Policy Line (Loan Policy 2018-19 IC no.

1333-2018)

POLICY LINE

ALL THE BEST !!

Staff College, Bengaluru

Disclaimer: This is purely a voluntary effort for dissemination of knowledge and enabling people to prepare for
promotion test. Best efforts have been put to provide the accurate and updated information. However, the users
are requested to refer relevant circulars and policies of our Bank for further clarity.

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 Policy Line (Loan Policy 2018-19 IC no. 1333-2018)

Subsidiary is an enterprise that is controlled by another enterprise (known as parent).

An Associate is an enterprise in which the investor has significant influence and which is
neither a subsidiary nor a Joint Venture of the investor.

Joint Venture is a contractual arrangement whereby two or more parties undertake an

economic activity, which is subject to joint control.

Significant Influence is the power to participate in the financial and/or operating policy
decisions of the investee but not control over their policies.

Corporate Borrowers (for the purpose of service charges and rate of interest) will include
Limited Liability Partnership (LLP), Private Limited Companies and Public Limited Companies.

Non-Corporate Borrowers (for the purpose of service charges and rate of interest) will
include individuals and other entities like proprietorship, partnership, HUF etc not covered
under Corporate.

IFBs will generally target proposals of above Rs.150.00 crore unless falling within the same
group), Large Corporate Vertical (LCV) shall handle proposals of borrowers from any branch
across the country with threshold credit Limit above Rs.150.00 crores falling within the
delegation of Central Office. Also, proposals pertaining to specific infrastructure sectors like
Road, Power, Ports, etc would be handled by LCV irrespective of limits involved.

CP&MSME shall handle various requests for approval in credit proposals of borrowers beyond
FGMO delegation (not falling within the scope of LCV / MCV).

When loans are sanctioned to a group concern, the highest sanctioning authority involved in
sanctioning of credit facilities should only sanction the credit facilities to the same group
concern not withstanding such credit delegation power falling under lower level sanctioning
authorities.

Proposals relating to Antwerp, Dubai, Hong Kong, Sydney and other existing/proposed foreign
branches/overseas offices /subsidiaries shall be processed at DFB&IBD.

The ownership and review of the Loan Policy shall be taken by Credit Policy & MSME
Department, Central Office.

Deviation: MCB / CAC-I / CAC-II are authorized to permit deviations other than those already
permitted in Credit Policies /Schemes within the overall statutory and regulatory framework.

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MODIFICATION AND REVIEW / REVISION IN POLICY (at short notice) Asset Liability
Committee (ALCO)/Credit Risk Management Committee (CRMC) is empowered to take such
decisions subject to board ratification.

Proposal shall be forwarded directly to the respective Sanctioning Authority under whose
delegation the proposal falls with a copy to other higher offices in between e.g. if the
proposal falls within the delegation of CO, the same shall be forwarded directly to CO for
decision with a copy to FGMO/RO for information.
Union Samriddhi Kendra (USK) – Bank has implemented a new operating model for RUSU
(rural and Semi Urban) Branches by introducing Hub and Spoke Model, where “Hub” is a
Centralized Processing Cell and “Spoke” is mapped RUSU Branches. The centralized
processing cell (Hub) is named as “Union Samriddhi Kendra” (USK). The main objectives of
USK are to accelerate the credit flows to RAM (Retail, Agriculture & MSME) through focused
sales/marketing in RUSU areas and to enhance customer service through improved TAT.

Rural & Agriculture Business (RABD): Identification of 30 Agriculture Focused Regions and
765 Agriculture Focused Branches to boost Agricultural Advances has been done. These
Region/Branches to achieve annual growth of 35-40% under Agriculture. In addition to this 21
Agri Cluster has been indentified Pan-India each comprising 12-15 Rural/Semi –Urban Branches
headed by Area Manager. 6 new schemes:
i. Estate Purchase Loans (As per Delegated Authority)
ii. Loans against Gold / Silver Jewellery for agriculture upto Rs.20.00 lac (under priority) and
Rs.10.00 lac (non-priority)
iii. Kisan All Purpose Term Loan upto Rs.20.00 lacs
iv. KisanTatkal Scheme upto Rs.0.50 lacs
v. Scheme for purchase of Renewable energy Equipment (As per delegated Authority)
vi. Purchase of land for agricultural purpose upto Rs.10.00 lacs
Tie-up with M/s Livestock & Crop Registry India Ltd. (LCRI) for crop / live stock registration
for animal identification and also for asset verification.

Thrust Areas: Generally CRISIL score of 6 and above in the scale of 1 to 10 (1 being extremely
negative and 10 being highly positive), is considered. Few of the Thrust areas are as under:
Priority sector with emphasis on agriculture (including micro finance), Export, Retail Finance,
MSME, Trade, Service sectors like Tourism, Health, and Transportation, Food Processing
including Branded Foods (excluding Rice Mills), Advance against warehouse receipts to
Traders, Non conventional renewable energy including Bio-mass, Solar & Wind Energy,
Integrated Textile Mills, Garment Manufacturing, Affordable Housing etc.

Stable Areas: For stable areas, fresh exposure would be considered depending upon merits on
case-to-case basis both to existing clientele as well as new customers, proposed to be brought
in Bank‟s fold. However, the credit requirements of the existing customers would be
considered subject to prudential norms. Few examples of Stable Area are:
i. Cement.
ii. NBFC/MF/FIs

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iii. Real Estate – Financing Housing Projects / Commercial Space (excluding Malls/
Multiplexes)
iv. Capital Market
v. Software/IT Enabled Services Sector including BPO / Call Centres.
vi. Auto Ancillaries
vii. Breweries/Distilleries
xviii. Rent Receivable Finance (Union Rent)
xix. Financing to Road Sector (only Hybrid Projects / Annuity Based Projects/Toll Receivables
Financing.)

Low priority / negative list for lending: lending to be considered selectively on a case-to-
case basis on the inherent strength of the borrower as per the delegation vested in Policy on
Delegation of Loaning powers. Few examples of Low Priority Area are:
i. Casting of Iron & Steel in raw form.
ii. Manufacture of Plastic in primary form includes plastic compounds like
resin/adhesive/Polymers/stabilizers.
iii. Vegetable Oil and Vanaspathi sector
iv. Newsprint Paper
v. Telecom cables / Telecom
vi. Multiplexes/Malls
vii. Gems &Jewellery
viii. Manufacturing of Steel Alloys, Steel Flat-HR
ix Sugar Industry (Standalone)
x. Airline Services
xi. Film Production / Media production/ Entertainment
xii. Financing of State Electricity Board (SEBs) / Distributor companies of PSUs.

The credit facility granted to any trader upto Rs.25 crores covered under Union Trade/ Union
Trade Plus/Union Trade-GST /Union Turnover Plus, even if engaged in trading of commodities
classified under Low Priority Areas will be out of the purview of Low Priority Areas. Credit
facilities to traders engaged in trading of commodities classified under Low Priority Areas &
not covered under Union Trade as above will only be treated as under Low Priority Areas
irrespective of limits.
Credit facilities upto Rs.5.00crore to priority sectors even if engaged in areas classified under
Low priority and exercised within the delegation vested with RLCC-I & above will be out of
the preview of Low Priority Areas.
The credit facilities under TReDS granted to any Corporate even if engaged is area classified
under low priority will be out of the purview of low priority area.

The Low Priority list is therefore more relevant for stricter scrutiny and not for putting ban on
financing.

Prohibited Areas are exposures under Lease Financing, Industry producing Ozone depleting
substances, Virtual Currencies, issuance of LOC/LOU

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Restricted Areas: Statutory restrictions imposed by RBI.

No loans / advances shall be granted against the security of Bank‟s own shares.
No loans / advances shall be granted against gold bullions / silver bullions / primary gold.
Gold Loans (should not exceed 75% of the value of gold ornaments/jewellery) to farmers will
not be under restrictive category.
Bank can grant loans against specially minted gold coins (weight of the coin/s should not
exceed 50 grams per customer) as these gold coins sold by the Banks is not treated as
“bullion” or “primary gold”. Gold loan to jewellery manufacturer/exporter is governed by a
separate scheme namely “Union Bullion” of the Bank.
No loans / advances shall be granted to companies for buy-back of their own securities
(except buy back of FCCB).
No loans / advances shall be granted against Certificate of Deposits except Mutual Fund.
No loans / advances shall be granted against the security of partly paid shares.
No loans / advances shall be granted:-
a.To Partnership Firms / Sole proprietor concerns against the primary security of shares /
debentures.
b. For financing Badla transactions,
c. Against FDRs / Term deposits of other Banks

The Bank shall not hold shares in any company whether as a pledgee / mortgagee or absolute
owner, of an amount exceeding 30% of the paid-up share capital of the company or 30% of
Bank‟s paid-up share capital and reserves, whichever is less.
The Bank shall not hold shares whether as pledgee, mortgagee or absolute owner, in any
company in the management of which any Managing Director or Manager of the Bank in any
manner concerned or interested.
No loans/advances shall be granted for setting up new units consuming / producing Ozone
Depleting Substances (ODS).
No loans shall be sanctioned for acquisition of/investing in Small Savings Instruments including
Kisan Vikas Patras (KVPs).

Loans and advances to Directors and their relatives –

All credit proposals for Rs. 25 lakhs and above in respect of borrower / proprietor / partner /
director / guarantor of the borrowing firm / company related to a director on Board of our
Bank / other Bank / or director in other Bank himself should be sanctioned by the Bank's
Board of Directors/Management Committee of the Board. The proposals for less than Rs.25
lakhs may be sanctioned by RLCC-I in terms of the powers delegated to them but the matter
should be reported to the Board.

Sanction of credit proposal to Relatives of / Employees

Commercial loans:
a) Consider credit proposals of staff relatives less than Rs.25 lacs on selective basis by the
next higher authority. Such sanction in respect of relative of senior officers (scale IV and
above) should be reported to Central Office for reporting to Board for information.

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b)In case of new proposal of Rs.25.00 lacs and above to staff relative, the delegation shall
vest with CAC-II and above.
Other loans:
1.By the respective delegatee other than to self/own relative:
i. Secured Loans against Deposits to Staff and their relatives
ii. Loan against NSC/LIC Policies to Staff and their relatives.
iii. Agricultural production finance (Crop Loans) to Staff and their relatives.
2. By respective RLCC and above
i. Cases not covered under (a) above.
ii. Loans under Retail Lending Schemes to staff relatives
In case of proposal of relative of any member of RLCC/SLCC falling within their delegation,
the proposals should be sanctioned /renewed by respective ZLCC under whose jurisdiction the
Region/SARAL falls.
In case of proposal of relative of any member of ZLCC falling within their delegation, the
proposal should be sanctioned/renewed by CAC III. In cases of relatives of members of CACs
(upto General Managers) at Central Office, the same shall be sanctioned / renewed by CAC-II
& above. However, the subject member of the committee should abstain from the meeting.
The scope of the term “relative‟ will be as under:
i. Spouse
ii. Father
iii. Mother (including step-mother)
iv. Son (including step-son)
v. Son's Wife
vi. Daughter (including step-daughter)
vii. Daughter's Husband
viii. Brother (including step-brother)
ix. Brother‟s wife
x. Sister (including step-sister)
xi. Sister’s husband
xii. Brother (including step-brother) of the spouse
xiii. Sister (including step-sister) of the spouse
Retired staff of bank and their relative is to be treated on par with General Public and retail
loans/other loans to them are to be sanctioned on terms and conditions for general public
except for any special schemes introduced by the Bank.
Letter of Credit and Purchase / Discount /Negotiation of bills under LCs shall be considered
only in respect of genuine commercial trade transactions of the borrower constituents, who
have been sanctioned regular credit facilities by the Bank.
However, in cases where negotiation of bills drawn under LC is restricted to our bank and the
beneficiary of the LC is not a constituent of our bank, we may negotiate such an LC, subject
to the condition that the proceeds will be remitted to the regular banker of the beneficiary.

RBI has allowed granting non-fund based facilities including Partial Credit Encashment (PCE)
to those customers, who do not avail any fund based facility from any Bank in India, subject

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to that: Branches / Offices shall ensure that the borrower has not availed any fund based
facility from any Bank operating in India.
The delegation for sanction of such facilities shall be 50% of the usual delegation vested with
respective CACs (SLCCs, RLCCs & ZLCC) at field level towards non-fund based limits as per
extant Policy on Delegation of Loaning Powers. However, CACs at Central Office can sanction
upto their delegated powers.
In case of guarantees with 100% cash margin, the same to be sanctioned as per the usual
Delegation even if the same is to be issued on stand-alone basis.

Lending Automation Solution consists of five modules.

a. Loan Processor
b. IRB Module
c. Credit Monitoring Module
d. NPA Manager
e. MIS Module
LAS is a solution having a capability to define any product for particular branch, particular
Region and particular State.

Preliminary Information Memorandum (PIM) is a structured format for submitting new credit
proposal for “in principle‟ approval before submitting the detailed regular proposal.
It is applicable for new credit proposal of above Rs.20.00 crores.
In case proposed enhancement exceeds 25% of the existing credit exposure subject to
minimum of Rs.50.00crore, term sheet is to be submitted for existing accounts also.

In case of Retail loans case of Rs.10 lacs and above for Rural & Semi Urban Branches and Rs.50
lacs and above for Urban and Metro Branches, Branch Heads/ULP Heads should invariably lead
the due diligence verification of the borrower and securities offered.

Legal Entity Identifier (LEI) is a 20 digit unique code to identify parties to financial
transactions worldwide. As advised by RBI existing large corporate borrowers having total
exposures of Rs.50.00 crore and above to obtain LEI code as per RBI prescribed time line.
Borrowers who do not obtain LEI as per the schedule are not to be granted renewal /
enhancement of credit facilities.

The Bank has subscribed to Industry Research Services of ICRA for ICRA Industry Report and
ICRA Credit Perspective on ICRA rated companies.
Bank also subscribe to Cybercline package which is digital data base of 13000 listed and
unlisted companies. Further, Projects Today, which is the database carrying information of
over 50,000 live projects in various stages of execution, is also subscribed by the Bank.
When a company belongs to a specific group, the group’s consolidated financial statements
should be obtained and analysed, source of promoters‟ contribution should be reviewed in
detail to assess multi-leveraging by the group companies.

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Financial Statements
As per IT Act, Audited Balance Sheet is required for sales Turnover > Rs.1 crore and in case of
Professional it is required when Revenue > 50 Lakh.
All companies / Trust / Society are required to obtain audited financials.
In case of total exposure of the party from all Banks/FIs is Rs.10 lakh and above, audited
balance sheet is required to be submitted.

Market Information
Opinion about the applicant /associate shall be collected by making market enquiries with
people (minimum three) in similar line of business / buyers / suppliers / competitors
/employees etc.
In the case of small borrowers (under Retail Lending Schemes, Traders, MSE etc), it shall be
ensured that the individual resides or undertakes activity within the command area or Area of
operation of the branch (Unless specific exemption is mentioned in the bank‟s scheme) and
his address shall be got confirmed.
Credit Report on Sponsors/JV partners, wherever applicable is to be obtained. In case of
foreign subsidiaries/associate, report from Dun & Bradstreet or similar agency shall suffice in
case credit report from its banker is not available.
Branches to obtain Credit Report (Business Information Report) from external agencies like
D&B, wherever available for major domestic Buyers/Supplier i.e. 20% of sales/purchase from
particular buyer/supplier at least once a year for accounts availing credit facility of Rs.5.00
crore & above.
Due Diligence on supplier of the machinery to be carried out if the cost of machinery is above
Rs.5.00 crore.
Insurance policy having coverage of more than Rs.1.00 crore, Branch to ascertain the
genuineness of insurance policy by writing directly to respective Insurance Companies.
It may be ensured that due diligence is carried out preferably by an officer other than the
processing officer. Further, in case of advances above Rs.1.00 crore, the Branch Head should
invariably lead the due diligence verification.
There may be cases wherein certain due diligence is not feasible e.g. obtaining credit report
from bankers of large number of group concerns. In such exceptional cases exemption may be
permitted by next higher authority above the sanctioning authority upto ZLCC level and by
respective sanctioning authority above ZLCCs subject to suitable mitigating factors.

Benchmark Ratios:
i. Current Ratio (CR) of 1.17 and above,
ii. Debt Equity Ratio (DER) <= 2.00:1,
iii. Debt Equity Ratio (DER-Operational Phase ) <=4.00:1
iv. Total Outside Liabilities to Net Worth Ratio (TOL/TNW) of <= 4:1,
v. Average DSCR (tenor of the loan) of 1.5:1 with Minimum DSCR of 1.2:1,
vi. Average DSCR of 1.3:1 (tenor of the loan) with Minimum DSCR of 1.1:1 only for Solar/wind
power, Road-Annuity/Hybrid Annuity projects
vii. Project Debt Equity Ratio (Project DER) <=3:1,
viii. In case of project appraised /syndicated by other Banks/FI Project DER <=4.00:1

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will be considered as reasonable requirement for any credit proposal. Benchmark of TOL/TNW
ratio will be <= 5:1 for Trade Advance as against <=4:1 for other sectors.
The Current Ratio, Debt Equity ratio and TOL/TNW ratio to be benchmarked as per the latest
Audited Balance Sheet (ABS) of the concern. DSCR and Project DER are to be based upon the
projections in case of fresh term loan.

These benchmarks will be observed for all (new/existing) connections. Relaxation may
however be considered on merits of the case by respective Sanctioning Authority. However, in
case of new connection following modalities should also be followed:

 In case the sanctioning authority is upto scale III, the concurrence of RLCC I / RLCC II
for allowing deviation in benchmarks should be obtained before release of any credit
facility.
 CR less than 1 (one) should generally not be accepted. However in exceptional cases,
CR less than 1 (one) may be permitted by authority not less than RLCCs after recording
proper justification in the proposal. It is to be noted that in cases of project finance,
Current ratio is applicable only after the Date of Commencement of Commercial
Operations (DCCO) of the project.
 Similarly, in respect of ratio of Total Outside Liabilities to Tangible Net Worth
(TOL/TNW), ZLCC may approve relaxation upto 5:1 in deserving cases after recording
justification for permitting such deviations in the proposal. With regard to TOL/TNW >
5:1, in proposals falling within the delegation upto RLCCs shall be referred to ZLCC
and ZLCC proposals shall be referred to CAC-III for permission to allow such deviation.
However, CACs at Central Office can permit relaxation in TOL/TNW on merits of the
case.
The above benchmarks in respect of Current Ratio, TOL / TNW and DER shall not be
applicable for financing to NBFCs / Financial Institutions.
In case of standalone term loan, the current ratio benchmark is generally not applicable and
will not be considered as deviation to loan policy.
The IRR approach is used for assessment of Term Loans of Rs 10 crores and above with
repayment period of 5 years or more.
A project will be generally accepted if its IRR is 3% more than 3 year MCLR at the time of
sanction of loan. Generally project term loan have tenor of more than 3 years and maximum
applicable ROI in MCLR regime is 3 year MCLR, so 3 yr MCLR is considered as a conservative
estimate. However in the case of projects under Hybrid Annuity Model and Solar power, the
accepted IRR should be equal to or greater than cost of borrowing of borrower.
The permission for approving deviation in IRR should be taken from the next higher authority
upto RLCCs and respective delegatee from ZLCC onwards can allow deviation in IRR.

Assessment of the Working Capital of the borrower can be done under anyone of the
following four methods:
i. Turnover Method
ii. Flexible Bank Finance Method (FBF)
iii. Cash Budget Method
iv. Net owned Fund for RNBFCs.

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Turnover Method
The working capital limit shall be computed at 20% of the projected sales turnover accepted
by the Bank.
In the case of MSE borrowers, seeking/enjoying fund based working capital facilities upto
Rs.500 Lacs from banking system, the limits shall be assessed on the basis of turnover
method.
The turnover method shall be applied for sanction of fund based working capital limits to the
non MSE borrowers requiring working capital facilities upto Rs.100 Lacs from the banking
system.
The guidelines on turnover method were framed assuming an average production / processing
cycle of 3 months (i.e. Working capital would be turned over four times in a year).
25% of the estimated sales turnover value shall be computed as working capital requirement,
of which, at least 4/5th (20%) shall be provided by the Bank and the balance 1/5th (5%) shall
be by way of promoter’s contribution towards margin money.
If operating cycle exceed 3 months, then even for limits upto Rs.5.00 crore, assessment by
way of FBF method may be used instead of Turnover method.
Financial data in CMA format may not be insisted upon for credit limit upto Rs.1.00 crore
covered under turnover method.

Flexible Bank Finance Method

Acceptable level of Current Ratio is taken at 1.17:1 against benchmark level of 1.33:1 in
Permissible Bank Finance.
Flexible Bank Finance method is normally applicable for account with credit limits of above
Rs.5 crores for MSE advances & above Rs. 1 Crore for other advances.
Under FBF method, assessment of credit requirement of a party shall be made based on the
projected study of the borrowers‟ business operations vis-à-vis the production/processing
cycle of the industry.

Cash Budget Method

Cash Budget Method may be adopted in case of specific Industries/Seasonal activities such as
Software Development, Construction Industry, Film Industry, Sugar, Fertilizers etc., and
working capital short term loans.
The required finance is arrived at from the projected cash flows and not from the projected
values of assets & liabilities. Besides the cash flow, other aspects like the borrower’s
projected profitability, liquidity, gearing, funds flow are also to be analyzed.

Net Owned Funds Method

RBI has withdrawn Net Owned Funds method for NBFCs except for Residuary Non-Banking
Companies (RNBCs). Hence, the cash budget method can be used for assessment while lending
to NBFCs.

Loan System of Delivery of Bank Credit was made applicable for borrowers enjoying credit
limits of Rs.10.00 crores and above from the Banking System.
By and large, for borrowers enjoying credit limits of Rs.10.00 crores and above the Loan
Component shall be 80% of the assessed limits.

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Borrowers will have to adjust the WCDL component at least for a day in a year.

Sometimes the existing borrower having multiple Term Loans /WC applies for fresh Term Loan
(Pick up van/Generator sets/Computers/Equipments). Branches have to calculate
consolidated DSCR taking the existing terms loans repayment schedule and standalone DSCR
taking the repayment schedule of the proposed fresh Term Loan. In case term loan
requirement is of Rs.50.00 lacs and below or 20% of the existing credit exposure in aggregate,
whichever is less, credit assessment of term loan for the specific project is to be done on
standalone basis. It should be ensured that
i. There is no overdue in any of the existing term loans.
ii. Operation in WC is satisfactory.
iii. The DSCR in the existing term loan should be minimum 1.2 / average 1.5 or above at the
time of assessment of new term loan.
iv. The existing credit rating should be minimum CR4/UBC4 as per latest ABS.
v. No fresh rating for the facilities is to be done, provided the rating has already been done
based on the latest ABS as per para 7.1.10.
vi. However it should be ensured that comprehensive review /renewal of the account is
carried out at least once within the stipulated period as per applicable rating.

Tenor:
The maximum period for repayment of Term Loans shall be normally 84 months [including
moratorium].
This may, however, be increased upto 180 months in respect of projects having longer
gestation period.
The tenor of housing loan classified under CRE also may be extended beyond 180 months also.

Techno Economic Viability (TEV) study and Lenders Independent Engineers (LIE):
TEV study is a pre-sanction diligence process and Lender Independent Engineers study is a
post-sanction monitoring of the project.
Techno Economic Viability Study (TEV study) shall be conducted by Bank‟s empanelled Third
Party Services Providers (TPSPs) in cases of manufacturing industries / project finance where
our exposure in respect of fresh Term Loan is Rs.25 crores & above (excluding working capital
if any) or cost of the project (availing Term Loan) is Rs.50 crores & above and by Bank‟s
Technical Officer in all other eligible cases.
Lender’s Engineers shall be employed wherever Bank‟s total exposure by way of Term Loan is
Rs.25 crores and above or cost of the project financed through Term Loan is Rs.50 crores and
above to evaluate the progress of the project and assessing the amount invested, compliance
of sanction norms, etc. In other cases, TEV/LIE study may be carried out if stipulated by the
sanctioning authority.
We may accept TEV/LIE study conducted by consultants on the panel of consortium leader or
member banks in the consortium. Besides above, TEV/LIE report compiled by TPSPs who are
not on the panel of our Bank can be accepted by CAC-II and above on case to case basis.
The Technical Inspection is applicable for project finance and industries involved in
manufacturing or processing or production or preservation of goods. In the eligible cases as
above, Technical Inspection by Bank‟s technical officer will be applicable for all new and

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enhancement proposals with credit exposure above Rs.50.00Lacs emanating from branches in
Major A class cities and above Rs.25.00 Lacs in other areas.
Technical Inspection as above for credit limits upto Rs.200 lacs emanating from branches in
Major A class cities and upto Rs.100 lacs in other areas can be waived by RLCC-I & above.
The Delegation for waiver of TEV / LIE study shall be vested with Central Office.

Brand as Security:
The brand has a value and the same can be considered as security/collateral security for the
loans and advances extended to a borrower company.
The borrower should be a limited company incorporated under provisions of the Companies
Act 1956 or PSU/Semi-PSU Company or a Corporation.
The valuation of the brand should be got done from at least two valuers empanelled with the
bank. The lower of the two may be accepted as value of security. Also, valuation from
reputed external agencies who have undertaken similar assignments in other PSBs can be
accepted.
The owners of the brand should be a highly reputed corporate in existence for at least 10
years.
The brand must have been patented along with the trade mark and registered with the
competent authority.
The charge of the bank should be created on the brand through a document vetted by Banks
empanelled legal advisor and should be registered with ROC.
Acceptance of Brand as security can be decided on a case to case basis at Central Office level
only.

Quasi Equity:
It is subordinated to the Bank’s loan. The unsecured loan should not be repaid during the
currency of the Bank loan or without prior concurrence of the bank. As far as possible it
should not carry an interest at least up to DCCO. If such loan carries interest, it should be
only with prior consent of the Bank and servicing of interest would also be subordinated to
interest on the Bank loan. Ratios calculated considering unsecured loan as quasi equity will
not be construed as deviation to the benchmark ratios.

Promoter’s Contribution: Out of the promoters‟ contribution, at least 50% should come by
way of equity in case of project loan. The lower level of promoter contribution by way of
equity / capital can be accepted by ZLCC & above.

Upfront Contribution:
Infusion of 50% promoters’ contribution upfront before disbursement of Term loan by Bank(s)
with balance to be brought in stages in predefined manner, and infusion of entire promoters’
contribution upfront to be encouraged. ZLCC may consider 25% promoters’ contribution
upfront before disbursement by Bank(s) with balance to be brought in stages in predefined
manner in Large Industrial/Infrastructural Projects/ Syndicated Loans as per their respective
delegated powers on case to case basis. However, CACs at Central Office may consider lower
upfront promoter‟s contribution on merits of the case.

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Guarantee of Shareholders:
Mandatory guarantee of shareholders where shareholders hold equity of 20% and more.
Aforesaid condition is not mandatory for corporate with external credit rating of A/AA/AAA or
equivalent, PSUs and Government Owned Bodies (including societies), the companies
promoted by PSUs / private sector, JVs promoted by PSUs/private sector. In case of down
gradation of rating below A, Branch to insist for guarantee of the shareholders holding equity
of 20% or more otherwise Branch may exercise exit option in such accounts.
Sanctioning Authority shall have the authority to waive such guarantee, on case to case and
based on merits of each case.

Period of Book Debt for computation of Drawing Power:

Generally, Book Debts for more than 90 days is not to be considered for the purpose of
Drawing Power.
However, relaxation in period of book debt for calculation of Drawing Power in proposals
falling under the delegation of Branch Heads can be permitted by RLCCs and proposals falling
under the delegation of RLCCs/SLCCs and above can be considered by the respective Credit
Approval Committees themselves.
Book Debt above 180 days for calculation of Drawing Power may be permitted by next higher
authority above the sanctioning authority upto ZLCC level and by respective sanctioning
authority above ZLCCs.
No Drawing Power is to be permitted against Book Debts of group concerns unless permitted
by next higher authority above the sanctioning authority upto ZLCC level and by respective
sanctioning authority above ZLCCs.

Inspection / Valuation of Securities:

In respect of any particular property/ies offered as prime/collateral security valued at Rs.2
crores and above, Title Search Report from two empanelled advocates approved by the Bank
shall be obtained.
Two independent valuations are to be obtained from the panel valuers in cases where the
value of any particular property (ies) is Rs 5 crores and above.
The valuation of properties to be reckoned with reference to their registered price during
first year after the registry has been made.
The value of property to be considered for the purpose of collateral /prime security to be
restricted to the balance of value of property (As per valuation by Bank’s approved valuer) in
excess of 200% of the outstanding of the loan facility against which the property is held as
prime security.
Legal reports by empanelled advocate of Member Bank/s in consortium / Multiple Banking
Arrangement (MBA) account may be accepted by the Bank unless otherwise specified by the
Sanctioning Authority. The aforesaid mechanism is applicable for legal reports obtained by
Public Sector Banks on commonly charged security. However, in security exclusively charged
to our Bank, legal report should be obtained from our empanelled advocate only.

Consortium / Multiple Banking Arrangement (MBA) / Joint Lending Arrangement (JLA):

JLA with a single borrower with aggregate credit limits (both fund based and non-fund based)
of Rs.150 crore and above involving more than one Public Sector Bank.

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JLA shall also be applicable on all non-investment grade borrowers (External rating below BBB
or equivalent) irrespective of the amount of exposure.

Minimum Threshold limit for participation –

In case of aggregate exposure under the consortium is below Rs. 250 crore, Bank‟s minimum
share shall not be less than Rs. 25 crore.
Bank shall have a minimum share of 10% in case of consortium with aggregate exposure of Rs.
250 crore & above and upto Rs. 2000 crore.
In case of large exposures under consortium with aggregate exposure exceeding Rs. 2000
crore, Bank shall take minimum share of Rs. 200 crore. In such cases, minimum threshold of
10% will not be applicable.

Credit Evaluation Grid (CEG):

Credit proposals which would be placed before MCM, CACs at Central Office, Zonal Office
(ZLCC), SARAL (SLCC) and Regional offices (RLCC) are not required to be routed through the
Credit Evaluation Grid (CEG).
CEG will apply to all new/enhancement proposals of Rs 100.00 lacs and above in Chief
Manager headed Branches and in case of Rs 200.00 lacs and above in AGM & above headed
Branches, except Retail Lending schemes other than Union Health, falling within the DA of
branch head (where SARALs are not present).
The renewal proposals of Rs 100.00 lacs and above in Chief Manager headed Branches and in
case of Rs 200.00 lacs and above in AGM & above headed Branches at existing level where
fresh credit rating based on latest Audited Balance Sheet duly vetted by Branch Head as per
IRB Module, has deteriorated to be routed through Credit Evaluation Grid. Likewise the
review proposal of Term Loan need not be routed through the Grid.

Validity of sanctions:
All fresh sanctions, if not availed within a period of 3 months in case of working capital (FB /
NFB) facilities and 6 months in case of term loans from the date of sanction, would lapse and
require validation from the competent/delegated authority.
In case of enhancement in existing working capital limits, this provision will not apply.
In case both the facilities are sanctioned in a single account and there has not been any delay
in achievement of COD and no cost overrun, in such cases working capital sanction to be
released within 3 months from the COD date.
Revalidation of sanction will not extend the date of original sanction for calculation of due
date of review / renewal.

Extension of Expired limit:

If due to unavoidable circumstances and genuine reasons the party is not able to furnish the
required particulars, generally, the extension of the limits by review should be allowed for 3
months which can be extended for further period of 3 months. Any extension of tenability of
limits upto 3 months can be done through a review by the respective sanctioning authority
twice in any account i.e. maximum upto 6 months from due date of original review / renewal.

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However, such review upto 3 months falling within the delegation of Management Committee
of Board is vested with CAC-I.
An account where limit (regular /adhoc) have not been reviewed/ renewed within 180 days
from the due date / date of adhoc sanction will be treated as NPA.
If the branch has submitted a full fledged review proposal recommending renewal for further
period of 1 year, but in view of certain adverse features if the competent authority has
extended the limits only for a period of 6 months, such review will be treated as full fledged
review.
Extension of any concessions already permitted by the competent authority will remain valid
as per provisions in the Loan Policy.
Normally, in expired limits, exposures beyond the sanctioned limits cannot be permitted.
In respect of consortium accounts where we are only a member, if the processing of limits is
not likely to be completed by the leader even within the extended period of tenability
permitted by our Bank, our branches / offices shall take steps at least to independently
renew the limits either at the existing level or at a lower level after obtaining the latest
Audited / Provisional Balance Sheet / figures relating to key financial indicators etc. from the
borrower within a period of 45 days thereof. In such cases the enhancement in limits can be
considered only when it is assessed by the lead bank of the consortium.

Credit Process Audit:

(CPA) shall be applicable in respect of all advance accounts with aggregate credit limits of Rs
1.00 crore and above and in case of Retail loans (disbursed on or after 01.04.2013), of Rs.10
lacs and above for Rural & Semi Urban Branches and Rs.50 lacs and above for Urban and Metro
Branches except as under:
 Release of Adhoc facilities unless otherwise specified by sanctioning authority.
 Renewal of Credit facilities at the existing / reduced level without any change in
major terms.
 Advance against deposits standing in the name of the borrower at the branch where
advance is sanctioned.
In case of Non retail Loans Credit Process Officer has to comment on
a. Applicable processing charges are recovered / not recovered.
b. Creation of correct / incorrect Account Master in the System.
c. Rate of Interest is fed / not fed in the system as per terms of sanction.
CPAO has to verify the correct feeding/updation of Internal Credit Rating in Finacle (Credit
Rating in Finacle should match with IRB rating) and comment about the same in CPA.

Legal audit shall be applicable in respect of all credit exposures of Rs.5.00 crores and above.
Advances accounts with exposure (Both FB & Periodicity
NFB credit limit) of
Rs.5.00 crore & above upto Rs.100.00 crores Once in 5 years
Above Rs.100.00 crores Once in 2 years

In case of any change/substitution in securities is done in the intervening period of 5/2

yrs,fresh legal audit shall be done within 3 month of the change/substitution.

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Legal Audit should also be conducted for all mortgage based retail loan accounts with
outstanding of Rs.10 Lacs and above and falling under „SMA-II‟ category as on 30th April every
year.

Disbursement on Reimbursement Basis:

In genuine cases, the loans and advances may be disbursed by way of reimbursement. Such
cases should be referred for concurrence to next higher authority for loans sanctioned upto
Deputy General Manager as Branch Head / RLCCs and by respective sanctioning authority
above RLCCs.

Documentation Standards
Documents in respect of advances above Rs. 10 lacs and upto Rs.1 crores are to be vetted by
law officer attached to RO/FGMO/ panel advocate and documents in respect of advances
above Rs. 1 crores are to be vetted by approved advocates before release of limits.
Documents in respect of advances upto Rs. 10 lacs are to be vetted /certified by Branch
Manager/ Advance Officer himself /herself.

Holding on operation may be considered for a period of 6 months to viable/potentially viable

units (MSME or otherwise). This will allow subject units to draw funds from the cash credit
account at least to the extent of their deposit of sale receipts during the period of such
“holding on operation” less pre-agreed cutbacks to reduce overdues. Holding on operations
within the overall sanctioned limits to be permitted by the next higher authority upto RLCCs
and respective delegatee thereafter.

Transfer of loan accounts:

Accounts to be transferred Approval Committee
Inter zone CAC II
Inter Region (within zone) ZLCC
Inter Branches (within Region) RLCC

In case of business exigencies, the account may be transferred with the permission of
Regional Head / Zonal Head based upon merits on case-to-case basis which has to be ratified
by respective RLCC / ZLCC.
Agriculture Advance:
Branches may extend need based fresh finance to deserving and eligible farmers after they
settle their accounts which were earlier classified as Non Performing Assets if:
 The Bank has not made any sacrifice unless otherwise in any Government approved
Scheme or any other scheme adopted by the Bank and
 There is no instance of fraud, malfeasance or misappropriation / diversion of fund.
Delegation for working capital and term loan shall be used to sanction working capital
components and term loan components respectively for UGC/Crop Loan.

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Infrastructure Finance: Banks are permitted to exceed the single borrower / group exposure
norm to the extent of 5% / 10% respectively provided the additional exposure is for the
purpose of financing infrastructure projects.
The exposure would generally be taken jointly with leading Term Lending Institutions / Banks
in case of large infrastructure projects say project cost of above Rs.150.00crores.
Branch to feed the drawdown schedule of every term loan of Rs.5.00crs and above as
submitted in Finacle and disbursement is to be monitored as per schedule
It will be ensured that during the currency of bank finance, the promoters‟ holding in SPVs
does not fall below 51% at any time.

NBFC:
Reserve Bank of India has withdrawn the ceiling on bank credit to NBFCs based on their Net
Own Funds.
As per RBI directives, NBFCs with Paid-up Capital of less than Rs.25.00 lacs are prohibited
from carrying on business operations
“Systemically Important NBFCs” are defined as “all NBFCs with an asset size of Rs 500 crores
and more as per the last Audited Balance Sheet”. These NBFCs are termed as NBFC ND SI [Non
Deposit Systemically Important]. Deposit Taking NBFCs are termed as NBFC D SI [Deposit
taking Systemically Important].

Capital Market Advance:

Loans against the security of debentures and bonds should not exceed the limit of Rupees ten
lakhs per individual if the securities are held in physical form and Rupees twenty lakhs per
individual if the securities are held in dematerialized form.

Quick Mortality will be defined as:

All accounts becoming NPA within a period of 12 months from the date of first disbursement
in respect of the limits sanctioned for the first time.
In cases where repayment holiday is given either of interest or instalments, the period of
12months shall be reckoned after the expiry of the repayment holiday.
All accounts renewed / reviewed with or without any enhancement shall be excluded for this
purpose.

Bridge loans:
Bank shall not sanction Bridge loans / interim finance for activities which are required to be
legitimately met out of Government resources / budgetary allocations except subsidy
receivable in fertilizer industry and duty drawback.

Trade Receivables Discounting System (TReDS) - TReDS is a digital platform to help MSMEs
to get their trade receivables financed (without recourse) at a competitive rate through an
auction mechanism where multiple financiers can bid on invoices accepted by PSUs /
Corporate Buyers.
Factoring transactions taking place through TReDS shall be eligible for classification under
priority sector. Bank has till now entered into agreement with two TReDS Fintech Companies
viz.RXIL-TReDS and invoicemart.com for operating on TReDS.

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Acquisition Financing:
In Infrastructure bank finance should be restricted to 50% of the finance required for
acquiring the promoter’s stake in the company being acquired. The tenor of the bank loans
may not be longer than seven years.

Finance to specialized entities:

“specialized‟ entity will be a body corporate exclusively set up for the purpose of taking over
and turning around troubled companies and promoted by individuals or/and institutional
promoters (including Government) having professional expertise in turning around „troubled
companies‟ and eligible to make investments in the industry/segment to which the target
asset belonged.
Bank should ensure that these entities are adequately capitalized, and debt equity ratio for
such entity is not more than 3:1. Delegation is with CAC at Central Office.

MIBOR Linked Advances

The major features of the products being:
a. Large corporate borrowers of the Bank with credit rating not less than CR1/UBC1 to
CR3/UBC3 of our Bank and preferably “P1” or equivalent by reputed credit rating agencies.
b. Generally would be with Call and put option.
c. Considering the interest rate outlook as also to protect the yield on advances, the Bank will
selectively utilise this product. However, effective Rate of Interest will be in compliance with
the prevailing guidelines on MCLR.
d. The delegation for offering MIBOR linked advances will vest with CAC-II and above.

Line of Credit is to be offered only to Large Corporates / PSUs. Sanction of Line of Credit
should be communicated with unconditionally cancellable clause.

TAKE-OVER OF ADVANCES CODE:

Takeover norms are not applicable to Retail lending schemes except Union Health & Union
Mortgage Schemes.
As per CVC guidelines, the takeover norms should also apply where the borrower comes to
another bank after closing account within a period of 3 months.
Norms for takeover of advances under Manufacturing / Industrial advances, Trade and
Services Sector segments will be as under:
- The advance to be taken over should be rated CR4/UBC4 or better
- Branches are advised to make discrete inquiries with at least 3 people in the similar
line
- The account should have been a Standard Asset in the books of the other Bank/FI
during the preceding 3 years.
- The unit should have earned net profits (post tax) in each of the immediately
preceding 3 years.
- Statement of account of the existing bank for preceding 6 – 12 months

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- Current Ratio of 1.17. However, CR may be considered on case to case basis upto 1.10
by sanctioning authority looking to other strengths of the proposal.
- TOL/TNW Ratio of 3:1 and in case of Trade accounts above 4:1.
- The average DSCR for the project should not be less than 1.50 at the time of take-over
or for the remaining period of advance.
- It should have commenced commercial production and surpassed the break-even level
and the moratorium period for repayment of loan should be over.
- The term loan proposed to be taken over should not have been rephased by the
existing FI / bank after commencement of commercial production.
- The remaining period of scheduled repayment in future, after take over, should be at
least 2 years
- In case more than one term loan is to be taken over, one Term Loan should be at least
with remaining repayment period of 2 years.
In consonance with the best Corporate Governance practices, the Bank would not take over
from any Bank where any of our EDs or MD&CEO have worked earlier.
However, these guidelines will not be applicable for the following with ticket size upto Rs.20
crores:
a. All retail loans and
b. Other loans especially in the MSME & Trade segment
In the cases of Working Capital / Term Loan finance through Consortium / Multiple Banking /
Joint Lending Arrangement, increasing our share as well as taking over of the share of other
bank or induction of our bank by taking over of the share of other bank shall not be reckoned
as takeover of advances from other banks.
The approval of takeover norms (without deviation or with deviation) is to be obtained from
next higher authority upto RLCC-I in all the cases of takeover proposals after the proposal is
sanctioned by the delegatee but before release of such facilities. The next higher authority
for branch heads of IFB will be CACs at Central Office. However, approval from next higher
authority is not applicable for CACs at Central Office.
Upto RLCC level, a maximum of one deviation in financial norms may be permitted. ZLCC can
approve maximum of two deviations in financial norms (CR, DSCR, TOL/TNW and Profitability)
for takeover of account and approval for deviations more than the above in takeover norms is
to be taken from Central Office.
As a matter of policy, no takeover beyond hurdle rate i.e., CR-4/UBC-4 should be
entertained.

Pricing:
Rate of Interest: (MCLR) with effect from 1st April 2016.
In case of newly established enterprises not having started operations, the credit rating of
CR-3/UBC-3 will be considered for pricing in respect of highly rated accounts upto CR-3/UBC-
3 and in other accounts pricing will be considered as per actual credit rating.
As per SEBI guidelines, listed entities should submit audited results for the entire financial
year within 60 days from the end of the financial year. Therefore, listed entities should
submit the audited financial results of previous financial year to the Bank within 3 months
from the end of the financial year. Other entities should submit their audited results within 7
months from the end of the financial year.

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The cutoff date for pricing of loan as per credit rating will be the date of rating as per latest
Audited Balance Sheet or 31st December (30th September for Listed companies) of next
financial year whichever is earlier.
The authority for approval of fixed interest bearing advance (other than those specified) will
continue to be centralized at Central Office.
Additional interest on adhoc (Except Export Facilities) is 2% p.a. However, during the validity
of interest concession on regular limits, if ad-hoc facility (Except export facility) is permitted
by the competent authority, additional interest is to be charged on Ad-hoc Facility at normal
applicable rate as per credit rating or 2% over the concessional rate, whichever is higher
subject to overall spread approved by the Bank.

The system has 10 grades for credit rating upto CR/UBC-10. Unless otherwise specified,
applicable interest rate for UBC/CR-9 & UBC/CR-10 rated account will be treated as CR-
8/UBC8 for pricing purpose.

As per extant guidelines, ALCO is the competent authority for pricing of assets & Liabilities in
the Bank.

For concessional pricing in case of consortium, utilization of limits with us should be at least
60%.
In cases concession in processing charges is approved by the competent authority but system
charges normal processing charge or waiver of service charges or refund of excess interest,
commission, discount, etc or otherwise approved by the competent authority, Regional Head
of respective region is authorized to permit debit to income account for reversal of such
amount in the system for all Branches including IFBs and Mid-Corporate Branches in the
region. However, Branch Heads of IFBs are authorized to permit debit to income accounts for
reversal of such account in the system as approved by competent authority.

The Bank in consultation with Boston Consultancy Group (BCG) has developed account
profitability plan which gives RAROC in absolute and percentage terms.

Continuation of Concession
Even if the concessions as above in a particular facility have been sanctioned by a Higher
Authority, at the time of renewal at existing or reduced level, the delegatee may continue
the concessions, provided:
- Fresh credit rating based on latest audited balance sheet is carried out,
- Fresh credit rating is vetted by the Risk Manager, and there is no deterioration in the
credit rating as compared to previous credit rating, based on which the concessions
were granted.

In case of up-gradation in credit rating, the continuation of concession shall be as detailed

below:
a. Existing concessional rate of interest i.e. appropriate MCLR + Spread as per previous rating
or
b. Applicable rate of interest as per upgraded credit rating, whichever is lower.

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c. Thus, concessional rate of interest may be continued without passing the benefit of up-
gradation in credit rating.

Risk Rating
For borrowers rated with Bank’s own models, the hurdle rate for new borrowers / green field
projects will be CR-5/UBC-5 and for takeover and CRE loans to builders the same will be CR-
4/UBC-4. Bank shall normally not take new exposure below hurdle rate.
Hurdle rate for new accounts, if rated by external credit rating agencies is BB and for
takeover accounts is BBB. For Infrastructure projects, hurdle rate for sponsors rated by
external credit rating agencies should be BBB or above. However, the account rated below
hurdle rate of external credit rating is to be placed before the respective Credit Approval
Committee / sanctioning authority for acceptance. The principle hurdle rate for compliance
of takeover norms will be considered as per internal rating model.
CRISIL Ram Model is IRB Compliant i.e. it has provisions for conducting a) Obligor rating b)
Facility rating and c) Composite Rating. Bank has shifted from obligor rating to composite
rating of CRISIL Ram Model for internal rating, pricing and hurdle rate with effect from
01.12.2016. The credit ratings under RAM Models have been aligned with the rating grades of
Bank’s own models.
UBI models will be used for doing the credit rating in respect of borrowers with aggregate
exposure (FB limits + NFB limits) upto Rs.5.00 crores.
Rating Model Applicable limit to aggregate
exposure (FB limit + NFB limit) to
borrowers
UBI-I Above Rs.2.00lacs &upto Rs.10.00lacs.
UBI-II Above Rs.10.00lacs &upto Rs.1.00crs.
UBI-III Above Rs.1.00crs &upto Rs.5.00crs.
Union Trade-I Above Rs.2.00lacs &upto Rs.50.00lacs.
Union Trade-II Above Rs.50.00lacs &upto Rs.5.00crs.

In case of borrowers with aggregate credit exposure of above Rs.5 crore or average turnover
of above Rs.25 crore in the last 3 years or 3 years average projected turnover of above Rs.25
crore, respective CRISIL RAM rating model to be used. Also in case of exposure to Banks,
NBFCs, CREs, Brokers & MFIs irrespective of their exposure and turnover, the respective
CRISIL RAM rating models will be used
The hurdle rate for borrowers under CRISIL RAM rating models will be CR5/UBC5 for new
borrowers and CR4/UBC4 for take over accounts and CRE loans to builders.

Scoring Model for Land Based Agricultural loans above Rs 2 lacs viz. Crop Loan/UGC, farm
Mechanization, Minor Irrigation is in vogue and such loan will not be subject to credit risk
rating.
Other Agriculture loans more than 2 lacs within the scope of rating system of the Bank in
nature of manufacturing activities under Food and Agro Processing unit/ production /services
activities shall be rated as per Credit rating Model I, II & III or CRISIL Ram Model, whichever is
applicable.

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However, agriculture loans accounts having total credit exposure upto Rs 1 crore will remain
delinked with rating for fixing rate of Interest and credit risk rating will be done to know
whether the account is coming under investment grade or not. Rate of Interest in agriculture
loan accounts having aggregate loan amount more than Rs 1 crore will be linked to Credit Risk
Rating.
As per RBI guidelines all accounts enjoying Fund Based and Non Fund Based limits above
Rs.5.00 crores are to be rated by the External Credit Rating Agencies.
Unrated borrowal accounts with above mentioned cut-off limits from cut-off time period will
attract risk weight of 100%.
With effect from April 1, 2019, all unrated claims on corporate, AFCs, and NBFC-IFCs having
aggregate exposure from banking system of more than Rs.200 crore will attract a risk weight
of 150%.
However, claims on corporate, AFCs, and NBFC-IFCs having aggregate exposure from banking
system of more than Rs.100 crore which were rated earlier and subsequently have become
unrated will attract a risk weight of 150% with immediate effect.

RBI accredited seven external rating agencies i.e. CRISIL, CARE, INDIA RATINGS AND
RESEARCH PVT LTD, ICRA, Brickwork Ratings India Pvt Ltd, Acuite Ratings & Research Ltd
(previously known as SMERA Ratings Limited) and Infomerics for Basel –II compliant rating of
the loan facilities of the borrowers of our Bank. The services of Acuite Ratings & Research
Ltd, CRISIL, CARE, ICRA and ONICRA can be utilized for external credit rating of the SMEs.

The accounts where initially the limits are above Rs.5.00 crores but subsequently due to
repayments the outstanding comes to Rs.5.00 crores and below, such accounts need not be
rated by the External Credit Rating Agencies.
In case of any delay in renewal and deterioration of rating based on latest ABS, the existing
ROI / service charges shall be permitted for a maximum period of 3 months or till the date of
renewal, whichever is earlier. Any delay in renewal beyond 3 months will attract applicable
ROI / service charges based on revised rating.
In case of renewal / enhancement of accounts rated UBI/CR-6 and below, the delegation for
sanction of such proposals should be exercised as per policy on Delegation of Loaning Powers.
Wherever feasible, branch may tactfully try to come out of the exposure either immediately
or in a phased manner.
The Bank shall adopt discriminatory time schedule for renewal / review of credit limits of Rs.
10 lac and above based on the credit rating assigned as under.
Risk Rating Maximum period of
Review/Renewal
CR1/UBC1 18 months
CR 2/UBC2 to CR 5/UBC5 Annual (12 months)
CR 6/UBC6 to CR 8/UBC8 Biannual (6 months)
Advances where credit rating is not applicable, retail loans (irrespective of quantum of loan)
and advances below Rs 10 lac will continue to be reviewed / renewed once in a year.
Also, proposals under restructuring irrespective of credit rating should be reviewed / renewed
on an annual basis unless otherwise specified by sanctioning authority.

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Time limit for Disposal of Proposals:
i. Disposal of loan applications for Priority sector advances:
Bank’s Initiative Time Limit
Proposal falling within the delegated authority of Branch Head–
MSEs 7 days
Other than MSEs as under:
Credit limit upto Rs.25,000/- A fortnight

Over Rs 25,000/- 8 to 9 weeks

Proposal beyond delegated authority
of Branch Head (within delegated
authority of RLCC/SARAL)-
MSEs
12 days
Other than MSEs over Rs 25,000/-
10 weeks
(the above period includes time limit
at Branch also)
ii. Disposal of loan applications other than above:
As per Fair Practice Code adopted Time Limit
by the Bank
Credit proposals for export finance
including those under consortium:
Sanction of fresh/enhanced credit
45 days
limits
Renewal of existing credit limits
30 days
In respect of consortium advances
other than exports:
Sanction of fresh/enhanced credit 60 days
limits
Renewal of existing credit limits
45 days
All other applications 10 weeks
iii. Disposal of Preliminary Information Memorandum (PIM): Time limit of 7 to 15 days is
adequate for disposal of PIM from the date of receipt and respective authority should adhere
to the same.
iv. Disposal at Controlling Offices: Average time limit of 15 days from the date of receipt of
proposal at delegatee level within the overall TAT for disposal of loan application.
v. Disposal of Retail Loan Applications:
Level For sanction of New Loan For approval of deviation
Branch / ULP TAT (T) TAT (T)
RO T+3 T+2
ZO T+5 T+4
CO T+12 T+9

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Where ‘T’ is standardized TAT as given below for each scheme:

Scheme TAT
Union Home 5 days
Union Miles 2 days
Union Education 7 days
Union Mortgage 7 days
Union Personal 3 days
Other Retail Schemes 7 days

MSOD, QPR and Half yearly operating / Funds flow statement (HOF) shall be submitted by
borrowers with credit limits of Rs.5 crores and above.
Quarterly certificate for verification of Book debts by Chartered Accountants should be
submitted for working capital limits of Rs.1 crore and above.

Branches shall ensure that the account does not slip to NPA category on account of the
following Technical reasons:
- Review/Renewal of regular/ad hoc credit facility is not done within 180 days from due
date of actual review / renewal of account.
- Drawings allowed against Stock/Book Debt Statements older than 180 days.

Fair Practices Code (FPC) for lenders:

In case of rejection of any loan application under priority sector, Branch may reject
application (except in respect of SC/ST), provided the cases of rejections are verified
subsequently by the Regional Manager.
If applications in respect of SCs/STs are to be rejected, the same should be done at the next
higher level instead of at branch level.

Insolvency and Bankruptcy Board of India (IBBI) (Information Utilities) Regulations –

As per Section 215 of IBC, a financial creditor shall submit financial information and
information relating to assets in relation to which any security has been created to
Information Utility.
Information Utilities are entities, registered under IBC which act as a repository of legal
evidence holding the authenticated information pertaining to any debt / claim to produce in
any court of law.
National e-Governance Services Limited (NeSL) is first such Information Utility (IU) and Bank
has entered into an agreement with NeSL for submission of financial information of the
borrowers, as a part of obligations under IBC 2016. Submission of financial information to a
registered Information Utility is a statutory obligation and non compliance will attract penal
provisions under IBC.
Central Repository of Information on Large Credits (CRILC)
Threshold of Total Exposure (TE) for reporting to CRILC is Rs.5.00Cr & Above.

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Apart from exposure details, other credit parameters such as Asset Class Special Mention
Account (SMA 0, 1, 2), FRAUD / RFA, Current account balance etc are available with CRILC.
The reports submitted under CRILC are
 CRILC Main: (Monthly Reporting)
 RLC (Return on Large Credit): (Quarterly Reporting)
 Defaulted Borrower Report (DBR): (Weekly- Every Friday)
 RFA / FRAUD: (As and when basis)

Group Approach:
In simple layman language, if at any time during the reporting period or during the period
under review, a person / enterprise has a say in the day-to-day management of the other
firm, then the two entities will be considered as a part of same group.
Two or more enterprises are deemed to be controlled by the same enterprise/person
when:
 Controlling / substantial Interest, i.e. holding of shares, conferring voting rights of 20%
and above, is by the same enterprise or by the same individual himself or jointly with
his/her close relatives
 More than 50% of the directors / partners (excluding the ones nominated by
Government of India / Reserve Bank of India / Financial Institutions / Banks /
Debenture Trustees) in one enterprise are the same and / or closely related to each
other to those in another enterprise(s); and / or.
 Two or more enterprises have a contractual arrangement to share the power to govern
the financial and / or operating policies of the said enterprises; and / or
 One company is subsidiary company (as defined under Companies Act) of another
company either by itself or through one or more subsidiaries.
 If holding company of two or more companies are the same company.
 SPVs formed for execution of specific project.
 Joint Venture for execution of specific project. The Joint Venture will belong to the
company/group which retains management control.

“Significant Influence”: voting rights of 20% or more.

As far as possible fresh credit facilities should not be normally considered in any new account
of a group/ sister concerns, which come under non-investment grade i.e. CR-6/UBC6 and
below.

TReDS: CAC-III is empowered to approve TReDS limit.

GUIDELINES ON CREDIT EXPOSURE TO NPA/DEFAULTERS:

If there are defaults on credit cards or otherwise as reported by CIBIL/Credit Information
Companies upto Rs.2,00,000/- and the applicant produces sufficient proof for having removed
default, the credit facility can be sanctioned by the respective Delegatee / CAC on being
satisfied with the proof of removal of default.

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Wilful Default & action there against:

The penal measures would be made applicable to all borrowers identified as wilful defaulters
or the promoters involved in diversion / siphoning of funds with outstanding balance of
Rs.25.00 lac or more without any exception. Similarly, the limit of Rs.25.00 lac will also be
applied for the purpose of taking cognizance of instances of siphoning and diversion of funds.
Bank has in place a separate Policy on Non-Cooperative Borrowers and Wilful Defaulter of
Rs.25 lacs and above duly approved by the Board.

Sanction of Loans/ Advance to Applicant who had settled their dues by Compromise/OTS:
The delegation for fresh finance as per norms to applicant who had settled their dues with
our bank by compromise/OTS will be one stage higher than the authority, which has approved
the subject compromise/ One-time settlement at RLCC-I & above. Similarly, delegation for
fresh finance to applicant as per norms who had settled their dues by Compromise/OTS with
other Banks will be next higher authority at RLCC-I & above. However, Proposals under
delegation of CACs at Central Office need not be referred to next higher authority. The
delegation for sanction of such proposals shall vest with respective CAC itself.
Respective sanctioning authority can exercise delegation as per policy on delegation of
loaning powers in case compromise/OTS is of credit cards default upto Rs.2.00Lacs and same
should not be referred to higher authority.
Fresh finance as per norms to applicant who had settled their dues with our Bank by
compromise/OTS is subject to reimbursement of the sacrifice involved on the part of the bank
through write-off, waiver of interest charges, absorption of legal & other charges
CAC-II and above can permit waiver of reimbursement of the sacrifice in other cases
Application for fresh finance should be entertained only after a period of 3 months from the
date of adjustment of the erstwhile account by compromise/OTS.

Sanction of Loan to standard connection, Defaulter/NPA with Our Bank/Other Bank in the
past: Fresh Advance as per norms to new standard connection, which was NPA with Our
Bank/Other Bank anytime earlier during last 3 years, the delegation will vest with the next
higher authority. However, Proposals under delegation of CACs at Central Office need not be
referred to next higher authority. The delegation for sanction of such proposals shall vest
with respective CAC itself.
The accounts classified as 'standard assets' with our Bank re-classified as 'sub-standard assets'
upon restructuring can be Reviewed/Renewed as per the delegated authority vested for
standard account in Policy on delegation of Loaning powers. In case account is not upgraded
upto the „specified period‟ (as defined in the extant prudential guidelines on restructuring of
accounts) or subsequent restructuring is to be taken up, the delegation for NPA advance is to
be exercised as per Policy on Delegation of Loaning Powers.
In addition to CIBIL, RBI has approved Experian, Equifax and Highmark for undertaking
business of credit information under the Credit Information Companies (Regulation) Act,
2005.
Banks are required to provide periodical information on suit filed defaulter accounts of Rs.1
crore & above and wilful defaulters (suit filed & non-suit filed) of Rs.25 lacs and above.

Limited Liability Partnership:

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NOC for conversion from partnership to LLP may be granted by the concerned sanctioning
authority on the conditions that personal guarantee of all existing partners will continue.
The continuation of the existing credit limits with/ without modifications will be on the
conditions that personal guarantee of all existing partners will continue.
CACs at Central Office may waive personal guarantee of partners on case to case basis.
Further, CACs at Central Office may waive continuation of personal guarantees of the
erstwhile partners even in MCM accounts.
In case any credit facilities are sanctioned to a new LLP, personal guarantee of partners
should be insisted upon.
New Connections: Bank as a matter of abundant caution would restrict exposure to
Proprietary, Partnership concerns, LLPs, Pvt. Ltd./ Public Ltd Companies and SPVS [New
clients]:
Constitution Prudential Limit (Per party)
HUF Rs 25 crores
Individual / Proprietorship concerns Rs.60 crores
Trust / Association of Persons (AOP) Rs 80 crores
Registered Partnership Concerns Rs.100 crores
Limited Liability Partnership (LLP) Rs.100 crores
Society / Registered Society Rs.125 crores
Private Limited Rs.200 crores
Closely held Public Ltd Rs.200 crores
Widely held Public Company/SPVs Need based subject to exposure
(Pvt. Ltd/Public Ltd ) floated by norms.
reputed large business Group/
Conglomerates
Government owned companies / PSUs 10% of the net owned funds of the
/ Mutual Funds Bank
i. Minimum sanctioning authority for Trust / AOP should be RLCC-I
ii. As far as possible Bank would lend preferably to registered partnership firms. In deserving
cases lending to unregistered partnership firms may be considered and exposure should be
restricted to 50% that of registered partnership firm. The Branch should persuade the
unregistered firms to get themselves registered.
iii. In case any corporate is having external rating of A and above, the following prudential
limit should be considered:
A 2 X above limit
AA 3 X above limit
AAA 4 X above limit

Existing connections: The above limits are applicable at entry level for new accounts.
Thereafter need-based limits can be made available subject to following caps.
Constitution Prudential Limit (per party)
HUF Rs.30.00 crores
Individual / Proprietorship concerns Rs.150.00 crores

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 Policy Line (Loan Policy 2018-19 IC no. 1333-2018)
Trust / Association of Persons (AOP) Rs.200.00 crores
Registered Partnership Concerns Rs.200.00 crores
Limited Liability Partnership (LLP) Rs.200.00 crores
Society / Registered Society Rs.250.00 crores
Private Limited Rs.400.00 crores
Closely held Public Ltd Rs 400.00 crores
Widely held Public Company/SPVs Need based subject to exposure
(Pvt Ltd/Public Ltd)floated by norms.
reputed large business Group/
Conglomerates
Government owned companies / PSUs 10% of the net owned funds of the
/ Mutual Funds Bank

As far as possible Bank would lend preferably to registered partnership firms. In deserving
cases lending to unregistered partnership firms may be considered and exposure should be
restricted to 50% that of registered partnership firm. The Branch should persuade the
unregistered firms to get themselves registered.
ii. In case any corporate is having external rating of A and above, the following prudential
limit should be considered:
A 2 X above limit
AA 3 X above limit
AAA 4 X above limit
CAC-II and above may permit any breach in the above cap.

Exposure towards Unsecured Guarantees and Unsecured Advances:

Ceiling for unsecured advances at 30% of total advances of the immediate preceding year.
Unsecured exposure‟ is defined as an exposure where the realisable value of the security, as
assessed by the Bank /approved valuers / Reserve Bank‟s inspecting officers, is not more than
10 percent, ab-initio, of the outstanding exposure.
„Security‟ will mean tangible security properly charged to the bank and will not include
intangible securities like guarantees, comfort letters etc
Banks can lend against the guarantee/s of other Bank and such guarantees shall be included
for the purpose of security.
Annuities under build-operate-transfer(BOT) model in respect of road/highway projects and
toll collection rights, where there are provisions to compensate the project sponsor if a
certain level of traffic is not achieved, can be treated as tangible securities subject to the
condition that Banks’ right to receive annuities and toll collection rights is legally enforceable
and irrevocable. Therefore, such advances hitherto classified as unsecured will be classified
as secured advances.

Measurement of Credit Exposure of Derivative Products:

For the purpose of exposure norms, credit exposures, arising on account of the interest rate &
foreign exchange derivative transactions and gold is to be computed using the 'Current
Exposure Method'.

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Large Exposure Framework:

Large Exposure Framework (LEF) will be effective from April 1st 2019
In terms of LEF norms single party exposure should not be higher than 20% of Tier I Capital of
the bank. In case of group accounts, exposure should not be higher than 25% of the Tier I
Capital of the bank.

Large Borrowers through Market Mechanism:

RBI has issued guidelines on enhancing credit supplies for large borrowers through Market
Mechanism. The summary of RBI guidelines is as under –
 Aggregate Sanctioned Credit Limit (ASCL) means the aggregate of the fund based
credit limits sanctioned or outstanding, whichever is higher, to a borrower by the
banking system. ASCL would also include unlisted privately placed debt with the
banking system.
 „Specified borrower‟, means a borrower having an ASCL of more than
a. Rs.25,000 crore at any time during FY 2017-18;
b. Rs.15,000 crore at any time during FY 2018-19;
c. Rs.10,000 crore at any time from April 1, 2019 onwards;

 Normally permitted lending limit (NPLL), means 50 percent of the incremental funds
raised by the specified borrower over and above its ASCL as on the reference date
(date on which a borrower becomes a „specified borrower‟) in the financial years (FYs)
succeeding the FY in which the reference date falls. For this purpose, any funds raised
by way of equity shall be deemed to be part of incremental funds raised by the
specified borrower (from outside the banking system) in the given year.

SHORT TERM LOANS:

Unsecured STL initially for a maximum period upto 6 months.
Secured STL initially for a maximum period upto 12 months.
Secured as well as Unsecured STLs can be sanctioned only at the Corporate level (Central
Office).
CAC I and CAC II can sanction secured STLs as per the scheme of delegation of loaning powers
presently in vogue.
Management Committee can sanction both secured / unsecured STL.
Delegation for pricing will be co-terminus with the delegation of loaning powers.
STLs may preferably be sanctioned in favour of the following for meeting their short term
funding requirements:
 Navratna/Maharatna/Miniratna Public Sector Undertaking / Central Government PSUs
/ State Government PSUs with good track record.
 Non-PSU Corporates / reputed large business conglomerates with credit rating of
AAA/AA or equivalent.
 Mutual Funds subject to paragraph no.44 (2) of SEBI (Mutual Funds) Regulation, 1996.
The mutual fund shall not borrow more than 20% of the net asset of the scheme and for a
duration not exceeding six months

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Within the Board approved ceiling for unsecured advances at 30% of total advances of the
immediate preceding year (Rs.369792 crores as of 31st March 2018) which comes to
Rs.110937.60 crore, exposure ceiling for unsecured STL is fixed at 50% of total unsecured
advances i.e.15% of total advances of the immediate preceding year.

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