TIPS ON VALUE STATEMENTS IN CREDIT AUDITABLE ACCOUNTS UPTO Rs 50 CR

ZERO TOLERANCE AREAS - TIPS ON
VALUE STATEMENTS IN CREDIT

AUDITABLE ACCOUNTS UPTO RS 50 CR
U. Ravi Kiran
Chief Manager & Faculty
SBILD, Secunderabad.
ZERO TOLERANCE AREAS - TIPS ON VALUE STATEMENTS IN CREDIT AUDITABLE ACCOUNTS UPTO Rs 50 CR
BY U. RAVI KIRAN, FACULTY, SBILD, SECUNDERABAD Page 0 of 25
INFORMATION ABOUT THIS BOOKLET
In day to day credit administration, various aspects of credit related to Pre sanction and Post
sanction have to be taken care, to have healthy portfolio and to avoid risk of failures.
Though operating functionaries are taking lot of care in this aspect, periodical audits play a
pivotal role in gauging the health of the unit and also guide the operating functionaries
regarding the importance of systems and procedures to be followed on an ongoing basis.
With regard to Audit, we have various value statements in Credit Auditable accounts/ RFIA
with exposure upto Rs 50 cr and above Rs 50 cr. These value statements have been divided
into Positive score, Negative score and Zero Tolerance Areas.
This booklet has been aimed to give tips to the operating functionaries to score full marks
in respect of “Zero Tolerance Areas” in respect of advances upto Rs 50 cr, by keeping the
extant guidelines of the Bank in focus.
Hope this booklet which contains various clarifications will be of immense use to RMSMEs,
CSOs working in R&DBG advances and handling advances upto Rs 50 cr.
With best wishes,
Ravi Kiran. U
Chief Manager & Faculty,
SBILD, Secunderabad
Mob:7893430001
Date: 15.03.2020 Email: ur.kiran@sbi.co.in
ZERO TOLERANCE AREAS - TIPS ON VALUE STATEMENTS IN CREDIT AUDITABLE ACCOUNTS UPTO Rs 50 CR BY U. RAVI KIRAN, FACULTY, SBILD,
SECUNDERABAD
Page 1 of 25
Zero Tolerance Areas (ZTA) – Value statements and Guidelines
S.No Value statement Guidelines
01 Pre-screening of New Connections (Rs.5.00 Crs. and 1. In respect of new connections where our exposure is Rs.5 crore and above,
above) carried out from the Bank's authorised Service Bank has entered into an agreement with M/s Cubictree Technology Solutions
provider and enhanced due diligence examined in Pvt Ltd for pre-screening services to conduct enhanced due diligence (Ref-
respect of any adverse remarks with adequate Circular No CCO/CPPD-ADV/146/2014-15 dated 30.12.2014)
mitigation.
2. Despite of any adverse remarks, if Branch is recommending the proposal,
adequate mitigation has to be put in place and the same has to be recorded in
the proposal.
02 Administrative clearance obtained in applicable cases. In Principle approval/ Administrative clearance from the competent authority has
or to be obtained in respect of all cases (placed alongside) and the date of such
approval has to be recorded in the proposal.
Clearance from RMD obtained before taking new
exposure (including renewal or additional exposure)
on State Governments/State Government Apart from this, in respect of few other cases like “renewing limits based on
Departments/State PSEs/Exposure guaranteed by audited balance sheet which is more than seven months old for listed companies,
State Government or Investment in non SLR State and nine months old for non-listed companies” Administrative clearance has to
Development Loans (except food credit and exposure be obtained from the appropriate authority.
against 100% cash margin)
or
In-principle approval for taking exposure on new
connections (from the controllers)/ structuring cases,
involving funding needs of >1000 crore (from Interim
Committee for structuring cases) is obtained.
ZERO TOLERANCE AREAS - TIPS ON VALUE STATEMENTS IN CREDIT AUDITABLE ACCOUNTS UPTO Rs 50 CR BY U. RAVI KIRAN, FACULTY, SBILD, SECUNDERABAD Page 1 of 25
03 ROC search conducted and adverse features Before putting up the proposal (either new connection or renewal), ROC search
observed if any, assessed for due mitigation. has to be conducted and the following aspects needs critical examination by the
operating functionaries.
1. Latest Balance Sheet must have been filed with ROC and there should not be
any difference between the Balance sheet filed with ROC and the one which is
submitted to the Bank.
2. In case of renewal, ensure that all our existing charges are properly recorded
and redundant charges, if any have been satisfied.
3. If the Processing Officials notice any delinquency in the above, bring it to the
notice of sanctioning authority with proper mitigation along with timelines to
redress the issue.
04 The total exposure of a borrower from the Banking 1. RBI maintains data in CRILC (Central Repository of Information on Large
system mentioned in the Loan Proposal is the same Credits) in respect of all loan accounts where the exposure from the Banking
with that of CRILC Report, if not, whether, commented system (not only from SBI) is Rs.5 crores and above.
satisfactorily in the appraisal note. [difference on
2. During processing of the proposal, the total exposure needs to be cross
account of non-submission of data by the
checked with CRILC Report and the same has to be commented in the proposal.
Bank/Branch will not be taken as a justification.]
[required record held with the Branch] 3. If there is any difference in the data submitted by the unit/ ROC search Report/
CRILC report, the same has to be brought out in the appraisal memorandum with
suitable justification.
4. A copy of the CRILC verification report needs to be kept on record.
5. URL to access CRILC Report: https:// secweb.rbi.org.in/orfsxbrl/customer
05 For borrowers with ECR of below investment grade i.e. In respect of new connections/ renewals, for borrowers with ECR of below BBB
below BBB, and unrated borrowers, an affidavit in the and unrated, a declaration from the Directors stating that “names of the Directors
specified format is obtained from the Directors, stating and the Company do not appear in Defaulters/Wilful Defaulters list of RBI/CIBIL
therein that their names and the name of the Company
do not appear in Defaulters/Wilful Defaulters list of and other Credit Information Companies” has to be obtained in the form of a duly
RBI/CIBIL and other Credit Information Companies. notarised affidavit and the same has to be kept on record.
06 The Statement of Assets & Liabilities along with latest 1. Opinion reports are divided into two parts viz.
IT return/IT Assessment Order submitted by the
i) Loans upto Rs.25 lacs (Annexure-OR-2),
Borrower/Guarantor(s) on Bank's specified format with
complete details is held with opinion reports. ii) Loans above Rs.25 lacs (Annexure- OR-3)
Profile of Guarantors and their worth adequately (Please refer Chapter 17, Part 2 of Manual on Loans and Advances for the
assessed and taken into account. formats)
In case submission of ALS/ compilation of OR from/ 2. Opinions reports should be compiled at least once in a year based on the
on the Guarantors is waived, positive score may be Assets & Liabilities statement obtained from Borrower/Guarantor(s).
considered only when suitable risk mitigation is
3. In respect of the following cases, Notarised assets and liabilities statement in
suggested in the appraisal note. Else, only negative
the form of a stamped affidavit, has to be obtained from the borrower/ guarantor
score, despite approval from appropriate authority]
as under:
New and existing units (renewal / For all loans rated SB-9 and
enhancement) worse
Existing units - rehabilitation / restructuring In all cases, irrespective of rating
4. Latest IT returns along with Assessment Order should be obtained along with
assets and liabilities statements.
5. Copies of Documentary evidence in respect of assets of Borrowers/ Guarantors
to be obtained and kept on record.
6. Even in case of waiver of submission/ compilation of opinion reports approved
by the sanctioning authority, suitable risk mitigation has to be incorporated in the
appraisal note for having such waiver.
07 Critical Risks / Deficiencies recorded in the Executive 1. In all the applicable cases, appraisal note has to invariably contain all Critical
Summary of previous Credit Audit Report and Risks / Deficiencies pointed out in the Executive Summary of previous Credit
corresponding score are recorded along with Audit Report along with corresponding score.
compliance, such as action taken / proposed to be
taken. 2. Further, in all the applicable cases, appraisal note to contain critical
observations pointed out in Risk Based Supervision (RBS) Report of RBI, Stock
Compliances in respect of critical observations pointed and Receivable Audit, Statutory Audit Report etc.
out in RBS of RBI, Stock and Receivable Audit,
Statutory Audit etc confirmed 3. In any case, if none of the reports are available, then RFIA report has to be
mentioned in the proposal.
4. Operating Officials have to ensure to incorporate compliance remarks and

present status in respect of all Critical Risks / Deficiencies pointed out in the above
reports.
08 Security Interest with CERSAI created on: Following types of Security interests are required to be filed on the CERSAI Portal
in Form I or Form II, as the case may be and shall be authenticated by a person
a) Immovable Properties by mortgage other than
specified in the form with a valid digital signature:
mortgage by deposit of Title Deeds,
a. Creation, modification or satisfaction of security interest in immovable
b) Hypothecation of Plant & Machinery, Stocks, Debts property by mortgage other than mortgage by deposit of title deeds.
including book debts or receivables, whether existing
& future, b. Creation, modification or satisfaction of security interest in hypothecation of
plant and machinery, stocks, debt including book debt or receivables,
c) Intangible Assets, whether existing or future.
d) Any under construction residential or commercial c. Creation, modification or satisfaction of security interest in intangible assets,
building etc. [as per Form 1 or 2] being knowhow, patent, copyright, trademark, licence, franchise or any other
business or commercial right of similar nature.
d. Creation, modification or satisfaction of security interest in any under
construction residential or commercial building or a part thereof by an
agreement or instrument other than by mortgage.
Further, the status of noting in CERSAI has to be recorded in the appraisal note,
under security column.
09 Documents are valid and current. 1. In respect of Term Loan accounts which are repaid regularly and are classified
as Standard Assets, obtention of Revival Letters and Balance Confirmation
Revival Letters, wherever applicable, are obtained.
Letters has been dispensed with.
Balance Confirmation is obtained annually.
2. However, in respect of Cash Credit, obtention of revival letter (once in 03 years)
and Balance confirmation (yearly intervals) has to be obtained and kept on record.
10 Documents executed were entered in the Document 1. The particulars of documents, Applicant’s address, date, amount and names of
Execution Register with due authentication. signatories etc. have to be entered by the documentation officer in the Document
Execution Register under his signature.
2. A narration reading that “the documents were read before by the executants
and the implications explained to them” has to be incorporated under the
signature of the Documentation Officer.
11 All the Guarantee Agreements are duly stamped and 1. Care has to be taken for affixing adequate stamp duty, depending upon the
executed by guarantors / corporate guarantors place of execution, before execution of documents.
mentioned in the proposal.
2. Wherever Corporate Guarantee is stipulated, Board resolution from the
12 Supporting Board Resolution of Corporate Guarantor Corporate Guarantor has to be obtained for extending the Guarantee.
is obtained.
3. Full details as mentioned alongside have to be incorporated in the Guarantee
13 Full Particulars like S/o, W/o, full postal address, agreement, both in respect of Individual Guarantor and Corporate Guarantor.
Phone No., Mobile No., e-Mail ID, Fax No. etc. of the
Apart from the above, the following aspects have to be ensured by the operating
Guarantors are recorded in the Guarantee Agreement.
officials.
(a) CRA of the corporate guarantor has to be carried out based on the latest
Audited Balance Sheet and furnished in the appraisal memorandum.
(b) Net Worth on the basis of latest Balance Sheet has to be arrived and furnished
in the appraisal memorandum.
(c) Charges in respect of Corporate Guarantor have to be filed in ROC and a copy
of the search report has to be kept on record.
14 Undertaking by the borrower about non-payment of 1. It is one of the Mandatory Negative Covenants (MN 15) to be obtained as a
Commission and declaration from guarantors for not part of documentation process.
demanding commission for the guarantee extended
2. A specific undertaking has to be obtained from the borrower about non-
are obtained.
payment of Commission to Guarantor.
3. Further, a declaration from guarantor(s) to be obtained for not demanding
commission for the guarantee extended.
4. All these letters/ declarations have to be kept on record.
15 In case of Consortium documents, where Bank is the Wherever we are a member in a Consortium, operating Officials have to ensure
member, copies of documents forwarded by to obtain copies of Consortium Documents from the Lead Bank with their covering
Consortium Leader with covering letter held on record. letter.
16 Annual possession Certificate in respect of Security 1. In respect of project loans under consortium financing, services of a Security
Documents executed outside the Home Branch / held Trustee are engaged with the concurrence of the lenders and security is created
by the Security Trustee or other Branches are held on in its favour on behalf of and for the benefit of all the lenders and a Security
record Trustee Agreement is executed for this purpose.
2. Further, in some cases, Security Documents are executed at a place other than
Home Branch depending upon the convenience of other lenders/ borrower and
all the documents will be kept in the custody of Security Trustee, post execution.
3. In such cases, Annual possession Certificate has to be obtained from the
Security Trustee and kept on record.
17 Security trustee services are engaged where the The consortium may engage the services of Security Trustee for consortium
exposure of the unit under consortium is above exposures above Rs.500.00 cr, after obtaining the approval / consent of the
Rs.500.00 crore. Consortium members.
‘Annual possession letter obtained & shared by us/ The Lead Bank shall obtain the “Annual Possession Letter” from the Security
lead bank (copy) is held on record. Trustee, wherever applicable and share it with the other member banks.
18 Legal Opinion / TIR validated the documents executed 1. Title Investigation Reports (TIR) furnished by the Bank’s empanelled advocate
through POA, Gift Deed (Clearance from Law Dept.) in respect of sales by PoA holders, shall be vetted by the Bank’s Law Officer for
etc. and laid down instruction followed. their genuineness and enforceability. However, in respect of loans upto an
amount of Rs.30 Lacs, vetting by Bank’s Law officer is waived subject to the
condition that TIR being furnished in respect of POA transaction is vetted by two
empanelled advocates.
2. Whenever any property is taken as security based on Gift Deed as the principal
title deed, clearance must be obtained from the Law Department without fail. This
is in addition to obtention of two TIRs from the Advocate.
3. Confirmation to this effect has to be provided in the loan proposal submitted to
the Sanctioning Authority, as a foot note under Security column.
19 Annexure-E compiled based on TIR and duly signed Operating officials have to scrutinise the TIR received from the empanelled
by the authorised officials. advocate(s) and verify each and every column/item/paragraph of the TIR to
ensure that all the columns have been commented without any omissions.
Deficiencies highlighted in TIR, if any, are properly
addressed. A certificate to this effect (in the form of Annexure E) has to be signed by the
authorised officials and kept on record.
For format of Annexure E, please refer to circular no. CCO/CPPD-ADV/70/2017
– 18 dated 25.09.2017 (SOP on title deeds & title investigation report)
20 Properties mortgaged owned by the Company / In case of properties owned by companies offered as security, it should be backed
Corporate Guarantor [duly listed] are backed by Board by Board resolution with a specific reference to such mortgage.
Resolutions of borrower / corporate guarantors as For particulars like area of land, boundaries etc – the base document is Title deed.
applicable. Care should be taken to ensure that the details related to Survey No, Address,
D.No etc mentioned in all other documents viz., proposal, TIR, Recital, EM
Particulars of land like, area of land, boundaries etc.
Confirmation Letter, Valuation report should exactly tally with the Title Deeds.
mentioned in the proposal/ TIR, tallies with the Title
Deeds, Recital and EM Confirmation Letter.
21 Wherever EM is created at other branches of SBI / Extant guidelines in this regard are mentioned in Manual on Loans & Advances,
other Banks/ Security Trustees, copies of Recital Part 2, Chapter 18, point 2-18-3.4.14 as under:
/Memorandum of Entry (duly certified) are held on
record as per extant guidelines. The issue of creating EM at other Branches of SBI arises when a particular loan
got sanctioned at a Branch located at a non notified centre and EM needs to be
created at a notified centre.
1. Wherever EM is created at other branches of SBI, the Branch Manager of the

other Branch must arrange for the recital and issue a certificate to the branch
where the advance is sanctioned that the title deeds have been deposited by the
mortgagor (s) with an intent to create equitable mortgage in favour of the Bank.
2. A copy of the recital so recorded should be forwarded to the branch where the
advance is sanctioned.
3. Subsequently the title deeds deposited at the branch of the notified centre could
be returned to the branch, which has sanctioned the loan after completion of the
formalities connected with the creation of the equitable mortgage. For this
purpose, the following procedure must be followed by the branch at the notified
centre.
i) The branch at the notified centre should forward the title deeds, certificate, copy
of recital and other documents to the branch which has sanctioned the advance,
by registered and insured post.
ii) A copy of the letter, together with a copy of the list detailing all documents with
full descriptions and number (all documents to be numbered with pencil) should
be sent separately by registered post to the branch, which has sanctioned the
advance.
iii) The branch which has sanctioned the advance must acknowledge the receipt
of the title deeds and enter them in the title deeds register and hold them in safe
custody in the strong room.
iv) The branch at the notified centre must preserve the above acknowledgement
for scrutiny by the Bank’s Inspectors/Auditors.
v) It is the responsibility of the Branch Manager at the non-notified centre branch

to ensure that the title deeds of immovable properties offered as security are
scrutinised by the Bank’s local advocate at his end to satisfy himself that they
convey a clear, absolute and marketable title to the owner thereof.
vi) In cases where the documents have not been properly described/ correctly
treated, e.g. an agreement to sell being treated as a sale deed, copies of the title
deeds being treated as originals etc., the managers of both the branches, i.e.,
non-notified centre branch which has sanctioned the advance and the branch at
the notified centre which has created the equitable mortgage, will be held
responsible.
vii) In all cases, the mortgagors must call at the branch at the notified centre to
make the deposit of title deeds in the presence of the Branch Manager/ Divisional
Manager and two employees of the Bank.
22 Wherever the mortgage covers exposure of other 1. In respect of consortium advances, the security for the loan will be a joint
Banks, (Under MBA or Consortium), aggregate equitable mortgage and the charges rank on pari passu basis.
exposure covered by the mortgage as well as nature
and rank of charge (first / second) are suitably 2. The ‘Lead Bank’, as an agent of all other members of the consortium will accept
recorded in the Recital / MOE / EM Register. the deposit of title deeds from the borrowing company with an intent to create a
joint equitable mortgage for all the loans granted by all members of the
consortium. For this purpose, all the other members of the consortium are
required to issue a ‘Letter of Authority’ in favour of the Lead Bank authorising it to
accept the deposit of title deeds as their agents.
3. As the charge will be on a pari passu basis, each member of the consortium
will also be required to issue a letter to all the other members agreeing and
confirming that the charge will rank pari passu without any preference or priority
of one over the other.
4. As soon as the joint equitable mortgage is created as above, a certified copy

of the ‘Memorandum of Entry’ for joint Equitable Mortgage by Deposit of Title
Deeds should be obtained from the Lead Bank and the details have to be
recorded in EM register.
23 All documents as per TIR obtained and held on record. All documents as per TIR have to be obtained and kept on record.
24 EM created on the basis of Sale Deed executed by Extant guidelines in this regard are mentioned in Manual on Loans & Advances,
POA holder, Gift Deeds and by deposit of Certified Part 2, Chapter 18, point 2-18-3.4.11, 2-18-3.4.12 and 2-18-3.4.18 as under:
Copy of the title deeds are duly vetted by Bank's Law
Officer as per the guidelines. POA:
Title Investigation Reports (TIR) furnished by the Bank’s empanelled advocate in
respect of sales by PoA holders, shall be vetted by the Bank’s Law Officer for their
genuineness and enforceability. However, in respect of loans upto an amount of
Rs.30 Lacs, vetting by Bank’s Law officer is waived subject to the condition that
TIR being furnished in respect of POA transaction is vetted by two empanelled
advocates.
Gift Deeds:
Whenever any property is taken as security based on Gift Deed as the principal
title deed, clearance must be obtained from the Law Department without fail. This
is in addition to obtention of two TIRs from the Advocate.
A suitable confirmation to this effect must be provided in the appraisal note
submitted to the Sanctioning Authority, as a foot note under Security column.
Certified copies of title deeds:

Creation of mortgage by deposit of Certified copies of title deeds would arise in
following cases.
(a) In cases where Bank stipulates creation of second charge on borrower’s

immovable properties like land and buildings which are already charged to Term
Lending Financial Institutions (TLFIs) and in respect of which, despite reminders,
the necessary permission from the TLFIs is not forthcoming, as a way out, in such
exceptional cases, branches may obtain second charge of a borrower’s
immovable properties by deposit of certified copies of the title deeds subject to
the following conditions.
i) This method should be adopted only when TLFIs do not give permission for
creating second charge on immovable properties despite reminders from the
Bank.
ii) The borrower should be willing to create mortgage by deposit of certified copies
of title deeds (issued by the Office of the Registrar of Assurance) along with other
documents like revenue records, rent receipts, tax receipts, etc.
iii) In the recital, it should be stated that the originals are held by TLFIs.
(b) In addition to the above, the branches should take the following precautions.
i) Obtention of an undertaking from borrower (duly signed before Notary) to hand

over the title deeds to the Bank clearly stating that the consent of 1st mortgagee
(usually TLFIs) is not forthcoming despite many requests and hence the request
for creation of mortgage by deposit of certified copies of title deeds issued by
Registrar of Assurance.
ii) Obtention of “Power of Attorney” from borrower authorising the Bank to get the
title deeds from 1st mortgagee (usually the TLFIs) immediately after satisfying the
dues of 1st mortgagee (TLFIs).
iii) Obtention of an undertaking backed by an affidavit by borrower not to deposit

the original title deeds with any other creditor after getting back the same from 1st
mortgagee (TLFIs).
iv) (i) and (ii) should be invariably brought to the notice of 1st mortgagee (TLFIs).
v) Creation of such mortgage (second charge) must be registered with ROC and
TLFIs must be informed of such second charge.
vi) Branches have to keep a watch regarding the action of the 1st mortgagees
(TLFIs) against the immovable properties and on the activities of the borrower in
respect of the said properties.
vii) If second charge on the moveable plant & machinery is required to be

obtained, in such cases agreement of hypothecation of such assets must be
obtained from the borrower and formalities stated above as applicable must be
complied with. The first charge holder must be informed of creation of such
second charge.
(c) Branches should follow the above procedure only in exceptional cases and
only after they fail to get the permission from TLFIs despite repeated follow up.
(d) The follow up measures taken by the branches in this regard should be duly
recorded.
Most importantly, the above procedure should be followed only after

obtaining approval from the controlling authority.
Other scenario:
If the original registered Title Deed has been lost / misplaced and the mortgage
is proposed to be created on the basis of certified copy of the Title Deed, the
certified copy of the title deed should be accepted only in exceptional cases where
the original is conclusively proved to have been destroyed or lost and after
obtaining prior approval from the controlling authorities. (In no case photocopy of
the title deed is to be accepted).
Besides, the undernoted procedure is to be followed strictly in all such cases.
➢ FIR has been lodged in respect of the lost title deed and the advertisement
in respect of the loss of the title deed has been published in a prominent
national and a regional newspaper.
➢ An affidavit from the borrower/ guarantor is to be taken declaring that the

title deed has been lost. The affidavit should also contain:
I. full particulars of the property,

II. reference to the FIR lodged and
III. the details of advertisement published in a prominent newspaper.
25 Confirmations for Creation / Extension of Mortgage 1. A letter confirming the deposit of the title deeds (SME 6) with an intent to create
have been received and held on record. the mortgage in favour of the Bank should be obtained from the mortgagor(s).
Charges created in respect of the assets of Corporate 2. Particulars like the names of the borrower/guarantor, the date of deposit and
Borrower and Corporate Guarantor have been filed the documents deposited are entered on the left hand side of the Title deed
with appropriate authorities for registration within the register, while the right hand side contains the recital of the deposit and the
stipulated time without any omission. signatures of the two witnesses.
The description of the properties and the extent to be 3. This letter (SME 6) should be obtained only subsequent to the deposit of title
agreed as stated in the appraisal or TIR. deeds, say a day or two after the mortgage is created. It would be preferable to
have this letter sent by registered post and to retain the relative cover (if sent in
an envelope) bearing the postal date stamp, along with the letter and the title
deeds.
4. The Bank’s date stamp should be affixed on this letter without fail, so that there
would be no difficulty in proving at a later date that the letter was received
subsequent to the deposit of the title deeds.
5. When the mortgagor who has already created an equitable mortgage in favour
of the Bank as security for existing advance, and if additional/ fresh advance is
granted and sought to be secured by extension of the existing mortgage, a
modified recital (SME 7) should be recorded in the title deeds register and
confirmatory letter (SME 8) should be obtained from the mortgagor.
6. In case, where the mortgagor is a company, this confirmatory letter need not
be obtained. This is because in the case of companies, the mortgage will be
supported by a Board resolution and the particulars of the mortgage will be filed
with the Registrar of Companies.
7. In the case of companies, the deposit of title deeds should be supported by a

Board resolution for authorising a representative of the company to make the
deposit of the title deeds with intent to create the mortgage in favour of the Bank.
8. Particulars of Equitable Mortgage created by companies must be registered
with the Registrar of Companies within 30 days of their creation.
26 Legal Audit Completed for the current documentations 1. All Loan and mortgage related documents in respect of accounts with
& Security Creation. aggregate credit exposure (FB+NFB) of Rs.5.00 crore and above are subjected
to Legal Audit.
[If not carried out within 30 days of documentation,
then Zero Tolerance]
2. Legal Audit has to be conducted prior to Credit Audit / Combined Audit / RFIA
for all eligible accounts i.e. for both existing accounts (where there has been a
change in the facilities / securities) and new accounts.
3. Accounts which have been subjected to Legal Audit and in which there are no
changes either in documents or securities will be subjected to subsequent Legal
Audit only after three years.
4. Legal Audit in respect of the accounts availing finance under Consortium

Arrangement shall be done by our branches, where we are the Lead Bank and
the original documents (Loan & Mortgage) are held by us.
5. In accounts where another Bank is the Lead Bank, our branch shall take up the
matter with the Lead Bank / the bank holding original mortgage documents for
conducting Legal Audit and furnish a copy of their Legal Audit report to our RFIA
/Credit auditor.
6. In case of MBA, Legal Audit of Loan Documents shall be arranged by our

branch, while Legal Audit of Mortgage Documents shall be arranged by the bank
holding the original documents relating to the properties charged. The relative
Legal Audit report obtained from the respective banks shall be furnished to the
RFIA /Credit Auditor.
27 Legal Audit Report uploaded in LLMS Legal Audit Report has to be uploaded in LLMS to have a permanent record in
soft form.
28 Whether Cash Budget/ Cash flow statement is being 1. Cash budget method is used for assessing Working Capital finance for
obtained and validated and prior approval of seasonal industries and for sanction of ad hoc WC limits. In these cases, the
appropriate authority has been obtained before issue required finance is quantified from the projected cash flows and not from the
of fresh LC & BG, in case of accounts with a history of projected values of current assets and current liabilities.
devolvement's of LCs and invocation of BGs during
2. Cash budget should be obtained at the time of opening of LCs, to ensure that
the year.
the borrower would be able to retire the bills drawn under the LC on their
respective due dates.
3. Prior approval of appropriate authority has to be obtained before issue of fresh
LC & BG, in case of accounts with a history of devolvement's of LCs and
invocation of BGs during the year, as detailed in Circular No: CCO/CPPD-
ADV/150/2013 – 14 dated 28.02.2014.
29 Auditors to examine that the review of diversion of Drawals allowed from Cash Credit should not result in double financing of
funds for units having exposure of Rs.50.00 Crs. and chargeable current assets. For this purpose, Stock statement and FFR-I
above, has been carried out at quarterly intervals submitted by the borrowing unit should be scrutinised to see: -
aligned with FFR-1, in addition to an annual review.
➢ Changes in net working capital is in tandem with change in value of
inventory and receivables.
➢ Changes in level of bank borrowing is in tandem with change in value of

inventory and receivables.
➢ Any significant change in the pattern of individual sources of financing for

current assets is acceptable.
The afore mentioned exercise is to be undertaken to ensure that drawals from
cash credit account are strictly for the purpose for which credit facilities have been
granted. There should be no diversion of working capital funds for acquisition of
fixed assets, investment in associate concern, acquisition of shares, debentures,
units of mutual funds, buy back of own shares, etc. Such diversion should be
treated as mis-utilisation of working capital funds.
Apart from ongoing verification of the above, the following certificates need to be
obtained from the borrowers.
➢ Obtention of certificate from the borrowers that the funds have been utilised
for the purposes approved.
➢ Declaration to be obtained from the borrowers at half yearly intervals on
the details of accounts opened by them with other Banks.
➢ Details of investments in stock markets, mutual funds, NBFCs, ICDs,
associate companies, subsidiaries, real estate, etc. made by the company
should also be obtained.
This should be made as a part of the Standard covenant and in case of violation,
prompt action against the borrowers should be initiated, which may include
withdrawal of concessions and/or facilities sanctioned over a period of time.
30 Online check-list of activities & Compliance Certificate Circular No. CCO/CPPD-ADV/81/2017 – 18 dated 02.11.2017
before each disbursement to be undertaken are duly a) An online checklist of various activities to be undertaken at the pre-sanction
compiled and certificate for release of Term Loan stage for verification by the operating functionaries and certificate on compliance
signoff by the Concurrent Auditor held on record. with the terms and conditions of sanction before disbursement of loans have been
rolled out in LLMS.
b) For all exposures of Rs. 1 cr and above (FB+NFB), Operating Units need to
take a print out of the compliance certificate, generated from LLMS, which will be
put up to appropriate authorities for obtaining their approval for disbursement of
loan.
Note:-
1.To be drawn up before disbursal of Credit Facilities (New / Enhancement).
2. To be kept with Loan Documents.
3. To be submitted to Branch Head / RM (CAG/MCG) / Head of RACPC/ RASMEC
(as the case may be)
c) An online checklist of various activities to be undertaken by operating units

during disbursement of each tranche of Term Loan of Rs 5 crores and above have
also been rolled out in LLMS. A Compliance Certificate for release of term loan is
also be recorded in LLMS, covering verification from concerned Concurrent
Auditor (wherever posted) who will verify the documents/information of checklist,
produced by designated credit support officer.
d) The compliance certificates for both functionalities mentioned above are

required to be kept along with loan documents for record and verification.
Roles & Process flows for CAG and CCG

SO/CSO/Credit Analyst will prepare the report in LLMS and forward it to the
Concurrent Auditor (CA). After verification by CA, it will be forwarded to the
Relationship Manager (RM) at CAG and CCG.
Roles & Process flows for R & DBG

SO/CSO/Credit Analyst will prepare the report in LLMS and forward it to the
Relationship Manager (RM). After verification by RM, it will be forwarded to the
Concurrent Auditor. Concurrent Auditor shall forward it to the Branch Head.
31 Whether the Irregularity Reports are submitted in time 1. Irregularities in WC accounts arising solely from application of interest need not
without delay (On or before 10th of subsequent month) be reported, if the account is regularised within 30 days from the date of
application of interest, irrespective of whether the outstandings are within the
sanctioned limit or not.
2. In respect of term loans, for any delay in repayment of interest/ instalment,

irregularity report has to be reported on or before 10th of subsequent month.
3. In respect of NPA accounts, once the account is classified as NPA, irregularity

report is to be submitted within 10th day of subsequent month and Subsequent
reporting to be done at Quarterly intervals.
32 EPC/PCFC Drawing Power Register is maintained by 1. Branches should maintain a packing credit drawing power register wherein the
capturing all the required details. drawing power available to each borrower should be recorded under the signature
of an authorised official.
2. Amounts of orders/letters of credit lodged and repayments of the advance
granted etc should be recorded in this register.
3. Under PCFC facility, the method of ‘first in first out’ liquidation of PCFC is
permitted. While allowing repayments into the PCFC account, order to order
application of repayments may not be necessary. But order to order monitoring
through drawing power register is essential to ensure proper end use of funds and
repayment of a particular PCFC advance within the stipulated period.
4. Before any disbursal is made under PCFC, branches should ensure that the
total of outstandings under EPC and the rupee equivalent of outstandings under
PCFC (arrived at the fixed notional rate) is within the overall EPC limit.
5. The drawing power register, therefore, should provide for columns to reflect
PCFC and EPC outstandings and the total thereof, for monitoring the total
outstandings at any point of time.
33 Confirmation from ECGC for the sanction accorded is Circular No. CCO/CPPD-ADV/101/2017 – 18 dated 30.12.2017
held on record. Timely reporting of irregularity to
ECGC observed. 1. Sanction of export credit limits to an existing or a new exporter customer, by
way of renewal or fresh sanction, not exceeding Rs.5 Cr (Discretionary limit) for
The required premium has been collected as per the
Pre & Post Shipment Credit facilities separately, to be notified account wise to the
instructions.
ECGC Ltd Link Office by the Operating Units, within 30 days from the date of
sanction. Any reduction / cancellation of limits also should be notified to ECGC
Ltd.
2. Prior approval of ECGC Ltd is required for any ‘New Limits’ and ‘Take Over’
accounts above the discretionary limit of Rs.5 Cr (Pre and Post Shipment limits
separately) by way of fresh sanction.
3. Prior approval is not required for sanctions by way of enhancement of limits

outside the Discretionary Limit to existing units already availing export credit
facilities from the Bank and are STANDARD, provided such sanctions are not in
any of the categories mentioned below.
➢ Limits sanctioned/renewed/enhanced, where the asset classification is

other than ‘Standard’.
➢ Wherever combined (PC + CC) limits are sanctioned, if the component of

PC limits (out of CC) exceeds Rs.25 Cr or 25% of the combined limit
(CC+PC).
➢ Where the individual exporter limit /exporter group limit (PC and PS limit)
is equal to or more than Rs.200 Cr irrespective of Asset Classification of
the account.
➢ Where the exporter has diversified into unrelated business activities,
wherein the share of the unrelated business activity is equal to or more
than 10% of the Export Turnover (applicable only to exporters excluding
Merchant exporters whose Export Turnover is equal to or more than
Rs.500 Cr).
➢ Irrespective of the Asset Classification of the account, where per buyer

limit/exposure exceeds Rs.100 Cr and shall also include cases where
interchangeability of the limits of PC and PS facilities are permitted by the
Bank.
➢ For granting extension in due date of PC advances remaining outstanding

beyond 360 days and for granting extension in due date of Post-shipment
advances remaining outstanding beyond 180 days (for Status-holders it is
360 days).
➢ For allowing further operations in the account where the asset classification
has slipped to ‘Sub-standard’ or ‘NPA’.
➢ Before implementing any restructuring/nursing rehabilitation programme.
➢ Before implementing any OTS/Compromise settlement.
➢ Before effecting any sale of the financial assets to ARCs.
➢ Before purchasing/discounting bills drawn on buyers in Restricted Cover

countries, if exporter has not obtained the same under policy issued to
them. However, it is suggested that wherever possible, the Bank may
obtain ECGC’s prior approval before extending finance on such buyers
who are in Restricted Cover Countries at the pre- shipment stage itself.
A “Report of Default” should be submitted by branches in respect of accounts
within one month from the date of calling up of an advance by the Bank or within
four months from the due date / extended due date of the outstanding PC / PS
advances, as the case may be, whichever is earlier.
34 Sharing of information: Whether relevant information Circular No: CCO/CPPD-ADV/130/2012 – 13 dated 01.03.2013
is shared amongst member Banks both in case of
Consortium Lending and Multiple Banking 1. Operating units have to put up a monthly Compliance report on the status of
Arrangement as per directives of RBI? exchange of information to the Branch Head. Non-Compliances, if any, to be put
up to the Controllers for monitoring and to take up with other Banks wherever
intervention is required.
2. Information shared by our Bank as well as the information received from other
member banks of MBA/CA should invariably be uploaded in LLMS for the purpose
of monitoring.
35 Diligence Reports (Half-yearly intervals) in respect of Refer Annexure III, Chapter 16, Part 2 of Loan manual for the format on Diligence
borrowing Company, certified by the Professionals as Report (Part I and II) and the same has to be obtained at Half-yearly intervals.
per RBI guidelines obtained and examined, in case of
MBA / Consortium.
36 Confirmation of enforceability of Mortgages/Charges Once the account turned as SMA/ NPA, confirmation regarding enforceability of
created over the properties and reflected in ROC Mortgages created over the properties has to be obtained from another panel
search reports, to be obtained from another panel advocate (apart from the advocates, who have initially given TIR).
advocate after the account turned into SMA/NPA.
Same exercise has to be done for the charges reflecting in search reports to
validate the existing charges.
A report to this effect has to be kept on record.
37 The Bank officials confirmed the title of the properties Once the account turned as SMA/ NPA, Branch Officials have to immediately
by independent verification and the validity of conduct independent verification of security mortgaged to ensure the valuation
and enforceability of the property.
valuation of security to secure the Bank’s interest after A report to this effect has to be kept on record.
the account turned into SMA/NPA.
38 Promoter's contribution brought upfront as stipulated In all stipulated cases, Promoter's contribution has to be brought upfront.
(Zero tolerance, if the promoter's contribution not
brought till the date of implementation or after the date
of implementation)
39 Additional collateral / pledge of shares/ conversion of These stipulations will normally be made by the sanctioning authority in respect
debt to equity as envisaged carried out (Zero of Restructured cases, which has be meticulously followed to maintain time limits.
tolerance, if it is not arranged within 30 days of the
date of implementation)
Assets / non-core assets disposed off and funds
brought in as envisaged.
Investments have been recalled as per the approved
plan.
40 Diminishing Fair Value of advance arrived at Quarterly For restructured accounts, the Present Value of future cash flows will be
intervals for provisioning purpose. computed/ discounted at a rate equal to the actual interest rate charged to the
borrower before restructuring for the purpose of determining the diminution in fair
value of loan on restructuring. This value needs to be arrived at quarterly intervals
for the purpose of provisioning.
41 Confirmation obtained for deviations, if any, and non- In case of any non-adherence of terms and condition of re-structuring / structuring,
adherence of terms and condition of re-structuring / approval for deviation has to be obtained from the competent authority, in
structuring. deserving cases.
42 All charges/ Security interests as per Restructuring / All charges/ Security interests as per Restructuring / Structuring Scheme have to
Structuring Scheme approved/ sanctioned have been be created within the timelines, else extension of time has to be obtained from
created competent authority.
43 Monitoring meetings are held / attended regularly to Monitoring meetings are to be held / attended regularly at periodical intervals as
review the progress. (JLF/ Monitoring Committee decided by the lenders to review the progress and the same has to be put up to
etc.). competent authority for information and guidance.
44 Notice issued u/s Sec. 13(2). The objections / queries/ When it is expected that legal proceeding may be initiated by the borrowers to
representations of the borrower/ guarantors have stall the recovery process, the branches may file caveat application in the DRT/
been attended to as per the provisions of law. Caveat Court as the case may be. Wherever it is expected that the borrower/mortgagor
filed in DRT / High Court. would challenge the Banks action, caveat should be filed, so that notice would be
served on the Bank before the hearing, if any appeal is filed by the borrower.
Wherever considered essential, caveat should be filed so that ex-parte stay is not
granted by the DRTs.

TIPS ON VALUE STATEMENTS IN CREDIT AUDITABLE ACCOUNTS UPTO Rs 50 CR

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ZERO TOLERANCE AREAS - TIPS ON

VALUE STATEMENTS IN CREDIT

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S.No Value statement Guidelines

4. Operating Officials have to ensure to incorporate compliance remarks and

1. Wherever EM is created at other branches of SBI, the Branch Manager of the

v) It is the responsibility of the Branch Manager at the non-notified centre branch

4. As soon as the joint equitable mortgage is created as above, a certified copy

Certified copies of title deeds:

(a) In cases where Bank stipulates creation of second charge on borrower’s

i) Obtention of an undertaking from borrower (duly signed before Notary) to hand

iii) Obtention of an undertaking backed by an affidavit by borrower not to deposit

vii) If second charge on the moveable plant & machinery is required to be

Most importantly, the above procedure should be followed only after

Besides, the undernoted procedure is to be followed strictly in all such cases.

➢ An affidavit from the borrower/ guarantor is to be taken declaring that the

I. full particulars of the property,

7. In the case of companies, the deposit of title deeds should be supported by a

4. Legal Audit in respect of the accounts availing finance under Consortium

6. In case of MBA, Legal Audit of Loan Documents shall be arranged by our

➢ Changes in level of bank borrowing is in tandem with change in value of

➢ Any significant change in the pattern of individual sources of financing for

c) An online checklist of various activities to be undertaken by operating units

d) The compliance certificates for both functionalities mentioned above are

Roles & Process flows for CAG and CCG

Roles & Process flows for R & DBG

2. In respect of term loans, for any delay in repayment of interest/ instalment,

3. In respect of NPA accounts, once the account is classified as NPA, irregularity

3. Prior approval is not required for sanctions by way of enhancement of limits

➢ Limits sanctioned/renewed/enhanced, where the asset classification is

➢ Wherever combined (PC + CC) limits are sanctioned, if the component of

➢ Irrespective of the Asset Classification of the account, where per buyer

➢ For granting extension in due date of PC advances remaining outstanding

➢ Before implementing any restructuring/nursing rehabilitation programme.

➢ Before implementing any OTS/Compromise settlement.

➢ Before effecting any sale of the financial assets to ARCs.

➢ Before purchasing/discounting bills drawn on buyers in Restricted Cover

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