

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However these accounts will be eligible if the NPA accounts of directors/partners, (in their
individual capacity) or the accounts of corporate borrowers are either closed by full recovery or
settled by compromise acceptable to the bank or upgraded
 Accounts of Corporate Borrowers (Company/LLP), Partnership firms where guarantee of a
company/LLP/Partnership firm is obtained and the account of such corporate guarantor (separate
Borrowing A/c as Principal Borrower) is NPA. However these accounts of Corporate Borrower,
partnership firms will be eligible if the NPA A/c of the Corporate Guarantor is;
o Closed by full recovery without any sacrifice on the part of the bank
o Upgraded
o Settled by compromise acceptable to the bank
 Cases referred to NCLT under Insolvency and Bankruptcy code, 2016 will not be eligible
unless agreed upon by more than 90% of lenders by value.
While sanctioning OTS in CGTMSE/ECGC settled accounts, prior approval of HO should be taken
before conveying the sanction to the borrower.
Settlement Amount as per the scheme;

1) For security value < 100% if ledger balance

Scheme type based on IRAC One time Settlement (OTS) amount
outstanding balance as on Classification as of Ledger Balance*
31.03.2020 on 31.03.2020 On secured** On unsecured
Portion Portion
Scheme A DB-1 80% 40%
(o/s Ledger Balance above
Rs. 1.00 crores to Rs. 25.00 DB-2 75% 40%
crores) DB-3 70% 35%

Loss/ TWO 60% 35%

Scheme B DB-1 Not Eligible

(o/s Ledger Balance above
Rs. 25.00 crores to Rs. 50.00 DB-2 Not Eligible
crores) DB-3 70% 35%

Loss/ TWO 65% 35%

Loss/ TWO 70% 60%

2) For securities value ≥ 100 % of Ledger Ledger Balance (100%)

balance

* Ledger Balance as on the date of OTS application

** Secure portion of the ledger balance should be decided on the basis of distress sales
value as per the valuation not older than six months.

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Validity of the scheme – The scheme is valid till 28/02/2021 for acceptance of application along with
down payment. 31/03/2021 for repayment of OTS amount.
Time period for repayment- The OTS is valid for 2 months from the date of sanction. In case the
borrower does not turn up for repayment before 2 months, the OTS will automatically expire after
2 months of sanction or 31.03.2021 whichever is earlier.
Date of payment
10% of OTS amount be received along with application and the same must be credited in Loan
account,
OR
25% of OTS amount be received along with application and the same must be kept in “No Lien
account”.
Processing Fees: NIL
Sanctioning /Delegation of powers for sacrifice under the scheme:

 The sanctioning powers will be as per HO Circular no

AX1/Recovery/Delegation/Cir.No6/2016-17 dated 08/11/2016

Deviation: No deviation is permitted

No Dues Certificate
“No Dues Certificate” be issued on specific request of the borrower, mentioning clearly therein that
“the dues are settled by mutually agrees settlement involving sacrifice on the part of the bank”.
Sanction of fresh credit facilities to the borrowers/guarantors, settled under the scheme
No fresh facilities to be sanctioned to such borrowers and guarantors whose accounts are settled
through compromise.
In deserving cases, fresh credit facilities may be considered, provided;
1) In Agricultural loan accounts, borrower pays sacrifice in ledger balance and unapplied
interest at the base rate/MCLR/ Repo rateor contractual rate, whichever is lower, up to the date of
payment of OTS amount.

2) In case of non-agriculture loan accounts, borrower pays sacrifice in ledger balance and
unapplied interest at contractual rate up to the date of payment of compromise amount.

3) The decision as regards fresh financing should invariably be taken by not less than ZLCC

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STRUCTURED OTS SCHEME –MAHA RAHAT YOJANA
Bank has been implementing Special OTS schemes for loan accounts to improve recovery under this
segment. A SOTS scheme named Maha Rahat Yojana, launched in 29/05/2020 for the NPA accounts
ledger balance up to Rs 100 lakhs as per Board’s approval.
Salient Features & eligible accounts for new scheme:
 NPA accounts in Doubtful 1,Doubtful 2, Doubtful 3, Loss and TWO accounts
 The scheme “MahaRahatYojana2020-21)” will be valid up to 28/02/2021 for acceptance of
application along with down payment and 31/03/2021 for repayment of OTS amount.
 NPA accounts in doubtful& Loss/ TWO categories under single CIF with outstanding Ledger
Balance aggregating up to Rs100 lakhs as of 31.03.2020 irrespective of sanctioned limit/ amount.
(Substandard accounts are not eligible under the scheme)
 Housing loans with total dues less than Rs. 1.00 lakh which is not covered for SARFESAI
action.
 Housing loan where no physical security is available.
 Accounts under consortium or multiple banking arrangements.
 Cases pending before court/ Decreed cases are eligible. However consent decree to be
obtained from Courts.
 Cases where Bank has issued notice u/s 13 (2) or taken action u/s 13 (4) of the SARFAESI
Act- 2002.
 Fraud cases are eligible subject to Management Committee
 Accounts where Bank holds Physical Possession of the Immovable Property/ies under
SARFAESI, but e-auction failed minimum 2 times or more

Accounts not covered under the scheme

 Accounts secured by deposits, paper securities, Gold, pension loan,Adhaar loans etc.
 Accounts related to staff
 Compromise case under repayment
 Units under rehabilitation / restructured
 Central Govt., State Govt. guaranteed accounts
 Accounts where bank holds physical possession of the immovable properties under
SARFAESI and minimum OTS amount will be higher of DSV of applicable slab (This condition shall
not, however, be applicable to those cases where e-auction has failed on two or more occasions).
 Housing loan accounts with mortgaged security.
 Accounts which have turned NPA within one year of the date of sanction i.e. accounts
sanctioned on or after 01/04/2019 and NPA as on 31/03/2020
 Sub-Standard accounts
 Accounts of Corporate Borrowers (Company/LLP). Partnership firms, Individuals where the
accounts of Directors/Partners, Proprietor (in their individual capacity) or vice versa, are also NPA.
However these accounts will be eligible if the NPA accounts of directors/partners, (in their
individual capacity) or the accounts of corporate borrowers are either closed by full recovery or
settled by compromise acceptable to the bank or upgraded

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 Accounts of Corporate Borrowers (Company/LLP), Partnership firms where guarantee of a
company/LLP/Partnership firm is obtained and the account of such corporate guarantor (separate
Borrowing A/c as Principal Borrower)is NPA. However these accounts of Corporate Borrower,
partnership firms will be eligible if the NPA A/c of the Corporate Guarantor is;
o Closed by full recovery without any sacrifice on the part of the bank
o Upgraded
o Settled by compromise acceptable to the bank
Validity of the scheme – The scheme is valid till 28/02/2021 for acceptance of application along
with down payment. 31/03/2021 for repayment of OTS amount.
Processing Fees: NIL
Date of payment
 The OTS is valid for 2 months from the date of sanction. In case the borrower does not turn
up for repayment before 2 months, the OTS will automatically expire after 2 months of sanction or
31.03.2021 whichever is earlier.

OTS Recovery Table/ MINIMUM EXPECTED RECOVERY (MER)

One Time Settlement (OTS) amount of Ledger Balance as on the date of OTS offer
irrespective of Security Coverage
Amount Payable as per IRAC Classification as on 31.03.2019
Category DB-1 DB-2 DB-3 Loss/ TWO
Borrower having ledger balance upto RS. 5.00 lakhs
Agriculture 75% of LB 60% of LB 30% of LB 25% of LB
Other than 80% of LB 65% of LB 35% of LB 30% of LB
Agriculture

Borrower having ledger balance above RS. 5.00 lakhs

Agriculture 75% of LB 60% of LB 30% of LB 40% of LB
Other than 80% of LB 65% of LB 55% of LB 50% of LB
Agriculture

Sanctioning /Delegation of powers for sacrifice under the scheme:

ZLCC of Zone will be the competent authority for sanction irrespective of sacrifice amount.
The scheme is non-discriminatory and non-discretionary. The branch functionaries do not have the
authority to reject any proposal under this scheme. The Zonal Managers/respective Controllers will
be the competent authority for rejection of any proposal under the scheme.
Deviation
No deviation is permitted by any authority under the scheme

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No Dues Certificate
“No Dues Certificate” be issued on specific request of the borrower, mentioning clearly therein that
“the dues are settled by mutually agrees settlement involving sacrifice on the part of the bank”.

Down Payment/ Upfront Amount

For Borrowers having ledger balance up to Rs. 25 lakhs
Down payment of 5% be explored from borrowers having ledger balance upto Rs. 25 lakhs as far as
possible at the time of application.
For Borrowers having ledger balance aboveRs. 25 lakhs
10% of OTS amount be received along with application and the same must be credited in Loan
account,
OR
25% of OTS amount be received along with application and the same must be kept in “No Lien
account”.

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 BASEL III
RBI has come up with Final Guidelines on Basel III Capital Regulations in India on May 02, 2012.
These guidelines will be effective from April 01, 2013 in a phased manner. The Basel III Capital Ratios
will be fully implemented as on April 01, 2021.
 Three Pillars Of BSCBS

1) Minimum Capital Standards

2) Supervisory Review Process-By Rbi Being Our Supervisor
3) Market Discipline ( Whether We Maintain Proper Capital Or Not Watch By Markets)

 PILLAR-I- MINIMUM CAPITAL STANDARDS/REQUIREMETS

Sr. No. Particulars % of Risk –

weighted assets
of all times
(i) Common Equity Tier 1 ( after deductions) 5.5
(ii) Capital Conservation Buffer (CCB) 2.5
(iii) Minimum Common Equity Tier 1 Ratio plus Capital Conservation 8.00
Buffer [(i) + (ii)]
(iv) Additional Tier 1 Capital 1.5
(v) Minimum Tier 1 Capital [(i) + (iv)] 7
(vi) Tier 2 Capital 2.00
(vii) Total Capital ( Tier 1 + Tier 2) [(v) + (vi)] 9
(viii) Minimum Total Capital + CCB [(vii) + (ii)] 11.50

 Composition Of Cet-1 Or Core Capital ( Going Concern Capital)

1) Common Shares( Paid-Up Equity Capital)
2) Reserves
3) Revaluation Reserve@55% Discount
4) Forex Translation Reserves @25% Discount
5) Others

 Composition Of At (Additional Tier)-1

1. PNCPS [Perpetual Non-Cumulative Preference Shares]-Max. 1.5% Of RWA
2. Debt Capital Instruments[Eligible For Additional Tier-1]
3. Others

 Composition Of Tier-2 ( Gone Conern Capital)

1. General Provisions And Loan Loss Reserves [Max. 1.25% Of Rwas] Debt Capital
Instruments[Eligible For Additional Tier-2]
2. Preference Shares[ Perpetual Cumulative Ps(Pcps), Redeemable Non-Cumulative
Ps(Rncps), Redeemable Cumulative Ps(Rcps)

348
Capital Conservation Buffer:
The Capital Conservation Buffer is designed to ensure that banks build up capital buffers during
normal times which can be drawn down as losses are incurred during a stressed period. The CCB
can be drawn down only when a bank faces a systematic or idiosyncratic stress. A bank should not
choose in normal times to operate in the buffer range simply to compete with other banks and win
market share. This would be reviewed in SREP.
Banks are required to maintain a capital conservation buffer of 2.5%, comprised of Common Equity
Tier 1 Capital, above the regulatory minimum capital requirement of 9%. Banks should not
distribute capital i.e. in the form of dividend, bonuses, etc. in case capital level falls below this
range. These constraints are related to distribution only and not related to operation of the Banks.
Countercyclical Capital Buffer:
The objective behind this concept is to achieve the broader macro-prudential goal of protecting
the banking sector from periods of excess aggregate credit growth. Countercyclical Capital Buffer
within a range of 0-2.5% of RWAs in form of Common Equity or other fully loss absorbing capital
will be implemented according to national circumstances. The Countercyclical Capital Buffer, when
in effect, would be introduced as an extension of the capital conservation buffer range.

 Calculation Of Capital Adequacy Ratio Or Capital To Risk Assets Ratio-

Step 1- Calculate Risk Value of Credit, Market, And Operational Risk
Step 2- Calculate Amount of Eligible Capital Funds
Step 3- Calculate CAR i.e. Capital Adequacy Ratio

CAPITAL ADEQUCY RATIO= ELIGIBLE TOAL CAPITAL FUND

RWA (risk weighted assets) of (Credit+ Market+ Operational risk)

 Approaches/methods to calculate RWA ( Risk weighted assets)

CREDIT RISK MARKET RISK OPERATIONAL RISK

1) Standardized 1) Standardized Approach ( 1) Basic Indicator Approach(

Approach ( Presently Presently Adopted In India) Presently Adopted In India)
Adopted In India) I.Maturity Method
II.Duration Method( Presently In
Vogue) 2) Standardized Approach

2) Internal Rating 2) Internal Risk Management

Based Approach Approach 3) Advanced Measurement
I.Foundation Version Approach
II.Advanced Version

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o CREDIT RISK

ASSETS RISK WEIGHT

Cash & Bank balance, balances with RBI, Central/State govt. claims, 0%
Central govt. guaranteed loans, DICGC claims, loans secured by
CGTMSE guarantee.
CASH/BANK BALANCE WITH OTHER BANKS 20%
Secured staff loans, State govt. guaranteed loans, ECGC guaranteed 20%
loans
CORPORATE LOANS AS PER CREDIT RATING
Long term loan:
AAA 20%
AA 30%
A 50%
BBB 100%
UNRATED 100%

Short Term loan:

A1+ 20%
A1 30%
A2 50%
A3 100%
UNRATED 100%
RETAIL BANKING Feature- (Amount up to Rs. 7.5 Crore; Annual 75%
turnover max. Rs. 50 Crore; individual loan amount Max.0.2% of
total retail lending. )
STAFF LOAN OTHER THAN SECURED LOANS 75%
HOME LOANS RANGE (35% TO 75%)
HOME LOAN UP TO RS.30 LAKHS-LTV MAX.80%. 35%
HOME LOAN UP TO RS.30 LAKHS-LTV MAX.90%. 50%
HOME LOAN ABOVE RS.30 LAKH UPTO 75 LAKH-LTV MAX.80% 35%
HOME LOAN ABOVE RS.75 LAKH-LTV MAX.75%. 50%
COMMERICAL REAL ESTATE(Residential House 75%
COMMERCIAL REAL ESTATE 100%

NOTE- HOUSING LOAN sanctioned between OCT-2020 TO MARCH-

2022, LOAN AMOUNT CRITERIA WONT BE APPLICABLE AS A
TEMPORARY MEASURE AS ANNOUCED BY RBI OCT-9, 2020-vide
Statement on Developmental and Regulatory Policies, SO RISK
WEIGHT APPLICABLE WILL BE AS FOLLOWS-

IF LTV IS 80%- RISK WEIGHT-35%

IF LTV IS 90%- RISK WEIGHT-50%
PERSONAL LOANS 100%
CREDIT CARDS & LOANS AGAINST SHARES OR CAPITAL MARKET 125%
EXPOSURE, VENTURE CAPITAL EXPOSURE

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 PILLAR 2-SUPERVISORY REVIEW PROCESS
FOUR PRINCIPALS

1) Bank should have a process to assess their overall capital adequacy ( called ICAAP-internal
capital adequacy assessment process)
2) Regulatory to review and evaluate the process through supervisory review & evaluation
process(SREP)
3) Supervisor expects banks to operate above the minimum regulatory capital ratios i.e. 9%
and CCB
4) Supervisor to interfere at an early stage to prevent capital from falling below the
minimum level.

PILLAR 3-MARKET DISCIPLINE

1) Banks to make disclosures based on accounting standards.
2) Disclosures are to be made on quarterly, half-yearly and annual basis through Balance
sheet & websites.

NOTE- HOUSING LOAN sanctioned between OCT-2020 TO MARCH-2022, loan amount criteria
won’t be applicable as a temporary measure as announced by RBI OCT-9, 2020-vide Statement on
Developmental and Regulatory Policies, so risk weight applicable will be as follows-

IF LTV IS 80%- RISK WEIGHT-35%

IF LTV IS 90%- RISK WEIGHT-50%

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 Investments in the Capital Instruments of Banking, Financial and
Insurance Entities that are outside the scope of regulatory
consolidation (i.e. excluding insurance and non-financial
subsidiaries)

In the entities where the Bank does not In the entities where the bank owns more
own more than 10% of the Common than 10% of the Common Share Capital of
Share Capital of individual entity individual entity

Aggregate of investments in Capital Equity: Compare Non-Common Equity:

instruments of all such entities and aggregated equity All such investments will
compare with 10% of bank’s own investments with 10% be deducted following
Common Equity of bank’s Common corresponding
Equity deduction approach

Investments les 999Investments Investments More than 10%

than 10% will be more than 10% will less than will be
risk weighted be deducted 10% will be deducted from
according to following risk Common Equity
banking book and corresponding weighted at
trading book deduction 250%
approach

Disclosure Requirements:
i. A full reconciliation of all regulatory capital elements back to the balance sheet in the audited
financial statements
ii. Separate disclosure of all regulatory adjustments and the items not deducted from CET 1
iii. A description of all limits and minima, identifying the positive and negative elements of capital
to which the limits and minima apply;
iv. a description of the main features of capital instruments issued; and

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 v. Banks which disclose ratios involving components of regulatory capital must accompany such
disclosures with a comprehensive explanation of how these ratios are calculated.
vi. Banks are also required to make available on their websites the full terms and conditions of all
instruments included in regulatory capital. The Basel Committee will issue more detailed Pillar 3
Disclosures shortly.
vii. During the transition phase banks are required to disclose the specific components of capital,
including capital instruments and regulatory adjustments which are benefitting from the
transitional provisions.

Risk Coverage:

1. Capital Charge for Credit Risk has been prescribed

2. Capital charge for Counterparty Credit Risk (CCR): Under Basel II, banks compute and
maintain capital charge for counter party credit risk as per Current Exposure Method (CEM). Under
Basel III banks are required to maintain adequate capital to absorb CVA losses i.e. to cover the risk
of mark-to-market losses during a time horizon of one year due to increasing counterparty credit
spreads.

Capital Charge for Default Risk will be calculated using Current Exposure Method. The Current
Exposure Method is applicable only to OTC Derivatives.

3. External Credit Assessments:

Basel III prohibits banks from changing the credit rating agencies without any substantial grounds.
4. Credit Risk Mitigation:
To ensure sufficient resources are devoted to the orderly operation of margin agreements for OTC
derivatives, SFT counterparties and that appropriate collateral management policies are in place
the guidance on credit risk mitigation under standardized approach has been revised under Basel
III.
Under Basel III, one more point added on Eligible Financial Collateral in existing Basel II i.e. Re-
securitizations, irrespective of any credit ratings, are not eligible financial collateral.
Under Basel II, the financial collateral in the form of securitization exposure was not subject to any
separate treatment in terms of supervisory haircuts. In view of the uncertainty in pricing and
quality of ratings of securitization exposures observed during the financial crisis, Under Basel III,
Standard Supervisory haircuts for financial collateral in the form of such exposures have been
increased substantially.
5. Capital charge for market Risk has been prescribed.

Supervisory Review and Evaluation Process (Pillar 2):

1. Bank need to asses whether the risk weight to which an unrated exposure is assigned is
appropriate.
2. Guidance on Collateral Management in the context of Counterparty Credit Risk made more
stringent. Basel III requires bank to review CCR management system regularly through its internal
audit process and prescribed minimum criteria to address specifically.

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3. Some provisions of implicit support for securitization transactions and reputational risk on
account of implicit support have been prescribed.

Capital Conservation Buffer:

The Capital Conservation Buffer is designed to ensure that banks build up capital buffers during
normal times which can be drawn down as losses are incurred during a stressed period. The CCB
can be drawn down only when a bank faces a systematic or idiosyncratic stress. A bank should not
choose in normal times to operate in the buffer range simply to compete with other banks and win
market share. This would be reviewed in SREP.
Banks are required to maintain a capital conservation buffer of 2.5%, comprised of Common Equity
Tier 1 Capital, above the regulatory minimum capital requirement of 9%. Banks should not
distribute capital i.e. in the form of dividend, bonuses, etc. in case capital level falls below this
range. These constraints are related to distribution only and not related to operation of the Banks.
Countercyclical Capital Buffer:
The objective behind this concept is to achieve the broader macro-prudential goal of protecting
the banking sector from periods of excess aggregate credit growth. Countercyclical Capital Buffer
within a range of 0-2.5% of RWAs in form of Common Equity or other fully loss absorbing capital
will be implemented according to national circumstances. The Countercyclical Capital Buffer, when
in effect, would be introduced as an extension of the capital conservation buffer range.
Leverage Ratio:
Under Basel III, Leverage Ratio is intended to achieve the following objectives:
i. To avoid destabilizing, deleveraging processes which can damage the broader financial
system and the economy;
ii. Reinforce the risk based requirements with a simple, non-risk based “backstop” measure.

During the period of parallel run, banks should strive to maintain leverage ratio of 4.5%.
Final Leverage ratio requirement would be prescribed by RBI after the parallel run taking into
account the prescriptions given by the Basel Committee.
The Leverage Ratio shall be maintained on a quarterly basis. Bank is required to report its Tier 1
Leverage Ratio to the RBI from the quarter ending December 31, 2012.
Bank level disclosure of the leverage ratio and its components will start from April 01, 2015.

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 RISK MANAGEMENT
A. CREDIT RISK

1.1 Credit Risk: Definition

Credit Risk is defined as the possibility of losses due to following:

 Outright default due to the inability or unwillingness of a borrower/counterparty to meet

obligations in relation to lending, trading, settlement and other financial transactions.
 Reduction in the portfolio value arising from actual or perceived deterioration in credit
quality of borrowers or counterparties.

Credit Risk arises from a Bank’s dealings with an Individual, Non-Corporate, Corporate, bank,
Financial Institution or a Sovereign.

1.2 Sources of Credit Risk

Credit Risk may arise from the following sources:

 Non repayment of Principal or interest payment in case of direct lending.

 Funds may not be forthcoming from constituents upon crystallization of liability in case of
Letter of Credit (LC), Letter of Comfort (LOC) and Guarantees.
 Payments or a series of payments due from counterparties under respective contracts such as
Derivatives, Forward contracts etc., may not be forthcoming in case of Treasury Operations.
 Funds/Securities settlement may not be forthcoming in case of Securities Trading Business.
 Availability of free transfer of foreign currency funds may either cease or restrictions
may be imposed by the Sovereign in case of Cross Border Exposures (in case any).

2. Credit Risk Governance

Bank’s risk governance framework focuses on strengthening risk assessment and
management, while also positioning to manage the changing regulatory environment in an efficient
and effective manner. Bank provides an independent and effective framework to ensure adequate
risk oversight, monitoring, control and assurance.
Bank has set up an independent Risk Management Department headed by General Manager who
shall function as the Chief Risk Officer. Credit Risk Management Structure, thus, falls within the
Integrated Risk Management Structure as highlighted in the diagram. The responsibilities for
governing credit risk extend throughout Bank and key principles of governance are:

 Adequate oversight, monitoring and control of credit risk through Board, RMCs and senior
management.
 Clearly defined roles and responsibilities for overall credit risk management.
 Business units to monitor and manage credit risk in their businesses and report issues.
 There should be appropriate Risk Rating model governance framework across Bank to ensure:

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- Independence between teams responsible for development and validation of rating systems,
models and processes.

- Domain expertise in development, testing and validation of rating systems.

- Detailed mechanism of reviewing and approval of rating systems and models.

For that purpose, Bank shall set up Credit Risk Support Group

5. Internal Audit

Internal Audit is required to provide an independent assurance to the Board through Audit
Committee and RMC on the effectiveness of implementation of credit risk management
framework, including overall adequacy of internal control system and credit risk control function
and compliance with internal policies and procedures.

Internal audit must review at least annually Bank’s rating system and its operations, including the
operations of the credit function and the estimation of Probability of Default (PD) along with Loss
Given Default (LGD) and Exposure at Default (EAD) where applicable. Internal audit must document
its findings. Bank may also consider their credit risk models’ accuracy by external agencies also
who should ensure inter alia:
(i) Whether internal validation of models is being done satisfactorily and objectively by the
Model Validation team.
(ii) Whether the internal models used by Bank is sufficient to cover all its activities and
geographical coverage of operations.
(iii) Whether data flows and processes associated with risk measurement system are
transparent and accessible to agency and they have access to model’s specifications and parameters.
(iv) Agency must document the findings, validation procedure, tests and reasons, if
applicable to conclude that the model is valid. Report shall be placed before the Board.

6. Credit Risk Identification And Assessment

Bank’s approach towards Credit Risk assessment starts from credit appraisal of both fund base
and non-fund base exposures. All credit applications above certain limits must be subjected to
risk rating process to support credit approvals, exposure management, pricing and capital
measurement. Credit officials must perform a comprehensive assessment of risk profile of the
borrower and transaction characteristics, based on the set of criteria prescribed in the applicable
rating models. Internal ratings produced by the rating models should form the integral part of the
credit approval and proposals which do not meet the required threshold rating are either rejected
or may be considered with approval of the appropriate authority as prescribed in this policy/extant
Lending Policy.
The assigned internal risk rating should be required to be validated by an independent official prior
to sanction/renewal or enhancement of the credit facilities. The assigned ratings must be reviewed

356
periodically and updated annually to re-assess the creditworthiness of borrowers or effectiveness of
the facilities.

Appropriate credit administration procedures and controls are required including:

 Segregation of responsibilities between credit sanction and risk assessment functions

 Defined authorities for credit sanctioning.
 Information to be documented to make appropriate judgments about acceptability/ extension
of the loan.
 In case of loan syndications, robust due diligence, including an independent credit risk analysis
and review of syndicated terms prior to commitment.
 Clear audit trail from credit origination to approval process.
 Business units are required to ensure that credit risks involved in new products and activities are
clearly addressed and required to be approved by the Board/ appropriate authority.

7. Instruments of Credit Risk Management:

Following Instruments of Credit Risk Management would be put to use on Bank wide basis.

 Credit Approval Process

 Prudential/Exposures limits
 Credit Risk Rating Framework
 Risk Based Pricing
 Portfolio Management
 Loan Review Mechanism
 Credit Risk Evaluation of Investment decisions
 Credit Risk Evaluation of off balance sheet exposures
 Credit Risk Evaluation of Inter Bank exposures and country risk.

As regards to policy prescriptions related to Credit Risk Management mentioned in Lending

8. Credit Risk Measurement

On the basis of the broad management framework, Bank shall have the following credit risk
measurement and monitoring procedures:

i) Bank shall establish proactive credit risk management practices like annual/half yearly
industry studies and individual obligor reviews, periodic credit calls that are documented, periodic
visits of plant and business site, and at least quarterly management reviews of troubled
exposures/weak credits.

ii) Bank shall have a system of checks and balances in place for extension of credit viz.:
a) Separation of credit risk management from credit sanction.
b) Multiple credit approvers making financial sanction subject to approvals at various
stages viz. undertaking credit risk ratings, credit risk rating approvals, credit approval committees, etc.

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c) An independent audit and risk review function.

iii) The level of authority required to approve credit might increase in due course as amounts
and transaction risks increase and as risk ratings worsen.

iv) Each facility will be assigned a risk rating in addition to the risk rating of obligor in due course
as and when the Bank migrates to advanced approaches. At present borrower with exposure
above Rs 5.00 crore will be assigned facility rating.

v) Mechanism to price facilities depending on the risk rating (external/internal) of the

customer, and to attribute accurately the associated risk weightings to the facilities shall be put in
place.

vi) Bank shall ensure that there are consistent standards for the origination, documentation
and maintenance for extensions of credit.

vii) Bank shall have a consistent approach towards early problem recognition, classification of
problem exposures, and remedial action.

viii) Bank shall maintain a diversified portfolio of risk assets; have a system to conduct regular
analysis of the portfolio and to ensure on-going control of risk concentrations.

ix) Credit risk limits include, obligor limits and concentration limits by industry or geography.
The Board shall authorize efficient and effective credit approval processes for operating within the
approved limits.

x) In order to ensure transparency of risks taken, it shall be ensured that comprehensive set of
credit risk data is reported accurately, completely and in a timely fashion to the independent
risk system. Bank shall have systems and procedures for monitoring financial performance of
customers and for controlling outstanding within limits.

xi) Bank shall continue to have a clear, well-documented scheme of delegation of powers for
credit sanction.

Management Information System (MIS) of Bank shall be enhanced to enable it to manage and measure
the credit risk inherent in all on-balance sheet and off-balance sheet activities. MIS shall provide
adequate information on the composition of the credit portfolio, including identification of any
concentration of risk.

Bank’s approach to credit risk measurement shall be based on own internal estimates of risk
components (Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD),
taking into consideration default and loss data, recovery rates, rating migrations, transaction

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specific characteristics etc., for both fund based and non-fund based exposures. A range of
statistical/ expert judgmental/ hybrid techniques are required to estimate these risk components.
As per the guidelines for computation of capital charge for credit risk under Advanced Internal Rating
Based Approach (AIRB), PDs are required to be computed for each borrower grade and LGDs are
required to be estimated for each facility risk grade to the borrower, in case of non-retail exposures.
In respect of retail exposures, risk components are estimated for each homogenous pool to which
retail exposure is assigned based on similar borrower and transaction characteristics of
exposures.

Bank is required to demonstrate use of these internal risk estimates for calculation of
Unexpected Losses (UL), Expected losses, as well as risk based pricing, portfolio risk
management and limit setting.

All the credit risk assessment models are subjected to review and validation once in five years to
ensure the comprehensiveness and integrity of bank’s internal risk assessment capabilities. Credit
function of IRMD shall present the capital analysis results and use of risk estimates to RMC at least
on a quarterly basis.

9. Internal Credit Risk Rating

Exposures to be rated:

 All existing credit exposures (Fund plus Non-Fund) of above Rs.25.00 lakh. (Including term
loans).
 All Entry level Prospective borrowers including Retail Borrowers with exposure of above
Rs.25.00 lakh.
 Borrowers with total exposure above Rs 5.00 crore shall be assigned facility rating (As
approved in CRMC meeting dated 23.09.2016).

Credit Risk Rating Framework (CRRF)

Bank is using in-house web based software for assigning credit risk rating to a borrower. This software
enables analysis of credit portfolio and is accessible on bank-wide basis on WAN. All branches shall use
this software for assigning credit risk rating and shall freeze the data after assigning credit risk rating
to a borrower. Branches where sub-limits are granted shall not undertake credit risk rating
separately. The credit risk rating shall be done by the parent branch where the borrower
maintains the main limits. Bank has adopted an eight scale (alpha numeric) rating system. Seven
grades represent
performing assets ranging from “AAA to C”. One grade is for defaulted borrowers namely “D”.

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These ratings represent default risk associated with an exposure. Each grade has a risk
description and risk perception as mentioned below:

Weighted Average Rating Risk Description (Risk Perception)

Score Scale
Above 75 AAA Minimal Risk (Highest Safety)
Above 68 -75 AA Low Risk (High Safety)
Above 61-68 A Medium Risk (Adequate Safety)
Above 54 -61 BBB Average Risk (Average Safety)
Above 47 -54 BB High Risk (Below Average Safety)
Above 40 -47 B Very High Risk (Low safety)
40 & below C Highest Risk (Lowest Safety)
Default Category D Default (Default)

It has in all 22 risk rating models which contain quantitative and qualitative risk factors such as Current
Ratio, OPBIDT, Debt equity Ratio, achievement of sales target, achievement of profit target, DSCR
and TOL/TNW etc. The qualitative sectors are broadly categorized into internal and external risk
and are subjective in nature. Thus cannot be assigned numerical value. Judgmental view shall be
formed in such cases to assign value. It has adopted simplified models for small borrowers.

Basis Of Financial Data For Risk Rating

Mandatory requirement of audited financial statements shall be governed by Lending Policy.

a) At the time of review/renewal of the borrower’s facilities, the branches shall undertake
Credit Risk Rating assessment based on audited/un-audited financial data (where audited financials
are mandatory).
b) Whenever a borrower’s credit facilities are renewed/enhanced on the basis of un-audited
financial data, such Credit Risk Rating Assessment shall be subjected to revision in assessment
of Credit Risk Rating, based on audited financial data, as and when received, provided the audited
financials are mandatory as per Lending Policy.
c) Quarterly/Half yearly available financial data may be used to assign the score/awarding
Credit Risk Rating.
d) Credit Risk Rating may be validated on the basis of recent financial data/recent information
about the company.

Frequency Of Credit Risk Rating:

Credit Risk Rating shall be under taken at least once in a year for exposure upto Rs. 5.00 crore and
twice a year for exposure above Rs. 5 crore, including one assessment at the time of sanction or

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review/renewal/enhancement. In respect of borrowers with credit risk rating of BB and below
during previous FY, the credit risk rating shall be twice a year, irrespective of amount of exposure.
In case of term loan also, the review of Credit Risk Rating shall be done during financial year. In
case of Retail loans (such as Housing, Education, Consumer etc) rating is to be done only once i.e.
at entry level.

Benchmark Entry Level Rating:

Threshold rating (minimum acceptable rating) for a new entry level proposal shall be “BBB”
(Average Risk / Average Safety).

For takeover proposals, entry level rating shall be “BBB” as per internal rating. In case of
internal rating and external rating are different, the lower of the two will prevail.

Relaxation from entry level rating of "BBB" to "BB or inferior” in case of proposals falling up to
the sanctioning powers of ZLCC of Zonal Managers shall be decided by the next higher
authority. In case of proposals falling within the sanctioning powers of HLCC of General
Manager and above, respective sanctioning authority may decide on the relaxation. In any case
Management Committee shall have full discretion to give relaxation in this regard and it should be
supported by due justification.

External Credit Rating for All Eligible Borrowers

 In India, external rating is awarded by RBI approved rating agencies namely CRISIL, ICRA, CARE,
INDIA RATING (earlier FITCH), BRICKWORK, ACUITE (earlier SMERA) and INFOMERICS

 All eligible exposures above Rs.5.00 crore should be externally rated. Here loan rating
means Bank Loan Rating.
• Clause for obtaining external credit rating be stipulated by the sanctioning authority for all
eligible borrowers. Zonal offices/Branches to ensure that borrowers which are eligible for external
rating but are Unrated as on date should be asked to solicit valid external rating (Bank loan rating
only) from one of the RBI approved rating agencies.

 In case of unrated borrowers, penal interest at 1 .00% p.a. shall be recovered.

 In case of unrated borrowers, if time limit (maximum 6 months) is allowed by sanctioning

authority to solicit the rating from external agency, penal interest at 1% p.a. shall be recovered
from the expiry of 6 months period till the Borrower solicits the External Rating. Considering the
merits of the case, waiver to recover penalty can be allowed. In respect of credit proposals
upto the sanctioning power of GM, the authority to allow the waiver shall be with Executive
Director. In respect of credit proposals within the sanctioning power of Executive Director and
above, the respective sanctioning authority may permit the waiver.

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 Branches/Zones to obtain the copy of letter issued by the borrower to the credit rating
agencies to solicit the external credit rating or alternatively letter to be sent to the external rating
agency should be under copy to the branch/zone.

Maturity Profile of Term Loans And Interest Rate Risk:

The outstanding share of Term Loans (exceeding one year) of Rs.10.00 crore and above shall be
monitored and the interest reset option will be market related.

Credit Department shall maintain the records of exposures Rs 10.00 crore and above having
interest reset option & the same should be reported to ALCO on monthly basis.

Limit On Concentration

a) To avoid concentration of advances as well as deposits in a particular Zone, a limit of 25% in

growth of deposits and advances in particular zone is stipulated. In case growth exceeds 25% on
Y-O-Y basis and IRMD shall monitor the same on quarterly basis.

b) Considering the higher requirement of capital and high incidence of NPA, the limit on unrated
and "BB" and inferior rated advances is stipulated at 40% of advances eligible for external rating.

Risk Based Pricing:

In compliance with the New Basel Capital Accord and RBI guidelines on Credit Risk
Management, the Bank has adopted Credit Risk Rating Framework (CRRF) for rating of
borrowers.

Under Risk Based Pricing the better rated customers should be offered lower price and the pricing
would increase with lower (inferior) credit risk rating. In order to achieve this, the basic cost of
lending has been marked up with suitable margin (Spread / Risk Premium) depending upon the risk
grade of the borrower.

The Risk Based Pricing as decided by ALCO from time to time will be applicable.
Ceiling for maximum rate of interest:

The final chargeable rate of interest inclusive of processing charges, penal interest and
additional load factor should be as per Risk Based Pricing framework approved by ALCO.

Incentive for collateral security– Reduction in rate of interest:

In order to mitigate credit risk with appropriate collateral security, it is decided to offer
additional discount/ reduction in rate of interest based on percentage of Collateral security

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offered by the borrower/borrowing unit. The incentive of reduction in applicable interest rate is
as follows:

Percentage of collateral security offered Discount/ reduction in rate of interest offered

More than 50% to 75% 0.25%
More than 75% to 100% 0.50%
More than 100% 0.75%

Eligible collateral securities for concession in rate of interest are as under:

Nature of Security Valuation

1 Free hold Land and Building ( excl. Agricultural land) Distress value
2 Paper securities in the form of
(a) FDR Principal + accrued interest.
Value applicable to payment
before maturity.
(b) NSCs/KVPs( Kisan Vikas Patra) Principal +accrued interest
(c) Insurance policies Surrender value
(d) Debt instruments of public Ltd companies with AAA and Principal amount/Marketvalue
AA rated; by RBI approved external rating agencies whichever is lower
(e) Government securities ( only central and state govt Principal amount/Marketvalue
bonds) whichever is lower
3 Gold valuation by approved valuer

All the above securities should be unencumbered. Respective sanctioning authorities shall allow
the concession as above upto the exposure within their delegated power. However, in case of
branch level sanction, authority to offer concession will be with Zonal Head. Zonal Head after
recording justification and eligibility of the borrower can accord approval for concession in rate
of interest.

Multiple concession:

As per the Risk Based pricing frame work and as per industry practices, certain concessions are
offered from time to time. All concessions put together shall be subject to floor ceiling of MCLR. In
other words, if the applicable ROI after all concessions works out to below MCLR, applicable ROI shall
be MCLR.
Increase in rate of interest:

Increase in rates may be considered in case of borrowers where higher risk weights is
applicable for capital adequacy namely commercial real estate, exposure level in particular industry
/ sector and / or for borrowers falling in the category of individuals, proprietorship and partnership

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firms, HUFs, low earning prospects, only funded limits, advances with maturity exceeding 1 year,
poor collateral coverage, absence of guarantors and inferior Industry risk rating.
Sanctioning authority under whose delegated powers the proposal falls may decide on the
increase.

Review of Risk based Pricing:

Risk based pricing shall be reviewed on annual basis. A review may be taken earlier,
depending upon the changes in various contributing factors like change in interest ra te
structure, cash reserve ratio, loan delinquency, probability of default, capital structure etc.

Applicability of RBPF

The RBPF shall be applicable on all existing and new accounts with exposure of above
Rs. 25 lakh, except the categories of advances excluded from RBPF given here under. As RBPF is in
alignment of CRRF, branches should invariably undertake credit risk rating for all eligible entry
level and existing borrowers and the risk rating should be got confirmed/ approved by the
competent authority.

Exemption from Risk Based Pricing Framework:

The following categories of advances shall be out of the purview of Risk Based Pricing;
 Staff loans
 Loans against paper securities / FDRs
 Export finance
 Food Credit
 Foreign Currency Loans
 Agriculture Loans
 Housing Loan to Public
 Mahabank Griha Laxmi Scheme
 Personal loans
 Consumer loans
 Mahabank Salary Gain Scheme
 Vehicle loans
 Education loans
 Realty Rental Scheme
 Realty Mortgage loans
 Loans under Mahabank Aadhar Scheme
 Loans under Traders / Services Scheme
 Sick units under nursing / rehabilitation
• Any other credit facility where the interest rate is fixed on the basis of scheme /purpose /
exposure-size / tenor

In all these categories of advances, lending rate is not fixed on the basis of credit risk rating but
the same is fixed based on scheme /purpose / exposure-size / tenor. The lending rates for the above

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categories of loans and advances will be as per the extant guidelines. However, the credit risk
rating of borrowers (existing and entry level) in these categories, wherever applicable shall be
continued for risk management purpose, though not for pricing. Please note that the CRR of the
borrower assessed by the branch should be got confirmed / approved by the competent
authority.

Quick Mortality of Loans:

With a view to improve quality of credit portfolio and also arresting slippages of performing
assets into non-performing category, Bank has put in place Lending Policy, Credit Risk
Management Policy and various systems and procedures. However, due to various reasons, accounts
slip to non-performing asset category. Slippages of standard assets to NPA category is a cause of
concern and more so if such slippages are quick mortality cases.

Quick Mortality of Loans is defined as:

“Term Loans & Demand Loans to new borrowers which turn into NPA within one year from the date
of first repayment (or before the first repayment date in case of non-repayment of interest during
moratorium period) and Cash Credit & Overdraft facilities to new borrowers which turn into NPA
within one year from the date of disbursement are considered as quick mortality cases.

In some of these cases, loans were sanctioned prior to one year period. However, projects were
not completed as per original sanction and there was extension of first repayment date due to
shift of Date of Commencement of Commercial Operations (DCCO). Hence, such cases should
also be are considered as quick mortality.”

Unconditional Cancelability Clause (UCC):

RBI master circular on Basel III state that “commitments that are unconditionally cancellable at
any time by the bank without prior notice or that effectively provide for automatic
cancellation due to deterioration in a borrower’s credit worthiness will attract 0% Credit
Conversion Factor (CCF)”. Thus, thereby resulting in “Zero” risk weighted assets.
Bank is calculating risk weight and thereby providing capital on the undrawn portion of fund and
non-fund advances. Implementation of UCC would result in optimization of risk weighted assets
and improve the capital adequacy (CRAR) ratio.

Implementation of UCC Guidelines:

Following procedure will be followed to implement UCC:

> For New borrowers: A UCC clause in line with the above guidelines shall be part of standard
loan documents/ sanction letter.

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> For Existing Borrowers: UCC clause in line with the above guidelines shall be part of standard
loan documents/ sanction letter during review/ renewal/ enhancement.

Where UCC clause is not part of standard loan documents/ sanction letter, a consent
letter/undertaking to be obtained from existing borrowers to abide by UCC clause. The format
of consent letter to be obtained from existing borrowers.

> Cutoff limit: The initial cutoff limit for implementation of UCC clause should be for
borrowers having a total limit (Fund + Non Fund) of Rs 10.00 lakh and above. The limit may be
reduced subsequently so as to cover the borrowers having limit below Rs 10.00 lakh.
External Reporting:
The Bank’s reporting to RBI is required to include:
 Compliance with Prudential Norms
 Regulatory capital analysis
 Pillar III disclosures

B) OPEARIONAL RISK MANAGEMENT

1. Operational Risk Management

1.1 Introduction

Deregulation and globalization of financial services, together with the growing sophistication of
financial technology, are making the activities of banks and their risk profiles more complex.

Further, growing numbers of operational loss events have led banks and supervisors to
increasingly view operational risk management as an integral part of risk management activity.
Operational Risk is pervasive, complex and dynamic. Unlike market and credit risk, which tends to
be in specific areas of business, operational risk is inherent in all business processes. As a result,
sound operational risk management is increasingly important to banks and to supervisors.

With the introduction of Basel Capital Accord, operational risk has become subject to
regulatory review. Banks are required to comply with specific qualitative requirements and set
aside capital for operational risk similar to capital charges for both credit and market risk.

According to the current Basel II/Basel III regulatory requirements, banks shall,
i. Assess their operational risk;
ii. Develop an operational risk management framework;
iii. Collect their losses caused by operational risk in a loss database;
iv. Implement operational risk indicators; and
v. Calculate and set aside risk capital.

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Reserve Bank of India (RBI) has come out with comprehensive guidelines on Operational Risk
Management. In order to make operational risk management an integrated and effective
process of managing Operational Risk in banks, RBI has come out with the following key
guidelines:

i. Guidance note on Management of Operational Risk.

ii. Implementation of the Standardized Approach for Calculation of Capital Charge for
Operational Risk.

iii. Implementation of the Advanced Measurement Approach (AMA) for Calculation of

Capital Charge for Operational Risk.

iv. Master Circular on Basel II & Basel III.

All the above mentioned guidelines and the Basel Committee recommendations have been duly
considered as key reference points while formulating this policy. The basic purpose of the
Operational Risk Management Policy document is to provide guidance on operational risk
management issues and to create awareness among the rank and file of the Bank. It spells out
the minimum that shall be expected of the Operational Risk Management framework in the
Bank.

1.2 Definition of Operational Risk

Operational risk has been defined by the Basel Committee on Banking Supervision as, ‘the risk of
loss resulting from inadequate or failed internal processes, people and systems or from external
events’. The definition includes legal risk but excludes strategic and reputational risk.
Reserve Bank of India has adopted this definition in the guidance note circulated among banks.
It seeks to identify why a loss has happened and at the broadest level includes the breakdown
by four causes: people, processes, systems and external factors.

The Basel Committee has identified the following types of operational risk events as having the
potential to result in substantial losses,
i. Internal Fraud
ii. E xt e r n al Fraud
iii. Employment practices and workplace safety
iv. Clients, products and business practices
v. Damage to physical assets
vi. Business disruption and system failures
vii. Execution, delivery and process management

Operational Risk differs from other banking risks in that it is typically not directly taken in return
for an expected reward but is implicit in the ordinary course of corporate activity and has the

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potential to affect the risk management process. 'Management' of operational risk means the
'identification, assessment, monitoring and control / mitigation' of this risk.

The consequences of not managing operational risk effectively often include significant
operational losses, regulatory fines or censure, loss of public confidence and patronage and
sometimes the loss of banking license all of which directly impact shareholder value.

Accordingly, the Bank‘s operational risk strategy shall seek to minimize the impact that
operational risk can have on its shareholders’ value. In more specific terms, the Bank‘s strategy
shall be to,

i. Reduce the likelihood of occurrence of expected risk events and related cost by managing the
risk factors and implementing loss prevention or reduction techniques to reduce variation to
earnings.
ii. Minimize the impact of unexpected and catastrophic events and related costs through risk
financing strategies that will support the Bank‘s long term growth, cash flow management and
balance sheet protection.
iii. Improve productivity, reduce capital requirements and improve overall performance of
the institution through well designed and implemented internal controls.

1.3 Operational Risk Management Objectives

The policy aims to achieve the following broad objectives,
i. Define the Organization Structure for Operational Risk Management.
ii. Define the Bank’s operational risk strategy and appetite.
iii. Ensure assignment of roles & responsibility for management of operational risk.
iv. Define the risk identification, assessment, monitoring methodology, Control and
mitigation of operational risk.
v. Facilitate establishment of comprehensive process for detection, reporting and
tracking operational loss events.
vi. Establish training and awareness programs for promoting a risk sensitive culture
throughout the Bank.
vii. Fortify the business & support groups to control and mitigate operational risks.
viii.Ensure compliance with international best practices on Operational Risk
Management.
ix. Assessment of Capital Charge and Risk Weighted Assets (RWA) due to Operational Risk.
The Bank shall endeavor to manage the operational risk arising out of people, process or
system inadequacies or that resulting from external events on a pro-active basis. This shall
be implemented through effective risk identification, assessment and importantly monitoring
measures focusing on early-warning indicators. It should be noted that unlike other types of risk,
Operational Risk is present in each and every function of a bank. Hence to successfully implement

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the operational risk strategy this framework lays down the roles and responsibilities of
different functions including the business and support departments in managing operational
risk. The effectiveness of the strategy would depend on creating awareness on Operational Risk
across all functions in the Bank.

1.4 Operational Risk Policies & Procedures

The Operational Risk Management Unit shall develop policies and procedures for the
management of operational risk across the Bank as appropriate. The policies shall
unambiguously address the following,

i. The goals of operational risk management.

ii. Approved risk management strategies.

iii. The specific individuals authorized to engage in these risk management strategies.
iv. Defined reporting and authorization structures for these individuals.
v. Establish risk limits and target and

vi. Establish procedures for monitoring risks.

1.5 Operational Risk Appetite

Risk appetite can be described as a measure of the risks that an organization chooses to accept,
whether as a monetary measure for the possible loss suffered and/or as a frequency measure for
the likelihood of the risk occurring. It can also be described as the amount of risk the Bank is
willing to accept in pursuit of value and is directly related to the Bank‘s strategy. Risk appetite
is either quantitatively defined by the appropriate indicators (e.g. risk limits) or qualitatively
embedded in the risk policies and procedures (e.g. customer satisfaction). It should be
considered in strategy setting, and the desired return from such strategy directives should be
aligned with the Bank‘s risk appetite.

The Bank will set up Operational Risk limits considering both qualitative and quantitative
aspects. The overall risk appetite shall be stated in terms of

 Maximum permissible losses for each business line/business type.

 Acceptable self assessment ratings for risk and control assessment.
 Acceptable threshold limits for loss events like frauds.

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1.6 Operational Risk Governance Structure

The Bank already has in place an Integrated Risk Management department (IRM) to overlook
the functioning of all the three types of risk the Bank is exposed to, namely, Credit, Market &
Operational Risk. Chief Risk Officer of the Bank directly reporting to the Board.

A Board level Sub-Committee on Risk Management has been constituted by the Board to overview
the Risk Management Systems in the Bank. The Committee shall meet on quarterly basis or
earlier if necessary. The Quorum shall be either of Managing Director &CEO/Executive Director/s
and any one of two Director Members. The composition of the Sub-Committee is

i. Managing Director & CEO

ii. Executive Director/s

iii. Two Directors approved by the Board

1.7.2 Operational Risk Management Department

The ORMD shall be responsible for coordinating all the operational risk activities of the Bank,
working towards achievement of the stated goals and objectives. Activities include building an
understanding of the risk profile, implementing tools related to operational risk management, and
working towards the goals of improved controls and lower risk.

1.7.2.1 Role of the ORMD

Specific activities of the ORMD shall include:
.i Risk Profile - The ORMD shall co-ordinate with the nominated officer/s in each of the
functional departments of the Bank and collate information to build an overall risk profile of
the Bank, understand and communicate these risks, and analyze changes/trends in the risk
profile. ORMD shall utilize the following four-pronged approach to develop these profiles:
 Risk indicators
 Risk Control and Self-Assessment
 Loss Database
 Capital Model

ii. Risk Control and Self-Assessment - The ORMD is responsible for facilitating and ensuring that
self-assessments are conducted periodically (annual) for the business functions and support
functions in the bank. The results of these assessments along with the status of the action plans
must be compiled and communicated to the ORMC and RMC on periodic basis.

iii. Key Risk Indicator Monitoring - The ORMD is responsible for implementation of the Key Risk
Indicator (KRI) framework and communication of the results of the KRI monitoring to the RMC by
way of reports. The ORMD is also responsible for ensuring that breaches of acceptable tolerance
levels for the KRIs triggers alerts to the concerned stakeholders like business heads / support

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function heads / senior management, etc.
iv. Loss Data Management - The ORMD is responsible for maintaining the database of
‘Operational Loss Incidents’.
v. Business Continuity Planning / Disaster Recovery Planning - The Business Continuity and
Disaster Recovery plans will be prepared by the respective functional departments. The plans will be
tested periodically by Corporate Services/Security Department (BCP) and IT division (Disaster
Recovery) to ensure that the plan objectives are satisfied.
vi. Capital – The ORMD shall be jointly responsible with the other functional division involved
in capital management for development and implementation of a capital measurement
methodology for operational risks. The ORMD must develop and implement an approach for
computing the capital requirement for operational risk. This approach must conform to
regulatory guidelines. The approach would cover aspects like assumptions used in loss data
modeling, approach used in scaling losses and choice of data (internal data/ external data/
scenario data/ combinations of these) to compute the Operational Value at Risk (OpVaR) estimates.
This will be implemented as and when Bank migrates to AMA.
vii. Co-ordination with Internal Audit – The ORMD shall work closely with Inspection and
Audit department to plan assessments of risks in the Bank. ORMD and Inspection department
shall share information and coordinate activities so as to minimize potential overlap of
activities.
viii. Advice / Consultation – The ORMD shall be responsible for working with the Risk
Specialists (Team at IRM department) and the Risk Managers (Zonal Risk Officers)

to provide guidelines on implementing the ORM framework, identifying operational risks and
improving the risk profile of the Bank.

ix. Assessment of Operational Risk in new product / services - ORMD is required to assess the
operational risk inherent in new products / services which are proposed to be launched by the
Bank. The same must be done prior to the launch of the product /service. A note detailing the
likely risks and the necessary changes in controls, modifications in current processes required to
manage those risks must be prepared. Thus, when the product / service is being approved by the
Board, the risk opinion shall also be a part of note for the Board put up by respective departments.
Summary report on various products refereed to ORMD shall be reported to ORMC on a quarterly
basis.

x. Training - The domain of operational risk is at an evolutionary stage. Nevertheless, a conceptually

sound understanding of operational risk across the bank is critical. Hence, the ORMD is assigned
the role of creating awareness about operational risk within the bank to ensure that there is a
common understanding of operational risk in the bank. While it is clear that not everyone in the bank

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will have the same degree of knowledge on operational risk, a basic understanding of operational
risk concepts and loss events / risks, etc. is something that is targeted at. In addition to the above,
training on Key Risk Indicators (KRI) & Risk Control & Self Assessment (RCSA) to be given to the
officers of the concerned functional departments on an ongoing basis.
xi. Insurance - Certain business lines might be prone to losses from one or multiple loss event
types. Based on the severity and frequency of the occurrence of these events and the self
assessment results for such business lines, the Bank may consider risk transfer by way of buying an
insurance cover. This decision will be taken in consultation with the concerned department
heads /Zonal heads. The functional divisions shall work with the Financial Management &
Accounts Department and Corporate Services Department to determine optimal insurance limits
and coverage to ensure that the insurance policies purchased by the bank are cost beneficial and
align with the operational risk profiles of the Bank. The details of all the premium amount paid for
various insurance covers, the eligible claims submitted to companies and the status of settlement of
such claims, including the ones related to third party frauds shall be maintained by the concerned
departments at Head Office/Zonal Offices and the same shall be reported to ORMC on half yearly
basis.

xii. Compliance - The ORMD will co-ordinate with the Compliance Department of the
bank to ensure that the bank is complying with all the applicable laws and regulations. As
per Compliance Policy of the Bank, there should be an integration of

Compliance Risk Management Framework and Operational Risk Management Framework so

that Compliance department can keep track of major risk areas and their compliance status.
The role of co-ordinating between the Compliance Risk Management Function and
Operational Risk Management Function will be undertaken by Chief Compliance Officer in
Consultation with Chief Risk Officer.

xiii. External Review - The ORMD will be responsible for providing the required
information on operational risk to the external agencies like external auditors, rating
agencies, regulatory inspection teams, etc.

1.7.3 Role of Branches

Branches would play an execution role in implementation of ORM framework across the Bank.
Their roles shall be as follows:

i. Identification of loss events within the Branch and regular reporting of these events, the details,
amounts and circumstances to Zonal Office on a complete and timely basis.

ii. Reporting the accurate data for KRI requirements to Zonal Office.
iii. Attending the ORM awareness programme.

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2 Operational Risk Management Process
2.1 Risk Identification:
Risk identification is at the core of the operational risk monitoring and control system.
Operational Risk (OR) arises from activities, products, processes and systems. It is, therefore,
necessary to identify OR in all activities and products (such as credit, deposit, investment, credit
card, customer service), material products (such as, savings, current and fixed deposits, term loan,
cash credit, overdraft, bills, guarantees, letters of credit), processes (such as transaction
processing, processing of instructions for payment, data transmission in connection with remittance
of funds, processing for payment and settlement, processing for reconciliation of books of
accounts) and systems (such as hardware, software, CBS, ATM, maintenance of records and
accounts).

Simultaneously, when new products, activities or systems and processes are introduced, it is necessary
to identify Operational Risk inherent in them by considering both internal and external factors
such as people, process, system, legal, regulatory, reputational risks that’s could adversely affect
the achievement of the objective.
RBI has advised banks to follow a four stage process for identification of risks. The first is to identify
the business group, second to identify the services under each business group, third to identify
the products under each service and fourth is to list the operational risk events associated with
each product.

The Bank shall identify and assess the operational risk inherent in all material products, activities,
process and systems. Bank shall also ensure that before new products activities, process and
systems are introduced or undertaken, the operational risk inherent in them is subject to adequate
assessment procedures.
2.2 The following are the broad area of Operational Risk to which the Bank is exposed.People
Risk - Placement, competency, work environment, motivation, turnover / rotation.

Process Risk -
 Transaction Risk - Transaction guidelines, errors in execution of transaction, product
complexity, competitive disadvantage, documentation / contract risk.
 Operational Control Risks – Violation of controls, operational disruptions, exceeding of
limits, money laundering, fraud etc.
Model Risk – Model methodology error

System Risk -
 Technology Risk – System failure, System Security, Programming error, communication
failure. The Bank is aware of the increasing threat perception from Information Technology related
risks and risks from external events and has put in place ‘Information System Security Policy’.
Business Continuity Plan duly approved by the Board is also put in place.

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Legal & Regulatory Risk – includes but not limited to exposure to fines, penalties or punitive
damages resulting from supervisory actions as well as private settlements. It also would cover
failure to comply with laws and regulations (e.g. data protection, labour, taxation, KYC, AML,
etc.).

Event Risk – Operating Environment Risk due to unanticipated changes in external

environment other than macro economic factors.

2.2 Risk Assessment

Risk Assessment can be defined as ‘assessment of its operations and activities against a menu of
potential operational risk vulnerabilities. This process is internally driven and often incorporates
checklists and/or workshops to identify the strengths and weaknesses of the operational risk
environment’.

In addition to identification of the risk events, assessment of the vulnerability of the Bank to these
risk events should also be done. Effective risk assessment allows for a better understanding
of its risk profile and most effectively target risk management resources. Some of the tools for
assessing operational risk are,

a) Key Risk Indicators (KRI)

b) Risk Control & Self Assessment (RCSA)
c) Risk Based Internal Audit (RBIA)

2.2.1 Key Risk Indicator (KRI)

Key Risk Indicators (KRI) is an important component of operational risk management

framework. Key Risk Indicator is defined as a measure that attempts to identify potential
operating losses before such losses happen. There is a strong correlation of operational risk with
values of the KRI falling outside an established range indicating potential operational risk
scenarios. The tracking of KRI significantly improves the risk awareness levels and prepares the
Bank to respond to risk-sensitive changes.

A good KRI parameter must be measurable and quantifiable. However, KRIs are not meant to
predict future risk with certainty, nor are they a comprehensive way of detecting a specific risk.
They are designed to provide indications that something could go wrong.In order to meet the
requirements under the Advance Measurement Approach (AMA), KRIs together with RCSAs (Risk
and Control Self Assessments) constitute important tools for Business Environment and Internal
Control Factors (BEICFs).

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2.3 Risk Measurement
Measurement is done based on bank‘s historical loss experience i.e., by classifying the risk event
in the risk matrix according to its frequency and severity on any predefined scale (say 1-10, Low,
Medium, High etc.). Potential losses shall be accurately categorized broadly as arising from ―high
frequency, low severity (HFLS) events, such as minor accounting errors or bank teller mistakes,
and ―low frequency, high severity (LFHS) events, such as terrorist attacks or major fraud. Data
on losses arising from HFLS events are generally available from a bank‘s internal auditing systems.
However, LFHS events are uncommon and thus limit a single bank from having sufficient data for
modeling purposes. The factors for assessing potential risks include staff related factors such as
productivity, expertise, turnover, Extent of activity outsourced, Process clarity, complexity,
changes, IT Indices, Audit Scores, Expected changes or spurts in volumes.

A three scale band—Low, Medium and High--for classification of frequency and severity of
operational loss events at the corporate level as indicated hereunder:

No. of times of occurrence

Amount of total loss from Loss
of loss events during a Frequency Severity
Events
year
1 –25 Low Up to Rs 5.00 lakh Low
26–50 Medium Above Rs. 5.00 to 10.00 lakh Medium
More than 50 High More than Rs.10.00 lakh High

All risk events will thus be classified in one of the four categories

( i) High frequency –High severity (HFHS),

( ii) High f r eq ue n cy - Lo w se ve rit y (HFLS),

( iii) Low frequency-High severity (LFHS) and

( iv) Lo w f r e qu en cy - Lo w se ve rit y (LFLS).

2.4 Risk Monitoring

Monitoring of Operational Risk as an integral part of risk is done with forward looking indicators
that provide early warning of an increased risk of future losses such as rapid growth, the
introduction of new products, employee turnover, transaction breaks, system downtime, and so on
by linking thresholds directly to these indicators.

Monitoring of Operational Risk at the Head Office level would basically focus on three areas:

i. Correctly interpreting and observing all the standards and guidelines set out in the operational
risk policy and other related documents.

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ii. Monitoring operational risks in a timely manner and as per the framework of the defined
methods, structure and processes.
iii. Pursuing the measures initiated by the concerned Verticals for addressing the
weaknesses in processes, structures and control and for limiting the losses.

Operational Risk areas identified through Historical Loss data, Risk and Control Self Assessment
and Key Risk Indicators would be monitored by the IRMD at the Bank level and by the concerned
business lines/divisions at the Process/Activity level. The Risk Based Internal Audit policy and its
activities are governed by the Internal Audit Department (IAD) whereas the Fraud Monitoring Cell
(FMC) in the Bank owns the collection and analysis of Fraud Data.

2.5 Risk Mitigation

Unlike market risk and credit risk, operational risk factors are largely internal to the bank. Hence
internal Controls and Internal Audit shall continue to be the primary means to mitigate operational
risk. Internal Audit is a part of ongoing monitoring of Bank’s system of Internal Controls and of
its internal capital assessment procedure, because Internal Audit provides an independent
assessment of the adequacy and compliance of the Bank’s established policies and procedures.

Bank shall continue to strengthen its control principles by reinforcing prudent standards of controls
in all key risk areas of operational risk. In addition, Bank shall build adequate framework and
processes to cover emerging operational risk areas depending upon the increasing complexity of
business.

All Branches/ Departments at HO and TIBD are responsible for initiating risk mitigation action to
prevent the recurrence of operational losses. Bank should have control functions which will oversee
the operation of the Branch/ Department at HO and TIBD. The losses which are recurring despite
the controls are to be monitored seriously and if the losses for a particular process has been recurring
for more than 3 times in the last 6 months should be resolved on priority basis i.e. the underlying
cause for the operational losses has to be identified and suitably the controls might required to
be modified for preventing further occurrence of loss. The action plan for the mitigation
measure has to be presented in Operational risk management committee for the losses where
there is repetitive occurrence of loss for a particular process. For each operational loss incident, the
user reporting the loss incident will also need to record the Control(s) violated and the
Management Actions post the loss incident.

External events cannot in most cases be predicted. But the adverse impact of the same will be
controlled by vigorous internal control and preventive measures. In order to address issues
relating to effective control of OR, it is proposed that the Bank shall take actions on the following
lines:

i. Ensure effective Internal Controls by reinforcing a strong control culture such that the Bank
complies with laws and regulations and decrease the risk of unexpected losses or damage to the
bank's reputation.

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ii. Complaints: Timely handling of complaints - both customers and shareholders within the set
framework will be ensured. This will enhance the image of the bank due to positive effect in terms
of organizational responsiveness.

iii. Monitoring & Control of payments and settlements: Payments and settlements are subject
to control, which are commensurate with the underlying risk characteristics. Monitoring
the same for its efficacy and effectiveness helps in controlling operational risks emanating from
it
iv. Technology Risk & Information Security: The Information Technology Department would assess
the IT Environment Risk and IT Operation and Product Risk and report to the ORMD. This would
cover losses on account of technological issues, operational breakdowns, systems downtimes,
ATM downtimes and programming error with impact on loss of business/income, repair & recovery
cost, the efficacy and appropriateness of disaster recovery plans etc.
v. The Bank‘s information system that hold and use data in electronic form be properly classified in
accordance with their sensitivity and adequately secured to prevent leakage and unauthorized use.
vi. In the wake of SWIFT-related fraud involving significant amount recently, RBI mandated
Banks to implement, within stipulated deadlines, the prescribed measures for strengthening the
SWIFT operating environment in Banks New Product Development: Product development is a
continuous activity and will be subject to thorough screening as per the new product approval
process institutionalized in the bank. All Verticals should ensure that the Operational Risk
Management Committee is kept informed of new developments; initiatives, products and
operational changes to ensure that all associated risks are identified at an early stage.
vii. Outsourcing: Bank has put in place a Board Approved Outsourcing Policy based on the
guidelines of RBI. The Policy incorporates amongst other things the criteria for selection of activities
as well as service providers, clauses to be incorporated in the Outsourcing agreement, delegated
authority for approval of such arrangements and system to monitor & review.
x. Training: Bank‘s training colleges and training centers would include inputs on operational risk
and internal control to educate the staff. Effective communication channels would be set up within
the organization to promote increased awareness about OR at all levels.
xi. Insurance: Insurance can work as a mitigation agent in areas where it is difficult to put in place
internal controls or processes which are outside the control of the Bank. However it is essential to
analyze the costs and benefits associated with such an exercise before implementation. An optimal
insurance policy/decision generates maximum value for the bank.

xii. Business Continuity Plan: One of the main and serious risks faced by the bank is the disruption
of services. In today’s competitive environment, the ability of the bank to provide continued service
without interruption or if business is interrupted due to reasons beyond the control of the bank, the
recovery time within which the business is commenced is critical to retain customer loyalty and
reputation. A detailed Business Continuity Plan approved by the Board, detailing the various steps
required to be taken at different levels are communicated to the branches. The same should be

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followed.

3 Operational Risk Capital Charge Computation

This section discusses the Basel II/Basel III approaches to capital calculations, the
requirements for each approach, and the criteria for mapping the Bank‘s activities into the Basel
defined business lines. Basel guidelines have proposed three approaches for the calculation of
regulatory minimum capital requirement for operational risk namely:

i. The Basic Indicator Approach (BIA);

ii. The Standardized Approach (TSA); and

iii. The Advanced Measurement Approach (AMA)

The Bank is providing capital under Basic Indicator Approach with effect from 31 Mar 08. Bank is
also computing the capital charge as per The Standardized Approach (TSA) under parallel run.

3.1 Basic Indicator Approach (BIA)

New Capital Accord provides for an explicit capital charge for Operational Risk. While endorsing
the accord, RBI has advised the Banks to start with ‘Basic Indicator Approach’ where capital charge
is 15% of Gross Income. The Gross income will be the average of previous three years. Where the
gross income is negative during any one of the previous three years, then the same is to be omitted
and the average calculated only for the years where it is positive.

In Basic Indicator Approach, the charge may be expressed as follows:

KBIA = [∑ (GI1... n x a)]/n

Where: KBIA = the capital charge under Basic Indicator Approach

Gross Income (GI) = Net profit (+) Provisions & contingencies (+) Operating expenses (schedule
16) (-) Income from insurance (-) extraordinary/irregular item of income (+) loss on sale of HTM
investments.

n = number of the previous three years for which gross income is positive.

Alpha (a) = 15%

3.2 The Standardized Approach (TSA)

In accordance with the Bank’s overall risk management strategy, Bank has decided to transition
to advance approaches in Operational risk management. Accordingly, Reserve Bank of India has
accorded approval to migrate to ‘The Standardized Approach’ for computing the capital charge

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on parallel basis. However for regulatory capital purpose, capital is required to be provided as per
BIA.

For the purpose of this transition to The Standardized Approach, the Bank is following the guidelines
as prescribed by the RBI. With regards to the Bank’s intent to fully migrate to The Standardized
Approach, the Bank envisages the following steps:

i.Identify the Bank’s products & activities: The Bank shall collate a detailed list ofall the income
generating business activities the Bank is presently engaged in and the products offerings in such
businesses. The Bank being a Scheduled Commercial Bank is engaged primarily in Retail &
Commercial banking with a stress on sectors such as Agriculture, SME etc.

ii. Classification of Bank’s products & activities into Business Lines: The RBIguidelines on
The Standardized approach states that the business activities of the Bank needs to be grouped
into 8 separate Business Lines as prescribed by Basel. Based on the analysis of the detailed list of
the Bank’s business activities, the Bank has found out that it has relevant business activities in 5
Business Lines, namely;

 Retail Banking
 Commercial Banking
 Payment & Settlements
 Agency Services
 Trading & Sales

i ii.Capturing of Gross Income Data: The Bank presently uses a Core Banking Solution
which keeps records for all Income & Expenditure arising out of all the business activities the
Bank is engaged in. The Bank also has data for the last 3 years, which is a requirement for the
capital calculation. In order to calculate the income, all the income generating activities are
mapped to the Basel defined Business Lines based on the nature/ classification of various
banking activities/products. The list of activities and their classification in Basel defined
Business Lines shall be reviewed annually or as and when required.

Assets Business Lines

Cash in hand Retail
Balance with RBI Retail/Commercial
Bal with other banks Commercial
Money at call & short notice Trading & Sales
RIDF Commercial
Investment SLR Trading & Sales
Investment Non SLR Trading & Sales
Retail Retail

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 Commercial (CRE+PSU+CORP) Commercial
Fixed Assets Retail/ Commercial
Branch Adjustment Retail
Other Tangible Assets Retail/Commercial
Balance held abroad Commercial

Thereafter the total interest expenditure for corresponding period is taken and divided by the total
assets to arrive at Cost of Fund. In order to apportion the expenditure into various business
lines, the cost of fund is multiplied by the quantum of assets under Business line as above to
distribute the interest expenditure into various business lines. The expenditure is then netted
with interest income and gross income is arrived for respective business line.

Iiv.Calculation of Operational Risk Capital Charge: The Operational Capital Chargeof the Bank
based on the Gross Income data shall be calculated using the methodology as advised by
the RBI in its guidelines on The Standardized Approach.

3.3 Advanced Measurement Approach (AMA)

The Advanced Measurement Approach provides to calculate operational risk capital with an
internally developed operational risk measurement system, provided the Bank meets certain
qualitative and quantitative standards. The capital charge is based on internal loss data,
external loss data, scenario analysis and recognition of risk mitigation. The Bank shall
develop measurement system provided the measure calculates capital that covers both
expected loss and unexpected loss.

Bank shall endeavor to move to AMA framework in the future.

The steps to be initiated have been enumerated below:

i. A web based template for collection of loss data. The minimum threshold limit for reporting of
individual loss event data is Rs 10000.
ii. A clear methodology shall be created to incorporate various data components such as Internal
/ External OR loss data, Scenario Analysis and Business Environment and Internal Control Factors
into the Loss Distribution Approach
iii. The Bank shall make provisions for improving where required various risk
measurement processes such as RCSA, KRIs, etc
iv. The Bank shall develop a Loss Distribution Approach (LDA) for capital computation

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 Topic – IT Products
1. Which is the Second Factor of authentication in case of online / e-commerce
transactions by using ATM-cum-Debit Card?
PIN
OTP
CVV
None of the above

Ans. (b)

2. In Internet Banking, Through Set Limit Menu, maximum allowed transaction amount
limit is -
50,000/-
1, 00,000/-
5,00,000/-
Rs.10,00,000/-

Ans. (c)

3. Instant IB reports are available for branches under –

Exceptional reports
CGL Reports
Trade Finance Reports
Separately sent through e-mail

Ans. (a)

4. ---------- is an attempt to obtain sensitive information such as usernames, passwords,

and credit card details (and, indirectly, money), often for malicious reasons, by disguising
as a trustworthy entity in an electronic communication.
Hacking
Phishing
Skimming
Pharming

Ans. (b)

5. Information Security ensures C/I/A. C/I/A stands for

Control, Internet, Authentication
Confidentiality, Integrity & Availability
Conduciveness, Intentionality, Authority
Coordination, Issuance, Attachment

Ans. (b)

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6. Date of death of a customer can be recorded in CBS using the following menu
Customer Management Amend Customer Details, remove date of birth & record
Date of death
Customer Management Amend Personal Details
Customer Management Amend Miscellaneous details
None of the above

Ans. (b)

7. In the event of entering PIN wrongly on ------ consecutive attempts in a day, the card
will be ------ for rest of the day. You can use the card again with the correct PIN after ------
hours

a) 3, hotlisted, 12
b) 2, blocked, 12
c) 3, blocked, 24
d) 2, hotlisted , 24

Ans. (c)

8. In normal scenario how much GST input tax credit is allowed to Bank of total input tax
credit

a) 100%
b) 50%
c) 0%
d) None of the above

Ans. (b)

9. ISSP refers to:

a) Information Security Service Policy

b) Internet Systems Security Policy
c) Internal Systems Security Policy
) Information Systems Security Policy

Ans. (d)

10. Bank of Maharashtra’s Internet Banking Facility (MahaConnect) has multiple security
features to safeguard the customers from cybercrimes. Which among the following is
incorrect:
a) Login ID with Password
b) Transaction Password
c) Mahasecure Pin & OTP on Registered Mobile
d) Mahasecure PIN and OTP in Mahasecure app

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Ans. (c)

11. The default handle in virtual address of MahaUPI is:

a) @mahabank
b) @npci
c) @mahb
d) @mahbh

Ans. (c)

12. Failed Transactions at ATMs: The time limit for resolution of customer complaints by
the issuing Banks is _____ working days and delay will entail payment of compensation to
the customer @ Rs ______ per day.
a) 7;100
b) 12;100
c) 15;50
d) 20;50

Ans. (a)

13. Meaning of https in computer is:

a) Hypertext transfer protocol secure
b) Hypertext transmission protocol secure
c) Hypertext transport protocol security
d) Hypertext transport protocol secure

Ans. (b)

14. URL for Bank of Maharashtra’s Internet banking portal is :

a) http://www.mahaconnect.co.in
b) https://www.mahaconnect.co.in
c) https://www.mahaconnect.in
d) https://www.mahaconnect.com

Ans. (c)

15. Activation of corporate IB account could be completed by –

a) Calling Mahaconnect team
b) Dropping mail to branch/Mahaconnect team
c) OTP [One-time password] based activation
d) Any of the above

Ans. (c)

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16. Tollfree Number of Mahaseva Is:
a) 18002114562
b) 18002334526
c) 18002114526
d) 18002334562

Ans. (b)

17. Rent payable by a branch is Rs 118000/- i.e.(Rs 100000/= rent and plus Rs 18000/=
GST). How much Income tax TDS to be deducted?

a) Rs 1000/-
b) Rs 2000/-
c) Rs 11800/-
d) Rs 10000/-

Ans. (d)

18. For issuing Instant IB, personal CIF needs to have:

a) Correct Regd Mobile no, email ID, own Savings Bank A/C
b) Correct Regd Mobile no, email ID, term deposit A/C
c) Correct Regd Mobile no, email ID, loan A/C
d) Any of the above

Ans. (a)

19. Which of the following facility is not available in internet banking?

a) Balances Enquiry
b) Mini Statement
c) Statement of Account
d) ATM Card transactions

Ans. (d)

20. Which of the following request is available in internet banking?

a) Stop Payment of Cheque
b) Issue of Demand Draft
c) Issue of Cheque Book
d) Deposit Account Opening
e) All above

Ans. (e)

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21. Which of following transactions is allowed in Internet Banking
a) Funds Transfer to third party account
b) Funds transfer outside Bank of Maharsahtra
c) E-payment of taxes
d) Utility Bill Payment
e) All of the above

Ans. (e)

22. What is MahaSecure

a) Security feature of Bank of Maharashtra
b) MahaSecure, secured by REL-ID, is a next generation secure digital banking app for
all online banking needs.
c) It is a security partner of Internet Banking
d) It is a Mahamobile app

Ans. (b)

23. It provides the convenience, security and uniform experience across all devices
including desktops, laptops, smart phones and tablets through the apps medium to
deliver services, what is it?
a) Mahamobile App
b) Mahasecure
c) BOM UPI
d) BHIM

Ans. (b)

24. Internet Banking application is used on device

a) Desktop
b) Laptops
c) Tablets
d) Smart Phone
e) All above

Ans. (e)

25. Internet Banking application is supported on following operating system

f) Windows
g) MacOS
h) iOS
i) Android
j) All of the above

Ans. (e)

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26. What is the procedure for activation of Internet Banking for Retail Customer?
a) Call to customer care center
b) Use Toll free No 18002334526 for activation.
c) Send a mail to mahaconnect
d) OTP Based Activation
Ans. (d)

27. How can customer get duplicate password, if he forgets earlier passwords?
a) Send a sms for duplicate password
b) Visit your home branch
c) Forgot password link is provided on the Login page. Customer has to click on this
link & submit the request for duplicate
d) Call on toll free number.
Ans. (c)
28. What is the alternate way of communication if any branch/customer wants to
communicate with Internet Banking Cell? (If Phone lines are busy)
a) Call to customer care center
b) Customers can send their queries/requests by Email to
mahaconnect@mahabank.co.in.
c) Call through Branch Manager
d) Video call through whatsapp
Ans. (b)

29. In Internet Banking, default limit for retail users is:

a) 50,000/-
b) 1, 00,000/-
c) 5,00,000/-
d) 10,00,000/-

Ans. (a)

30. USSD Stands for:

a) Unstructured Supplementary Service Date
b) Unstructured Service Supplementary Data
c) Unified Supplementary Service Data
d) Unified Service Supplementary Data

Ans. (a)

31. MMID Stands for:

a) Mobile Money Identifier
b) Money Mobile Identifier
c) Mobile Money Identity
d) Mobility Mobile Identifier

Ans. (a)

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32. Fraud Risk Management System for card related transactions implemented by our
Bank to detect & prevent potential frauds is done through
a) Fraud Navigator
b) Risk Management
c) Management System
d) Fraud Management

Ans. (a)

33. What is rate applicable for GST on Banking and Financial services as of 31.12.2019?
a) 10%
b) 12%
c) 15%
d) 18%

Ans. (d)

34. What is length of GSTIN prescribed?

a) 10 digit
b) 12 digit
c) 15 digit
d) 18 digit

Ans. (c)

35. How much GST TDS is to be deducted if a transaction comes under the purview of
GST TDS?

1%
2%
5%
10%

Ans. (b)

36. Which GST component comes in picture if a transaction takes place between two
states?
a) CGST
b) SGST
c) CGST & SGST
d) IGST

Ans. (d)

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37. Missed call number for balance enquiry:
a) 9222281818
b) 9223181818
c) 18002334526
d) 18002334527

Ans. (a)

38. Insurance cover for Rupay Classic debit card holder in case of permanent total
disability:
a) 1 Lakh
b) 2 Lakh
c) 1.5 Lakh
d) 0.5 Lakh

Ans. (a)

39. Insurance cover for Rupay Classic debit card holder in case of Personal accident
(death):
a) 1 Lakh
b) 2 Lakh
c) 1.5 Lakh
d) 0.5 Lakh

Ans. (a)

40. Insurance cover for Rupay Platinum card holder in case of Personal accident (death):
a) 1 Lakh
b) 2 Lakh
c) 1.5 Lakh
d) 0.5 Lakh

Ans. (b)

41. Insurance cover for Rupay Platinum card account holder in case of permanent total
disability:
a) 1 Lakh
b) 2 Lakh
c) 1.5 Lakh
d) 0.5 Lakh

Ans. (b)

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43. In SMS banking service,SMS opcode for balance enquiry is
a) ACTV
b) ASSIST
c) BALAVL
d) Any of the above

Ans. (c)
44. Mobile no for SMS banking service is
a) 9222231818
b) 9222318188
c) 9223181818
d) 9223118118

Ans. (c)

45. Mahasecure is also known as

a) 3FA [3rd Factor Authentication]
b) 2FA [2nd Factor Authentication]
c) Mahaconnect
d) None of the above

Ans. (b)

46. Mahasecure can be installed maximum on –

a) Five devices
b) Fifteen Devices
c) Ten Devices
d) Only one Device

Ans. (c)

47. In SMS banking service, SMS opcode for IB AC activation is –

a) ACTV
b) ASSIST
c) BALAVL
d) Both a & b

Ans. (d)

48. Overall per-day limit of Maha-UPI is:

a) 10000
b) 50000
c) 100000
d) 20000

Ans. (d)

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49. Transaction limit for single customer through Maha – UPI is
a) 10000
b) 50000
c) 100000
d) 20000

Ans. (a)

50. NCMC stands for:

a) National credit mobility card
b) National common mobility card
c) National CIBIL mobility card
d) National common monitoring card

Ans. (b)

51. Hot listing of Debit Card means

a) Temporary blocking card
b) Temporary unblocking card
c) Permanently Blocking card
d) Permanently unblocking card

Ans. (c)

52. Warm Listing of Debit Card means

a) Temporary blocking card
b) Temporary unblocking card
c) Permanently Blocking card
d) Permanently unblocking card

Ans. (a)

53. Unwarm Listing of Debit Card means

a) Temporary blocking card
b) Unblocking card
c) Permanently Blocking card
d) Blocking card

Ans. (b)

54. Green Pin for Debit card can be generated by:

a) Internet Banking
b) Mahamobile
c) Branch Xtranet
d) BOM ATM Machine

Ans. (d)

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55. Registration of Mahamobile can be done through:
a) Internet Banking
b) Branch
c) ATM Debit Card
d) a, b & c

Ans. (d)

56. Hot listing of Debit card can not done though

a) Mahamobile & Internet Banking
b) Xtranet
c) Mahaupi
d) 18002334526/18002334527

Ans. (c)

57. NPCI Stands for

a) National pension corporation of India
b) National Payment creditors of India
c) National Payment Corporation of India
d) New Payment Corporation of India

Ans. (c)

58. In Internet Banking, limit for corporate customer can be increased by

a) Option is there in IB to set limit upto 5 Lakhs
b) Customer call to mahaseva
c) Through ULC limit can be increased
d) Customer has to send request to home branch, home branch
communicate to mahaseva

Ans. (d)

59. Can Branch initiate internet banking for multiple customers having same mobile
number?

a) TRUE
b) FALSE

Ans. (a)

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60. Can Customer do transaction in UPI/IMPS, If same Mobile Number is registered with
Multiple CIF:

a) TRUE
b) FALSE

Ans. (b)

61. BBPS stands for:

a) BHIM BILL Payment System

b) Bharat Bhim Payment System
c) Bharat Bill Payment System
d) Bharat Bill procurement system
Ans. (c)

62. CVV on the back of the Card which is a 3 digit code stands for:
a) Card Verification Value
b) Card Validation Value
c) Credit Verification Value
d) Credit Validation Value

Ans. (a)

63. URL stands for

a) Universal Resource Locator
b) Uniform Restricted Location
c) Ultimate Resource Locality
d) Uniform Resource Locator

Ans. (d)

64. Which of the following statement is correct?

a) Passwords should not be changed at regular intervals.
b) Password should be easy to guess by other persons.
c) Do not share your password with any one.
d) Write your passwords anywhere so that others are easily accessible to it.

Ans. (c)

65. In respect of ATM Pin, one of the following is the correct statement
a) Keep pin and card together.
b) Reveal your pin to others.
c) Do not write your pin on the backside of the card.
d) Reveal your pin through e-mail/sms etc.

Ans. (c)

392
66. One of the following is not an internet security. Which is that?
a) Do not click on web links in e-mail.
b) Do not visit untrusted sites.
c) Do not use internet for downloading, distributing unauthorized software or tools.
d) Download games from untrusted internet sites

Ans. (d)

67. Lottery fraud, Recruitment fraud are types of

a) Smishing fraud
b) Nigerian Fraud
c) Malware
d) All the above.

Ans. (b)

68. Which among following Act is not amended in Information Technology Act 2000?
a) The Bankers Books Evidence Act, 1891
b) BSNL IT Policy
c) RBI Act 1934.
d) The Indian Evidence Act, 1872

Ans. (b)

69. What is/are component of IT Act 2000?

a) Legal Recognition to Digital Signatures
b) Regulation of Certification Authorities.
c) Digital Certificates
d) All the above

Ans. (d)

70. _____ is unauthorized access to or use of data, systems, server or networks

including any attempt to probe scan or test the vulnerability of a system, server or
network or to breach security or authentication measures without express authorization
of the owner of the system, server or network:
a) Hacking
b) Cracking
c) Viruses
d) None of These

Ans. (a)

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71. _____is a computer program that is loaded into a computer without the owner's
knowledge:
a) Hack Material
b) Viruses
c) Both of Above
d) None of These

Ans. (b)

72. A ______is a harmful computer program that has been hidden inside of something
benign, such as an email attachment or even an innocent looking program:
a) Trojan Horses
b) Worms
c) Macro Viruses
d) None of These

Ans. (a)

73. The Hot Key for (screen 069029) Enquiry in CBS is

a) F6
b) F7
c) F10
d) F12

Ans. (b)

74. Capability of Auditor User is

a) 1
b) 2
c) 10
d) 0

Ans. (d)

75. User type of Vault Teller is

a) 10
b) 40
c) 50
d) 60

Ans. (c)

76. While opening a CIF of a Non Resident Indian staying in USA, the values used in the
fields NATIONALITY & DOMICILE respectively are
a) USA & USA
b) INDIA & INDIA

394
c) INDIA & USA
d) USA & INDIA

Ans. (c)

77. Minimum KYC score required to open an active CIF is

a) 40
b) 70
c) 110
d) 150

Ans. (c)

78. Date of death of a customer can be recorded in CBS using the following menu
a) Customer Management Amend Customer Details, remove date of birth & record
Date of death
b) Customer Management Amend Personal Details
c) Customer Management Amend Miscellaneous details
d) None of the above

Ans. (b)

79. Menu for activating Alternate Delivery Channels in CBS is

a) Customer Management Amend Personal Details
b) Customer Management Amend Miscellaneous Details
c) Customer Management Amend marketing details
d) None of the above

Ans. (b)

80. The product code for Savings Bank without Cheque book starts with
a) 20
b) 21
c) 22
d) 23

Ans. (b)

81. Customer category code to be used while opening a term deposit for a STAFF SENIOR
CITIZEN is
a) 1
b) 3
c) 4

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 d) 5

Ans. (d)

82. While opening a term deposit under SPECIAL RATE (DRI) scheme, the rate of interest
applicable to the deposit is
a) Fetched automatically by the system
b) Has to be manually punched in the field “Variable Interest Rate”
c) Interest has to be manually calculated on maturity
d) None of the above

Ans. (b)

83. While opening a term deposit, UNDER THE TAB TERM OPTIONS, maximum value that
can be entered in the field “TERM MONTHS” IS
a) 120
b) 12
c) Any value
d) None of the above

Ans. (b)

84. A & B Have a joint account and request you to delete A and continue the deposit in
the name of B the request,
a) The old account needs to be closed and a new account in the name of B has to be
opened
b) The request can be handled through the menu through the OWNERSHIP CHANGE
option under the menu Customer Management Link CIF to account Own
accounts
c) Cannot be handled in CBS
d) None of the above

Ans. (b)

85. A government Department opens a Term Deposit account with you and is not liable
for TDS by virtue of its status as a GOVT organization. The TDS exemption can be
allowed by
a) Recording 15H/15G
b) Recording Tax Exemption document
c) Making TDS flag “N” in the CIF of the organization
d) The exemption cannot be handled in CBS

Ans. (c)

396
86. Menu navigation for change of Home branch of a Deposit account is
a) Customer ManagementAmend Customer Details Customer Details  Change
the values in the field “Home Branch” to the desired home branch
b) Deposit/CC/OD Accounts Deposit/CC/OD/Bills Account Account Type/Home
Branch change
c) Any of the above
d) None of the above

Ans. (b)

87. CBS screen used for accepting Loan repayment in a loan account is
a) 1010
b) 11010
c) 20010
d) 1045

Ans. (b)
88. The first activity that needs to be done in CBS before lodging cheques in clearing is
a) To clear earlier days session
b) To open a new session for the relevant date
c) Both the above
d) None of the above

Ans. (b)

89. A Depositor who holds many TERM DEPOSIT ACCOUNTS in your branch submits 15H,
The same is recorded in the system for one account. 15 H thus recorded works/will be
applicable
a) Only the TDR for which it is recorded
b) For all the Term deposits existing under the CIF as on the date of recording BUT NOT
for future deposits that would be opened during the FY
c) For all the Term deposits existing under the CIF as on the date of recording AND ALSO
for future deposits that would be opened during the FY
d) For all the deposits under the CIF, present, future irrespective of financial year

Ans. (c)

90. TDS projections of a Customer are contained in the following report

ACCOUNTWISE_DATEWISE_TDS_DEDUCTION_REPORT_DOMESTIC_IN2387
Account_statement_of_TDS_BGL_depd0804
BalanceInDepositGlCodeWise-gend7045
BranchWise_CustomerWise_ProdjectedTDS_depd0625

Ans. (d)

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91. Minimum User capability required for opening a Loan account without
Maker/Checker is
a) 5
b) 6
c) 8
d) 9
Ans. (b)

92. Menu Navigation for account opening a LOAN ACCOUNT is

a) DL / TL Accounts & Services Loan TrackingOperations
b) DL / TL Accounts & Services Loan Processing
c) Transactions Posting Loan Accounts (DL / TL) Disbursements
d) Common Processing

Ans. (a)

93. Menu for Posting an a voucher from Inland Remittance account to another BGL is
a) Inland Remittance Issue/Funding From GL
b) BGL Transfer GL To GL
c) Any of the above
d) None of the above
Ans. (b)

94. After issuing a term deposit to a customer, if receipt number (Stationery on which the
TDR is printed) needs to be verified the same can be seen from the field
a) “Receipt No” in Short Enquiry Screen for Deposits
b) “Term Receipt No” in Long Enquiry Screen for Deposits
c) Both the above screens
d) None of the above screens

Ans. (c)

95. A candidate applying for a recruitment examination to be conducted by IBPS

approaches you for paying necessary fee in cash, the same can be accepted in cash to
the account of IBPS through the menu

a) Transactions Posting Deposit / CC / OD Accounts Receipts Cash

b) Fee/Application Money Collections Cash
c) BGL Credits Cash Posting
d) Any of the above

Ans. (b)

96. Screen 020450 is used for Transaction Enquiry of

a) Deposit accounts
b) BGL Account

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 c) Cash Credit accounts
d) Loan Transaction

Ans. (d)

97. The Menu Navigation for enquiring a C2C raised on us by another branch for the
purpose of responding is

a) BGL Enquire Transaction

b) BGL Reconciliation Reconciliation Enquiry
c) C2C Reconciliation C2C Multi-Purpose Screen
d) Any of the above

Ans. (c)

98. Maximum transaction limit for Mahamobile is

a) 5000
b) 50000
c) 10000
d) 100000

Ans. (b)

99. Used id for mobile banking login is:

a) CIF No
b) Account No
c) Mobile No
d) None of above

Ans. (a)

100. Cooling period after endorsing beneficiary in Mahammobile & Internet Banking is
a) 12 Hours
b) 7 Hours
c) 18 Hours
d) 4 Hours

Ans. (d)

101. Transaction through MahaUPI Beneficiary addition is compulsory:

a) TRUE
b) FALSE

Ans. (b)

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102. NACH Stands for
a) National Automated Centralized House
b) New Automated Clearing House
c) National Clearing House
d) National Automated Clearing House

Ans. (d)

103. RFID Stands for

a) Radio Frequency Identification
b) Radio Frequent Identifier
c) Radio Frequency Identity
d) Radio Frequency Identifier

Ans. (a)

104. IMPS Stands for

a) Intermediate Payment System
b) Interbank Payment System
c) Immediate Payment Service
d) Immediate Payment & Settlement

Ans. (c)

105. Total Maximum amount to be transferred to IMPS per day clubbing all channels
a) 70000
b) 50000
c) 100000
d) 75000

Ans. (d)

106. The Number of Digits in MMID is

a) 4
b) 7
c) 6
d) 3

Ans. (b)

107. Insurance cover for VISA/MASTER/MAESTRO debit card is:

a) 1 Lakh
b) 2 Lakh

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c) 1.5 Lakh
d) No Insurance

Ans. (d)

108. EMV in terms of Banking means

a) Electronic Voting Machine
b) Euro Master Visa
c) Electronic Master Visa
d) Euro Voting Visa

Ans. (b)

109. Which of the following is not an e-gadget?

a) BNA & Cash Recycler
b) Self Updated Passbook Printing Kiosk
c) DMS & Integrated Queue Management System
d) Internet Banking

Ans. (d)

110. BNA stands:

a) Bunch Note Acceptor
b) Bank Note Acceptor
c) Bunch Note Acceptance
d) Bunch Note Agreement

Ans. (a)

111. DMS stands for:

a) Digital Media Sign
b) Digital Multimedia Sign
c) Digital Media Signage
d) Digital Multimedia Signage

Ans. (c)

112. QMS Stands for:

a) Query Monitoring System
b) Query Maintenance System
c) Query Management System
d) Queue Management System

Ans. (d)

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113. PFMS Stands for
a) Public Financial Management System
b) Private Financial Management System
c) Public Fraud Monitoring System
d) Public Fraud Monitoring System

Ans. (a)

114. Charges for ATM Debit Card Issuance for first year is
a) Nil
b) 50 + GST
c) 100 + GST
d) 300 + GST

Ans. (a)

115. Charges for Debit card second year onwards is:

a) Nil
b) 50 + GST
c) 200 + GST
d) 300 + GST

Ans. (c)

116. For Hot listing a Debit card maker checker is required:

a) Yes
b) No

Ans. (b)

117. Charges for Re-issuance of Hot Listed card is:

a) 100 + GST
b) 300 + GST
c) 50 + GST
d) 150 + GST

Ans. (d)

118. RTGS Stands for:

a) Regional Time Gross Settlement
b) Real Time GRAS Settlement
c) Real Time Gross Settlement
d) Real Time Green Settlement

Ans. (c)

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 119. NEFT Stands for:
a) Net Electronic Fund Transfer
b) National Electronic Fund Transfer
c) Net Electronic Fund Transaction
d) National Electronic Fund Transaction

Ans. (b)

120. Minimum amount of transaction through NEFT is:

a) 2 Lakhs
b) 1 Lakhs
c) 50000
d) Any amount

Ans. (d)

121. Minimum amount of transaction through RTGS is:

a) 2 Lakhs
b) 1 Lakhs
c) 50000
d) 1.5 Lakhs

Ans. (a)

122. OTP is:

a) One Time Pin
b) One Transaction Pin
c) One Transfer Pin
d) One Time Password

Ans. (d)

123. AEPS stands for

a) Aadhaar Enabled Payment System
b) Aadhaar Electronic Payment System
c) Automatic Electronic Payment System
d) Automatic Enabled Payment System

Ans. (a)

124. What is IFSC code?

a) International Financial Standard and Codes
b) International Financial System Cod

403
 c) Indian Financial system code
d) None of these

Ans. (c)

125. BCSBI Code of bank’s commitment to customers is –

a) Voluntary code set up by Basel Committee
b) Compulsory code which is set up by RBI
c) Voluntary code which sets minimum standards of banking practices
d) Optional Code which sets highest standard of customer service

Ans. (c)

126. Voucher Checking done through EVVS on

a) Everyday
b) Alternatively
c) Once in a week
d) Fortnight

Ans. (a)

127. What does VSAT refer to?

a) VSAT is a satellite used by our bank for communication purpose
b) Valuable Satellite
c) Very Small Aperture Terminal
d) None of these

Ans. (c)

128. What is the maximum time allowed for settling an RTGS transaction?
a) Under normal circumstances the beneficiary branches are expected to receive the
funds in real time as soon as funds are transferred by the remitting bank.
b) The beneficiary bank has to credit the beneficiary's account within two
hours of receiving the funds transfer message.
c) 1 day
d) a and b

Ans. (d)

129. What is the difference between RTGS and NEFT?

a) In RTGS Settlement is done on a One to one basis without netting at a
real Time, where as in NEFT it being done in batches and netting of credit and
debit takes place at each batch.
b) In both RTGS and NEFT settlement is done on a gross basis. But in RTGS it is
Real Time and NEFT is done on batches
c) RTGS is used for funds transfer across the countries and NEFT is used for
Funds transfer within the country

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 d) No difference in RTGS & NEFT

Ans. (a)

130. Under PMJJBY Scheme if a person enroll in July what is premium amount?
a) 86 * 3
b) 86 * 4
c) 85 * 3
d) 85 * 4

Ans. (a)

131. MTPIN is used for

a) Application logged in
b) Balance Enquiry
c) Fund Transfer
d) Mini Statement

Ans. (c)

132. While Opening CIF which of the following is not mandatory Field is:
a) PAN
b) Address
c) Segment Code
d) Mobile No

Ans. (d)

133. Short key for enquiry of Linked Guarantor:

a) F7
b) F9
c) Ctrl + F7
d) Ctrl + F9

Ans. (d)

134. Full Form of CIBIL

a) Credit Information Bureau (India) Limited
b) Common Information Bureau (India) Limited
c) Credit Identification Bureau (India) Limited
d) Common Identification Bureau (India) Limited

Ans. (a)

135. On Pressing F9 which of the following is not available:

a) Mobile No
b) PAN

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 c) Date of Birth
d) Aadhar

Ans. (c)

136. Steps used during Linking Proprietor:

a) Entity 1 = Personal CIF, Entity 2 = Non Personal CIF
b) Entity 1 = Personal CIF, Entity 2 = Personal CIF
c) Entity 1 = Non Personal CIF, Entity 2 = Non Personal CIF
d) Entity 1 = Non Personal CIF, Entity 2 = Personal CIF

Ans. (d)

137. Steps used during Linking Guarantor:

a) Entity 1 = Loan Account Number, Entity 2 = CIF of Guarantor
b) Entity 1 = CIF of Loan Account, Entity 2 = Account Number of Guarantor
c) Entity 1 = CIF of Guarantor, Entity 2 = Loan Account Number
d) Entity 1 = Account Number of Guarantor, Entity 2 = CIF of Loan Account

Ans. (c)

138. Types of CIBIL Enquiry

a) Consumer & Commercial
b) Retail & Commercial
c) Consumer & Corporate
d) Retail & Corporate

Ans. (a)

139. CIF Stands for:

a) Customer Information
b) Consumer Information
c) Customer Identification
d) Consumer Identification

Ans. (a)

140. How to update email address in CBS

a) CIF -> Amend -> Personal Details
b) CIF -> Amend -> Normal Details
c) CIF -> Amend -> Miscellaneous Details
d) CIF -> Amend -> Identification Details

Ans. (c)

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141. How to update Mobile Number in CBS

a) CIF -> Amend -> Customer Details

b) CIF -> Amend -> Normal Details
c) CIF -> Amend -> Miscellaneous Details
d) CIF -> Amend -> Identification Details

Ans. (a)

142. ASBA stands for

a) Application Supported by Blocked Amount

b) Amount Supported by Blocked Application
c) Application Service by Blocked Amount
d) Amount Service by Blocked Application

Ans. (a)

143. BAS stands for

a) Biometric Authorization System
b) Biometric Authentication Server
c) Biometric Authorization Server
d) Biometric Authentication System

Ans. (d)

144. Screen No 29090 is used for

a) Stop Enquiry
b) Balance Enquiry
c) Hold Enquiry
d) Cheque Enquiry

Ans. (c)

145. Screen No 1060 is used for

a) Withdrawal Slip
b) Cheque Payment
c) BGL Debit
d) Deposit Closer

Ans. (a)

146. Response Code 238 on Debit transaction in ATM Machine is for:

a) Invalid Card For Device
b) Incorrect Pin
c) Exceed Limit
d) Insufficient Fund

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 Ans. (d)

147. Response Code 055 on Debit transaction in ATM Machine is for:

a) Invalid Card For Device
b) Incorrect Pin
c) Exceed Limit
d) Insufficient Fund

Ans. (b)

148. Screen No for Loan Closure

a) 1010
b) 11010
c) 13010
d) 20010

Ans. (c)

149. Response Code 054 on Debit transaction in ATM Machine is for:

a) Expired Card
b) Incorrect Pin
c) Exceed Limit
d) Insufficient Fund

Ans. (a)

150. Screen Number for Passbook Printing is

a) 700
b) 503
c) 501
d) 600
Ans. (d)

151. The list of account holders opened by Foreign Nationals report is provided in

a) Exceptional Reports
b) Branch Trade Finance report
c) Branch Interface Report
d) New Updates  Various Utilities
Ans. (d)

152. Days allocated for reimbursement through Charge Back are

a) Five days
b) Seven days
c) Seven working days

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 d) Five working days
Ans. (d)

153. If the claim is not settled in Arbitration or Customer is not satisfied in Arbitration,
then matter is referred to

a) PRD (Panel for Resolution of Disputes)

b) RBI Appellate Authority
c) Should be paid under compensation policy
d) None of the above

Ans. (a)

154. Which of the following is wrong Common response code on receipts

a) 055- Invalid PIN

b) 061- Exceeds Limit
c) 051- Insufficient funds
d) 100- Transaction approved

Ans. (d)

155. Set limit for Rupay Platinum card is

a) Domestic ATM – 100000 and POS 200000

b) Domestic ATM – 50000 and POS 100000
c) Domestic ATM – 100000 and POS 100000
d) Domestic ATM – 200000 and POS 200000

Ans. (a)

156. Annual Maintenance fees on Debit card is

a) First year there will be no any changres

b) Second year onwards Rs 200/= will be charged
c) For each add on card Rs 300/= will be charged separately
d) For Re-issue of hot-listed card Rs 150/= will be charged.
e) All the above are correct

Ans. (e)

157. Following Value added services are available in our ATMs

a) Card to card fund transfer (BOM cards to Other Bank card)

b) Card to Account fund transfer (BOM Accounts)
c) Utility Payment
d) Lead Generations

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e) All the above are correct

Ans. (e)

158. BSR Activity Code for 4 Wheeler car is:

a) 40146: VEHICLES-FOUR WHEELER –RETAIL
b) 40145: VEHICLES-FOUR WHEELER –RETAIL
c) 40144: VEHICLES-FOUR WHEELER –RETAIL
d) 40143: VEHICLES-FOUR WHEELER –RETAIL

Ans. (a)

159. Common Processing->Security -> Customer->Amend/Enquire security->Enter Security

Number- > Then go to Screen 2 (Details) -> Enter latest Valuation Date, while
punching valuation in CBS, valuation should be;
a) Valuation of Housing Loan is 5 Years for other loan 3 Years
b) Valuation of Housing Loan is 3 Years for other loan 5 Years
c) Valuation of Housing Loan is 3 Years for other loan 3 Years
d) Valuation of Housing Loan is 5 Years for other loan 5 Years

Ans. (a)

160. Investment in Plant & Machinery” field is left zero or invalid under:
a) Document Revival
b) CISLA Detail
c) Recovery/Upgradation/Exp.Curr.Chest Recording
d) BASEL

Ans. (b)

161. In case of open land securities, Collateral type should be ___ & Collateral Sub Type
should be _____ So, that system won’t ask for Insurance of these properties:
I) (Immovable/movable property) & (Commercial/Residential plot)
II) (Commercial/Residential plot) & (Immovable/movable property)
a) Only I
b) Only II
c) Both I & II
d) Neither I Nor II

Ans. (a)

162. Navigation for creating Insurance is :

a) Common Processing  Security (Primary/Collateral) Customer  Create  Create
Insurance Details
b) Common Processing  Security (Primary/Collateral)  Customer  Create  Create
Security

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 c) Both are incorrect
d) Can be done through both

Ans. (a)

163. Navigation for creating Security is:

a) Common Processing  Security (Primary/Collateral) Customer  Create
 Create Insurance Details
b) Common Processing  Security (Primary/Collateral)  Customer  Create
 Create Security

Ans (b)

164. Menu Navigation for Correction in BSR Activity Code is Correct/Incorrect:

a) Loan Tracking -> Operations-> Select “2.Existing Accounts” & Transmit-> Provide
Account Number &Transmit -> Give Selection No.”1.”i.e. Maintenance -> Give selection
No.” 3.” i.e. Account Creation -> Select No.”6” i.e. additional loan details from option ->
Correct the BSR Activity Code -> Transmit
Ans. Correct

165. Menu Navigation for account opening a LOAN ACCOUNT is

DL / TL Accounts & Services Loan TrackingOperations
DL / TL Accounts & Services Loan Processing
Transactions Posting Loan Accounts (DL / TL) Disbursements
d) Common Processing

Ans. (a)

166. How much GST TDS is to be deducted if a transaction comes under the purview of GST
TDS?
a) 1% b) 2% c) 5% d) 10

Ans. (b)

167. Ransomware is:

a) Client Server Machine
b) System Software
c) Malicious Software
d) Database
Ans. (c)

168. As regards E-TDS is concerned Justification Report is

1. To check Short Payment, Short Deduction.
2. Pan Error, Late filing, PAN Not Available.
3. Declaration of Non Filing of statement.

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 4. To request for refund
a) Only 1 & 2 b) 1, 2 & 3 c) all are correct d) only 1
Ans. (a)

169. Internet Banking Users can initiate RTGS transaction during Bank holidays and
non- business hours i.e. from 06 pm to 09 am (next day) upto the amount of
a) Retail users can transact upto Rs 10 lakh & Corporate user can do the transaction up
to Rs 25 lakh
b) No such facility is provided
c) Retail users can transact upto Rs 5 lakh
d) Corporate user can do the transaction up to Rs 10 lakh

Ans. (a)

170. Through internet Banking following service is not available for customers for making
instant fund transfer

a) Under this servicer prior beneficiary addition is not required

b) Per day fund transfer limit is Rs 10000/=
c) Per day allowed number of transactions are five
d) Per transaction limit should be minimum Rs 10000/=

Ans. (D)

171. Following facility is not provided in internet Banking

a) PPF account enquiry of withdrawal amount is provided
b) Enabling SMS/Email alert facility for CASA accounts
c) Call me
d) Opening of new Sukanya samrudhi account

Ans. (D)

172. Used id for Credit card login is:

a) CIF No
b) Account No
c) Mobile No
d) None of above

Ans. (a)

173. Our Fast Tag is working on which technology

a) Radio Frequency Identification
b) Radio Frequent Identifier
c) Radio Frequency Identity
d) Radio Frequency Identifier

Ans. (a)

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174. Maximum credit card limit of Bank of Maharashtra is
a) Maximum limit is allowed as per request of customer.
b) Rs 150000/= and for HNI customers Zonal Office can recommend to raise upto Rs
3,00,000/=
c) For HNI customers Zonal Office can recommend to raise upto Rs 5,00,000/=
d) No such limit is given

Ans. (b)

175. To avail credit card limit of Bank of Maharashtra which of the following is
incorrect.
a) Applicant should have minimum yearly annual income of Rs 3.60 lacs.
b) CIBIL score should be greater than 725.
c) Card can be issued to non-resident Indian
d) Cards will be issued to Individuals only

Ans. (C)

176. Regarding annual fee of credit card which of the following is incorrect.
a) No annual fee for add on card
b) Rs 500/= from second year onward to be recovered in last bill
c) For ex staff members no annual will be recovered
d) Charges are waived for customer making annual transactions of Rs 30000/= or more

Ans. (B)

177. Which of the following channels is not inactive by default in Credit card
a) E-com (online transactions)
b) International transaction
c) ATM
d) NFC (Contactless Transactions)

Ans. (c)

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 ALTERNATE BUSINESS CHANNEL

Business Planning for field offices for taking actions with the ultimate aim of improving quality of
service at each stage and enhancing our Non-interest income
Why ABC
 Source of Risk Free NII
 To serve customers all financial needs under one roof
 Customer retention & loyalty
 Strengthens customer relationship
 Improves profitability, lowers price
 Why to say no to a cherry on a ice-cream
 Develop more leads

Portfolio Coverage

 Govt. Business
 Bancassurance
 Depository (DEMAT) Services
 Online Share Trading i.e. Maha E-trade & ASBA
 Mutual Fund
 Payment Gateway Facilities

Govt. Business: e-Payment of taxes

 Taxes & GST can be Paid

 Advantages to the customers :
 Payments can be made 24 x 7
 Customer can make payments from his /her premises / place.
 Can make payments within due dates without waiting in queue.
 Can keep track of payments made using Transaction History facility

P.P.F.Scheme 1968
 NAME =>Public Provident Fund Scheme 1968
 TENURE =>15 Years
 Can be extended for one or further blocks of 5 years.
 INTEREST RATE => 7.10% (Notified by GOI from time to time)
 INTEREST FREQUENCY =>Yearly (On 31st March every year)
 INVESTMENT =>Min. Rs. 500/- :; Max. Rs. 1,50,000/- (Every year)
 No limit on the number of deposits in a year. Can be deposited in lumpsum also.
 ELIGIBILITY FOR ACCOUNT OPENING
 Only Individuals/ In Single name/ NRI’s not allowed
 The account on behalf of a Minor can be opened by either father or mother
 NOMINATION

414
 A subscriber may nominate one or more persons, Max. 4
 LOANS
 Any time after expiry of one year, from the end of financial year in which the a/c is opened,
i.e in the 3rd financial year, but before expiry of 5 years.
 Once in a year.
 Loan amount not exceeding 25% of amount at the end of 2nd year immediately preceding
the year in which the loan is applied.
 Maximum term for loans is 36 months for principal repayments, interest have to be repaid
in not more than 2 monthly installments after principal repayment. ROI is 1% p.a.

 WITHDRAWALS
 First withdrawal can be made at any time after the expiry of 5 years from the end of year
in which the initial subscription is made.
 Thereafter, withdrawal is allowed every year ; Limited to 50% of balance at credit at the
end of 4th year immediately preceding the year in which the amount is to be withdrawn or at the
end of preceding year, which ever is less.
 PREMATURE PAYMENT
 Only after completion of 5 financial years.
 If the amount is required for treatment of serious illness of life threatening diseases of
account holder or dependents.
 If amount is required for higher education of the account holder.
 On change of residency status.

** Circular :: AX 1/ ABC/GB/PPF/Cir No. 13/20-21 dated 20th June 2020.

SENIOR CITIZEN SAVING SCHEME (SCSS) 2004

 NAME =>Senior citizens savings scheme – SCSS-2004
 TENURE =>5 Years (Can be extended by 3 more years)
 INTEREST RATE =>7.40 % (Notified by GOI from time to time)
 INTEREST FREQUENCY =>Quarterly/can be credited to SB A/c
 INVESTMENT =>Min. Rs. 1,000/- :; Max. Rs. 15,00,000/- (One Time)
 ELIGIBILITY FOR ACCOUNT OPENING
 Only Individuals with 60 years of age.
 Individuals having age 55 > 60, who have retired under VRS or on superannuation subject
to if account is opened within one month of receipts of retirement benefits.
 50 years & above Retired personnels of defence services, subject to above condition.
 RETIREMENT BENEFITS; - any payment due to the a/c holder of retirement on
superannuation or otherwise & includes PF dues, gratuity, commuted value of pension, leave
encashment, ex gratia etc.

 Joint A/c can be opened along with spouse. Both the spouses can open individual &/or joint
a/c’s with each other with maximum deposit of Rs. 15.00 lakhs each, provided both are eligible to
invest under relevant provisions of the scheme.

415
 In case of death of any of the a/c holder where both spouse have opened the ac’s under the
scheme, the amount over the maximum limit shall be refunded.
 LOAN FACILITY =>Not Available
 NOMINATION =>Available
 PREMATURE CLOSURE
 If A/c is closed before 1 year within A/c opening, interest paid shall be recovered.
 The depositor may withdraw the deposit and close the account, any time after expiry of
1 year , subject to :
1. If closed after 1 year but before expiry of 2 years ; deduction of 1.50 % of deposit
2. If closed on or after expiry of 2 years ; deduction of 1.00 % of deposit
3. In case of death of depositor , the account should be closed and deposit be refunded to
nominee or legal heirs
4. In case of joint account or where spouse is the sole nominee, the spouse may continue the
account
** Circular:AX 1/ ABC/GB/SCSS/Cir No. 10/20-21 dated 10th June 2020.
SUKANYA SAMRIDDHI ACCOUNT SCHEME (SSA)

 Sukanya Samriddhi Account (SSA) is a scheme designed & introduced by Govt. of India
in the year 2015.
 It encourages parents to build a fund for the education and marriage
expenses for their girl child.
 INVESTMENT => Min. Rs. 250/- :; Max. Rs. 1,50,000/- (Every year)
 There is no limit on the number of deposits in a year . Can be deposited in lumpsum
also.
 TENURE
 Deposits can be made till completion of 15 years from account opening date
 Account shall mature on completion of 21 years from account opening date
 INTEREST RATE =>8.40 % (Notified by GOI from time to time)
 INTEREST FREQUENCY =>Yearly
 NOMINATION : Available
 ELIGIBILITY FOR ACCOUNT OPENING
 The account may be opened by natural or legal guardian in the name of girl child, from the
birth of the girl child till she attains the age of 10 years
 Any girl child, who attained the age of 10 years, 1 year prior to the commencement of
these rules, will also be eligible
 Natural or legal guardian shall be allowed to open accounts for 2 girl children only
 WITHDRAWAL
 Allowed upto 50% of balance outstanding at the end of the preceding financial year, for
the purpose of higher education when the girl child attains the age of 18 yearsor passed 10th Std.
 PREMATURE CLOSURE – after 5 Years
 On the death of account holder (girl child) ; balance payable to guardian
 On compassionate grounds; such as medical support in life threating disesases etc.
 Change of status of citizenship or non resident of India.
 In case the girl child gets married before completion of 21 years of account opening i.e.
before maturity of account, operation shall not be permitted beyond the date of her
marriage.A/c can be closed as per request.
** Circular :AX 1/ ABC/GB/SS/Cir No.11 /20-21 dated 10th June 2020.

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 BANCASSURANCE
Bancassurance in its simplest form is the distribution of insurance product through Banks
distribution channels. It is basically a provision of banking and insurance services through a
common distribution channel or to common client.
In their natural and traditional roles and with their current skills, neither banks nor insurance
companies could effectively mount a Bancassurance start-up alone. Collaboration is the key to
making this new channel work. With this background we have entered into MOU with different
companies for Life products and Non- Life products.

Benefits of BANCASSURANCE
Benefit for Banks:
i) Additional cash flow;
ii) Attracts new customers;
iii) improved resource utilization;
iv) Create additional source of revenue by their own commission income etc;
v) Prevents entry of other service providers competing for same products and ensured customer
loyalty.
Benefit for Banks’ customers:
i) Single window clearance for banking and insurance;
ii) Saving the time and adding convenience to the customers;
iii) Ease of renewals – a single day for renewal of all the policies at a time;
iv) Providing the opportunity to obtain a basket of products under one roof.

To sum up, the benefits of Bancassurance are:

i) increased income to banks;
ii) Infrastructure costs are optimized;
iii) Satisfy risk needs of the customers;
iv) creates a universal banking platform;
v) Strong brand image is built up;
vi) Benefit of customer information is reaped;
vii) Revenue diversification takes place;
viii)Staff skill and loyalty are increased;
ix) More market penetration – specially for huge untapped rural market, is possible.

TIE - UP
 Life Insurance
 Life Insurance Corporation (LIC)
 AVIVA Life Insurance Company
 Reliance Nippon Life Insurance Company (renewal only)
 Non-Life Insurance
 United India Insurance Company
 Future Generali Insurance Company

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 Health Insurance
 United India Insurance Company
 Manipal Cigna Insurance Company

Bancassurance Tie up with ECGC(Applicable to all Branches other than Rural Branches)
Bank of Maharashtra (BoM) entered into corporate agency agreement with the Export Credit
Corporation of India (ECGC) on 02/04/2008 for marketing their insurance products to our existing
as well as new customers under Export finance.

ECGC products
ECGC issues following type of policies
1. Shipment Comprehensive Policy

2. Small Exporters Policy

3. Specific Shipment Policy

4. Export Turnover Policy

5. Exports( Specific Buyer) Policy

6. Consignment Export (Global entity) Policy

7. Consignment Export (Stock Holding Agent ) Policy

8. Buyer Exposure Policy

9. Multi Buyer Exposure Policy

10.Software Projects Policy

11. Exports(IT Enabled Services) Policy (Single-Customer)

12. Export (IT Enabled Services) Policy ( Multi Customer)

13. Services Policy.

Comission : commission rate is 10% for all the ECGC policies. ECGC will send the commission to the
respective branches.This has to be credited to the P/L commission Bancassurance A/c- ECGC.
Claim: The claim will be settled by ECGC, on submission by the beneficiaries of the policy, directly.
For more details, refer cir nos
Cir no. AX1/PLNBAC/cir no.229/2010 dated19/02/2010
Cir no. AX1/Bancassurance /ECGC /2008 dated 17/04/2008

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 MAHABANK SWASTHYA YOJNA
 Health Insurance scheme in association with United India Insurance Co. Ltd.
 Policy provides for reimbursement of hospitalization / domiciliary hospitalization expenses
in India for illness / disease suffered or accidental injury sustained during policy period.
 SUM INSURED
 Minimum => Rs. 50,000/-
 Maximum => Rs. 5,00,000/-
 Scheme is having 2 plans to cover hospitalization expenses of customers.
 Plan A : 1 + 3 (self + spouse + 2 dependent children)
 Plan B : 1 + 5 (self + spouse + 2 dependent children + parents)
 Max. entry age 65 years

By charging additional premium, personal accident (death only) can be covered as under:
i. Account holder : 100 % of Mediclaim sum insured
ii. Spouse : 50 % of Mediclaim sum insured
iii. Child above 12 years & below 21 years : 20% of Mediclaim sum insured
iv. Child below 12 years : 10% of Mediclaim sum insured

MANIPAL CIGNA PROHEALTH GROUP INSURANCE POLICY

 Health Insurance scheme in association with Cigna TTK

 SUM INSURED
Base Plan Super Top up

Covers Silver Gold Platinum Platinum

Sum Insured Rs. 2/3/4 lakhs Rs.5/7.50 lakhs Rs 10/15/20 lakhs Rs 10 lakhs

 Scheme is having 3 plans to cover hospitalization expenses of customers.

 Individual Plan : (A/c Holder can cover Self or Spouse or Son or Daughter)
 Family Plan : 1 + 5 (Self + spouse + upto 4 children of age < 25 years)
 Parents Plan : (Cannot cover self, but set of parents/parents in law )
 Max. entry age 70 years

“ACCIDENT SURAKSHA POLICY” for BOM-MKCC Accounts

 M/s Future Generalli has come up with Accident suraksha policy exclusively for Bank of
Maharashtra – MKCC Account holders
 AGE ELIGIBILITY : 18 years to 70 years only
 ACCIDENTAL DEATH BENEFIT : Rs. 3.00 lakhs
 Permanent Total Disablement Benefit : Rs. 2.00 lakhs
 Permanent Partial Disablement Benefit : Rs. 1.50 lakhs
 Premium : Rs. 495/- + gst
** Circular : AX1/ABC/Bancassurance/2017-18/63 dated 08.12.2017

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 DEMAT
 Bank is Depository participant of Central Depository Services
Ltd. since year 1999

 All Branches can source the DEMAT application and forward it

to DMAT Cell Mumbai (Fort Branch)
 Email: demat_mum@mahabank.co.in
 Contact : 022-22620502/22626748
 Fax: 022-22621779

Maha E Trade
 It is 3-in-1 Integrated Account i.e. SB, DEMAT & Trading account
 Benefits to Customer:
 Services like Intra day trading, Delivery based Equity trading to Customer.
 Value Added Services to Customer
 Unique facility to Customer – Hold / Release of Funds/ securities
 Tie Up arrangements
 Religare Securities
 Reliance Securities
 Ventura Securities
 * Circular : AX1/PLN/Online Trading/Cir. No.199/2009-10 dated 01.01.2010

ASBA

 Application supported by Block Amount

 ASBA investors” while applying should take care to give their correct: PAN number,
DPID, BOID and 11 digit bank Account number of our Bank (SB/CA only)

 Benefits to customer
 Earn Interest - customer continues to earn interest.
 Security & Confidence- higher level of safety
 **Circular : AX1/ABC/ASBA/2016-17/Cir. No. 13 Dated 19.07.2016

Mutual Fund
 Bank is associated with 24 AMC (Asset Management Co.)

 Focus on 6 selected mutual fund i.e.

 SBI MF,
 Reliance MF,
 HDFC MF,
 Birla Sun Life MF,
 Franklin Templeton MF
 UTI MF

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Payment Gateway Facilities

Payment Gateway is a facility provided to merchants / institutions/ Colleges/ Schools/ trusts by

the Aggregators which provide platform to accept online payment through debit card/ credit card/
internet banking/ IMPS etc.

 We have tie up arrangement with following aggregators

Sr. Aggregators Sr. Aggregators

1. M/s Atom Technologies 7. M/s CC Avenues

2. M/s BILL DESK 8. M/sCitrusPayment Solutions Pvt Ltd

3. M/s EBS solutions limited 9. M/s PayTm

4. M/s Ibibo i.e. PAYU 10 M/s Techprocess payment Solutions

5. M/s Timesof Money Limited 11. M/s SBI e pay

6. M/s Airpay

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 RISK BASED INTERNAL AUDIT POLICY (RBIA)
The new approach of Internal Inspection is risk based. Verification of level of risk of the branch is
done by this approach. De-regularization and globalization of financial services together with the
growing sophistication of financial technology are making the activities of bank and thus the risk
profile across the firm’s activities/ risk categories more complex. Developing banking practices
suggest that there can be substantialrisks thebanks have to address other than credit risk, interest
risk, and market risk. Branch efficiency depends on how it is managing these risks. For this effective
risk management & internal control system is required.
Some of the growing risk faced by banks would be technology risk, risks associated with mergers
and acquisitions, legal risk, outsourcing risk, etc.These diverse risks are grouped under operational
risks.
Basel committee has defined operational Risk as “The risk of loss resulting from inadequate or failed
internal processes, people & system Or from external events.”
The BASEL committee, for effective banking supervision spelt out the need for effective banking
supervision & spelt out need for effective internal controls and internal audit. The audit should
independently evaluate the adequacy, completeness, operational effectiveness &efficiency of the
control system within the organization.
RBI accordingly provided guidelines of Risk based Internal Audit as also Ministry of Finance as per
recommendations of Seth Committee to have uniformity in RBIA in banks.
RISK BASED SUPERVISION:-
This is essentially to entail the allocation of supervisory resources and paying attention with the risk
profile. The frequency of supervisory inspection would depend upon risk profile of the bank. As one
of the component under this approach, RBI suggested adoption of risk focused internal audit by
banks under the proposed RBS approach the supervisory process would seek toleverage the work
done byinternal auditors of bank.
RISK BASED INTERNAL AUDIT:
Policy covers guidelines so as to bring the RBIA in tune with the present requirements taking into
account the regulatory prescriptions it covers following:-
The Risk assessment methodology for identifying the risk areas.
Audit planning, focus on frequency, prioritizing extent of checking, risk assessment, profiling of
activities, functional products & their updating broadening the risk classificationetc. during the
audit process.
OFF SITE MONITERING CELL:-
Set up to review the structured MIS on critical items and sensitize the controlling offices and
branches/ departments for corrective action on a daily basis. The monitoring is being done at ZO
leveland concerned department at HO.

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RBIA POLICY:-
As per guidelines of RBI, The Internal audit Department shall be independent from the internal
control process in order to avoid any conflict of interest and shall be given the appropriate standing
within bank to carry out assignments.
Internal audit shall be independent of the activities they audit/ independence permits inspecting
officers to render impartial and unbiased judgments essential to the proper conduct of audits. This
independence shall be achieved through organizational status and objectivity.
Organizational structure consist of Audit Committee of Board, Audit Committee of Executives, GM,
Inspection, DGM, Inspection and Zonal inspection cells. A diagram for showing the structure is
shown below:

Audit Committee of Board:

Oversees all audit functions of the bank. Committee will guide in developing effective internal
audit.Concurrent audit, IS audit and all other inspection and audit functions for protecting the
assets of the bank.
Audit Committee of executives:-
Headed by ED and members are GMInspection, GM IRM, GMRecovery, GM IT.

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ACE will work under guidance of ACB all minutes of ace should be put to ACB.
Types of Internal Audit:-
The Internal audit department shall undertake audits as per risk based internal audit plan as
approved by the audit committee of board on annual basis. The audit plan comprise mainly the
Internal audit, Information system audit, Concurrent audit & Management Audit.
First Inspection of newly opened branch shall be taken within one year of opening.
RBIA Strategy:
RBIA shall have following dimensions:
1. Pre audit requisite for inspecting officer/ auditor
2. Indexing of products, services, processes
3. Identification of Risks
4. Indication of level of risks
5. Implementation of audit plan based on Risk Level
REVISED RISK RATING SYSTEM
Risk Assessment Module would be developed for each significant auditee unit viz business, division,
product, support area and or a branch location and broken down into relevant parts to address the
auditee unit’s activities and related risk profile comprehensively to ensure audit coverage of all
important aspects. The inherent risk would be graded on a three point scale of High, medium or
low.
As per present rating system the risk is rated “LOW” if the marks allotted are more than 65, as per
revised rating system the rating will be “LOW” if marks are more than 70.
Moderate Rating will be for having marks between 40-70.
High Risk rating will be for having marks below 40.
Rider has been provided as per revised rating system. In case of rise in NPA more than 40% from
level of NPA of last Inspection,(not due to single group account) the branch will be rated High Risk
Rated branch in spite of it is having more than 70 marks achieved in the RBIA risk rating.
If rating arrived is already high, very high or extremely high, the rider for NPA or fraud need not be
applied.If fraud is occurred at branch two or more times during the RBIA period, it is to be treated
as High Risk.
Periodicity of Audit:
Number of days allowed to be carried out RBIA will be decided by inspection cell head based on
Scale/ size of branch:
1. Small branch : 5 – 6 days

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2. Medium size branch : 8 – 10 days
3. Large branch : 10 – 12 days
4. VLB &ELB : min 15 – 20 days
Following aspects should be considered while allotting number of days:
1. Advances portfolio of branch/ New credit sanctions since last RBIA
2. Allotment of number of days for last RBIA
3. Other factors like fraud, high NPA, existing rosk profile of branch
Overstay of the RBIA officer will have to be justified in RBIA summary.
On receipt of RBIA of the branch, Zonal office will prepare monitorable action plan of the branch
specifying actions to be undertaken by the branch for mitigation of various risks. On achieving 100%
compliance of the MAP zonal office will close the RBIA report.

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426
 FRAUD RISK MANAGEMENT POLICY

RBI has defined fraud 'A deliberate act of omission or commission by any person, carried out in the
course of a banking transaction or in the books of accounts maintained manually or under computer
system in banks, resulting into wrongful gain to any person for a temporary period or otherwise, with
or without any monetary loss to the bank'.

Following three factors are present in every situation of fraud:

1. 1. Motive (or pressure) - the need for committing fraud (need for money, etc.);
2. 2. Rationalization - the mindset of the fraudster that justifies commission of fraud; and
3. Opportunity - the situation that enables fraud to occur (often when internal controls are
weak or nonexistent).

The 'Fraud Risk Management' aims at protection of reputation, image and assets of the Bank from
loss or damage from the suspected or confirmed incidents of fraud/ misconduct and focuses on
efforts to:

 Identify and take corrective action against fraud occurrence,

 Review of adequacy of anti-fraud controls in existence and put in place a robust control
mechanism so as to thwart attempt/s to commit the fraud,
 Spread awareness amongst the employees through sharing information,
 Promote zero tolerance to fraud/misconduct.

Objectives of Fraud Risk Management:

The 'Fraud Risk Management' aims at protection of reputation, image and assets of the Bank
from loss or damage from the suspected or confirmed incidents of fraud/ misconduct. An
effective business driven `Fraud Risk Management' approach encompasses controls which
have three objectives:

Prevent: Reduce the risk of fraud and misconduct from occurring,

Detect: Detect the fraud and misconduct at the earliest,
 Respond: Take immediate corrective action and remedy the harm caused by fraud or
misconduct.

 Fraud Risk Management functions

(i) Fraud prevention practices are by way of:

 Fraud risk vulnerability assessment of Channels of Bank such as branches, internet,
phone banking, ATMs, and systems, procedures etc.
 Review of new products and processes,

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 Setting and reviewing fraud loss limits for products and processes and take up with
business group for corrective measures if the amount reaches the limit.
 Root cause analysis of actual frauds (mandatory for frauds of amount Rs 10 lakh and
above) and use the findings to redesign products and processes,
 Examining the processes for KYC, know your employee, vendors,
 Physical security and data information security are maintained,
Creation of fraud awareness among staff.
ii) Strengthening Fraud detection Measures through:
Enforcing of scrutiny of exceptional reports,
Encouraging employees / customers / well-wishers to report suspicious transaction,
Transaction monitoring (carried out by Security Operation Center),
Alert generation mechanism,
Dedicated e-mail ID and Phone for reporting
Fraud Investigation with help of specialized groups,
Recovery of losses,
Reporting of Fraud to RBI and appropriate authorities,
Reporting of Fraud to Police / CBI.
Creation of customer awareness on frauds, and
Creation of employee awareness,
Reporting of Fraud to RBI and appropriate authorities,
Reporting of Fraud to Police / CBI.
Creation of customer awareness on frauds, and
Creation of employee awareness,
Fraud Monitoring Cell (FMC): In compliance to the regulatory guidelines aFraud Monitoring Cell
(FMC) was established underthe administrative control of Risk Management Department since
July 2014. The Cell is engaged in classification and monitoring aspects of frauds and will inform
the Managing Director& CEO, Board, Audit Committee of Board, Special Committee of Board
the progress as per scheduled times and in classified manner.

Broadly the basic functions of the Cell are:

 Identification and classification of frauds,
 Reporting to RBI / Board and other competent authority.
 Ensuring & Monitoring of:
 Lodgement of FIR / complaint with Police or with CBI.
 Comprehensive investigation if necessary

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 Staff accountability Examination/Re-examination and disciplinary action,
 Insurance claim wherever eligible,
 Recovery of loss or write off.
 Quarterly provisioning of frauds: Provisioning of borrowal frauds is done
by Recovery Department while for Non-borrowal frauds is done by FMC.

 Complying Board I Regulatory authorities' directions or queries in case of

Fraud related matters.

 Compilation of decision taken by Committee for examining role of Third Party Entities
- Advocates, Valuers and CA's from Credit Monitoring department and submitting to RBI.

 Assessing Fraud risk Sensitivity of Branches in terms of approved guidelines.

 To assess the system lacunae or gaps and to sensitise the operational departments and
field functionaries for preventive measures.

Borrowal and Non Borrowal frauds:

Frauds in Borrowal Accounts are termed as Borrowal Frauds and Frauds which do not occur
in Borrowal accounts are termed as Non -Borrowal frauds (Frauds in SB a/c, Cheque frauds,
frauds committed by debiting nominal heads etc)

Process of Identification/Declaration of Fraud:As per RBI guidelines each Fraud is to be

reported to RBI within 21 days of detection and inordinate delay in reporting is to be dealt with
fixing staff accountability. Therefore branches andZonal Offices are to follow a time bound
approach in reporting fraud or suspected fraud as under:

Branch to report occurrence of suspected fraud/fraud within48 hours/ 2 days by Flash Report
toZonal Office and by Zonal Office to FMC department at H.O. (online), followed by FMR -1
within a weeks' time. Alongwith FMR-1, preliminary investigation report needs to be
submitted which should include among other things the following points:

 Borrowal Profile (in case of borrowal frauds)

 How and when the fraud came to light?
 Modus operandi of fraud.
 Crystallization of the exact amount of fraud.
Why it was not detected during concurrent audit/internal investigation and whether control
returns were submitted to Z.O.

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Sr.No. Particulars Timeline
1 Report occurrence of suspected fraud by branch Within 48 hours/ 2 days
to Zonal Office and Zonal Office to FMC,H.O Of detection.
2 FMR-1 along with preliminary investigation by Within a weeks' time of
detection
Zonal Office to H.O
3 Decision in all suspected cases and declare frauds wherever detected
a.Wherein internal investigation is required 90 days from date of detection
b.Wherein internal investigation is not 60 days from date of detection

4 required
Reporting of frauds to RBI after classification 21 days of occurrence or
5 Filing of complaint with law enforcement agencies detection
a.Below Rs. 300 lakh -where CVO approval not required
Immediately on detection of
is not required fraud.
b.Rs. 300 lakhand above -where CVOapproval is required

All suspected fraud cases other than those mentioned above to be placed to the Committee for
Identification/classification of fraud/Fraud Monitoring Group (FMG). Based on Committee decision
the cases to be reported to RBI if classified as fraud.

7.lCentral Fraud Registry: RBI as a part of dealing loan frauds has created a Central Fraud
Registry (CFR) based on the Fraud Monitoring Returns, filed by the banks and select Fls,
includingthe updates thereof. It is web -based and a centralized searchable registry containing
information pertaining to frauds involving an amount of Rs. One lakh and above reported by
all Commercial Banks which can be viewed by logging on to the CFR.

Flash Report of Fraud cases involving an amount of Rs. 500 lakh and above.
In addition to FMR, FMC department is required to furnish a flash report for fraud involving
Rs. 5Crore and above, in the form of D.O. letter/Flash report addressed to the Principal Chief
GeneralManager, Department of Banking Supervision, RBI, Central Office, Mumbai w ith a copy
to CFMC, Bengaluru, within a week of such frauds coming to the notice of the bank's Head
Office

Staff Accountability in case of delay in reporting:

FMC department should, therefore, ensure that the reporting system is suitably streamlined
so that frauds are reported without any delay. The Bank must fix staff accountability in respect
of delays in reporting fraud cases to RBI.
Branches and Zonal offices should take note of it and act promptly in case of reporting and filing
police complaint and investigation of fraud cases.
Filing of Police Complaint in Fraud cases: Complaint in all fraud cases should be filed
immediately on detection of fraud. There should be no delay in filing of the complaints with
thelast enforcement agencies as delay may result in loss of relevant "relied upon' documents,

430
non-availability of witnesses,absconding of borrowers and also the money trail getting cold in
addition to asset stripping by the fraudulent borrower.

The Bank shall report fraud cases as detailed below:

Cases to be referred to Local Police (Cases below Rs 300 lakh)
Fraud cases above Rs.10,000/- & below Rs 1,00,000/- where only staff is involved ,need to be
reported /file complaints with the local Police station by the Bank Branch concerned.

(As per Central Vigilance Commission directions dated 14th June 2017).
ii) In all other Cases of financial frauds of value Rs. 1 Iakh and above but below Rs 300 lakh,
which involve outsiders and bank staff, should be reported by the Zonal Manager concerned to
a senior officer of the State CID/Economic Offences Wing of the State concerned.

Cases to be referred to CBI (Cases Rs. 300 Iakh and above and up to Rs.2500 lakh)
 Where staff involvement is prima facie evident - CBI (Anti-Corruption Branch)
 Where staff involvement is prima facie not evident - CBI (Economic Offences Wing)

Cases to be referred to BSFC (Cases above Rs. 2500 Iakh up to Rs.5000 Iakh)
All fraud cases of value more than Rs 2500 lakh and uptoRs. 5000 lakh should be reported to
Banking Security and Fraud Cell (BSFC) of CBI of the respective centers irrespective of the
involvement of a public servant

Cases to be referred to JD-Delhi (Cases above Rs. Rs.5000 lakh):Allfraud cases of value more
than Rs 5000 Iakh should be reported with the Joint Director (Police) CBI, HQ-Delhi.

Reporting to Board:FMC shall report all frauds of Rs 1 lakh and above to the Board on quarterly
basis. Such reports should, among other things, take note of the failure on the part of the
concerned branch officials and controlling authorities, and initiate appropriate action against
the officials responsible for the fraud.

All case of fraud less than Rs 1 lakh it shall be expeditiously reported to Managing Director& CEO
and Executive Directors.
Quarterly Review of Frauds by Audit Committee of Board:
Information relating to frauds for the quarters ending June, September and December will be
placed, FMC shall place a copy of circular on modus operandi of fraud issued during the quarter
for altering Branches/Offices on specific fraud before the Audit Com mittee of the Board of
Directors during the month following the quarter to which it pertains, irrespective of whether or
not these are required to be placed before the Board / Management Committee in terms of
the Calendar of Reviews prescribed by RBI.

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Quarterly Review of Frauds by Special Committee.

There is a Special Committee for monitoring and follow up of cases of frauds involving amountsof
Rs 100 lakh and above exclusively. The Special Committee is headed by MD & CEO and othertwo
members - one member each from ACB and Board, excluding RBI nominee. Major functionsof
the Special Committee would be to monitor and review all the frauds of Rs 100 lakh and above

Annual Review of Frauds:

For an annual review of the frauds by Board of Directors, the Fraud Mon itoring Cell will place
a note before the Board of Directors for information. The reviews for the year-ended March may
beput up to the Board before the end of the next quarter i.e. quarter ended June 30'th.Such
Reviews need not be sent to RBI but may be preserved for verification by the Reserve Bank's
inspecting officers
Closure of Frauds
FMC cell will report to the Central Fraud Monitoring Cell, RBI and the Senior Supervisory
Manager (SSM), the details of fraud cases. ofRs 1 lakh and above closed along with reasons for
the closure after completing the process as given below:
FMC cell will report only such cases as closed where the actions as stated below are complete
and prior approval is obtained from the respective Senior Supervisory Manager (SSM).

i. The fraud cases pending with CBI/Police/Court are finally disposed of.
ii. The examination of staff accountability has been completed
iii. The amount of fraud has been recovered or written off.
iv. Insurance claim wherever applicable has been settled.
The bank has reviewed the systems and procedures, identified as the causative factors and
plugged the lacunae and the fact of which has been certified by the appropriate authority
(Board / Audit Committee of the Board)

Reimbursement to the customer 1 paying bank.

If there is a claim from a customer or Bank that has been defrauded due to fraud, a thorough
investigation may be carried out to establish that:
(a) There has been a forgery.
(b) The loss has occurred due to the forgery only
(c) There is no contributory negligence on the part of the claimant.
(d) The claimant has filed police complaint.

PREVENTIVE VIGILANCE
Fraud Risk management policy has been put in place by bank to deal with the frauds/ suspected
frauds. Various guidelines are provided as follows:-
Early Warning signals:- Tracking of early warning signals should be done as credit monitoring
process, any trigger in this behalf should be seen as a possible credit impairment.

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1. In respect of large accounts detailed study of the annual report as a whole should be
undertaken including financial statements. This should include Directors Report, auditors Report,
Report on Corporate Governance, Management Discussion & analysis statement. Notes on
accounts. Officer monitoring this type of accounts should report EWS.
2. Credit monitoring should be effective and involve following ckecks/investigations during
the different stages of the loan life cycle.
3. Presanction stage: - KYC of Borrower & Guarantor, Visit To place of borrower. Collecting
market intelligence & Independent Information on the potential borrower from the public domain
on their track record. Involvement in legal disputes, raids conducted on these businesses if any,
strictures passed against them by Government agencies.
DISBURSEMNT CHECKS:- should focus on
1. Adherence to terms and conditions of sanction& rational for allowing dilution if any in
terms and conditions. Some terms & conditions are core and should not be diluted.
2. Branches to report such dilutions to sanctioning authority, also concurrent auditors to
report specifically in their report. Credit monitoring will flag the non adherence of core
stipulations to the sanctioning authority immediately.
3. At the time of annual Review, following care should be taken
Analyze transactions in account to know diversion of funds. Verify adequacy of stock and compare
stock statements. Verify stress in group account. Branches should refer Central fraud Registry and
Fraud Monitoring cell at HO.
IMPORTANT EARLY WARNING SIGNALS:-
A) Default in undisputed payment to the statutory bodies as declared in the annual Report.
B) Bouncing of High value checks.
C) Frequent change in scope of project to be undertaken by borrower.
D) Foreign bills remaining outstanding with the bank for a long time & tendency of bills to
remain overdue.
E) Delay in payment of outstanding dues.
F) Frequent invocation of BG & devolvement of LC.
G) Under insured Or over insured inventory.
H) Invoices devoid of Tan & GST details.
I) Disputed title of collateral security.
J) Funds coming from other banks to liquidate the outstanding loan amount unless in normal
course.
K) In merchanting trade, import leg not revealed to bank.
L) Request by borrower to postpone verification on flimsy ground.
M) Funding of interest by sanctioning another facilities.
N) Exclusive collateral charged to number of creditors without obtaining NOC.
O) Concealment of vital documents like Master agreement.
P) Floating front / associate companies by borrowing money.
Q) Critical issue highlightened in stock audit report.
R) Liabilities appearing in annual search report not reported by borrower in annual report.
S) Frequent request for general purpose loan.

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T) Frequent adhoc sanctions.
U) Not routing of sales proceeds through consortium/ member bank to the company.
V) LCs issued for local trade/ related party transactions without underlying trade transactions.
W) High value RTGS payment to unrelated parties.
X) High cash withdrawal in loan accounts.
Y) Non production of original bills for verification upon request.
FINANCIAL RELATED SIGNALS:-
1. Significant movement in inventory disproportionately differing vis a vis change in the
turnover.
2. Significant movement in receivables disproportionately/ differing vis a vis change in the
turnover &/or increase in aging of receivables.
3. Disproportionate change in other current assets.
4. Significant increase in working capital turnover as compared to account turnover.
5. Increase in fixed assets without corresponding increase in long term sources.
6. Increase in borrowing despite huge cash & cash equivalents found in borrower balance
sheet.
7. Frequent changes in accounting period & policies.
8. Wide variation in costing of projects.
9. Claims not acknowledged as debts high.
10. Substantial increase in unbilled revenue, year over year.
11. Large number of transactions with interrelated companies and large outstanding from
them.
12. Substantial related party’s transactions.
13. Material discrepancies in the annual report.
14. Significant inconsistencies with annual report.
15. Poor disclosure of material adverse information and no qualification by statutory auditory.
EXTERNAL FACTORS:-
1. Raid by Income Tax/ Sales Tax/Excise.
2. Significant reduction in stake of promoter/ Director, increase in encumbered shares of promoter
/ Directors.
3. Resignation of key personnel & frequent changes in the management.
Area of Fraud & preventive Measures are as follows:-
1. Fake KYC documents
Preventive Measures:- Xerox copies be verified from originals and officer should put remark as
verified from originals. Obtain latest photograph of customer and verify personally. Certified copy
of passport be obtained in case of advance is above Rs.50.00crores. Duly registered partnership deed
and registered firm with registrar of firms be obtained. Thanks letter be sent to depositor and
introducer for verification of genuineness of address of depositor.
2. Submission of Fake/ forged documents

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Credit proposal should be received from applicant borrower only & should be delivered by the
officials/ promoter/ executive of company.CA/ professional should have mandate from applicant
and direct dialogue with applicant is must. Any clarification should be obtained from borrower only.
GST return is authentic source and must be verified. Financials of company be verified from portal
of MCA21, Stock exchanges, various taxation authorities at the time of processing proposal.
Independent confirmation from Chartered accountant of firm regarding thee financials provided.
Actual transactions in branch be compared with financials in case of Unaudited statements are
submitted. RBI Defaulter list, CIC’s, ECGC specific approval list and Central Fraud Registry be verified.
Verify records on CRILC of RBI.Seeking of report from Central Economic Intelligence bureau at
presanction stage for exposure above Rs.10.00crore. Income tax return should be verified from bank
statement, details in account should be studied. Sales/ gross income should broadly match with the
turnover with some allowance for cash transactions.
3. Agriculture/ Farmers Defrauded bank by submitting fake/ fabricated land records, Fake/
fabricated valuations, fake mutation records, fake no dues certificates. In many cases multiple
finance was given by bank on same piece of agriculture land. The panel advocate has given clear title
search reports in some cases.
Confirm and verify that the ownership of land is as per 7/12 extract and mutation entries are
recorded in 6 D extract. Obtain copies of extract for confirming land holding. Verify receipt of
payment of land revenue with receipt of talathi. Verify the title of the land by panel advocate for
loan above Rs.1.00 lakh. Presanction visit to land of farmer to verify the land holding given in
application.
4. Cheating & forgery/ Fake Title deeds in Mortgage Loan.
Branch should obtain certified copy of title deeds through empanelled advocate from the registrar’s
office duly verified by the Advocate with the original submitted by the applicant borrower to ensure
genuineness of the document. Also they should be verified with e Registration wherever possible.
Branch should obtain copies of title deeds and documents provided to the advocate duly signed by
him confirming that he has undertaken document verification based on such copies. Search Report
7 title certificate should be accompanied with search receipt clearly showing the payment of
requisite fee for search carried out by the panel advocate. In case of mortgage of properties all the
ownership title documents as per chain of transfer be obtained and perused by branch official at the
time of accepting loan application.
5. Wrong/erroneous Third Party entities Reports.
Valuer should submit directly to branch. Counterchecking be done by using market information
source. Ready reckoners and newspapers reports be verified. There should be no undue reliance on
certificate given by TPE’s like advocates/ valuers as regards valuation certificate. An assessment of
correctness of the same be made at the time of personal visit.
6. Quotations from unauthorized dealers or suppliers/ vendors who are not dealing in the line
of business.
Due diligence in respect of suppliers/dealers/vendors be done. Credentials/ genuineness capability
to supply machinery be verified through document and personal visits. In case of specific high value
machinery, visit godown of supplier and verify readiness of machinery.
7. Frauds in Housing loans/ Loans for commercial real estate/ Loan against property.
Following documents should be obtained.

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 Registered agreement for purchase of property, receipts of payment already made, search& title
report from panel advocate, copy of sanction plan building approved plan, construction permission
from competent authority, NA permission. Also paid receipt for latest maintenance, water tax,
municipal tax. NOC from builder and NOC from society for Mortgage and non-encumbrance
certificate.
8. Vehicle Loan frauds.
In addition to regular KYC documents, following documents should be kept on record.
Proof of disbursement directly made to the dealer, Office copy of banks letter to dealer giving details
of payment made and details of loan granted. Receipt, Invoice and delivery chalans. Latest
registration details of vehicle including name and address of owner charges of hypothecation,
payment of tax, expiry of registration etc. Blank TTO forms/RC book with banks charge noted with
RTO. Post sanction visit report.
9. Frauds in education Loan.
Obtain proof of payment made to college and purchase of books, computer etc.
10. Obtaining LIC policy & NSC as security.
Verify the LIC policy and NSC certificate for genuineness, Obtain surrender value of policy from LIC
office by sending staff member from our bank. Create our charge on NSC certificates by lien marking
to be done by postmaster from which post office the NSC is issued.
11. False letter of Credit submitted.
Confirmation to be called for from issuing bank, verify LC for any onerous clause. Issuance of LC/
receipt of LC favoring our customer shall be through SFMS only.
12. Frauds in Export finance.
The genuineness of export bill should be checked through portal ICEGATE, before discounting
relevant bills. Verify that borrower is not in specific approval list of ECGC if so prior permission is
required.
Export order should not be pertaining to banned commodities, countries. End use of packing credit
should be monitored.
13. Fake Bank Guarantee
Issuing branch to send a copy of BG to the beneficiary requesting him to check up the terms and
conditions of BG. BG be issued only through SFMS.
14. Opening of accounts by professionals on behalf of their clients.
Compliance of KYC & due diligence be followed, personal interaction be done with clients.
15. Siphoning of funds by opening accounts in name of reputed builder/dealer/supplier.
Instruments of payment be directly delivered to the dealer/ builder etc. If payment made by RTGS,
then ownership details of the account should be ascertained from the bank where the account is
maintained. Letter of terms and conditions be delivered to supplier and acknowledged to bind him.
Invoices of machinery/ insurance policy cover note be obtained earlier to avoid redelivery of
vehicle/ machinery. Post sanction visit be made and report be prepared.
16. Fraudulent removal of pledged stock/ disposing of hypothecated stock without knowledge
of bank.
Direct disbursement to supplier and immediate verification of assets. Surprise visit be made after
some period. Sanctioning authority is empowered to accept or reject disproportionate increase in
sundry creditors & take decision to renew or not accordingly. Opinion reporton suppliers should be

436
taken from experts. SRA audit should be done for Limit above Rs.50.00lakh for externally not rated
borrowers.
17. Diversion of funds/ not depositing the sale proceeds in the account.
Transactions in Cash Credit account be checked regularly, they should commensurate with the sales
of the borrower unit. All transactions be routed through our Cash Credit account only. Transactions
in current account and with other bank be stopped by informing that bank. It should be ensured that
assets are created for the purpose for which loan is sanctioned & funds are not diverted elsewhere,
this monitoring should be done continuously. Disproportionate blocking of funds in receivables and
not routing transactions is not allowed. In respect of standalone term loans, operating account
details be obtained and ECS mandate be taken for repayment of loan from that account.
In respect of consortium accounts information about other bankers, leader of consortium, our %
share, date of latest meeting, outcome/ minutes of such meeting etc should be readily available with
the bank officials.
18. Gold/ Jewels Offered as security
Licensed assessors certificate must be obtained regarding Purity of ornament/ gold jewelry,
Correctness of weight of gold/ornaments/jewelry., assessing the market value of security offered as
gold/jewelry.

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 DECEASED CLAIM

1) Guidance to the customers on advantages of nomination facility /

Survivorship mandate:

a) Nomination facility

 Nomination Facility — an ideal tool to mitigate hardships of common persons in settlement

of claims in the event of death of the account holder.
 Nomination facility simplifies the procedure for settlement of claims of deceased depositors as
banks get a valid discharge by making payment of the balance outstanding in a depositor's account at the
time of his death or delivering contents of locker or articles kept in safe custody to the nominee on
identification of nominee and against receipt.
 Nomination is optional for bank customers. It is therefore necessary that nomination facility is
popularized and customers are made aware of its advantages while opening a deposit account or opting for
the lockers.
 Branches should inform account holder about the availability of nomination as a voluntary
facility and recommend his/her availing the option. Nomination facility, if availed, would ensure smooth
settlement of claim to the nominee.
 It should also be made clear to the depositor(s) that nomination is introduced solely for the purpose
of simplifying the procedure for settlement of claims of deceased depositors and nomination facility does not
take away the rights of legal heirs on the estate of the deceased. The nominee would be receiving the stock
(amount) from the bank as a trustee of the legal heirs.
 Payment by the bank in accordance with the provisions of the Act shall constitute a full discharge to
the bank of its liability in respect of the deposit.

b) Survivorship

A joint account opened as "Either or Survivor" or "Anyone orSurvivors" or "Former or Survivor" or

"Latter or Survivor" will permit the surviving account holder(s) to have unimpeded access to credit
balance in the account for withdrawal if one of the co-account holders dies.

 If the mandate of survivorship is given / provided, the survivor(s) can give a valid discharge to
the bank in the case of "Either or Survivor" / "Anyone or Survivors" and "Former or Survivor" / "Latter or
Survivor" joint accounts.
 In short, payment to survivor(s) can be made in the normal course subject to the only rider that
there is no order from a competent court restraining the bank from making such payment.

c) Customer Guidance and Publicity

IBA's Model Operational Procedure (MOP) for settlement of claims of deceased depositors has been
suggested with a view to removing hardships faced by common persons in settlement of claims in
respect of the accounts of the deceased depositors. This document also aims at creating greater
awareness amongst depositors about the advantages of availing "nomination" facility offered by bank
or giving mandates for survivorship like "Either or Survivor" etc. when accounts are opened in joint names.

438
Branches should provide guidance to deposit account holders/ locker-hirers/ depositors of safe custody
articles on the advantages of the nomination facility and the survivorship clause and induce them to avail these
facilities. It should also be clarified to the joint account holders that, in the event of the death of one of the
joint account holders, the right to the deposit proceeds does not automatically devolve on the surviving joint
deposit account holder/s, unless there is a survivorship clause.

2) Settlement of claims in various types of accounts:

A) Single Account with or without nomination

i) Savings Account / Current Account with Nomination:

The balance outstanding will be paid to the nominee on verification of his/her identity (such as
Election ID Card, PAN Card, Passport, Aadhar Card etc.) and proof of death of depositor & against
receipt.

Without Nomination:

The balance outstanding will be paid to the legal heirs (or any one of them as mandated by all of the
legal heirs) on verification of the authority of the legal heirs and proof of death of depositor & against
receipt.

ii) Term Deposit Account With Nomination:

The balance outstanding will be paid to the nominee on verification of his/her identity (such as
Election ID Card, PAN Card, Passport, Aadhar Card etc.) and proof of death of depositor on maturity
of deposit & against receipt.
Without Nomination:

The balance outstanding will be paid to the legal heirs (or any one of them as mandated by all the
legal heirs) on verification of the authority of the legal heirs and proof of death of depositor on
maturity of deposit & against receipt.

iii) Premature termination of Term Deposit Account with Nomination:

Premature termination of term deposit account as per terms of contract will be permitted at the
request of the nominee on verification of his/her identity (such as Election ID Card, PAN Card, Passport,
Aadhar Card etc.) and proof of death of depositor.

Without Nomination:

Premature termination will be permitted on joint request by all legal heirs (or any of them as mandated
by all the legal heirs) as per the terms of the contract on verification of the authority of the legal
heirs and proof of death of depositor.

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B) Joint Account with or without nomination or without survivorship mandate
(operated jointly)

i) Joint Savings Account / Joint Current Account with Nomination:

a) In the event of death of one (or more but not all) of the joint account holders, the balance
outstanding will be paid jointly to survivor(s) and the legal heirs against their joint claim on verification
of the authority of the legal heirs and proof of the death of the depositor and against receipt.
b) In the event of death of both / all joint account holders, the balance outstanding at the time of death of
the depositors will be paid to the nominee on verification of his/her identity (such as Election ID Card, PAN
card, Passport, Aadhar Card etc.) and proof of death of depositors & against receipt.

Without Nomination:
a) In the event of death of one (or more but not all) of the joint account holders, the amount
outstanding will be paid jointly to survivor(s) and the legal heirs of the deceased account holder(s) (or any
one of them as mandated by all the legal heirs) against their joint claim on verification of the authority of
legal heirs and proof of death of depositor on maturity of the deposit.
b) In the event of death of both/ all joint account holders, the balance outstanding will be paid jointly
to the legal heir(s) of all the deceased depositors (or any of them as mandated by all the legal heirs) on
verification of authority of the legal heirs and proof of death of the depositors on maturity of the deposit.

ii) Joint Term Deposit Account With Nomination:

a) In the event of death of one (or more but not all) of the joint account holders, the balance
outstanding will be paid jointly to survivor(s) and the legal heirs of the deceased joint account holder(s) (or
any one of them as mandated by all the legal heirs) on verification of identity of the legal heirs and proof
of death of the depositor on maturity of the deposit.
b) In the event of death of both / all the joint account holders, the balance outstanding at the time
of death of the depositors will be paid to the nominee on verification of his/her identity (such as Election ID
Card, PAN Card, Passport, Aadhar Card etc.) and the proof of death of depositors on maturity of the
deposit.

Without Nomination:
a) In the event of death of one (or more but not all) of the joint account holders, the balance
outstanding will be paid jointly to the survivor(s) and the legal heir(s) of the deceased joint account holders
(or any of them as mandated by all the legal heirs) against their joint claim on verification of authority of
the legal heirs and proof of death of the depositor on maturity of the deposit,
b) In the event of death of
both / all the joint account holders, the balance outstanding will be paid jointly to the legal heirs of all the
deceased depositors (or any one of them as mandated by all legal heirs) on verification of authority of the
legal heirs and proof of death of depositors on the maturity of the deposit.

iii) Premature termination of Joint Term Deposit Account with Nomination:

a) In the event of death of one (or more but not all) of the joint account holders, premature termination will be
permitted against joint request of the survivor(s) and the legal heir(s) (or any one of them as mandated by
all legal heirs) as per the terms of contract on verification of identity of the legal heirs and proof of death
of depositor.
In the event of death of both / all the joint account holders, premature termination of term

440
 b) deposit account as per the terms of contract will be permitted at the request of the
nominee on verification of his/her identity (such as Election ID Card, PAN Card, Passport, Aadhar Card
etc.) and proof of the death of the depositors.

Without Nomination:
a) In the event of death of one (or more but not all) of the joint account holders, premature termination
will be permitted against joint request by the survivor(s) and the legal heir(s) of all the deceased
depositors (or any one of them as mandated by all legal heirs) as per the terms of contract on
verification of authority of legal heirs and proof of death of depositor.
b) In the event of death of both / all the joint account holders, premature termination will be permitted
against joint request by all legal heirs of the deceased depositors (or any one of them as mandated by
all legal heirs) as per the terms of contract on verification of authority of legal heirs and proof of death
of depositors.

C) Joint account with mandate "Either or Survivor"/"Former or survivor/ "Anyone

or Survivors"/ "Latter or Survivor" - with or without nomination:

i) Joint Savings Account / Joint Current Account with Nomination:

a) In the event of death of one (or more but not all) of the depositors, the balance
outstanding will be paid to survivor(s) on verification of proof of death of the depositor.
b) In the event of death of both/all the joint depositors, the balance outstanding will be paid to
the nominee on verification of his/her identity (such as Election ID Card, PAN Card, Passport, Aadhar Card
etc.) and proof of death of depositors.

Without Nomination:
a) In the event of death of one (or more but not all) of the depositors, the balance
outstanding will be paid to survivor(s) on verification of proof of death of the depositor.
b) In the event of death of both/all the joint depositors, the balance outstanding will be paid jointly
to the legal heirs (or any one of them as mandated by all the legal heirs) on verification of authority of
legal heirs and proof of death of depositors.

ii) Joint Term Deposit Account with Nomination:

a) In the event of death of one (or more but not all) of the depositors, the balance
outstanding will be paid to survivor(s) on verification of proof of death of the depositors on
maturity of deposit or as agreed at the time of opening of deposit.
b) In the event of death of all joint depositors, the balance outstanding will be paid to the
nominee on verification of his/her identity (such as Election ID Card, PAN Card, Passport,
Aadhar Card etc.) and proof of death of depositors on maturity of deposit or as agreed at the
time of opening of deposit.

Without Nomination:
a) In the event of death of one of the depositors (or more, but not all), the balance
outstanding will be paid to the survivor(s) on verification of proof of death of the depositor on
maturity of deposit or as agreed at the time of opening of deposit.
b) In the event of death of all joint depositors, the balance outstanding will be paid to the legal
heir(s) of all the deceased depositors (or any one of them as mandated by all the legal heirs of joint

441
holders) on verification of authority of legal heirs and proof of death of depositors on maturity of
deposit.

iii) Premature termination of Joint Term Deposit Account with Nomination:

a) In the event of death of one (or more but not ail) of the depositors, the survivor(s) will have
the right to seek premature termination of term deposit account as per the terms of contract and
submission of proof of death of the depositor.
b) In the event of death of all the joint depositors, the nominee will have right to seek
premature termination of term deposit account as per the terms of the contract and on submission
of his/her identity (such as Election ID Card, PAN Card, passport, Aadhar Card etc.) and proof of
death of depositors.

Without Nomination
a) In the event of death of one (or more but not all) of the depositors premature termination will
be allowed against request from surviving depositor(s) as per the terms of the contract on
verification of the proof of the death of the depositor.
b) In the event of death of all joint depositors, premature termination will be permitted against
joint request by all legal heirs of the deceased depositors (or any one of them as mandated by all the
legal heirs) as per the terms of contract on verification of authority of legal heirs and proof of death
of depositors.

D) S e t t l e m e n t o f c l a i m s i n r e s p e c t o f S a f e D e p o s i t L o c k e r s / S a f e
Custody Articles

a) Safe Deposit Locker in single name with or without nomination

With Nomination:
The nominee will be allowed to access the locker and remove the contents on identification (such as Election
ID Card, PAN Card, Passport, Aadhar Card etc.) and verification of proof of death of locker hirer. Before
permitting the nominee to remove contents of the Safe Deposit Locker, the branch should prepare an
inventory of the articles in the presence of nominee(s) and two independent witnesses.

Without Nomination:
Legal heir(s) of the deceased locker hirer or a person mandated by the legal heir(s) will be allowed to access
the locker and remove the contents on verification of proof of death of locker hirer. The legal heir(s) will have
to produce documents to establish his / their identity. Before permitting legal heir(s) to remove contents of
the Safe Deposit Locker the branch should prepare an inventory of the articles in the presence of legal
heir(s)/mandate holder and two independent witnesses.

b) Safe Custody Article/s in single name with or without nomination

With Nomination:
Safe custody article's will be delivered to the nominee on identification (such as Election ID Card, PAN Card,
Passport, Aadhar Card etc.) and verification of proof of death of depositor. Before permitting nominee to
remove contents of the Safe Deposit Locker, the bank should prepare an inventory of the articles in the
presence of nominee and two independent witnesses.

442
Without Nomination:
Safe custody article/s will be delivered to the legal heir(s) or a person mandated by the legal heir(s) on
establishing his / their identification and verification of proof of death of the depositor. Before permitting
legal heir(s) to remove contents of a Safe Custody Articles the bank would prepare an inventory of the articles
in the presence of legal heir,(s) /mandate holder and two independent witnesses.

c) Joint Safe Deposit Lockers with or without nomination or without survivorship

mandate (operated jointly) with Nomination:

i) In the event of the death of one (or more but not all) of the joint locker hirers the nominee(s) will be
jointly allowed to access the locker and remove the contents on identification and verification of proof of
death of the locker hirer(s) along with the surviving hirer(s).

ii) In the event of death of both / all joint locker hirers the nominee(s) will be allowed to access Iche locker and
remove the contents on establishing his/her/their identity and verification of proof of the death of the hirers.

Before permitting surviving hirer(s) and/or nominee(s) to remove contents of the Safe Deposit Locker,
the bank would prepare an inventory of the articles in their presence along with two independent
witnesses.

Without Nomination:
i) In the event of death of one or more but not all) of the locker hirers, the surviving hirer(s) and legal heirs
of the deceased hirer (or a person mandated by them) would be allowed to access the locker and remove
the contents on verification of authority of legal heirs and proof of death of the hirer.
ii) In the event of death of both / all the joint locker hirers, all the legal heirs (or any one of them as mandated by
all legal heirs) would be allowed to access the locker and remove the contents on verification of authority of
legal heirs and proof of death of the locker hirers.

Before permitting surviving hirers and mandated legal heir(s) to remove contents of a Safe Deposit Locker, the
bank would prepare an inventory of the articles in the presence of surviving hirers, mandated legal heir(s)
and two independent witnesses.

d) Joint Safe Custody Articles with or without nomination or without survivorship mandate
(operated jointly)
Generally, safe custody articles are not accepted in joint names. Even if accepted in joint names, nomination
facility is not provided.

e) Joint Safe Deposit Lockers with mandate "Either or survivor"/"Former or survivor"/

"Anyone or Survivors"/ "Latter or Survivor" - with or without nomination
With Nomination:
At present B R Act (Section 45 ZE) does not provide nomination facility in respect of lockers with "Either or
Survivor" / "Former or Survivor"/"Anyone or Survivors"! "Latter or Survivor" mandate. Hence operational
instructions are not given in this regard.

Without Nomination:
In the event of death of one (or more but not all) of the joint hirers, the surviving hirer(s) will be allowed to access
the locker and remove the contents on verification of proof of death of the joint hirer(s).

443
In the event of death of all the locker hirers, all the legal heirs of the deceased joint hirers (or any one of
them as mandated by all legal heirs) would be allowed to access the locker and remove the contents on
verification of the authority of legal heirs and proof of death of the locker hirers.

Before permitting the surviving hirers/legal heir(s) to remove contents of a Safe Deposit Locker, the bank
would prepare an inventory of the articles in the presence of surviving hirers/legal heirs and two independent
witnesses.

f) Joint Safe Custody Article/s with mandate "Either or Survivor"/"Former or survivor/

"Anyone or Survivors"/ "Latter or Survivor" - with or without nomination:
Generally safe custody articles are not accepted in joint names. Even if accepted in joint names
nomination facility is not provided.

g) Safe Deposit Locker - Procedure in case there is no Nomination / Survivorship clause:

1. It should be noted that Succession Certificate does not entitle the holder to receive the contents of
the locker such as cash, ornaments, jewellery etc. Only shares, securities, Insurance Policies kept in the
locker can be delivered if so mentioned in the succession certificate. Therefore, without taking the
inventory of the contents of the lockers and without knowing what the contents really are, branch
should not ask the claimant(s) / legal heir (s) to obtain Succession Certificate form the court. Obtaining
legal representation from the court involves cost as well as time. Calling for wrong type of legal
representation puts the the claimant(s) / legal heir(s), to hardship / inconvenience, unnecessarily, and
also invites complaints against the bank. Branches must therefore exercise due care in this regard.

2. The value of the contents of the Locker should be added to the amount of other deposits for the
purpose of sanctioning of the deceased claim, and the consolidated claim should be considered by the
appropriate authority to whom sanctioning powers are delegated as per the value of the of claim. For
the purpose, valuation of the articles in the locker such as cash, ornaments, jewellery etc. shall be got
done (at the time of Inventory) through shroff / goldsmith on the panel of the Bank.

3. In case wherein the claim is entitled to be settled without production of legal representation
(as per the bank's policy), heirs of the deceased renter may be allowed to have access to the locker and
withdraw the contents against indemnity & two sureties acceptable to the bank. Guidelines as applicable for
settlement of claims in respect of deposit accounts without legal representation shall apply in such cases
also.

Following procedure in respect of Safe Deposit Locker without

Nomination/Survivorship clause should be followed

1. On receipt of notice of death of a sole renter or of the last survivor of the joint renters, the locker
should be sealed with the Bank's seal and a note to this effect should be made in the all respective
records.
2. Death certificate of the locker holder issued by the competent authority should be obtained and
held on record.
3. Identity of the claimant/s, survivors / legal heirs should be established by obtaining appropriate
documentary evidence.

444
4. Branches should make diligent effort to find out if there is any order from a competent court
restraining the bank from giving access to the locker of the deceased.
5. On production of satisfactory evidence, legal representative(s) of the deceased should be
permitted to inspect the contents of the locker to enable him/ her to lodge the claim or to obtain the
necessary legal representation).
6. The claimant(s) / heir(s) of the deceased renter should furnish necessary particulars in the claim
format, which is ordinarily obtained in deposit accounts.
7. A letter should be taken from all the heirs requesting the Bank to open the locker for the
purpose of inventory.
8. The branch should then fix up a date and time for making an inventory and accordingly an
inventory may be taken in the presence of all the heirs/ their duly constituted attorney/ies, two
respectable witnesses known to the branch (should not be employees or ex-employees of the Bank),
the valuer, the Safe Deposit Vault Custodian and another officer. The inventory should be prepared
in the prescribed inventory record form under the signatures of all the persons stated above.
9. Sealed/closed packets found in locker are not required to be opened while taking the inventory
(and also while releasing them to the claimant(s) / nominee(s) / surviving hirer(s) etc.) Description of the
sealed/closed packet(s) should however be mentioned in the inventory.
10. Where an inventory is to be taken in terms of a court order, it should be done in the presence of
(i) the Court's Representative, (ii) the claimant/s to the contents of the locker held by the deceased
renter, (iii) the valuer (iv) the Safe Deposit Vault Custodian and another officer. The inventory should
enumerate the contents of locker and it should be signed by those persons in whose presence the
locker has been opened. The valuer's assessment of the value of each item of the inventory should
be in triplicate, one copy to the Court, the second to the claimant and the third to be retained on branch
record.
11. After making an inventory, care should be taken to redeposit all the contents in the said
locker and to seal the locker.
12. The claimant(s) should be advised to obtain legal representation such as Letter of
administration/Probate from the Competent Court and produce the same to the bank to claim the
contents. This is applicable in respects of claims required to be settled against legal
representation as per the policy of the bank.
13. The claim papers along with inventory, valuation etc. should be submitted to the
sanctioning authority for decision, as per usual procedure..
14. On receipt of sanction of the appropriate authority or on production of legal
representation, the Legal Representative(s) of the deceased should be allowed to remove the
contents from the locker after complying with the terms of sanction, signing an indemnity,
acknowledgement of receipt of articles and a letter of surrender together with the key.
15. After removal of the contents from the locker, the claimant/s may still keep them with the branch, if
they so desire, by entering into a fresh contract of hiring a locker.

E)HUF Accounts — Death of Karta

In the event of death of a Karta, HUF account may be settled as under:

a) HUF continued with new karta: obtaining affidavit cum indemnity from surviving members of
HUF and legal heirs-with two guarantors confirming their acceptance to one of the members as a new
Karta. New Karta shall be allowed to continue to operate the existing account on the basis of such
documents.

445
b) HUF cease to exist: similar procedure should be followed in cases where account is to be
closed and balance in the account to be paid to the new Karta.

HUF is a separate legal entity with perpetual succession. Therefore, for settlement of the claims for
HUF accounts in the event of death of a Karta, no legal representation in the form of Succession Certificate
etc. is required.
F) SURETIES

Bank insists for sureties for settlement of claim which is not supported by legal representation
in respect of deceased depositors for claim above Rs. 1 lakh & in respect of missing depositors for claim
above 0.50 Lakh.

Creditworthiness of the sureties play very vital role in deciding settlement of such claims. Normally, two
sureties having aggregate net worth twice the amount of the claim should be obtained. The sureties should
furnish their detailed information in the prescribed form, along with the supporting papers in proof of
the information provided. Any additional details/ information/ documents are required by the bank
for verification / confirmation of the net worth of the sureties, they should be called for. Sureties, who are
the relatives of the deceased, may be accepted, provided they are not directly involved as claimants
and are considered individually or jointly good for the amount involved. If one surety is considered good
for the amount by the Bank, second surety is not necessary. The sureties have to sign the Letter of
Indemnity.

3) SETTLEMENT OF CLAIMS IN RESPECT OF MISSING PERSON:

A)Legal Position:
The settlement of claims in respect of missing persons would be governed by the provisions of Section
107/108 of the Indian Evidence Act, 1872. Section 107 deals with presumption of continuance and section
108 deals with presumption of death. As per the provisions of Section 108 of the said Act, presumption
of death can be raised only after a lapse of seven years from the date of his/her being reported missing.
As such, nominee/legal heirs have to raise an express presumption of death of the subscriber under Section
107/108 of the Indian Evidence Act before a competent court. If the court presumes that he/she is
dead, then the claim in respect of a missing person can be settled on the basis of the order from
the court.

B) Adoption of simplified procedures to avoid inconvenience and undue hardship to the

common person

Obtaining court order regarding presumption of death could prove to be costly and time consuming for
a common person. Hence the RBI has suggested that every bank should fix a threshold limit as per its risk
perception and may follow a simplified procedure for settlement of such claims up to the threshold
limit so fixed so as to avoid inconvenience and undue hardship to the common person.

446
C) Settlement of claims within threshold limits

As suggested by RBI, our bank has fixed threshold limit of Rs. 50,000/- up to which claims in respect of
missing persons could be settled without insisting on production of court order declaring the person as
presumed to be dead. Claim up to the threshold limit of Rs. 50000/- can be settled on the basis of
submission of following papers by the claimants, provided the claims are made by the spouse,
children and parents of the missing person;

For claims in respect of missing person made by claimants other than his/her spouse, children
and parents, production of court order must be insisted upon.

Also for the claims in respect of mission person above the threshold limit of Rs. 50000/-,
production of court order must be insisted upon.

Premature termination of Term Deposit Account

The rules as applicable to deceased depositor would be made applicable to missing depositor
also.

4) Simplification of the process for settlement of Claims in deceased depositors' accounts

A) Documentation

Application for deceased claim shall contain details of all deposits, SDV locker, Safe custody articles in one or
many of the branches of the Bank and shall be submitted in the branch having major portion. The total
value of the claim shall be considered for exercising delegated sanctioning powers and only one set
of documents shall be obtained. Copies of documents along with sanction should be sent to other branches
for payment and record.

Documents, which are required to be submitted along with the claim form:
i. Proof of death of depositor(s) or hirer(s)
ii. Proof of identification of nominee(s) wherever applicable such as Election ID Card, PAN Card, Passport,
Aadhar Card etc., or any other satisfactory proof of identification acceptable to the bank or proof of
authority of legal heir(s) wherever applicable.

a) Branch should exercise due care and caution in ascertaining the identity of legal heir(s) /
nominee(s) and the fact of death of the account holder, through appropriate documentary evidence.

b) Itshould be made clear to the survivor(s)/nominee(s) that he / she / they would be receiving the payment
from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him / her / them
shall not affect the right or claim which any person may have against the survivor(s)/nominee(s) to whom
the payment is made.

c) It may be noted that payment made to the survivor(s) / nominee(s), subject to the foregoing conditions,
would constitute a full discharge of the bank's liability, insistence on production of legal representation is

447
superfluous and unwarranted and it would only serve to cause avoidable inconvenience to the
survivor(s)/nominee(s). In such case, therefore, while making payment to the survivor(s)/nominee(s) of
the deceased depositor, we should not insist on production of succession certificate, letter of
administration or probate, etc., or obtain any bond of indemnity or surety from the
survivor(s)/nominee(s), irrespective of the amount standing to the credit of the deceased account
holder.

d) In case where the deceased depositor had not made any nomination or has not given any mandate of
survivorship, it has been decided to adopt a simplified procedure as given below for repayment to legal
heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship
to the common person.

e) Settlement of claims where there is no nomination or survivor clause

(i) Claim up to (and inclusive of) Rs. 1 lakh:

Claim up to (and inclusive of) Rs. 1 lakh (i.e. balance in the account/s of the deceased depositor, including
value of contents of locker) shall be settled without insisting on production of legal representation,
provided there are no disputes between legal heirs, all of them are ready to join execution of
Indemnity in, favour of the bank and there is no court order restraining the Bank from making
the payment.

Such claim up to Rs. 1 lakh shall be settled on the basis of the following papers;

1. Application for deceased claim

2. Copy of Death Certificate (original or attested)
3. Proof of identification of legal heirs such as Ration Card, Election ID Card, PAN Card, Passport or
Aadhar Card or any other satisfactory proof of identification acceptable to the bank
4. Letter of Indemnity signed by the claimant & all legal heirs
5. Receipt

(ii) Claim above Rs. 1 Iakh & up to (and inclusive of) Rs. 25 lakhs:

Claims above Rs. 1 lakh & up to (and inclusive of) Rs. 25 lakhs may be settled without production of legal
representation such as succession certificate, letters of Administration, probate of will etc. provided there
are no disputes between legal heirs, all of them are ready to join execution of Indemnity in favour of
the bank, there is no court order restraining the Bank from making the payment, and
where there are no circumstances/ information/ reason for the Bank to doubt the genuineness
of the claimant/s being the only legal heirs of the deceased depositor.

Such claim Rs. 1 Iakh & up to (and inclusive of) Rs. 25 lakhs shall be settled on the basis of the
following papers and against minimum two sureties acceptable to the bank;

1. Application for deceased claim

2. Copy of Death Certificate (original or attested)
3. Proof of identification of legal heirs & proposed sureties such as Ration Card, Election ID Card, PAN
Card or Passport, Aadhar Card or any other satisfactory proof of identification acceptable to the bank

448
4. Attested consent letter of legal heirs to pay the amount to any one or more of them — duly attested
by Gazetted Officer, Executive Magistrate or Notary
5. Affidavit from claimant
6. Letter of Indemnity signed by the claimants and all legal heirs with sureties accepted by the bank

(iii) Claim above Rs. 25 lakhs

Claim above Rs. 25 lakh (in cases where nomination or survivorship mandate is not available) shall be
settled only against legal representation such as Letter of Administration, Probate, Succession Certificate etc.

B) Time Norms for settlement of claims

Branch shall settle the claims in respect of deceased depositors and release payments to survivor (s)/
nominee in case of accounts wherein nomination or survivorship mandate is available, within a period not
exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the
depositor and suitable identification of the claimant(s) to the satisfaction of the branch.

In the case of accounts wherein nomination or survivorship mandate is not available, the claim shall be
settled within 1 month from the date on which the requisite documents have been submitted.
C) Competent authority for settlement of claims:

Keeping in view the objective of settling the claims within the stipulated time limits as above, and the risk
perception of the bank, monitory limits monetary limits for different levels of officers for settlement of
claims are revised and specified as below;

Deceased Claims — Revised Sanctioning Powers Rs. In lakhs

GM Branch Head
DGM AGM CM in Scale
Authority CMD ED AO/Z
BR/ZO/HO BR/ZO BR/ZO
O III II I

a Claims wherein survivorship mandate or nomination is available

ExistingPo - - Full Full Full Full 20 15 10
wers
b Claims supported by legal representation(such as Succession Certificate, Probate of Will,
Letter of Administration, Order of court etc.)
Existing - - Full Full Full 15 10 5 2
Powers
Claims not supported by Legal Representation and wherein survivorship mandate or
nomination is also not available
Existing Full 100 50 30 20 15 10 5 2
Powers
d Claim in respect of HUF account, in the event of death of a Karta
Existing - - Full Full Full 15 10 5 2
Powers

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In view of customer friendly deceased claim settlement, Claims not supported by Legal Representation
and wherein survivorship mandate or nomination is also not available, the condition for keeping fixed
deposit of 50% claim amount in fixed deposit by legal heirs for 3 years with no premature and no loan
facility is waived off.

In respect of claims above Rs. 25 lakhs (wherein nomination or survivorship mandate is not available),
legal representation is to be insisted. For HUF account, no legal representation is required irrespective
of the amount of claim.

Note: Under the claim in respect of a particular deceased depositor, accounts / SDVs / Safe Deposit
Articles wherein nomination or survivorship mandate is available should be segregated, and each of the
segregated accounts / SDVs / Safe Deposit Articles should be considered as a separate claim and settled
as per the nomination / survivorship mandate available for the particular account / SDV etc., within the
sanctioning powers as specified under (a) above.

Remaining accounts / SDVs / Safe Deposit Articles of the same deceased depositor wherein nomination
or survivorship mandate is not available should be clubbed together and suchclubbed amount
(inclusive of value of contents of locker) should be considered as a consolidated single claim for
settlement within the sanctioning powers as specified under (b) or (c) above (as applicable).

It is the responsibility of the branch where the claim is submitted, to check the CIF of the deceased
depositor and to confirm that no account/s is/are left out of the claim. Accounts of the same deceased
depositor I locker holder with other branches of the bank should be included under the same claim.
Branch-wise separate settlements are not to be made. Since the risk perception of the claim is for the
bank as a whole, settlement should also be for the bank as a whole. Splitting of accounts resulting in
accommodating settlement within lower scale and/or facilitating the claimant to escape from the
requirement of production of legal representation, shall be viewed very seriously.

Competent authority for settlement of claims in respect of missing persons:

For claims above Rs. 50000/- and for claims made by the claimants other than the
Spouse/Children/Parents of the missing person (irrespective of the amount of claim), production of court
order declaring the missing person as presumed to be dead, is to be insisted upon and the same sanctioning
powers as mentioned above should be exercised.

For claims NOT supported by Court Order declaring the missing person as presumed to be dead, monetary
limits for different levels of officers for settlement of claims arespecified as below;
Rs. in lakhs
Authority GM DGM AGM Branch Head in Scale
BR/ZO/HO BR/ZO/HO IV III II I
a Claims NOTsupported by Court Order declaring the missing person as presumed
to be dead
Existing 0.50 0.50 0.50 0.50 0.50 0.25 0.10
Powers

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D) Premature termination of Term Deposits Accounts and payment of interest / other issues
relating to Term Deposit Account

a) In the case of term deposits, a clause to the effect that "in the event of the death of the depositor(s), premature
termination of term deposits by the survivor(s)/ nominee/ legal heirs would be allowed" has been incorporated
in the in the account opening form itself. The conditions subject to which such premature withdrawal would
be permitted is also be specified in the account opening form. Such premature withdrawal would not
attract any penal charge.

b) Payment of interest in case of term deposit accounts of deceased depositor(s)

In case of a term deposit standing in the name/s of a deceased individual depositor, or two or more joint
depositors, where one of the depositors has died, interest shall be paid in the manner indicated below;
(i) On the maturity of the deposit:
At the contractual rate
(ii) In case of death of the depositor before the date of maturity of the deposit, and the
payment is sought after the date of maturity
At the contractual rate till the date of maturity, and from the date of maturity to the date of payment,
simple interest at applicable rate on term deposit as on the date of maturity, for the period for which
the deposit remained with the bank beyond maturity date

(iii) In case of death of the depositor before the date of maturity of the deposit, and the
payment is sought before the date of maturity (i.e. prematurity payment)
At the applicable rate on term deposit on the date of opening of the deposit to the date of payment with
reference to the period for which the deposit has remained with the bank, without charging penalty.

(iv) In case of death of the depositor after the date of maturity and the payment
is also sought subsequently
At contractual rate up to the date of maturity, and at savings bank deposit rate (simple interest on daily
product basis) operative on the date of maturity, on the maturity value of the deposit as on date of
maturity, for the period from the date of maturity till the date of payment

c) Splitting of Term Deposit: On request from the claimant/s, splitting of the amount of term deposit
may be allowed and two or more receipts individually in the names of the claimant/s may be issued.
It shall not be construed as premature withdrawal of the term deposit, provided the period and
aggregate amount of the deposit do not undergo any change.

E) Treatment of flows in the name of the deceased depositor

In order to avoid hardship to the survivor(s) / nominee of a deposit account, branches may obtain
appropriate agreement / authorization from the survivor(s) / nominee with regard to the treatment of
pipeline flows in the name of the deceased account holder. In this regard, adopting either of the following
two approaches may be considered;

The bank could be authorized by the survivor(s) / nominee of a deceased account holder to open
an account styled as Estate of Shri ________________________________________
the Deceased' where all the pipeline flows in the name of the deceased account holder could be

451
allowed to be credited, provided no withdrawals are made.

OR

The bank could be authorized by the survivor(s) / nominee to return the pipeline flows to the remitter with
the remark "Account holder deceased" and to intimate the survivor(s) / nominee accordingly. The survivor(s)
/ nominee / legal heir(s) could then approach the remitter to effect payment through a negotiable
instrument or through ECS transfer in the name of the appropriate beneficiary. Branches shall offer
both the options to the claimants & act according to the option preferred by the claimants. (This is
also included in code of Bank's commitment to customers.)

F ) C l ai ms in r esp ec t o f NRI ac c o un t ho l der s

In case of demise of NRI accountholder(s), the funds lying in their accounts may be claimed and the
claims shall be processed in the same manner as Resident account holders/depositors.

However, in case of Resident Indian account holders, where the claimant or nominee is a NRI,
question of repatriation of the funds may arise.

In such a case, the claimant/nominee should be asked to open a NRO account by submitting his/her KYC
documents such as Passport, international driving license, OCI Card, PAN Card etc. Submission of PAN
Card is a must because a Chartered Accountant will not issue Form 15 CA and CB without a PAN Card
and repatriation from NRO account is allowed only on submission of Form 15 C A and CB from a
Chartered Accountant.

In case the claimant/nominee does not have a PAN Card, he/she will have to apply for and obtain a PAN
Card. NRIs, including those who have foreign citizenship, are also entitled to apply for and obtain a PAN
Card.

The claim settlement funds can then be credited to this account from where they can be repatriated
abroad under funds received by inheritance on production of documentary evidence in support of
inheritance subject to payment of taxes as prescribed by CBDT from time to time.

G) Policy to be displayed on Web-Site

The policy document will be placed on the website of the bank

H) Redressal of complaints and grievances

Depositors having any complaint / grievance with regard to services rendered by the Bank, has a right
to approach authority/ties designated by the Bank for handling customer complaint / grievances.
The details of the internal set up for redressal of complaints / grievances will be displayed in the branch
premises. The branch officials shall redress the grievances of the Customer if any. They shall provide all
required information regarding procedure for lodging the complaint in case complainant is not satisfied

452
with their action. In case the depositor does not get response from the Regional Office within 4 weeks
from date of lodging complaint or if he is not satisfied with the response received from the Bank, he
has a right to approach banks Nodal Officer for Public Grievances, Central Office, "Lokmangal",
'1501, Shivajinagar Pune —411005 or Banking Ombudsman appointed by the Reserve Bank of India.

So me c l ar i fi c at i on s r egar d i n g Pr o visi ons i n No mi n ati o n Ru les: The Banking

Companies (Nomination) Rules, 1985 have been framed in terms of Sections 45 ZA to 45 ZF of the
Banking Regulation Act, 1949.

1.Deposit Accounts

a) Nomination facility is intended only for individuals including a sole proprietary concern.
b) There cannot be more than one nominee in respect of single / joint deposit account.
c) Variation/cancellation of a subsisting nomination by all the surviving depositor(s) acting together,
may be allowed. This is also applicable to deposits having operating instructions "Either or Survivor".
d) It may be noted that in the case of a joint deposit account the nominee's right arises only after the
death of all the depositors.
e) Nomination Rules prescribe specific formats for making nomination, variation in nomination and
cancellation of nomination.
f) Nomination does not require witnesses except where it is under thumb impression.
g) Payment to nominee should be on verification of his/her identity and against receipt.
h) With the request and consent of the depositor, the name of nominee may be mentioned on the
pass book or term deposit receipt.

2.Safe Deposit Lockers

a) Nomination facility is available in respect of lockers hired singly as well as jointly. In respect of lockers in
joint names nomination rules are applicable only if lockers are operated jointly.
b) Where the lockers are hired jointly, on the death of any of the joint hirers, the contents of the locker
are allowed to be removed only jointly by the nominee(s) and the survivor(s) after an inventory is taken in
the prescribed manner. In such a case, after such removal preceded by an inventory, the nominee and
surviving hirer(s) may still keep the entire contents with the same bank, if they so desire, by entering into a
fresh contract of hiring a locker.
c) Ba n ks a r e n o t requ ire d to o p en seale d / clo sed p acke t s f o un d in locker while
releasing them to the nominee or nominees and surviving hirers. Description of the sealed/closed
packet(s) should however be mentioned in the inventory.
d) It should be made clear to the survivor(s) / nominee(s) that access to locker / safe custody articles is given
to them only as a trustee of the legal heirs of the deceased locker hirer i.e., such access given to him shall
not affect the right or claim which any person may have against the survivor(s) / nominee(s) to whom the
access is given.
e) Section 45 ZE of the B.R Act, 1949 does not preclude a minor from being a nominee for obtaining
delivery of the contents of a locker. The responsibility of the bank in such cases is to ensure that when the
contents of a locker are sought to be removed on behalf of the minor nominee, the articles are handed over
to a person who, in law, is competent to receive the articles on behalf of the minor.

3.Safe Custody Articles

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Nomination facility is available only in the case of individual depositor / sole proprietary
concern and not in respect of persons jointly depositing articles for sate custody.

Settlement of Claims in Various types of Operational Instructions

Deposits With Nomination

Account Operational
in the Nominee Situation What is to be done by branch
Instructions
Name of
A Self Y Y dies A can change the nomination

A Self Y A dies Y will receive the outstanding

A, B Either or Survivor Y A dies Balance outstanding will be payable to B.

A, B Either or Survivor Y B dies Balance outstanding will be payable to A.

A,B Either or Survivor Y A & B dies Y will receive the outstanding

A,B Jointly Y A dies Payable to B and legal heirs of A jointly

A,B Jointly Y B dies Payable to A and legal heirs of B jointly

A,B Jointly Y A & B dies Payable to Y

Without Nomination

Account
Operational
in the Situation What is to be done by branch
Instructions
Name of
A Self A dies Outstanding will be payable to the legal heirs or any one
of them mandated by all of the legal heirs
A, B Either or Survivor A dies Outstanding will be payable to B

A,B Either or Survivor B dies Outstanding will be payable to A

A,B Either or Survivor A & B dies Jointly payable to legal heirs of A & B (or any of them
mandated by all the legal heirs)
A,B Jointly A dies Jointly payable to B and legal heirs of the A (or any one
of them mandated by all the legal heirs).
A,B Jointly B dies Jointly payable to A and legal heirs of the B (or any one
of them mandated by all the legal heirs)
A,B Jointly A & B dies Jointly payable to legal heirs of A & B (or any of them
mandated by all the legal heirs)

454
 IFRS
• An accounting standard is a guideline for financial accounting, such as how an entity
prepares and presents its business income, expenses, assets and liabilities. Specific examples
of accounting standard include revenue recognition, asset classification, allowable methods
of depreciation etc.
• Accounting standards are issued under supervision and control ofAccounting Standards
Board (ASB). ASB is a committee under ICAI which consist of representatives from Govt.
Dept, academicians, other professional bodies etc.
• Accounting standards ensures the financial statements from multiple companies are
comparable. Accounting standards make the financial statements credible and allow for
more economic decisions based on accurate and concise information.
• The International Financial Reporting Standards, usually called the IFRS
Standards, are standards issued by the IFRS Foundation and the International Accounting
Standards Board (IASB) to provide a common global language for business affairs so that
company accounts are understandable and comparable across international boundaries.
• Worldwide adoption of IFRS will be beneficial to investors and other users of financial
statements, by reducing the costs of comparing alternative investments and increasing the
quality of information.
• Adoption of IFRS mainly benefited to following companies –
1.Companies that have high levels of international activities,
2. Companies that are involved in foreign activities
Ind-AS are International Financial Reporting Standards (IFRS) converged India Accounting
Standards (Ind-AS) issued under supervision and control of ASB.
Benefits of Ind-AS Implementation
 Improved quality of financial statements
 Improved access to international markets & investors with large resources.
 Avoiding preparation of multiple sets of financial statements for different
regulators worldwide.
 Enabling benchmarking / comparisons with international peers.
 Ind-AS are International Financial Reporting Standards (IFRS) converged India
Accounting Standards (Ind-AS) issued under supervision and control of ASB.
 Improved quality of financial statements
 Improved access to international markets & investors with large resources.
 Avoiding preparation of multiple sets of financial statements for different
regulators worldwide.

455
 Enabling benchmarking / comparisons with international peers.

Implementation of IFRS
 Phase I applicable from 1 April 2016 onward to:
 Listed or unlisted companies whose net worth is greater than Rs. 500 crores,
 Holding, subsidiaries, joint ventures or associates of these companies
 Phase 2 is applicable from 1 April 2017 onward to
 Listed companies whose net worth is less than Rs. 500 crores
 Unlisted companies whose net worth more than Rs. 250 crores but less than Rs. 500 crores
 Holding, subsidiaries, joint ventures or associates of these companies
 As per the revised guidelines of RBI, the transition date is 1st April 2019 and publication of
Ind AS Balance Sheet as on 31st March 2021 with comparatives 31st March 2020.
Components of financial Statements
 Balance Sheet
 Current / non-current – in order of liquidity
 Statement of Profit and Loss
 Reconciliation of IGAAP profit to Ind-AS profit on 1sttime adoption
 Statement of Other Comprehensive Income
 Gain / loss on actuary valuation
 Fair valuation movement and gain / loss on equity recognized at FVOCI
 Statement of Changes in Equity
 Replacing existing reserve movement schedule
 Statement of Cash flows
 Notes, including accounting policies

Ind-AS 109 - Financial instruments

Financial assets
 Cash
 Equity instrument of another entity

456
 Contractual right to receive cash or another financial asset or to exchange financial
assets or financial liabilities under potentially favorable conditions
 Certain contracts settled in the entity’s own equity

Financial liability
 Contractual obligation to deliver cash or another financial asset or to exchange
instruments under potentially unfavourable conditions
 Certain contracts settled in the entity’s own equity
 Initial measurement of all financial assets is at fair value.
 Ind AS prescribes three principles for classification of Financial Assets (FAs) based
on business model adopted by an entity. Business model and measurement are as under: -
 Measured at Amortized Cost - Conditions required to be satisfied: -
 To hold financial assets in order to collect contractual cash flows.
 Contractual terms of the FAs give rise to cash flows that are solely the payment of
principal and interest.
 b. Fair value through other Comprehensive Income (FVOCI):
 To hold financial assets in order to collect contractual cash flows and sale of
financial assets
 Contractual terms of the FA give rise to cash flows that are solely the payment of
principal and interest.
c. Fair Value through Profit & Loss (FVTPL)
All financial assets shall be measured at FVTPL unless it is measured at amortised cost or
FVOCI
Financial Liabilities – Measurement
 Initial measurement of all financial liabilities is at fair value.
 All financial liabilities are classified into two categories viz. FVTPL & at amortized
cost.
 Financial liabilities measured at fair value - gain or loss shall be recognized in income
statement / profit & Loss account.
 Presently provisioning for non-performing assets (NPAs) are based on IRAC norms
issued by RBI.
 Under Ind-AS, provisioning requirements are based on “expected credit loss” (ECL)
model. Banks will have to measure actual deterioration in asset quality based on expected

457
cash flow generating capacity of the borrower and accordingly, provisioning has to be made.
The new impairment requirement provides a forward-looking framework unlike current
regime which recognize loss based only on a set of past and current information. ECL = EAD
* PD * LGD.
 For financial assets, a credit loss is the difference between:
 contractual cash flows that are due to an entity under the contract
 the cash flows that the entity expects to received, discounted at the original
effective interest rate.
Stages under Expected Credit Loss
 Stage 1 – No significant increase in credit risk at the reporting date. Overdue of
principal and interest on advances are within 30 days of past due. Bank is required to provide
for 12 months expected credit loss. (e.g. Standard Asset without stress)
 Stage 2 – Lifetime Credit Loss - Significant increase in credit risks, due to
deterioration in credit quality but not yet at impaired stage. 30 to 60 days past due advances
are covered under this stage. Impairment loss recognition will be based on lifetime ECL. (e.g.
Standard Asset under stress)
 Stage 3 - Credit impaired - 90 days past due advances are covered under this stage.
Impairment loss recognition will be based on lifetime ECL.
 However, under Ind AS, it is left to the individual bank to classify an asset as Non
Performing based on deterioration in credit quality, expected cash flow generating capacity
as per the policy of individual banks.
 Stage 1 – No significant increase in credit risk at the reporting date. Overdue of
principal and interest on advances are within 30 days of past due. Bank is required to provide
for 12 months expected credit loss. (e.g. Standard Asset without stress)
 Stage 2 – Lifetime Credit Loss - Significant increase in credit risks, due to
deterioration in credit quality but not yet at impaired stage. 30 to 60 days past due advances
are covered under this stage. Impairment loss recognition will be based on lifetime ECL. (e.g.
Standard Asset under stress)
 Stage 3 - Credit impaired - 90 days past due advances are covered under this stage.
Impairment loss recognition will be based on lifetime ECL.
 However, under Ind AS, it is left to the individual bank to classify an asset as Non
Performing based on deterioration in credit quality, expected cash flow generating capacity
as per the policy of individual banks.
Fair Value Measurement (Ind AS 113)
 Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date,
under current market conditions

458
 Fair value is a market based measurement, not entity specific measurement;
 It is an exit price at the measurement date from the perspective of a market
participant, under current market conditions. In words, exit price at arm’s length
transaction;
 Impact of Fair Valuation:
 Fair valuation of financial assets & financial liabilities will give rise to gain or loss
and therefore an entity will have to account for the gain or loss, as per the requirement of
the Standard, at the time of transition to Ind AS and also at the time of recognition of
financial asset & liability.

Key differences - Property, Plant & Equipment

Standard Ind-AS Provision IGAAP Provision

Applicability Not applicable to entities
having net worth less than Rs.
250 crores
Prior period Standard requires that change
item / errors in accounting policy should be
accounted for with
retrospective effect subject to
the situation where it is
impracticable to determine
period specific effects or
cumulative effect of applying a
new accounting policy.
Definition Tangible items are held for use
in the production or supply of
goods or services, or for rental
to other or for administrative
purpose and are expected to be
used during more than one
period.
Dismantling Ind AS 16 requires that the
Cost initial estimate of the costs of
dismantling and removing the
item and restoring the site on
which it is located should be
included in the cost of the
respective item of property
plant and equipment.
Exemption –
Unlisted entities, entities
with a turnover less than Rs.
50 crores and those with
borrowings less than Rs. 10
crores
Standard does not specify
how change in accounting
policy should be accounted
for except that the change
should be accounted for as
per transitional provisions
of the standard consequent
upon adoption of the
Standard.
Fixed assets are an asset
held with the intention of
being used for the purpose
of producing or providing
goods or services and is not
held for sale in the ordinary
course of business.
AS 10 does not contain any
such requirement

459
Major Impact areas for the Banks
 Loan provisioning will be on assumptions, past events, current conditions, future
projects & economic indicators as against rule based provisioning;
 Accounting treatment transaction cost (transaction cost directly attributable to a
particular transaction), through EIR or SLM basis;
 Provision for depreciation Component Wise;
 Fair valuation of staff deposits & staff loans;
 Following ratios may be impacted under Ind-AS
o Debt equity Ratio
o Current Ratio
o Net-Worth
o DSCR
 Change in accounting policy – Retrospective effect of change in accounting policy.
Therefore, need to recast previous year’s figures
 Exceptional Items – Need not to disclose separately as under Ind-AS it is considered
as routine business matters.
 Intangible Assets: In respect of BOLT transaction, under IND-AS, lessee will not
recognize fixed assets in the books and shall recognize present value of lease payment as
intangible asset.

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SOME TERMS EXPLAINED
A
Asset Reconstruction Fund:
A fund which takes over bad and doubtful debts from financial
institutions/companies/entities
Acceptance:
The drawee’s acknowledgement of the liability on a bill of exchange, in writing on the
instrument itself.
Accommodation bill:
A bill of exchange without any consideration. The acceptance enhances the liquidity of the
instrument which can be discounted by the drawer with a bank.
Acquisition:
The purchase of a controlling share holding in a company or an individual.
Ad Valorem:
A term which specifies that the basis of levying a charge e.g. taxes of stamp duty, is on the
value of the item /transaction
ADR:
An acronym for American Depository Receipt. It is an instrument traded at the US
exchanges representing a fixed number of shares of a foreign company that is traded in the
foreign country.
Amortization:
The reduction of an amount at regular intervals over a certain time period. This term is
used for describing the accounting process of writing off an intangible asset or reduction of
debt.
Annuity:
A series of payments of a fixed sum at regular intervals over a period of time.
Approved Security:
A security which constitutes an acceptable investment for the purpose of meeting the SLR
requirements. Typically, these are securities which are issued by government or by other
bodies, but bearing a government guarantee with respect to the payment of all obligations.
(i.e. Principal & Interest)
Arbitrage:
The simultaneous purchase and sale transactions in a security or a commodity undertaken
in different markets to profit from price difference.
Asset: Any item, whether having physical property or not, which is owned and has a
tangible value. (Items on Right Hand side of B/S.)
Asset Management Company:
A company set up for floating and managing schemes of a mutual fund.
Asset Reconstruction Fund:
A fund which takes over bad and doubtful debts from financial institutions / banks at a
discount. This was suggested by Narasimhan Committee to clean up the balance sheets of
the nationalized banks.
B
Bad Debt:

461
Amount due from a debtor that is deemed irrecoverable.
Badla system:
An Indian term for a trading system with a mechanism for deferring either payment for
shares purchased or delivery of shares sold.
Balance of Payments:
A statement that contains details of all the economic transactions of a country with the
rest of the world, for a given time period usually one year. The statement has two parts:
current account and Capital account.
Current account: gives a record of country ‘s
(a) trade balance which shows the difference of export and imports of physical goods
(b) invisibles that comprises services rendered and received
Capital account: details of inward and outward flows of capital and international grants and
loans.
Balance sheet:
A statement of financial position of an enterprise, as of certain date, and in a certain
format showing the type and amounts of the various assets owned, and shareholders’
funds.
Balance Fund:
A mutual fund whose objective is to earn a mix of periodic income and capital appreciation
for its investors.
Balloon Fund:
The final payment on a debt which is larger than the previous sums paid.
Bank Guarantees:
Guarantees issued by banks on behalf of its client for fulfilment of a promise or a debt.
There are two types 1. Financial Guarantee 2. Performance Guarantee
Bank Rate:
The rate at which RBI discounts gilt edged securities. It represents the cost of funds that
banks obtain by way of re-discounting of bill.
Bankers receipt:
A non transferable document in a certain format, used by banks in securities transactions.
It acknowledges a transaction and confirms that the issuer has undertaken to deliver the
specified securities within a specific period.

Basis Point:
A term commonly used in international financial markets for representing interest rates.
e.g.200 basis points over LIBOR, which means 2% above LIBOR. One basis point means
0.01%
Bear:
Term used in share market. A person who expects share prices in general to decline and is
pessimistic about the market.
BETA(B):
A measure of volatility of a stock in relation to the market. e.g. If Beta of ACC scrip is 1.2,
that the return from the share will be 20% more than the return from the market.
Bid:

462
The price offered/quoted by an intermediary for buying a security or foreign exchange.
Bill of exchange:
A credit instrument that originates from the creditor (drawer) on whom the debtor
(drawee) acknowledges his liability.
BIS:
Bank for International settlement: undertaking two functions stabilizing the international
financial system by financial regulation, especially vis-a-vis the banking system managing
the foreign exchange reserves of various central banks. OR Bureau of Indian Standards
Blue Chip:
A share of a company that is financially very sound, with an impressive track record of
earning and dividends.
Board for Financial supervision (BFS):
A body set up by RBI in Nov. 94 for supervision and surveillance of the financial system. The
board rates the bank as per “CAMELS” rating
Bond:
A long term debt instrument on which the issuer pays interest periodically.
Book Building:
A process used to ascertain and record the indicative subscription bids of interested
investors to a planned issue of securities. Advantage is correct pricing of the instrument
and demand for the same.
Book runner:
In the above said book building process, the person who maintains the record of various
bids received is called book runner.
Book Value:
Amount of net assets that will be available to a equity share holder after payment of all
liabilities from the sale proceeds of all assets.
Breakeven point:
The point where the revenues from business operation is equal to the total costs i.e. where
the unit is making “No profit-No loss”. Sales beyond BEP earn profits for the company.
Bridge loan:
A short term loan granted to a borrower to tide over a temporary funds shortage.
Budget:
A financial plan that projects receipts and payments of an entity covering a specific period
of time, usually one year.
Bull:
An investor who accepts share prices in general would move up. He is optimistic.
Busy season:
The period from November to April and is so called because of the impact of heightened
agricultural activity in India; particularly on banking operations and industrial sector.
C
Call Money:
A term used for funds borrowed and lent mainly by banks for overnights use. This is a
market which banks access in order to meet their reserve requirements or to cover a

463
sudden shortfall in funds and the interest rate is determined by supply and demand
conditions.
Camels:
An acronym for a technique of evaluating and the management and performance of banks
in terms of capital, assets quality, management, earnings, Liquidity and systems for control
Capital Adequacy Ratio (CAR):
A requirement imposed on banks to have a certain amount of capital in relation to their
assets. Introduction by RBI in 1992 in accordance with the standards of Banks for
International settlements (BIS).
Capital Gain:
The profit on a capital asset, being the excess of selling price over the periodically adjusted
for Inflation.
Capital Reserves:
The reserves created out of profit in capital transactions. These reserves are not available
for distribution of dividend. These may be available for expansion.
Capital structure:
The nature of mix of long term sources of funds consisting of capital, term loans, reserves,
bonds etc. of a project.
Cash Reserve Ratio (CRR):
A legal obligation on all Scheduled commercial banks excluding RRBs to maintain certain
amount in the form of cash with RBI.
Certificate of Deposit (CD/COD):
A negotiable interest bearing debt instrument of specific maturity issued by banks or F.I.s.
Chakravarthy Committee:
A committee set up by RBI to appraise the working of the Monetary System in 1985.
Chelliah Committee:
A committee on tax reforms constituted by Government of India in 1991 under the
chairmanship of Sri Raja Chelliah.
Chore Committee:
Working group set up in 1979 by RBI to review the operations of Cash Credit system.
Chit Fund:
This is a non bank financial intermediary. Involves the process of collecting subscriptions
from enrolled members which is disbursed as a loan to its members.
Closed ended fund:
A scheme of Investment Company in which a fixed number of shares are issued during the
fixed period. After the initial issue /period is over, then purchase of shares is possible only
through secondary market and not primary market.
Collateral:
An asset which serves as additional security of the asset created out of project.
Commercial Paper (CP):
An unsecured Usance promissory note issued by a company fulfilling certain conditions
prescribed by RBI.
Commitment Fee:

464
The charges levied by the lending institution for making available a line of credit but not
utilized by the applicant.
Consortium:
In banking parlance, it refers to the group of banks coming together for the purpose of
meeting the financial requirements of a borrower with a common assessment and
document.
Commodity Futures:
A standardized contract guaranteeing delivery of certain quantity of a commodity on a
specified future date, at a price agreed to in the contract.
Contingent Liabilities:
The liabilities that may arise as a result of some future event, the happening of which
cannot be ascertained as of date.

Contribution:
In the context of BEP, it is the difference between the selling price per unit and the variable
cost per unit. (s-v)
Convertibility-Full:
The feature of unrestricted exchangeability of a currency for another currency.
Corporate Governance:
The manner in which a company is managed. It deals more about clean business practices,
complete transparency in actions, ethics, moral etc. Responsibility of Company Personnel
towards outside world.
Cost of Capital:
The weighted average cost of long term funds raised by a company from differences
sources such as term loans, equity shares etc.
Coupon /Coupon Rate:
The rate of interest payable on a security.
Covenants:
The clauses mentioned in an agreement /deed etc.
Credit-Deposit Ratio:
The relationship between the credit extended by the bank and its deposit liabilities,
expressed in percentage terms.
Credit Rating:
The exercise of assessing the borrower regarding the risk perception to the lender.
Credit rating is done by banks for fixing up the rate of interest. It is also done by external
agencies like CRISIL, CARE, ICRA, & Flitch etc for A/cs above Rs 10 crore.
Credit Risk:
The chance that of a borrower will not meet his financial obligations. Also known as default
risk.
Cross Currency Option:
An instrument that confers a contractual right on the purchaser of the “option” to buy or
sell a currency against currency. For this privilege, the purchaser pays a cost termed
“premium”

465
Cross Rate:
The exchange rate between two currencies derived from the rates relating to a common
currency
Cross Subsidization:
A phenomenon in our economy in which entities which are earning more income and are in
better position, are paying less interest on their borrowings (At lower ROI) e.g. Big
Corporates. Secondly, entities like individuals who are earning less income/revenue are
paying more interest (At higher ROI) on their borrowings from financial system.
Current Assets:
The assets which are expected to be converted into cash or consumed during the
“operating cycle” of the business.
Current Liabilities:
The liabilities that are payable within one year which are created for purpose of acquiring
fixed assets.
Current Ratio:
This ratio is a measure of a company‘s liquidity position i.e.. The company‘s ability to pay its
current liabilities on the due dates.
Current Yield:
Yield on securities with reference to the acquiring rate i.e. arrived by dividing coupon rate
by its market rate.
Custodial Services:
The services rendered by some agencies such as safe keeping of securities, collecting
income etc. It is done by some banks and financial institutions.
D
Debenture:
A debt security issued by companies, having a certain maturity and bearing a definite
coupon rate.
Debenture Redemption reserve:
The provision made every year till date of redemption of debentures.
Debenture Trustee:
The trustee appointed by the debenture holders to safeguard their interest in relation to
the securities charged to the debenture holders by the company.
Debtor:
One who owes money either as a purchaser of goods on credit or as a borrower of funds.
Debt Service Coverage Ratio:
The ratio indicates the repaying capacity of the borrower to pay instalment and interest
out of the cash flow generated from the project. It is calculated as under:
PROFIT + DEPRECIATION + INTEREST PAYABLE ON TERM LOAN.
---------------------------------------------------------------------------------------------
REPAYMENT DUE ON TERM LOAN + INTEREST PAYABLE ON TERM LOAN
Debt Equity Ratio (D/E ratio):
This ratio explains the financial leverage of the borrower i.e. The owner’s contribution vis-
a-vis the external long term debt obtained for the project
Debt Equity Ratio = (all long terms loans) / (total owner’s funds)

466
Default risk (Credit Risk):
The risk run by the creditor on account of default of repayment of debt by the debtor;
DICGC:
Deposit Insurance and Credit Guarantee Corporation which provides insurance coverage to
depositors and also guarantees loans by banks / lending institutions to small borrowers.
DFHI:
Discount and Finance House of India Limited. Institution promoted by RBI, public sector
banks and financial institutions to develop secondary market instruments.
Disintermediation:
The process of meeting of surplus sector and deficient sector in finance directly instead of
through financial intermediaries.
Disinvestment:
The offloading of investment/shares in the market by the shareholders.
Diversification:
The process of spreading out investment so as to limit exposure and reduce risk.
Dividend:
The return on investment made by shareholders in the equity capital of a company.
Drawee Bill System:
The system of financing purchases of raw materials by manufacturers / producers by the
acceptance and discounting of bills of exchange drawn by the suppliers of raw materials.
E
Earnings per share:
(EPS) The net profits of a raising funds. These issues will be listed in stock exchanges
outside India.
Eurobond:
A bond denominated in a currency different from that of the country in which it is sold.
Exim Bank:
Export-Import Bank. A bank set up by Government of India, in 1982 for the purpose of
financing imports and exports, refinancing of banks/financial institutions etc.
F
Face Value:
The nominal value of a security.
Financial Inclusion:
Process of assuring access to financial services & timely and adequate credit where needed
by vulnerable groups such as weaker section / low income group.
Factoring:
An arrangement by which the receivables can be sold without recourse. Normally the
factoring is done for short term receivables.
FEDAI:
FOREIGN EXCHANGE DEALERS ASSOCIATION OF INDIA
Finance Commission:
A commission appointed every five years, by the President of India, to recommend the
basis for distribution of certain tax receipts between the Centre and the states and also
between the states.

467
Financial Engineering:
Refers to creation of new financial instruments or development of new financing
techniques.
Financial Futures:
A Contract guaranteeing delivery of specified financial instruments on a future date, at a
pre-determined price.
Financial Institution:
A non banking financial intermediary carrying on any of the activities specified in the
relevant section of RBI act.
Financial Intervention:
Made by say government authority facilitating aid to Bank/FI in the form of subsidy, fund,
refinance
Financial Intermediation:
The process of acting as a mediator between surplus sector and deficient sector in finance.
Financial Market:
The market in which transactions take place mostly in the form of tradable securities which
result in creation or transfer of financial assets and liabilities.

The Money Market:

Part of financial markets in which financial instruments having maturities of less than one
year are traded.
The Capital Market:
Part of financial markets where securities having maturities exceeding one year are traded.
Financial Structure:
The composition of short term and long term sources of funds of a company.
Fixed Asset:
Any asset which is used for converting the current assets into cash.

Fixed Cost:
An item of cost which does not automatically change with changes in volume of production
within a reasonable time span.
Fixed Exchange Rate:
The exchange rate of a currency which is pegged to a predetermined value of another
currency or gold.
Fixed Income Investment:
An investment which yields a constant sum at regular intervals.
Float Funds:
The funds available with the banks during the execution of remittance instruction. Eg. In
case of Demand drafts, the funds available with the banks during the time gap of issuance
and payment.
Floating Exchange Rate:
The exchange rate of a currency that is allowed to float, either within a narrow specified
band of a reference rate, or totally freely according to market forces.
Floating Rate Bond:

468
A debt security whose coupon rate is periodically adjusted upwards or downwards, usually
within a specified band, on the basis of a benchmark interest rate or an Index.
FOB:
Free on Board. The term used as a prefix to the name of a certain place or location
indicates the delivery point to which the seller of goods will bear expenses and charges
relating to transportation. i.e. The seller of goods is freed from his responsibilities once he
boards the goods on the ship.
Forfeiting:
Sale of export receivables without recourse. Normally long term receivable is taken under
forfeiting.
Forfeiture:
In capital markets, it means the deprivation of shares held by an investor, usually as a
consequence of default in paying call money.
Fund Based:
Financial assistance that involves disbursement of funds.
Fungible:
An instrument is said to be fungible when it can be replaced by another of a similar
description.

G
GDR:
Global depository Receipt: Instrument denominated In foreign currency listed in foreign
stock exchanges, each GDR is backed by the multiplies of shares of domestic company.
GIC:
General Insurance Corporation
Gilt Edge Securities:
Refer to securities issued by government.
Going Concern Value:
The firm is valued on the assumption that the firm will be continued to be in business.
Goodwill:
The value of image of the firm in the market which helps the firms in marketing its goods /
services. This will not be normally reflected in the balance sheet.
Green shoe Option:
An option to retain oversubscription, in case of issue of securities.
Gross Domestic Production:
(GDP) Total values of final goods and services produced in an economy in a year.
Growth Fund:
This is mutual fund scheme that aims at capital appreciation for its investors.
H
Havala Transaction:
Mode of transaction of funds out of India or into the country, by passing official and legal
channels.

469
Hedging:
The processing of covering the risks for minimizing the loss.
Hire Purchase Agreement:
A transaction by which an asset is acquired on payment of regular instalments comprising
the principle and interest spread over a specified period.
Although the asset gets transferred on payment of last instalments, the installments are
treated as hire charges only and not as installments.
Holding Company:
The company which controls a majority share holding of another company or controls the
composition of the board of directors or exercises controls through a subsidiary.
HDFC:
Housing Development Financial Corporation limited. Premier Private Sector housing
financial company promoted by various banks and F.I.’s.
Hundi:
An Indian term for Bill of Exchange.
Hypothecation:
One of the ways of creation of charge by the banks, in which the borrower is allowed to
have possession of the security unless demanded by the bank.

I
ICICI:
Industrial Credit and Investment Corporation of India limited- One of the Financial
Institution started in 1955
ICRA:
Investment Information and credit Rating Agency of India Limited- one of the credit
agencies in India approved for rating the commercial papers
IDBI:
Industrial Development Bank of India. One of terms lending financial institutions started in
1976.
IFCI:
Industrial Finance Corporation of India. One of the lending financial institutions started in
1948.
IL & FS:
Infrastructure leasing and Financial Services Limited- Major Institution Financing in
infrastructure project.
Incremental Cash Flow:
The net differential cash flow accruing as a result of an investment decision.
Inflation:
The phenomenon of rising of goods and services in general.
Insider Trading:
A trading done by an insider who has access to sensitive information concerning a
company, that is not publicly available and is of such a nature that enables him to make
substantial profits in share transactions.

470
Intangible Asset:
An asset which is useful to the firm but lacks a physical characteristic. e.g. Goodwill, Debit
Bal in P/L, Preliminary Expenses, Patents, Copyrights, Trademarks.
Inter-bank Term Money:
These are money market transaction exclusively involving bank in which funds are
borrowed and lent for period ranging from 15 days to less than one years at market relate
interest rates.
Inter-corporate Deposit:
A short term deposit made by one company with another. The period usually does not
exceed six months.
Interest Rate Risk:
The risk of reduction in size of the balance sheet due to change in interest rates.
Internal Financial:
The utilization of funds generated from operation i.e. profits.
Internal Rate of Return:
The “Discount Rate “that equates the total present values of expected cash flow on a
project to its initial outlay so that the net present value of the project is zero.
Inventory:
A term that refers to the stock of raw material semi-finished goods and F/G lying with a
company.
IPO:
Initial public offering First issue of securities.

IRBI:
Industrial Reconstruction banks of India –Banks for rehabilitation of sick industrial units.
J
Jilani Committee:
A committee headed by Rashid Jilani Chairman of PNB to review and suggest changes in
the system of banks lending for working capital submitted in Oct. 1993.
K
Kannan Committee:
A committee constituted by IBA to examine the relevance of MPBF as a method of
assessing the requirement of the bank’s credit for working capital and suggest alternative
methods. The committee was headed by K. Kannan chairman of BOB and submitted its
report in 1997.
Khan Committee:
Headed by Khan then chairman of IDBI working group by RBI in Dec. 97 to harmonize the
role of banks and development financial institutions.
Kharif Season:
The main agriculture season in India occurring between October and April.
L
Laissez Faire:
The economic doctrine of freedom to individuals in business and commerce, advocated by
Adam Smith through his famous work “Wealth of nations” in 1776

471
LC Gupta Committee:
To develop the regulatory framework for derivatives trading in India. Constituted by SEBI in
1997 with LC Gupta as chairman.
Lease:
A contractual agreement by which a firm or a person acquires the right to use an asset for a
definite period, in return for rent payable at regular intervals, called lease rentals. Two
types of leases, operating lease and financial lease.
Operating lease: Short term lease with a purpose to return the asset after a specific period.
Financial lease: Long term lease with no intention to return the asset and the asset is user
specific.
LERMS:
Liberalized Exchange Rate Management system: A dual rate system that was introduced in
March, 1992.
Letter of Credit:
A letter issued by Banks on behalf of a purchaser of goods undertaking responsibility to pay
a certain amount of money during a specified period, on fulfilling certain condition.
Liability:
A claim against a company or an individual acknowledged as due.
Libor:
London Inter Bank Offered Rate
Lien:
Lender’s claim on assets forming security for the loan-two types -General Lien and specific
lien
Limited Liability:
A term which conveys that the liability of the share holders is limited to the extent of
amount nominal value of the shares.
Line of Credit:
This is an arrangement under which the lending institution agrees to provide to a borrower
any amount of funds up to a specified limit, during a specified period.
Loan Syndication:
Arranging of funds for a borrower by a financial intermediary by bringing in various
financial intermediaries so as to spread the risk among themselves.

Local Area Bank (LAB):

A bank whose operations will be confined to a narrow geographical domain of three
contiguous districts. The idea proposed in 1996, is to ensure a focused approach to
mobilization of savings and provision of credit by clearly defining the boundary of
operations.
M
M1:
A measure of stock of money in India is also called Narrow money. It is calculated by adding
the net demand deposits of banks and other deposits with RBI to sum of currency notes
and coins held by the public.
Malegam Committee:

472
A committee set up to recommend reforms in the primary market. The committee headed
by YH Malegam gave its recommendations in 1995.
Malhotra Committee:
A committee set up to recommend reforms in the insurance sector, headed by the former
RBI Governor RN Malhotra.

Marathe Committee:
A committee set up to review the licensing policy of new urban coop banks. Headed by Shri
SS Marathe submitted report in May 1992.
Margin:
The amount of money that a borrower must invest when acquiring an asset by taking bank
loan. This is also the safety margin for the bank.
Marginal Cost:
Cost of producing an additional unit of a product
Marginal Revenue:
The additional revenue generated by selling one or more unit of output.
Market Capitalization:
The value of equity shares outstanding at prevailing market prices.
Market Maker:
An intermediary in the secondary market, who is ready to buy and sell securities by offering
two-way quotes
Market Risk:
The risk of asset deterioration due to sharp price fluctuations of the securities which is out
of control of the lender as well as the receiver.
Marking to Market:
A system of valuation of securities as per the market rate on the date of financial report.
Thus the financial statement will reflect the value of all the assets as on the date of the
statement.
Merchant Banker:
An intermediary who provides various financial services, other than banking, such as issue
management etc.
Merger:
The combination of two (or more) companies into one entity usually through exchange of
shares.
MIBOR:
Mumbai Inter Bank Offer Rate: Weighted average interest rate of the rates at which certain
banks/Institutions in Mumbai belonging to a representative panel are prepared to lend Call
Money.
Micro Credit:
Credit extended to small and needy borrowers who normally cannot have access to bank
credit due to inadequacy of margin money.
Micro Finance:
Financial and Non financial assistance to poor from Rural, Semi Urban and Urban area for
the generation of income and increase in standard of living.

473
Money Market:
The segment of financial markets wherein financial instruments having maturities of less
than one year are traded.
Money Market Mutual Fund (MMMF):
A mutual fund which invests in money market securities such as treasury bills etc. Started
in April 1992.
Moral Suasion:
This refer to the persuasion employed by Central bank in its communications with various
banks, in order to ensure control over the expansion of credit.
Moratorium:
The time allowed to borrowers for starting the repayment of loan. Normally this period is
required so as to give time to the promoter for implementing the project.
Mutual Fund:
A fund to collect savings from the individuals and invest in various securities for mutual
benefit.
N
NABARD:
National Bank for Agricultural and Rural Development. Set up in 1982-apex institution for
rural and agri credit, through primarily refinance institution.
Narasimham Committee (1991):
A committee appointed by the Government of India in Aug. 91, to examine all aspects of
the financial system, in terms of its structure, organization and procedures.
Narrow Banks:
Banks that invests funds only in government securities.
NASDAQ:
National Association of Security Dealers Automated Quotations System, USA
NSE:
National Stock Exchange: It is a nationwide screen based trading network available
throughout India inter-linked by electronic network. Started in Nov. 1992.
Negotiable Instrument:
A document that entitles a person a sum of money which is transferable by endorsement
and/or delivery.

Net Asset Value:

(NAV): Net asset value of a unit of a mutual fund is calculated by dividing total net assets of
the fund by total number of units outstanding.
Net Present Value:
Net Present Value is the difference of the sum of discounted cash outflows over the life of
the project and the expenditure outlay.
Net Worth:
The funds belonging to the shareholders of a company.
Nidhi/Mutual Benefit Fund:

474
An Indian term for an organization that sets up a common fund from the specified
contributions of its members, which is then used to extend financial assistance to its needy
members. The purpose can be commercial or personal.
NBFC - Non Banking finance Company:
A financial intermediary who is involved in all types of financial activities excluding
accepting of “chequable deposits”
Non Convertible Debentures:
Debentures which will be paid on maturity as per terms and will not be converted into
equity shares like “Convertible debentures”
Non Performing Asset:
An asset which does not earn any income for the bank.
O
Open ended Fund:
A mutual fund which continuously issues new units to meet investor’s demand. E.g Unit 64
of Unit Trust of India
Open Market Operations:
The purchase and sale of securities, by the Central Bank of a country to expand or contract
the money supply with the banking system.
Operating Cycle:
The total time taken for the cash to be converted into cash through material, WIP, finished
goods and receivables.
Opportunity Cost:
The value or benefit from an alternative proposal that is forgone in favour of another
Option:
A contract that gives the holder the right to buy (call option) or sell (Put option) a financial
product at a specified price during a specified period.
OTCEI:
Over the Exchange Counter of India: A floorless national securities exchange, meant
especially for small companies i.e. with small share capital, with a screen based system of
trading. Started in 1992.
P
Par Value:
The nominal / face value of a security
Pari Passu:
A term indicating equality of claim. Normally used for creation of charge. “Pari Passu
charge” means all having equal claim over the securities.
Payback Period:
The period in which the total of the periodic cash outflow is equal to the investment made
in the project.
Portfolio:
Collection of securities. A term that collectively refers to the different securities belonging
to an individual or a group of persons.
Post Shipment Credit:

475
Funds lent by banks to the exporters against their receivables, which arises after shipment
of the goods is done.
Pre Shipment Credit:
Funds lent by banks to the exporters for the purpose of manufacture of the goods and
shipping them for export, which arises prior to shipment of the goods.
Preference Share:
A share that bears a fixed dividend which preference over the equity share holders for
dividend and for repayment of principal amount in case of liquidation.
Premium:
The increment of price over the face value of a security. In case of insurance, it is the
subscription paid for keeping the policy alive.
Present Value:
The discounted value of a future cash flow.
Primary Dealer (PD):
An institution that participates in the primary auctions for government securities and
subsequently liquidates them in secondary market.
Primary Market:
The segment of financial markets in which securities are originated.
Prime Lending Rate:
The rate of interest charged to prime borrower, where default risk is minimal.
Promissory Note:
An underwriting given in writing to pay a certain sum of money only or to the order of a
specified person.
Prospectus:
The offer document prepared by a public company for inviting funds from the public which
contains all details about the proposed project.
Public Issue:
An invitation to the public at large to subscribe to the securities issued by the company.
Q
QIS:
Quarterly Information System: Was introduced in 1979 as per Chore Committee report.
Monitoring tool for working capital. Recently this has been replaced by QMR and HMR
Quick Ratio:
The ratio between quick assets and current liabilities. This ratio is fine turning of current
ratio for ascertaining liquidity of the firm.

R
Ratio Analysis:
The use of financial ratios for assessing the financial performance and position of a
company by means of various ratios.

476
REER:
Real Effective Exchange Rate. The exchange rate arrived at after adjusting the nominal
exchange rate by the relative price changes within a country and in the foreign country in
question.
Reddy Committee:
Working group on matters relating money supply - report June 1998.
Redemption:
The repayment of a debt Regional Rural Banks (RRB): The banks sponsored by public sector
banks to cater exclusively to rural areas. There are 196 RRBs in India.
Repos:
Repurchase option Scheme. It is a sale of securities with an agreement to repurchase the
same on a future date at a specific price.
Retained Earnings:
The amount of profits after taxes not paid out as dividends which is available to the firm for
internal use.
Revaluation:
Revaluation of assets means fresh valuation of fixed assets of a company such as land,
machinery etc. by an approved valuer so as to state realistic value of assets in the balance
sheet instead of historical cost.

S
Scheduled Bank:
A bank that is registered in the Second Schedule of the RBI Act 1934.
SDR:
Special Drawing Rights, an international reserve Asset crated in 1970 to enable member
countries to IMF to deal with payment problems.
SHG (Self Help Group):
Group of women/men of 5 or more engaged in a common activity and having savings
habits, regularity of meetings. Such groups can be granted microfinance.
SEBI:
Securities and Exchange Board of India – regulatory body to protect the interest of
investors in securities.

STCI:
Securities Trading Corporations of India- market maker in designated government
securities.
Securitization:
The transfer of loans of a homogenous nature from a lending institution to investors
through an intermediary by packaging them in small denominated securities.
Seed Capital:
The financial assistance towards a promoter’s equity contribution.
SENSEX:
Sensitive Index – Index based on the prices of 30 selected stocks traded on BSE, the base
year being 1978-79.

477
SGL:
Subsidiary General Ledger: The ledge maintained by Public Debt Office of RBI to note the
transfer made by investors of government securities.
Shah Committee:
A working group constituted by RBI in May 1992, to suggest reforms relating to NBFCs.
Share Capital:
The capital raised by the company by issuing shares. Authorised capital: The limit up to
which shares can be issued Capital: The amount sought to be raised by issue of shares
Subscribed Capital:
The amount up to which investors have committed to contribute
Paid Up Capital: The amount actually paid by shareholders
Shetty Committee:
A committee appointed by RBI to review consortium based lending-1993
Sinking Fund:
The money accumulated by setting aside a certain sum periodically, to facilitate the orderly
retirement of a debtor or purchasing an asset.
SIDBI:
Small industries Development Bank of India. The principal financial institution for
promoting, financing and development of SSIs in India. Established in 1989.
Special Purpose Vehicle:
The intermediary used for issuance of securities.
Spread:
The difference between the ROI charged to borrowers and the rate paid to the depositors
by a Bank or FI
SLR:
Statutory Liquidity Ratio. The scheduled commercial banks have to maintain this ratio. This
ratio is arrived at by: Investment in Government securities Net Demand and time liabilities.
Stock Index futures:
Future contracts based on broad stock market indices.
SWAP:
The exchange of financial liabilities. This can be interest rate Swap, currency swap etc.
T
Tandon Committee:
A study group set by RBI in 1974 to examine the then prevailing system of working capital
financing by banks.
Tarapore Committee:
A committee on capital account convertibility which was headed by SS Tarapore of RBI.
Treasury Bill (T-Bill):
A short term debt instrument of GOI-issued by RBI on behalf of GOI.
Treasury Management:
The management of cash flows and outflows of an organization
Trust Deed:
The birth document of a trust. A legal document containing covenants that establish the
duties, obligations, rights of the various parties to the trust.

478
U
Underwriting:
Insurance against under subscription. Undertaking by the underwriters to subscribe to the
securities in case of non subscription from the market.
Unencumbered securities:
The securities against which no loan is outstanding.
Usance Bill:
A bill of exchange with a fixed maturity and not payable on demand but payable after
certain period.
V
Vaghul Committee:
A working group on money market appointed by RBI in 1986 headed by Mr.N.Vaghul,
Chairman, ICICI.

Value at Risk (VaR):

A measure of risk that indicates the maximum amount at stake, i.e. the maximum loss that
an entity could incur on its exposures at a point of time determined at a confidence level.
Variable Cost:
The expenses that vary proportionately with the level of production activities or volume of
output.
Venture Capital:
The long term financial assistance to projects being set up to introduce new
products/inventions/innovations etc. it is also known as “Risk Capital”.
W
Warrant:
An instrument issued by a company that carries a option to buy a specified number of
securities during a specified period.
Ways and Means Advance (WMA):
The short term loans granted by RBI to state governments to enable the latter to overcome
a temporary mismatch in cash flows.
Whole Life Policy:
A type of life insurance policy for which premium is payable till death. The policy will not
mature during the life time of the assured.
Working Capital:
That amount of money which is used for building up of current assets.
Y
Yield to Maturity:
The return earned by an investor by holding till maturity. The discount rate which equates
the present value of a security’s inflows to its purchase price.

Z
Zero Base Budgeting:

479
A method of preparing the budget in which all the expenses are estimated fully instead of
having a percentage increase over the previous year. This leads considerable economy in
wasteful expenditure.
Zero Coupon Bond:
A bond that bears a zero interest rate and hence is issued at a discount.

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 HOW TO PREPARE FOR PERSONAL INTERVIEW

Introduction
Interview can be won or lost in the very first moments of meeting. It is not only the words
but also the whole sense of confidence, interest and enthusiasm that count. Any
interviewer will tell you that the most common reason why people fail in personal
interview is that they do not prepare thoroughly.
The word interview is derived from the word ‘interview’, meaning the sight between. It is a
face-to-face interaction between the candidate and the Interview panel.
One is selected to attend a personal interview in recognition of his/her excellent
performance in the written examination or by virtue of being a senior in a particular
hierarchical set up in the organization. An interview makes one feel both excited and
nervous. With good preparation and practice, it is possible to perform well and do justice
to one’s skills and experience. A personal interview is a selection process. In a promotion
interview, the interview panel judges a candidate as to whether he/she is prepared and
well equipped to shoulder higher responsibilities in the organization. The process also gives
opportunities to a candidate to demonstrate his/her personalities, interpersonal
communication capabilities, conceptual and practical knowledge, self-confidence,
motivation and leadership qualities. It is a management tool for selection of the right
person at the right place.
Personal Interview is a management tool for selection of right personnel for the right job.
· It is a best method for getting information about feelings, emotions and sentiments of the
candidate.
· Useful for securing information from persons at all levels.
· A method of psychological study of the candidate.
· A method of mental intersimulation and observation of candidate’s behavior.
· A method to verify information earlier provided by the candidate.
The Role of the Interview panel
The Panel members are knowledgeable people and are always drawn up based on their
experience and practical exposure. The interview panel always wants the candidate to do
well in the personal interview.
The Panel initiates the interview process and always ensure to
 Open the interview with a warm greeting
 Relax the candidate at the initial stages
 Create a positive rapport with the candidate
 Listen attentively and analytically
 Motivate and bring out the best from the candidate
 Read the body language
 Form opinion about the candidate during the course of the interview
 Assess the capabilities and personality.
 Control the entire interview process

The job of the Interview panel is basically to assess the candidate’s skill set as follows.

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  Organizational - Does the candidate display signs of being well organized and
methodical?
 Analytical - How well the candidate analyzes business situations and how quickly can
he/she come up with best solutions.
 Decision-making - how well the candidate makes difficult decisions, how quickly can
they then implement those decisions?
 Social - will the candidate get on well with the superiors, colleagues, and subordinates
with whom he or she will be working?
 Communication - How efficient is the candidate at communicating clearly and
confidently.
The normal questions those are asked in a personal interview can be categorized as
below.
 Physique includes health, personal appearance and manners
 Attainments cover educational achievements and experience
 General Intelligence covers common sense
 Aptitudes include mechanical, verbal and artistic skills
 Interests are demonstrated through one’s outlook and hobbies
 Dispositions covers personality traits: like whether one is an extrovert or introvert,
dominant or submissive
 Circumstances help the panel to put the candidate’s achievements into a proper
context
We can classify the questions in a different way as follows.
Leading questions - Normally the Chairperson begins the interview with the leading
question. The panel is normally friendly and cooperative. Such questions help a candidate
feel comfortable and confident to do well. It may be initiated through
 Candidate’s background
 Academic Topics
 Job handled and exposure
 Candidates interests and hobbies
 General awareness
 Odd questions
Open-ended questions - These questions follow the leading questions. These questions
enable the candidate to talk, explain and illustrate something he knows or has done before.
Probing questions -These questions gauge the depth of knowledge of the candidate. These
questions are intended to determine as to how a candidate would react to a situation or
how would organize follow up questions.
Close-ended questions - These questions seek to extract information on specific items and
test candidate’s knowledge of facts and figures.
Preparation for the interview
A self-assessment before the preparation for the actual interview is a must. The well
planned and well drafted self-appraisal form / personal resume plays a pivotal role in the
entire process. While writing the personal resume, one must take care of and be ready for
any question based on that information. Normally, it is the self-appraisal form / personal

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resume that give a lead to the panel to start the ball rolling. One must be thorough on the
following areas.
 One’s educational qualification
 Professional qualification
 Extracurricular activities if any
 Experience and exposure in various branches and offices
 Domain Knowledge of the job handled and contribution to the progress of the
branch/office
 Profile of the Branch/Office where posted at present
 Profile and achievement of the parent organization.
 Knowledge of current affairs
 Banking and financial update
 RBI & Government Policies
 Present international economic scenario
 Economic update
The list is indicative.
Appearing for the Interview
Personal interview is not a routine matter and one should be very particular about the
preparations. One gets a few days before the interview to get oneself organized. The time
should be used profitably to inform and prepare oneself. Looking good will makes one feel
good and that boosts one’s confidence. Reach the venue at least 30 minutes before the
scheduled time. Be polite to everyone you meet before and after interview.
Get organized in appearance
It is said that first impression is the last impression and the last impression is the lasting
impression. Research shows that people form 90% of his or her opinion within a minute
and half even before somebody speaks. Since it is difficult to correct impressions during the
interview due to time constraint, it is better to get as much as possible through a smart and
pleasant appearance. It is important to be well dressed and well groomed.
 Dress should be formal clean and well pressed. Gaudy and colorful dress should be
avoided.
 Wear a necktie if comfortable.
 Ladies can wear saree or any Indian / Western formal and comfortable dress.
 Ladies can wear minimum jewelry.
 Hair should be well combed and less oily.
 Shoe should be well polished. Avoid sports shoe.
Body language
A candidate’s body language speaks volume about his/her personality. One should walk
into the room with back straight and maintain a posture while sitting down. Seek
permission to sit with a request, “may I sit down sir”. A soft pleasing expression with a hint
of smile enhances one’s personality. One must appear cheerful and confident.

The Interview / Marketing of self

 Always greet the Panel with Good Morning, Good afternoon or Namaskar depending
upon the time and applicability.

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 Try to relax and be yourself
 Breathe slowly and deeply before entering the room.
 Walk in smartly and cheerfully
 Do not loll on the chair in a relaxed way
 Do not get too close to the interviewer
 Do not put hands in pockets
 Do not cross arms
 Do not put hands or fingers over the mouth when speaking
 Restrain hand or finger movements aimlessly
 Maintain a moderate eye contact with the member asking questions
 Give him full attention
 Never raise voice or speak in hushed tones
 Do not rush to answer
 On receiving the signal from the chairperson, stand up and thank the panel before
leaving the room.
During the interview
· Be enthusiastic and responsive
· Follow the panel’s lead
· Be prompt in reply and always assertive
· Answer should be free, frank and honest
· Always volunteer good information about self
· Remain calm and composed
· Exercise self control
It is always useful to keep the interest of the interviewer alive. An element of salesmanship
is always helpful in facing the interview. Most often people do not have the patience to
listen to others. They are in a hurry to speak or reply. Listen carefully to communicate in
proper tone. Modulate the pitch of the voice. It includes both content and delivery. One
gets more attention from the panel if one is more enthusiastic and energetic while putting
forward one’s idea. Brevity is the soul of the wit. Be brief and to the point. Concentrate on
strong points. One should consciously always display one’s leadership quality, initiative
and willingness. Demonstration of team spirit, cooperation, organizational skill and strong
decision-making capacity always pays rich dividends. If you do not anticipate a question
and have not prepared for it, pause and think before giving a reply. Do not bluff. The panel
is well informed and well read. One can politely say sorry, if one could not give a correct
reply. Always, one should support one’s answer with relevant evidence and past
experience. Never put the blame on others, make any character assassination or offer an
excuse for yourself while replying to a question. Honesty and sincerity always pays.
Assessing the candidate’s knowledge and awareness is an important aspect of the personal
interview process. The panel in the process also tries to assess the interpersonal and social
qualities of the candidate. It reveals the sense of responsibility, cooperation, adaptability,
integrity, group sense and persuasiveness of the candidate.
In the last stage of the interview, the panel tries to form a final impression of the
candidate. The Chairperson normally gives a hint to the candidate that the interview is

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over. A candidate must thank the panel and leave the room with confidence, without
looking back and in a graceful manner. The door of the room should be closed quietly while
leaving the room. One must remember that the panel also assesses the candidate while
leaving the room. A candidate should always try to convey the message to the panel that
he/she is always a part of the solution in a positive frame of mind.

Disclaimer
While preparing this study material every effort has been made to provide updated and
correct information. There may be human error while compiling the study material. For more
accurate information, the users of this study material are advised to also refer RBI Circulars,
IBA Guidelines, Govt. Notifications, Policies and Circulars issued by the Bank etc.

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